Steve S: Tonight, we're gonna tackle the next step in the fight to bring down inflation, some of the worst assets you could possibly leave to your heirs, and more. You're listening to "Simply Money," presented by Allworth Financial, I'm Steve Sprovach, along with Steve Hruby. Okay, we had one of the most important economic events in months, happen last week. We're talking about the Federal Reserve's Annual Symposium in Jackson Hole, Wyoming. Star of the show on Friday was Fed chair, Jerome Powell, but the star of our show joins us right now, and that would be Allworth Chief Investment Officer, Andy Stout. Hey, Andy, fill me in. What did Jerome Powell say last week?

Andy: Hi, Steve. To reiterate what Powell has been saying is what we've been saying the whole time, is that the Fed is going to be keeping rates higher for longer. The market has been pricing in rate cuts, expecting the economy to slow down for, you know, quite a few months now. And those rate cuts keep getting pushed out and out. And Chair Powell has consistently said higher rates for longer, and he's lived up to that. And when he spoke on Friday he said that, and he noted a few very specific things. Specifically, he talked about the economy growing above its long-term trend, saying that, and also saying that inflation is still too high. So, he did say the Fed is prepared to raise rates if needed.

Steve H: So, how have the markets reacted to this information, Andy?

Andy: Well, the markets liked it, because even though he talked all this, what we call hawkish discussion, hawkish mean he favoring tight monetary policy, he sprinkled in some sayings or statements regarding the other side of the coin and where he really talked about looking at inflation starting to come down, describing the inflation's descent as encouraging. And when he was asked about rate cuts or when he was talking about it, he didn't rule out rate cuts in the future. So, that was something the markets kind of grabbed onto. And stocks had a good day, bonds were mostly flat. But was another interesting point, was that the expectations for a rate hike this year, it increased on that, so...

Steve S: He's been pretty consistent with this. I mean, the whole time the economists have been saying, "Yeah, but we're gonna have rate cuts, yeah, but we're gonna have rate cuts." And he consistently has been saying, "No, just don't get ahead of yourselves we still see some concerning inflation data." And he really came down, I don't know, the way I took it on Friday was he came down pretty hard and said, "Just cut it out guys, we may even raise rates one more time." I mean, nobody seems to take him at his word yet he has been very consistent. This isn't really a change in Fed policy, is it?

Andy: No, it's not. I think you hit the nail right on the head there. The market seems to be not believing Powell, because Chair Powell does have to talk tough. Because if he doesn't talk tough about inflation, what's going to happen is that it's going to make inflation a lot worse because his words have a big impact on things. And if he doesn't talk tough, that's what happens. But the market also knows that's what Powell needs to do and just has not believed him, right? And here we are still no rate cuts, but if you go back about six, eight months from now, the market was expecting to have already seen some rate cuts by now. And, obviously, we're still talking about another hike.

Steve H: Yeah, it's fascinating to me. We actually did a segment a few months ago because we're, obviously, we've been talking about interest rates and what the Fed's gonna do for quite some time. And just the language that they use and the markets can easily overreact to the word choices during these meetings. Now, I am curious to know, when do you see our first rate cut on the horizon, Andy, and what might change that timeline?

Andy: Yeah, that's a good question. If we look at where the market is pricing things right now, and really it's about the middle...it's about this time next year where we see rates lower than where they are today. And that seems about right. So, the market is starting to buy this higher for longer, finally, and when you look at the pricing. And so, when you look at, you know, this time next year, the reason I say that's about right because there has been progress on inflation, and I do believe the Feds, actions they've taken so far to bring down inflation has had an impact but yet they're going to keep having an impact because the Feds raising up interest rates, they affect the economy with a lag, meaning sometimes it takes many, many months to really flow through. And if you think about it, it's only been roughly a year and a half since they started, and it's been one of the most aggressive rate height campaigns ever, where rates are basically 5.25 percentage points higher than what they were a year and a half ago.

So, we got some more things coming down the hike that will slow down the economy. And then when you look at other, so other things in terms of inflation and the interest rates and possible slowing of the economy, in other words, possible recession, you know, that would be another reason you might see the Fed cut interest rates. So, I think with inflation coming down, and if we get there and if there's a recession, you know, we'll see some rate cuts. And the Fed can cut rates without a recession as long as they believe inflation is at a good level or on its way to a good level, and they wanna make policy still restrictive, but not as restrictive.

