Build a Forever Paycheck with Jean Chatzky of HerMoney

25:18I mean, saving more solves a lot of problems no matter when you do it. But you can also look at your timeline. There's a piece of research that I've held on to for a very long time that shows that working an extra six months to a year at the end of your career is the equivalent of adding 1 % to your retirement savings for 30 years. Wow. Right. Now that math works, again, because there are a lot of other factors in the mix, but also because the amount that you're likely earning at the end of the career is probably higher than at the earlier stages in your career. But there are different levers that you can pull.

26:03And when you are taking care of your children, it doesn't mean that you need to be earning nothing. Right. There are different ways to side gig it a little bit, bring in a little bit of an income, and maybe that money goes to fund some sort of a retirement account.

26:22Sean Pyles:Yeah, I've seen a couple of friends do exactly that, where they maybe took a year off after their kids were born. And then both of these friends I'm thinking of, they got a job where they can leverage the skills that they studied hard for and earned degrees in, but they can do it from home on a part-time basis. So they're staying in the job market. They're reestablishing those connections and shoring them up and importantly, bringing in money and continuing that access to a workplace retirement account. Yeah, absolutely. And I think since COVID, the opportunities to be remote, to be part time have just gone up.

26:56Sean Pyles:Okay, well, let's hop into our third question, which is fortunately a shorter one. Here we go. Hello, nerds. I just opened a self 401k and I was wondering how I should contribute to the employer 401k and employee contribution. Should I contribute an equal amount as an employee and employer to maximize the benefits? If not, what ratio would you recommend? I have been in both of these seats, and I've tried to max out both because that way you get the most amount of money in the plan. Contributing more as an employer than as an employee helps the business. Contributing more as an employee rather than an employer helps you on your personal tax returns.

27:46So if you've got an accountant, if you've got a CPA, or even if you've got a good piece of tax software, I'd run it both ways and I'd see how it shakes out for you at the end of the year. Yeah.

27:58Sean Pyles:One of the benefits of contributing as an employer is that the contribution limit is just simply much higher. So that's really appealing. When I first read this, I actually misread it and thought that they had their own business and then another employer that was contributing or offering them a 401k, which isn't exactly the case. But one thing on that, because people are in that situation too, people need to know that even if they have multiple 401ks across different employers, there is a pooled contribution limit. So it's not like you can contribute$23 ,000,$24 ,000 max to one and then also the same amount to another if you are lucky enough to have all of that money lying around.

28:32Sean Pyles:It's all connected. So just keep that in mind too for those who do have access to multiple 401ks. But if you've got some self-employment income in addition to your 401k, you can also go ahead and fund one of the plans for the self-employed, which is a nice way to just if you have some additional money laying around that you want to put to work in a tax advantaged way, that can be helpful. And the same applies to SEPs, right? Yes. SEP IRAs as well. I contribute to one. Yeah. Yeah. So Elizabeth, just for folks who don't know, you contribute to your 401k through NerdWallet and then you have your own retirement account through your small business.

29:10Sean Pyles:So you can contribute to multiple at the same time. And those contribution amounts are not pooled, which is really nice. Yeah. So you can save more for retirement. Exactly. And I've always figured if you have years where you can save more for retirement, you probably should save more for retirement because it allows you to take your foot off the gas in those years where maybe a medical emergency hits or you have a big expense. And then you don't have to feel bad about that. So, Jean, we've run through a few different areas of retirement savings. One thing we didn't totally get to is what you mentioned way at the beginning, which is how to begin to build that forever paycheck when you're in your early working years.

29:49Sean Pyles:You mentioned that there's a process or steps to follow for this. Can you outline those? Sure. First, you want to figure out what size of paycheck you're looking to fund. And that really means taking a look at those things you need to pay for and the ones you really, really want to pay for. There are certain things that are discretionary, but not really discretionary. Like I'm not giving up my gym. I'm going to pay for that pretty much no matter what. And so I want to know that my forever paycheck is going to cover that. The second vacation, that's more discretionary. If I don't get that this year, I might be a little disappointed, but nothing bad is going to happen.

30:38Sean Pyles:At least you're getting one vacation now. Exactly. So you figure out what size paycheck you're looking to cover. Go to mysocialsecurity.gov. Look at the amount of Social Security you expect to receive when you intend to claim it and figure out how much of your paycheck will be covered by Social Security. Then isolate the gap. That's the amount that you want to cover with the forever paycheck that you build yourself. The next step, as we talked about, is figure out how you want to pay for that paycheck. Do you want to use insurance or an annuity? Do you want to use investments, tips, dividend-paying stocks, other things?

