Amy: Tonight inflation cools, the stock market goes wild, and yes, crypto crashes. We got a lot to talk about tonight. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. It has been a wild, I don't even know, wild few days, but it's really just been a wild year when it comes to markets, money, the economy. So we're gonna get our take, of course, as we do every Monday, from our expert, Allworth's Chief Investment Officer Andy Stout.

Andy, I was watching a basketball game over the weekend, it was at Temple and Villanova, right? Villanova is a basketball powerhouse, Temple's winning, and so the students just absolutely stormed the court before the game was actually over. And I was thinking it kind of reminds me of markets when that inflation data came out, like, kind of not even maybe a premature reaction because we don't really know where things are going long-term yet. But the excitement over those numbers, man, it was real.

Andrew: Well, that's a really good analogy, Amy. And if you think about it, that's exactly what happened. People saw the lower than expected inflation. And let's fast forward. Well, that means the federal stops in or that means that'll be good for stocks, that will be good for bonds. And we really did jump the gun. And you know, I would say unlike...or similar to what you were saying, those players getting there a little early...or the fans getting on there a little too early, we might be getting a little too excited about this as well.

Amy: Yeah, the game was not even over yet. They had to literally push people off the court to finish the last two-tenths of a second that was left in that game. And I was thinking, "Gosh, we do have a long haul ahead, right?" We're still in 7.7%, whatever inflation we're still high, we're nowhere close to 2% yet, markets absolutely loved it.

Andrew: Yeah, I mean, what we saw kind of good news across the board when you dig into the inflation print. So first off, as you noted, we increased 7.7%, that's on a year-over-year basis. So we're including a lot of months in the past, and we're talking...we're including December of 2021 in these numbers. So these numbers will drop off, what we're wanting to pay a little bit more attention to is those monthly changes. So when we look at the monthly change in consumer prices or CPI, what we saw was that it increased 0.4%, that's still a little high, but it's a lot lower than what was expected, which was 0.6%. So that was a good thing.

And probably, more importantly, was this core CPI number. Core CPI excludes food and energy prices because they're really, really volatile. And when we look at the core CPI, what we see is that it increased by 0.3%, which was also less than what was expected, which was 0.5%, and a big slowdown from the prior month. So what we're seeing, and I'm kind of wrapping this up right here, the prices are coming in...price increases are coming in slower than expected and slower than the prior months. So we're moving in the right direction here.

Steve: But, Andy, it's great we're moving in the right direction, but this doesn't mean it's over. This is what confuses me a little bit and I think a lot of people listening too. I mean, we're still looking at the Fed is gonna raise interest rates in December, except maybe half a percent instead of three-quarters of a point. They'll probably raise rates in January. We still haven't...really I don't think we've seen the impact of lower corporate profits due to higher interest rates and there's still talk of a recession in early 2023. I mean, was this a game changer where none of this stuff is gonna happen? Or are you still expecting a further slowdown in the economy?

Andrew: I wish I could say it was a game-changer, Steve, but I don't think it is. I mean, does it change the game a little bit? Sure. Does it have an impact on some of those things you mentioned, which I think are all spot on? No, not so much. I mean, the Fed is still gonna hike rates. So what it did, you know, it did take that three-quarter-point rate hike off the table. Now, we're looking squarely at a half-point rate hike. Now, a lot can change between now and then, right, between now and December 14th, which is when the Fed would next meet. So based on today, we're looking at a half-point hike. And that's what took it off the table.

So what markets are looking at, they're really looking at the fact that maybe the beginning of the end is in sight from a rate hike perspective. But that doesn't change the fact that you know, recession risk is still elevated, doesn't change the fact that we haven't seen too much of a slowdown in corporate profits with all these higher inflation numbers. Now, I will say, Steve, what you have seen, though, is sales increasing at a quicker rate than earnings. In other words, we are seeing an impact in profits by shrinking profit margins.

