November 8, 2024 Best of Simply Money Podcast
Election Results and Your Investments: Stay the Course
On this week’s Best of Simply Money podcast, Amy and Steve delve into the implications of the recent presidential election on the financial markets and investment strategies.
The episode also touches on the significance of the Federal Reserve's actions over political changes and encourages investors to control what they can, such as their spending and investment strategies, while letting go of factors beyond their control.
Download and rate our podcast here.
Transcript
Amy: Tonight, Donald Trump wins the presidency. What should you do as far as an investor? Well, maybe you should keep things the same. We'll get into that. You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner along with Steve Hruby. Perhaps the most surprising thing is that we actually know who the President-elect is at this point yesterday at this time. We were not anticipating that we might have this answer and we do. And if you want to dig a little deeper into what were voters thinking when they went to the polls and voted yesterday, it appears that the economy was one of the major things on their minds. I don't know that this is a major surprise. I think many of us sort of vote that way without being the biggest thing in mind.
Steve: Yeah. No matter where you fall on the political spectrum, it sure is good to have a result known. This is something that I think a lot of folks thought was going to drag on potentially for weeks. So, it's nice to wake up and see a result, no matter where you fall, because we've been talking about it for quite some time here. No matter who is the president, the markets will go up over the long term. Now, you said it yourself as far as people thinking that Kamala was going to win versus Trump. It does bring it back to Main Street inflation. The fact that things are more...
Amy: How much you're paying for eggs, right?
Steve: Exactly. Even though the economy has been growing, the markets have been doing well. Your 401(k) has been growing. Your investments have been growing. That's really what it boils down to. And again, we know that there is a winner and we know that the markets are going to continue to go up over the long term. Again, no matter where you fall on the political spectrum.
Amy: Yeah. And it's funny because I've talked to a number of investors who said, maybe we should be in the sidelines for a few weeks. And it's like, no, please stay the course regardless of whoever's in that office. However, the markets respond, right? Which has been pretty positive. You got to stay the course. And so it's like, okay, today is just an example of why everyone was really, really nervous about the markets in the wake of this election. And it's like, okay, moving forward, right? We've got this. We're looking on. And keep in mind, too, a lot of this stuff is very short-term noise because usually, the markets are looking out six months. So, it's like today it paused and said, "Okay, here's the new information. Here's how we think this will affect the businesses that make up the stock market and marching forward."
Steve: Yeah. And prior to the election, there's a lot of fear. No matter what side of the aisle you're on, people think that if the other side wins, everything's going to spiral out of control. So, they're tempted to sell and sit on the sidelines and wait to see some kind of a result. Obviously, as financial advisors, as fiduciary financial advisors, we have been helping people not make that decision, focusing on the financial plan, looking forward at their financial situation, needs, and goals, and showing them that selling to cash is almost never a good idea. And here it is. It's proven. Time and time again will be proven because, you know, we talked about it just the other day. If you miss the best 10 days in the market over the span of your investing lifetime, you are out a ton of money.
Amy: Yeah, it makes a big difference. And I was talking to an investor about the election yesterday, right? They had some jitters, understandably. They were worried about what the outcome was going to be, how it would affect the markets. And I said, "You know, for anyone who listens to our show regularly, they're very used to Andy Stout, our chief investment officer. He's on every Monday bringing us his perspective." And I had been on a call with Andy earlier this week. And it was like he was talking... There's no one on the planet, I think, who was talking about the election in more calmer and calmer terms than Andy was. I mean, it was like he was just talking about going to the grocery store and buying bread, right? It was in his point was, "Listen, I look at so much historical data. I know that emotions are running high about this election. But what I think will actually have the larger impact long-term is not whoever ends up in the Oval Office or however long it takes to get those results." What he has been looking at more closely is the Federal Reserve.
Steve: Yeah. And that's something that we have been talking about for years as well. You know, in 2016, we told you the Federal Reserve was going to raise interest rates by one-quarter of a point. We told you Wall Street was expecting the increase. So, it was baked in, into stock prices already. In other words, that had more of an impact on stock prices than the election.
Amy: Yeah. And you're talking about 2016. And I think that's important. We actually were talking about this with some of our producers yesterday. And we're like, "What were we talking? This feels very similar. What we're talking about right now." You know, I've been doing the show. I was doing it in 2020. I was doing it in 2016. You know, and I'm like, "Gosh, this feels really familiar." We pulled up the actual rundowns with the outlines of the show from those days to say, like, "Hey, you know, everyone was saying this time feels different. Is it different?" And it's like, "Nope. It actually wasn't. We were giving the same advice four years ago and eight years ago that we are now. And the perspective was the same." We were like, "Okay, we have a new president. Here's what the Fed's going to do, right?" And it's just like, it's good perspective to feel like, okay, maybe today we can all now take a collective sigh of relief. We have this major divisive issue in our country behind us now. Let's look at what the economic indicators are. Let's look at what the data is showing us and figure out, you know, where we're going to go moving forward. Yeah, some of that could have to do with Donald Trump and the decisions he makes as president and those policies. But what we have seen historically is that, you know, eight years ago, we were talking about Brexit, you know.
Steve: Yeah, I wanted to draw that parallel as well, because back in 2016, Brexit and how that could have an impact on stock prices more than the election could. Do you remember, Brexit is when Britain voted to leave the European Union? Fast forward to tonight. And we have other geopolitical events. Middle East war in Russia, Russia invading Ukraine. You know, we live in a worldwide economy. These are the kind of events that actually do sway the markets, especially the Russia and Ukraine situation, we've certainly seen that. The economy is really what drives the stock market, not so much the results of a political election in the United States.
Amy: You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner along with Steve Hruby. Deep breath. We have an election behind us. We have a president moving forward. If you are celebrating tonight, if you are not celebrating tonight, we'd want to just kind of bring you a little historical perspective as we always do. We think that's so important. We were talking about the same things four years ago and the same things eight years ago when it comes to control what you can control and let go of what you can't. So, looking beyond this election, as you were thinking about your retirement, your financial goals, we would say, here are the things you really need to keep in mind, right? Not splitting hairs on where you think gas prices are going to go tomorrow based on this election, where you think the Fed is going to go. You can't control those things, but there are certain things that you very much can control.
Steve: Yeah. And I brought it up earlier that a lot of people were making decisions on fear before the election. Another one that you want to be careful of is greed. Because the markets are on a bit of a tear, that doesn't mean that now is the time to take your money that's parked on the sidelines for short-term needs, emergency funds, and put it all into the market. That is certainly not something that a financial advisor who was a fiduciary would advocate. You need to have an understanding of how much cash you need to have parked on the sidelines before you make a decision on how much you invest with. So, if we look at the markets and everything's going green and it's going on a tear, that doesn't mean that it's time to get greedy either. It could be a time to revisit your financial plan and see if it makes sense to adjust your asset allocation but don't don't react on short-term news.
