Facing Your Financial Fears
by SGL Financial
Our 2 Cents – Episode #186
Facing Your Financial Fears
After a brief break, we are glad to be back with another episode of Our 2 Cents with Steve and Gabriel Lewit! On today’s show, the hosts dive into a bank “glitch” trend gone wrong and explain how some quirky phobias connect to the world of finance. Then, they share key tax planning strategies as the year comes to a close. Listen in now using a link below!
- Chase Bank “Glitch”:
- A series of viral videos reveals how some individuals, believing they could withdraw free money from ATMs, were unknowingly engaging in check fraud.
- Unusual Fears and Financial Planning:
- Explore the hardest to pronounce phobias and how they can reflect some of the most common financial concerns.
- Year-End Tax Planning Strategies:
- Discover proactive steps to reduce your tax burden as we approach the end of the year.
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Podcast Transcript
Announcer: You are 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: Well, good morning and welcome back to Our 2 Cents. You’ve got Gabriel Lewit and most of Steve Lewit.
Steve Lewit: I’m here totally repaired.
Gabriel Lewit: He’s missing part of an original hip, replaced with a new one.
Steve Lewit: Yeah, so folks, two weeks ago. Two weeks, it’s amazing. I had a hip replaced, and I’m back working in two weeks, which I think medicine is amazing.
Gabriel Lewit: Well, and this is why we had to take a little two-week hiatus. We didn’t want to spoil the surprise for you with Steve coming back.
Steve Lewit: Well, I didn’t have much of a choice in coming back.
Gabriel Lewit: So yeah, he’s doing great. He’s up and running, sort of?
Steve Lewit: Sort of. Yeah, sort of.
Gabriel Lewit: He’s raring to go here for the show today.
Steve Lewit: Well, I’ll tell you. Hips are a lot better than knees. So folks if you’ve got knees coming, get a hip instead because they’re a lot easier.
Gabriel Lewit: Yeah. I’m not sure if it works that way.
Steve Lewit: No, it doesn’t. It doesn’t.
Gabriel Lewit: Well, to start things off today, we had to narrow down what to talk about because there is so much that we could have picked and choose from. So, I thought I’d talk a little bit about why you should avoid viral trends, financial trends on TikTok. Okay?
Steve Lewit: Oh, my gosh.
Gabriel Lewit: To preface this, I was going to start with a statistic, which I think is terrible. Hold on, let me see-
Steve Lewit: Can I ask you a question first? Can I?
Gabriel Lewit: You can, yeah.
Steve Lewit: Thank you. Well, the question is I wonder how many of our clients actually tune into TikTok.
Gabriel Lewit: Yeah, I do not know. I don’t tune in.
Steve Lewit: I think it’s more than we probably imagine.
Gabriel Lewit: Yeah.
Steve Lewit: Because TikTok, I’ve been on it and off of it, but when you get on it, yeah, it just grooves you in there, and you can’t let go. You always want to go to the next video.
Gabriel Lewit: Well, they got you.
Steve Lewit: They got you. So, what is this one do?
Gabriel Lewit: Well, I was going to say there’s a data statistic here that says 80% of young adults get their financial advice from social media, with TikTok being one of the biggest sources for those surveyed.
Steve Lewit: Unbelievable. Yeah. Did they define what a young adult is?
Gabriel Lewit: An adult that’s younger, yes.
Steve Lewit: Yeah, so that would probably be 40 and under or 30 and under?
Gabriel Lewit: Probably 30 and under maybe, I would think.
Steve Lewit: Yeah.
Gabriel Lewit: Well, anyways, unfortunately, some of the topics, some are better than others. Things like passive income. There’s a lot of real estate deals on TikTok and stuff that I hear stories of people signing up for doing literally zero due diligence and just hopping on some random dude’s webinar promising 14%, 20% returns, and then just forking over their money. I wouldn’t do that either.
Steve Lewit: Mm-hmm.
Gabriel Lewit: There’s get rich quick plans. Then of course you’ve got things about gaming the system, or as the internet world likes to call them, hacks, which if I ever hear the word life hacks again, I want to punch myself because I can’t stand that word.
Steve Lewit: Kind of overused. Yeah.
Gabriel Lewit: So there apparently was a financial “hack” that people were thinking was really cool, which apparently turned out to be check fraud.
Steve Lewit: Well, that’s kind of a hack.
Gabriel Lewit: So, here’s what people were doing. Okay. There was viral videos where people were apparently making it look like they were getting free cash from Chase Bank ATMs after depositing fake checks for large amounts and withdrawing the money before they could bounce.