Amy: I think another point worth making here, Andy, too, is just when you talk about the reaction of the market to this inflation data from last week. I think I saw recently a statistic that said on most days if the S&P 500 is up, it's up about four-hundredths of a percent, right? When you get a day like Thursday, where markets were way up, but you timed the market, right, you got out because things have been just rocky and all over the place, you missed a big day.

Andrew: Oh, yeah, that was a very big day in a very big week. A lot of those gains did happen on Wednesday. I mean, you saw the S&P 500, it jumped 5.5% in one day, that's your 500 largest stocks. NASDAQ did even better, it soared by 7.4% in a single day. I mean, the weeks we saw last week, just in general, they were pretty good across the board. I mean, the bulk of the gains did come on Thursday. But the whole week, the S&P 500 rose 5.9%, and that was its best week since June of this year. The NASDAQ was up 8.1%, that was its best week since March. Bonds even had a good week, their climb, I mean, it doesn't seem like a lot, but 2.2%.

Steve: That's high.

Andrew: That's a big...yeah, I know, right? That's a big move for bonds. It's actually the second-best week for the bond market since 1988.

Steve: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, along with Amy Wagner. And if it's Monday, we must be talking to Andy Stout, chief investment officer of Allworth Financial. Andy, it was a phenomenal week last week. I mean, when that inflation data came out, markets loved it, absolutely took off. And I guess my immediate knee jerk, I get nervous when stuff like that happens. I mean, did the market get ahead of itself was it too much?

Andrew: Well, when you look at the market, where we're at and where we've come from, in terms of, you know, the highs on January 3rd where you've seen, you know, markets come down a decent amount since, and obviously, we've had a nice little rebound here over the past few weeks. But even just looking at the S&P 500, you know, just for this year itself, we're still down about, not including dividends, about 16% for the entire year. Now, I know for this quarter, you know, we were up, like, a solid 11%. So that's really good. However, we're still down. The question is whether or not we're out of the woods. I mean, who knows? Time will tell, right?

I think what we see with the S&P 500 on this shift lower is that inflation became more and more of a risk as the year progressed. And that's why you saw stocks sold off because that would mean the Fed would have to hike rates, and that raises the risk of an economic recession when the Fed is raising interest rates. Now, when we look at these leading economic indicators, Steve, you know, they do show high early recession risk, not that it's right around the corner because if you saw growth in the third quarter, you know, came in pretty decent. I know the first two quarters were negative, but I would argue those are kind of one-offs because those were impacted by import prices as well as inventories, which aren't really too indicative of the underlying strength of the economy.

So what I would like to look at is more business spending, individual consumer spending, those show that we're still at a pretty steady growth. So now when we look ahead to next year, what sort of recession risk is being priced in? Well, I think it's moderately priced in, I don't think it's 100% priced in. And if we do see a recession, you know, sometime in 2023, it wouldn't be too shocking to see some more volatility in the days ahead, but it's not a certainty, right? I mean, you can look at historical recessions and when market bottoms have occurred, here's the thing market bottoms occur before a recession is over. And so, when you think about that, trying to time your investment strategy to whether or not we're in a recession or not in recession becomes a really difficult, if not impossible, thing to do.

Amy: Another thing I think that will be interesting this week, Andy, is we have, what? Fifteen speeches from various members of the Federal Reserve. And we've seen this year, with so much attention focused on the Fed, that they speak and markets respond. Now, we're looking at 15 speeches in one week, like, what do we need to prepare for here?

Andrew: Well, I think one of the bigger ones has already happened today. Federal Reserve Vice Chair, Lael Brainard, she said that the Fed will probably need to slow down their pace of rate hikes soon, specifically, and I'll quote her here, "It will probably be appropriate, soon, to move to a slower pace of increases." So that reinforces where the market is pricing, and we can see what...when I say where their markets pricing, there's like specific securities you can trade that predict or trade or make assessments based on where the Fed will be in terms of rate hikes or how quick they'll hike rates. And that really reinforces that the Fed will downshift to a half-point hike at its December meeting from these three quarter-point hikes we've been accustomed to, these large outside rate hikes over the past four meetings.