Amy: Yeah. Have a plan and stick with your plan. I say that's first and foremost. Don't make any decisions based on fear or on the flip side to your point, greed. Also, look at your advisor, right? Many people have a relationship and you feel like it's that person. And then all of a sudden that person leaves. They retire. And it's like you're just left reeling. If the advisor that you're working with has a team approach and you know that team, then all is not lost when that person is gone. So, you know, if you are looking around and, you know, I'm getting close to retirement, I want to partner with someone. Absolutely, have a relationship with whoever that person is. You want to make sure that there's trust there. You want to make sure that that person is absolutely a fiduciary, putting your best interest forward. But also pay attention to the team that they are working with. Do you trust that team? Do they all seem to have the same values and opinions of the person that you're working with? Because that can make a big difference. It's so funny. I've got new clients coming on board now and one of the first things that they'll ask me is, "How old are you?" They want to know how long am I sticking around. And, you know, it's funny I'll say, "Well, actually, I'm 48. In addition to that, my daughter is a finance major and there may be some day when she's here...
Steve: And a little bit of that.
Amy: ...you know, working." You go, it's like succession planning already. I've got probably 20 more years to continue working.
Steve: That's perfect.
Amy: And they're already thinking behind that. But I think it's a really smart question to ask. We've all had that situation where your doctor leaves, your attorney, whatever it is, some professional that you have a significant relationship with leaves. And it leaves you feeling adrift. And so kind of thinking ahead that, hey, this person could leave and what would that relationship look like after that? It's a really smart thing to think through.
Steve: Yeah. When you know that your advisor has a team-oriented focus, then you know that there's a business continuity plan. Or you just work with somebody like Amy, who has a daughter, that's a finance major and that's the continuity.
Amy: A family continuity plan.
Steve: Exactly. Some other things to focus on that we just need to be aware of, because in the United States, it's up to us as the individual to make sure that we are making the best decisions for ourselves and our family when it comes to retirement planning. And a trend that we're always talking about is open communication. Don't lack communication because, you know, there's your spouse, there's your children, there's your financial professional, there's your estate planning attorney. You can't be the only one that knows your financial and legal situation. This is a team-oriented situation where everybody needs to work together to ensure that you're going to get across the finish line and that your money is going to last longer than you do.
Amy: You know, another issue I see a lot of people having, and this is something you can control, is if you have some debt being laser-focused on that debt, which I like, but at the same time, doing it to the detriment of saving. I've been doing the show for long enough to know we have been asked. If we've been asked this once, we've been asked it 10,000 times. What is more important, paying off debt or investing? Both. Maybe there's not. And you can do both simultaneously. You can siphon dollars towards debt and you can siphon dollars towards saving. Because if it's going to take you 5 or 10 years to pay off that debt, you don't want to wait 5 or 10 years to start putting money into your 401(k) or an IRA, because then you're wasting all of that time that that money can be growing and compounding. And both is actually the answer to that. And then I think, you know, we've talked about this before, but having that plan for your dollars. And we've been saying this so much recently, especially when emotions have been running high around this election. When you get nervous, when you get anxious, when you get greedy, whatever, pull out that plan and say, "Are these emotions that I'm feeling right now good for the long term for this plan? Or are they bad?" And if the answer is bad, don't make any decisions with your money based on how you're feeling right now.
Steve: Yeah, don't do the thing if your financial plan doesn't support it.
Amy: Yes. Preach, right? And I think if we could sum up, right? Everything we've been talking about for the past few weeks, you, like, just nailed it on the head right there. Here's the All Worth advice. Listen, the president is not going to be able to magically fix your money situation. He cannot get you on track for retirement. So, you're going to have to take the initiative and control what you can control. Coming up next, the changing of guard for the Dow Jones index, the company that's coming and the one that's going plus how to find lost retirement accounts. You're listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner along with Steve Hruby. If you can't listen to our show every night, you don't have to miss a thing. We have a daily podcast where you just search Simply Money. It's right there on the iHeart app or wherever you get your podcasts. Straight ahead, you have lots of questions and we're going to cover them about ETFs, exchange-traded funds, Roth conversions, divorce, and much more. But first out with the old and in with the new. What are we talking about here? The Dow.
Steve: Yeah, quite interesting. A major shake-up in the Dow. So, Nvidia is actually placing Intel on the exchange, which is a major change in guard in technology to kind of represent the downfall of what was once an industry type. I mean, Intel joined the Dow 25 years ago, but unfortunately, the status of the company, it hasn't been the semiconductor powerhouse that it could have been. It did not keep pace with many current trends.
Amy: I think there is a larger lesson here, right? It's like, okay, gee whiz, Intel's out and Nvidia is in, no surprise to anyone. Nvidia, of course, an investor darling right now, you know, growing by leaps and bounds because they are, seem to be on the forefront of AI right now. But I think maybe the larger lesson here for those who do invest in individual stocks and you feel like, "Gosh, like, this company can just do no wrong." The last high that Intel saw was in 2020. Since then, this company has been on a downward slide. You know, it's just like, no, it went back to 2000. So, it's been 24 years.
Steve: Yeah, I thought it was longer than that.
Amy: Yeah, no, I said that wrong. Yeah, 24 years. So, in 1999, you could have felt like, "Oh, my gosh, this company can do no wrong. I'm going all in." And then, you know, a year later, it reaches its high and never gets back there again.
Steve: Yeah, I mean, there's there's only 30 companies that make up the Dow Jones index. Nvidia will be one of them based on its positioning in AI and kind of leading the market in that trend. You know, not bad for a company owner who originally wanted to just make video game graphics look better. Kind of interesting where that took a turn.
Amy: Yeah, it's kind of like the Amazon story, right? Like, "Let's sell books online." And here we are, right? Here we are, all these years later. Look what happened now. You know, Nvidia, that who knows what we'll be saying about Nvidia 20 years? You know, so I just think it's a great perspective to keep in mind.
Steve: Sure. Good point.
Amy: Here's the question for you. Think back. How many jobs have you had, right? How many different 401(k) plans have you contributed to? And do you know where every single one of those dollars actually is right now?
Steve: Maybe you do, but there's a lot of forgotten retirement accounts...
Amy: A lot of people don't.
Steve: ...without even a number. It's actually 29 million forgotten retirement accounts with $1.65 trillion just hanging around out there that people simply forgot about.
Amy: Yeah, I mean, I saw that years ago and I think it still rings true. The average person changes jobs about a dozen times over the course of your career. That's 12 different 401(k)s that you might have to keep track of, right? That's a lot. And what if some of those companies, you know, 10 years after you left them are no longer in existence? You know, they file bankruptcy, whatever it is. What happened to that money if you didn't roll that money over? You know, I think this is a pretty common theme that we see for people who've had many jobs. It's just like, "Wait a second. I think I did have a 401(k) with them. I have no idea now even how to track it down."
Steve: So, by the way, this was actually implemented in a law change. The conversation we're having right now, it's such a big issue that the Retirement Savings Lost and Found Act was part of Secure Act 2.0 and it was signed into law by President Biden in late 2022 as part of the $1.7 million omnibus spending package. The goal here is to create a database by the end of the year that will enable retirement savers to search for the contact information of whoever the plan administrator was so that they can claim the benefits that they were owed. This is obviously beneficial because sometimes the reason why your 401(k) is lost is because the company went out of business. How do you find that money unless you had a point of contact to get in touch with, to talk about the next steps for claiming it?
Amy: Yeah, and I think this database is going to be really good for investors. It's a ginormous, if that's a word, a huge collaboration. You've got the IRS, the Treasury, the Social Security Administration all working together to try to get this information up and running for us. But in the meantime, what can you do? Well, number one, try to track down your old workplace. You know, that old employer, try to find old statements or old paperwork. What's the last thing you have from that business place? Are there numbers or email addresses associated with that, that you can reach out to? You know, try to contact the plan administrator directly. So, I think that's where you start. But, yeah, to your point, your money may be in an abandoned plan. That company may not be in existence anymore.
