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Financial Literacy Month

Planning Matters Radio / Peter Richon
The Truth Network Radio
April 28, 2022 5:02 pm

Financial Literacy Month

Planning Matters Radio / Peter Richon

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April 28, 2022 5:02 pm

Interest, compounding, inflation, & bonds...FINRA annually tests the American public's knowledge of basic financial concepts. Peter Richon of #RichonPlanning discusses these topics, as well as Traditional vs. Roth IRA's, the recent and upcoming Fed rate hikes, and where you can get a secure 7.12% interest on savings right now on this week's show.

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We want you to plan for success. Welcome to Planning Matters Radio.

Welcome into the program. My name is Amber Rashaan with Rashaan Planning and April is Financial Literacy Month. In a recent series of interviews, Peter Rashaan, my husband of Rashaan Planning, discussed the importance of general financial literacy and understanding of basic financial concepts, as well as more specific issues like traditional versus Roth IRAs, the Fed interest rate hikes, and where you can get a government-backed guaranteed 7.12% interest on safe money right now.

Each of these interviews were produced as podcasts for you to listen or view on demand and can be found at If you have any questions or would like to improve your financial literacy or confidence in your financial plan, well-being, and future, contact Peter Rashaan at Rashaan Planning at 919-300-5886. Now, let's get into Financial Literacy Month topics with Peter Rashaan.

Hey Peter, good to see you. April is Financial Literacy Month, so happy Financial Literacy Month to you. And this is so important, the importance of a financial education. In fact, FINRA often gives people a test to measure their knowledge of interest, compounding inflation and bonds, and surprisingly, only 34% of people are passing.

So I just want to break it down. Peter, why do you think a financial education is so important? Well, because only 34% of people are passing. I mean, I think it's really important that we get that financial education, understanding, that financial literacy. That FINRA test has a lot of different components that go into it that they ask questions about, but some of them are just as simple as compounding interest. Do you understand that it's important that you're earning money on the money that your money has earned for you? That's when you put money to work. And not only 34% financially literate according to that FINRA test, but I also saw some other studies from Bloomberg that said under 30% of millennials felt financially prepared for an emergency or the unexpected. So we really need to do a better job in getting educated and setting that foundation in place for some good financial habits into and throughout life.

Yeah, good point. I want to talk to you a little bit more about compounding because I think this is one of those things that I wish I'd known earlier. And Peter, you said this specifically is so important to you that you actually make it your mission to go out in the community and educate young people about it.

Yeah, I've been to a couple of the local area high schools here, invited in for career day or for some one-off professional information and education days. And I talked to the high schoolers about the importance of saving early and often and as much as possible, but also the difference between saving and investing. And I show them a chart similar to what you're, you're putting on the screen now where we see the implications, the effects of compounding interest. Albert Einstein said it was the most powerful force on the planet. The power of compounding has been called the eighth wonder of the world. And the reason why is that your money works for you. It continues to grow.

And I show the high school. There's a chart of somebody who begins saving at 20 and saves only till 30 versus somebody who starts at 30 and saves all the way till 65. And the difference is pretty remarkable. And then I show them if they didn't stop at all, but start at 20 and save all the way through to 65, what that looks like.

But here's the thing. If your money is not compounding for you, it doesn't matter where in that chart you take time off, like the end of that chart, it begins to show the real power of compound interest. The growth of the money begins to hockey stick and grow exponentially. And if you miss any time, it's not that time at the beginning or the middle that you miss. It is the end where that money really begins to pick up and grow so quickly because of that compounding interest.

Right. Well said. You know, and one of the reasons I think that it's kind of so complicated now is that we live in this world that the entire financial landscape has changed, but chief among them, retirement planning, right? It used to be that we had a pension, you would contribute, somebody else would manage it and then you would retire and it was great. But now there are so many options to choose from, you know, tax deferred, do I pay my taxes now or later? And this is something that you specialize in helping people navigate all these options and figuring out what's best for them.

Yeah. Well, having many, many options doesn't necessarily simplify things more often than not. It actually complicates things. And in our world of ease of use and digital done for you, everything financial and retirement planning has, I agree with you, Erin, become more complicated. It used to be that we had the pensions kind of set it and forget it. You start your career, you work your entire career for one company, and then you retire and that company continues to pay you.