So when you look at where we're at now, it certainly suggests that the Fed is shifting. But as Chair Powell said, following the Feds meeting last time, on November...yeah, early November. He said, it's not necessarily about how quickly we hike, but he did indicate that we'll be at these higher rates for longer than what might be expected. So that means there could be more restrictive policy, and that does raise the risk of an economic slowdown. But, you know, that doesn't mean that, you know, stocks and bonds will move in tandem with the economy because as we've seen, from time to time, markets can, you know, they're relatively random. But if you look at it over a long period of time maybe...when I say, like, a long period, I'm talking like, three, five years, so not that long. Markets go up over pretty much every single time period, 95% of the time markets are higher over every five-year period, going back over the past 50 years.

Amy: Great perspective as always, Andy. Here's the Allworth advice. If you stay in the market when times are tough, you're going to be there to take advantage of huge gains, right, as we saw last week. Timing the market, it just doesn't work out. Speaking of markets, the crypto market in a bit of a crisis, we're gonna talk about that. Say you just lost tens of millions of dollars and explain what some say needs to happen to keep it all afloat. 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 night, subscribe and get our daily podcast, listen to it on your next day on the way to work or while you're at the gym. And if you got some friends, maybe you were hanging out with them over the weekend and you thought they could use a little bit of help with their money, well, share the word with them too, just search Simply Money on the iHeartRadio app or wherever you find your podcast. Coming up at 6:43 why you need to have your investment accounts organized and get things together, what you need to think through and be ready for. Steve, the IRS, sometimes you just got you just...IRS, shake your head. Now they're trying to find hundreds of, yes, billions of dollars because they never got it.

Steve: Well, they call it a tax gap. In other words, what they think people owe versus what they collected. They think the tax gap may be somewhere in the neighborhood of $500 billion a year. So obviously, Congress looks at that and says, "Oh, okay, that's found money. Let's just go get it."

Amy: "Bring that in," right?

Steve: Bring that in. Yeah, exactly. And that's why, at least from Congress's perspective, that's why they are funding an extra $80 billion to the IRS, in part to recover what they think is $500 billion a year just trickling right through their fingers.

Amy: And listen, I don't wanna overstate this, but I think it's fair to say that the IRS is a mess, right? I mean, we have seen pictures of IRS cafeterias that are just full of paper files, right? And we know they're so behind on returns, and you go to call the IRS with a question and you're gonna be waiting until December of 2029, right? Just such a mess. So, the funding for the IRS makes sense. Whether they will actually recoup this money or not, man, it remains to be seen. The money that was supposed to go for enforcement, customer service, operation upgrades, all things that I think we could all get on the same page and say, "Yeah, that's needed."

Steve: Yeah. And if you're worried about them coming after you, or maybe you have something to worry about, I don't know. But, you know, I think a lot of it boils down to, there are 6,871 pages in the tax code. I mean, it's a ridiculous number. I went to a talk years ago by Steve Forbes, and he literally had an index card that he wanted to propose as the way you file your taxes. Whenever you have a tax code that complicated, you know, there's gonna be errors made. But really what they think is going on is that there are huge numbers from crypto transactions, offshore bank accounts, flow through corporate entities. This isn't me and you, Amy. I mean, this is the big dollars that they honestly think is just going right through their fingers and they wanna grab some of it. So, well, we'll see how that shakes out.

Amy: It's not John Doe or Joe Schmo, right, it's these corporations or super-wealthy individuals that they're looking into. If you are a crypto investor, if you've been paying attention to headlines, if you're not an investor and you're glad you weren't invested, well, maybe there's a good case for you. We're talking about the crypto market and we wanna splain something that's been in the headlines a lot lately that has to do with FTX. It's hard to keep up with crypto because I feel like every two weeks there's a new kind of currency. FTX isn't a currency though, it's an exchange. It's a place that you go to, to buy and sell crypto. So that's what we're talking about here.

