Financial Warning Indicators

Our 2 Cents – Episode #117

Financial Warning Indicators

Like the lights that pop up on your car’s dashboard to tell you something is wrong, there are warning signs that can indicate potential trouble in your financial life too. On today’s episode, Steve and Gabriel are discussing things to watch for to spot potential problems ahead. Plus, they’re sharing some quick hits and answering a listener question.

1. Gabriel’s ‘Quick Hits’:
   • Social Security COLA for 2023 is the most since 1981
   • Increased 401(k) and IRA contribution limits for 2023
   • Tax bracket adjustments & standard deduction increases
   • Average college tuition costs have declined
2. Financial Warning Indicators:
   • No idea what your budget is for your retirement years
   • Only focusing on the “retirement number”
   • Not having sources of tax-free income in retirement
3. Listener Question:
   • “I’ve always been a more aggressive investor. I like seeing my money grow. At what age should I begin getting more conservative?” – Art

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Podcast Transcript

Announcer: You’re listening to Our 2 Cents with the team from SGL Financial, building wealth for life. Steve Lewit is the President of SGL Financial. And Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies and more.

Gabriel Lewit: Good morning, everybody. Welcome to Our 2 Cents. This is Gabriel Lewit and Steven Lewit joining you from our studio, aka conference room here in Buffalo Grove.

Steve Lewit: That is a very enthusiastic reading, Gabriel.

Gabriel Lewit: Was that serious?

Steve Lewit: No, I really mean it. Especially because I know you’re under the weather a little bit and-

Gabriel Lewit: Just the tiniest bit.

Steve Lewit: … I expected like, “Good morning, everybody.” But it was very enthusiastic.

Gabriel Lewit: Oh, heck no. I’m excited.

Steve Lewit: Good job.

Gabriel Lewit: Well, thank you. And hope you all are doing great out there. And I think we’ve got assembled here a good collection of topics here for you today to entertain, thrill and entice.

Steve Lewit: Well, okay then. Anything else?

Gabriel Lewit: So, might as well jump right in, right?

Steve Lewit: Yeah, let’s jump.

Gabriel Lewit: All right. So today I’ve got a collection of quick hit updates for you. It’s interesting, sometimes as I’m working to assemble articles, and content topics, and ideas for the show, I get some nitty grittier items. And sometimes I just get a collection of, I think, quick but important updates. And so I’ve got a few of those for you here today to kick things off, starting with, which some of you might have heard, and maybe some of you haven’t, they have announced what the Social Security COLA is for next year. And drum roll, [inaudible 00:01:43], which you can hear on the table as I’m drum rolling.

Steve Lewit: Excellent drum roll.

Gabriel Lewit: Steve, do you want to give the magic number?

Steve Lewit: (Singing.) There’s the drum roll, 8.7%.

Gabriel Lewit: 8.7%.

Steve Lewit: 8.7%.

Gabriel Lewit: Now, there had been some rumblings of a high COLA for next year. Some people had thought it might have been as high as 10%. Others were saying as low as 8%. Turns out it is 8.7%.

Steve Lewit: Pretty good, folks. Us folks over 60, full retirement age, I should put it, are getting wealthier by the minute, although inflation is at the same amount.

Gabriel Lewit: Is taking away your wealth by the minute. So let’s do some quick math here for you. If your benefit, let’s just say, is $3,000 a month times .087, you would get an increase of $261 per month.

Steve Lewit: Which is nice. It’s good. Based on the costs of food today, and gas, and everything creeping up, I’m very thankful for that.

Gabriel Lewit: Yes. And if you get $2,000 a month, you’d get an increase of $174 per month. So interesting, it’s also one of the first years… It’s not in this article that I just remembered it off the top of my head. So if you’re looking for it, you may not see it in there as we’re referencing some key data points. The costs that they’re projecting for Medicare Part B is actually scheduled to go down a little bit next year.

Steve Lewit: Which is totally surprising, because it normally goes up and erases a good portion of the inflation.

Gabriel Lewit: Well, it normally goes up 10 bucks a year. If you get 174 or 274 more dollars from Social Security, you pay an extra 10 for your Medicare Part B, not the end of the world. In this case, so you’re getting a boost to your Social Security COLA and also getting a slight, I think, it was $8 for your Medicare Part B. Helps across the board.

