Amy: Tonight, a word of advice, maybe just don't check your 401(k) right now. Head chair, Jerome Powell, brings a Wall Street rally yes, to a screeching halt. You're listening to "Simply Money," I'm Amy Wagner, along with Steve Sprovach. Steve, we said last week, "If he would just say nothing, if he would just say nothing."

Steve: Right. You could always dream, but not quite.

Amy: He didn't say a lot, he spoke for 10 minutes, the tone of voice, right? I mean, we say even what color of tie he wears and which direction he's looking, all of those things being digested by Wall Street. So, joining us tonight as he does every Monday night to make sense of Jerome Powell, the Fed and everything else going on in the market and the economy right now is Allworth Chief Investment Officer, Andy Stout. Andy, I don't know, what did you make of what Powell said on Friday?

Andy: Well, Powell wanted to put to bed any notion that the Fed was going to come in and save the economy with inflation at these levels, or even lower than these levels. Because inflation does appear to be heading lower, but just because we have peak inflation behind us doesn't mean we're at normal inflation levels. And that's what Powell wants to get to.

Steve: Andy, I just wanna welcome you back from Jackson Hole. And I'm not sure how much input you had with Jerome Powell, but...

Amy: What did you say to Powell over drinks, dude?

Andy: Apparently not the right thing.

Steve: Well, but, you know, let's talk about this a little bit because the market, the Standard and Poor's 500 dropped 4% on Friday after Jerome Powell, Chairman of the Federal Reserve, explained his, you know, he gave his comments. And is this a restatement of his old policy or was this something new that the market reacted negatively to?

Andy: I think it was Powell really just trying to correct the markets misinterpretation of the Fed's last meeting in July where many participants thought that Powell was coming off as what we called dovish, meaning that he would be there to help the economy and help the job market, not so much inflation. So, he wanted to put that to rest.

Steve: Well, they even called it a pivot, that the Federal Reserve pivoted and was dovish. They were more relaxed on their policy after the July meeting, which wasn't the case.

Andy: Yeah. It depends on how you interpret what he said. I didn't think he came off as dovish as a lot of people said. So, this wasn't really much of a surprise if you kind of looked at everything supporting what he said and all the data and materials around it all. But when you look at it together, he just put that to rest. And now, it's firmly in the place where the Fed is going to do whatever it takes in their opinion at least to stop inflation, to get it back down to levels, even if that means pushing us into a recession.

Amy: And that's truly what they've said all along, right, Andy? I mean, when you look at the Fed's mandate, it's to keep stable pricing. So, 2%, if that's the goal, we're what? North of 8%? So, why do you think then the market reacted so strongly, negatively? Because I think the Fed has pretty much stayed the course as far as, "Hey, we have one focus and one focus alone, and that's inflation."

Andy: Well, we're also looking at like the size of the rate hikes and when the Fed might stop. So, there was some indication at the last meeting in July that the Fed might only hike by, I say only, by half a percent, and then they might stop in early 2023 or possibly even late 2022. That's where some people started to position themselves for. But that really isn't going to be the reality at all. I mean, right now, these as we're talking, there's about a 70% chance at the federal hike by three-quarters of a point, which is what they've done the last two meetings. And when you look at that, then the next question is, when will they start to, you know, no longer hike and keep it at levels and will they start to cut rates? I mean, the market's pricing and rate cuts next year.

I don't know if we'll get that, but will kind of depend on how inflation plays out. And then typically the Fed would cut rates when the economy starts to slow to spur spending. And that would be an inflationary, a gesture, I guess, if they are cutting rates. I don't know if we'll get that. And I think one of the bigger questions is, "How long will these interest rates stay restrictive?" Meaning, slowing the economy down. Because that's what the Fed's trying to do, right? They want to slow down the economy. They don't wanna cause a recession, but if a recession happens, they appear to be comfortable with it. They're more concerned about inflation right now.

Steve: Well, I think he made it clear in his comments on Friday that he's in no hurry to pivot or start reducing rates and they're gonna keep raising rates as long as they have to. But, you know, you mentioned the market has already accounted for that and, you know, their next meeting is coming up in just a couple of weeks here. So, if they do raise rates by three-quarters of a percent, is that a new target? I mean, is this something new that the market might react negatively to? Or is that just the Federal Reserve hurrying along their target peak rate this whole time?

