By Jonny West
5
1010 ratings
The podcast currently has 72 episodes available.
Welcome to episode 71 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. In this episode, I’ll share about an estate plan checkup, for those that have one and for those that don’t.
In this episode...
An estate plan is an absolutely crucial part of one’s financial plan. Over a lifetime you accumulate assets—real estate, investment accounts, a classic VW van, etc. When you pass away, there needs to be an orderly way for these assets to be distributed to those people you want to receive them. An estate plan is the way to carry out your wishes. Otherwise, the state of your residence, i.e. California, Hawaii, Texas, etc, will decide how it is divided up amongst your family. And if your estate is of significant value, you’ll have a lot of people claiming to be your family.
Because estate planning is a critical piece of better planning it is one of the five financial planning domains I focus on with my clients. These five domains are investments, income (aka cash flow), Insurance, taxes, and Estate planning.
Of those five domains, estate planning is the one most often ignored and that makes sense for a few reasons. We usually have a long time before we have to worry about it so it’s easy to put it off and the second reason is that no one wants to consider their own death. It’s rather depressing. But despite these facts, it’s incredibly important that any adult who owns real estate and or has children must have an estate plan.
For those who already have an estate plan in place, I say well done! You should commend yourself for doing what far too many do not.
But even if you already have one it’s important to complete a periodic check-up of your plan. Here is when to consider a checkup:
First, When was the last time your estate plan was reviewed? If it has been ten years or more you will want to review it to ensure it reflects your current desires and circumstances and that the people who are assigned as the decision-makers are the people you still want.
The second reason to consider a check-up is if there have been substantive changes in your life or the life of your beneficiaries. For example: marriages, divorce, births, adoptions, or even challenges faced by your beneficiaries (such as health events or substance abuse) all of which can change how you might wish to distribute your assets. Additionally, moving to a new state can affect your estate plan due to differing laws, so a review is advisable when relocating.
Now if you have reviewed your estate plan and everything reflects your current desires and circumstances the next thing you need to do is ensure your loved ones know about it. Do they know where to locate the documents in the event they are needed? Do the people who will make the financial and medical decisions on your behalf, know they have that responsibility?
It would be helpful to rehearse such a scenario to see how it plays out. The military practices scenarios to ensure they have made the necessary preparations as do firemen, policemen, lifeguards, and other professionals. It would be wise to consider what would happen if you and your spouse were incapacitated and couldn’t make a decision-what would happen then. Would the person named in your durable power of attorney documents know they are making the decisions and what you wanted them to decide? This is especially relevant for those of you in the later stages of life (70s and above). An older family member of ours recently had a health event, that put our preparations to the test. For a year before we had expressed the need to get the estate planning documents in the hands of the decision makers only until this recent scare had this been remedied. It’s wise to consider the what-ifs, as painful as such a thought may be.
Now for those who don’t have an estate plan, there is work to do. Yes, you do have a default plan. In fact, every state in the United States, from Alaska to Wyoming has a default plan in place. BUT YOU ABSOLUTELY DON’T WANT it. It will take way longer and is way more expensive.
Now you may be thinking, that sounds like something I’d want to avoid. And you would be right, but as I’ve shared in previous episodes you’d be surprised by the number of people that didn’t have an estate plan when they died. Here are just a few of the famous people you would know that sadly did just that: Pablo Picasso, Sonny Bono, Aretha Franklin, Prince (the artist formally known as), and the actor Chadwick Boseman (he played Black Panther in the Marvel Studios film). He did a phenomenal job in that role. Maybe you can’t entirely fault those who died suddenly, such as Sonny Bono and The Artist Formerly Known as Prince, but Aretha Franklin and Chadwick Boseman both had longer-term illnesses and still didn’t have an estate plan. Not a lot of R-E-S-P-E-C-T for one’s loved ones.
Speaking of Aretha Franklin’s estate, her own sons had a five-year legal battle, before they were finally awarded real estate. A judge made the decision based on a handwritten will from 2014 that was found between couch cushions.
It took 44 years to settle Jimmy Hendrix’s estate. Hendrix died in 1970 without a will. Without a will, Jimi Hendrix’s estate passed to his father. When his father died in 2002, he left behind his son’s estimated $80 million estate to Janie Hendrix, Jimi’s sister, cutting out Leon Hendrix, Jimi’s brother Leon Hendrix contested his father’s will in 2004, but it was upheld in 2007. Even when there isn’t lots of money there can still be a lot of drama.
There are so many advantages to an estate plan as it allows you to name who gets to receive what, and also when they receive it and on what conditions. For example, you could say, I want money to go to my kids at 25, 35, and 45 years of age, rather than a lump sum of money at age 25. Most people in their early 20s wouldn’t make a great decision if hundreds of thousands were dropped into their lap. But without an estate plan, the State of your residence will be making all of those decisions for you because that’s the default estate plan, which isn’t great, but at least it’s better than the State assuming ownership.
You might reason - but I’m already dead, who gives a rip, let my family sort things out when I’m gone. That’s a great strategy if you want your family’s last memory of you to be one of stress, expense, and struggle and you want your legacy to include family members fighting over your fortune, however small. If this isn’t enough reasons here are three additional reasons why you need one:
First, it will take a long time without one - Even if you don’t have a huge estate like Aretha or Jimmy. Because the courts are backlogged, it can take 9 months before you can schedule just an initial hearing and likely several more years to finalize it (depending on the size of the estate and number of people who want to benefit).