Steve: Yeah. And supposedly, this was the go-to place this was the trustworthy place

Amy: Like the gold standard. Yeah.

Steve: Yeah, yeah, it was, which tells you, you know, just there...not how little regulation there is, how there's a complete lack of regulation. And that's the problem. There's a...I almost wanna call him a kid. There's a guy named Sam Bankman-Fried, who built up this...first he built up something called Alameda, which is his trading arm. He set that off as a corporate entity, and then he builds up FTX. Congratulations. He's an entrepreneur in crypto. By the time he was 30, he was worth somewhere between $16 and $20 billion. Okay?

Amy: With a B?

Steve: Yeah. And so he sees crypto as the future, and he's helping bail out other crypto companies that screwed up and were making errors and whatnot. And everybody looked at them as...FTX as the white knight, as the one that was going to give credibility to crypto. Only one problem, it completely, completely nosedived. It just completely cratered in about a week's time, went from a value of somewhere around 20 billion, 30 billion, numbers are all over the place, to maybe zero, and they filed bankruptcy last week.

Amy: Yeah. It was once valued at $32 billion at exchange, now facing a shortfall of up to $8 billion. I was reading tweets a couple of weeks...late last week, I guess from the Sam Bankman-Fried as he was trying...they were super cryptic tweets, first of all, cryptic crypto tweets.

Steve: Yeah. Say that three times fast.

Amy: Yeah, exactly. Yeah, I'm not gonna try that. But he was trying to make sense of what happened here. And, you know, and part of it too is it's more expensive to borrow money right now, right? And so as you talk about what the Federal Reserve is doing, companies that are not rock solid become exposed at times like this. And that's exactly what happened with FTX, right? It's almost, when you look at what happened, like a Ponzi scheme. He took some of the money that people had invested and tried to cover some other companies with it. And then when that went south and people started to pull their investments out, right, when word started to get out to the public that, "Hey, you probably don't want your money in this exchange," $5 billion worth of people went in and said, "Give me." There was nothing left.

Steve: In one day $5 billion went out the window, in one day from people saying, "Give me my money before this thing completely breaks."

Amy: I'm getting out of here. Yeah.

Steve: And I can't blame them at all. But, you know, I don't know if there's gonna be anything left for people. And this is not FDIC-insured like your bank account and my bank account. When the money's gone, it's just gone. To give you an idea of the scale of this thing, Amy, older people will remember Enron.

Amy: Yes.

Steve: Enron was, you know, a legitimate company, but, you know, they went belly up, and a lot of people got hurt when Enron went under. The guy that oversaw Enron during the bankruptcy proceedings is now the new CEO of FTX, I mean.

Amy: Oh, I didn't know that. Wow. Wow.

Steve: Yeah. So yeah, so you got an expert in unraveling very complicated issues. But this thing ain't gonna, you know, show up tomorrow as being, "Oh, no, it was just an accounting error, guys. We're fine." It's not going to be that. And I am really, really...bummed out I don't think is, you know, where I'm at with this. It just brings to light what we've been saying all along of where crypto is. I mean, you're gonna have Justice Department probes, Securities Exchange Commission probes. There's gonna be a lot of probes going into what happened with this company, and maybe finally get some regulation in that industry.

Amy: And that's exactly what's needed.

Steve: It's what it needs.

Amy: Also, some famous faces tied to this one, you know, poor Tom Brady and his wife.

Steve: It just keeps getting better.

Amy: Soon-to-be ex-wife, fashion model, Gisele Bündchen. Like, these two are in the headlines all over the place for their divorce and all that stuff, but now they were actually one of the big investors. And it's unclear exactly...I think it's 45 million that Brady lost 25 million that Gisele lost. I mean, they're gonna be just fine. But it does go to show that when you see these big-name people, right, out there talking about these things, they could lose just as much as you can. You've got to know what you're investing in. Here's the Allworth advice, man, crypto, it's just unregulated. And we would say right now, it's just not the best long-term investment, it's more of a gamble. If you've got money that it's okay to lose, maybe then crypto, but otherwise probably not.