Steve Lewit: Right, so say that again. Slow it down because-
Gabriel Lewit: So, these social media finance “gurus,” which they’re not, were showing videos of themselves depositing fake checks into Chase Bank ATMs, then withdrawing the money prior to the checks bouncing.
Steve Lewit: Right, okay.
Gabriel Lewit: And claiming to the rest of the world out there, the young adults that are listening to them for financial advice, that this was just an innocent hack to get some free cash out of a Chase Bank ATM.
Steve Lewit: Exactly. Yeah, so my understanding from Gabby, one of our proud broadcast directors here. Why are you looking at me? Gabby? Gabby? Folks, if you had a person named Gabriella?
Gabriel Lewit: Gabriella.
Steve Lewit: Gabriella, would you call her Gabby or Gabby? I like Gabby. It’s much more sophisticated than Gabby.
Gabriel Lewit: You do you. Her name isn’t Gabby, though.
Steve Lewit: She responds When I say Gabby. “What’s going on?”
Gabriel Lewit: You’re sidetracking us.
Steve Lewit: Yes, I am. So there were people, I understand that once they were saying, “Oh my gosh.” Making believe they made a big mistake when they did all of this.
Gabriel Lewit: Well, there are things that are innocent hacks. Maybe you get an extra, I don’t know. You go to one of those candy machines. You put in a quarter and you get 10 M&Ms? Maybe the hack would get you 15 M&Ms. I would see that would be okay.
Steve Lewit: Or you bang on the machine and some of them fall out.
Gabriel Lewit: I would hope that our young adults in this world would know that taking cash, that’s not yours out of a bank ATM-
Steve Lewit: Not a good thing.
Gabriel Lewit: It’s not just a harmless glitch. In fact, the Chase people came out and said, “Yeah, this is check fraud. Don’t do it. We will prosecute you, and you’ll go to jail.”
Steve Lewit: Yeah, it’s not a game.
Gabriel Lewit: Oh, my gosh.
Steve Lewit: It’s just not a game. Well, when you go on TikTok, some of them seem like a lot of fun. It becomes like, “Well, this is a gas. Let’s just go do it.” The group mentality says when one starts, “Yeah, let’s go try that, and let’s go have some fun.”
Gabriel Lewit: Well, yeah, unfortunately people think, well, because somebody else did it on TikTok, it must be legal. Folks, it’s not. It’s not like the ice bucket challenge. Right? Okay. You want to dump some ice on yourself? Great. Go ahead. No harm, no foul. That’s a good viral thing. Stealing money from banks? Eh?
Steve Lewit: Not a good idea.
Gabriel Lewit: I wouldn’t go that route. Okay?
Steve Lewit: Yeah, so did Chase say how they handled this to put a stop to it?
Gabriel Lewit: I don’t have a follow-up on this yet, how many people got arrested because it says here it’s working with the authorities to see how many customers tried to participate. So, I don’t have a specific number for you.
Steve Lewit: How clever is the human mind? I’ll cash a check that’s going to bounce and then withdraw money from it and then celebrate.
Gabriel Lewit: I’ve always asked this question. If criminals attempted to just put their brain power to use for positive things instead of crime, my goodness. Maybe they’d get somewhere.
Steve Lewit: Well, they are clever. Look at the amount of fraud out there, amount of misrepresentation, the amount of miscalculation that gets sold to people. That takes a lot of brain power.
Gabriel Lewit: Yeah. Well, so anywho, point being of this little, short story is don’t listen. Don’t get your financial advice from TikTok. You can get it right here from your Our 2 Cents podcast, and we’ll keep you square.
Steve Lewit: Square?
Gabriel Lewit: On the right path.
Steve Lewit: On the right path. I don’t want to keep people square.
Gabriel Lewit: I think that’s a phrase.
Steve Lewit: It is a phrase. Yeah. We’ll keep you square. You said it correctly, and I-
Gabriel Lewit: You’re making me doubt myself.
Steve Lewit: No, no. Square is good. I was thinking square in terms of square people.
Gabriel Lewit: Well, no. I wasn’t talking about the shape of the person. Yes, okay. All right. Let’s move on, shall we?
Steve Lewit: Yes.
Gabriel Lewit: All right.
Steve Lewit: I’m out of surgery two weeks.
Gabriel Lewit: Okay, that’s good.
Steve Lewit: I’m off of the narco, whatever it was. Oxy? No. What is the one that everyone gets hooked on?