Second, It’s dang expensive - Without a trust, your family would need to pay all of the legal fees, namely court filing fees and the billable hours of an estate planning attorney. It’s WAY less expensive to pay for one before.
The third and final reason you need an estate plan is that without one it is open to the public. That’s why we know about Aretha and Jimmy Hendrix's estate. It’s all played out in public. With an estate plan, it can be handled privately. But without an estate plan, your beneficiaries' names will be listed for the public to see and for the scammers who specialize in taking money from them.
In conclusion, when it comes to estate planning it’s imperative that you complete a check-up. For those that have one, well done, but be sure it reflects your current circumstances and values and that all of the affected parties are notified and aware of the location and details.
For those who own real estate or have minor children and don’t have an estate plan, get on it. You can complete these quickly and easily and inexpensively online. As you get older you can meet with an estate planning attorney to complete a new estate plan as you will have a better idea about your and your beneficiaries' situations.
Tips Tricks and Strategies
Years ago, I spoke with another advisor and asked how everything was going. He said he was in the midst of a challenging time because one of his clients in his early 50s had died unexpectedly. The good news was that this client had life insurance. The bad news was that his ex-wife from over 10 years ago was still listed as the only beneficiary on the policy, and his current wife wasn’t too happy about things. The advisor told me that he didn’t facilitate the purchase of the original policy so hadn’t thought to review that policy to ensure the beneficiaries were up to date.
Things will transfer first by title, then by beneficiary designation, and finally by probate. In this case, there was a legal battle because the beneficiary was the ex-wife and her being the beneficiary of the life insurance wasn’t a part of their divorce agreement. Needless to say, this caused a huge issue for the widow.
This is an example of exactly why we review clients' estate plans and regularly conduct beneficiary reviews. We always want to ensure everything is in alignment with your wishes, and we’ve made more than a few updates to beneficiary designations. None as drastic as the example just shared, but we’ve still made changes.
References
Estate Planning Basics
9 Famous People Who Died Without a Will
Connect with Jonny WestSubscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
PODCAST FAST TRACK
Welcome to episode 70 of the One for the Money podcast. I am so very grateful you have taken the time to listen. In this episode, I answer the question “How much should one spend on vacation?”
In the tips, tricks, and strategies portion, I will share some cost-saving travel tips.
In this episode...
MAIN
When it comes to travel, St Augustine and Mark Twain said it best in my opinion.
St Augustine said that -The world is a book and those who do not travel only read one page.
And Mark Twain said - Travel is fatal to prejudice, bigotry, and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome, charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime.
My family and I are enamored with travel because of what we learn about the world, other cultures, and about ourselves. There are few things that create better memories than a vacation. Some have argued that life is really about collecting wonderful memories and research has shown that people tend to be happier when they have purchased experiences rather than things.
That certainly is the case with our family. When both my children and my business were young, we traveled by car around the Western United States and Western Canada. We love the outdoors and visited over 25 national parks in both the US and Canada with Banff, Jasper, Waterton, Glacier, Yosemite, and Crater Lake being some of our favorites but there were so many others that were really great as well.
As my business and kids grew we have been fortunate to be able to take a few international trips with Moorea and Cinque Terre being some of our favorites.
When our family talks about our favorite memories it almost always involves experiences we’ve had together on our trips and our favorite family photos have come from our trips as well.
This is why I am a strong advocate of traveling. It doesn’t have to require an airplane, because seeing a local museum or park can also provide a memorable time.
In fact, when I was a kid our family never took an airplane on our trips. Instead, we all piled in our wood-paneled station wagon with the rear-facing seats in the back and went to the national park near our home, and a couple of times we visited family that lived in the Western States of Utah, California, and Texas. It was an incredibly long drive from Alberta, Canada but I have some cherished memories from those trips.
One question that many ask is how much should one spend on travel. Some financial experts recommend that you spend 5-10% of your net income per year on vacations.
For example, if your net income is $100k a year, and as a reminder that is your income after taxes and retirement contributions. then you could reasonably spend $5-10k a year on vacations.
My family and I tend to spend more than 10% but we restrict our expenses in other areas of spending to compensate. We only eat out rarely and if we do it’s usually inn-n-out. Our kids don’t participate in club sports and just play AYSO soccer instead. With savings in those areas, we are able to do more on our vacations.
When it comes to money for vacation it should be saved in advance of the year of travel and would be in addition to what you have in your emergency savings.
I recommend you tentatively plan your upcoming trips for the coming years so you can anticipate the expenses. We have already planned our travel destinations for the next 2-3 years. I’ll do research on the expected expenses and create a Google spreadsheet that forecasts potential transportation, accommodations, food, activity, and other related expenses. As the trip gets closer, I even break it down by a daily expense. We usually save money on our trips by only eating out one meal a day and it’s usually a one to two-dollar sign place we find on Tripadvisor or like website. We also frequent the grocery stores of the country which is an enriching cultural experience to shop with and amongst the locals.
For those who like to eat out more or at nicer restaurants, you can forecast those anticipated expenses beforehand. I always add a few extra thousand dollars to our overall travel budget just in case we have some unexpected trip expenses.