Steve Lewit: It does. So if you’re waiting till 70, do you get the inflation?

Gabriel Lewit: Yeah. So sometimes people who are not currently on Social Security ask the, I think, admittedly the good question, “Well, so I look online on my statement and I-”

Steve Lewit: Wait a second. I just asked that question. Not people. I asked-

Gabriel Lewit: Well, you asked it rhetorically, because you know the answer.

Steve Lewit: I do.

Gabriel Lewit: So, I’m referencing actual people-

Steve Lewit: Actual people.

Gabriel Lewit: The real… I mean, people that have the actual question.

Steve Lewit: Folks, now I’m not an actual person anymore.

Gabriel Lewit: Anyhoos, well, so yes, if you are looking on your online benefit projections, and let’s say it says you are going to get $2,000 a month when you turn 67, yes, over time, that does get adjusted by the cost-of-living adjustments as well. And so it’s not like because you haven’t claimed your benefit yet that you lose the COLA adjustments. Those get factored in and you’ll ultimately, get a higher benefit in 6, 7, 8, whatever number of years you’ve got left before you claim.

Steve Lewit: So, you don’t go backwards. You are exactly in the same place that you would’ve been had you taken your Social Security earlier as far as it comes to inflation.

Gabriel Lewit: Right. It’s not like it’s a penalty that you get by not qualifying and claiming earlier. Correct. So anyway, when… [inaudible 00:05:09], blah blah, blah! See? I told you. We’re answering my sentences here together today.

Steve Lewit: Was that a technical word?

Gabriel Lewit: That was a very technical term. Yes. So of course, there’s some good news there on the COLA front. And if you have any questions, of course, how that might impact you, give us a call and we can guide you through that one. So that’s our first quick hit for today. Our second quick hit for today is also some updated numbers on how much you can contribute to your 401K here in 2023, coming up next year. And so the IRS has come out with the new brackets. Or not brackets, I should say, but the amounts. I’m thinking about the brackets, because I’m going to talk to you about those in just a second as well.

Steve Lewit: Brackets are coming.

Gabriel Lewit: So, this last year you could have contributed up to $20,500 in your 401K, not counting the catch-up provision. And now this year coming up in 2023, you’ll be able to contribute up to 22,500 in your 401K, 403B and most 457 or TSP plans.

Steve Lewit: Now, give the good news about if you’re 50 and older, you can do the catch-up, which means you can put a total of…

Gabriel Lewit: Well, so again, the catch-up itself has risen to 7,500, up from 7… 6,500, apologies. And so now a total of 7,500 plus 22,500 means you can contribute up to $30,000 per year and get that deducted from your taxes if you do a pretax contribution, if you’re age 50 or older, and make a $30,000 contribution to your 401K.

Steve Lewit: So now, Gabriel, so we’re recommending a lot of Roth conversions and putting money into the Roth. So I know this is a little bit of an aside, but do you take the deduction on 30 grand? Or do you pay the taxes, take the match, and put it into a Roth?

Gabriel Lewit: It’s very person dependent, of course. It depends on how much income you have and what bracket that you’re in. And if you’re above a 24% tax bracket, you’ll probably choose to do the pretax, most likely. If you’re below that, you’ll probably want to do, if you have the option, the Roth. That’s a rough rule of thumb.

Steve Lewit: I didn’t mean to put you on the spot like that. It is very individual. But I guess the point I was trying to make is, that’s something that should be thought about before you just say, “Wow, I can take a $30,000 deduction,” and just take it.

Gabriel Lewit: Right. Well, and the other thing that’s interesting here is you’ve got to hope that your company also gives you a reasonable COLA as well for your earnings. So some people are saying, “Hey, I’ve got hit by inflation. That’s great. The extra boost here of how much I can save is nice, but I feel like I’m losing money because of inflation. So where am I going to get the extra money to save anyways?” Right?

Steve Lewit: Exactly.

Gabriel Lewit: So, it’s kind of a double-edged sword when you think of it from that perspective. But for certain people out there that have sufficient income, this gives them some additional opportunities. Or if you’re looking to try to catch up for your retirement savings, this gives you some additional opportunities that didn’t exist before. And it’s also not limited just to your 401K. If you contribute instead to Roth IRAs or IRAs, you get an additional boost as well of $500. So 6,000 was the prior year contribution limit, 7,000 if you had an additional $1,000 catch-up for being over age 50. So the catch-up is the same for your IRAs or Roth IRAs, but the overall boost was $500. So you can now contribute 6,500 or 7,500 depending on your age.

