Finding Your Financial Risk Comfort Zone
by SGL Financial
Our 2 Cents – Episode #188
Riding the Financial Waves
Steve and Gabriel are back with a new episode of Our 2 Cents where they discuss the impact of the Fed’s interest rate cut on your financial outlook and address the key “what ifs” surrounding financial risk-taking. Then, they answer some insightful listener questions. Listen in now using a link below!
- Fed Interest Rate Cut:
- For the first time in 4 years, the Federal Reserve cut interest rates, marking a shift from their previous tightening, to help stimulate economic growth.
- Financial Risk-Taking:
- Understand investor perspectives on financial risk-taking and explore effective strategies to address potential concerns.
- Listener Questions:
- “I recently remarried, and we both lost our previous spouses to cancer in the last five years. We’re in our late 60s, each with three kids, and he has more assets than I do. How can we ensure his kids inherit his wealth while also securing my financial future if I outlive him?” – Linda
- “My 64-year-old husband wants to work another decade, but I think we have enough for him to retire sooner. I’d prefer to travel more. Is it worth debating, or should I just let him keep working?” – Beth
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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: Welcome to Our 2 Cents. You’ve got Gabriel Lewit back here in the studio conference room, of course, in our double duty studio and conference room combined.
Steve Lewit: Combined, yup.
Gabriel Lewit: Mr. Steve Lewit. Of course, our second penny.
Steve Lewit: I’m here. The second penny.
Gabriel Lewit: We are ready for a great show with you. Our most valued, wonderful, extraordinary listeners. Yes.
Steve Lewit: Phenomenal listeners. And thank you, because we reached, what was it, 10,000 downloads? Was it?
Gabriel Lewit: 10 million? I think 10 million.
Steve Lewit: 10,000-
Gabriel Lewit: I got a couple extra zeros.
Steve Lewit: … downloads, folks. Thank you so much for listening.
Gabriel Lewit: Yeah, yeah. We really do enjoy our show. We love when we hear comments from you out there saying, “Great job. Keep up the good work,” because it gives us the juice.
Steve Lewit: Yes, it does.
Gabriel Lewit: To keep going.
Steve Lewit: And we have to apologize. We missed last week.
Gabriel Lewit: Yeah. This is Steve’s fault.
Steve Lewit: It is nobody’s fault.
Gabriel Lewit: Might’ve been my fault.
Steve Lewit: We really dislike missing a session. So I want you all to know that, that we are really dedicated to doing this every week, but sometimes life happens.
Gabriel Lewit: Yes, it does.
Steve Lewit: As you all know.
Gabriel Lewit: It does. Yeah. And sometimes interest rate cuts happen.
Steve Lewit: Well, before we get to interest rate cuts, I just want to express my sadness.
Gabriel Lewit: For?
Steve Lewit: The dog act on AGT should have won, not the singer. And I am devastated that this dog… Folks, if you haven’t seen it, look up the finals of AGT, America’s Got Talent, and watch the dog act. You have never seen anything like that in your life. And they came in second.
Gabriel Lewit: And the quarterfinals.
Steve Lewit: And in the quarterfinals, every performance was better than the other.
Gabriel Lewit: Called Roni & Rhythm.
Steve Lewit: Is that it? Roni-
Gabriel Lewit: Roni Sagi, something like that. Roni & Rhythm.
Steve Lewit: You have never seen a dog trained like this. It’s just extraordinary, and they didn’t win.
Gabriel Lewit: Well, back when my pup was alive a few years back, I was very-
Steve Lewit: No.
Gabriel Lewit: …. I was very excited if he would sit.
Steve Lewit: Right.
Gabriel Lewit: I mean, that was a win for me. And this dog is doing tricks, walking backwards, dancing, prancing. My goodness.
Steve Lewit: He does a whole dance routine.
Gabriel Lewit: Yeah. Yeah. Pretty impressive.
Steve Lewit: Yeah.
Gabriel Lewit: Not that the singer guy was bad. Now actually, I would like to say, if you watch AGT, let us know who you thought should have won. I’d love to share that on the show. Everyone got their favorites.