31:23You go ahead and you make that purchase or you isolate those accounts, and then you decide when essentially you're going to turn on the income. And it's really that simple. It's much more of a mind shift than it is anything else. And as I said, this is not a solution for all of your money. It's a solution for a portion of your money, generally 25%, 30%. The rest of it you'll invest in stocks and other investments that will provide growth because that is necessary for longevity, for legacy, and for all of your future needs down the road.

32:05Sean Pyles:That last point is really important because I think some people may have this idea that once you hit retirement, you are done investing and you're out of the market. But in fact, you do need to keep your money growing in order to have enough in all likelihood. So people should be aware of that and look at what sort of investment mix might make sense for their retirement years. 100%. And we're always talking about this calculator, but for anyone out there who hasn't used it yet and who wants to know their retirement numbers and maybe isn't ready to go see a CFP or finance professional, head over to our website.

32:35We have a calculator that you can use, a retirement calculator, just to give you a benchmark and a ballpark figure of what you're working towards. Because trust me, knowing your number makes working towards that forever paycheck, as Jean has explained, a lot easier.

32:48Sean Pyles:And we'll have a link to that in the episode description of this episode. Well, Jean Chesky, host of the Her Money podcast, thank you so much for coming on talking with us today. Thank you so much for having me. Coming up, we've got this week's money news, and we're looking at how your grocery store is spying on you to extract even more money from your wallet. But before we get into the news, I need you to get your phone out and send us some money questions. Maybe you're wondering about how to make progress on your generational wealth building goals or how to deal with money trauma. Or maybe you have questions about financial planning for 2027.

33:25Whatever your questions are, send them to us. You can leave a voicemail. You can text us. You can comment on Spotify, YouTube. Look at all the options we gave you.

33:32Sean Pyles:Even email. You didn't even mention that. Podcast at nerdwallet.com. Whatever your money question, send it our way. More smart money in a moment. Stay with us.

33:44Sean Pyles:Fall has never looked or tasted this good. Sweet Green's Fall Harvest Menu is back with seasonal favorites dressed to impress and made to be devoured. Warm roasted sweet potatoes, crisp apples, maple glazed Brussels, and crave-worthy flavors in the autumn harvest bowl, maple glazed salmon plate, and roasted bacon Brussels side. The season's most desirable menu has returned to Sweetgreen, featuring fall's best dressed. Make your move. Order on the Sweetgreen app. When you've got a job to do, Lowe's knows how to help you keep it moving. Milo's Pro Rewards members save more with member volume discounts on eligible orders through a quote of$2 ,000 or more.

34:26Sean Pyles:Plus, save time with job site delivery on select purchases. Not a member? Join for free today. Exclusions, more terms, and restrictions apply. Can't be combined with any other discount, including but not limited to contract and or special pricing. Loyalty programs subject to terms and conditions. Details at lowes.com slash terms. Subject to change. Okay, let's get to our weekly money news roundup. We're breaking down the latest in the world of finance to help you be smarter with your money as usual. When is the last time you went to the grocery store, Sean? Wait, wait, wait. Before you answer that, I feel like you're a bi-daily grocery store goer.

35:01Sean Pyles:Oh, absolutely not. I want to go to the grocery store as infrequently as possible unless I'm like vacationing in Europe or something. But I do a weekly pickup curbside where I don't even step foot in the grocery store for the most part if I can avoid it. I've become an almost everyday grocery store goer and it's annoying. But anyways, while we're talking about grocery store shopping, did you know that they're tracking on every move, Sean? Yeah, unfortunately, I did. And it seems like everywhere we go, we're being surveilled and our prices are changing accordingly. But let's get to some details and hand it over to our news maven, Ana Helhosky.

35:33Sean Pyles:She interviewed our colleague Amanda Barroso, a personal finance writer, about how retailers are now using surveillance pricing to mark up what you pay for all kinds of things. Welcome to Smart Money, Amanda. Hi, Ana. It's always nice to be here. So first off, can you explain what dynamic pricing is? Dynamic pricing is when prices change in real time based on supply and demand. So the cost goes up for everyone shopping at that moment. You see this in action at like grocery stores or other retailers that have those like little digital price tags. You know, it makes it easier for stores to change their prices quickly.