Andy: Well, that would not be a target level or the end level, if you will, or what the economists call a terminal rate, which is where the interest rates are when the Fed stops hiking. What's priced into the markets is really another...a full 1.5% of rate hikes. So, if they do three-quarters of a percent, that would be halfway there to that terminal value, at least as of right now. If we got to that terminal value, you know, what you're looking at is the Fed funds rate at a target range between 3.75% and 4%. By the way, Steve, the Fed funds rate, what that actually is, that's the overnight rate that banks can lend to each other. I know that seems maybe, you know, not that important. Like, why do we care what a bank lends to each other, right? Do we care what JP Morgan's lending to Citigroup? No, not really, but actually we do. One way you can see that is by looking at what's called the bank's prime rate, which is the interest rate that the bank will lend to its best customers. And mathematically, it's a formula, it's a Fed funds rate plus 3%. So, if we get up to that like 4% Fed funds rate, you're looking at a 7% prime rate for your best borrowers out there. That's going to slow down the economy. There's no question about that.

Amy: You're listening to "Simply Money" tonight here on 55KRC. We are joined by our Chief Investment Officer, Andy Stout as we are every Monday, trying to make sense of how the market is responding to Jerome Powell. Of course, the Fed shares comments from Friday in Jackson Hole. Andy, okay, so he took a maybe, I don't know, firm... I think firm is the word I kept reading over and over again about his comments. But what should the average investor's takeaway be? I mean, if the Fed share has a firm tone, does that mean anything to the rest of us?

Andy: Well, it really depends on your time horizon, right? If you're a short-term trader, I mean, you're getting whipsawed, first of all with market movements one way on one day, then violently the different way on the next day. You know, we're certainly more advocates of focusing on the long run. Here's the thing, I mean, we've been here before. It's a whole, what is there, been there done that, slogan that was popular what, 10 years or so ago. Just think about it this way, how many times, Amy, have you and I talked about mark of volatility? How many times have we talked about selloff? A lot. Guess what's happened every single time? What...

Amy: We've rebounded to new highs.

Andy: Every single time, right?

Amy: Yes.

Andy: So selloffs, remaining patient, I mean, we talked about it a lot, you know, the markets recover. You know, obviously, if a person needs money in the near term, it probably should not be at risk, right? But if you have a little bit of a longer-term time horizon, you know, just like we've seen in all past panics, you know, staying calm, remaining invested, avoiding costly emotional decisions, that's going to help you come out ahead so you can meet those financial goals of yours.

Steve: So, okay, we've covered stocks, expect more volatility and, you know, the Fed will probably continue raising rates. What about bonds? I mean, bonds have gone through just a meltdown earlier this year, and they're recovering a little bit, but they've got a long way to go to get back to break even for the year. I mean, what do you expect out of the bond market for the more conservative investor?

Andy: Well, I don't expect us to get to break-even for the year. I mean, that would be an unparalleled paradigm shift.

Steve: I shouldn't have said for the year, but you expect them to get back to break-even at some point.

Andy: Well, at some point, yes, because you think about bonds and what their returns are structured by, it's mostly the interest income that you receive. So, that's going to help. So, higher rates, it's kind of a double-edged sword, right? When interest rates go up, prices go down. But it also means that you can now buy bonds at higher interest rates and you can reinvest any proceeds at higher interest rates, giving you more income. So, that part's good. But when we look at the bond market in general with the Fed raising short-term interest rates, that has effect on short-term bonds out there. Now, the longer-term bonds, like a 10-year treasury bond, that's going to be very highly correlated with expected economic growth. So, here's the thing. As the Fed keeps hiking and they try to slow down the economy, what happens is the bond market starts to price in future cuts, not necessarily the next future rate cuts, not necessarily in the next year, but maybe we'll have lower rates five years from now, or six years from now. And those interest rates are still embedded in that 10-year government bond rate. So, wrapping this up, when the Fed is hiking quickly to slow us down, that's going to pull down longer-term rates, and that's going to be good for investors of bonds.