Whereas today that burden has really been placed more on each one of our own individual shoulders. And there is a lot that goes into what that pension used to provide that we as individuals now need to make sure that we have accounted for. Income planning is a buzzword of the last maybe 15 years that really wasn't heard much before that because income and retirement was sort of taken care of for you. Longevity was not necessarily something that was considered as much of a risk when pensions provided for a payment that was guaranteed throughout the duration of your lifetime. But now that we retire with a finite amount of money, no pension, we've got to make that money last for an unknown amount of time. Longevity risk as it's come to be known is something that we really have to specifically take the steps to address financially so that we can once again look at longevity as a blessing and something that we hope for rather than something that's going to risk our financial wellbeing and security. Right. Yeah. Especially now that retirement year is 25, 30 years.

You want it to last as long as possible. If somebody would like your help, then you know, kind of crunching the numbers regarding retirement or anything that isn't making sense to them right now, what's the best way to reach you? Well, you can reach out online,

It looks like You can email me, peter at or you're welcome to give the office call, 919-300-5886, 919-300-5886. I am actually pushing to have some financial literacy classes taught in the local area high school.

So if anybody here in, in the a few quaver arena, willow spring area would like to see that as something being taught to their high school students, I encourage you to reach out and let your, a career guidance counselor or, or, uh, students let their teachers know that this is something that they would be interested in. I vote yes on that. That's great. I'm glad you're doing it. Peter, thank you.

Absolutely. Thank you. Great information, Peter. The next interview was on the difference between tax deferred traditional IRA and Ross, a very important distinction to understand as it could potentially save hundreds of thousands of dollars in your retirement. Let's listen as Peter Rishon continues the financial literacy discussions. Hey Peter, happy financial literacy month.

I think this is so great. We are creating a series of videos that were breaking down some really good topics. Today we're going to focus on the difference between a traditional and a Roth IRA. This is important because I know that retirement planning is something you specialize in, but you also encourage tax diversification. So just break it down.

What is the difference between a traditional and a Roth IRA? Well, it's pay me now or pay me later. And a lot of people have made the deal to pay later. It's what we've sort of been taught and encouraged to do since really the inception of the 401k. We were told and taught to put as much money into the 401k as possible. And by the way, don't worry about paying taxes on that because they'll be lower later.

Well, a lot of people forgot that they're still due later. You still got to pay those taxes. And as we are turning from the working years into retirement years, the result is that tax planning and proactively managing that tax liability that we've built up for ourselves has really become a very important factor in retirement.

Right. And so as we consider the two kinds of Roths, you said it basically you pay your taxes now or later. But as I look at this to try to figure out, well, I don't know what my future marginal tax rate would be. So I'm asking why would I want to pay my taxes now?

Yeah, well, again, there are two different types of IRAs traditional that is save, don't pay the taxes now, put it away in a retirement account and taxes will be due at a later date in retirement or Roth, go ahead and pay the taxes now, buy Uncle Sam out of that account out of ownership, and be done with taxes forever. So all of the growth and all of the income that you take it is yours to keep. Now, you do need to crunch some numbers carefully on this because retirement is not always about replacing 100% of your working career income. Retirement often is about replacing 100% of your needed expenses.

And a lot of people are earning sufficiently more income today during their working career than they are likely to be spending in retirement. So you do have to do some projections there and figure out okay, what am I earning today? What tax rate and bracket does this put me in? And what are my living expenses today?

And can we extrapolate this out and with any likelihood and probability? Are we going to be in a lower tax rate and bracket in retirement? If so, it may make sense to continue to defer and delay paying those taxes until retirement. But if we find that we're likely to be about the same place, probably just as well go ahead and pay those taxes for a couple of different factors.

One, it's just easier to pay a bill while you're earning a paycheck and brand new income with which to pay it than it is to try to budget it out of your retirement nest egg. But also, we know as tax laws stand right now that tax rates are slated to increase in just a few short years. The 2017 Tax Cut and Jobs Act will expire.

It was only a temporary measure. And in 2026, tax rates and brackets go back up to their previous levels. It's not just on these ultra wealthy or the evil rich people or those making more than $400,000. The 12% bracket, the lowest one goes up to 15%. The 22% goes up to 25%. The 24% goes up to 28%. It's an across the board tax increase. Why not pay taxes now at a lower rate if we crunch these numbers and figure out that that makes sense? But it does, again, Erin, take some pretty careful planning for that. Right.

Yeah. Rates are historically low. And then just to give everybody anxiety because it gives me anxiety to look at it, the national debt clock. You know the government has to get its money somewhere, right, Peter? It's either by raising taxes or reducing spending.