Steve: And the Department of Labor does have an older database for abandoned plan search program. This was started back in like 2006. And with that, you can determine whether or not a former employer now has terminated their plan or not and get pointed in the right direction for the next steps. And now the kind of cool thing about this stuff is if you do have or you suspect that you have an abandoned plan or just a forgotten one, it's almost like a little treasure hunt. There's money at the end of a rainbow here that you may or may not be able to fold back into your financial plan and to make sure that it's helping drive your goals forward. You know, it's actually pretty exciting when we work with somebody and we help them find an old retirement plan that they forgot about because it's money that you didn't know you had.
Amy: Yeah. Or better yet, just never lose track of it, right? Be very intentional...
Steve: Sure, that's better.
Amy: ...with the money that you have set aside for retirement. Here's the All Worth advice. The optimal solution here is to know where your dollars are at all times, so you don't have to jump through hoops and check databases and make calls and send emails later on. Coming up next, interest rates drops. Why did mortgage rates go the other way? A real estate expert is in next to explain what the heck is going on. You're listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner. Okay, so we have been talking about the fact that the Federal Reserve, our nation's central bank, was going to lower interest rates for months. And one of the expected sort of dominoes that we thought would fall in the wake of that would be your mortgage rates could go down, right? So, what the heck is happening right now? Joining us tonight is our Real Estate Expert, Michelle Sloan. Of course, you can hear her wisdom every Sunday afternoon right here on 55KRC on her show, Sloan Sells Homes. And she's also the owner of Remax Time. Michelle, I can't even begin to make sense of this. You know, what we anticipated is not what's exactly happening right now.
Michelle: You're absolutely right, Amy. You know, it is very, very interesting. I think a lot of people were just waiting to wait and see what the election was going to do, who was going to win. So, we have that information now. So, I'm hoping that we see a little bit of the floodgates open up because, number one, the buyers have been sitting on the sideline a little bit longer than I think they should have. Because rates have gone down. We are hovering right around 6%. You know, it goes up to six and a quarter. It hasn't gone into the fives as much as I think a lot of buyers want the rates to go into. But I think that's coming, right? We are expecting another rate decrease. And with that, I expect and I hope that more buyers will get back into looking for homes. Now, on the opposite side, there's something really crazy happening. And that's where you said, you never can predict anything in this world. You know, the sellers, there's a lot of sellers out there that are not getting showings on their properties and sellers are on the market for two, three, four weeks at a time.
Amy: Really?
Michelle: And they're wondering and their hands are up and they're looking at their real estate agent going, "What's happening here?" And, you know, we have to look for excuses, "Okay, well, we have a presidential election. Okay, it's fall. It's we're going into winter. So, that's not the greatest time of year to sell. The interest rates were high, but now they're not so high." So, we're looking at all of these reasons. And I think at this point, at least one of the obstacles is now in our rearview mirror. And we are really hoping and praying that the buyers will come back, the sellers will get their home sold, the ones that are currently on the market, and then we'll have a this is, I'm going to put quotation air quotes, ready? "A normal spring market."
Amy: We've been waiting for normal for several, several years now. I want you to touch on several things that you just mentioned and first, one of them being the presidential election, because I did see a lot of research actually that said there were a number of people that said, "I'm considering a major purchase. But for whatever reason, the presidential election makes me nervous and I'm going to wait until after." I know you don't have a crystal ball, but did you hear...
Michelle: Not yet.
Amy: ...that from people? Do you think?
Michelle: Absolutely, 100%. Yeah, there were so many people who just said, "I need to just put a hold on everything that I'm doing, put a hold on my plans to see what's going to happen." And again, you and I both know, and we talked about this, that the chances of whoever is in the Oval Office is not going to make that big of a difference if history is any indication. So, you know what? It's all about if you feel good about making the most important purchase of your life, that's all that matters. So, now I'm hoping people will look at it and say, "Okay, I'm ready now. I've been ready, but now I can actually go out, start looking again, get my pre-approval letter." And it's really interesting because over the course of the last, I don't know, 5 to 10 years, the average age of the first-time home buyer has gone up so significantly. The median first-time home buyer is now 38 years old.
Amy: Wow.
Michelle: Yeah. And so that's...
Amy: I've never heard that.
Michelle: ...the most recent research that has just come out, that's three years older than it was last year. So, in 2023, 38 minus 3 is what is that? Thirty-five.
Amy: Thirty-five, Michelle.
Michelle: And 35 years old, last year was the average age of the first-time home buyer. This year...
Amy: So, we're trending older and older.
Michelle: We're trending older and older. And there's so much that so many factors that go into it. And a lot of it has to do with the inventory and the rates and that feel good. You got to feel good if you're going to be plopping down thousands and thousands of dollars on a down payment and planting roots in a community. I mean, you've got to feel good about that. So, it's taking longer for many, many Americans to feel good about even buying that first home.
Amy: Well, and I would venture to say, and again, I look at a lot of people's financial plans, but many of them are coming out of college now with significant amounts of student loan debt. And that just makes the ability to purchase a home...
Michelle: Correct.
Amy: ...not even an option. So, you know, when I think about it through that lens, it makes sense at 38, right? I mean, I see many people in their early 40s who are still paying off those loans. But I think also, and I'm wondering if you agree that maybe buyers really still need a reality check. You know, I look at the interest rates, the mortgage rates that a lot of people have, and, you know, I've seen two and a half recently, three percent in homes that they bought, obviously, several, several years ago. So, I think there's two people that are staying on the sidelines waiting for three percent to come back around. What's your advice to those people?
Michelle: I don't think it's going to happen anytime sooner, in our lifetime again that we're ever going to see three percent again. I think that was a really weird anomaly that we're going to look back on in the history of things. And you look at the history when you're looking at stocks and bonds and people's portfolios and you look at that long term, that's going to be a blip on the radar that I don't think that we will refer to for many, many years. But I don't think we'll ever see three percent again, at least in my opinion. If we get to five percent, I would say, let's go full blast. We're all in. I think that when we're hovering around that six percent right now, it's still scaring some people.
Amy: You mentioned you are anticipating we'll hope for a normal spring market. If that is the case, what should buyers and sellers be doing right now to get ready for that?
Michelle: Well, for buyers, 100 percent, you need to know how much money you have, how much money you need to buy the type of home that you want or need. And, you know, that's the biggest thing. Getting pre-approved or at least talking to a lender about, "Okay, this is my budget. What can I get?" And then you can even go looking online and see how much of a house that gets you in the Cincinnati area. The price of homes are never going to... I can't say never will likely never go down. We may see some stabilization, but, you know, chances are the home prices are going to continue to go up. We have still a housing shortage of four million homes in the United States. That's crazy talk. So, if you're looking to buy in the spring, you need to have patience. You need to save your money. You need to be ready. Get pre-approved and you need to choose a buyer's agent who will work for you and with you to make sure that you're set up for success.