Regarding travel, you will also want to consider the season of life you’re in. If you’ve got little kids, you will likely want to spend less of your income on vacations and do lower-key, closer-to-home trips. That’s what we did with our road trips to National parks. So many great memories from these. However, my wife and I have many more memories than our kids because they were so young they don’t remember them as well, but they do look at the photos as they play on our TV. Now that our two oldest kids are older we have justified spending more than the 10% of our net income on vacations. That was the rationale used for our recent trip to Europe. When my wife would ask about planning the trip, I’d tell her that we have 2 reasons why we should go on it, and that number represented the number of summers we have left with our oldest son Lucas before he leaves the nest.
Now as wonderfully amazing as trips are one should never, ever, go into debt to go on a vacation. Instead, visit a local national or state park instead. Often the memories are just as good.
I was reading an article on travel spending and they had a very appropriate warning which was beware of luxury creep. They said “Remember that it’s much easier to go up in the luxury level of a vacation than it is to come back down. That is, right now, you feel a 2-star hotel is perfectly amenable. However, once you stay at a 4-star property, a 2-star hotel will seem like an unacceptable comedown.
One book that accelerated my travel was the book Die with Zero written by Bill Perkins.
One of the most significant learnings from the book was his explanation regarding the intersection of time, money, and health and how too many worked too long to the point where they had plenty of time and money but didn’t have the health to truly enjoy it. He argued that people should be spending more money when their health is better. He argues that more money on travel should be spent in their 40s then their 50s, and more in their 50s then their 60s, and more money in their 60s than their 70s because you have the health to do it. Too many wait until after they have retired to travel and they just don’t have the stamina needed. For some, due to work obligations and other factors, they cannot travel until they have retired. And for those people, I strongly recommend that you pack a lot of travel in those first few years of retirement. In fact this is exactly what I encourage and help my clients to do.
Whether it’s a trip in your car across a county or state line or a flight across the international date line, travel can create unique conditions for you and your loved ones to make incredible memories. The key is to be away from the daily requirements and to be fully present with your loved ones while you collectively experience with your 5 senses new places and things. You’ll have some incredibly memorable times as you meet with locals and read additional pages about the world, in the words of St. Augustine. You’ll also develop a broader more wholesome view of men and things as Mark Twain advised.
All of these experiences will be incredibly enriching. As Bill Perkins notes in Die with Zero, one's life is a sum of your experiences and so to maximize your life you need to maximize your experiences. He notes that memories are an investment in our future selves. Buying an experience just doesn’t buy you the experience itself–it also buys you the sum of all the dividends that experience will bring for the rest of your life. Consequently, we need to make the most of whatever health we have at every point in our lifetime and see the world around us. It could be as simple as exploring a nearby museum or park and interacting with the people in that area. All told, you should be investing and spending according to a plan so you can have even more experiences.
If you want to learn more about working with me to plan your ideal life, go to my website, betterplanningbetterlife.com. On the “getting acquainted page you can schedule a free introductory meeting that should be worth your time.
Thank you again for listening and I hope you found this helpful, now on to the tips tricks, and strategies portion of the podcast.
TIPS, TRICKS AND STRATEGIES
Welcome to the tips, tricks, and strategies portion of the podcast where I will share a few tips on how to spend less on vacation.
As I mentioned earlier in this podcast, when both my children and my business were young, we traveled by car around the Western United States and Western Canada visiting various National parks. I have always loved the outdoors and wanted to instill that same love in our 3 sons. One of the impetuses for visiting National Parks was that every 4 grader and their family gets into National Parks for free because of the wonderful Every Kid in the Outdoors program. This was Federal legislation that was passed that allowed 4 graders and their families to have free access to hundreds of parks, lands, and waters for an entire year. You just need to register online at everykidoutdoors.gov and print out your pass as electronic copies aren't accepted. We would present our paper and they gave us a plastic pass to our 4th grader. When we did this for our two oldest boys, they felt pretty special that they were able to get the whole family into the parks for free. When Lucas was in the 4th grade we visited Death Valley, Zion, Bryce, Canyonlands, Arches, Capitol Reef, Grand Canyon, and Joshua Tree National Parks. When Conway was in the 4th grade, we visited Redwoods, Crater Lake, Olympic, Mt Rainier, North Cascades, Yellow Stone, Grand Tetons, Sequoia, and Kings Canyon national parks. Our youngest son Quinton just entered the 4th grade this year so we look forward to planning our national park trips for this year.
Another travel tip for having less expensive vacations is to utilize Google Flights to scan for less expensive airline tickets. It’s important that you start watching for flights at least 6 months in advance of your trip. What that allowed me to do was determine what the usual price would be for a flight. I would monitor it regularly and when I would see the prices drop, I’d purchase the tickets. Sometimes those tickets were purchased 8 months in advance and other times they’d be purchased just 2-3 months in advance.
My final travel tip is I would recommend going for longer international trips if possible. The reason is that transportation costs, often airline tickets, can be the most expensive part of a trip. For shorter trips, travel expenses were 60-70% of the total trip cost but with longer trips, they would be 40% of the costs. Yes, your accommodation expenses would increase but there is a benefit if you’ve already spent the money to get to a location to stay longer.
Well, I hope you found these travel tips helpful. As a great friend and mentor of mine said, happiness is being on vacation or planning your next one. And with Better travel planning you can have a better life. Have a great one!