Steve S: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, along with Steve Hruby, and since it's Monday, we're talking to Andy Stout. Andy is a Chief Investment officer of Allworth Financial and manages about $18 billion worth of assets from right here in Cincinnati. And Andy, I read something over the weekend, I don't know if the guy's credible or not, but Kevin O'Leary from Shark Tank, he came out with a quote that he's really concerned about smaller banks. In his opinion, they've shut down, and I think the quote was, like, "A clamshell on lending to small businesses." He thinks we're gonna have another banking crisis and that there's gonna be a real credit crunch with very little lending from banks. Do you buy into that? Do you still see any issues with local and regional banks?

Andy: Well, from the banking sector as a whole, either has been some tightening of lending standards, meaning they're not making as much loans. So, Mr. Wonderful, you know, is correct there, you know, from that perspective. When you look at the small and regional-size banks, the concern there is the exposure to real estate, commercial real estate, specifically, where it's roughly two-thirds of all commercial real estate loans come from these small and mid-sized regional banks. And there is some real, you know, real concern that the real estate sector there has some outstanding issues and that can flow through to those banks. So, I would agree there is a risk of a credit crunch coming from that relating to commercial real estate, but it's not a guarantee. I mean, there's always risks, and I think what you're going to see is just a continued slowdown in the space, and yeah, something could happen, so it wouldn't shock me. But as we saw before earlier this year, the Federal Reserve stepped in really quickly with a lot of relief to really mitigate any sort of potential system-wide disaster.

Steve H: And in case this isn't clear, Mr. Wonderful is a nickname for Kevin O'Leary, not referring to...

Steve S: I don't watch the show, but yeah.

Steve H: Is Mr. Wonderful, just in case that wasn't clear.

Steve S: Gotcha.

Steve H: Now, I saw something, an unreal prediction about the third quarter GDP, this was from the Atlanta Fed's GDP nowcast, and they were saying for Q3, 5.9%. Can you talk about that a little bit and where does that come from?

Andy: Well, the 5.9% GDP growth for the third quarter, it seems unbelievable if you just, you know, think about it. I mean, I don't even think [crosstalk 00:08:58].

Steve S: That's not a slowing economy, yeah.

Andy: Right. The thing is though, that's a nowcast, it's not a forecast. A nowcast is based on the data that's been released so far. And so far we've only really gotten data for the month of July. And for the third quarter, we have July, August, September month. So, we only have data for one out of the three months for this quarter. So, I don't think that 5.9% will stay there, I think it will come down. If you look at what the average economist forecast is for the third quarter, right now that is about 1.5% in that general area.

Steve S: That's big difference.

Andy: So, that 5.9% is a nice talking point but it's not anything to really, you know, write down in stone.

Steve H: Why is this nowcast even a thing if it can be so misleading?

Andy: I tend to ignore it until really near the end of the quarter. It can be very telling then, and because once you get near the end of the quarter you got two months of data, and then you start to get some more and more, and I think it becomes more valuable there. But it's just a talking point for mainstream media.

Steve H: Fair enough.

Steve S: All right, Andy, so we've got numbers coming up this week, anything, in particular, you're paying attention to? Any statistics of concern coming up?

Andy: Yeah, there's quite a few things, right? We are going to get the jobs report. So, for the month of August, what's expected is that the unemployment rate remains at 3.5% and that the number of new jobs that employers added falls from 187,000 to 168,000. Now, if that happens that'll be the third month in a row that the number of jobs employers have added is below 200,000. And also, that would also be the lowest rating since 2020 when we, so when we look at the whole, the trend is down, and that suggests there are some cracks in the labor market, and that's not necessarily a bad thing.

Steve S: Yeah, we kind of wanna see that.

Andy: Yeah. If you look, think about the Fed, and one thing that Powell talked about on Friday was that when you look at the job data right now, he believes it's more sensitive to, or inflation is more sensitive to the job market than it has been in recent decades. In other words, if the job market weakens you could see inflation come down more quickly than it has in the past, so that's really important. And we're gonna get lots of job data, we're gonna get job openings this week, we're gonna get quit rates, we're gonna get job cuts, job layoffs. So a lot of job data is coming this week, and we're also gonna get some inflation data. We'll get the Fed's preferred inflation data point, which is PCE that's expected to increase 0.2% for the month.