Gabriel Lewit: Oxy probably? I don’t know.
Steve Lewit: Yeah, oxy something or another.
Gabriel Lewit: Yeah. I called him one day after his surgery. You could tell he was on something. He’s off now. Don’t worry. We drug tested him on the way in. I’m just kidding. Just kidding. Okay. Well, moving on. Today we’re going to talk about … Funny enough, we try to think of fun ways of equating non-financial things to financial things just to keep our show entertaining.
Steve Lewit: This is a riot.
Gabriel Lewit: So today we said, okay, let’s look at unusual fears that exist in the world and how do they relate to financial planning. Okay, so strange fears or phobias. We’re going to start with the first one.
Steve Lewit: I’m going to leave it to you to pronounce it.
Gabriel Lewit: Well, okay. The first one here is hippopotomonstrosesquippedaliophobia.
Steve Lewit: Yes.
Gabriel Lewit: Okay. Which is the fear of long words.
Steve Lewit: Yes.
Gabriel Lewit: So hippopotomonstrosesquippedaliophobia.
Steve Lewit: By the way, these are real words folks.
Gabriel Lewit: Yes.
Steve Lewit: We didn’t make these up. These are real.
Gabriel Lewit: We double-checked them.
Steve Lewit: All these fears have really weird names like this one. Some of them you’re going to recognize, but this is a real fear. Fear of long words. In our business, we don’t look at it as hippo whatever it is, but we have to be very careful that we don’t use long words.
Gabriel Lewit: Industry jargon, long words because-
Steve Lewit: And acronyms.
Gabriel Lewit: Yeah. I think if you’re out there listening to this, and you’ve invested in your 401k your whole life, and I come to you and I say, “Hey. Producer Gabby, are you interested in changing from this mutual fund to this mutual fund?” You are very familiar with the word mutual fund. It is not a long word, but if I said to you, and this is one retirement product that has a long name, “Gabby, would you like a minus 10% buffer S&P 500 link standard registered index-linked annuity, RILA?”
Steve Lewit: Now her hippopotomonstrosesquippedaliophobia would kick right in.
Gabriel Lewit: I think it would kick right in.
Steve Lewit: It would kick right in.
Gabriel Lewit: Right, so what did I just say? I said, there’s such a thing as a registered index-linked annuity called a RILA. That’s long enough. Then if you get into it, there’s different versions of it, different indexes. You can link to an S&P 500 index and then different buffer levels you can link to, minus 10 minus. Right? But all of that equates to, “Gosh, I don’t know what this is. It sounds unusual and complex.”
Steve Lewit: Yeah, so folks, when you’re listening to broadcasts or to other financial advisors or on the Sunday TV show and there’s words that they’re using that you don’t understand, this is what’s kicking in here is that it’s like-
Gabriel Lewit: Say it again?
Steve Lewit: No, I’m not going to say it. I can’t say it. This long thing, fear, actually is working in your system. You don’t even know it’s working there. It’s like, “I don’t know what that is, so I’m going to be afraid of it.” It’s like fear of the unknown.
Gabriel Lewit: Yeah, basically. Yeah, so what do we try to do as advisors? We try to simplify things down. Avoid using acronyms that you may not understand, like RMD, Required Minimum Distribution. We try to do lots of things to keep things simple, concise, clear, and help you gain a further understanding and not just be turned off from something just because you haven’t heard of it before or it has a long sounding name or something else that might be just unusual or different to you.
Steve Lewit: Yeah. Don’t be bashful to say, “Hey, could you translate that into English?” Some people don’t want to ask, Gabrielle, because they fear that they’re going to look not smart. “By asking that question, this guy is going to think I don’t know anything.” So just toss that into the garbage can where it belongs and ask your question because an advisor’s job is to speak to you in plain English.
Gabriel Lewit: Indeed.
Steve Lewit: So, you understand stuff.
Gabriel Lewit: Si.
Steve Lewit: Si.
Gabriel Lewit: Plain English.
Steve Lewit: Plain English, Si.
Gabriel Lewit: Oh, such a dad joke. I’m such a dad.
Steve Lewit: Yeah, you are a dad.
Gabriel Lewit: I’m going to skip this. I’m going to save one for a little later, but next one I want to bring up is Nomophobia.
Steve Lewit: Nomophobia.
Gabriel Lewit: Which apparently is the fear of being without your mobile phone or disconnected from tech.
Steve Lewit: Yes.