Amy: All right. Andy, obviously, what so many people are worried about is the dreaded R word or recession. And based on what Jerome Powell said last Friday, right? Not worried about...I'm not gonna say not worried about, but if they hike us into a recession and that's what's necessary to get inflation down, that's what we'll do. So, as you look at so much economic data, where do you see things standing right now?

Andy: Well, when you look at everything, you know, recession risk has certainly increased, right? And you can see that with interest rate spreads. You can see that with the housing market. I mean, the housing market's certainly taking a bit of a hit here recently, and you see that in sentiment as well. But we're not seeing it in other areas. We're not seeing it in the job market. I mean, we have the jobs report coming out this Friday. You know, 300,000 new jobs are expected. The unemployment rate's expected to remain basically at a 40-year low, right around 3.5%. So, you know, we talked about the Fed's mandate, it's stable inflation and full employment. We're pretty close to full employment. And that's part of the reason the Fed is being aggressive here when we look at that. But when we look at all of the evidence together, it still suggests an expanding economy, but it's slowing. Probably not at a recession yet, but risk is high.

Amy: Here's the "Simply Money" point. Powell's comments, no doubt have spooked investors. But, hey, if you're a long-term investor, stick to your game plan and don't make costly emotional investment decisions based on the headlines. Coming up, the ads and the buzz is everywhere. But are Americans actually buying into the crypto craze? We've got results of a new study that we're happy to talk about. We'll explain. You're listening to "Simply Money" here on 55KRC, the Talk Station.

You're listening to "Simply Money," I'm Amy Wagner, along with Steve Sprovach. If you can't listen to our show every night, well, subscribe to our weekly podcast, the best of our show, "The Best-of Simply Money." You'll find it on the iHeart app or wherever you get your podcasts. Coming up at 6:43, this is not good news for any of us. Number of people dipping into your retirement accounts way too early coming up, why that's not a good idea. What we would say you should do instead. That's coming up. Steve, you're a big fan of sports and sports memorabilia.

Steve: Yeah.

Amy: This is huge. I mean, literally this morning I said to my husband, "Did you hear about this?" You know, baseball cards, and my son has a few. He's got a Michael Jordan something card or whatever, you know, people will throw around, "It's worth X amount on eBay." I'm like, "Well, there's a greater fools theory that applies here. Like, how much someone is willing to pay you for this?" Mickey Mantle, a 1952 mint-condition card selling for $12.6 million.

Steve: Yeah. Don't call him a greater fool if he just sold it for 12 million bucks.

Amy: Yeah. He's not the fool here.

Steve: Exactly. And I'll tell you what crushes me, Amy, is I grew up a Mickey Mantle fan. I even tried batting lefty as a kid because Mickey was a switch hitter. I wonder how many Mickey Mantle cards I ruined by putting them with a clothespin on my bicycle to make it sound like a motorcycle. I mean, we used to flip cards all the time in grade school and on the playground. And I know for a fact I was trading Mickey Mantle cards because they were premo even back then. But 12 million bucks? I mean, this blows the baseball card numbers outta the water. I mean, this is crazy, crazy money and good for him.

Amy: This guy bought the card and he bought it for $50,000 back in 1991. To me, that's a huge investment even now.

Steve: For something that's not an a Honus Wagner card, yeah, that was big money. That was really big money.

Amy: Yeah. So, he bought it at Madison Square Garden. Yeah. Paid $50,000 for it. And of course it just sold for $12.6 million, just insane. I wanna stick with a sports theme because Forbes came out with a list, the NFL team values for this year, Bengals worth $3 billion. Sounds like a lot, but once again, the Bengals find themselves at the bottom of the list.

Steve: They're in last place. Exactly.

Amy: Exactly.

Steve: You know, but you can't feel like they're losers when they're worth $3 billion. I mean, the Browns paid $7.5 million in 1967 for the franchise. I would say $7.5 million to $3 billion over 40-plus years, they're doing okay. They're okay.

Amy: Yes. Right. And adjusting for inflation, that would be worth $67 million, right? What they paid for back in 1967. So, yes, $3 billion, a lot more than that. Of course, the darn Dallas Cowboys, number one on the list, they're worth $8 billion. But, you know, you like to slice and dice numbers certain ways to look at different values that you can get out of these teams. There's something they called the wins-to-player cost ratio. You wanna go back two years and that number probably didn't look so good, but man, it looked a lot better last year. In fact, the Bengals were among the best in the NFL last year, and the teams in terms of winning more compared to paying less for the players.