So I would think the safer bet is that your taxes are going to go up. Well, I think anybody who's been paying taxes has felt like the government's been getting their money, but they've been spending clearly from the national debt clock way more than they've been collecting. I saw this highlight video of the great recession and the housing market crash and it was showing different clips. And one of them was the national debt in 2007 where it was just cracking $10 trillion.

I had to go back and double check that for reference. But yeah, $30 trillion in debt. Ironically, maybe not so ironic, there's estimated to be just over about 30 to $35 trillion in yet to be taxed, taxed deferred retirement accounts.

And so those could become a target kind of in the bullseye of the government's question of where are we going to raise enough money to hopefully pay for some of our expenditures? So yeah, I really think that taking a look at that clock, it is scary, but it is yet another reason to consider taking advantage of Roth opportunities. I also want to throw out there, Erin, that the Roth opportunity is not just with IRAs any longer. A lot of companies are now offering Roth availability inside of a 401k. So kind of get it taken care of automatically, out of sight, out of mind, and oh, by the way, with your taxes already paid on that account. Kind of a misconception, often confused, is that people think that the company will only match if you choose to defer and delay and do the traditional 401k.

The company does not care if you choose the Roth. They will still match those contributions, but their match will always go to the traditional side. They're nice enough to offer a match, not nice enough to pay your taxes on that match for you.

I know. We need to negotiate that into our next contracts, I guess, Peter, we'll see. Good luck with that. They're shifting some of their tax liability onto their workers. I always take issue with the term free money. There's no such thing as free money. Very little in life is free. That's the thing with free lunch.

You are so right. Peter, this was really helpful. If somebody has some questions about the best way that they should diversify their retirement income and their retirement spending right now, what's the best way to reach you? Well, yeah, reach out, be in touch through the website, It looks like You can email me, peter at

You can call the office, 919-300-5886. All right, Peter, thank you very much. Always a pleasure.

Thank you. Definitely more great information. On the next podcast interview, Peter Rishon discusses the Fed's plan to continue raising interest rates and what it means for the market, the economy and your money.

Hey, Peter, it's very good to see you. We have a really important question for a lot of people today. What does the Fed's rate hike mean for you? As you know, after months of anticipation, the Fed is finally raising rates. That means we could be paying less for gas and groceries, I hope, but more for our mortgage, credit cards or car loan. It's not all bad news. We're going to break it down.

But first, Peter, what's the big takeaway for the average person? Well, this isn't just a one-time thing. The Fed's language has been that they plan to aggressively raise interest rates maybe six more times in 2022 and then several subsequent interest rate hikes in 2023. The last time the Fed tried to raise interest rates, we saw a pretty deep decline in the market at the end of 2018. And really, I think a lot of the volatility that we saw at the beginning of 2022 was the knowledge that the Fed intended to begin raising rates again. So the market had some pressures on it as a result of just the information put out there that the Fed's direction was being signaled. And so the market really kind of reacted to that more so than even the rate hike itself, it seems. So one question I want to ask, because I feel like there were a lot of people who really wanted to buy a home last year or refinance.

Some people were lucky enough, they got a home, some didn't. But the reason I'm asking, Peter, if we take a look at the 30-year fix right now on mortgages, right now, 467. And it's only, like you said, probably going to creep up more as those interest rates keep going up. So if I was thinking of buying or refinancing, is this something I should be doing now? Yeah, I think better now than later, if you're looking to finance and are going to need to borrow capital. As far as from a consumer perspective, yeah, what this rate hike and intended continued rate hikes mean are that borrowing money is going to be more expensive.

Right. The last into the rest of 2022 and years forward. Also, people were moving up to larger and larger homes because they could afford those larger homes for essentially the same payment because of the lower interest rates. We're probably going to see that slow down as well. But if you're looking to buy, if you're needing to finance that and borrow money, it probably means that now is as good a time as any to get into that process and lock in these low interest rates for as long as you can, really. I mean, I like being paid out of debt. I don't love having debt, but if you can lock into these historically low interest rates for as long a period of time, you're probably going to be able to afford a lower payment. And to put some perspective on this, Erin, is like, yes, the rates are slightly higher than they maybe were six months ago or a year ago, but rates still are very historically attractive. Right, right, right. It's just, it feels painful.

Historically, not so bad. So the other thing I wanted to ask about home equity line of credits, you're talking about refinancing being popular. There was an 83% increase in demand for home equity line of credits. So if I have a HELOC, how's this going to affect me? Well, the variable rates, you may need to watch out for those because what you had as a low rate last year in a couple of years, if you continue just those minimum payments, it could adjust. If you've got a variable rate, you need to definitely pay attention to that.