Gabriel Lewit: To do another great dad joke, I was thinking it should be nomophonia.
Steve Lewit: Nomophonia. They gave it the wrong word.
Gabriel Lewit: Oh, bad. Terrible. Terrible, terrible.
Steve Lewit: No, Gabriel. Have you ever been?
Gabriel Lewit: That’s a dad joke, for sure. That’s an even better dad joke.
Steve Lewit: This is a real deal. I am really attached to my cell phone. It’s like if I don’t have it? Where was I? Oh, when I was having surgery. I had to give them my cell phone and it was like for about-
Gabriel Lewit: You had nomophobia.
Steve Lewit: For about five minutes, I felt like I was disconnected from the entire world, which is such a ridiculous thing, but that’s-
Gabriel Lewit: Your anchor is gone.
Steve Lewit: My anchor was gone.
Gabriel Lewit: You’re free-floating on the water.
Steve Lewit: Yeah.
Gabriel Lewit: Yeah. Well, that is a thing. A lot of people, they’re so tethered to their phone or anchored to it, that if you chop that anchor, I think we’ve all been there, right? We’re driving away from our house to go to the store, go to work. You reach down for your phone. “Oh, my gosh.”
Steve Lewit: I don’t have it.
Gabriel Lewit: “Where is it?”
Steve Lewit: I don’t have it. Now how does that apply in our business is that we find people, folks, that are constantly on the phone checking their stocks, checking the stock market, seeing what the trends are, and they’re just stuck there.
Gabriel Lewit: Some people check it 12 times a day and not in a way that’s healthy. In a way that’s like, “Oh, my gosh. The S&P just went from 5,500 to 5,050. Oh, my gosh. What do I do today?” Really tethered to that stock market or what their money is growing by, even if it’s money that in their plan that they’re not going to touch for 20 years.
Steve Lewit: Right, and that’s a different. That’s another fear, a fear of losing money. I wonder what that would be. Is there a name for the fear of losing money?
Gabriel Lewit: Well, these aren’t money-related phobias.
Steve Lewit: I know, but I’m asking an inquiring question.
Gabriel Lewit: Oh, okay. I was going to say, you can’t.
Steve Lewit: To broaden our knowledge of the words that we’re using. Is there a phobia for fear of losing money? Does that have a name?
Gabriel Lewit: I don’t see one on there.
Steve Lewit: Like freak out or go crazy, depression?
Gabriel Lewit: Yeah. There’s chrometophobia. This is an irrational fear of money or spending money.
Steve Lewit: Really?
Gabriel Lewit: That’s what AI says. You can’t always trust AI. We’re Googling this in real time,
Steve Lewit: But I like that.
Gabriel Lewit: Yeah, chrometophobia? Yeah, something like that.
Steve Lewit: Yeah. There we go. See, we learned something.
Gabriel Lewit: We did learn something today. Now we can tell our clients, you got chrometophobia.
Steve Lewit: Exactly.
Gabriel Lewit: Chrometo?
Steve Lewit: Then they’ll say, “Oh no, I have hippopotamus.”
Gabriel Lewit: Yeah, which is the fear of long words.
Steve Lewit: Fear of long words. Right.
Gabriel Lewit: All right. Okay. Now this next one I’m going to preface this with is not what you think it is when I say it, which is xenophobia.
Steve Lewit: Yeah.
Gabriel Lewit: Okay. Xenophobia has gotten taken over as a fear of immigration or things like that, but really when you Google this-
Steve Lewit: It used to be a very negative.
Gabriel Lewit: Yeah. When you Google this, it does mean just fear of the unknown or foreign.
Steve Lewit: Things that are foreign to you.
Gabriel Lewit: Yeah, so that’s similar to the stock question I was saying earlier. I think a lot of people, they grow up their whole lives when they’re younger and they’re used to stocks, mutual funds, ETFs. When they get to retirement, there is a whole world of new products that are predominantly suited for retirement folks. Like an annuity, for example, is a very common one. Because they’ve never had any experience with it, it feels very unknown and very foreign, and there is an innate fear of that.
Steve Lewit: Definitely.
Gabriel Lewit: That I think it’s important to address and face because many times these fears are what phobias are. They’re unfounded just because they’re new, right?
Steve Lewit: Yeah. I was on Zoom with a client. What’s today? Thursday?
Gabriel Lewit: Yes.
Steve Lewit: On Tuesday. We’re building out their income plan. One of the possibilities, one of the options, folks, you know we use a lot of different products, not just the stock market.
