Episode 315 – Can you write your own will simply by recording a video with your cell phone? Not so fast, a Montana court has ruled. In many cases, it needs to be in writing.

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, what counts as a will?

We’ve talked a lot about wills in the past, particularly with regard to missteps by celebrities such as Lisa Marie Presley, Casey Kasem and Aretha Franklin. But a recent article in the Wall Street Journal sheds light on what legally counts as a will and what doesn’t.

All the way back in episode 125 we talked about the strange case of Cecil George Harris, a Canadian farmer who died in 1948. On the morning of June 8, Mr. Harris informed his wife that he would be out working on the family farm with his tractor, and not to expect him back for 10 to 12 hours.

Tragically, while out working on the farm, Harris got into an accident with the tractor and ended up being pinned underneath it. Realizing he was now in serious trouble and not expecting help anytime soon, Harris pulled out his pocketknife and etched what would become his will into the tractor’s fender. The message simply read “In case I die in this mess I leave all to the wife. Cecil Geo Harris.”

Harris did not survive the accident. The fender was later submitted to the probate court, and the court accepted the scratched message as a valid will.

The recent Wall Street Journal article discusses the case of Jesse Beck, who died in 2022.[1] Beck had recorded a selfie video in which he left all of his possessions to his brother. [2] Beck’s motivation was apparent hostility towards his ex-girlfriend, whom he specifically said should not receive anything.[3]

Beck died suddenly four days later after an accident with his motorcycle. He and a bystander, who had stopped to help, were killed when they were hit by a first responder’s vehicle.[4]

But a Montana-based court ruled recently that the video, which was authentic, did not count as a will.[5]

The main difference between the two cases is: Cecil George Harris recorded his will in writing, albeit in a rather unusual way. Jesse Beck did not. State law differences may also be in play.

According to the Wall Street Journal, “While most of the business of life has gone digital, estate law remains rooted to ink on paper.”[6] In other words, in order to qualify, a will has to be in writing.[7] Had Beck scribbled everything down, it would have counted. Just saying so doesn’t cut it, at least in Montana, where Beck lived.

Things vary from state to state. Many states will accept a handwritten will without any witnesses, like in the case of Mr. Harris. This is often referred to as a “holographic will.” And about a dozen states recognize electronic wills or “e-wills.” E-wills are often written, signed and recorded digitally. But they still need to be in a text format. Audio or video generally won’t work.[8]

In the case of Jesse Beck, there was an immediate conflict. Beck’s sole legal heir was his daughter Alexia, who wasn’t mentioned in the video.[9] Without a proper will, everything goes to her. Alexia and her uncle are each claiming the right to the proceeds of the estate.

It is unclear how much money Mr. Beck had at the time of his death. But due to circumstances of the accident, there is a pending wrongful death suit.[10] So it may be a while before everything is resolved.

Either way, the lesson is a simple one: You never know what’s coming the next day. Get your will done, in writing, with a qualified estate attorney.

[1] Ebeling, Ashlea. “Yes to Text Messages, No to Video: What Counts as a Will.” WSJ.com. https://www.wsj.com/personal-finance/his-will-was-a-selfie-video-but-courts-ruled-it-didnt-count-75e90cf8 (accessed Jan. 6, 2025).

[2] Elder Law Answers For Attorneys “Montana Supreme Court Affirms Video Does Not Count as Will.” attorney.elderlawanswers.com. https://attorney.elderlawanswers.com/montana-supreme-court-affirms-video-does-not-count-as-will-20771 (accessed Jan. 6, 2025).

[3] Ebeling, Ashlea. “Yes to Text Messages, No to Video: What Counts as a Will.” WSJ.com. https://www.wsj.com/personal-finance/his-will-was-a-selfie-video-but-courts-ruled-it-didnt-count-75e90cf8 (accessed Jan. 6, 2025).

[4] Ebeling, Ashlea. “Yes to Text Messages, No to Video: What Counts as a Will.” WSJ.com. https://www.wsj.com/personal-finance/his-will-was-a-selfie-video-but-courts-ruled-it-didnt-count-75e90cf8 (accessed Jan. 6, 2025).

[5] Elder Law Answers For Attorneys “Montana Supreme Court Affirms Video Does Not Count as Will.” attorney.elderlawanswers.com. https://attorney.elderlawanswers.com/montana-supreme-court-affirms-video-does-not-count-as-will-20771 (accessed Jan. 6, 2025).

[6] Ebeling, Ashlea. “Yes to Text Messages, No to Video: What Counts as a Will.” WSJ.com. https://www.wsj.com/personal-finance/his-will-was-a-selfie-video-but-courts-ruled-it-didnt-count-75e90cf8 (accessed Jan. 6, 2025).

[7] Elder Law Answers For Attorneys “Montana Supreme Court Affirms Video Does Not Count as Will.” attorney.elderlawanswers.com. https://attorney.elderlawanswers.com/montana-supreme-court-affirms-video-does-not-count-as-will-20771 (accessed Jan. 6, 2025).