Steve Lewit: Yeah. Gabriel intimated to me, he says, “I think this might be fixed.” I don’t think it’s fixed.
Gabriel Lewit: Oh, it’s so fixed. Definitely fixed. All right. But we can disagree on that.
Steve Lewit: All right, on to interest rates.
Gabriel Lewit: Onwards, yeah. I mentioned last time we were tracking what the Fed was going to do with interest rates. This has been, of course, a story we’ve been tracking all year for you, so we won’t spend too much time on it today. But yes, interest rates came down 50 basis points, half a percent. And what does that really mean? Mr. Celebrity was on, were on… Was on?
Steve Lewit: Was on.
Gabriel Lewit: Yes, you were on. Sorry.
Steve Lewit: I was on. You were on.
Gabriel Lewit: WGN.
Steve Lewit: Yes.
Gabriel Lewit: Okay. Talking about interest rates.
Steve Lewit: Yes.
Gabriel Lewit: And the cut and what it means for the Americans out there listening to our show and those who are not yet listening to our show. So, since you already covered this, I’m going to turn this over to you to give us a quick recap. What’s the most important takeaway here for our listeners to know?
Steve Lewit: Okay. So everybody understands that the Fed raised the interest rates because of inflation and the economy was getting too hot. So, raising interest rates, the analogy I used was like pouring cold water on the fire. But now the economy has softened a little bit. Unemployment is up, inflation is down, and the Fed is concerned, well, if they don’t lower interest rates, they might cause a recession. So they lower the interest rates a little bit, which is putting a little bit of gas on the fire.
Gabriel Lewit: You don’t want to pour so much cold water that the embers go out, and thus there is nothing left to ignite.
Steve Lewit: Well, that’s called recession.
Gabriel Lewit: Yeah, that’s a recession. And so to your point, they’re pouring a little gas now. There’s still some embers cooking there. Now you pour a little gas on it and whoosh.
Steve Lewit: Yeah.
Gabriel Lewit: Off the economy goes, right?
Steve Lewit: So now they have to wait and see how does the economy respond? Because if nothing happens, then they get more aggressive on rate decreases.
Gabriel Lewit: More gas.
Steve Lewit: More gas. If inflation all of a sudden comes back, well, they probably won’t raise them, but they certainly won’t lower them. I expect them to lower them consistently over the next year as an economist view. Now what does that mean for you?
Well, honestly not much because it’s only 50 basis points. It’s not a lot. When you go shopping for a car, it’ll be a little less expensive. Credit card, if you have credit card debt, instead of paying 24%, you’re going to pay 23 and a half. So pay off your credit card debt. But it will help the economy and the economy helps everybody. But day to day, I don’t see it having much of an impact on our clients or anybody’s lives, Gabriel.
Gabriel Lewit: Yeah. Well, thank you. That’s a very good recap. If you want the longer version, slightly longer version, you can watch Steve on WGN. Can people Google you, Steve Lewit at WGN? I wonder what comes up if that happens. Anywho.
Steve Lewit: Yeah. It will come up because I once Googled myself to see how famous I was and I believe it came up.
Gabriel Lewit: Yeah. Yeah. First, Steve Lewit, WGN, you’ll see him on the first link. Discusses the federal something, something, something.
Steve Lewit: How about them apples, huh?
Gabriel Lewit: Look at you. TV star.
Steve Lewit: My price of autographs went up 10 cents.
Gabriel Lewit: From what?
Steve Lewit: From zero.
Gabriel Lewit: There you go.
Steve Lewit: From zero.
Gabriel Lewit: I didn’t say. You said it. I was going to say like $1.00, $1.10, but yeah, you can start there.
Steve Lewit: When I autograph my book, or our book, I tell people, “Now the book is going to be worth less because I scribbled on it.”
Gabriel Lewit: Well, hey, you got to start somewhere. All right, so that was just a little snippet. Yes, I think just to put my 2 cents onto that same matter, I think when will interest rates level off? You mentioned over a year, it could be two. There’s different variations on what people are forecasting. It might level off around what, two and a half, 3% down from four and a quarter where they are today, or four and three quarters, sorry.