Gabriel Lewit: Tons of different products. Yeah.
Steve Lewit: So, one of the options was to buy a rising income, very modern fixed index annuity. We’ve had two or three meetings, and I’ve shown them all about this part of their plan and that world. He said, “Steve, I got to be honest with you. It’s so foreign to me, I don’t know if I can pull a trigger on this. I don’t know if I can actually buy it.” I really understand that because it’s like I’m used to eating a hamburger, and you just gave me fish or something like that.
Gabriel Lewit: I do think I’ve not done a ton of foreign travel of late with my young family, but I’ve been to some foreign countries. You get a bowl of the local cuisine plopped down in front of you. You’re poking at it like, “What is this?” It’s very foreign to you. “Do I eat this? What’s it going to taste like?”
Steve Lewit: I never thought of it that way.
Gabriel Lewit: It’s not a hamburger.
Steve Lewit: But it is xenophobia.
Gabriel Lewit: Yeah. I mean, I think when you get into the world of retirement, have an open mind, explore new options, dive into how they work, and then compare them to the traditional things you’re familiar with. Maybe try a bite of the foreign bowl of-
Steve Lewit: Pigs eyes.
Gabriel Lewit: I wouldn’t eat that no matter where it’s from.
Steve Lewit: Monkey hearts.
Gabriel Lewit: What? Are you sure you’re not on?
Steve Lewit: No. People eat these.
Gabriel Lewit: Are you sure?
Steve Lewit: People do eat. There are dishes.
Gabriel Lewit: I was thinking more like spicy Thai or something like that.
Steve Lewit: No, but there are dishes that have all these crazy things in it.
Gabriel Lewit: What countries are you traveling to?
Steve Lewit: Well, if you go to some of the Asian countries, they eat weird stuff.
Gabriel Lewit: You’re weird. I’m just going to preface that.
Steve Lewit: Why is everybody frowning at me?
Gabriel Lewit: All right, we’ll move on.
Steve Lewit: Our ancestors ate every part of everything. That was all right.
Gabriel Lewit: Okay. Seriously, let’s move on. All right, so the next one here is arachibutyrophobia, which is the fear of peanut butter sticking to the roof of the mouth.
Steve Lewit: No.
Gabriel Lewit: That’s what it says.
Steve Lewit: I love that.
Gabriel Lewit: Arachibutyrophobia. Okay, what does that have to do with your money, you might ask. Well, if you eat peanut butter, it sometimes sticks to the roof of your mouth, and some people don’t like that. They’re scared of that. They don’t like the feeling that something has a long-term effect, if you will. So, I don’t know. Maybe this is a long stretch. Maybe there’s certain financial decisions that are going to stick with you longer.
Steve Lewit: Is that the fear of failure?
Gabriel Lewit: Like putting some life insurance in an irrevocable trust. Right? Anything with the word irrevocable can make people feel nervous because it cannot be changed. They’re stuck with it. So, that’s an example. Anything that is a bigger decision that maybe makes you feel like you’re going to be stuck with it for a while or it’s irrevocable can sometimes make people feel at ease.
Steve Lewit: I’m stretching with you on this one.
Gabriel Lewit: I said it was a stretch. I just wanted to say the fear of peanut butter. Okay?
Steve Lewit: I’m stretching.
Gabriel Lewit: I just want to say arachibutyrophobia.
Steve Lewit: I’m trying to think of my clients that have arachi. What is it? Arachi?
Gabriel Lewit: You try pronouncing it.
Steve Lewit: No, I don’t want to pronounce this. This is a Arachi? Arachibutyrophobia. Wow. All right, whatever.
Gabriel Lewit: Well, I’m going to say-
Steve Lewit: I would say this way is that it tastes good going in, but then it’s stuck in your mouth. Some fears are you buy a financial product. It feels good, but then it don’t feel good because something about it you don’t like.
Gabriel Lewit: Yeah, could be. Well, let’s do one last one.
Steve Lewit: Really?
Gabriel Lewit: Yeah, because we’ll move on to our last topic for today. We can either do … I got six or seven on here, what do you like better? Then I’ll say it, six or seven.
Steve Lewit: I like seven.
Gabriel Lewit: Seven, okay. It’s not a very fancy name, but it’s decidophobia.
Steve Lewit: It’s not, but it tells you what it is.
Gabriel Lewit: Decidophobia.
Steve Lewit: That’s a real word by the way, folks.