References
Every kid in the outdoors
How much you should spend on vacation
Connect with Jonny WestSubscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
PODCAST FAST TRACK
Neither a Borrower Nor a Lender Be- Ep#69
Welcome to episode 69 of the One for the Money podcast. I am so very grateful you have taken the time to listen. In this episode, I shared whether it is wise to lend money to family or friends.
In the tips, tricks, and strategies portion, I share a tip regarding loans from a 401k.
In this episode...
MAIN
Recently I re-read The Tragedy of Hamlet by William Shakespeare. There are so many great quotes from this play. Just a few of these include:
But the quote most relevant to the subject of this podcast episode comes from Polonius’ counsel to his son Laertes.
Amongst other sage advice he provides his son, he tells him t0 “Neither a borrower nor a lender be; for loan oft loses both itself and friend.”
Over the course of life, we will invariably all experience times where friends and family will ask us for money. It’s important to prepare prior to such a request as the wrong approach could ruin some of our closest relationships.
Charles Barkley shared his thoughts on giving money to family.
Barkley and the rest of the Team USA basketball players were in Atlanta preparing for the 1996 Olympic Games when he heard a conversation between his teammate Grant Hill and Hill’s mother. Janet Hill told her son that she was only staying in town for a few days, because she had to return to work. Barkley wondered why she was still working, considering that her son was making tens of millions of dollars playing in the NBA.
And Grant Hill’s mom said the following:
“Do not start taking care of your family and friends. They never gonna stop, and it’s gonna ruin all your relationships,” She also said. “When you start giving people money, they never gonna ask for money [just] one time. No matter what you do for them, the first time you tell them no, they hate you.”
Barkley took the advice to heart and started to tell people no when they asked for money, which temporarily led to some ruined friendships.
“It was a tough and painful lesson for me,” Barkley said.
Some would think that professional athletes should share. Here is why most shouldn’t:
Nearly 80% of NFL players go bankrupt or are under financial stress within two years of retirement and 60% of NBA players go broke or are bankrupt within five years of retirement. Just look at the sad cases of Antoine Walker, Bernie Kosar and others.
When a family or friend asks for money, there could be a variety of reasons. Investing in their startup or helping them during a financially hard time.
-The first thing I recommend is to thank them for coming to you and before you can consider helping them you will need to ask them for more details.
TIPS, TRICKS AND STRATEGIES
The Internal Revenue Service has now made it easier to take a limited amount of money out of a traditional retirement account penalty-free. While previously you could tap your savings without penalty in more limited ways and often with more paperwork, (adoption, first time home buyer, etc), you can now take out up to $1,000 of your funds for any self-defined emergency.
The $1,000 provision is different from other retirement-account withdrawal options because you can just say that you have an emergency, without specifying what it is. So you can get the money faster. It is one of several ways Congress keeps making it easier for people to use their retirement savings as emergency funds.
You’ll still owe income tax on the $1,000 you take out if you don’t pay it back.
References
Charles Barkely - Don’t Give Money to Friends
Jr Bridgemen - $600 million Dollar NBA Man
WSJ - 401k Loan
Connect with Jonny WestSubscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
PODCAST FAST TRACK
Welcome to episode 68 of the One for the Money podcast. This is part 2 of a 2-part series on novel investment strategies. In this episode, I’ll review a novel investment strategy called factor investing.
In the tips, tricks, and strategies portion, I will share a second tip regarding stock options this time regarding incentive stock options also known as ISOs.
In this episode...
Factor investing is a strategy that chooses investments based on certain attributes or factors that historically have had higher rates of return. The assumption is that these same attributes will continue in the future.
The First one is that historically, stocks have outperformed bonds. Since 1926 stocks returned between 8% – 10% whereas the bonds returned between 4% – 6%. If you invested $1 in 1926 and earned the bond average of 5% it would be $113 by 2023, but if that dollar earned the stock average of 9% return it would be $4269. That’s why for longer-term goals we invest in stocks because historically they give you more to spend in the future when things will cost more.
The second investment factor is that smaller companies tend to grow faster than larger companies. Amazon and Apple all started in a garage and look at them now. But if people only invest in the S&P500 which all of the large American companies then they will miss out on buying the Apples, Teslas, Nvidia, Microsofts when they were smaller. From 1927 through December 2023 small stocks outperformed large stocks, 55% of the time after one year, 59% of the time after 5 years, and 68% of the time after 10 years.
The third factor to consider while investing is the price of the stocks you are buying. Some stocks are more expensive than others. Confusingly, this has nothing to do with the price of the stock but rather the price of the stock relative to the earnings of the company. This is known as the P/E ratio. On average, value stocks have outperformed growth stocks by 4.4% annually in the US since 1927. From 1926 through December 2023 value stocks were higher than growth stocks, 59% of the time after one year, 70% of the time after 5 years, and 78% of the time after 10 years.
The final factor to consider is profitability. That may seem like a captain obvious type comment but factoring in companies with higher probability can make a significant difference for investors. From 1963 through December 2023 high profitability companies were higher than lower profitability companies, 67% of the time after one year, 82% of the time after 5 years, and 92% of the time after 10 years.
Successful investing really should target factors that generate higher expected returns. Looking at average annualized returns going back decades, small-cap stocks have beaten large caps, value has outperformed growth, and high-profitability stocks have outgained low-profitability stocks.