So, I think there’s more room for that to slide. If that’s an opportunity for you to look forward to refinancing, for example, if you had a higher rate mortgage or a higher rate HELOC, these should all be positive things for you. So, don’t worry. Help us on the way in the form of lower rates bit by bit over the next couple years.
Steve Lewit: Yeah, I mean, mortgage rates did drop to, I think 6.8 from 7 point something.
Gabriel Lewit: No, I actually had a client said they got an offer for a sub-6, like 5.75, even the other day.
Steve Lewit: Outstanding.
Gabriel Lewit: So, in a much more manageable range.
Steve Lewit: So, folks, the whole housing market will shift. We haven’t seen a big shift yet, but there’ll be, more people will be willing to maybe sell their homes and buy a new home. You might see more supply on the market, which will cool the housing bubble, I think we’re in.
Gabriel Lewit: Yes. Yes. All right, well anything else you wanted to say on that? That was our main emphasis there is just so you’re aware, rates did go down and a very quick overview of what that means for you. If you’ve got no other key points, we can move along to our next focus for today.
Steve Lewit: All right, let’s move along. I think it’s pretty simple.
Gabriel Lewit: Mosey forward, we shall.
Steve Lewit: Yeah, it’s a wait and see. Good stuff.
Gabriel Lewit: Good stuff indeed. All right. Well, today we are going to do a little bit of a focus on risk-taking and how to and how not to. All right. When it comes to your financial plan. Now, simple question for you. Is risk-taking good or bad? Maybe it’s not so simple.
Steve Lewit: I don’t think that’s a simple question. Is risk-taking good or bad?
Gabriel Lewit: Yeah. When I say, “Hey, are you a risk-taker? Should you take financial risk? Is that a good decision, a bad decision?” Or maybe it depends.
Steve Lewit: I would take, it depends on the outcome. People that take risks and win-
Gabriel Lewit: If the risk works out, it was a good risk, right?
Steve Lewit: … it was a good decision. And if they take a risk and lose, they say, “I’ll never do that again,” but they do it.
Gabriel Lewit: Yeah, that’s a very, very true point. Certainly depend on the outcome. So, if you’re thinking about taking some kind of financial risk, and we’re going to talk about the different types of risks that exist in the financial world, what is the prudent thing to do as you are approaching that decision? So you’ve got this decision to make, you’ve got some money in hand. Let’s say you’re thinking about taking a risk with some investment. Is that a good decision or a bad decision?
And to give a little bit of an analogy on this, let’s say that you just got $2,000 from your paycheck deposited into your bank account and a friend invites you to head down to Rivers Casino for a night out on the town. I were to ask you, is it a good idea or a bad idea to take that $2,000 paycheck you received and roll it on black on the roulette table? Is it a good idea or a bad idea?
Steve Lewit: We’ll see. So, here’s how you approach that. May I?
Gabriel Lewit: You may.
Steve Lewit: I want to give you the secret to risk. You have $2,000 that you just got deposited in the bank and you don’t know what to do with it. So, the question that I would ask myself is, how much do I want this money to grow by? Do I want it to grow at 4%, 6%? Do I want to double it overnight? What do I want to do with that? Let’s say you say to yourself, “I would love the idea of doubling it overnight.”
Okay, now then you say, “What is the risk of doing that?” Well, the risk is I could double it at the casino or I could lose it all. So, are you willing to take that risk? Then let’s say you say, “Well, I want my money to grow at 8%.” Okay, well, where do you get 8%? In the stock market in an aggressive portfolio. Okay, you say, “I’m going to grow my money at 8%. What’s the risk?” Well, the risk is that portfolio in 2008 was down 38%. So if you had $100,000, it was now worth $62,000. That’s the risk. Are you willing to see your portfolio go down from a hundred or a thousand, 2000, whatever it is, to 62,000?
Gabriel Lewit: Well, Steve, as you know what many people will say, “Well, oh, that won’t happen again.”
Steve Lewit: Okay. I hear this all the time.