36:09But that's what we're talking about generally when we talk about dynamic pricing. And that's in-store and online, right? Right. You can see it sometimes, too, with, like, surge pricing. So, like, let's say you go to a concert and you want to take a lift and, like, all the prices in that area are jacked up$25 or whatever. That's, like, a version of that, right? Right. But it's happening, like, for everyone in that particular moment, right? Now, how about surveillance pricing? What's the difference there? Surveillance pricing is more tailored to individual consumer habits and preferences. So even things like personal demographics, your browsing habits, how fast you search for an item in a store app.

36:48This is all data that retailers are capturing about us through like loyalty programs that we're members of, internet cookies, location monitoring, and, you know, smartphone apps in general. That's the surveillance piece, right? The pricing piece is that they're now using this data to serve us individualized prices based on what they think we are willing to pay. Now, you've definitely seen this out in the wild. Can you talk a little bit about your experiences there? So back in August, I wrote this story about my experience buying cereal for my toddler. He needed iron. So the pediatrician was like, hey, Cheerios, right?

37:21So, OK, I'm going to go buy Cheerios. I go buy my family-sized box of Cheerios. And a week later, when I went to go restock, the price was higher. And I was like, OK, I didn't buy it that week. Next week I go, I get a coupon. OK, buy it again. In this example, what the retailer was learning or testing was what my threshold was or what I was unwilling to pay. And then when it found that number, it served me the coupon to bring me back in. And how is this different from a normal cycle of cereal, for example, going on sale? The key difference here is that consumers are being offered coupons and discounts based on their personal data rather than, like, say, a paper coupon that you get when you enter the store.

38:03You remember those old circulars, right, where you, like, get the coupons out? Those are virtually nonexistent anymore. Finding coupons, accessing coupons is either through loyalty programs, downloading the apps for free, or coupon database websites, things like that. Because those are virtually nonexistent, everything is personalized. In this sense, people shopping at the same store at the same time, buying the same items, could be paying different prices. While surveillance pricing is more prevalent and it's easier to document online for the folks who are doing the work to try to get to the bottom of some of this stuff, it's not exclusive to online shopping.

38:37So it's used for in-store shoppers, again, through those loyalty programs and apps. I have a Kroger down the street. they have special deals even if I go to shop in store that I have to go into my app and click because I can't go to a cash register because everything is self-checkout when I then go to check myself out those deals are loaded automatically onto my card so even when you're shopping in store you're being forced to those digital spaces you have to interface with the app somehow now recently I came across you know something on my algorithm this this interview with this woman who wrote this book called Gouged.

39:14And she talked about how she dug into the patents that have been filed by some of these major retailers. And this one was filed by Walmart. They're working on smart carts that allow you to scan items before you put them into your cart. And that might sound great, right? Yeah, I've seen them before. Right. In the future, though, these carts might let companies change the price of things or charge people different amounts based on what's in your cart. So that might be hard to understand. Let's pretend like you're going through the store. You're going to make spaghetti. You throw some spaghetti noodles into your cart.

39:48The algorithm driving the pricing structure of the cart is like, hey, by the way, hmm, I bet you she's making spaghetti. So when you go to the aisle with all the jarred marinara sauces, all of a sudden that Rao's jar is a dollar more.

40:02Sean Pyles:So it's having a different anticipation for what you might be buying based on what's already in your cart. And changing the price of those ingredients. Right. In real time, in the moment, as you're shopping. Again, these things are still like a futurity. They're something that's still, I guess, in development in the works. But like this kind of gives you a sense of where retailers' minds are at. So, Amanda, you've been writing about this. You've been tracking this sort of thing. Can you explain something that you wrote about in one article about the willingness to pay score? I think we all have a threshold where we stop and we think, nope, I'm not paying that.

40:36Sure, yeah. For me, I'm not paying six bucks for a box of cereal. Like, I don't care how much my son loves it. I don't care how much iron is in that little box. I'm not paying six bucks for it. And retailers are noticing these moments and documenting them through our purchase history. So they use that data to calculate what's called our willingness to pay scores. And then they set prices for us before we even add something to our carts. And again, this is all happening behind the scenes. So I'll add that this is much more prevalent for folks who do their shopping online, like Instacart, you know, things like that.

41:06I tend to stay away from those things. I'm an Aldi girl, but there are stores where I have to use the retailer apps, too. And that's definitely happening behind the scenes. Retailers are pushing shoppers to download their apps to access coupons and deals. We're about to be in pre-Black Friday season, which is October. We're already seeing prime big deal days and competing sales from Target and Walmart. They're driving you to download their app, become loyalty members. Hey, it's free because the promise is that this is where the best and lowest prices are. Early access to sales. And as shoppers, we're just we're trying to save a buck.