So that's a very important one. We're also gonna get, you know, the second estimate of second-quarter GDP. The economy grew 2.4% in the second quarter that's a quarter over a quarter annualized basis, and it's expected to stay the same. You know, when we were talking about the GDP for the third quarter just a few minutes ago, and one of the more interesting things I read over the weekend was these one-time effects that are going to essentially lift GDP by almost a half a percent, which is a pretty big amount. And those are these four things. It's the Barbie movie, the Oppenheimer movie, Taylor Swift's concert, and Beyonce's concert. Collectively those are going to add about 8.5 billion to GDP.

Steve S: Some people have too much more.

Andy: So, I mean, and these are more one-time events in terms of how that works out. So, I thought that was fascinating.

Steve S: Crazy. Okay. Well, thanks again. Great perspective as always from Chief Investment Officer of Allworth Financial, Andy Stout. Here's the Allworth advice, just because the stock market's humming along doesn't mean you need to necessarily do anything. Stick to your long-term plan. Coming up next, the concerning number of people who are asking robots, yes, I said robots, for financial advice. You're listening to "Simply Money" on 55KRC THE Talk Station.

You are listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach, along with Steve Hruby. Hey, if you can't listen to "Simply Money" every night, just get the podcast, we put it out there the very next day. And if you think you've got some friends who could use some of our advice, tell them to just search "Simply Money" on the iHeart app or wherever you get your podcast. Straight ahead at 6:43, we're gonna play a little fact or fiction. All right, so, last week we talked about the tragedy in Maui and how you should look at your insurance policies. This week we wanna make you aware that, eventually, you're gonna end up paying a lot more money for those policies because of what's happening, yep, in Maui over 4,000 miles away.

Steve H: Yeah, I mean, it's all connected. These insurance companies cover people all over the country, so it's estimated that insurance property losses from these wildfires will be about $3.2 billion.

Steve S: Yeah. And you've got all the hurricanes in Florida, there's another one heading up in the Gulf there. I think the biggest thing driving these premiums it's not so much the catastrophic event. Yeah, that's obviously the trigger, but, you know, your home has gone up in value, my home's, everybody's homes have gone up in values. So, the claim if something happens is gonna be for a lot more money, it would seem to me. I mean, isn't that what's driving it?

Steve H: And it's also gonna increase the potential losses that these insurance companies will anticipate in coming years. So, if, you know, keep in mind, if you feel bad for these companies, don't, because according to the insurance...

Steve S: No insurance companies don't lose, they make money.

Steve H: Yeah. The U.S.-based property and casualty industry had $980 billion in capital year-end 2022. So, they're doing fine. And this is one of those things where, you know, maybe they'll use this information to justify increasing rates.

Steve S: Yeah. Well, it wouldn't surprise me at all. I mean...

Steve H: It's gone up 10% since last year.

Steve S: Yeah, premiums are up, yeah. It's inflation is, you know, is coming down, but premiums up another 10% over the previous year. And I'd be surprised if that slows down at all.

Steve H: Just shop around and see if you can find a better deal is the moral of the story there, if you need to.

Steve S: I think that's the key. All right, so here's a question. If you need help managing your life savings, who would you use? Would you use a professional or would you use a robot? Would you trust artificial intelligence?

Steve H: I would not trust artificial intelligence...

Steve S: A lot people are.

Steve H: At this point. I know. I mean, maybe we're a little bit biased in, you know, being in the industry, but there was a survey that showed 1,000 people from the ages of 18 to 54 years old revealed that half of them use AI chatbots to manage their money, and not just managing their investments, but budgeting, stock recommendations. And yet, another half are highly concerned about data and privacy when it comes to using these chatbots.

Steve S: Yeah, I saw a breakdown. I read the same article and they broke it down a little further, 64% of those 25 to 34 year olds and 36% of the 45 to 54 year olds. And they didn't even bother checking with the 55 and over crew, because I fall into that category, I'm not even sure how I would, you know, find the website or turn it on, so...

Steve H: How do I have a chatbot to do this for me? We should do an experiment where we let a chatbot write a segment and see how it turns out.

Steve S: Yeah, that would be a real short segment for me, that's for sure. But, you know, this isn't anything new, this is just an offshoot of what we've been seeing for years. I mean, you go back to the 70s and we went from full commissions to no-load mutual funds, that was a big trend. And then, we went to fee-based advisors over commission-based advisors. And now, we're getting into what most people call robo-advisors, where literally you're not getting any advice, you're just plugging in on a computer and you're answering some risk tolerance questions, and you get plugged into an investment mix that's put together. You know, at some level by people, but still, there's no human interaction. This has been going on for years.