Steve: What you pay them, exactly. And the Bengals have never been accused of being the top-dollar paying team out there, but that's gonna have to change. I mean, last year was a dream season and...

Amy: You wanna keep Joe Burrow and Ja'Marr Chase around.

Steve: Exactly. Keep them all happy. They're gonna have to shell. Exactly. But that's a good thing. It's nice to have a winner back in town, isn't it? It's awesome.

Amy: Yes. Nice is an understatement. It is so long overdue, the sense of pride that everyone's feeling right now. So, excited about that. Listen, speaking of the NFL in a football, if you watched the Super Bowl, which hopefully if you're a Bengals fan you did last year, one of the things you noticed with the commercials was there were so many cryptocurrency commercials.

Steve: Yeah. There were. And, you know, the whole idea was the cryptocurrency markets are trying to get new people involved. I mean, there's a Pew study that was done, basically, 16% of respondents said, "Yeah, I've invested in crypto." And that number has basically stayed the same. In other words, there's a certain group of people that trade crypto and the vast majority don't. So, they're trying to attract investors to cryptocurrency not being real successful, Amy.

Amy: Yeah. They did the same research a year ago. Sixteen percent of people said, "I'm either invested or I know it well," then they spent millions and millions and millions of dollars advertising. Think about how many celebrity people, right? Matt Damon, Tom Brady, so many people had all these...

Steve: Yeah. They had to be bold.

Amy: Yes. Right. Huge commercials about it and all the benefits of it. And you really... And, you know, my son is a huge basketball fan. You watch the NBA, there's certain teams that every single uniform has coinbase on it or something like that. And I started to think, "Man, this is really mainstream now." Everywhere you look, especially in the sports world, it's there. Well, then one year later again, right, Pew does this research again, and it shows no growth in people investing in cryptocurrency. And listen, that could be lots of people bought in over the past year and then dumped it because it hasn't been the best year ever for cryptocurrency. But as investors who look at this from the standpoint of, "Hey, there's not enough regulation here yet, there's not enough history in this market, there's too much volatility," I actually think these numbers are a really great thing.

Steve: Yeah. You know, I don't care what the investment is, but when somebody can go in and steal what's yours, and there's no way for you to get your money back, that's a little bit of a problem, you know? And there's also the argument and that's kind of the way it is without regulation and in the crypto market. And there's also a little bit of a concern about what is it really? I, I mean, it's lines of computer code...

Amy: Blockchain, what does that mean?

Steve: What's the value? I can put out, and I'm kind of a skeptic on the whole deal. I can go out there and say, you know, it's only worth whatever the next person is willing to pay for it, because there is no inherent value. It's, you know, it's kind of the... You know, there's nothing. There's nothing there.

Amy: Well, and I think you've made a great point. There are so many different kinds of cryptocurrency that have come to the market. You could legitimately say tomorrow "I'm selling Spro coin" and...

Steve: Ooh, I like that.

Amy: ...people would, I mean, people could start investing in Spro coin. Well, what is Spro coin exactly?

Steve: Yeah, exactly.

Amy: Well, I don't have anything to show for it, but, you know, you're getting this blockchain, you're getting this series of numbers. But I'm telling you, you know, Spro coin is worth something, is it really?

Steve: Yeah. Yeah. No. And at least with the stock, yeah, people say it's like gambling, but at least with the successful company that has shares of stock, you can liquidate the company, pay off the debt, and anything left over is value. And most companies have, that's called book value, have a positive book value. So, there is something there in the stock market, not so much with crypto.

Amy: Here's a "Simply Money" point. If you have all the money in the world, right? And you have extra money on the sidelines and you've fully funded your 401(k) and your retirement, well, if you wanna invest extra money, absolutely go for it. Otherwise, we would say investing in crypto, probably not the best play for you on your road to retirement. Coming up, who's tracking your kids? Our cybersecurity expert is in next with the latest information every parent needs to know. You're listening to "Simply Money" here on 55KRC, the Talk Station. You're listening to "Simply Money" I'm Amy Wagner, along with Steve Sprovach.