[8] Ebeling, Ashlea. “Yes to Text Messages, No to Video: What Counts as a Will.” WSJ.com. https://www.wsj.com/personal-finance/his-will-was-a-selfie-video-but-courts-ruled-it-didnt-count-75e90cf8 (accessed Jan. 6, 2025).

[9] Ebeling, Ashlea. “Yes to Text Messages, No to Video: What Counts as a Will.” WSJ.com. https://www.wsj.com/personal-finance/his-will-was-a-selfie-video-but-courts-ruled-it-didnt-count-75e90cf8 (accessed Jan. 6, 2025).

[10] Ebeling, Ashlea. “Yes to Text Messages, No to Video: What Counts as a Will.” WSJ.com. https://www.wsj.com/personal-finance/his-will-was-a-selfie-video-but-courts-ruled-it-didnt-count-75e90cf8 (accessed Jan. 6, 2025).

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

Episode 314 – The President is about to sign the Social Security Fairness Act into law. But is it really fair? And how does it affect Social Security’s solvency?

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, the Social Security Fairness Act has been signed into law.

On December 21, the Senate passed the Social Security Fairness Act, which will result in increased benefits for millions of public sector employees. President Biden signed the bill into law on January 6.[1]

The new law would repeal two long-held provisions—the Windfall Elimination Provision and Government Pension Offset—that limit benefits for people who are also receiving benefits from state and local pensions that were exempt from paying Social Security withholding taxes.

The first provision, Windfall Elimination, also known as WEP, is one of the most complicated parts of Social Security. Some state and local governments provide employer-sponsored retirement programs for their employees where neither the employer nor employee pays Social Security withholding. These exempt retirement programs are considered to be in lieu of Social Security. For example, teachers in the state of Connecticut have their own retirement pension and do not have Social Security withheld from their paychecks.

In order to qualify for your personal Social Security benefit, you need to work a minimum of 10 years. WEP affects workers who spend part of their careers working in the public sector—not covered by Social Security—while still working at least 10 years in another job that is covered by Social Security, such as a private sector job.

The way the Social Security benefit is calculated, people with shorter careers or lower incomes generally get a better deal than others. That is, these people get more money back per dollar of withholding tax than people with longer careers or higher incomes. Many public sector workers end up with a significant pension from their non-Social Security taxable jobs. WEP tries to make the Social Security benefit calculation fairer to everyone else.

WEP uses a complicated formula to reduce the worker’s Social Security benefit in the belief that the other (non-Social Security) retirement benefit will offset the full Social Security benefit. In essence, it tries to eliminate the so-called “windfall” that may occur when someone gets both Social Security and an exempt pension.

The second provision, Government Pension Offset, also known as GPO, is a bit easier to understand. GPO is applicable only to Social Security spousal and survivor benefits. It reduces these benefits payable to a worker who also receives a non-covered pension, that is, from a job where no Social Security taxes were withheld. The GPO benefit reduction is equal to two thirds of the pension from non-covered Social Security employment. If the pension is big enough, it could completely eliminate the Social Security spousal and survivor benefit.

Here’s a quick example of why GPO exists. Assume I have a personal Social Security benefit of $2,000. Also assume that my spouse did not work outside of the home for more than 10 years. Under those circumstances, she would not be eligible for a personal Social Security benefit, but she would be eligible for a spousal benefit. Once I apply for my benefit, she could collect up to 50 percent of that benefit, or $1,000 per month.

But what if she worked outside the home as a state employee who never had to pay for Social Security? Her state pension might even be bigger than my Social Security benefit. Under those circumstances, should she still be entitled to a Social Security spousal benefit? This is what GPO tries to address.

The repeal of these two provisions means that, according to the Congressional Budget Office, approximately 2.5 million retirees will see their benefits increase.[2]

The government says it took this action in the interest of fairness. Senate Majority Leader Chuck Schumer tweeted that “This would ensure Americans are not erroneously denied their well-earned Social Security benefits simply because they chose careers in public service.”[3]

But it costs money. Perhaps the biggest concern people have with Social Security is its long-term viability. Based on the Trustees report published in May 2024, without any further action, the Social Security Trust Fund is projected to run out of money in 2033. The result of this would be a 21 percent reduction in all benefits for everyone.[4]

The Social Security Fairness Act could make the situation worse. It increases the amount paid out of the Trust Fund by an estimated $190 billion over 10 years, without any corresponding increase in the amount paid in.[5] It is estimated that the Act will shorten the life expectancy of the Trust fund by another 6 months.[6]

The last major reform of the Social Security system occurred in 1983. At the time, it was estimated that the Trust Fund would be solvent for the next 75 years.[7] The Social Security Fairness Act may put additional strain on the system which was not anticipated.