Amy: So, now is the time, right? To start getting ready. The presidential election is behind us. We expect interest rates, mortgage rates to continue to come down. So, if you are ready to jump in, to the spring markets, make sure you're ready for that. Our Real Estate Expert, Michelle Sloan, great advice. As always, you're listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner, along with Steve Hruby. Do you have a financial question you want us to answer? We can help you with that. There's a red button you can click on while you're listening to the show. It's right there on the iHeart app. Record your question. It's coming straight to us and we have some questions to get to tonight. The first one is from Scott in Westchester.
Scott: I listen to your radio show every night when I am driving home from work. Can you please explain what exchange-traded funds are?
Amy: Good question. And also, thanks for listening. I actually had this conversation yesterday with someone who said, like, "Listen, can you make sure that my wife fully understands the difference between a stock and a bond and a mutual fund and an exchange-traded fund?" And the way that I explain it is, I almost think like, an exchange-traded fund is sort of the evolution of mutual funds, right? Mutual funds were sort of the first step into rather than investing in an individual company's stock. You can invest into a basket of stocks, right? And then exchange-traded funds sort of were like the evolution of that, which are you can buy and sell these at any time. And also fees tend to be lower in exchange-traded funds, depending on which ones that you invest in. But for most to invest in, you know, highly diversified ETFs that track things like the S&P 500, the Russell 4000, like, those tend to be really well diversified and also lower fees.
Steve: Yeah, I think one of the big standout differences beyond fees is and you said, I just want to highlight again, which is being able to trade an ETF during market hours, whereas a mutual fund only sells at the very end of the day when the markets close. So, it gives you a little bit more control as well. Next question from Warren in Mason.
Warren: I'm 48 years old. If money can be taken tax-free from a Roth IRA after 59 and a half, why not convert all of my IRA money to a Roth?
Steve: You know, honestly, it's a great question, but it depends on how much IRA money you have. If you've been a good saver and you've rolled over multiple 401(k)s into an IRA and you're sitting on, I don't know, $400,000 of pre-tax dollars ready to convert to Roth, then what you're doing is you're kicking yourself into a very high tax bracket if you do that all at once.
Amy: Triggering a very high tax bill.
Steve: Sure. Yeah, I mean, there are opportunities, maybe spread this out strategically, working with an advisor and a CPA. It's a great question. It's a great strategy, but it's also not something that you want to make mistakes with, especially if you're converting too much at one time.
Amy: Yeah, I have clients that I met with last week and we actually met in their CPA's office and they are in the process of every year looking at how much money does it make sense to convert? And ultimately, the goal is to convert all of it. But, yes, over the course of several years. So, it's like, "Okay, how far are we from the top of this tax bracket? We don't want to kick you into the next tax bracket. Let's give ourselves a little bit of breathing room there." And that's the amount that we end up converting. So, this is a great conversation to be having with both your advisor and your accountant. The next question comes from Arlene, who lives in Fort Thomas.
Arlene: I am in the process of getting a divorce. Do I want the house or the retirement accounts?
Amy: Arlene, first of all, sorry to hear about this. Unfortunately, I've been here and done that too and been through this process and I know what an emotional time it can be. One of the things I'm really grateful for is that I do have the financial background that I do. And when we were having conversations during that time about who gets the house, what I through is well we bought this house with both of our incomes and even just keeping up the yard and things like that, right? It was a bigger yard. The deck was going to need to be replaced. It was like it was too much for me. So, that was one consideration. And the other thing is you can fight tooth and nail for that house because it's such an emotional thing. You've got so many memories. Maybe you raised your children in that house. But it may not make sense for either one of you to keep it. And if it does, what you have to think about is, you know, can you handle that upkeep through the years? Where on the flip side, those retirement accounts are going to continue to grow and they could set someone up really well in retirement. And I think, you know, so many people think about equitable, right? It seems equitable that one of us gets the house and one of us gets the retirement. But it's like, what is fair? And I think you have to look at those assets just beyond the dollar amount and say, "Long-term, right? What's this house going to be with? What is worth? What is this? What are these retirement accounts going to be worth?" And I think it becomes a much bigger conversation.
Steve: And then we have Melanie in Crestview Hills.
Melanie: Can you help me understand Social Security's spousal benefit? And do we both have to be claiming at the same time to get it or not?
Steve: A very good question. So, obviously, Social Security is part of the traditional three-legged stool that historically folks in the U.S. had, which was your pension, your Social Security, and your own investments, probably a 401K. Now, it's more like two or maybe one-and-a-half-legged stool. So, making the best decisions you can with Social Security is certainly important, maybe more important than ever. But ultimately, what it is, is collecting a monthly payment based on your spouse or even an ex-spouse, based on that person's earnings. And the max spousal benefit that you can receive at full retirement age, the spouse at full retirement age is 50% of their Social Security benefit. If you collect before they reach full retirement age, then your benefit is permanently reduced. There are some exceptions qualifying, you know, child care, you know, a dependent that's in child care. There's different situations, but you need to be careful about when you collect and how old you are and how old the spouse is when you collect.
Amy: Coming up next, it's just been a week, right? Regardless of where you are on the political spectrum, whether you are celebrating tonight or a little bit defeated, there's just so many emotions running wild. We want to just keep some perspective on your money. We'll get to that next. You're listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner along with Steve Hruby. Do you ever look at someone you know and you're like, "They've saved so well. Their retirement seems amazing. They seem like they can do things financially that I cannot. What's different between them and myself?" Well, I can tell you as we pull back the curtain, because we have the privilege of working with a lot of people who have been really smart with their money. Most of them, what it comes down to, is understanding how markets work, understanding how the economy works, and understanding what their financial plan is. And that when markets are up or markets are down, the plan is the plan, right? They stay the same. They're not calling me every two weeks saying, "Do you think a recession is coming?" Why? Because they're educated enough and they understand that a recession is always coming. It's a normal part of the market cycle, but they have weathered a number of those. And the reason why I say they're so smart is they have reaped the rewards.
Steve: Yeah, absolutely. They've reaped the rewards. If they have made mistakes in the past, they've learned from their mistakes. There's certainly folks that I work with that are very successful and they have stories about trying to time the market 30 years ago that they completely regret and wish they wouldn't have done, but they were able to recover from with the amount of time they had in front of them at the time. You know, they take those lessons, they apply them to their own situations and they keep moving forwards. It's also folks that live below their means. I mean, honestly, that when you look at the financial plan, it's how much you're spending. Some goals are going to be reoccurring. Some are going to fall off. There's your housing, utilities, groceries, gas. We're not getting away from that. Health care, we're not getting away from that. Maybe you have a travel goal that falls off when you're 80 years old or a vehicle purchase every 4 years or something. They have their spending mapped out and understanding of how they pay for things between their fixed income and their investments. And you bring up a good point because when it comes to your investments, the financial plan is the blueprint, the investments, or the building blocks. The more building blocks you have, the more robust your plan can be. But also you can make mistakes if you let emotions take control, especially in weeks like this and, you know, recent history here. There's the ability to look at the financial plan and see that no matter what happens in the markets, you will be fine.