I think a lot of the increase in volume of HELOCs though, was due to a lot of marketing. I mean, I heard the radio commercials almost every day saying you could consolidate other debt. You could put new additions on your home. You could buy that kitchen or that swimming pool that you had always dreamed of, or you could even eliminate debt by borrowing more money from your home.

It didn't make much sense to me. That's not how I look at eliminating debt by going out and borrowing more. But again, as compared to a lot of other rates like credit card rates, which are usually in the double digits, they're not very attractive. If you could borrow money at a low rate, put it on your home, it did seem like a much better deal. But I imagine that we will see this slowing down pretty substantially as well as those rates do begin to creep up.

Okay. So the way that I'm hearing you explain this, it's not great news if you have debt, but it could potentially be good news if you are a saver or an investor. Why is that? Well, specifically a saver. I mean, the interest rate that we will get on deposits to banks, checking savings, money market, those should slightly improve. In the grand scheme of things, is money in the bank keeping up with inflation?

No, probably not. And the rates that we're making on savings will probably lag behind the increase in the Federal Reserve's stated interest rate. They probably won't creep up quite as quickly, but we should over time begin to see better rates on savings, on deposits, where we are saving money. But there is a difference between saving and investing. Investing involves risk. And the bond market is actually much larger than the stock market.

We hear a lot about the stock market because it's more exciting, it moves, it drives headlines. But the bond market is where people, institutions have loaned money for a stated interest rate over a given period of time to entities that need that money. Municipalities, governments, there are bond issuers, corporations that want to raise capital and what they do is they borrow that money from investors. Well, when you make that loan as an investor, you lock into an interest rate for a period of time. If interest rates during that period of time begin to creep up and you want your money back, then you may have to sell your bond holding your loan at a lower cost, at a lower premium than what it had been valued at previously. If I have a 4% bond and interest rates are now 5, in order to make that attractive to a buyer, I have to lower my price to give them an equivalent yield. Now that's a lot to say that interest rates and bond values tend to move in opposite directions. So as we see rising interest rates, it may be that we could go out and buy new bonds for a better yield and get a better rate, but the value of existing bonds and bond funds could suffer. Historically, it has been known that when interest rates rise, bond values and bond fund values fall.

And the problem there is that's what is typically used for the more conservative portion of investors' portfolios. So we really need to be cautious on what we are looking at as far as the market direction. When we talk about the market including stocks and bonds, what these rising interest rates may mean for the markets in general. And then the housing market has ripple effects and implications throughout the economy. So as that slows down, what does that mean for the rest of the market? And also, economists are paying pretty close attention to the yield curve. Basically, I should be able to get a higher rate if I loan money out for a longer period of time than I would get for a shorter period of time. But when that yield curve inverts, meaning that I am actually earning higher rates of return off short-term money, economists have said that this often is kind of a signal, a warning flag, if you will, that there could be some coming economic headwinds. In fact, it's been a leading indicator of some recessionary periods in the past.

Yeah, I think there was only one exception when it wasn't ahead of a recession. This is a lot to unpack, Peter. There's so much to consider. If somebody would like to talk to you more about either prioritizing paying down their debt or where they should be investing now in this very volatile climate, what's the best way to reach you? Well, they can call the office, 919-300-5886. You can go online, It looks like, but it's my last name, Rishon, Peter Rishon, Rishon Planning. You can also email me, peter at

All the ways. Peter, thank you so much. Hey, a pleasure, Erin.

Thank you. We all need to have an understanding of the factors that can influence our money. We also want to earn as much on our money as possible and only take risk where necessary. Did you know that you can get a government backed guarantee 7.12% right now on this podcast interview, Peter Rishon discusses where you can secure this kind of rate without market risks.

Hey, Peter, it's very good to see you today. We are talking about a relatively safe investment that will soon yield almost 10%. We are talking about I bonds, which I feel like the rest of the country is talking about I bonds right now as well. Series I savings bonds are tied to the inflation rate, and I don't have to tell you this because I know you know what, but the CPI recently hit 8.5% in March. These are numbers we haven't seen since the eighties. So we're hearing a lot of interest from savers and investors.

So let's start at the top. What is an I bond and is it a good investment? When I bond is a security offered by the US government, it's got the full faith and credit and backing of the US government.