Steve Lewit: Yes. And I’ll add onto that, that the income limit of before you can contribute to a Roth was 144. In other words, if you were above 144,000, you couldn’t make that contribution. And now that has gone up to 153,000.

Gabriel Lewit: Yes. Now, this is good. If you were prior to this, let’s say your-

Steve Lewit: That’s single, by the way.

Gabriel Lewit: Yeah. Let’s say your income didn’t increase much. Your company hasn’t given you a bigger raise or a cost of living adjustment yet. And you, prior to this, were not able to contribute. Maybe you were right on that border. You weren’t able to contribute to a Roth IRA. This bump in the income eligibility is a good thing. It could open up that door for you.

Steve Lewit: By the way, folks, it’s 228,000 if you are married jointly up from 214,000. And we do have clients that are right on that borderline. So this is going to help.

Gabriel Lewit: So, it’s a good thing. It’ll open up that door for the Roth IRA contribution. So lots of numbers to fly around here today for you. Hope you had your notepad handy, because I’ve got more for you, a couple other quick hits. And I’m telling you, this is the week of quick hit updates on a number of things.

Steve Lewit: Oh, I can’t wait. But I know what you’re going to talk about next.

Gabriel Lewit: Well, I’m not going to spend too much time on this one, because it’s the least fun of the three or four.

Steve Lewit: It’s actually boring.

Gabriel Lewit: So, there’s some tax bracket changes. I’m not going to get into the nitty gritty on those. If you’d like to know what they are, let me know. But the big thing is the standard deductions, when you file for your taxes in 2023, for the calendar year 2023, that’s going to rise up $1,800 from 2022. So it’s now up to 27,700 for your standard deduction if you’re married filing jointly. And for single, it’s up $900 to 13,850.

Steve Lewit: Which is really important, because up until the tax change, the standard deduction, a lot of people itemized. But with the rise in the standard deduction, itemization has gone away for a lot of people. So getting an extra $1,800, great deal.

Gabriel Lewit: So that’s also a good deal. And then again, the income brackets themselves, I’m not going to get into the specific numbers, but they have all been adjusted upwards for inflation, which again, means more of your income if your income has remained unchanged, but the brackets have adjusted upwards for inflation, that means more of your income will be taxed at a lower bracket.

Steve Lewit: Exactly. I’m just thinking that I just said taxes are a good… How can you have a good deal in taxes? It’s a better deal than it was, but it’s not a good… Folks, that’s your government hard at work, taking money out of your pocket and teaching you how to put some back. I guess, in some way, that’s positive.

Gabriel Lewit: Well, look, I mean, I’m not going to get too deep into it, but you’ve got to obviously have some level of taxes that are paid in this world, or it’d be chaos, because nobody would have any services and goods. But certainly if there’s some ways to take advantage of it and put some advantage in your favor, they do make those strategies available for a reason. So, take advantage of them while they’re there, is the way I look at it.

Steve Lewit: Well, what I was going to say, Gabriel, is when you said take advantage of it, I said, “Man, that’s what we do.” I don’t want to give any money extra to our US government than I have to.

Gabriel Lewit: Sure, of course. Well, last but not least, there’s also some new updated data that came out on college costs. Now, some of you out there, this might be well in the rear view mirror. For others out there, this might be coming right up on the horizon for you. And for others, yet again, some of my younger clients, this might be good information for you as you plan ahead for savings amounts for your kids, or maybe even for your grandkids if you’re helping save for your grand kiddos. So there’s some new data here. Interestingly, on the cost of public and private colleges, a four-year public college tuition is, as of 2021 through 2022, averaging $10,740 for state residents per year. And then $27,560 for out-of-state residents.

Now, that’s just an average. Of course, there are much higher. There are much lower. But 27,560 times four, let’s see if you’re going to a four-year college, let me pull up my calculator here for you, would be a total of 27,560 times four, $110,240. And if you have say, three kids, times three, 330,720. It’s a good chunk of change.

Steve Lewit: I think you’re thinking of yourself and three kids.