Gabriel Lewit: I hear this. Now, if it happened in 2008 and there was a similarly bad crash for a different reason in 2001, right? Over the next couple of years there, why do you think people then say to themselves, “Oh, that won’t happen again.” What is it about the personality? Okay, it’s happened twice, but they definitively put their fist down on the table. “Oh, that won’t happen again.” They just write it off.
Steve Lewit: It’s the same thing that drives people to say, “Oh, I know the stock market will go up. Oh, I know-
Gabriel Lewit: Oh yeah, of course it can go up this year.
Steve Lewit: Of course it’s gone up. How do you know? Everybody knows.
Gabriel Lewit: Is that definition, am I saying this right? Hubris? Is that the right-
Steve Lewit: Hubris.
Gabriel Lewit: Hubris? Hubris?
Steve Lewit: Hubris, hubris.
Gabriel Lewit: How do you pronounce that?
Steve Lewit: Hubris.
Gabriel Lewit: Can you Google what that means? I sometimes use words and I don’t know if I’m using them right.
Steve Lewit: Hubris is… It might be hubris.
Gabriel Lewit: Hubris?
Steve Lewit: Yeah, it’s miss-something.
Gabriel Lewit: H-U-B-R-I-S.
Steve Lewit: Yeah. Hubris.
Gabriel Lewit: H-U-B-R-I-S.
Steve Lewit: I should know this as a writer.
Gabriel Lewit: A personality trait that involves excessive pride, dangerous overconfidence or complacency.
Steve Lewit: Yeah. Hubris. That would be hubris.
Gabriel Lewit: Hubris, right?
Steve Lewit: Yeah. Nice. Good.
Gabriel Lewit: Sometimes I’m like the books, all the books I read in high school, maybe they paid off for me.
Steve Lewit: I am so proud of you. My son taught me a word.
Gabriel Lewit: That’s all the word of the days I used to read a long time… You get the little word of the day action.
Steve Lewit: We should do a word of the day on the podcast.
Gabriel Lewit: That would actually be a fun little… “Hey, what’s the word of the week?” Every now and then maybe we’ll do a word of the week.
Steve Lewit: So yeah, people just live in denial. Denial.
Gabriel Lewit: A dangerous sense of overconfidence.
Steve Lewit: They’re overconfident. They just don’t want to believe the data. If it happened once, yeah it could happen again.
Gabriel Lewit: And I think some people with, hopefully I’m saying this right, hubris, I think that’s how you pronounce it, they’d say, “Oh, I’m not dangerously overconfident, I’m just an optimist.” Right? And they view people that think worst case scenario is a pessimist. Have any of you ever seen the movie Along Came Polly, I think it was? Can you Google Along Came Polly? I’m pretty sure I’m right on this too. It just popped in my head. But it’s Jennifer Aniston and Ben Stiller, who I don’t think has been in movies in a while, and I believe it’s when he’s an actuary or some kind of insurance based guy and he’s super risk averse.
He wouldn’t even go to a restaurant with her to eat dinner because he was worried… Or no, she wanted to dig into some Indian dish with her hands to eat it because it was like this dinner date they were on, and she’s like the polar opposite. And he was like, he wouldn’t do it because he didn’t want to put his hands in there with the germs as with the other person, with their germs, because he’s always worried, risk, risk, risk, risk, risk. That’s a mind of an actuary.
And some people are like that. And I do think there is a point when you’re looking at your financial plan, is it better to be a big time worrier? Also, another example, I recently watched the movie Inside Out 2 with my kids, just recently came out on Disney+. If you’re interested out there, you can watch it too. And it’s all about the emotions. And of course if you’ve seen Inside Out 1, it’s this young girl and there’s anger, happiness, sadness, and then she gets older and now they’re introducing a new emotion called anxiety, which is very funnily-
Steve Lewit: I know that one
Gabriel Lewit: … very funnily, interestingly portrayed, I don’t know the right word there. Anywho, where all about thinking about these worst-case scenarios. That’s what breeds anxiety, but it’s a protection mechanism, right?
Steve Lewit: Fear.