Unlike active investing or trend models, factor investing doesn’t use a crystal ball but instead is grounded in economic theory and backed by decades of empirical data. Of course, past performance is no guarantee of future results but investing based on science is way better than investing based on an active manager's hunch or predictions about the future.
Tips & Tricks
ISOs are usually issued by publicly traded companies or private companies planning to go public. My tip regarding ISOs is whether you should take a higher salary and fewer ISOs or a lower salary and more ISOs and it really comes down to how much risk can you afford. If you are in your 20s or early 30s it can make sense to take a lower salary so you can receive more ISOs because you can live with roommates and because you have time to invest later, if this company isn’t as successful as one had hoped it would be. This approach can also make sense if you are much older and are on track for retirement. But if you are older and not on track for retirement then you will really want to consider taking a higher salary and fewer ISOs or a different job altogether. There are too many people risking their retirement on the hope that their one company rockets higher.
References
Factor investing
Incentive Stock Options
Connect with Jonny WestSubscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
PODCAST FAST TRACK
Welcome to episode 67 of the One for the Money podcast. I am so very grateful you have taken the time to listen. This is part 1 of a 2-part series on novel investment strategies. In this episode, I’ll go over what is sometimes referred to as the borrow, spend, die strategy.
In this episode...
Most people are familiar with the notion of buying and selling investments. The goal when buying an investment is that it increases in value and then you sell the investment to enjoy the proceeds. But there is a strategy where you can spend without ever having to sell. This is much less complicated than it may sound when one realizes it’s not all that different from a home equity line of credit, or HELOC, for short. With a HELOC the homeowner will borrow money against their appreciated property and aren’t required to sell their home to do so. There is a similar option with stock market investments and it is called a security-based line of credit, or SBLOC for short. Here is how they work.
An SBLOC (Securities-Based Line of Credit) is a special type of loan where you use your non-retirement investments as collateral. Just how can you use some of this newfound wealth without triggering a huge tax bill and not missing out on potential future gains? Why an SBLOC of course. These allow you to borrow against these shares using your stock as collateral.
In fact this is the exact same strategy that many uber wealthy utilize to access the wealth formed in the publicly traded companies that they founded.
The strategy is sometimes called the borrow, spend, die strategy. They borrow from their massive wealth, spend the proceeds and when they die some of their shares are sold to pay off the loans. Often this can lead to massive tax savings as when they die, there could be a step up in the basis at death and the taxes could be severely limited.
Tips Tricks and Strategies
RSUs (short for Restricted Stock Units) are a type of compensation given to employees by a company. They represent company shares that an employee will receive in the future. However, there are certain conditions, such as working for the company for a certain period of time or achieving specific performance goals, which must be met before the employee actually receives the shares
Once your shares are granted and taxes paid, there is no taxable benefit to staying invested in those shares. For many investors, it may make more sense to sell all of the shares and diversify their investments or use the proceeds to pay of higher interest debt.
References
Security Based Line of Credit
Borrow, Spend and Die Strategy
Restricted Stock Units
Connect with Jonny WestSubscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
PODCAST FAST TRACK
What is one of the best ways a husband, wife, father, and mother can show their love financially? Hint it’s not diamond rings, cars, fancy trips, or a big house. It’s WAY cheaper than that.
In this episode...
If you died yesterday, how financially secure would your family be today, tomorrow, and for the years to come?
This is an incredibly depressing thought no doubt, but that’s exactly why we should address this just-in-case scenario. Because if you love your family, you will want to make certain that they are taken care of financially if you are not here today. Term life insurance is the only instrument that can provide sudden wealth for your loved ones in their greatest time of need all for just a fraction of the cost of the wealth obtained.
Term life insurance can be incredibly inexpensive far too many Americans lack life insurance. Too often you see, what I refer to as the worst type of life insurance, the GoFundMe page. But with term insurance being priced like a commodity, it really shouldn’t be this way for millions of families.
Some people don’t bother with Life Insurance because they don’t want to “waste” money on term life insurance premiums. I can certainly relate because that’s the reason I never purchased term life insurance for many years.
For those who worry about the cost of life insurance here are the five factors that impact the price
#1 - A person’s Age - all things being equal, a 35-year-olds policy will be less expensive than a 40-year-olds
#2 - A person's Gender - Men are more expensive than women. Men do stupid things and have a higher probability of death at all ages.
#3 A person’s health rating - Think, BMI, smoker/non-smoker, etc ones driving record is also included.
#4 The amount of the benefit - $2m of coverage will cost you more than $1m
#5 How many years you have coverage - Getting coverage for 10 years will be less than 20 years of coverage.
I must note that life insurance shouldn’t just be for the working spouse. If there is a stay at home parent they need life insurance as well. We cannot underestimate their contribution to the family. If they were to pass it would be devastating for the family and sure money would never replace their absence, it would help ease the tremendous burden so the working spouse can take the requisite time and have the means to help their family heal.
Tips Tricks and Strategies
I absolutely love what I do but it wasn’t until after a lot of research that I finally found my dream career. This career has married things that I love, namely personal finance, education, and being able to have a positive impact on others and for that reason, I became a Certified Financial Planner in order to have the greatest impact on my clients. But that’s not actually, how it started out for me. Due to my naiveté, I joined a “financial services" firm that claimed to put financial planning at the forefront of what they did but in truth, they primarily pushed expensive insurance that the overwhelming majority of people don’t need. But, in my defense, it wasn’t anything like what I was promised during the interviews with the firm. I had interviewed a few actual CFP®s from the firm who spoke of the merits of being fiduciaries, a fiduciary is a professional that puts the interests of clients above their own, (apparently, this was in name only) and they in fact did not do comprehensive planning nor were they fiduciaries but the main efforts was to sell really expensive life insurance.