Gabriel Lewit: Well, and I got to fast forward about 14 years.

Steve Lewit: In 14 years you can triple that.

Gabriel Lewit: So, what’s also interesting is the cost of tuition. Everybody thinks that they’re always skyrocketing. Well, actually, year-over-year, the public and state tuition costs have actually come down a little bit here. So I’ve got a great article if you’re interested in all these college statistics. The one that I have here, I can share with you, has a ton of great data and figures state-by-state, year-over-year. So you’ll see in Illinois the average cost year-over-year last year declined by 2.3% for public college tuition.

Steve Lewit: I haven’t seen that kind of a number in a long time. And having just your brother just started college at Purdue and that is kind of a private state [inaudible 00:14:14]. So we’re paying out of pocket… Well, I’m sorry, we’re paying out of state fees for that because it is a state school. So I’ve got my eye on costs pretty closely. But I have to check to see if they came down or didn’t come down. Why is my phone talking to me?

Gabriel Lewit: I don’t know. But you should turn that off, Mr. Lewit. It’s kind of a rule. When you start a podcast, you’re supposed to turn off your phone.

Steve Lewit: That’s what I thought, but my phone decided that… What’s the name of the person on my phone?

Gabriel Lewit: I have no idea, because you don’t have an iPhone. If you had an iPhone, it’d be Siri, but you do not.

Steve Lewit: Androids are much more interesting.

Gabriel Lewit: Well, and also there’s been some changes in student aid, typical average costs, room and board costs. I’ve got all these data and figures here. I didn’t want to get too sucked into the weeds of this one either, just because there’s a lot of data contained therein. But again, if you have questions on this and you’re thinking about your planning, these are good data figures to have, because they help you get a sense of how much you need to save up for and be prepared for, so you’re not totally surprised by sticker shock.

Steve Lewit: We should do a podcast, Gabriel, on college costs, on how to get financial aid. And if you’re grandparent, how to get money to your grandkids for college costs, what are the best ways of doing that.

Gabriel Lewit: Certainly could. Producer Katie, I see you jotting down some notes, so maybe that’ll be something that we’ll keep an eye on for upcoming episodes.

Steve Lewit: Yep. Thank you, Katie!

Gabriel Lewit: But, folks, those are our quick hits. So quite the array of numbers for us here this morning. But mostly, pretty good news actually going across the board. Higher deductions, higher contribution limits, cheaper college costs. So higher COLAs. So all and said and done, at least there are some positive things here to kind of tuck into the back of your head.

Steve Lewit: Absolutely. I feel very positive. Even more positive than your opening enthusiasm.

Gabriel Lewit: Well, great. I’m glad to hear that. Well, speaking of me feeling a tiny bit under the weather, I’ve got to take a two-second break here to blow my nose. And so I’m going to let you do the transition that you always love to do-

Steve Lewit: Wait, wait, wait, wait!

Gabriel Lewit: … into our next topic.

Steve Lewit: Wait, wait, don’t blow your nose yet. Oh, what is our next topic?

Gabriel Lewit: We were going talk about how to spot warning signals, kind of like your car, for possible problems in your financial life.

Steve Lewit: Wait, wait, wait, don’t go. I have to find this darn thing. Okay, here. Wait.

Gabriel Lewit: Folks, I put the cliff notes together for Steve and he lost them.

Steve Lewit: I’m looking for your notes.

Gabriel Lewit: I think he lost them.

Steve Lewit: Let me see here. No, that’s not it. Go ahead. Blow your nose while I’m searching around.

Gabriel Lewit: Well, no, I’m waiting for you to-

Steve Lewit: No, that’s not it. Warning signal. All right, here it is! It’s with your big writing on it, warning signals.

Gabriel Lewit: Yes, exactly.

Steve Lewit: I got it. Okay.

Gabriel Lewit: Okay. You got this? Can I take a two-second break?

Steve Lewit: Take a two-second break.

Gabriel Lewit: Folks, you’ll miss me. I’m going to leave you in Steve’s great hands here for about 10 seconds.

Steve Lewit: Folks, our next great topic today, to keep your interest and keep you listening, is when something goes wrong with your car, what happens on the dashboard, you have flashing lights and little signals, or beep-beeps and stuff like that. Well, is it possible that retirement gives you the same kind of warning signals? So what Gabriel has done here is he has creatively put together different warning signals that are like dashboard lights for us to consider and for you to enjoy. How’d I do?