[1] Gibson, Kate. “Senate approves bill to expand Social Security to millions of Americans.” cbsnews.com. https://www.cbsnews.com/news/social-security-fairness-act-senate-vote-passed/ (accessed Dec. 23, 2024)

[2] Haug, Norm. “H.R. 82 Passes Senate: A Historic Step in Social Security Reform.” rssa.com. https://rssa.com/resources/h-r-82-passes-senate-a-historic-step-in-social-security-reform/ (accessed Dec. 23, 2024)

[3] Gibson, Kate. “Social Security Fairness Act to get a vote in the Senate, Chuck Schumer says.” cbsnews.com. https://www.cbsnews.com/news/social-security-fairness-act-chuck-schumer-senate-vote/ (accessed Dec. 23, 2024)

[4] Gibson, Kate. “Social Security Fairness Act to get a vote in the Senate, Chuck Schumer says.” cbsnews.com. https://www.cbsnews.com/news/social-security-fairness-act-chuck-schumer-senate-vote/ (accessed Dec. 23, 2024)

[5] WSJ Editorial Board. “Whistling Past Social Security’s Insolvency.” wsj.com. https://www.wsj.com/opinion/whistling-past-social-securitys-insolvency-public-union-senate-a4267c71 (accessed Dec. 23, 2024)

[6] Adragna, Anthony. “Social Security measure passes Senate, sending it to Biden.” poltico.com. https://www.politico.com/live-updates/2024/12/20/congress/social-security-bill-passes-senate-00195786 (accessed Dec. 23, 2024)

[7] Steiner, Ken. “Social Security’s Deterioration and Implications for Future Reform.” advisorperspectives.com. https://www.advisorperspectives.com/articles/2024/02/26/social-securitys-deterioration-implications-future-reform (accessed Dec. 26, 2024)

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

Episode 313 – It’s probably the last thing you want to think about if you’ve just lost your spouse. But no matter who you are, no matter what your situation, financial issues are always there, and no matter how difficult, you’re going to have to address them.

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, dealing with grief and your finances at the same time.

It’s probably the last thing you want to think about if you’ve just lost your spouse. But no matter who you are, no matter what your situation, financial issues are always there. You simply can’t get away from it, even during the worst times of your life. With that in mind, here are a few financial things that you need think about when you lose a loved one.

Review your accounts and account balances. It’s surprising to see how many people really don’t know exactly what or how much they have. You’ll need to take a close look at what you’ve already got, what you’re going to inherit, and what your revised sources of income are going to be. Also, services such as MissingMoney.com can help you track down assets that you might have lost along the way.

Retitle your assets. A joint bank account is relatively easy. It will generally allow the surviving account holder to take ownership of the entire account balance.

Other assets can be more of a challenge. They will generally go into probate, which is the legal process of distributing the assets according to the decedent’s will or state law. A court will oversee the distribution of assets, and some accounts may be frozen until the probate process is complete.[1]

Take a look at your estate planning documents. You need to know where your late spouse’s assets are going to end up. Some may go to you, some may go to a trust, some may go to other people. You will also eventually need to review, and likely redo, your own will and trust arrangements. [2]

Review your life insurance. Someone needs to make sure that all required death claims are properly submitted. If you’re unsure if you’ve located every policy, many states, as well as many life insurance companies, can provide policy locator services.[3]

Once you’ve got all that figured out, you’ll also need to take a fresh look at your own life insurance coverage. You may need to designate a new beneficiary. You may not have expected to be your family’s sole breadwinner, and you may need to supplement the coverage you have. Consider consulting your professional life insurance advisor to assist you.

Review your retirement accounts. Unlike many other assets, retirement accounts generally pass to a named beneficiary at death, very often a surviving spouse. The options for a surviving spouse have expanded—and become more complicated—since the Secure Act and the Secure Act 2.0.[4] You will likely find it helpful to talk to a qualified professional to figure out your best option going forward.

Social Security survivor benefits. Social Security can be surprisingly complicated, but survivor benefits may be the exception. If both spouses are past Full Retirement Age (age 67 for most of us), the survivor benefit is simply the higher of the two. You also have the ability to “switch” from one benefit to the other. But switching is not something you can do online. You’ll probably have to visit your local Social Security office to complete the paperwork.

Final tax return and planning for next year. You are allowed to file a joint tax return in the year your spouse dies. The following year though, unless you have remarried, you will likely be filing as a single person. The tax system is designed to give married couples a bit of an advantage, so if you’re single, you’ll find that tax brackets accelerate more quickly. Depending on your circumstances, one potential way to deal with this might be to accelerate some of your income into the year of death.[5]

If you’re someone who is facing this type of grief, you may have well-meaning people telling you that it’s time to “pick up the pieces” or “move on.” But everybody deals with this differently, and only you can decide how to handle such an awful situation. For some people, grief counseling may be beneficial. Just be aware that your finances simply can’t wait. As awful as it may be, you need to deal with them, even in the worst of times. A trusted financial professional can help you as you work through these difficult times.

[1] Wohlner, Roger. “Financial Planning in the First Year of Widowhood.” ThinkAdvisor.com. https://www.thinkadvisor.com/2024/05/17/financial-planning-in-the-first-year-of-widowhood/ (accessed Nov. 27, 2024).

[2] Wohlner, Roger. “Financial Planning in the First Year of Widowhood.” ThinkAdvisor.com. https://www.thinkadvisor.com/2024/05/17/financial-planning-in-the-first-year-of-widowhood/ (accessed Nov. 27, 2024).