When it comes to technology, there's nothing I think that's more important than your children and protecting them from it, right? There's ways that technology can work to help you keep them safe and ways that you need to understand you need to protect them. Joining us tonight is our tech expert, Dave Hatter from Intrust IT. Dave, I wanna start with the ways that parents can use technology first of all to know where your kids are, which I'm just gonna be fully open here, I obsessively check this to figure out. I've got a 16-year-old, I've got a 12-year-old. I wanna know exactly where they are at all times. So, I constantly use the app through my iPhone to know where they are. I don't ever even think though that other companies have access to that information about my kids.

Dave: Well, as always, thanks for having me, Amy. And yeah, I think you raise an important point that many folks probably don't think about in a general sense, or maybe even more explicitly when they think about how they might be tracking their kids with all this great technology. You know, we're surrounded by technology everywhere today. Everything is a computer now, right? These so-called smart devices or internet of things, or as I like to call them internet of insecure things devices, your car, your phone, your refrigerator, everything is "smart." And, you know, as a result of all of these sensors and all this technology, it's never been easier to track someone, that obviously cuts both ways. You know, you may have seen, there's been some recent headlines about how AirTags, which for folks who may not realize are, you know, little tags you buy from Apple to put on something so that you can track it. So you don't... If you're like me, you lose your keys all the time or something, right?

Amy: Sure. Yeah.

Dave: But how those things are being used to stalk people, there's even been a murder involved with one of these AirTags.

Amy: Oh, my gosh.

Dave: So, you know, all of this technology cuts both ways. And to get back to your original point about the kids, you know, whether it's the Find My Friends app that's built into the iOS phones, which has been around for a long time, and yes, my wife was insistent that all of my kids when they were younger, turned this on so she could track them. So, totally understand where you're coming from.

Amy: Yeah. And it's a great feature for a parent, right? I mean, I love that. And I always joke with my kids, the double-edged sword, the things that I got away with when I was a teenager, right? "Yes. I am studying at Nicole's house." You know, I will know exactly where my kids are. But at the same time, I'm never thinking about the fact that other people know exactly where my kids are.

Dave: Well, Amy, there are plenty of examples out there. You don't have to look too hard to find real-world examples where people, you know, were their lives saved, I don't know. They were certainly pulled out of peril and jeopardy when they had a car wreck or something, and like the Find My Friends app was used to find them. Or, you know, even think about something like OnStar, the GM OnStar, which has been around for us. So, you don't have to look real hard to find examples where these things have saved lives. But the flip side of it is, you know, there are third-party apps, Life360 is a well-known one, there are others. So, you know, maybe if you have an Android phone or you just wanna use something that perhaps has more features and more capabilities to track different things and capture more information, you know, there are plenty of options out there. Life360, as I mentioned, has been around for a while. It's one of the more popular parental surveillance apps like this. And it's collecting...

Amy: And are they selling information? Are they tracking? Like, are some of them better than others?

Dave: Well, that is the right question to ask. I think, you know, some of these things will let you do things, like, I don't know if you've ever heard of the category of software called Bossware. This is kind of a similar situation where an employer would install it on your computer or your phone and, you know, it can do things like enable the microphone, turn on the video camera, take screenshots of everything you're doing. So, you know, this software has a wide variety of capabilities, perhaps can read their text messages and stuff like that. Again, it just kind of depends on what you buy. But, yeah, to get to your specific question, many of these applications are selling your information. So, Life360, again, it's got a pretty big user base, 32 million people in 140 countries. It's currently the seventh most downloaded social networking app on the Apple App Store.

So, we're talking about, you know, a considerable user base at this point, it's making an enormous amount of money, or I guess rather they are making an enormous amount of money selling the information that this app collects. So, you know, I would remind folks, first off, if you're not paying in money, you're paying in data, you are the product, not the customer. But even if you are paying, I can almost guarantee you if you read into the terms of service, they're collecting all kinds of data. I mean, the nature of a cell phone makes it possible to track you, right? They're collecting all this data, and in many cases, yes, they are selling it to other companies, which, are those companies reputable? Are they protecting that data? Who are they selling it to? Who knows? You know.