Gabriel Lewit: Fear and anxiety is a protection mechanism. So, it’s good in some sense to say, when you look at risk from a financial perspective, ask yourself this question, what is the worst case scenario? Okay? It’s not a bad question to ask, right? Because-
Steve Lewit: Well, that’s the measure of whether you should do it or not. If you can’t tolerate the worst-case scenario, then you’re going to worry about it and you shouldn’t do it. If you say to yourself, “Well, the worst-case scenario is not going to happen again,” why are you saying that? What data says that you are… Where did that come from?
Gabriel Lewit: Yeah, so there was an article I read that prompted this, and it was about this financial blogger or writer that I guess used to be an advisor and talked about a case where he was working with a client that was planning their whole retirement under the auspices that they were going to receive a big inheritance via life an insurance policy.
Steve Lewit: From mom and dad.
Gabriel Lewit: From mom and dad. Okay. “Oh, we don’t need to save. We’re going to get a big inheritance.”
Steve Lewit: We’re going to inherit all this money.
Gabriel Lewit: Now let’s look at this from the lens of risk-taking, right? If you were to ask yourself, on that conversation with that client, if you were an advisor and you ask them, “What is the worst case scenario that could happen here?” What would that worst-case scenario be, under that example?”
Steve Lewit: Mom and dad get dementia and Alzheimer’s and spend through their money.
Gabriel Lewit: That could be one. Another could be they don’t pay the life insurance premiums, policy lapses.
Steve Lewit: Yep.
Gabriel Lewit: There could be others.
Steve Lewit: Sure.
Gabriel Lewit: In this case, what happened was mom and dad didn’t pay the life insurance policy premiums.
Steve Lewit: Oh, so life insurance. I’m sorry. Yeah. So they would get that money, but what if they don’t pay? Right. Exactly.
Gabriel Lewit: Mom and dad didn’t, policy lapsed. Clients found themselves nearing retirement with $80,000 to their name.
Steve Lewit: That’s right.
Gabriel Lewit: Inheritance they were planning on did not come through. So there’s so many examples of taking risks. You have to always assess both sides, but it’s important to go at that very pragmatically and really put yourself in that hypothetical situation. And it’s not being overly pessimistic or a worry wart or nervous Nelly. It’s about making sure that if the worst case were to come to pass, you are still okay. And I know you do this a lot in your plans, right?
Steve Lewit: Oh, sure. So, it’s always the question, if you lose this, are you going to call me and freak out or are you going to be okay understanding that that’s in your plan and you agreed to that? Yeah. Look, risk is hard to define ahead of the time, you never know how you’re going to feel.
Gabriel Lewit: Yeah. Can I give one other example?
Steve Lewit: Yeah, sure.
Gabriel Lewit: I had a potential client about three months ago. We were talking and he was invested heavily in QQQ. Okay? This is a high-growth tech stock fund.
Steve Lewit: Volatile.
Gabriel Lewit: Now, this is a very, very well over the last 12, 13, 14 years, but QQQ back in 2000, okay? Dot-com bubble boom, and then followed by a dot-com bubble bust. Okay. Lost almost, I believe, I don’t have the exact number, I think it was 75 to 80% of its value.
Steve Lewit: It was huge. Yes.
Gabriel Lewit: Massive. Okay? And he and I got to talking and he said, “Oh, QQQ is making 14% every year. Why would I sell this now?” I said, “Well, because it’s been making 14% every year for the last 12 years.”
Steve Lewit: 12 years. What about the 12 years before that?
Gabriel Lewit: And I said, “But what would you do if this thing lost… I mean, it did lose 75% of its value back in 2000. What would you do if this happened again?” He said, “Oh, that’s not going to happen.” I said, “Huh?”
Steve Lewit: Then you said to him, “Do you have that in writing with a guarantee on it?”
Gabriel Lewit: But again, it is that interesting mindset. I mean, I think we get so used to recent history that we sometimes forget that that’s not necessarily an indicator of exactly how something will perform. You’ve really got to pay attention to these, ask yourself what is the worst case? And even after I prompted him, I said, “But what if it did happen again?” Unfortunately, he said, “Well, I don’t think that’s going to happen.” He just kind of refused to accept that as a possibility. It’s very challenging.