[3] Megna, Michelle. “How To Find Unclaimed Life Insurance Policies.” Forbes.com. https://www.forbes.com/advisor/life-insurance/find-lost-life-insurance/ (accessed Nov. 27, 2024).

[4] Wohlner, Roger. “Financial Planning in the First Year of Widowhood.” ThinkAdvisor.com. https://www.thinkadvisor.com/2024/05/17/financial-planning-in-the-first-year-of-widowhood/ (accessed Nov. 27, 2024).

[5] Wohlner, Roger. “Financial Planning in the First Year of Widowhood.” ThinkAdvisor.com. https://www.thinkadvisor.com/2024/05/17/financial-planning-in-the-first-year-of-widowhood/ (accessed Nov. 27, 2024).

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

Episode 312 – Do you have enough money to be considered wealthy? A recent survey by Charles Schwab and Company has the answer.

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode we take a look back at one of our favorite previous episodes, how much money do you need to be considered wealthy?

Let’s just say that a million dollars isn’t what it used to be. And unlike with previous generations, being a millionaire doesn’t necessarily mean you’re rich. But how much is a lot of money? A recent survey by Charles Schwab & Co., Inc., tried to quantify it.

The study, published in June 2023, came up with a specific answer: on average, most people would consider you wealthy with a net worth of $2.2 million or more.[1]  But the details reveal some glaring discrepancies. For one thing, 48 percent of all respondents said they feel wealthy today, even though their average net worth is just $560,000.

There are some significant generational differences as well. The study of 1,000 respondents broke down the generations as follows: Gen Z, or people born between 1997 and 2001; Millennials, or people born between 1981 and 1996; Gen X, or people born between 1965 and 1980; and Baby Boomers, or people born between 1947 and 1964.

Whether they are considered numerically wealthy or not, Millennials are the most likely to say they “feel” wealthy, with 57 percent of them saying so. Baby Boomers are the least likely at 40 percent.

Perhaps not surprisingly, younger generations are far more likely to use social media, not only to see how others around them are doing, but also to find some financial advice. 59 percent of Gen Z and Millennials say they follow influencers who share financial advice on social media. Only 13 percent of Boomers do this.

The study has its limitations. For example, the study does not consider regional differences. In other words, $2.2 million can be worth a lot more or a lot less depending on where you live. The cost of living in New York, Massachusetts and Hawaii is more than 40 percent above the national average. It’s more than 10 percent below the national average in Mississippi, Iowa, Oklahoma and Alabama.[2]

How much work have people done to protect the wealth they have? Only 35 percent indicated that they have determined their financial goals and have documented them in a formal plan.  Why so low? Nearly half of the respondents feel they don’t have enough money to need a plan. Some of the other reasons include that they feel it’s too complicated to create one, they don’t have enough time to develop one, or they haven’t had a major life event that requires one.

So how is it that almost half of the respondents said that they consider themselves wealthy when few of them actually meet the financial qualification? Maybe it’s because for most people, wealth goes beyond simple dollars and cents.

According to the report, “Americans generally choose non-financial assets when asked to choose which better describes wealth.”[3]  This includes having a fulfilling personal life, not having to stress over money and enjoying experiences. All of these non-monetary concepts were preferred by 70 percent or more of respondents when compared to a monetary concept, such as having more money than most of the people they know.

All this just shows how conflicted we are when it comes to wealth. True financial wealth, it seems, is less important than other types of wealth, like family and community connections. Perhaps this is the good news.

[1] Charles Schwab & Co., Inc. “Schwab Modern Wealth Survey, June 2023.” Aboutschwab.com. https://www.aboutschwab.com/schwab-modern-wealth-survey-2023 (accessed July 27, 2023).

[2] Kissell, Chris.  “Cost of living comparison by state.” Insure.com.   https://www.insure.com/cost-of-living-by-state.html (accessed July 28, 2023).

[3] Charles Schwab & Co., Inc. “Charles Schwab Modern Wealth Survey2023.” Aboutschwab.com.   https://content.schwab.com/web/retail/public/about-schwab/schwab_modern_wealth_survey_2023_findings.pdf (accessed July 28, 2023).

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

Episode 311 – There is so much that younger generations can learn from their elders. Not just from the things they got right, but from the things they got wrong. A recent study by the TransAmerica Center for Retirement Studies can help young people figure out some of the things they can do for their own future by avoiding the same mistakes.

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, what are the biggest regrets people have in retirement, and what can future generations learn from this?

Pretty much everyone has had lasting disappointments to one degree or another, some personal, some financial. Whether it’s words you wish you hadn’t said or the fact that you didn’t buy Nvidia stock when it first came out, we all have something. The best anyone can hope for is that someday you will look back and realize that on an overall scale, your regrets were, as they say, too few to mention.

Like everyone else, retirees have their share of regrets when it comes to finances. Understanding what they’d do differently can be incredibly valuable for younger people. It gives them a chance to avoid making a big decision—or a series of small decisions—that they will regret for the rest of their lives.