It's a major concern in my mind because that information could ultimately be used to impersonate your children or to fool your children, you know, some type of extortion type attack where they get a text because they found the phone number somewhere with all this other data. And then they use the information they've collected from these apps, like, "Well, I know your mom's name, I know your school, I know you're this, I know you're that." When I send you a text, I put all that in there. So now you legitimately believe I have access to this sensitive data about you. And when I try to extort you, whether it's some kind of sextortion type thing, or I'm just trying to get money outta you, having that information makes me seem a lot more legitimate and a lot more of a threat to you than if on the other hand I don't have all that. So, yeah, it's a legitimate concern in my mind. And as a general rule of thumb, the less information available out there about you is gonna be better to help block those kind of attacks.

Amy: You know, Dave as I'm listening to you talk, and I think, gosh, you and I have talked hundreds of times, right? Done so many of these interviews and conversations through the years. If I could sum them all up, it would be...technology always provides some kind of convenience. But you have to know what you're trading for that convenience. And I think so many of us don't take that step to figure it out. In some cases, maybe you'll say, "Okay, this information's being shared, but the convenience I'm getting is worth it." But if you don't know what you're trading by being able to track your children, and that information could be getting out there to other people, if you don't understand that, then you're stopping a couple of steps short of making sure you understand exactly what's going on here. And, Dave, I wanna switch gears quickly as we talk about our kids to the fact that, you know, when we talk about so many times, you know, keeping your information safe, it is because of course, you don't want your identity to be hacked. And I think you think about that as an adult because you've got credit cards and you've got bank accounts, but really the holy grail for hackers is your children. And I wanna talk about that.

Dave: Well, it really is on a couple of different levels. First off, because if I can steal enough information about your kids, buy it, steal it, collect it, somehow, it makes it really easy for me to then go do things like apply for credit in their name or apply for benefits in their name or something. And, you know, until they get old enough to care about their credit score or apply for a job where someone might check it or something, that kind of fraud can go unchecked for long periods of time.

Amy: It could be years, right? You think about, okay, how often do you apply for a new loan or open a new credit card? You know, maybe it's a few months, six months, a year, but you're gonna figure that out pretty quickly. Your kids, if someone steals their information when they're 2 years old, their Social Security Number and address and date of birth, when they're 18, applying for college or trying to buy their first car, it could be that many years that that information is out there about them. Think about the damage.

Dave: Think about how difficult that's gonna be to unwind after years and years and years of that sort of fraud of taking place. But the second angle, right? So, that's a major problem. It's a well-known major problem, and kids are often targeted simply because it allows that sort of fraud to continue for extended periods of time. But the second piece, going back to all of this information collection we talk about all the time and this myth that people have of why "I have nothing to hide," you know, "I'm an open book," "I'm a boring person," yada, yada, yada, is all of this information that you are willingly giving up by using these apps, and especially everything that's "free" because that's how they make money. Okay. There are companies out there right now, I encourage your listeners to go see this for themselves. Look up data brokers and look up AI companies that are building new algorithms that are using all of this data.

And so, for example, you go to apply for a job. Well, this employer happens to have purchased one of these tools that's gonna use information that they can find about you to determine will you be a good employee or not. You know, is everything that you're putting out on Facebook and Twitter and Snapchat and Instagram and all these other things other information they're buying from who to what you've purchased on Amazon, what you've searched for on Google. Axiom, a large data broker claims to have something like 5,000 data points on 100 million Americans. If I can dump your 5,000 data points into my AI algorithm that supposedly knows whether you're gonna be a good employee or not, or would you be a good risk for auto insurance or home insurance or health insurance? There's all kinds of these systems being developed right now. You may not get the job because this AI tool decided based on all of your data that you've been throwing out there saying, "Well, I have nothing to hide. This could never hurt me. I don't care about any of this." You might not get the job, you might not get the loan, you might not get the insurance.

So, you might get a ridiculous premium because they're making determinations and decisions about you based on all of this information, which of course you probably haven't thought about in a long time and/or, you know, don't have any clue what's really out there and/or have no way to look into these algorithms and challenge them like you could with a credit score or something. This is just happening silently in the background, you didn't get the job...

Amy: And you never know, right? You never know. Scary stuff.