Coming up, second marriages can really complicate your estate plan. Take it from me, I understand. Doing nothing though makes things much worse. We've got our estate planning expert in next to discuss this incredibly important issue. 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. You know, estate planning can be messy, it can be confusing, and complicated for anyone. But when it's a second marriage, well, it is an entirely different ballgame. Joining us tonight to make sense of what our options are if maybe we are in this situation is our friend Mark Reckman. Of course, he's our estate planning expert for the law firm of Wood + Lamping. Mark, as you know, I have...my mom passed away several years ago. My dad has remarried, so second marriage there. I also am in a second marriage. So I have seen this from just about every angle, and it can get incredibly complicated.

Mark: Well, it certainly can. And doing nothing often makes it much worse.

Amy: Absolutely. So you've seen situations where nothing is done, and let's talk through that scenario.

Mark: Well, let me tell you a story of a case that came across my desk last year. A client named Dave lived in Columbus. He married Sally back in the 1980s. They had one daughter, Karen. In 2006, Sally died of cancer. So, Dave, at that point was the single parent of a pre-teen daughter. So, Dave met with a lawyer, he signed a trust and a will. Now, the will leaves all of his assets to this trust because Karen was young, the daughter was a pre-teen. The trust says that Dave's mother will manage the money for Karen's benefit until she's older, 21, 24, 25, until she's older.

Several years later, Dave meets Nancy online, of course, and they begin dating. Nancy has been married before, she has three children of her own. So the relationship goes well. Dave sells his house, he buys a new house with a single floor plan because he's got bad knees. He put the house in the name of his Trust and the house is paid for.

Amy: And he buys it himself, right? He hasn't married Nancy yet, Nancy isn't part of this buying-the-house process, right?

Mark: That's right. This is before they got married, Dave downsized to a single-floor plan. And that house was free and clear, put in his trust. And then in 2016, Dave and Nancy get married. Now, Nancy has a house, which she sells at a loss and she moves into Dave's house. Five years go by, neither one of them do anything to update their estate plan. Dave developed a kidney problem, which he ignores. He developed sepsis and he dies in early March at the age of 64.

Amy: Oh, no. So she's living in his house, which is owned by the trust.

Mark: That's right. And the trust is everything to his daughter, Karen, who was now 28 years old. Now, Dave also kept all of his bank accounts and his investments in his own name. And under the terms of his trust, all of those assets also go to Karen. And they're ready to be distributed because Karen is now over the age of distribution in the trust. But Amy, it gets worse, Dave's mother who's in charge of the trust is now nearly 90 years old. She has no idea what to do or where to turn. So Nancy is living in the house she doesn't own.

Amy: And has no money.

Mark: She has no money coming from her husband. She doesn't even have enough money to pay the funeral.

Amy: What a mess.

Mark: Now, she's entitled to Dave's Social Security, but that only amounts to about $1,500 a month. Dave's pension died with him because he set up his pension payout before he met Nancy. So there's no survivor benefits from Dave's pension. So Nancy is very much up a creek without a paddle.

Amy: Absolutely. So how does this play out?

Mark: Well, I guess the first question that everybody asks when I tell the story is, "Well, that's not fair." Well, you know, that depends, Amy, on your point of view. Most of Dave's money was accumulated by him and his first wife. In fact, most of it was life insurance on his first wife's life. So is it unreasonable for Dave to leave that to his daughter? Is it unreasonable for his daughter to expect to receive that money? Well, probably not. But Nancy and Dave had a wonderful relationship. She cared for him when he got sick. She gave up her own house, and she now has nowhere to live. And she's stuck with this funeral bill. So it's a god-awful mess.