Amy: And if you are someone who made this mistake, right? Maybe you took your money out of your 401(k) because you were so worried about this election. How do you recover? Well, number one, I think, yes, you learn from that mistake. But second, you build your plan. You have this conversation with a financial adviser. You have your conversation with your spouse. What are our long-term financial goals, right? Keep this mistake close to your mind in the fact that you don't want to make it again and stick with that plan, right? In times when we just talked about 2016, it was Brexit. We've had so many geopolitical events. We've had different presidents. We have had so much that has impacted the economy and the markets. But here's the thing, every single time the markets have rebounded to new highs, and those who stayed in the markets, they reaped the rewards of that. Thanks for listening tonight. We hope you're going to tune in tomorrow. We're talking about how another interest rate cut could impact you. You've been listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station.
Steve: Yeah. No matter where you fall on the political spectrum, it sure is good to have a result known. This is something that I think a lot of folks thought was going to drag on potentially for weeks. So, it's nice to wake up and see a result, no matter where you fall, because we've been talking about it for quite some time here. No matter who is the president, the markets will go up over the long term. Now, you said it yourself as far as people thinking that Kamala was going to win versus Trump. It does bring it back to Main Street inflation. The fact that things are more...
Amy: How much you're paying for eggs, right?
Steve: Exactly. Even though the economy has been growing, the markets have been doing well. Your 401(k) has been growing. Your investments have been growing. That's really what it boils down to. And again, we know that there is a winner and we know that the markets are going to continue to go up over the long term. Again, no matter where you fall on the political spectrum.
Amy: Yeah. And it's funny because I've talked to a number of investors who said, maybe we should be in the sidelines for a few weeks. And it's like, no, please stay the course regardless of whoever's in that office. However, the markets respond, right? Which has been pretty positive. You got to stay the course. And so it's like, okay, today is just an example of why everyone was really, really nervous about the markets in the wake of this election. And it's like, okay, moving forward, right? We've got this. We're looking on. And keep in mind, too, a lot of this stuff is very short-term noise because usually, the markets are looking out six months. So, it's like today it paused and said, "Okay, here's the new information. Here's how we think this will affect the businesses that make up the stock market and marching forward."
Steve: Yeah. And prior to the election, there's a lot of fear. No matter what side of the aisle you're on, people think that if the other side wins, everything's going to spiral out of control. So, they're tempted to sell and sit on the sidelines and wait to see some kind of a result. Obviously, as financial advisors, as fiduciary financial advisors, we have been helping people not make that decision, focusing on the financial plan, looking forward at their financial situation, needs, and goals, and showing them that selling to cash is almost never a good idea. And here it is. It's proven. Time and time again will be proven because, you know, we talked about it just the other day. If you miss the best 10 days in the market over the span of your investing lifetime, you are out a ton of money.
Amy: Yeah, it makes a big difference. And I was talking to an investor about the election yesterday, right? They had some jitters, understandably. They were worried about what the outcome was going to be, how it would affect the markets. And I said, "You know, for anyone who listens to our show regularly, they're very used to Andy Stout, our chief investment officer. He's on every Monday bringing us his perspective." And I had been on a call with Andy earlier this week. And it was like he was talking... There's no one on the planet, I think, who was talking about the election in more calmer and calmer terms than Andy was. I mean, it was like he was just talking about going to the grocery store and buying bread, right? It was in his point was, "Listen, I look at so much historical data. I know that emotions are running high about this election. But what I think will actually have the larger impact long-term is not whoever ends up in the Oval Office or however long it takes to get those results." What he has been looking at more closely is the Federal Reserve.
Steve: Yeah. And that's something that we have been talking about for years as well. You know, in 2016, we told you the Federal Reserve was going to raise interest rates by one-quarter of a point. We told you Wall Street was expecting the increase. So, it was baked in, into stock prices already. In other words, that had more of an impact on stock prices than the election.
Amy: Yeah. And you're talking about 2016. And I think that's important. We actually were talking about this with some of our producers yesterday. And we're like, "What were we talking? This feels very similar. What we're talking about right now." You know, I've been doing the show. I was doing it in 2020. I was doing it in 2016. You know, and I'm like, "Gosh, this feels really familiar." We pulled up the actual rundowns with the outlines of the show from those days to say, like, "Hey, you know, everyone was saying this time feels different. Is it different?" And it's like, "Nope. It actually wasn't. We were giving the same advice four years ago and eight years ago that we are now. And the perspective was the same." We were like, "Okay, we have a new president. Here's what the Fed's going to do, right?" And it's just like, it's good perspective to feel like, okay, maybe today we can all now take a collective sigh of relief. We have this major divisive issue in our country behind us now. Let's look at what the economic indicators are. Let's look at what the data is showing us and figure out, you know, where we're going to go moving forward. Yeah, some of that could have to do with Donald Trump and the decisions he makes as president and those policies. But what we have seen historically is that, you know, eight years ago, we were talking about Brexit, you know.
Steve: Yeah, I wanted to draw that parallel as well, because back in 2016, Brexit and how that could have an impact on stock prices more than the election could. Do you remember, Brexit is when Britain voted to leave the European Union? Fast forward to tonight. And we have other geopolitical events. Middle East war in Russia, Russia invading Ukraine. You know, we live in a worldwide economy. These are the kind of events that actually do sway the markets, especially the Russia and Ukraine situation, we've certainly seen that. The economy is really what drives the stock market, not so much the results of a political election in the United States.
Amy: You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner along with Steve Hruby. Deep breath. We have an election behind us. We have a president moving forward. If you are celebrating tonight, if you are not celebrating tonight, we'd want to just kind of bring you a little historical perspective as we always do. We think that's so important. We were talking about the same things four years ago and the same things eight years ago when it comes to control what you can control and let go of what you can't. So, looking beyond this election, as you were thinking about your retirement, your financial goals, we would say, here are the things you really need to keep in mind, right? Not splitting hairs on where you think gas prices are going to go tomorrow based on this election, where you think the Fed is going to go. You can't control those things, but there are certain things that you very much can control.
Steve: Yeah. And I brought it up earlier that a lot of people were making decisions on fear before the election. Another one that you want to be careful of is greed. Because the markets are on a bit of a tear, that doesn't mean that now is the time to take your money that's parked on the sidelines for short-term needs, emergency funds, and put it all into the market. That is certainly not something that a financial advisor who was a fiduciary would advocate. You need to have an understanding of how much cash you need to have parked on the sidelines before you make a decision on how much you invest with. So, if we look at the markets and everything's going green and it's going on a tear, that doesn't mean that it's time to get greedy either. It could be a time to revisit your financial plan and see if it makes sense to adjust your asset allocation but don't don't react on short-term news.
Amy: Yeah. Have a plan and stick with your plan. I say that's first and foremost. Don't make any decisions based on fear or on the flip side to your point, greed. Also, look at your advisor, right? Many people have a relationship and you feel like it's that person. And then all of a sudden that person leaves. They retire. And it's like you're just left reeling. If the advisor that you're working with has a team approach and you know that team, then all is not lost when that person is gone. So, you know, if you are looking around and, you know, I'm getting close to retirement, I want to partner with someone. Absolutely, have a relationship with whoever that person is. You want to make sure that there's trust there. You want to make sure that that person is absolutely a fiduciary, putting your best interest forward. But also pay attention to the team that they are working with. Do you trust that team? Do they all seem to have the same values and opinions of the person that you're working with? Because that can make a big difference. It's so funny. I've got new clients coming on board now and one of the first things that they'll ask me is, "How old are you?" They want to know how long am I sticking around. And, you know, it's funny I'll say, "Well, actually, I'm 48. In addition to that, my daughter is a finance major and there may be some day when she's here...