Dave: It's going on right now as we speak.

Amy: You have to be aware, all kinds of technology out there to help you protect your children. At the same time, know how that technology can be used against them, and make sure you are doing everything you can to protect their identities. You've been listening to "Simply Money" here on 55KRC, the Talk Station.

You're listening to "Simply Money," I'm Amy Wagner, along with Steve Sprovach. Straight ahead, spending more for less. We're gonna tell you how those on social media are trying to warn you about something called shrinkflation. You know, Steve, I get it. When it comes to your 401(k), you're getting this, you know, quarterly statement, monthly statement, whatever you get. And over time you start to see, wait, I've accrued some money in here. Maybe not this year, but a lot of years. You feel pretty good about it. The problem is that we're starting to see more and more research about how many Americans are actually dipping into that 401(k). And new research shows half, half Americans have taken early withdrawals. So, that's before the age of 59 and a half out of your retirement accounts.

Steve: I hate seeing numbers like this, Amy. I would love to hear, you know, 1% or 2%, you know, maybe grab money early out of their 401(k), but 51%? I mean, this makes a big, big difference when you take that money and, you know, spend it on something that's not gonna increase your standard of living when you're retired. I mean, that's really what a 401(k) is designed to do, a supplement to your standard of living over and above Social Security and or any pensions. And the numbers are staggering.

Amy: I loved pensions. I mean, and obviously, this was your boss taking care of you, but if you can adopt that mindset that this is money that I'm setting aside for retirement and I can't touch it. You know, I cannot touch it. You will find other ways to come up with that money that you need. At least most people do. I mean, I've got a friend, I've told this story before, but new BMW. Super nice, very cool car. And again, because of what I do, lots of people talk very openly with me about money and mention to me, "Well, yeah, we just took some money out of our 401(k) for the down payment."

Steve: That's a killer. I mean, literally a killer. You're buying an asset that goes down in value.

Amy: It depreciates the moment you go off...

Steve: I don't know how many cars go up in value.

Amy: Yes, exactly.

Steve: Exactly. And, you know, it could have stayed in your 401(k) and have grown tax deferred. So, let's talk about that a second. You know, I actually know somebody who threw a party when they turned 59 and a half because they had access to their 401(k) without penalty. And I reminded them, "Wait a second, just because you have access doesn't mean you should touch it and you're still paying tax on that." "Well, no, no, there's no penalty." Yes, there's no penalty after 59 and a half, but you still pay tax on it when you draw it out.

Amy: Yeah, it was a tax-deferred account, right? So, unless it's a Roth 401(k), you're absolutely paying the taxes on that money that you set aside initially tax-free, right? It grows tax-free. And then this should not be breaking news for anyone, but Uncle Sam wants his piece of the pie, and as soon as you tap into that money, Uncle Sam's gonna get it before 59 and a half. If you tap that for a car, a bass fishing boat, a whatever it is. And I know there's a lot of legitimate issues, right? You know, medical bills that you didn't plan for, things like that. I know there's a range of issues why people tap this money but taking it out for those reasons before does a lot of long-term damage. And, you know, we talk ad nauseam on the show about the importance of an emergency fund. And this is a case in point. You know, you mentioned you're losing out on the compounding, you have to pay it back. That's time when it's not growing. You're simply trying to build back up what you had before. And for many of us, if you started in your 20s, good for you. But the research shows most people start saving when you're in your 30s, sometimes even your 40s, you are already behind the eight ball. So, pulling that money back out can have huge negative impacts on your retirement.

Steve: Well, let's talk about it, let's put it in numbers. I, mean, you take $10,000 out and let's say you're 40 years old, 10 grand outta your 401(k), well, you're gonna pay tax on that. Let's just say you're in the 22% bracket. Okay, 2200 bucks goes away. Oh yeah. But you're not 59 and a half yet...

Amy: Ten percent penalty.