What sort of expensive Life Insurance am I talking about; namely Index Universal Life (IUL), Whole life, and similar permanent life policies? Life insurance legally cannot be sold as an investment, but there are far too many instances where an IUL is sold as such. More importantly, they don’t even determine if these policies are in the best interest of the individual as permanent insurance is almost always sold and rarely bought.
You might be wondering, are permanent life insurance like IUL or whole life so bad? The answer is yes because with very rare exceptions term insurance is all you need and permanent policies are WAY MORE EXPENSIVE and leave a person with way less wealth than other solutions. Jeremy Schneider compares investing in an IUL policy vs an index fund and the results are remarkable. He showed how an IUL policy could erode over 80% of your wealth compared to investing directly in an index fund.
Some say I want whole life insurance because I don’t want to waste the money. You hope it’s a waste because it’s insurance.
References
Is Whole Life Insurance a Good Investment? - NerdWallet
The Statistic Whole Life Salesmen Don’t Want You To Know
Is IUL a Scam? Yes.
Jeremy Schneider - Founder - Personal Finance Club
Welcome to episode 65 of the One for the Money podcast. There are two huge risks when it comes to retirement, and they are contradictory to one another. In this episode, I’ll share those risks as well as a strategy to address them.
In this episode...
Before we talk about these risks, it’s helpful to first appreciate the absolute miracle that is retirement. A hundred years ago, three-quarters of the world’s population lived in extreme poverty. Today, it’s less than 10%.
Interestingly, the two biggest risks retirees will face are contradictory to one another. The first is the most obvious one, running out of money. That’s really everyone’s biggest fear. But since people are so focused on the fear of running out of money they ignore the second biggest risk in retirement which is dying with WAY too much money. But, with the right retirement income strategy, you can spend WAY more money WITH your loved ones all while having a much more fulfilling retirement, and still leave your loved ones with a generous inheritance.
Sadly way too many people go into retirement without a plan and just wing it instead. In episode 62 of this podcast, I shared the regrets of retired Americans and how more than 6 in 10 retirees say they change their retirement if they had the opportunity.
I believe it is helpful to think of your approaching retirement as summiting your financial Mount Everest. Taking withdraws from your investments in retirement is like climbing down which requires even more guidance because the financial mistakes in retirement are WAY more costly, because when you are still working, you have the time and income to overcome most financial mistakes, but not in retirement.
For these reasons, you need a plan that is designed to address your specific retirement needs. But not any plan will do because having the RIGHT plan is JUST as important as having a plan at all. Way too many people think they have a retirement plan when all they have is an expensive product sold to them by some salesman. Others may have a very “light” plan by following a certain rule of thumb believing that a one-size-fits-all all plan will fit their specific situation. Examples would include the 60/40 rule (having 60% invested in stocks 40% invested in bonds, and selling which is up for the year to provide the income. Or there is the 4% distribution rule. Neither of which accounts for how your account is invested or when is the best time to take social security or how to mitigate taxes.
What people need instead is a tailor-made income model to provide an inflation-adjusted income throughout their retirement.
For this reason, I create and implement a retirement income distribution plan for clients that accounts for all their income sources, pensions, social security, and rental income, and consequently we are able to maximize their income spending so that they can achieve wonderful goals throughout their retirement. With the properly structured retirement income models, we are able to help clients spend (i.e. enjoy) more in retirement.
Having a dynamic retirement Income model puts clients at ease and helps them enjoy retirement. They don’t have to fear running out of money or dying with too much. aspects of the strategy include investing money differently based on when you plan to spend this money.
I hope I’ve been able to convey that life in retirement turns out WAY better when you have a plan and that is especially the case when it comes to retirement income planning. Because with a plan that is designed and aligned with your specific goals, you won’t run out of money and just as tragic won’t die with too much.
Tips Tricks and Strategies
Earlier in the podcast, I mentioned how one should review retirement as summiting a financial Mount Everest and that taking withdraws from investments in retirement is like climbing down which requires even more guidance because the financial mistakes in retirement are WAY more costly which is why you want a Sherpa to Help Guide You To and Through Retirement.
Certified Financial Planners are the Sherpas that guide people through the storms and beautiful weather up and down the mountain. Adjustments will need to be made as you make your way up and down the retirement mountain.
With the right financial planner, you can feel confident and excited about the years and decades ahead in retirement.
References
World Population Living in extreme poverty
Connect with Jonny WestSubscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
PODCAST FAST TRACK
Welcome to episode 64 of the One for the Money podcast. I am so very grateful you have taken the time to listen.While investments, taxes, estate plans, risk management and cash flow are critical aspects of a financial plan, they won’t mean anything if they aren’t aligned with what matters most. In this episode I’ll share how one can align their financial plan with exactly that.
In this episode...