Steve: And a little bit of that.
Amy: ...you know, working." You go, it's like succession planning already. I've got probably 20 more years to continue working.
Steve: That's perfect.
Amy: And they're already thinking behind that. But I think it's a really smart question to ask. We've all had that situation where your doctor leaves, your attorney, whatever it is, some professional that you have a significant relationship with leaves. And it leaves you feeling adrift. And so kind of thinking ahead that, hey, this person could leave and what would that relationship look like after that? It's a really smart thing to think through.
Steve: Yeah. When you know that your advisor has a team-oriented focus, then you know that there's a business continuity plan. Or you just work with somebody like Amy, who has a daughter, that's a finance major and that's the continuity.
Amy: A family continuity plan.
Steve: Exactly. Some other things to focus on that we just need to be aware of, because in the United States, it's up to us as the individual to make sure that we are making the best decisions for ourselves and our family when it comes to retirement planning. And a trend that we're always talking about is open communication. Don't lack communication because, you know, there's your spouse, there's your children, there's your financial professional, there's your estate planning attorney. You can't be the only one that knows your financial and legal situation. This is a team-oriented situation where everybody needs to work together to ensure that you're going to get across the finish line and that your money is going to last longer than you do.
Amy: You know, another issue I see a lot of people having, and this is something you can control, is if you have some debt being laser-focused on that debt, which I like, but at the same time, doing it to the detriment of saving. I've been doing the show for long enough to know we have been asked. If we've been asked this once, we've been asked it 10,000 times. What is more important, paying off debt or investing? Both. Maybe there's not. And you can do both simultaneously. You can siphon dollars towards debt and you can siphon dollars towards saving. Because if it's going to take you 5 or 10 years to pay off that debt, you don't want to wait 5 or 10 years to start putting money into your 401(k) or an IRA, because then you're wasting all of that time that that money can be growing and compounding. And both is actually the answer to that. And then I think, you know, we've talked about this before, but having that plan for your dollars. And we've been saying this so much recently, especially when emotions have been running high around this election. When you get nervous, when you get anxious, when you get greedy, whatever, pull out that plan and say, "Are these emotions that I'm feeling right now good for the long term for this plan? Or are they bad?" And if the answer is bad, don't make any decisions with your money based on how you're feeling right now.
Steve: Yeah, don't do the thing if your financial plan doesn't support it.
Amy: Yes. Preach, right? And I think if we could sum up, right? Everything we've been talking about for the past few weeks, you, like, just nailed it on the head right there. Here's the All Worth advice. Listen, the president is not going to be able to magically fix your money situation. He cannot get you on track for retirement. So, you're going to have to take the initiative and control what you can control. Coming up next, the changing of guard for the Dow Jones index, the company that's coming and the one that's going plus how to find lost retirement accounts. You're listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner along with Steve Hruby. If you can't listen to our show every night, you don't have to miss a thing. We have a daily podcast where you just search Simply Money. It's right there on the iHeart app or wherever you get your podcasts. Straight ahead, you have lots of questions and we're going to cover them about ETFs, exchange-traded funds, Roth conversions, divorce, and much more. But first out with the old and in with the new. What are we talking about here? The Dow.
Steve: Yeah, quite interesting. A major shake-up in the Dow. So, Nvidia is actually placing Intel on the exchange, which is a major change in guard in technology to kind of represent the downfall of what was once an industry type. I mean, Intel joined the Dow 25 years ago, but unfortunately, the status of the company, it hasn't been the semiconductor powerhouse that it could have been. It did not keep pace with many current trends.
Amy: I think there is a larger lesson here, right? It's like, okay, gee whiz, Intel's out and Nvidia is in, no surprise to anyone. Nvidia, of course, an investor darling right now, you know, growing by leaps and bounds because they are, seem to be on the forefront of AI right now. But I think maybe the larger lesson here for those who do invest in individual stocks and you feel like, "Gosh, like, this company can just do no wrong." The last high that Intel saw was in 2020. Since then, this company has been on a downward slide. You know, it's just like, no, it went back to 2000. So, it's been 24 years.
Steve: Yeah, I thought it was longer than that.
Amy: Yeah, no, I said that wrong. Yeah, 24 years. So, in 1999, you could have felt like, "Oh, my gosh, this company can do no wrong. I'm going all in." And then, you know, a year later, it reaches its high and never gets back there again.
Steve: Yeah, I mean, there's there's only 30 companies that make up the Dow Jones index. Nvidia will be one of them based on its positioning in AI and kind of leading the market in that trend. You know, not bad for a company owner who originally wanted to just make video game graphics look better. Kind of interesting where that took a turn.
Amy: Yeah, it's kind of like the Amazon story, right? Like, "Let's sell books online." And here we are, right? Here we are, all these years later. Look what happened now. You know, Nvidia, that who knows what we'll be saying about Nvidia 20 years? You know, so I just think it's a great perspective to keep in mind.
Steve: Sure. Good point.
Amy: Here's the question for you. Think back. How many jobs have you had, right? How many different 401(k) plans have you contributed to? And do you know where every single one of those dollars actually is right now?
Steve: Maybe you do, but there's a lot of forgotten retirement accounts...
Amy: A lot of people don't.
Steve: ...without even a number. It's actually 29 million forgotten retirement accounts with $1.65 trillion just hanging around out there that people simply forgot about.
Amy: Yeah, I mean, I saw that years ago and I think it still rings true. The average person changes jobs about a dozen times over the course of your career. That's 12 different 401(k)s that you might have to keep track of, right? That's a lot. And what if some of those companies, you know, 10 years after you left them are no longer in existence? You know, they file bankruptcy, whatever it is. What happened to that money if you didn't roll that money over? You know, I think this is a pretty common theme that we see for people who've had many jobs. It's just like, "Wait a second. I think I did have a 401(k) with them. I have no idea now even how to track it down."
Steve: So, by the way, this was actually implemented in a law change. The conversation we're having right now, it's such a big issue that the Retirement Savings Lost and Found Act was part of Secure Act 2.0 and it was signed into law by President Biden in late 2022 as part of the $1.7 million omnibus spending package. The goal here is to create a database by the end of the year that will enable retirement savers to search for the contact information of whoever the plan administrator was so that they can claim the benefits that they were owed. This is obviously beneficial because sometimes the reason why your 401(k) is lost is because the company went out of business. How do you find that money unless you had a point of contact to get in touch with, to talk about the next steps for claiming it?
Amy: Yeah, and I think this database is going to be really good for investors. It's a ginormous, if that's a word, a huge collaboration. You've got the IRS, the Treasury, the Social Security Administration all working together to try to get this information up and running for us. But in the meantime, what can you do? Well, number one, try to track down your old workplace. You know, that old employer, try to find old statements or old paperwork. What's the last thing you have from that business place? Are there numbers or email addresses associated with that, that you can reach out to? You know, try to contact the plan administrator directly. So, I think that's where you start. But, yeah, to your point, your money may be in an abandoned plan. That company may not be in existence anymore.
Steve: And the Department of Labor does have an older database for abandoned plan search program. This was started back in like 2006. And with that, you can determine whether or not a former employer now has terminated their plan or not and get pointed in the right direction for the next steps. And now the kind of cool thing about this stuff is if you do have or you suspect that you have an abandoned plan or just a forgotten one, it's almost like a little treasure hunt. There's money at the end of a rainbow here that you may or may not be able to fold back into your financial plan and to make sure that it's helping drive your goals forward. You know, it's actually pretty exciting when we work with somebody and we help them find an old retirement plan that they forgot about because it's money that you didn't know you had.