Steve: So, add 10% or a thousand bucks. So, basically, 3,200 bucks comes out of that $10,000 leaving you with what? You know, 6,800 bucks. So, you thought you took out 10,000, you only get a check for 6,800 bucks. And that 10 grand could have grown to 20, could have doubled again, maybe to 40, could have doubled again, maybe to, $80,000. If it earns 7%, it's gonna double every 10 years. I mean, you don't have that money available anymore. So, not only do you get killed in tax, but that's less money that you're gonna live off of. There are a few exceptions, you know, and that avoids a 10% penalty. You will never avoid the taxation of that money, but you can at least avoid the 10% before you're 59 and a half. And, you know, if you did a child adoption that year, if you have an IRS levy and you need this money to pay it, you know, hardship withdrawals. There are reasons you can take money out without the 10% penalty. But please, if there's any way you can find a different way to pay for any of those items, please do. Because you're really hurting yourself in retirement.

Amy: Here's a "Simply Money" point. Taking money from your retirement accounts too early can leave you with penalties, taxes, and most importantly, the missed opportunity to let that money continue to grow for your retirement. Coming up next, the fight that you can join on social media to stop shrinkflation. We'll explain. You're listening to "Simply Money" here on 55KRC, the Talk Station.

You're listening to "Simply Money," I'm Amy Wagner, along with Steve Sprovach. Are you getting the same product that you've always have bought these days? It's a good chance the answer is "No." We talk about the fact that, you know, shipping costs and containers and all of these things companies like, you know, have to pass it on to you, Steve, and one of the ways that they're doing it, and I think the reason why people are so kind of outraged about this and talking about it on social media, it feels very sneaky. Shrinkflation.

Steve: Yeah. Yeah. There's no disclosure. No disclosure. I opened up, and you know how much air is in, you know, potato chip bags.

Amy: There's like 10 chips in the actual large bag.

Steve: Two, two in the one I opened. Two. No, I'm kidding. I'm kidding. But it's ridiculous and it's across the board. You know where the original shrinkflation was?

Amy: Where?

Steve: Wine bottles. You ever noticed a bottom of a wine bottle?

Amy: Yes. Good point.

Steve: Exactly.

Amy: It's funny because several years ago, I did a story on shrinkflation. And I remember thinking like, "I'm a really smart consumer, like, this... You know, I know about these things," and I check, you know, bags and things like that. What really got me was peanut butter. I was shocked when I pulled the jar of peanut butter upside down and I could fit my fist in the bottom of it. And I was thinking, "I think of it myself as a pretty savvy consumer, right? I mean, this is what I do, this is what I talk about." And I'm still mad. Every time I buy peanut butter, it still makes me mad. And for years now, people have been calling out certain products on Facebook. Now they're taking it to TikTok. If you are on TikTok, there's all kinds of products on there that people are talking about.

Steve: Did you see that guy that loves his Quaker's apple oats bars on TikTok?

Amy: I didn't see it. No.

Steve: I mean, he kind of went nuts because he noticed that he's paying more and the bar looked a little bit less, and sure enough, he analyzed it and it's down a couple of grams. It's a few pennies more. So, he's arguing, you know, those unit price things you see when he goes shopping, he's arguing that they should break it down per gram. And, you know, I'm thinking to myself, wait a second. Okay, so he is now paying 8.3 cents a gram instead of 7.3 cents a gram. I've got bigger fish to fry than that.

Amy: Right. So, they're a penny a gram.

Steve: Yeah, exactly. And he's having this big stink on TikTok about it, but it is real. It is real. We're getting less and there's no reason they have to disclose it and they're not exactly... Marketing is not gonna say "20% less for your money," you know?

Amy: Yeah. So, here's the products that right now are kind of on the firing line as far as people sounding off on social media: Lay's potato chips, Gatorades. One of our producers was just saying today, that she buys Gatorade regularly and they changed the entire way the bottle looks, right? So, you can't even tell is it as much as before? Probably it's less. Lipton tea. McDonald's value meals, apparently, a lot of people say those are smaller. Domino's pizzas. So, if this is something that really upsets you, whatever social media that you follow, just put in, you know, #shrinkflation, look around, see what products are actually part of this. Cadbury Dairy Milk bars are apparently dwindling in size. Some of Target's kind of oatmeal, although Target says they deny that charge, but you're right, they don't have to disclose this. So, this is simply a case of, "Hey, be a smart consumer, be aware that certain companies do this." And if it bothers you that you're paying more and getting less, do a little research, figure out what those products are. You're listening to "Simply Money" here on 55KRC, the Talk Station.