A better life is a result of actions you have taken via better planning and when it comes to financial planning it’s imperative that the focus is on what is absolutely essential for happiness. The pursuit of happiness has been a recurring theme on this podcast and I have encouraged clients and listeners to pursue the things that ultimately lead to happiness. The Harvard Study of Adult Development started in 1938 has been investigating what makes people flourish. The study was launched as a result of the generosity of WT Grant and as a result is sometimes called the Grant study. and his goal for the study, using his words, was to “help people live more contentedly and peacefully and well in body and mind through a better knowledge of how to use and enjoy all the good things that the world has to offer them.”
It’s the longest in-depth longitudinal study on human life ever done, and it’s brought the researchers to a simple and profound conclusion: Good relationships lead to both health and happiness. it’s not career achievement, money, exercise, or even a healthy diet that brings happiness. Rather the most consistent finding they found through 85 years of study is that Positive relationships keep a person happier, healthier, and help a person live longer. Those who scored highest on measurements of "warm relationships" earned an average of $141,000 a year more at their peak salaries.
If relationships are the most important criteria for a long and happy life, than surely the most meaningful relationships have the most importance, for example, one’s marriage or one’s relationship with their children. Whether it’s right or wrong, good or bad, money has a significant impact on these relationships.
I talk with many clients and most say that they would rather spend more time with their family then have a bigger inheritance. For this reason, I encourage my clients to spend their money having family get togethers, because this is what will help them the most. But it’s more than just having good memories, people that have better relationships do better in many facets of life, including money.
The Harvard Study of Adult Development noted that the warmth of childhood relationship with mothers matters long into adulthood: Men who had "warm" childhood relationships with their mothers earned an average of $87,000 more a year than men whose mothers were uncaring.
Interestingly, while the poorer participants had shorter lifespans than the Harvard men (attributed to more dangerous work conditions, and poorer access to health care) when it came to happiness, the inner-city men were just as happy as the Harvard men, and their families were just as happy and in some cases, happier.
Tips Tricks and Strategies
I will answer the question on whether one should spend money on experiences or should they spend it on things, and provide a strategy to help you decide. Most of the research shows that experiences can provide more joy and actual things. For instance, while a vacation might only last a week, a new car can be driven for many years. However, a 'thing' might last longer physically, the enjoyment of it and the memories it creates can wane over time. On the other hand, experiences act more like appreciating assets, in that the initial experience might be short, but the value of it tends to increase over time. From my own experience that has been the case. Throughout the years, I’ve asked my kids what they remember most and invariably it’s the trips we took.
References
Good Genes are nice, but joy is better
What Makes People Happy? Decoupling the Experiential-Material Continuum
The Grant Study
Lessons from the world’s longest happiness study
Connect with Jonny WestSubscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
PODCAST FAST TRACK
The Case of Optimism - Part 3
Each year I record one episode of this podcast that makes the case for why we should be optimistic. This is part 3. (Click here for part 1 and here for part 2) There are a lot of disturbing events and trends that are happening in the world at present and yet despite all of these concerns I’ll argue the case for why we should remain optimistic about our future.
In this episode...
This episode is airing in June of 2024 and we are starting to see some market volatility of late. That can create a lot of fear in the hearts of investors. Add to that a war that continues to rage in Europe, Add to that a war that continues to rage in Europe, and finally add to that a presidential election this November where a solid majority of people overwhelmingly don’t want either candidate to be president. There is a lot we can worry about but yet despite all of these concerns we really should remain optimistic. Let’s look at some of the evidence as to what’s so great:
The first is to consider the state of democracy. We are in an election year where we are told that our democracy is at stake, and you get that from leaders and followers of both political parties. For this reason the upcoming presidential election is one of investors chief concerns. there certainly has been more challenges to the pillars of democracy in the USA and also in other countries around the world but it’s much wiser to step back and take a longer view of the state of democracy. In 1976 just 23% of countries were legitimate electoral democracies but it’s 51% now. That is remarkable progress.
The brutal terrorist attacks perpetuated by Hamas on October 7th, were absolutely sickening. Iran fired 170 drones, more than 30 cruise missiles and more than 120 ballistic missiles but due to the marvels of technology and the help of allies 99% of them were intercepted or eliminated.
I recently read the book “Unsettled” by Steven E Kooning, The subtitle of the books is this “What climate science tells us, what it doesn’t, and why it matters”. Dr. Kooning notes that heat waves in the US are now no more common than they were in 1900 and that the warmest temperatures in the US have not risen in the past 50 years. Weather-fixated television news would make us all think that disasters are getting worse. They’re not. Around 1900, 4.5 percent of the land area of the world would burn every year. Over the last century, this declined to 3.2 percent. In the previous two decades, satellites have shown further decline — in 2021, just 2.5 percent burned.
Here’s additional details on how far we have come:
Americans fell to 23rd place in happiness, down from 15th a year ago, according to data collected in the Gallup World Poll for the World Happiness Report 2024. In the U.S., self-reported happiness has fallen in all age groups, but especially among young adults. Americans 30 and younger ranked 62nd globally in well-being. If you want to know how great you have it, you should really travel more to third world countries. What we have here in America, especially the freedoms provided by the inspired constitution are the envy of the world. There are 7.9 Billion people on planet 🌎 yet only 4.2% of us live in the USA 331,449,281. It’s a remarkable privilege but it’s only appreciated if you travel.