So you mentioned the word safe as much as anything could be considered safe. Those things with the full faith and credit and backing of the US government are on that spectrum of safety and the I bond is attached to inflation or inflation rates. So what the CPI acknowledges is that we're paying about 8.5% higher prices for the goods that we buy each and every day. Now savers are often looking for a way to maintain purchasing power and unfortunately in banks in this low interest rate environment that we've been in really for years now, inflation hasn't been that much of a problem until recently, but the interest rates still weren't keeping up with inflation prior to this spike. I mean, inflation historically has been about three and a half percent. Interest rates were paying 0.01% less than one half of 1% kind of across the board.

So money sitting in banks in excess of what you may need or can justify as an emergency account was in fact losing money safely. At the end of the year, if inflation is 3%, your interest rate was only one, you've lost 2% in purchasing power. So savers look for alternatives. I bonds offer that alternative that can help keep up with inflation. And the rate currently is 7.12%.

Because of this higher CPI number that was just released, we think that those rates could in fact go up, but 7.12%, government backed, guaranteed by all intents and purposes, not a bad rate. Here's the downside is that each individual can only invest $10,000 to get that rate. Not good for IRAs. You can't do it inside of a tax deferred account. It's got to be kind of cash on hand, non-qualified money. Technically, if you're doing a tax return and getting a refund, you can direct up to 5,000 additional dollars from your refund to buy more. But each individual, the maximum amount each year would be a total combined of $15,000. 10,000 that you can deposit, 5,000 that you can put from a tax return. Now you could do that for members in your family and maybe multiply that number depending on how many people you have in your household. But if you're doing that for children or grandchildren, that is considered a gift. So you just need to be aware of that, but a gift earning 7.12%, not a bad deal.

Not too shabby. Well, I think that that was helpful. So let's break down a little bit more of those pros and cons. You did mention if you have a savings account, which right now they're returning 0.06%, CDs right now returning 0.15%. So this may be a good option for those who are conservative investors, but again, it's capped out at that $10,000.

Yeah. And in a savings account, I always talk about the three to six months worth of living expenses for your emergency account is appropriate to be in the bank. However, a lot of savers, conservative minded folks have put more money than that in banks and CDs has traditionally been the approach.

They may have a hundred thousand or several hundred thousands of dollars in CDs. You can't convert all of that money over and get into one of these series I bonds because again, the limits 10,000 also the interest rate can adjust after a year right now, this year, 7.12%. The penalty for getting out early, as long as you've been in it at least one year, but before five is three months worth of interest. So you could potentially lose three months worth of an annual 7.12% if you got out early and if the rates do adjust and this 7.12% falls and becomes less attractive than that penalty correspondingly would be less also. But you do need to understand that if you're going to dedicate some money to some of these I bonds, that there is a cost of liquidity.

If you do need to get out early and you need to be able to mentally dedicate that money for at least one year where you're not going to need it, you're not going to touch it. Always very important to know. Peter, this was really helpful to speak with you and I think that you have so much to offer when it comes for people who are looking for kind of alternate investments during these high inflationary periods. If somebody has some questions, what's the best way to reach you? Well, you can reach me by calling the office, 919-305-886. You can go online,

It looks like Also worth noting here though, Erin, is that I don't offer I bonds. In fact, they are something that you have to buy direct from the government, It's something that I have talked about with my clients over the past several months and said, hey, if you've got some extra cash, here's a great place to put it. But it's not something that you purchase through a bank or an investment advisor or a stockbroker.

You have to purchase it directly with a account. So that's where you go. That's where you can find out more information. If you want to evaluate if that's right or what piece of your assets that's right for, then we could talk about it, but that's where you go to actually make your purchase.

Well, I do very much appreciate talking it through with you. Peter, this was very helpful. Thanks for tuning in as we highlighted some of Peter Roshan's recent interviews for April's Financial Literacy Month. If you'd like to hear any of these educational interviews again or want to get in touch to find out more, visit or call Peter Roshan at Roshan Planning directly at 919-300-5886. Thanks for tuning in to Planning Matters Radio.

This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to take investment, tax or legal advice from an independent professional advisor. Any investments and or investment strategies mentioned involve risk, including the possible loss of principal. Advisory services offered through Brooks' Own Capital Management, a registered investment advisor. Piduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker-dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission which may result in a conflict of interest regarding compensation.
Whisper: medium.en / 2023-04-24 21:54:39 / 2023-04-24 22:06:38 / 12

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