Gabriel Lewit: I’m back!

Steve Lewit: Good, thank you.

Gabriel Lewit: You did great!

Steve Lewit: How’d I do? Did I-

Gabriel Lewit: I could hear you, because I had you in my headphones here when I stepped away from the mic.

Steve Lewit: But I did okay?

Gabriel Lewit: Yeah, that was terrific. I give that an A+.

Steve Lewit: Okay, so do you think we should alternate now on transition?

Gabriel Lewit: [inaudible 00:18:00].

Steve Lewit: No. Okay.

Gabriel Lewit: You wish. I’m kidding.

Steve Lewit: Okay. That was fun!

Gabriel Lewit: All right. Well, with that terrific introduction there, what are some of those warning signs? Obviously, in your car you’ve got your dashboard light, it tells you… I will actually admit I’ve got one on my car right now, which is a low tire air indicator.

Steve Lewit: You’ve actually had that on your car for a month.

Gabriel Lewit: We won’t go there. Well, I know that it’s only, it tells me it’s 34 psi. And I got a 33. And it’s supposed to be 35. So it hits the warning light, but it’s not bad enough to really worry that much about. I keep an eye on it. Anyways, it is a warning indicator that I should pay more attention to, which I am. But the idea is in your personal life, and your finances, and your retirement planning, there are possibly warning indicators as well. One of the ones that comes to mind is, I think it’s a very simple one that’s probably applicable to a lot of people, is if you start to see your credit card balances building more consistently than they’re going downwards or being eliminated back to zero more consistently. Why is that a warning sign, Mr. Lew?

Steve Lewit: Well, first of all, credit is very expensive. Debt is expensive and getting more expensive. And then how does that fit into your budget? Because when you have debt, you have to pay it back. The day comes when you got to pay the bill.

Gabriel Lewit: Well, I think we all sometimes have unexpected expenses that pop up, big things. And so if you start looking at your debt over more of a macro trend, over three, four months instead of one month or one week at a time, if you see that balance creeping up, what that’s telling you is that you’re putting more onto it than you’re taking off. And that’s probably a sign that your budget is stretched either very thin or that you’re spending more depending on what you’re spending on, than you’re bringing in. And that’s a trouble indicator, if that were to continue.

Steve Lewit: Well, look, we have holiday season coming. And most people rip out their credit cards and, “Oh, I love this,” and, “John would love that shirt.”

Gabriel Lewit: I can’t not get so-and-so this and this.

Steve Lewit: And if he likes the shirt, I should buy him a tie to go with the shirt. And oh, that belt will look good with the tie in the shirt. And then all of a sudden you’re spending $300, where you planned to spend 100 bucks. So just like having a budget for your lifestyle, you need to have budget for these events as well. And if you don’t have a budget or you’re not clear on what you’re spending, if you’re [inaudible 00:20:27], “Are we spending too much or are we spending too little,” to me, that’s a warning sign.

Gabriel Lewit: Well, that in itself is the second warning sign, just you knowing or answering that question, I have no clue what my budget is. So sometimes we have introductory calls with new clients. And one of those questions that’ll come up is, “Hey, do you have a sense of how much you need to spend or what’s your budget?” And I have a lot of people that they look at me sheepishly and they’re like, “Well, I know I probably should, but I don’t.” And that itself is a warning sign for lots of reasons, but in particular, for retirement planning. If you said to me, “Hey, Gabe, can you help me map out my road trip with directions, and where I should go, and how much gas I need, and how much food I should have in the car?” And then I said, “Okay, great. Where are you going?” And you look at me like, ” We’re not really sure where we’re going,” that would be hard to plan for.

So that’s kind of the idea with your retirement. If you don’t have that budget then you can’t predict what you’re going to need to spend in retirement. And so how are you planning for how much you need to have saved for income in the future if you don’t have a clue of what that amount might be?

Steve Lewit: Exactly, exactly. And it is surprising how many people… We have clients that are very detailed and have spreadsheets and they track everything. But most of our, not most, but many of our clients or people that we meet when it comes to budget it’s this kind of estimate. And then we give them, I know you do this, too, we give them a budget and say, “Hey, let’s just confirm these expense numbers.” And they go home, do a budget, and what do they come back with, Gabriel?