With that in mind, a recent survey by the Transamerica Center for Retirement Studies can provide insights to younger people as they begin preparing for their retirement. According to the study, some of the biggest regrets current retirees have are:[1]

There are plenty of lessons for younger generations in these study findings. But for the most part, they reinforce what many people already know. Start saving as soon as possible and keep at it. Minimize credit card debt. Learn the basics of personal finance. Someday you may find that the sacrifice was worth it.

[1] Transamerica Center for Retirement Studies. “Retiree Life in the Post-Pandemic Economy.” transamericainstitute.org. https://www.transamericainstitute.org/docs/research/retirees/retiree-life-post-pandemic-economy-survey-report-2024.pdf?sfvrsn=e99c5ab5_9 (accessed Dec. 5, 2024)

[2] Schleckser, Jim. “Why Einstein Considered Compound Interest the Most Powerful Force in the Universe.” Inc.com. https://www.inc.com/jim-schleckser/why-einstein-considered-compound-interest-most-powerful-force-in-universe.html (accessed Dec. 5, 2024)

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, when is the best time to downsize your home?

It should be fairly simple. The kids have all grown up and moved out. You don’t need that big house anymore. You’re tired of all the maintenance and expense of running that place. So, it’s time to downsize. It’s really a pretty easy decision, isn’t it? Time to buy something smaller and start saving money.

Not so fast. You might change your mind when you really think about it and consider all the other factors. After a thorough review, you may realize that moving into a smaller home doesn’t always make financial sense. There can be many considerations. Here are just a few of the things you might want to think about before you make your move.

These are all important considerations, but not all of the factors you need to look at are purely financial. There are also personal and lifestyle reasons to review before you downsize. It’s best to give everything some serious thought before you take the plunge. Let’s take a look at some of these other issues:

One alternative to all this may be a simple dry run. Try renting a place in your new location for a few months and see how it goes. Have you made new friends? Do you have access to all the services you need? If you’re moving to be near family members, how are they responding?

The truth is that it’s often not really about downsizing and saving money. Very often what people are looking for is a better quality of life. But that can be hard to define. Enjoying a warmer climate and living near your children are a good start. But there’s also something to be said for trying to streamline your life. You won’t know until you try.

[1] Ostrowski, Jeff. “Compare current mortgage rates for today.” Bankrate.com. https://www.bankrate.com/mortgages/mortgage-rates/ (accessed Nov. 18, 2024)

[2] Zillow “How Much Does It Cost to Move?” Zillow.com. https://www.zillow.com/learn/how-much-does-it-cost-to-move/ (accessed Nov. 18, 2024)

[3] Taylor, Kelley R. “Capital Gains Tax Exclusion for Homeowners: What to Know.” Kiplinger.com. https://www.kiplinger.com/taxes/capital-gains-home-sale-exclusion (accessed October 11, 2024).

[4] Metz, Jason. “How Much Does Flood Insurance Cost?” Forbes.com. https://www.forbes.com/advisor/homeowners-insurance/flood-insurance-cost/ (accessed Nov. 19, 2024)

[5] iPropertyManagement “HOA Statistics.” iPropertyMangement.com. https://ipropertymanagement.com/research/hoa-statistics (accessed Nov. 19, 2024)

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

Episode 309 – According to a recent study, an astounding 36% of Americans have more credit card debt than emergency savings, and 27% have no emergency savings at all. These sobering statistics spotlight a glaring hole in many Americans’ finances. If this is you, how do you start to climb out?

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, a new study indicates that one third of people have more credit card debt than emergency savings.

The study was published earlier this year as part of Bankrate’s “2024 Annual Emergency Savings Report.” Among the more startling findings, it reported that 36 percent of U.S. adults have more credit card debt than they do in an emergency savings account.[1] But that’s not all. A majority—59 percent—of Americans are uncomfortable with how much they have saved for an emergency. This is up from 37 percent in 2018.[1]

Many people would simply have to borrow money if faced with an emergency. In fact, 27 percent have no emergency savings at all. This is the highest percentage since 2020. The situation is worst amongst millennials (defined as between the ages 28 and 43) at 34 percent. It is best amongst baby boomers (defined as between the ages 60 and 78) at 16 percent.[2]

Bankrate has been measuring these statistics since 2014. The most recent survey was a poll of over one thousand American adults in May of 2024.

The gold standard for emergency savings is said to be at least three months’ worth of take-home pay, and the survey respondents seem to agree with that figure.[3] For those who are more cautious, only 28 percent of American adults felt that they had enough savings to cover a full six months of expenses if needed.

So, what if you’ve fallen behind? It makes sense that a younger person, say someone defined as part of generation Z (between the ages 18 and 27) may be less worried than a baby boomer, simply because many of them have yet to take on the additional responsibilities of parenthood.

Some have suggested that the best way to start saving is to just do it; nothing more complicated than that.[4] There’s no need to worry—at least initially—about much you start out with. There’s no amount that’s too small. One simple baby step might be to simply put your goal in writing. Make saving a priority.