41:40Right. You don't think twice about signing up. There's a lot of fine print. And most of us just say, I can't even understand what this is at. The terms and conditions, right, are you need a team of lawyers. So you just click and move on with your day. And often what's in that fine print is the bit about data privacy here. So again, in that willingness to pay score, what's weighing most heavily? Companies are tracking your behavior, like, you know, what time of day you shop, your brand preferences, which locations you shop at the most, even how quickly and accurately you type things into the search bar.

42:17Sean Pyles:Oh, so they're tracking your spelling as well. Absolutely. Even the way that the phone moves in your hand. Wow. Wow. Now, everyone isn't subject to discounts when it comes to this type of pricing, right? So who tends to fall into the groups of people who do and don't see lower prices in their cards? A lot of what I know about this comes from an interview that I had with Derek Kravitz, who's a reporter at Consumer Reports, and he's on the front lines of a lot of this surveillance pricing reporting. I learned so much from him, including some of the stuff that I mentioned about companies tracking us based on how we move our phone, how fast we type, things like that.

42:54And I asked him, I was like, OK, so can I shop using my desktop then? Is that going to get me around something? He's like, no, it's pretty ubiquitous. Right. Yeah. So what I learned from that interview is like the other thing is like there's no way of knowing if you're in this control group or if you're paying the full price. You know, he's just like there's just no way of knowing. There's so much technology at play behind the scenes, and a lot of it is so new that it's not even being regulated yet. And I'm sure we'll probably touch on that later.

43:25Sean Pyles:Yeah, and I'm sure that nobody's, like, standing outside their grocery store polling everyone who comes in and out about what price they're actually seeing. Right, but that would be what it would take, essentially, to figure out. So is there any way to confirm that you're being surveillance priced? What are some signs to look for? I would just say assume it's happening to you. But the truth is it's really hard to prove. but it's important to pay attention to patterns. So here's some things that you can look for. So maybe you notice that prices differ based on the browser that you're using, or maybe you see one price when you Google an item, but see a different one once you log into a retailer's app and type in your loyalty information, that could be something to pay attention to.

44:01Sometimes prices might start creeping up after you make multiple searches for the same item. You might also start to get suspicious if a family member or friend is seeing a different price for the same item that you're looking at. So like really paying attention to the fine details. And can you talk a little bit about the legal landscape right now? Is there anything already on the books to prevent this in certain places or any movement happening to curb the practice? When I was talking to Derek Kravitz about this, he was really talking about the momentum here around legislation. And as you can imagine, it's a hard thing to legislate.

44:31Two states, Maryland and Connecticut, are trying to make it harder for companies to use personalized pricing, but the laws aren't perfect. And how about at the federal level? Is the FTC looking into it? So in August, the FTC released a statement about businesses that are using personalized data to set individual prices based on how much a consumer is willing to pay. So, again, that willingness to pay score. And the FTC noted that this runs contrary to consumers' reasonable expectation, that everyone sees the same price at the same time in the same place, right? That's kind of what we expect as a consumer, and this is running contrary to that.

45:04At the moment, though, Congress hasn't given the FTC any authority to ban personalized pricing outright. Right. But the agency does say that it plans to aggressively enforce deceptive or unfair personalized pricing. So we'll see. You know, holiday shopping season is upon us. So we'll see how this plays out in real time.

45:23Sean Pyles:And you mentioned that Kravitz said that a new browser isn't going to help. Is there anything that people can do to prevent being surveilled in their shopping habits and with the prices that they pay? Like, I guess I'm thinking, does a VPN meaningfully change those prices? He did say, like, if you're really serious about this, you can use a VPN to shop. Prices are partially determined by your location. So this would hide your location and might disrupt the algorithm in that way. But it's a huge lift, both in terms of technology knowledge, right, and the cost of buying a VPN. For him, he's just like, I just think that this is beyond the reach for most Americans.

45:55but there are some things that you can try to do just to disrupt the algorithm like if you always shop on Sunday afternoon try shopping on Tuesday morning if you can shopping at stores like Aldi or Trader Joe's that don't require any app or loyalty program to get the best deals there's not even a really any coupons that you can use there so kind of changing up where you shop I think at the end of the day after having this conversation with Kravitz I got used to the idea of like friction. And we talk about this some, and I've been on the podcast to talk about it about we should just get used to like having a little more friction in our shopping experience.