Now, what ultimately happened, in this case, is that the daughter was a good moral character. She stepped up and she authorized the trust to pay the funeral bill, and she is letting her...she has an excellent relationship with Nancy who was her stepmother. And she's letting Nancy stay in the house as long as Nancy pays all the taxes and utilities and things of that kind. And how long that will last, Amy? I don't know. Nancy is at the mercy of her stepdaughter's generosity, which at this point has been fine, but it's very uncertain in the future.

Amy: Anything can change at any point, right?

Mark: It could change at any point, especially if the daughter gets married, has kids, and now needs money to buy her own home.

Amy: We're joined by Mark Reckman, our estate planning expert with the law firm of Wood + Lamping with kind of a cautionary tale on what can go wrong, right? If you are in a second marriage and there's no estate planning that takes place, things can get incredibly messy. What else do we need to learn from this, Mark?

Mark: Well, the main concept is to sit down and decide what you want. Perhaps you want your...perhaps you feel a loyalty to your children, perhaps you have a loyalty to your new spouse, perhaps you feel loyalties to both, but sit down and decide what you want. Don't ignore the problem. We are not immortal. We don't have a warning always when our health is gonna turn bad. Amy, not many people saw the COVID epidemic coming.

Amy: No.

Mark: And over a million Americans died.

Amy: Yes, great point. And I think...

Mark: So don't be caught unprepared.

Amy: You know, and also...and I'm always a big fan of sitting down and having conversations with family members, right, so that everyone knows what to expect. But especially, I think, in second marriages, right, where there's children and stepchildren and a first spouse and a current spouse, things get really tricky. And so if you wait until...even if you do have an estate plan but it's never been discussed with anyone, you know, that can be really tricky, too. So I think having conversations early and often about how this can look like or what to expect is also incredibly beneficial.

Mark: Absolutely. And to drive that point home, it certainly would have helped this family a great deal if we really knew what Dave wanted, but he didn't say. We didn't know, we had to guess.

Amy: That's tough. So if you got a re-do, right, if Dave and Nancy had to re-do, on this, as soon as they got married, they would have made an estate plan.

Mark: And my guess is that Dave probably would have amended his Trust, to say that Nancy could stay in the house for some period of time, three years, five years, maybe the rest of her life, as long as she paid all the costs associated with it, but when she was done with the house that the house would go to Dave's kids and not Nancy's kids. That's a common balance that a lot of people will strike.

Amy: But luckily, also Karen, the daughter doesn't need that money right now, right? If she was in a financial situation where she needed the money, even if the relationship was good, that would have been really, really sticky for them.

Mark: Really sticky. That's exactly right.

Amy: So the advice from you is to make sure that the estate plan is set up and communicated to everyone.

Mark: That's right. And to be sure that you think through the long picture, the big picture.

Amy: Great advice as always from our state planning expert from the law firm of Wood + Lamping, Mark Reckman. 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 you'd like for us to talk about on the show? There's a red button, you can click on. If you're just listening to the show on the iHeart app, click on that button, record your question, it comes straight to us, we'd love to talk about it right here on the show. Straight ahead at 6:43, an experiment that shows how impactful your money can be when you give it away. This is great cutting-edge research and it's really, really interesting.

This happens quite often, Steve, right? We get a new client coming into Allworth and we start talking to them about IRAs, 401Ks, or investment accounts, and all of a sudden we realize they've got like a dozen of them, right? I will also say it might happen, and I won't give any specific examples, but say when you remarry, and the person that comes into the marriage. And you're looking at it like, "Wait, what?" I'm not gonna throw any names out there.

Steve: Asking for a friend.

Amy: Exactly. Asking for a friend. But this is a pretty common situation. And if you're someone who's interested in, "Hey, let's get organized here, let's start really talking seriously about retirement and financial goals," This might be one of the first things to tackle.

Steve: It is. And, you know, everybody walks in, when they meet with an investment advisor, with, you know, certain questions, certain goals. And usually, performance is up there, you know, "Tell me a little bit about yourself and what your company can do." And if they show up with about 30 different IRA statements, I just say, "Hey, before we get into any of that, you need to kind of get a handle on things, don't you?" You know, can you imagine?