Gabriel Lewit: Which makes me wonder, why didn’t they call it peanut butter phobia? If you’re going to have some, so this is fear of making decisions. Why is that decidophobia, and the other ones are weird names like hippopotomonstra instead of longwordophobia. You know?
Steve Lewit: Yeah.
Gabriel Lewit: Weird, right?
Steve Lewit: Yeah. It is
Gabriel Lewit: Just food for thought.
Steve Lewit: It is what it is.
Gabriel Lewit: Okay. Well, so yeah, this is fear of making decisions, analysis paralysis. When the bigger the decision somebody has to make, they sometimes just are scared of making it.
Steve Lewit: Yeah. Well, I think this is huge. Of all of these that we’ve talked about today, I think decidophobia is a huge deal, especially when it comes to retirement funds. Let’s say you’re just retired or you’re planning on retiring in three years, or you’re going to retire next week or in three months. Those decisions are really, you got one shot of getting it right because if you don’t get it right at 65, you can’t correct it at 78. So there’s a lot of fear of making decisions, especially in retirement. It’s like a young couple buying a house, their first house. There’s a tremendous amount of fear. “Can we afford it? Will we be able to do that?” Or having their first child. So, decidophobia I think plays into so many different parts of our lives, but especially when it comes to money. People just don’t like or enjoy making financial decisions because they don’t know what the future is going to be.
Gabriel Lewit: Yeah, and I think we attempt to solve that by putting the context all within the picture of a bigger plan so you can really see long-term what this smaller decision is going to do in the context of your bigger overall plan. We found that sometimes helps people to make a decision that’s good for them because they can see the bigger picture.
Steve Lewit: Yeah. We promote decision mania to counter decidophobia on smaller decisions one at a time.
Gabriel Lewit: You’re running with this, huh?
Steve Lewit: I’m running with it.
Gabriel Lewit: All right. Well, hopefully you enjoyed our alphabet soup here today. If you’ve got questions on any of these-
Steve Lewit: Because they are real.
Gabriel Lewit: I mean, yeah, not so much the words themselves. I probably can’t help you really understand how to say them or anything like that, but what they mean for your financial planning. Of course, we’re here to help in any way, shape or form. Call us (847) 499-3330 or go to sglfinancial.com and click Contact Us.
Steve Lewit: Come on.
Gabriel Lewit: All right, so with our remaining time, we have recently sent out an email to clients of ours … so, if you’re not a client of ours, you wouldn’t have gotten it … called Year-end tax planning. Why am I bringing this up now? The year end is still a little bit further away. Well, because I want you to have some time to plan ahead for these different things. All right, so all we want to do here today is just touch upon some of these year-end planning items real quick. We won’t get into necessarily a deeper dive on all of these, but we’ll talk about if they might apply to you and how to get started with them, a little snippet on each. Okay, Mr. Lewit?
Steve Lewit: Sounds good to me.
Gabriel Lewit: Okay, so all of these are designed to take advantage of tax planning. So this is all under the tax planning umbrella. If you don’t know who to talk to about these, you call us. Okay. Number one, Roth conversion.
Steve Lewit: Yes. Okay. You want me to say something, more than yes?
Gabriel Lewit: Just a snippet, a more than yes snippet.
Steve Lewit: Okay. Ask yourself this. There are three tax buckets: a pay as you go tax bucket, tax deferred bucket or tax-free bucket. If you had a choice, where would you want all your money?
Gabriel Lewit: Tax-free.
Steve Lewit: Tax-free. Roths are tax-free money. How do I get as much money from my IRA into my tax-free bucket as I possibly can, as quickly as I can? That’s all what a Roth conversion is about. Especially important if you think taxes are going up in the future. Based on a 35 trillion national deficit and an 822 billion dollar interest on the deficit, if you don’t think taxes are going up in the future, I’d like to understand why.
Gabriel Lewit: Yeah. Well, so yeah, Roth conversion, you got to do it before year-end. So there is usually quite a bit of number crunching and calculations involved in doing them properly. You don’t just want to willy-nilly go and convert large amounts of money without a plan.
Steve Lewit: Yeah. We have actually specialized software that really guides us and guides you in figuring out. Like October, November, our Roth conversion months where we call you.
Gabriel Lewit: Well, we’re even starting them now, actually.
Steve Lewit: We have started, actually.
Gabriel Lewit: This is the time of the year to do, to get going. Yeah, you don’t want to wait until last minute. Okay. Number two on the list is Required Minimum Distributions. Perhaps you just turned 73 this year, or maybe you’re just 74 and you just forgot that you got to take them every year after you turn 73, but the point is don’t forget to take your Required Minimum Distributions, RMDs, because there are penalties if you do forget.