Steve Lewit: Gabriel, you know what’s behind that? So, fear wants to stop you from making that investment. Fear says, “Don’t do it,” but greed says, “Hey, you might really win.”
Gabriel Lewit: Yeah. I don’t want to lose if this keeps going up.
Steve Lewit: Yeah. So when greed wins over your fear and it doesn’t work out, then you’re miserable and upset and you hate yourself and feel like you made bad decisions and you may not recoup the money.
Gabriel Lewit: Yeah. Now let’s talk about even more speculative investments. You can get something beyond, you talked a little bit about S&P already. The next layer up in risk, I mentioned QQQ. You could go another layer up with risk, let’s talk Bitcoin.
Steve Lewit: Yep.
Gabriel Lewit: Okay. Bitcoin has a lot of naysayers on it, but despite the massive fluctuations in volatility, up and down, massive amounts in the last five, seven years, it is up huge from a starting point, seven years ago. But nobody really knows what’s going to happen with cryptocurrencies. So if you invest in Bitcoin, what should you be willing to accept, not want or be happy with, but willing to accept if you were to invest into it?
Steve Lewit: So, I invest in it and I’m willing to accept losing most or all of my money. The worst thing that could happen with Bitcoin is that something happens with blockchain technology where it gets hacked, that whole thing falls apart. And now Bitcoin is worth nothing. And can that happen? I don’t think so, but if it did happen, whatever I lose, I lose and I’m okay.
Gabriel Lewit: Yeah. Another example would be individual stocks. A lot of people fall victim to, “Oh, Coca-Cola has been around for a hundred years. It could never go out of business.” But history’s littered with stories of individual stocks of big, steady companies that quote-unquote at the time could “never go out of business” that did. And so that is always something we’re trying to relay about the risks of individual positions is that they can go to zero. Big companies can go out of business.
Steve Lewit: Let’s make a list. Gabby, director Gabby, on our next podcast, let’s make a list of all the big companies that were never going to go out of business that went out of business. Okay?
Gabriel Lewit: Maybe not everyone.
Steve Lewit: Well, not every… There are tons of, but all-
Gabriel Lewit: I get, every single one of them.
Steve Lewit: It’s eye-opening.
Gabriel Lewit: It is. Yeah.
Steve Lewit: These are companies, people said, “Oh, they’re so good. They’ll never go out of business.” And they’re out.
Gabriel Lewit: They are. Yes. And funny enough, if you had asked those people at that time, “Oh, this company will never go out of business.” Again, it’s a refusal to imagine, I suppose, the worst-case scenarios or be willing to accept them for some crazy reason or another. All right?
Steve Lewit: Yup.
Gabriel Lewit: Now last but not least, we’re going to talk about… Now, I do think there are some concerns that do cross the line into, gosh, people that say, “Well, I shouldn’t invest my money because what if the US government goes under?”
Steve Lewit: Yes.
Gabriel Lewit: Okay. “What if the next apocalypse comes? I should have all my money stashed in cash in the backyard.”
Steve Lewit: Well, Gabriel, we gave a seminar last week and we had one person in the group. Every time I said something she said, “Oh, well the dollar could fall apart or the government could collapse.” You can’t handle, there’s nothing we can do about that. That’s the kind of person you’re talking about.
Gabriel Lewit: Yeah. Now, is that being risk-averse or is that something else, right? Where is that line? Because one thing to obviously be concerned about things and another where, look, if you say to yourself, I don’t trust the entire US financial banking system. I had a client ask me this. She’s like, “Where should I put my money? I don’t trust the… ” I said, “What are you thinking?” She’s like, “Well, I could put it in a different country.” I said, “I guess you could.”
Steve Lewit: Go ahead. It won’t be worth anything there. But if you really feel that way, that the government is going to collapse, that the money is going to be worthless, that this is really coming, then you buy a bunker and you stock it up. You buy your guns because people will come after you. Buy a ton of gold and you take your money and convert it into another currency, not a paper currency.