It’s also a good idea to create a budget. One potential rule of thumb you can try is the “50/30/20” rule.[5] Under this guideline, you allocate 50 percent of your monthly income to needs, 30 percent to wants, and the remaining 20 percent to savings. Needs are generally defined as things like housing, food, healthcare, and transportation. Wants are things like vacations, dining out and hobbies. It may take some time to figure all this out, but doing so can show you where you need to make adjustments.

For many, impulse purchases have a way of messing up their budget and savings goals. One way to deal with this might be to try a 30-day cooling off period. Say you really want to buy an expensive pair of shoes you just saw, but the ones you have are perfectly ok. The idea here is to simply wait 30 days before making the purchase. If you still want to buy them 30 days later (and you can still afford them), then go ahead. But after 30 days have passed, you may not be quite as interested, and you might think better of it.

It might also be a good idea to do a detailed audit of your spending. If you look carefully, you may find “leaks” that need to be fixed, such as wasted money on streaming services, magazines and unnecessary groceries.

So, once you get started, where should you put your emergency fund? It’s generally considered unwise to invest your emergency fund the way you would, say, your 401(k). The problem is that you never know when an emergency is coming. If your emergency fund is invested in the stock market and you lose your job when the market is down, your problem could be even worse. A bank savings or money market account might be a better place to start.

There’s simply no way of knowing when a calamity will strike, but it probably will at some point. If you haven’t done so already, it’s time to start preparing.

[1] Gillespie, Lane. “Bankrate’s 2024 Annual Emergency Savings Report.” Bankrate.com. https://www.bankrate.com/banking/savings/emergency-savings-report/ (accessed October 30, 2024)

[2] Gillespie, Lane. “Bankrate’s 2024 Annual Emergency Savings Report.” Bankrate.com. https://www.bankrate.com/banking/savings/emergency-savings-report/ (accessed October 30, 2024)

[3] Gillespie, Lane. “Bankrate’s 2024 Annual Emergency Savings Report.” Bankrate.com. https://www.bankrate.com/banking/savings/emergency-savings-report/ (accessed October 30, 2024)

[4] Bennett, Karen. “How to start saving (even if you’re starting from scratch).” Bankrate.com. https://www.bankrate.com/banking/savings/start-saving-from-scratch/ (accessed November 1 2024)

[5] Bennett, Karen. “How to start saving (even if you’re starting from scratch).” Bankrate.com. https://www.bankrate.com/banking/savings/start-saving-from-scratch/ (accessed November 1 2024)

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

Episode 308 – For many, many people, their home is their biggest asset. Can you use your home to fund a portion of your retirement? It’s not ideal, but here are five ideas you can try if you need to.

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, five ways to use home equity as a source for retirement income.

It’s been said over and over again that for many people, their home is their biggest asset. If that’s true for you, can you use your home to fund a portion of your retirement? It may not be the best choice, but your home can help.

Here are five ways to potentially use your home as a source of retirement funds if needed. None of these are easy. Your home may be your biggest asset, but it’s probably also your least liquid.

Keep in mind that there is no perfect answer. Each one of these has its downsides. In fact, none of these options are ideal. The ideal solution is simply to save enough money well in advance through some other means. But what if it’s too late for that? Here are some interesting choices:

Also known as a HELOC, a Home Equity Line of Credit is an easy way to access the equity in your home. It is a line of credit where you can borrow money—up to a designated maximum—against your home. Of course, the HELOC must be repaid. Depending on how big your mortgage is, the interest on your home equity loan could be deductible. But keep in mind that interest rates ain’t what they used to be. According to Bankrate, as of October 2024, the average HELOC interest rate is 8.36 percent.[1] Nevertheless, the HELOC can help provide access to a source of funds.

This could make sense depending on interest rates, including the rate on your current mortgage. If the value of your home has gone up since you’ve owned it, there’s a good chance that you can access some of your home equity. In other words, it may be possible to pull out some cash against your home equity and use it for some other purpose, like retirement. It can also be a good alternative to selling your home, particularly if the market drops.

While sometimes difficult to understand, a reverse mortgage essentially converts your home equity into a monthly payment while you’re still living there. It is a way of selling your home equity to the bank one month at a time.

The majority of reverse mortgages don’t get repaid until the borrower leaves the house. Instead, the loan typically gets paid back when the borrower sells the home or dies. In these cases, whoever sells the home, likely either the initial borrower or the borrower’s estate, will get the remaining proceeds.[2]

There are federal regulations when it comes to reverse mortgages. Most reverse mortgages are issued through a set of government-insured programs that have their own rules and qualification standards.

The temptation to move into a smaller home often occurs when the last child moves out. People tend to feel that they just don’t need all that room anymore and you can save money on utilities, maintenance and upkeep. There is also a tax incentive that can help.

When you sell, the first $250,000 in profit, or $500,000 for married couples, is free of capital gains tax. If your gain is less than that, you won’t have to pay any capital gains tax at all. But there are some rules you must follow. Among them, the home must be your primary residence for at least two of the five years. Also, you can only use the exclusion once every two years.[3]

Home prices are way higher than they were a few years ago. And you may be able to take advantage by selling your home and moving into a cheaper rental. This can be an attractive option for someone who’s tired of dealing with (and paying for) all the yard work and maintenance. As many people in the Southeast can attest to, if you’re not the owner, you don’t have to worry as much about things like storm damage.