46:30So companies don't want us to wait to purchase anything, but sometimes waiting can be a good thing. Either they'll send us a discount code over email. I'm sure if you've abandoned a cart anywhere on the internet, that retailer has sent you an email saying, please come back. We saw you were looking at this, but that time and space could actually help you realize, well, I didn't really need this thing at all. So any way that you can put friction between yourself and purchasing that thing, I think will be a good thing in the long run. So loyalty programs must make it pretty hard to fully opt out since you're effectively attaching yourself to a retailer.

47:04Do the discounts outweigh the risk of markup? Oh, Ana, this is like, oh, this is the question that I've been grappling with. As a budgeting writer here at NerdWallet, this is kind of the crux of it, right? Like, We're trying to help people save money. And often that means joining a store's loyalty program. Paper coupons, like I mentioned, are largely a thing of the past. Online shopping is how many Americans like to shop. So in many ways, this makes sense. But the data privacy issue is concerning. And when businesses use your personal information to set personalized prices without telling you, that's unethical.

47:37Sean Pyles:Is there anything that you can recommend that people start doing that could make a real difference to how much that they're actually paying? Well, with the holidays approaching, I know we're all thinking about managing costs, trying to stick to our budgets. So when it comes to gifts, I've started setting price alerts on items I know I will want to buy, as well as looking at their price history. So I'm already kind of getting a sense for what the average price is there. Amazon has a lot of flaws, but I will say this. They make that piece of it, the price history piece, easy. They include a link next to the current price so you can see what you're paying, if what you're paying now is higher or lower than usual.

48:12I've actually held off on some recent purchases because I looked at the price history and could see that the months ahead typically have lower prices for that item. Obviously, this is impossible for every shopping decision that you have to make, especially when it comes to gas, to groceries. For me, I'm going to try to keep shopping at Aldi and Trader Joe's and Costco even as much as possible. My husband and I have given ourselves a$150 grocery budget each week, and when that's out, we're just like eating out of the pantry. We're also going to try to take advantage of our rewards credit cards.

48:42So there's new Q4 bonus categories that are rolling out. We want to take advantage of those. And this is like kind of cynical, but if we're going to get hit with personalized prices on the front end, at least we can get some cash back in return, you know, maybe get some points for a flight, for a vacation. I mean, at this point, trying to strategize in that way is the best we can do.

49:02Sean Pyles:Yeah, the best attitude to take. Amanda, thanks so much for unpacking this. Thanks for having me, Ana. That's it for today. Don't forget, folks, we need your money questions. So turn to the nerds and call or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD. Or email us at podcast at nerdwallet.com or drop a comment on Spotify or YouTube. And join us next time to discuss one of my favorite topics, how to accumulate and pass on generational wealth. Follow Smart Money on your favorite podcast app that includes Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.

49:38Sean Pyles:And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. Some companies mentioned in this episode may be NerdWallet partners, but that does not influence how we discuss them. And with that said, until next time, we will miss you, but still turn to the nerds.

50:04Sean Pyles:Smart Money Fan. If you're getting this, it's because you live in the Chicago area. And guess what? Elizabeth and I are going to be in Chicago the week of October 19th. And we want to talk with you. We're going to be recording episodes and we want you there. So do you have money questions around how to overcome any money fears you have? Maybe you're trying to save for the holidays and don't want to overspend and want us to help you look through your budget. Also, guess what? It's almost 2027. So it's time to start thinking about your New Year's financial goals. Elizabeth and I can help you sort those out too.

50:35Sean Pyles:Or if you have any other financial question, talk with Elizabeth and I about it live on the podcast in Chicago, the week of October 19th. If you're interested in joining us, send an email to podcast at nerdwallet.com with the subject Chicago, and let us know what's on your mind. And hopefully we can find a time to talk. You can also send us a text or leave a voicemail on the nerd hotline at 901-730-6373. That's 901-730-NERD. One more time, Elizabeth and I will be in Chicago the week of October 19th, and we want to hear from you. Send an email to podcast at nerdwallet.com with the subject line Chicago.

51:09We can't wait to meet you, and I promise we're really fun in real life.

51:13Sean Pyles:And after we finish recording, we might just go to Portillo's together. We'll see. See you soon. Fall has never looked or tasted this good. Sweet Green's Fall Harvest Menu is back, with seasonal favorites dressed to impress and made to be devoured. Warm roasted sweet potatoes, crisp apples, maple glazed Brussels, and crave-worthy flavors in the autumn harvest bowl, maple glazed salmon plate, and roasted bacon Brussels side. The season's most desirable menu has returned to Sweetgreen, featuring fall's best dressed. Make your move. Order on the Sweetgreen app.