Steve H: Yeah, it sure has. And, you know, one of the challenges there is that these robo-advisor platforms, they don't necessarily have a complete picture of your other assets and investments. It's only handling what you hold at the firm that is, you know, being where your assets are being managed by the robo-advisor platform. So, there's no connectivity between your financial accounts. So, it lacks the level of personal advice that a human can offer. And, again, I'm talking from bias, clearly, I don't use robo-advisors to manage my own assets. Maybe for some people out there with very simple financial situations, not a lot of moving parts, just getting started. This can be a very cost-effective way to have assets managed.

Steve S: You're listening to 55KRC, I'm Steve Sprovach, along with Steve Hruby, and this is "Simply Money." And we're talking about robo-advisors. You know, I think my primary job description is to keep investors from doing something financially stupid. And that would be like trying to jump outta the market when things are in free fall, trying to jump back in at any point. Trying to time the market doesn't work. I think that's one of the most important things we bring to the table, and if you have no interaction with a human you may not do the right thing.

Steve H: Yeah, you bring up a great point because a robo-advisor is just a website with some algorithms behind the scenes, so you can log in, sell everything, and close your account, and there's nothing stopping you from making that bad decision. That's one of the tougher parts of our job, is talking people off the ledge to make sure they're not gonna derail their financial plans. And having a human to help you with that is very beneficial.

Steve S: Here's the Allworth advice, if a chatbot can help you understand financial terms and investing concepts, yeah, that's fine, that's one thing, but don't pull the trigger on a major financial decision without consulting a qualified human, financial pro. Coming up next, we'll break down some of the worst assets you'll want your family members to inherit. You're listening to "Simply Money" on 55KRC THE Talk Station.

You're listening to "Simply Money" presented by Allworth Financial. I'm Steve Sprovach, along with Steve Hruby. You know, you wanna do the right thing, you wanna leave a legacy to your children through an inheritance. But, you know, sometimes we think we know what our kids want and they don't really want some of the things that we think are important to leave to them.

Steve H: Yeah. I mean, it's important to have these conversations with your loved ones while you're still around, and, you know, today we're talking about a couple of things that might create more problems than good. And the first one is a timeshare. So, this, I know.

Steve S: Yeah, that could cause a problem.

Steve H: Yeah. I mean, this causes a problem for the owners of timeshares themselves sometimes. So, I mean, for those that are unaware of timeshare, it's a long-term contracts where you agree to rent out an annual trip to a resort or some kind of a vacation property. These contracts oftentimes last decades or even for life.

Steve S: And they're open-ended in a lot of cases.

Steve H: Yeah. They're notoriously difficult to get out of. So, even if you love your timeshare, you know, there's lots of good memories tied to it maybe it's not the best thing to leave it to the next generation.

Steve S: Yeah. And your idea of a fantastic place to vacation might not necessarily be your kids' favorite place.

Steve H: And they also inherit the ever-increasing contract costs of that timeshare, so it's not something...

Steve S: Oh, they can go up a lot.

Steve H: Yeah, they can't afford to foot the bill then this is something that they can get stuck with. I mean, a lot of these timeshare salespeople, they'll actually attempt to get the buyer of the timeshare in the first place to put the younger family members on the deed for that very reason.

Steve S: Is that right? Wow. Wow. I'll tell you something we ran into on my wife's side of the family when her parents, eventually, passed away, and a lot of sentimental pieces. Mom collected hummels, there were some dishes that went back generations. And, you know, this was something that was really difficult, number one to value, but number two, which kid gets them. I mean, there were more than, you know, with nine kids in the family, it wasn't just one person who wanted some of these things. I'm not sure anybody wanted the hummels, but the dishes, they had a lot of sentimental value. And these types of things can cause problems either from a valuation or from a how do you divide it situation.

Steve H: Yeah. So, the reason why this is one of these items that we're talking about as maybe more harm than good with an inheritance is because it can lead to, emotion, emotional disagreements amongst the people inheriting them. You know, you bring up a good point, it's hard to divide, it's hard to price these things. So, to avoid trouble, start planning ahead of time. Have these conversations while you're still around, set expectations so that everybody knows what they're gonna get and they can deal with it with you there to talk about, as opposed...