Gabriel Lewit: Yeah. So, there’s so much we could unpack about risk. We want to switch gears for a little bit at the end of our show here with a few listener questions. There’s a lot of other things, we can talk about how to protect your portfolio against risk as well. But I think that can be for a different show. Today is just about getting you thinking with these questions.
Let me give you these questions. What would be the worst-case scenario? How would my life change if that were to pass? In other words, if the person who went and took their paycheck to double it on black, if they lost that paycheck, are they going to get evicted from their home?
Steve Lewit: What would happen?
Gabriel Lewit: Right? That’s not good.
Steve Lewit: Will I get divorced. Will my wife or husband divorce me?
Gabriel Lewit: What potential remedies if that were to happen, do I have? Is that going to impact me further? And is the reward really worth the risk?
Steve Lewit: Or as a famous man once said, “Is the squeeze worth the juice?”
Gabriel Lewit: No.
Steve Lewit: “Is the juice worth the squeeze?” This is Gabriel’s. I got that one-
Gabriel Lewit: You got the famous man’s quote backwards.
Steve Lewit: “Is the juice worth the squeeze?” That makes a lot more sense.
Gabriel Lewit: And I can’t even take credit for it. I just took it from a movie. But I like it a lot. I like it a lot. All right, so if you’ve got questions on that, call us, 847-499-3330 or go to SGLfinancial.com or email us at info@sglfinancial.com along with who you thought the AGT winner should have been. Of course, we need to know that information. With our last five, six minutes here today, we wanted to talk about a couple listener questions that we promised we would get to because we’ve got a few of those trickle in.
Steve Lewit: We did promise.
Gabriel Lewit: So, Mr. Lewit, I know you had this jotted down in front of you.
Steve Lewit: I do.
Gabriel Lewit: Would you like to take us away?
Steve Lewit: Yeah. I’m going to take Linda here. She says, “I just got married last month. We’re both in our late sixties.” Congratulations, Linda. “Both lost our previous spouses to cancer… ” I am so sorry to hear that. “… within the last five years, and we both have three kids. We bring our own assets to the marriage, although he has more than me. How do we make sure that the kids inherit the wealth that he’s built over the years while also making sure that I’m okay financially if I outlive him?” That’s a great question. What do you think?
Gabriel Lewit: Well, you’ve got to do this little thing called estate planning. When we get into what we, complexities of estate planning. So some people have what I call simple estate plans. You’ve got three kids, you had one marriage, both your money’s going to go to each other if you pass and then go to the three kids equally.
Steve Lewit: Simple.
Gabriel Lewit: Simple, bing, bang, boom, done. Not so hard there. When you start bringing in divorces.
Steve Lewit: Two families.
Gabriel Lewit: Prior spouse’s assets, your assets, your new spouse’s kids, your old kids, who’s going to get what? Things get more complicated. And this is where you definitely need to have a game plan because if you don’t have a game plan, the default would be if you get remarried, you’ll probably list each other as spouses. You pass away first, hypothetically, all your money goes to him. He passes away, all his money goes to his three kids, and you may or may not be having your money go to where you wanted it to be.
Okay. And so that’s where you’ve got to enlist the help of an estate planning attorney. I really recommend obviously somebody nuanced and good at this type of work. We can make recommendations there, of course.
Steve Lewit: Sure can.
Gabriel Lewit: And then you set up the right trust to allow for that scenario. So you receive maintenance or income, and then whatever’s left from your trust goes to your kids or his trust goes to his kids. There’s so many ways or combinations. Really all you have to do is think of in plain English what you would like to happen. Give that to the attorney, they can draw it up in legal documents.
Steve Lewit: Yeah, they are married, by the way. So look, if you’re married, then depending on how your spouse’s funds are held, you may have a right to those funds legally and your spouse may not be aware of that and vice versa. So Gabriel’s point, you got to have a trust, which explains in detail where money goes as each person passes away or gets in a coma and stuff like that. It’s very complicated.