Gabriel Lewit: Always different. Always. So now, it makes a lot of sense, because if you have enough coming in while you’re working and you’re saving in your 401K, et cetera, and you’re kind of like, “Okay, I’m saving. I can spend the rest. As long as I’m not spending more than I’ve got coming in, I’m good and what do I need a budget for?” So it logically kind of makes sense. But as you think ahead to the future when you’re on a different amount of income source, a different kind of income source from your own investments versus new money coming in from a salary, very, very different. Something to pay attention to. Okay. You want to go with another warning indicator, Mr. Lew?

Steve Lewit: Yeah. So the one I liked here that you wrote, Gabriel, was a lot of folks come in saying, “Well, I’m aiming to have a million dollars or 2 million at retirement.” And they’ve got this number. Like the ads say, “What’s your retirement number? You should have a million. You should have two. You should have three.” Which begs the question, because how much money you have isn’t the problem in retirement. The number one concern in retirement is how much income can I get from my money? Not how much money do I have.

Gabriel Lewit: The two are very closely linked, but the idea behind having a certain amount of money saved is typically because you need that money to generate income from it.

Steve Lewit: So, if you have a more efficient way of generating income, then you actually don’t need that much money. You might need, instead of 2 million, you might need a million and a half. So it’s how do you get your income in retirement that really drives retirement, not how much money do I need?

Gabriel Lewit: Correct. Correct.

Steve Lewit: Right?

Gabriel Lewit: Yep. Okay. That’s a simpler one. It’s just trying to change your perspective from a dollar amount target to more of a planning-based mindset of determining how much income you need, which of course, piggybacks on budgets and some of the other things we talked about. But a very different approach to thinking ahead of the future.

Steve Lewit: It’s a headset. And just to beat a dead horse here, is when we sit with clients, a lot of clients come in and say, and potential clients, and they’re focused on growth, “Well, how did you guys do in the market? And what is your investment style?” And all of that’s important. But we always wind up saying, “You’ve kind of got the cart before the horse here, because growth is important. But what’s more important than growth is your income. So once you change your focus then your decisions are better.”

Gabriel Lewit: Yep, yep. Well, I’m going to do one more here, because we have a couple listener questions. So I don’t want to steal their thunder too much. I want to give us some time to make sure we answer those. Another warning sign for me, or indicator, a little light on your dashboard, would be, I sometimes will talk to clients and new clients and when we’re getting to know each other, and I say, “Do you have any Roth IRA funds? Anything tax free?” And they think for a second and they say, “No, I don’t,” or, “Oh, I put the three grand in a Roth IRA once a while ago, but that’s it.” So the warning indicator is you look at your own portfolio and you assess that, “Wow, I’ve got zero dollars in my portfolio that’s going to generate me tax-free income in retirement.” And why is that a warning indicator, Mr. Lew?

Steve Lewit: Well, if you have listened to Mr. Lew for the past seven years, he is absolutely convinced, the economist in him is convinced taxes are going to go up in the future. So if they do, which I think they will, maybe not in three years, but 10, 15, 20 years, especially for your kids, having money in that tax-free bucket is absolutely something that needs to be considered. Why isn’t it there? And if it isn’t there, how do you get it there?

Gabriel Lewit: Well, and I think a lot of people just, I don’t know, it just somehow skates by. They don’t put a lot of thought to it. Or they just don’t realize they have the option. Or they aren’t sure quite how it works. Or if it’s really a good idea or a bad idea.

Steve Lewit: Or they are doing it. But doing it quite simply, very, “Oh, I’m going to do 10 grand this year.” And it’s going to take them a hundred years to get all their money into the tax-free bucket. So they don’t know how to do it.

Gabriel Lewit: So, the warning light is if you have no tax-free income, you have what we call very poor tax diversification, which means in retirement it’s a really good idea to have money in the three different tax buckets, which are tax-deferred, taxable and tax free. And all are tax a little differently. And we call that tax diversification. The other warning indicator would be you have no money outside of any IRAs or 401Ks also. That’s called your taxable bucket. Because all of these buckets have different ways that they can work in your time horizons, in your planning, in your withdrawals that you know can take advantage of some of the different tax brackets and tax rules associated with those different accounts, which you can’t do if it’s all just in the tax-deferred 401K. That’s what we call a tax diversification. So the warning signal is that you have no tax diversification. And it’s something that we want to take a look at.