Steve S: It's like anything else, communication solves problems, right? Yeah, and, you know, if you have the time, you know, later in life, and it doesn't have to be at the very end. It's, like, I've had conversations with my kids now, and as far as I know I'm good for a while. I don't know, you know anything different, but...

Steve H: I mean, you...

Steve S: It's not over yet. Yeah. Businesses. Now, this doesn't affect everybody, but if you own a business, this can be a major headache to pass along to the next generation, especially, if your kids don't necessarily want to run your business.

Steve H: Yeah. So, there's challenges here because while you're still alive, and around, and kicking, and running the business, if you start working on business continuity planning today that is one thing that can even maximize the sale price of the business if you're not there. And then you have family members where maybe one has been hands-on from the beginning or for much longer and they still want to work in the business. And then you have other family members that are just like, "Well, you know, this isn't really my interest, I already work in my field that I'm passionate about, I just wanna generate income off of this business." That's gonna create some butting of heads for somebody that's maybe working harder than somebody else attached to that business.

Steve S: You know, and maybe just package it and sell it before you're even close to death. I mean, you know, cash is the best inheritance, you know, there's no doubt about it, it makes life a heck of a lot easier. I ran into something a couple of years ago, somebody I know. I mean, you talk about passionate, this guy collected coins, and I'm talking about very rare coins. He knew which dealers had the best deal out there, he had appraised value, I mean, he literally had boxes and boxes and boxes of coins worth tons of money. And the problem was when he passed the rest of his family they didn't share the passion. And, you know, a lot of the knowledge went away with him. So, when you inherit something like that, a coin collection or any type of collection, there are people out there that are great and honest that'll appraise and give you a fair price for them and there's some other people that aren't exactly fair and honest. And how do you know which ones to go to?

Steve H: Well, it's a good question. And if you have the fair and honest ones on your side, one of the benefits of inheriting collectibles like that is there is a step up in basis. But if you're going to somebody that doesn't really care to work with you or have your best interest in mind, then they may offer a lot less than what these collectibles are actually worth, that is.

Steve S: Yeah. I think the whole key is talk it through and put in writing whatever you can put in writing, I think that's important. But these are some major blunders that you can make. If you plan on having your kids inherit these types of assets, it can cause more problems than good. And I think sitting down with the kids and saying, "Hey, do you really want this collection? Or do you really want these dishes?" You might be surprised what you think they would want in a lot of cases they don't. Here's the Allworth advice, if you want less drama for your kids after you die, just go through everything you wanna leave them, and explain why. Just have a good, honest conversation. Coming up next, get your thinking caps on, we're gonna play a little fact or fiction. You're listening to "Simply Money" on 55KRC THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial, I'm Steve Sprovach, along with Steve Hruby. Hey, if you've got a financial question you want us to answer, just click that red button on the iHeart app, record your question. Yeah, we listen to every single one of them. Straight ahead, want to avoid the cost of living in a nursing home, well, there's one thing you can do that could go a real long way, it's something we should all do. All right, we love to play this game every once in a while, fact or fiction. Let's clear up some misconceptions out there with some basic investment concepts. Hruby fact or fiction, when you die your children will have to pay taxes when they sell your home.

Steve H: Fiction for the most part. I mean...

Steve S: If they inherit, yeah.

Steve H: Yeah, if they inherit it, that's the key there. So, why I say fiction, it really, it's one of these that depends. There is a step up in basis on date of death, meaning you get to reset the cost basis that is used to determine the tax liability of selling that property. So, if there was a major gain on the value of the home, then that's wiped out for those that inherit that property.

Steve S: I don't think a lot of people realize that. I mean, this is huge, and it's true with stock also that's inherited to the next generation. If you bought your house, let's say 50 years ago for, I don't know, $70,000 and it's worth $400,000 today. If you just put in your will, if your kids inherit that house, which is, you know, generally, what's in pretty much every will, one more reason you need a will, guess what? You never sold a house while you were alive, so there's no gain for you to pay tax on. And when the kids get it, they get it with a cost basis just like they had bought it of the value on the date of your death. So, if they turn around and sell it the next day, and it's the same value it was the day you died, there's no gain, there's no tax for them to pay, that's huge. And that goes for houses, stock, anything.

Steve H: Yeah, the little catch here is that if it takes a while to sell the property and it goes up in value, then yes, there can be a little bit of taxes, but it's not gonna be the same amount as if you sold the house before you die.