Amy: Yeah. Or better yet, just never lose track of it, right? Be very intentional...
Steve: Sure, that's better.
Amy: ...with the money that you have set aside for retirement. Here's the All Worth advice. The optimal solution here is to know where your dollars are at all times, so you don't have to jump through hoops and check databases and make calls and send emails later on. Coming up next, interest rates drops. Why did mortgage rates go the other way? A real estate expert is in next to explain what the heck is going on. You're listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner. Okay, so we have been talking about the fact that the Federal Reserve, our nation's central bank, was going to lower interest rates for months. And one of the expected sort of dominoes that we thought would fall in the wake of that would be your mortgage rates could go down, right? So, what the heck is happening right now? Joining us tonight is our Real Estate Expert, Michelle Sloan. Of course, you can hear her wisdom every Sunday afternoon right here on 55KRC on her show, Sloan Sells Homes. And she's also the owner of Remax Time. Michelle, I can't even begin to make sense of this. You know, what we anticipated is not what's exactly happening right now.
Michelle: You're absolutely right, Amy. You know, it is very, very interesting. I think a lot of people were just waiting to wait and see what the election was going to do, who was going to win. So, we have that information now. So, I'm hoping that we see a little bit of the floodgates open up because, number one, the buyers have been sitting on the sideline a little bit longer than I think they should have. Because rates have gone down. We are hovering right around 6%. You know, it goes up to six and a quarter. It hasn't gone into the fives as much as I think a lot of buyers want the rates to go into. But I think that's coming, right? We are expecting another rate decrease. And with that, I expect and I hope that more buyers will get back into looking for homes. Now, on the opposite side, there's something really crazy happening. And that's where you said, you never can predict anything in this world. You know, the sellers, there's a lot of sellers out there that are not getting showings on their properties and sellers are on the market for two, three, four weeks at a time.
Amy: Really?
Michelle: And they're wondering and their hands are up and they're looking at their real estate agent going, "What's happening here?" And, you know, we have to look for excuses, "Okay, well, we have a presidential election. Okay, it's fall. It's we're going into winter. So, that's not the greatest time of year to sell. The interest rates were high, but now they're not so high." So, we're looking at all of these reasons. And I think at this point, at least one of the obstacles is now in our rearview mirror. And we are really hoping and praying that the buyers will come back, the sellers will get their home sold, the ones that are currently on the market, and then we'll have a this is, I'm going to put quotation air quotes, ready? "A normal spring market."
Amy: We've been waiting for normal for several, several years now. I want you to touch on several things that you just mentioned and first, one of them being the presidential election, because I did see a lot of research actually that said there were a number of people that said, "I'm considering a major purchase. But for whatever reason, the presidential election makes me nervous and I'm going to wait until after." I know you don't have a crystal ball, but did you hear...
Michelle: Not yet.
Amy: ...that from people? Do you think?
Michelle: Absolutely, 100%. Yeah, there were so many people who just said, "I need to just put a hold on everything that I'm doing, put a hold on my plans to see what's going to happen." And again, you and I both know, and we talked about this, that the chances of whoever is in the Oval Office is not going to make that big of a difference if history is any indication. So, you know what? It's all about if you feel good about making the most important purchase of your life, that's all that matters. So, now I'm hoping people will look at it and say, "Okay, I'm ready now. I've been ready, but now I can actually go out, start looking again, get my pre-approval letter." And it's really interesting because over the course of the last, I don't know, 5 to 10 years, the average age of the first-time home buyer has gone up so significantly. The median first-time home buyer is now 38 years old.
Amy: Wow.
Michelle: Yeah. And so that's...
Amy: I've never heard that.
Michelle: ...the most recent research that has just come out, that's three years older than it was last year. So, in 2023, 38 minus 3 is what is that? Thirty-five.
Amy: Thirty-five, Michelle.
Michelle: And 35 years old, last year was the average age of the first-time home buyer. This year...
Amy: So, we're trending older and older.
Michelle: We're trending older and older. And there's so much that so many factors that go into it. And a lot of it has to do with the inventory and the rates and that feel good. You got to feel good if you're going to be plopping down thousands and thousands of dollars on a down payment and planting roots in a community. I mean, you've got to feel good about that. So, it's taking longer for many, many Americans to feel good about even buying that first home.
Amy: Well, and I would venture to say, and again, I look at a lot of people's financial plans, but many of them are coming out of college now with significant amounts of student loan debt. And that just makes the ability to purchase a home...
Michelle: Correct.
Amy: ...not even an option. So, you know, when I think about it through that lens, it makes sense at 38, right? I mean, I see many people in their early 40s who are still paying off those loans. But I think also, and I'm wondering if you agree that maybe buyers really still need a reality check. You know, I look at the interest rates, the mortgage rates that a lot of people have, and, you know, I've seen two and a half recently, three percent in homes that they bought, obviously, several, several years ago. So, I think there's two people that are staying on the sidelines waiting for three percent to come back around. What's your advice to those people?
Michelle: I don't think it's going to happen anytime sooner, in our lifetime again that we're ever going to see three percent again. I think that was a really weird anomaly that we're going to look back on in the history of things. And you look at the history when you're looking at stocks and bonds and people's portfolios and you look at that long term, that's going to be a blip on the radar that I don't think that we will refer to for many, many years. But I don't think we'll ever see three percent again, at least in my opinion. If we get to five percent, I would say, let's go full blast. We're all in. I think that when we're hovering around that six percent right now, it's still scaring some people.
Amy: You mentioned you are anticipating we'll hope for a normal spring market. If that is the case, what should buyers and sellers be doing right now to get ready for that?
Michelle: Well, for buyers, 100 percent, you need to know how much money you have, how much money you need to buy the type of home that you want or need. And, you know, that's the biggest thing. Getting pre-approved or at least talking to a lender about, "Okay, this is my budget. What can I get?" And then you can even go looking online and see how much of a house that gets you in the Cincinnati area. The price of homes are never going to... I can't say never will likely never go down. We may see some stabilization, but, you know, chances are the home prices are going to continue to go up. We have still a housing shortage of four million homes in the United States. That's crazy talk. So, if you're looking to buy in the spring, you need to have patience. You need to save your money. You need to be ready. Get pre-approved and you need to choose a buyer's agent who will work for you and with you to make sure that you're set up for success.
Amy: So, now is the time, right? To start getting ready. The presidential election is behind us. We expect interest rates, mortgage rates to continue to come down. So, if you are ready to jump in, to the spring markets, make sure you're ready for that. Our Real Estate Expert, Michelle Sloan, great advice. As always, you're listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner, along with Steve Hruby. Do you have a financial question you want us to answer? We can help you with that. There's a red button you can click on while you're listening to the show. It's right there on the iHeart app. Record your question. It's coming straight to us and we have some questions to get to tonight. The first one is from Scott in Westchester.
Scott: I listen to your radio show every night when I am driving home from work. Can you please explain what exchange-traded funds are?