Steve Lewit: So, it’d pretty neat if we really did have lights that went off for us, “Hey, you got a problem here. You got a problem here. You got a problem there.”

Gabriel Lewit: And then like me with my car tire indicator, a lot of people-

Steve Lewit: Then don’t pay any attention to it.

Gabriel Lewit: What you don’t want to do… I am going to get it fixed, actually. I got to take the car to the shop and I know they’re going to fix it for me.

Steve Lewit: We’ll see.

Gabriel Lewit: All right, so we’ve got two listener questions lined up for you here today that have come in over some of the prior weeks. And thanks for your patience, folks out there as we’ve waited to talk about them here on the show. And so our first is from Art. Art said, “Hey, Gabe and Steve, I like your show. Thanks for taking the time to do it each week.” Appreciate that, Art. And you mentioned that you’ve been an aggressive investor and you like to see your money grow, but you’re wondering at what age am I supposed to get conservative?

Steve Lewit: Well, Art, there isn’t an age. You might be aggressive for the rest of your life. The real question to me is, can you afford to be your aggressive and what are the goals for your money? So once you retire, this is what we were talking about before, Gabriel, once you retire, growth isn’t necessarily the number one priority. It becomes income. Now, to get income, you may need to be more conservative. However, if you set up your income in a bucket plan rather than just putting your money in the market and taking it out, there are parts of that plan which could be very aggressive and parts which could be very conservative, because your income is being taken care of.

Gabriel Lewit: Exactly. And Art, I think there are so many factors into that. But if I were to give a general age, it’s usually right around when you’re going to retire, assuming you’re retiring in that sort of normal age band of 60 to 65. If you’re retiring at 50, it’s actually, you don’t get too conservative too soon. There’s a different issue if you retire young, because of how long your money needs to last. But it is highly dependent on a number of specifics.

Steve Lewit: And also, stay in touch with your own psyche. Some people as they get older, just get more conservative. And there’s no rule that says you have to be aggressive, because you were as a younger person, you were very aggressive. And now, you kind of want things a little simpler. Or you don’t want to worry about it. Or it doesn’t mean that much to you anymore.

Gabriel Lewit: But, Art, you might want to consider de-risking, we call it de-risking, some of your money to more conservative options that you identify that you’re going to need for income in the next five to ten years. So that’s another way to approach it as well.

Steve Lewit: The other thought, Gabriel, just to add on to that, is that there are options today, which you can get some pretty good growth that are very conservative, whereas those options weren’t available 15 years ago, 20 years ago.

Gabriel Lewit: Yep, exactly. The other one here, I’ve got another question from Ellen. And Ellen, I hope it’s okay with you. I’m going to save your question till our next show. And the reason for that is I don’t want to run out of time. And I think it warrants a more deeper dive discussion. So stay tuned on that one, okay? And we’re going to circle back to that on the next show. Well, folks, thanks so much for tuning in to us here today on Our 2 Cents. We so much appreciate your listenership. Many of you have mentioned you’ve shared the show with some of your friends, and relatives, and family members. Thank you so much. We take that as a very high badge of honor and we appreciate that.

Steve Lewit: Echo from me.

Gabriel Lewit: And if you have any questions, of course, as always, call us here (847) 499-3330 or go to sglfinancial.com. You can also write us an email at info@sglfinancial.com. That’s how we get many of our questions. Just jot a quick email note to us and we’ll see about answering it on the next show. Meanwhile, stay well and we will talk to you… Is next week November?

Steve Lewit: Yeah.

Gabriel Lewit: It is. Right. We’ll talk to you in November.

Steve Lewit: And then we have an election coming up.

Gabriel Lewit: Oh, boy.

Steve Lewit: Pretty exciting times.

Gabriel Lewit: Maybe we’ll talk about that one. Well, the financial impacts of that on one of our upcoming shows. All right, guys. Thanks so much. Have a wonderful day.

Steve Lewit: Stay well everybody.

Announcer: Thanks for listening to Our 2 Cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at (847) 499-3330 or visit us on the web at sglfinancial.com. And be sure to subscribe to join us on next week’s episode.

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