Steve S: Yeah. We see that a lot with stock in Cincinnati, Procter and Gamble stock. Maybe you inherited it, maybe you bought it back in the 50s or 60s, and okay, I wanna give it to the kids, that'll save them the trouble of having to go through probate. No, this is one time where the probate process is good because when they inherit it's highly appreciated stock, it's the same deal.

Steve H: Yeah. In that situation would be having a beneficiary on the account, so it would avoid probate as long as you have the beneficiary on the account. Then those that inherit it will also get the step up in basis for the stock just like they would for a home. So, I'm gonna give you one fact or fiction, you may have to pay taxes on your Social Security benefit.

Steve S: Yeah. Bad news people. Yes, you may very well have to pay tax. And, you know...

Steve H: I gave you the bad one.

Steve S: Yeah, exactly. And the calculation includes your Social Security benefits, so there's different thresholds. Talk to your accountant on this, but it boils down to what's your adjusted gross income plus half of your Social Security benefit, whatever that total is. If it exceeds the thresholds, there's a chance it may be low enough where you don't pay any tax, but it's real easy to have to pay tax on half of your Social Security benefit. And it's not too difficult to get up to paying tax on 85% on your benefit. And that's not an 85% tax, let me clear that up. People hear, "Wait a second, I pay 85% tax on my Social Security?" No, no, you pay tax on 85% of the amount you receive, or possibly 50% of the amount you receive is going to be taxed at whatever your tax rate happens to be. Yeah, that throws a lot of people at, "Wait a second, I've gotta pay tax on this?" You might, your accountant will figure it out for you.

Steve H: In short it's awful, but it's not as bad as it sounds.

Steve S: Yeah, exactly. You're listening to "Simply Money" on 55KRC, I'm Steve Sprovach, along with Steve Hruby, and we're playing fact or fiction. I got one for you Hruby. Fact or fiction, should you be saving 10% to 15% of your pre-tax income for retirement?

Steve H: Fact.

Steve S: Yeah. No ambiguity.

Steve H: Yeah, there's no ambiguity here. In fact, I've seen recent numbers that have kicked that up a notch based on how old you are when you started saving. That's the key, the earlier you start saving the less you have to save over the span of your working life. If you start later, then that number can actually be higher than 10% to 15%.

Steve S: Oh, it can be a lot higher. Yeah, if you're a late bloomer or a late investor. I love sitting down with kids that are just getting outta college, a lot of times they're sons or daughters of clients. And, you know, they, would you be willing to sit down with my kid, please. Yeah, let me sit down with them, and the first thing I tell them is, "Hey, when you sign up for that job or maybe you already just got a job when you sign up for the 401(k), 10%, just don't ask questions, 10%. And if you get started putting 10% of your pre-tax pay into the plan plus whatever the company matches, wow. When you're in your mid, late 30s, you might be ahead of your parents." I mean, it's incredible how it compounds.

Steve H: With compounding interest on your side it can get very nice, very quickly. So, yes, fact, it's 10% to 15%. Fact or fiction, you can't contribute to an IRA if you make a certain amount of money.

Steve S: Fiction. You can contribute, it's, you may not be able to deduct. And that's the key. When people say, "Wait a second, I can't even put money in an IRA?" No, you can't put money in an IRA and deduct it if you make more than the IRS permits. So, you can make, you know, even if it's a million dollars of income, you can go ahead and make a non-deductible IRA contribution. Why would...

Steve H: Be careful with this.

Steve S: Yeah, be careful. Yeah.

Steve H: If you have the ability to do that, let's say you're a high earner and you do wanna contribute to an IRA if it's gonna be a non-deductible contribution, maybe open a separate IRA to do that for tracking purposes.

Steve S: Good point.

Steve H: Rather than co-mingling it with other pre-tax assets, because then that's extra tax paperwork. The onus falls on you to record that properly, and if you make a mistake then you can end up paying taxes twice on those dollars.

Steve S: Yeah, which you certainly don't wanna do. And I'm gonna throw something out there, and this is getting a little bit in the weeds, but you can go ahead and make a non-deductible IRA contribution. Yeah, you can't write it off, but you can still get it in an IRA and turn around and transfer or convert that into a Roth. And that's something you might've heard of a backdoor Roth. That's what they're talking about, where, yeah, you make too much money to make a Roth contribution directly, but you can make a non-deductible IRA contribution, and then convert it into a Roth. And if any gain happened over the couple of days it takes you to get that done, yeah, you might have a couple of bucks in tax too. But talk to a professional on whether or not that makes sense for you.