Amy: Yes. How do you make sense of it? Yeah, and there's different fees and investment options and all kinds of things. And maybe, ultimately, consolidating all of them doesn't make the most sense, but let's pare it down a little bit here, right? Let's get this under control.

Steve: And there's some confusion out there over how you can do it. I mean, I've gotten calls and this happens on a regular basis, "Hey, my wife and I wanna combine our IRAs just to make life simpler." Love to, can't do it, illegal, you know, IRA stands for...

Amy: Her IRA and your IRA, different.

Steve: Yeah, IRA stands for Individual Retirement Account. But, you know what, if you've got four or five, six different IRAs, yeah, you can combine them. I'm not saying give them all to one advisor, but you can combine them or maybe have one managed by an advisor, one that you keep on top of yourself, whatever you want. But you don't have to have five or six, you can combine those. And yeah, people get tripped up by, "Well, I thought there's only one rollover a year you can do." Yeah, a rollover is where you take possession of the money for up to 60 days, you can combine, you can do transfers from one IRA to another, there really is no limitation on that. So I think step one, and you're right on the money talking about organization, let's go ahead and maybe do a little consolidation if the goal is the same. You don't have to have accounts all over the place. And you know what? When you're gone someday, your kids might spend years tracking down all of those different accounts. So consolidation will keep your and your heirs' lives a lot simpler.

Amy: Yeah. All right, so you get to the point where you've got your accounts figured out, right? And they're maybe consolidated, you're down to just a few, then figure out the dreaded b-word. And I'm talking about a budget here. And I don't mean necessarily, you need to know, on a daily basis, what you're spending, but what's a realistic amount that you will need in retirement, right? And don't try to cut back on, "Hey, this is what we're spending now, but I think we can get it down to this amount in retirement." You don't wanna cut back in retirement, you wanna continue living the way you always have. You don't wanna have to change that up. Or maybe you wanna live a little veteran retirement, but certainly not worse.

Steve: I saw a good friend last night for the first time in about two years since he retired. And, you know, "How are you doing? You enjoying life?" And he's only a couple of years older than me, and he said, "I am loving it. I am traveling, we're doing this, we're doing that." And he spent about 10 minutes telling me, and I was happy to hear it because he's a good friend. And I said, "You know what? That just goes to show you if you're not spending more money at least in the first two years of retirement than you were when you were working, you're not doing it right." I mean, that's why you worked so hard to enjoy life.

So, you know, I've heard, you know, there's lots of different rules of thumb about, you only need 80% of your income, which I think is a total bunch of you know what. One of the best guidelines I saw was expect to spend maybe 20%, 10% to 20% more the first couple years of retirement than you are right now. I think that's reasonable because all those things you put off, you wanna get done while you're healthy.

Amy: Well, and know yourself too, right? I met a couple who, literally the day after retirement was done, they packed up their suitcases and they put their stuff in storage and they headed to Europe. They were months in Europe, right? And they had the absolute times of their life. They've been planning this for years, right, but probably significantly more expensive than the way that they had been living here. They had planned for it, they knew that those first years or two were gonna be more expensive, and they could handle it.

So I think also that conversation with your spouse about, what do we want this to look like? And you know what, I mean, to that point, starting out with a trip or something like that might be a great thing because, many times, you go from very different kinds of separate lives of at least one of you being in the office all day, you know, Monday through Friday. It's an adjustment, I think, an emotional adjustment for both of you being at home. So having something kind of fun to do together to sort of kick off this next stage of your lives, not a bad thing to plan or think about.

Steve: No, and talking to your spouse is probably number one, we probably should have started off on that one. Because I have seen you know, one spouse just grin and lit up when he started saying, "What do you plan on doing in retirement?" And the other spouse turn to the first and kind of look at them like, "Who are you, and what are you even talking about?

Amy: You wanna do what?