And the other part of it is to assure… This is the hard conversation, Gabriel, that a lot of people don’t have where one spouse says to the other, “You’ve got all the money. You’ve been more fortunate than I am. If you die, I am not going to do too well. And what are we going to do to fix that?” It might be buying a life insurance on the partner. It might be funding a special trust for the partner. I don’t know, but if it’s a good relationship, each partner wants the other to be okay when the other passes. So, that’s a hard conversation that has to be had.
Gabriel Lewit: Yes. But it does have to be had no different than asking yourself in some ways hard questions about risk on investments that you’re thinking. There are more difficult conversations of finances that you have to make sure that you go into depth on.
Steve Lewit: Yeah. So Linda, I think you’re on the right track. I have many more questions that I would ask you, but definitely find yourself a really good estate planning attorney. If you need a reference, give us a call.
Gabriel Lewit: Yes, indeed. Yeah. I know we’ve got another one here. We may only have time for one more, Mr. Lew, but we’ll see how we proceed forward.
Steve Lewit: Do you want me-
Gabriel Lewit: Yeah. Go ahead.
Steve Lewit: I’ve got Beth here. “My husband wants to work for another decade, but he’s already 64 and that sounds insane to me.” Well, Beth, I don’t agree with you there, but everybody looks at the world differently. “I think we have enough money for him to retire sooner, but he just wants to keep working anyway. Is there any point in debating this or should I just let him work forever? For the record, I prefer for us to be able to travel a lot.” Sounds like a marriage counselor.
Gabriel Lewit: Well, I was just going to say, it is money related, yes. But it may or may not really be money related.
Steve Lewit: It probably isn’t money related.
Gabriel Lewit: So, you could start by trying to have that conversation and explain why it’s important to you that he would not work another decade. And if it turns out that maybe he thinks you really need the money or maybe he just really enjoys what he does, maybe there’s a balance there.
Steve Lewit: Or maybe he’s afraid, a lot of men are afraid to retire because they say to themselves, “I’m worthless. What am I going to do?”
Gabriel Lewit: Well, he would travel with his wife.
Steve Lewit: But men like to do things that create things. And traveling for some men is just not rewarding. Speaking of me, for example.
Gabriel Lewit: You’re looking at me. I love travel, so I don’t know what you’re talking about.
Steve Lewit: I’m talking about myself. I mean, I like traveling, but I love building things and creating things. A lot of men like that and they think when they retire, “Then what am I going to do?” So it might be fear your husband has, Beth. Is it Beth, right? Yeah. Beth. It might be fear. It might be he thinks, like Gabriel said, you haven’t done a plan. So he says, “I got to work because we really do need the money.” There are a variety of reasons, so that’s a heart-to-heart conversation.
Gabriel Lewit: Yeah, I think you got to unpack that. If it turns out it’s because he really enjoys what he does and doesn’t want to lose that yet, you’ll have to have some further conversations about how do you balance that.
Steve Lewit: Yeah, and I’ll just say this, unless you and your husband are very good communicators, which in my experience isn’t normally the case, I would recommend that that conversation be held with a holistic financial advisor or somebody out of a field of therapy of some kind that can negotiate that conversation because it’s going to be a difficult conversation.
Gabriel Lewit: Maybe they have a great communication.
Steve Lewit: Yeah, I’m wishing them well.
Gabriel Lewit: I won’t go there.
Steve Lewit: We won’t go there.
Gabriel Lewit: With you, no. Anyways. Anyways, well that’s our show for today. Thank you so much for tuning in. We hope you, as always, enjoyed listening into our conversation here about all things money, finance or otherwise related. And if you have any questions, we’re here to help. Give us a call, 847-499-3330 or go to sglfinancial.com, click contact us. Or email us of course, info@sglfinancial.com and tell us who you thought the AGT winner should be. There we go.
Steve Lewit: That’s a must.
Gabriel Lewit: That’s the most important thing.
Steve Lewit: We must know.
Gabriel Lewit: All right, we’ll share that with you on the next show. Have a great rest of your day and week. We’ll talk to you soon.
Steve Lewit: Be well everybody. Bye now.
Gabriel Lewit: Bye now.
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