Steve Lewit: Yeah, the key word in Required Minimum Distributions is the word required?
Gabriel Lewit: Required, yes.
Steve Lewit: It means you can’t leave it there or forget about it.
Gabriel Lewit: Yes. People often ask us, “Do I have to take my RMD?”
Steve Lewit: And the answer is?
Gabriel Lewit: It is your required minimum distribution.
Steve Lewit: It’s required to do that.
Gabriel Lewit: Yes, you do.
Steve Lewit: For sure.
Gabriel Lewit: Okay. It’s like getting money from the ATM machine.
Steve Lewit: No.
Gabriel Lewit: The automatic teller machine machine, right?
Steve Lewit: Yes. I don’t know what to do with that one.
Gabriel Lewit: I was piggybacking on our ATM thing earlier.
Steve Lewit: Yeah, I got it.
Gabriel Lewit: I like the ATM machine, the automatic teller machine machine. Yeah.
Steve Lewit: Well, we have a perpetual retirement income machine.
Gabriel Lewit: All right. Next on the list I was going to say. No. Next on the list, maximizing your contributions to your retirement accounts. Now let’s say you have a certain amount you’re looking to contribute during the year, whether it’s your 401k or your IRA or your 403b. If you don’t max it out, you can’t go back necessarily in the future to prior years and max them out then. Okay? Especially your workplace plans have to be maxed out before the end of the year. Your IRAs, on the other hand, you do have a little bit of wiggle room because you can do those through tax time.
Steve Lewit: Right.
Gabriel Lewit: But if you’re looking to max out your 401k or other workplace retirement plan, usually you got to do that by the end of the year.
Steve Lewit: That is especially important if there’s a match. You want to make sure you’re getting the match from your company because that’s free money.
Gabriel Lewit: Yeah. Now if you care about reducing your taxes for this year, you would have to choose a pre-tax option that’ll lower your taxes or your taxable income. If you care about tax-free buckets, it depends on your tax bracket. You may want to do a Roth 401K or Roth IRA, which won’t lower your taxes this year, but will put your money in a tax-free bucket.
Steve Lewit: Yes.
Gabriel Lewit: Okay. Number four, tax loss harvesting. Now, when the markets are up quite a bit, sometimes there’s not as much to harvest. Or if you’ve recently done tax loss harvesting in the past, then that’s going to lower your basis. So, what tax loss harvesting is, if a position is down, and there’s a capital gain or loss,
Steve Lewit: So, you’ve got a losing stock, and you want to sell it.
Gabriel Lewit: From the date you purchased it, it’s lower in value. You could sell that in a non-qualified or what’s called taxable account and capture that loss. You can buy a similar but not identical position. Now you’re in the same net asset allocation that you were in before, and you’ve got now this carry forward loss to apply to other gains.
Steve Lewit: So, you can offset a loss with a gain. When the market is up, however, there are very few losses to apply to gain, so tax loss harvesting is very difficult.
Gabriel Lewit: Less common. More so if you have a lot of individual stocks. A little less common if you’ve got funds, but that’s something to keep in mind. If you haven’t looked, you should at least look and take a look at that.
Steve Lewit: Right. Just so you know, in our portfolios we are doing tax loss harvesting all the time, actually. We’re looking at the markets. We’re looking at what’s in each portfolio, and our managers are making decisions. “Should we sell this and offset it with a gain? Should we keep it a little while? What are we going to do?” But taxes are an important component of a well-managed, non-qualified, non-IRA portfolio.
Gabriel Lewit: Yes, I agree. All right, number five. Reviewing your charitable contributions. If you’re charitably inclined, you have the ability to make donations. But what a lot of people don’t realize is unless you exceed the standard deduction and start itemizing, your charitable contribution is not going to lower your taxes.
Steve Lewit: That’s correct.
Gabriel Lewit: So, if you are charitably inclined, let’s take a look at what amount you’re contributing, whether or not you should do things like bunching, which is combining multiple years of charitable contributions into one year to try to itemize instead of the standard deduction. We can look at donor-advised funds as another option. We can also look at what’s called a qualified charitable distribution.
Steve Lewit: And charitable remainder trust. There are so many things you can do with charities, especially if you have highly appreciated individual stocks. Folks, some of you own. We have clients, for example, that have worked at Abbott, and they’ve worked at UPS and McDonald’s. They’ve got the stock they’ve earned over 20 years, and there are tremendous capital gains in there and they’re locked in because they don’t want to pay the capital gains. So, there are ways of using charitable trusts. Even if you’re not interested in charity, but there are ways of using charitable trusts to avoid paying those capital gains.