Steve: Yeah, which tells me maybe communication might be one of the keys to planning for retirement, no doubt about it. I'll tell you it's something that everybody has to do. And I still run into this with 75, 80-year-olds that, "Oh, I'll get to. Yeah, I know I need to do that." Would you please update your legal documents, don't go into retirement without updating wills, trusts if you have them. Beneficiary designation is very important. I just had a call this morning about, "Hey, I just updated my will, that covers my IRA, right?" "No." "Okay, let's get the beneficiary changed on that." That's what's important, not what's in your will for something like an IRA.

Amy: It is so important. And yes, update beneficiaries because those supersede wills. And I even know the story of, you know, a man who had saved and saved and saved. He ended up having millions of dollars, you would have never known it from looking at the way that he lived. But there were several charities that were sort of near and dear to his heart and he wanted to make sure the money went to them. He had the will drawn up but never signed it. And as the result, that money ended up going to a nephew that was estranged that he was not close to at all. Right? So it's just so important to make sure that these things are taking...you just never know when something could change, when something could go wrong. But these are all things that are important to just get these ducks in a row, the sooner the better.

Steve: Yeah. And make sure your loved ones know where all these documents and information is.

Amy: So important.

Steve: Yeah, otherwise it's gonna be a mess when you're gone.

Amy: Here's the Allworth advice. Knowledge is power. Knowing where those investments live, where your documents are, can lead to smarter decisions and just peace of mind for everyone. Coming up, if you love to just spread happiness in the world, well, what do you want to do? Give away money, appears to be the answer, really interesting experiment done that proves it. We're gonna tell you about 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. Imagine you had $2 million of just extra money sitting around and you and your spouse are talking about it. What are we gonna do with this money? Well, there was such a couple, we don't know who they are because they're anonymous. But what they decided to do with that money, they contacted TED, right, TED Talks, and they said, "We wanna do an experiment. We wanna give this money away. But we also want a social experiment done at the same time about happiness." Hence, this experiment was born where...what was it, 2,000 people? Two hundred people.

Steve: Two hundred people. Yeah.

Amy: Two hundred people got $10,000 and the only rule about that money was, you've got to spend it in three months.

Steve: Yeah. And what they found is that people were happier after they received $10,000.

Amy: Amazing. Breaking news.

Steve: The study was done at the University of dah, I mean come on. You know, it was really interesting. I'm reading into the study and, you know, I got into it a little bit. And the way they contacted these people that eventually got the money was by Twitter, basically saying, "Hey, we wanna give you $10,000. We need your bank information." How many people would have looked at that and said, "No, nice try." But that was pretty...that wasn't even a good effort.

Amy: Yeah. The interesting thing is, though, they did contact people through Twitter, and people from all different countries, right, so not just here in the U.S. So they had sort of third world countries, you know, countries that are in deep poverty or whatever. And so this money was distributed to people who've got six-figure salaries and people who are incredibly poor. And what they found was the biggest kind of bang for the buck, right, the most return on that happiness was often for people...and think about $10,000. I think, even when I first got out of college, right? But when you look at people in these lower...like, the impact that that money made was really overwhelming for them. And they put it in numbers, and they said, "Hey, by giving this money away, this couple generated 250 times more happiness than they would have if they had kept it to themselves." I wonder if they feel that way. I don't know.

Steve: Yeah, so poor people appreciated the $10,000 more than rich people. Okay, another shocking discovery. Yeah.

Amy: That's the university of dah, right?

Steve: Yeah, but good for them. I mean, that's a nice thing to do. And I know you gift money, I gift money. Charities are real important in my and my wife's lives, and I feel good making sure that that money goes to people who really, really need it, it's a good thing to do.

Amy: And that's the biggest takeaway from this research, right? Giving that money away does make a difference for you and the people receiving it. And the more impact that you can have, right, the better that everyone feels. Interesting research. Thanks for listening. We hope you're gonna tune in tomorrow, we're gonna talk about ways to save money this holiday season when you're spending so much. You've been listening to "Simply Money" presented by Allworth Financial and 55KRC The Talk Station.