Amy: Good question. And also, thanks for listening. I actually had this conversation yesterday with someone who said, like, "Listen, can you make sure that my wife fully understands the difference between a stock and a bond and a mutual fund and an exchange-traded fund?" And the way that I explain it is, I almost think like, an exchange-traded fund is sort of the evolution of mutual funds, right? Mutual funds were sort of the first step into rather than investing in an individual company's stock. You can invest into a basket of stocks, right? And then exchange-traded funds sort of were like the evolution of that, which are you can buy and sell these at any time. And also fees tend to be lower in exchange-traded funds, depending on which ones that you invest in. But for most to invest in, you know, highly diversified ETFs that track things like the S&P 500, the Russell 4000, like, those tend to be really well diversified and also lower fees.
Steve: Yeah, I think one of the big standout differences beyond fees is and you said, I just want to highlight again, which is being able to trade an ETF during market hours, whereas a mutual fund only sells at the very end of the day when the markets close. So, it gives you a little bit more control as well. Next question from Warren in Mason.
Warren: I'm 48 years old. If money can be taken tax-free from a Roth IRA after 59 and a half, why not convert all of my IRA money to a Roth?
Steve: You know, honestly, it's a great question, but it depends on how much IRA money you have. If you've been a good saver and you've rolled over multiple 401(k)s into an IRA and you're sitting on, I don't know, $400,000 of pre-tax dollars ready to convert to Roth, then what you're doing is you're kicking yourself into a very high tax bracket if you do that all at once.
Amy: Triggering a very high tax bill.
Steve: Sure. Yeah, I mean, there are opportunities, maybe spread this out strategically, working with an advisor and a CPA. It's a great question. It's a great strategy, but it's also not something that you want to make mistakes with, especially if you're converting too much at one time.
Amy: Yeah, I have clients that I met with last week and we actually met in their CPA's office and they are in the process of every year looking at how much money does it make sense to convert? And ultimately, the goal is to convert all of it. But, yes, over the course of several years. So, it's like, "Okay, how far are we from the top of this tax bracket? We don't want to kick you into the next tax bracket. Let's give ourselves a little bit of breathing room there." And that's the amount that we end up converting. So, this is a great conversation to be having with both your advisor and your accountant. The next question comes from Arlene, who lives in Fort Thomas.
Arlene: I am in the process of getting a divorce. Do I want the house or the retirement accounts?
Amy: Arlene, first of all, sorry to hear about this. Unfortunately, I've been here and done that too and been through this process and I know what an emotional time it can be. One of the things I'm really grateful for is that I do have the financial background that I do. And when we were having conversations during that time about who gets the house, what I through is well we bought this house with both of our incomes and even just keeping up the yard and things like that, right? It was a bigger yard. The deck was going to need to be replaced. It was like it was too much for me. So, that was one consideration. And the other thing is you can fight tooth and nail for that house because it's such an emotional thing. You've got so many memories. Maybe you raised your children in that house. But it may not make sense for either one of you to keep it. And if it does, what you have to think about is, you know, can you handle that upkeep through the years? Where on the flip side, those retirement accounts are going to continue to grow and they could set someone up really well in retirement. And I think, you know, so many people think about equitable, right? It seems equitable that one of us gets the house and one of us gets the retirement. But it's like, what is fair? And I think you have to look at those assets just beyond the dollar amount and say, "Long-term, right? What's this house going to be with? What is worth? What is this? What are these retirement accounts going to be worth?" And I think it becomes a much bigger conversation.
Steve: And then we have Melanie in Crestview Hills.
Melanie: Can you help me understand Social Security's spousal benefit? And do we both have to be claiming at the same time to get it or not?
Steve: A very good question. So, obviously, Social Security is part of the traditional three-legged stool that historically folks in the U.S. had, which was your pension, your Social Security, and your own investments, probably a 401K. Now, it's more like two or maybe one-and-a-half-legged stool. So, making the best decisions you can with Social Security is certainly important, maybe more important than ever. But ultimately, what it is, is collecting a monthly payment based on your spouse or even an ex-spouse, based on that person's earnings. And the max spousal benefit that you can receive at full retirement age, the spouse at full retirement age is 50% of their Social Security benefit. If you collect before they reach full retirement age, then your benefit is permanently reduced. There are some exceptions qualifying, you know, child care, you know, a dependent that's in child care. There's different situations, but you need to be careful about when you collect and how old you are and how old the spouse is when you collect.
Amy: Coming up next, it's just been a week, right? Regardless of where you are on the political spectrum, whether you are celebrating tonight or a little bit defeated, there's just so many emotions running wild. We want to just keep some perspective on your money. We'll get to that next. You're listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by All Worth Financial. I'm Amy Wagner along with Steve Hruby. Do you ever look at someone you know and you're like, "They've saved so well. Their retirement seems amazing. They seem like they can do things financially that I cannot. What's different between them and myself?" Well, I can tell you as we pull back the curtain, because we have the privilege of working with a lot of people who have been really smart with their money. Most of them, what it comes down to, is understanding how markets work, understanding how the economy works, and understanding what their financial plan is. And that when markets are up or markets are down, the plan is the plan, right? They stay the same. They're not calling me every two weeks saying, "Do you think a recession is coming?" Why? Because they're educated enough and they understand that a recession is always coming. It's a normal part of the market cycle, but they have weathered a number of those. And the reason why I say they're so smart is they have reaped the rewards.
Steve: Yeah, absolutely. They've reaped the rewards. If they have made mistakes in the past, they've learned from their mistakes. There's certainly folks that I work with that are very successful and they have stories about trying to time the market 30 years ago that they completely regret and wish they wouldn't have done, but they were able to recover from with the amount of time they had in front of them at the time. You know, they take those lessons, they apply them to their own situations and they keep moving forwards. It's also folks that live below their means. I mean, honestly, that when you look at the financial plan, it's how much you're spending. Some goals are going to be reoccurring. Some are going to fall off. There's your housing, utilities, groceries, gas. We're not getting away from that. Health care, we're not getting away from that. Maybe you have a travel goal that falls off when you're 80 years old or a vehicle purchase every 4 years or something. They have their spending mapped out and understanding of how they pay for things between their fixed income and their investments. And you bring up a good point because when it comes to your investments, the financial plan is the blueprint, the investments, or the building blocks. The more building blocks you have, the more robust your plan can be. But also you can make mistakes if you let emotions take control, especially in weeks like this and, you know, recent history here. There's the ability to look at the financial plan and see that no matter what happens in the markets, you will be fine.
Amy: And if you are someone who made this mistake, right? Maybe you took your money out of your 401(k) because you were so worried about this election. How do you recover? Well, number one, I think, yes, you learn from that mistake. But second, you build your plan. You have this conversation with a financial adviser. You have your conversation with your spouse. What are our long-term financial goals, right? Keep this mistake close to your mind in the fact that you don't want to make it again and stick with that plan, right? In times when we just talked about 2016, it was Brexit. We've had so many geopolitical events. We've had different presidents. We have had so much that has impacted the economy and the markets. But here's the thing, every single time the markets have rebounded to new highs, and those who stayed in the markets, they reaped the rewards of that. Thanks for listening tonight. We hope you're going to tune in tomorrow. We're talking about how another interest rate cut could impact you. You've been listening to "Simply Money" presented by All Worth Financial here on 55KRC, The Talk Station.
.svg)
.svg)
.svg)
.svg)