Gabriel Lewit: Amen. Yes. The only reason I’m not elaborating on that is because we’ve got a couple more and we’re staring down the barrel of our targeted time here. I don’t want to exceed it by too much for you all out there.
Gifting strategies, there are annual gift tax exclusions. Annual meaning if you miss them, you can’t go back for prior years and make up for them. So if giving or gifting away money under the annual gift tax exclusion is important to you, make sure you do that before the end of the year. So that’s 18,000 per person, per recipient as well. There’s different rules there that sometimes confuse folks, so let us know if that’s the case. Flexible spending accounts through work. If you have funds in an FSA, use them up because a lot of plans don’t let you roll those over.
Steve Lewit: They won’t carry over a lot, yeah.
Gabriel Lewit: HSAs. If you’ve got those, make sure you max them out by the end of the year. So, that’s important, whether it’s through your employer or on your own.
Steve Lewit: Your HSA is a health savings account.
Gabriel Lewit: Yeah, correct. A health savings account. If you don’t have one, you’re probably not familiar with how to get one, but that’s a topic for a different day. If you’ve got one, you’re probably familiar with it, but just make sure you don’t forget to max that out.
Steve Lewit: Max it out, yeah.
Gabriel Lewit: Great tax deduction as well as the ability to grow your money tax-deferred and then take the money out tax-free. It’s a triple tax advantage account for the purposes of health expenses now or in the future.
Steve Lewit: Yeah, it’s terrific. It’s terrific. Yeah.
Gabriel Lewit: 529 plans. Similarly, you’ve got to fund those by the end of the year. In Illinois here you do get a small state tax deduction if you max that out. I believe the max is $20,000 to save you some money on taxes. You also can use that as a way of funding a future Roth IRA now for your grandchildren or even children. So there’s some neat things we can do with 529s to save you on taxes and set up your future beneficiaries to be receiving a tax-free bucket.
Steve Lewit: Yeah, so if you have old 529s sitting around, you’ve got to look.
Gabriel Lewit: Call us. We’ll help you, tell you what to do with them now.
Steve Lewit: Maybe convert that to a Roth.
Gabriel Lewit: Correct. Correct. Yeah. Last but not least, if you’re not sure about your withholdings for the year and are you going to owe money, are you going to get a refund, let us know before the year is over, so you can have three or four months here to adjust those to get yourself slightly back on track if you’re not sure. Last but not least, make sure that you’re thinking of all the other things that are pertinent for you. So, if you’re a business owner, are there expenses that you could deduct this year versus next year? There’s a lot of other things here as well. These are probably the top 10 that we see most often.
Steve Lewit: These are the ones.
Gabriel Lewit: But not to say that that’s an exhaustive list of everything.
Steve Lewit: It certainly isn’t, but these are the major ones that most folks will focus on in preparation to make sure you get all your deductions in for this year. Because as Gabriel said, sometimes many of them don’t carry over to the first four months of the following year. So, keep an eye on those. Double check them. If you need any help, Gabriel will give you his announcement of where to call us.
Gabriel Lewit: Yeah. Last but not least, I thought of one last one.
Steve Lewit: You did?
Gabriel Lewit: Which is if there’s income, you’re thinking about taking this year, but you might be in a higher bracket this year than you would be next year, then you could defer to January 1 of next year to take your withdrawal for whatever it is you might need the money for and pay a lower tax bracket, too.
Steve Lewit: Yeah, and that’s especially true if you have RSUs, which are Restricted Stock or options and things like that. What year to take those in is usually optional, and how to take them, when to take them has a lot of tax consequences.
Gabriel Lewit: Yes, sir. Yes, sir.
Steve Lewit: Yes sir.
Gabriel Lewit: All right. Well, that’s our show for you today. Thank you so much for tuning in. Great to be back here with you.
Steve Lewit: It is.
Gabriel Lewit: We will see you on the next show. If you want to call us for any financial questions, tips or needs, (847) 499-3330 or go to sglfinancial.com. Click Contact Us or email us. Of course, info at sglfinancial.com.
Steve Lewit: Stay well, everybody.
Gabriel Lewit: Thanks so much. Have a great day.
Steve Lewit: See you soon.
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. Be sure to subscribe to join us on next week’s episode.
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