Despite all these additional options, the best way to prepare for retirement is still the old-fashioned way: Save the money as you go. You’ll have less to worry about later.

[1] Ostrowski, Jeff. “Current home equity interest rates.” Bankrate.com. https://www.bankrate.com/home-equity/current-interest-rates/?zipCode=10025 (accessed October 11, 2024)

[2] Treece, Dock David. “Reverse Mortgages: How They Work And Who They’re Good For.” Forbes.com. https://www.forbes.com/advisor/mortgages/reverse-mortgages/ (accessed October 10, 2024)

[3] Taylor, Kelley R. “Capital Gains Tax Exclusion for Homeowners: What to Know.” Kiplinger.com. https://www.kiplinger.com/taxes/capital-gains-home-sale-exclusion (accessed October 11, 2024)

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

Episode 307 – According to an estimate by Experian, the average American adult holds $6,501 in credit card debt. Is there a way out? Here are six things that you might want to try.

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, six ideas on how to manage debt.

In today’s economy, you don’t have to be a big spender to feel overwhelmed by how much you owe. You’re certainly not alone. As of late last year, the average American adult held $6,501 in credit card debt, according to an estimate by Experian.[1] This is up 10 percent from the previous year. And credit card interest rates can be as much as 20 percent, or even higher.

Once you’re saddled with a significant amount of debt, there is rarely an easy way out. But if you’re in that situation, here are six things that you might want to try. The idea is to get your debt under control before it has more serious consequences for your financial health.

One final note. Owing money to someone else is not always such a bad thing, and living debt-free is not always the best choice. You need to look at the details of the debt itself. For example, if you bought a house a few years ago with a 3 percent mortgage and tax-deductible interest, why would you hurry to pay it back? You may be able to get a better rate of return simply by keeping the extra money and investing it.

[1] Horymski, Chris. “Average Credit Card Debt Increases 10% to $6,501 in 2023.” Experian.com.
https://www.experian.com/blogs/ask-experian/state-of-credit-cards/ (accessed October 21, 2024)

[2] Sherman, Emily. “6 Easy Ways to Pay Off Debt.” usnews.com.
https://money.usnews.com/money/personal-finance/debt/articles/easy-ways-to-pay-off-debt (accessed October 21, 2024)

[3] Frankel, Robin Saks. “5 Steps To Take Now To Save More And Reduce Debt.” Forbes.com.
https://www.forbes.com/advisor/personal-finance/steps-to-take-to-save-more-and-reduce-debt/ (accessed October 18, 2024)

[4] Coleman, Sara. “The pros and cons of 0% APR credit cards.” Bankrate.com.
https://www.bankrate.com/credit-cards/zero-interest/pros-cons-of-zero-percent-apr-cards/?tpt=b (accessed October 21, 2024)

[5] Sorter, Amy. “7 tips to help dig your way out of debt.” Bankrate.com.
https://www.bankrate.com/personal-finance/debt/ways-to-get-out-of-debt/?tpt=b (accessed October 18, 2024)

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

Episode 306 – Behavioral economics has become a buzzword over the last few years. But understanding its role in making financial decisions can lead to a better outcome.

Hello, this is Bill Rainaldi with another edition of Security Mutual’s “SML Planning Minute.” In today’s episode, we take a look back at one of our favorite previous episodes. What is “behavioral economics,” and can it help you figure out how to make financial decisions?

Behavioral economics became a buzzword in 2017 when Richard Thaler, a professor at the University of Chicago, won the Nobel Prize for Economics. The concept is a simple one: investing is not a purely mathematical decision. Psychology plays a role in the economic decision-making processes of individuals and institutions. If you understand the psychology, you’ve got a head start when it comes to financial decisions.

Behavioral economics tries to explain why, when it comes to financial matters, an individual might make irrational decisions, and why their behavior doesn’t always follow the predictions of economic models. Decisions such as what kind of car to buy, how much to save for retirement, or whether to eat that last piece of chocolate cake are all influenced by behavioral economics. Behavioral economics seeks to explain why an individual selects one option over another. People sometimes make decisions that are not actually in their own self-interest, simply because people can be emotional and easily distracted.

There are some basic applications of behavioral economics that you can see in your everyday life. Here are a few of them.

Availability bias states that our decision-making process is most strongly influenced by events closest and most available to us. You are more likely to buy a snow blower after a major storm than you are in the middle of summer.

How does this apply to investing? One of the effects of availability bias is what’s known as “FOMO,” or fear of missing out. A stock may seem overpriced to you, but the price keeps going up. If you pass on this stock at $500 per share, you might worry that next year it could be $1,000.

Anchoring is something that can lead to bad results when you’re investing. Let’s say you find a stock that had been selling for $100 a share, but after a few months, the price has fallen to $80. You may be hesitant to sell that stock at $80, $90, or $95 simply because you bought it at $100. This has nothing to do with what the company is actually worth.

