So Money with Farnoosh Torabi: Episode 1758 Summary

Released on December 6, 2024, "Ask Farnoosh: Trump Tariffs, Retirement Decisions, and Car-Buying Tips" delves into pressing financial questions affecting listeners as they navigate economic uncertainties. Host Farnoosh Torabi provides expert insights on impending Trump-imposed tariffs, strategic retirement planning, and savvy car-buying strategies, all aimed at empowering her audience to make informed financial decisions.

1. Understanding the Impact of Trump Tariffs

Farnoosh begins by addressing questions from the Huffington Post regarding the new tariffs announced by President Donald Trump. These tariffs include a 25% tax on goods from Mexico and Canada and an additional 10% on Chinese goods set to take effect with Trump's presidency.

Key Points:

• Price Increases: Tariffs are expected to raise the cost of imported goods, directly affecting consumer prices across various sectors such as apparel, toys, furniture, household appliances, and technology.

  "President Trump announced that he's going to impose a 25% tariff on all goods from Mexico and Canada, as well as an additional 10% tariff on Chinese goods." [16:36]

• Affected Categories: The most impacted areas will likely be major home appliances, technology, furniture, and groceries due to their heavy reliance on imported materials and components.

  "The three product categories that I think are going to be most affected are major home appliances, technology and furniture." [16:36]

• Economic Implications: Economists predict that these tariffs could exacerbate inflation, increasing the financial burden on both businesses and consumers. Yale’s Budget Lab research suggests that additional tariffs may add $2,000 to $7,600 to a household’s annual budget.

  "Additional tariffs could add another 2,000 to $7,600 to a household's budget, depending on your consumption profile." [16:36]

Strategies to Mitigate Impact:

• Advance Purchases: Consumers are encouraged to buy big-ticket items like washers, dryers, refrigerators, and electronics before tariffs take effect to avoid higher future costs.

  "If you're in the market right now for a big ticket item that's likely created overseas or manufactured overseas, you might want to pull the trigger before the end of the year." [16:36]

• Energy-Efficient Investments: Investing in energy-efficient appliances not only reduces long-term costs but also qualifies for tax credits under the existing Inflation Reduction Act, which may be revoked under Trump's administration.

  "You get up to a maximum of twelve hundred dollars back through the Energy Efficient Home Improvement Credit." [16:36]

• Secondhand Market: Emphasizing the benefits of refurbished or gently used items as a cost-effective and environmentally friendly alternative.

  "You can get secondhand clothing, toys, books, furniture, cars, technology. It's all available to us as secondhand." [16:36]

2. Expert Car-Buying Tips Amid Tariff Concerns

Listener Sandrine shares her concerns about purchasing a car in the current market, influenced by post-pandemic supply chain changes and the upcoming tariffs.

Advice Provided:

• Timing Your Purchase: December is highlighted as an optimal time to buy due to dealerships aiming to clear out old inventory. Purchasing before the tariffs take effect can safeguard against price hikes.

  "If you're thinking about it, now would be a good time to get one before December 31st." [16:36]

• Negotiation Tactics: Farnoosh advises negotiating virtually by contacting multiple dealerships via email to obtain the best offers before visiting in person, saving time and enhancing bargaining power.

  "Find the sales managers' emails and request their best offers across various dealers to secure a competitive price." [16:36]

• Financing vs. Cash: Evaluating the benefits of paying in cash versus financing. Paying cash can eliminate interest payments and provide immediate ownership, while financing may preserve liquidity.

  "If you can comfortably pay in cash without disrupting your financial goals, consider cash. Otherwise, weigh the interest savings against maintaining liquidity." [16:36]

• Insurance Savings: Shoppers are encouraged to obtain multiple insurance quotes, inquire about discounts and bundling options, and regularly renegotiate policies to reduce costs.

  "Get quotes from at least three insurers, ask about discounts, bundling, and safe driver programs to lower your insurance costs." [16:36]

3. Navigating Retirement Planning: Traditional vs. Roth 401ks

Addressing Carolina’s question about maximizing retirement contributions and choosing between Traditional and Roth 401ks, Farnoosh breaks down the differences and considerations.

Traditional 401k:

• Tax Benefits Now: Contributions are made pre-tax, reducing current taxable income.

• Taxation on Withdrawals: Taxes are paid upon withdrawal during retirement.

  "Traditional 401k contributions lower your taxable income today, and you pay taxes on the withdrawals in retirement." [16:36]

Roth 401k:

• Tax Benefits Later: Contributions are made with after-tax dollars, offering tax-free withdrawals in retirement.

• No Income Limits: Unlike Roth IRAs, Roth 401ks do not have income restrictions.

  "Roth 401k contributions are made with after-tax dollars, and withdrawals, including earnings, are tax-free in retirement." [16:36]

Considerations for Decision-Making:

• Current vs. Future Tax Bracket: High earners in high-tax cities may benefit from Traditional 401ks to reduce current tax liabilities, especially if they anticipate a lower tax rate in retirement.

  "If you’re currently in a high tax bracket, contributing to a Traditional 401k can provide immediate tax relief." [16:36]

• Future Tax Rates: Anticipating potential tax increases, a Roth 401k may be advantageous to lock in current tax rates for future withdrawals.

  "If you anticipate your retirement tax bracket will be the same or higher, a Roth 401k could make more sense." [16:36]

• Geographical Considerations: Retirement location impacts tax implications. Consulting a tax professional is advisable when planning to retire in a different state or country.

  "If you're moving to a lower tax state or country, consider how that affects your retirement withdrawals and tax obligations." [16:36]

Diversification Strategy:

• Hybrid Approach: Contributing to both Traditional and Roth 401ks allows for tax diversification, offering flexibility to manage taxes effectively in retirement.

  "Contributing to both accounts provides flexibility to withdraw from different tax buckets, minimizing overall tax liability in retirement." [16:36]

4. Building Community and Continued Support Through So Money Members Club

Farnoosh introduces the So Money Members Club, a platform designed to foster a community of financially motivated individuals. Members receive monthly live financial training, access to live office hours, and an engaged network to support their financial goals.

Features:

• Monthly Workshops: Covering topics from real estate and investing to debt consolidation and point optimization.

• Interactive Support: Live office hours for personalized financial advice and community-driven discussions.

• Exclusive Benefits: Free money consultations and extended trials to foster member engagement and growth.

  "In 2025, we have now decided on what we're going to learn during those monthly live workshops, including topics like real estate, investing, and debt management." [09:05]

5. Listener Feedback and Engagement

Farnoosh highlights positive listener feedback, showcasing testimonials that emphasize the podcast's impact on personal financial strategies and relationships.

Notable Listener Quote:

"Farnoosh's steady stream of informed and relevant guests bring new points of view to my inner financial dialogue and stoke important conversations with my partner." – Brooklet 80 [09:05]

Farnoosh responds by offering a free money consultation to listeners who leave reviews, encouraging continued community support and engagement.

Conclusion

In Episode 1758, Farnoosh Torabi equips her audience with actionable strategies to navigate the financial challenges posed by new tariffs, make informed decisions about retirement accounts, and optimize car purchases in a fluctuating market. By fostering a supportive community through the So Money Members Club and actively engaging with listener feedback, Farnoosh reinforces her commitment to empowering individuals to achieve financial well-being amidst economic uncertainties.

Stay Connected: For more insights and to join the So Money Members Club, visit SoMoneyMembers.com.