Steve H: Yeah, exactly.

Steve S: All right, fact or fiction, once you hit 65, you should start getting conservative with your investments, what do you think?

Steve H: Oh, I don't, this one's too gray. Steve, this one's a tough one for me.

Steve S: A lot of people are saying that though now, because CDs are back up to 4% and 5%, and I'm starting to hear again something I haven't heard literally in over 40 years of, "Hey, you know what, I think I just wanna play it safe, get outta the rat race of the stock market and just live off the interest after I retire. I'm getting 5%." Works good until interest rates come down.

Steve H: Yeah, I mean, I would say typically this is a fact for many people because if you're gonna start supplementing income with portfolio assets then it's not prudent to have extremely aggressive investments.

Steve S: Oh, I'm gonna disagree, big time on you.

Steve H: In case, the markets go down. Let's say you don't have an emergency fund, you're not positioned to allow your money to grow. This is why this is a gray one because I disagree with it as well. If you have the ability to take the risk and you're comfortable with the risk.

Steve S: Okay. My point is, well, you just might live another 20, 25 years, and you don't wanna run outta money because you played it to save. That's why you wanna have a plan done. "How much risk do I need to take to not run out of money?" How would you know if you don't do a financial plan? That's my point on that. Coming up next, the one thing you can do now that could one day offset the cost of a nursing home later. You're listening to "Simply Money" on 55KRC THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach, along with Steve Hruby. All right, we've talked about this time and time again, the unbelievable cost of living in either assisted living or a nursing home. It can financially wipe you out, and it's one of the biggest concerns that I run across with people either in early retirement or later on as they start to encounter health problems. But there's one thing, just one thing that you can do that you've got a lot of control over that a new survey, a new study determines can really make a big difference.

Steve H: Yeah, it's sleep, how about that?

Steve S: Yeah, pretty basic.

Steve H: Yeah basic.

Steve S: That's something a lot of people just don't pay enough attention to.

Steve H: I try, I try the best I can, I'll tell you that. So, according to new research conducted, now this is amongst 125,000 senior citizens in Australia.

Steve S: Yeah, but this is not a small study, that's 125,000 retirees, that's a good study.

Steve H: And poor sleep quality turns out to be one of the biggest risk factors for ending up in a nursing home. You look kind of tired today, Steve, you getting enough sleep?

Steve S: I'm doing just fine. Thanks. But, you know, it's interesting because they found that the higher amount of sleep, of getting at least 7 or 8 hours was so much better than those that not only, only got 4 or 5 hours of sleep, but also people who slept 11 or more hours a night that was actually bad for them. Seven or eight hours seems to be the number. And the only thing that's worse than not getting enough sleep is smoking. I mean, that's it, this is one of the most healthful things you could be doing if you wanna stay out of a nursing home.

Steve H: Yeah. Smokers were twice as likely to end up as a nursing home than non-smokers, so that was the biggest risk factor. But sleep between seven and nine hours was the second, which is remarkable to me. Now, obviously, they looked at other areas as for exercise, it wasn't just what you did that counted, but what you didn't do. So, five hours of moderate to vigorous exercise per week got you credit, but so did sitting for fewer than seven hours per day.

Steve S: Yeah, get off your butt. I mean, that's really what it boils down. Even if it's just light walking, it makes a difference. And we're talking about numbers that 23% fewer people going into a nursing home, that's a huge number. Just because you got sleep and you got out and walked around a little bit. Diet, exercise, all the basics, yeah, these things add up. That's a massive improvement in quality of life.

Steve H: Yeah, when it came to diet, healthy typically, meant eating lots of fresh fruit, vegetables, plenty of fish. Unfortunately, very little processed red meat, that one bums me out because really the finding of the study is don't sleep 12 hours a day, lay around, and the rest of the day, and sitting around eating red meat, and smoking cigarettes.

Steve S: Yeah, exactly.

Steve H: You really wanna focus on seven to nine hours of sleep, that's the second biggest factor behind smoking to save you from having to go to a nursing home.

Steve S: Yeah. I think the key is just diet, exercise, and just don't sit around. And besides physical wellbeing, mental wellbeing, you wanna stay engaged in retirement. Hey, thanks for listening. You've been listening to "Simply Money," presented by Allworth Financial on 55KRC THE Talk Station.