Be aware that corporate America understands this, and they are using this type of behavioral economics to market their products. Technology companies use anchoring all the time. You often see this when the latest smartphone is introduced. Let’s say the new phone initially cost $800, but it’s now selling for $500. By introducing the phone at a higher price and then reducing it, consumers will tend to believe they’re getting a good deal, even if the plan all along was to sell the phone at $500.

Confirmation bias occurs when we pay more attention to the things that support our pre-existing ideas. We tend to rationalize our opinions, and pay less attention to things that contradict those opinions. Almost everyone does it, and it can be dangerous when we’re investing. If you like a particular company’s product, you might ignore any red flags or risks the company is facing.

What if you were betting on a coin flip, and “heads” came up five times in a row? According to the gambler’s fallacy, your next bet would be tails, simply because you recognize how unlikely it is to get “heads” six times in a row. But the truth is that the odds are always 50-50. The previous five flips have no bearing on the sixth.

The same phenomenon occurs when we invest. People tend to commit to the gambler’s fallacy when they see a stock that has gone up or down for several days or weeks in a row. This can lead to an unfortunate situation where you buy low and sell lower.

Herd Behavior is something you see in many places. When people line up at a food truck for some tacos, others tend to go along and line up with them. The rationale is that since the line is long, the food must be good. Herd behavior happens in investing as well. When everyone buys a stock, there is a subtle belief that it can’t go wrong since everyone is buying. Herd behavior can be the cause of exuberance, overvaluations and price bubbles.

Present bias provides a good explanation for why people tend to be bad at saving. In a trade-off situation, it is simply the tendency to settle for a smaller present reward than to wait for a larger future reward.

In recent years, understanding present bias has led to at least one concrete change in the way people save money. It is the more popular use of “auto-enrollment” in company pension plans.

The introduction of auto enrollment was a result of the work done by behavioral scientists, including Richard Thaler. And that research showed that you were less likely to do something, such as save money using a 401(k), if you had to take action in order to participate.

Studies by Allianz Global Investors, among others, have shown that saving increases when an employer moves from an “opt-in” retirement plan—where the employee has to affirmatively choose to participate—to automatic enrollment. Thus, the concept of auto enrollment emerged and became part of the Pension Protection Act in 2006.

Under the Pension Protection Act, automatic enrollment allows an employer to enroll its employees and make salary reductions without having to actually complete the enrollment process. It’s simply easier to participate now, and more people are saving money as a result.

Behavioral economics shows how people too often make poor decisions based on biases of which they may not even be aware. Biases affect our decision-making, including financial decisions, when we least expect it. They can undermine our rational thought process and lead to poor conclusions. I hope today’s podcast helped to raise your awareness of those biases, so you can keep them in mind when making important financial decisions and formulating protection strategies.

Contact your local Security Mutual Insurance Advisor today to coordinate your financial plans and help you achieve your goals and objectives.  

Benz, Christine. “Behavioral Finance Research in Action.” morningstar.com, Nov 17, 2010. Accessed April 7, 2021. https://www.morningstar.com/articles/360350/behavioral-finance-research-in-action

ChangYueSin. “The 8 Key Concepts of Behavioural Finance.” TheAncientBabylonians.com, July 14, 2019. Accessed April 7, 2021. https://www.theancientbabylonians.com/the-8-key-concepts-of-behavioural-finance/

Kenton, Will. “Behavioral Economics.” Investopedia.com, updated September 28, 2020. Accessed April 7, 2021. https://www.investopedia.com/terms/b/behavioraleconomics.asp

Miller, Terin. “Behavioral Finance: Concepts, Examples and Why It’s Important.” TheStreet.com, March 28, 2019. Accessed April 7, 2021. https://www.thestreet.com/personal-finance/education/behavioral-finance-14909070

Samson, Alain. “An Introduction to Behavioral Economics.” behavioraleconomics.com. Accessed April 7, 2021. https://www.behavioraleconomics.com/resources/introduction-behavioral-economics/

The University of Chicago Booth School of Business. Richard H. Thaler Biography. ChicagoBooth.edu. Accessed April 7, 2021. https://www.chicagobooth.edu/faculty/directory/t/richard-h-thaler

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®.  The content provided is intended for educational and informational purposes only.  Information is provided in good faith.  However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered.  It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation

To help reach your goals, you need a skilled professional by your side.  Contact your local Security Mutual life insurance advisor today.  As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives.  For more information, visit us at SMLNY.com/SMLPodcast.  If you’ve enjoyed this podcast, tell your friends about it.  And be sure to give us a five-star review.  And check us out on LinkedIn, YouTube and X (formally Twitter).  Thanks for listening, and we’ll talk to you next time.

Tax laws are complex and subject to change. The information presented is based on current interpretation of the laws. Neither Security Mutual nor its agents are permitted to provide tax or legal advice.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances.  Results may vary, and products and services discussed may not appropriate for all situations.  Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently.  We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances.  Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York.  Product availability and features may vary by state. 

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