Tips Tricks and Strategies
I will share a tip on how to earn more interest on your savings but oddly many Americans curiously are not doing so. This information is courtesy of a recent article in the WSJ entitled The $42 Billion Question: Why Aren’t AmericansDitching Big Banks? Americans are missing out on billions of dollars in interest by keeping their savings at the biggest U.S. banks.
I’ve helped at least a dozen clients and even more non-clients transfer some of their deposits to online banks accounts earning as much as 5% which are also FDIC insured. These accounts were setup in as little as 20 minutes and they easily transferred funds between their traditional account and their new online bank account.
References
Good News, the World Is Getting Better
U.S. Carbon (CO2) Emissions 1960-2024
Climate Change Indicators: U.S. Greenhouse Gas Emissions
American Airlines Announces Agreement to Purchase Boom Supersonic Aircraft
Ridley: Good News Is Gradual, Bad News Is Sudden
Is humanity doomed? Five ways the world is actually doing better - in data
The World has made spectacular progress
2022 Was One of the Worst Years Ever For Markets
The World Really Is Getting Better
The $42 Billion Question: Why Aren’t Americans Ditching Big Banks?
Why Climate Alarmism Hurts us All
Connect with Jonny WestSubscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
PODCAST FAST TRACK
The Top Regrets of Retired Americans and How to Avoid Them - Ep #62
In episode 61, I shared the top financial regrets of Americans and how to avoid them but in this episode, I’ll share the top regrets of Retired Americans and how to avoid them. The future is unknown so no one can plan their retirement perfectly we will all have some regrets, but it’s important to be aware of what the most common regrets are for retirees so we can take action now to avoid them in the future. In the tips, tricks, and strategies portion, I will share a tip regarding how to spend more in retirement.
In this episode...
More than 6 in 10 retirees say they would go back and change their retirement planning if they had the opportunity. This comes courtesy of a survey conducted by the Lincoln Financial Group and their results reveal many of the top regrets of retirees. businesswire.com referenced this survey and also shared 10 ways today’s retirees say they would have planned differently.
Save More
According to an annual study by the Transamerica Center for Retirement Studies, a full 78% of retirees wish they would have saved more. The majority (70 percent) would advise changing savings habits by saving or investing more or earlier. Other savings regrets included not making the most of their 401(k) plan, not enrolling in the plan early enough, and not saving the maximum amount allowed by their plan. What if I told you that if you invested $5000 per year for 40 years from age 25 to age 65 ($200,000 total) you could then withdraw ~$140,000 each year for the following 30 years?
Not having a plan for retirement
According to a Transamerica study it found that only 18% of retirees have a written plan. This is one of my favorite things to do with clients when we plan financially. As we enter the data in their financial plan, and add their goals and wishes, it shows them everything that is possible. It’s especially great when I am able to surprise clients by telling them they can retire much sooner than they thought they could.
Plan more carefully for the fun they want to have in Retirement
Two-thirds of pre-retirees (68%) have not completed a budget of anticipated income and expenses, according to Fidelity Investments. With the proper financial plan, I can show how they can spend much more in the earlier years, while they have the best health to do so. It’s highly unlikely you will run out of money.In fact, overall, the retiree finishes with more than double their starting wealth in a whopping 2/3rds of the scenarios, and is more likely to finish with quintuple, or 5 times, their starting wealth than to finish with less than their starting principal.
Plan For Health Care
Many people are surprised when they hear that Medicare does not cover everything. The annual expenses for a couple in retirement are around $12,000. One of the best things a person can do to prepare for healthcare costs in retirement is to exercise regularly. In episode 29 of this podcast I shared how many retirees can have a healthy wealthy and wise retirement.
Learn more about Personal Finance
A full 66% of retirees wish they were and had been more knowledgeable about financial planning.
Plan and make moves to protect money from taxes
Ed Slott the tax guru calls pre-tax retirement accounts a ticking tax time bomb. Every spring I hold strategy meetings with my clients that focus on strategies that ensure they don’t pay more taxes than they are required. In episode 15 I share about the ticking tax time bomb in retirement.
Anticipate the unexpected
we don’t have to look back too far to think of an example of the unexpected, namely Covid. Many retirees had planned to travel during 2020 and 2021 only to see those plans scuttled by the reactions to the pandemic.
Plan for Income
It can be challenging on how to turn your savings into income but once you do it can provide peace of mind.
Have less Debt
One-third of retirees regret not paying off debts sooner. In episode X I explained whether you can retire with debt.
Retire Earlier
In episode 26 I shared about mini-retirement and how these can be a great way to enjoy moments of retirement sooner. Also, I shared in episodes 50 and 52 about the book Die with Zero whose title belies the true message of the book. I will always remember when a dear friend let me know after her husband had passed away in his 50s, that she was so relieved that they hadn’t waited to go on adventures and had went on many when they were younger.
Tips Tricks and Strategies
When it comes to retirement spending there really are two huge risks which are: running out of money and dying with too much money. To combat these conflicting risks I use a dynamic distribution strategy that allows clients to maximize their level of spending but, also ensures they won't run out of money.
References
Retirement Regrets: Top 10 Things Retirees Wish They Would Have Done Differently
7 Retirement Mistakes You Will Regret
10 Retirees Share Their Biggest Regrets
Over 60% of retirees wish they could get a “do-over”
Connect with Jonny WestSubscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
PODCAST FAST TRACK
The podcast currently has 72 episodes available.
667 Listeners