Money Mistakes to Learn From
by SGL Financial
Our 2 Cents – Episode #153
Money Mistakes to Learn From
Do you ever wish you could foresee financial missteps before they happen? On today’s episode of Our 2 Cents, Steve and Gabriel are exploring some real-life stories of regrets to help you learn from the mistakes of others. Then they’re answering a couple client questions they received this week.
- Money Mistakes to Learn From:
- Maybe I should have investigated opportunities for Roth IRAs
- I spent way too much money in my peak earning years
- I refinanced my mortgage too many times
- I retired too early and now it’s costing me
- I should have been safer with my investments
- I kept my kids on the payroll for too long
- Questions from Clients:
- “I have the option to renew my CD for one year for 5.25%. Should I do that? – James
- “How does all the economic and political stuff going on in the world affect me?” – Mary
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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 and financial news trends, strategies, and more.
Gabriel Lewit: Well, hello. Welcome to Our 2 Cents. You’ve got Gabriel Lewit, Steve Lewit, and producer Katie here with you today. How are you?
Steve Lewit: I’m good. Katie does the best countdown. She got this big smile on our face and she goes 3, 2, 1. They’re so cool. I wish you folks could hear Katie do a count. You want to do a live one, Kate?
Gabriel Lewit: Producer Katie doesn’t like-
Steve Lewit: She will not get on the…
Gabriel Lewit: Starring on the show. So it’s just going to be Mr. Lewit and Mr. Lewit for you here today.
Steve Lewit: Yes.
Gabriel Lewit: We hope you are doing well out there in Chicago land and surrounding states.
Steve Lewit: A little cool here today.
Gabriel Lewit: It’s a little chillier here, yep. Officially have got my fall jacket out of the closet.
Steve Lewit: I did mine too, yes.
Gabriel Lewit: Yep. And it is that time of the year.
Steve Lewit: It is that time of the year. Some sad stuff going on out there.
Gabriel Lewit: Well, yeah, obviously we can talk a bit about the impact of recent world turmoil and events on the markets and a little bit more about that, but of course…
Steve Lewit: I think we have a client question that actually asks that.
Gabriel Lewit: We do. But of course, it’s just terrible to see people getting killed. Crazy world that we live in out there and trying to make the best of our lives over here while that’s all going on over there.
Steve Lewit: You bet.
Gabriel Lewit: Let’s turn to what we’re going to focus on here today, which is learning from some money mistakes. If you’re like most people…
Steve Lewit: That assumes you made a mistake with your money.
Gabriel Lewit: I was just going to say, if you’re like most people at some point in the past, you’ve probably made a mistake.
Steve Lewit: Probably.
Gabriel Lewit: Most likely.
Steve Lewit: Most likely. And definitely.
Gabriel Lewit: And so have millions of other people, and we’ve seen many of those in action. We’ve seen the results of those mistakes manifest themselves 20, 30 years later. And part of our hope here today in sharing these with you is, can we learn from other mistakes that we’ve seen and hear about out there and avoid making those same mistakes for ourselves no matter where we are in our current stage of life?
Steve Lewit: It’s easier to see other people’s mistakes, Gabriel, than seeing our own. It’s like, “I don’t make mistakes, but Joe across the street, he bought that stupid stock, and I would never do that.”
Gabriel Lewit: One of the things about mistakes is you first want to recognize them and then you have the opportunity to rectify them and put yourself back on a better course of action.
Steve Lewit: Exactly. It’s interesting. I don’t think you learn anything from a mistake other than what not to do. But if you’re on a course that’s not working, and we’re going to go over the mistakes today, it does give you a pause to think and say, “Uh oh. What should I really be doing here? Because this is not working out for me.”
Gabriel Lewit: And some people really don’t learn from mistakes, so we’re here to hopefully help you not make that mistake of not learning from your mistakes. There we go.
Steve Lewit: That would be a mistake.
Gabriel Lewit: Yes. Super confusing.
Steve Lewit: Yes.
Gabriel Lewit: Let’s start talking about some of them here. And one of the first ones, I’m going to not go in any particular order here, but I hear this one a lot, is people that I see nowadays about to retire have said that they wish they had started investing in tax-free accounts like Roth IRAs way, way, way, way back when they were younger. And they regret that they have very little to no money saved today in Roth IRAs or other tax-free accounts.
Steve Lewit: Yeah, that’s a big deal. And even today, you have young people that are burying a lot of money into tax-deferred accounts and that may not be the wisest idea, if you look at what’s happened to people in the past.
Gabriel Lewit: It’s one of those topics where I don’t know why people don’t. I think there’s just a lack of understanding of the Roth option in particular and a lot of just autopilot, we call it, where you just kind of do and you don’t really think.
Steve Lewit: Younger folks are being, and we were too, not we, I was too, because you’re still a younger folk. You are.
Gabriel Lewit: I’m a middle folk.
Steve Lewit: You’re a middle folk. We’re being told put your money in 401K and tax deferred accounts, take the tax deduction now because in the future when you take the money out, you are going to be in a lower tax bracket.
Gabriel Lewit: I’m not even sure that a lot of younger kids just starting out in their first jobs even know that much. I think what happens is they just hit the default on the plan, which are the pre-tax options. How much do you want to deduct? 500 bucks a month or whatever and 10% or who knows what the number is, and then what option do you want? And the first one on the list is probably traditional. People just check that off. “Roth, what is that?” Obviously I’ve heard that word a couple thousand times at this point, so I know, but I think if you’re just fresh out of school and you’re “Roth, what’s that?” And you just check traditional pretax.
Steve Lewit: Even while sometimes into your thirties, you still don’t know about it. So what to do?
Gabriel Lewit: Well, what to do is never too late to start. And in fact, one of my classic is actually a follow-up to this, if I’ll call it a part one and part two to this mistake. The second mistake that I see all the time, all the time, is somebody that qualifies not for a Roth 401K or pretax, we’re talking outside your 401Ks, to put money into a Roth IRA. And they have the opportunity every year. They’re under the income requirements, they’re sitting on a lot of cash, and they miss the opportunity to put that cash into the Roth IRA. And it is such a wasted opportunity.
Steve Lewit: They just forget to do it.
Gabriel Lewit: And here’s what I mean. Let’s say you qualify income-wise, you’re under the income threshold, which I think is $218,000 for married filing jointly. And you have, I’m just going to say $50,000 sitting in your bank account and you qualify for the Roth IRA, and lo and behold, you just get busy with your lives. You forget and you miss the window for 2023 to contribute to your Roth IRA, which by the way, you have until tax time of next year. Here’s the problem. You can’t go back to prior years and re-add that later if you realize that you missed it.
Steve Lewit: Can’t make it up.
Gabriel Lewit: Cannot make it up.
Steve Lewit: Yes.
Gabriel Lewit: The problem with that is it’s a once-a-year opportunity to hit that window and if you miss it, it’s gone forever. But here’s what’s advantageous about that. If you take, let’s say it’s $7,500 per person, and that depends on your age, it’s a little lower if you’re a little younger. You get a catch-up if you’re a little older. You could put away between you and your spouse $15,000, 100% forever tax-free. Now, if that money is already in your checking account, you’ve already paid taxes on it’s already sitting there. You’re just moving it from your checking account into a Roth IRA. Even if you left it in cash inside of a money market or account in your Roth IRA, it’s the exact same investment choice. You’re still in cash, but you now took advantage of that opportunity to move it into forever tax-free. If you don’t need the cash now you can choose to invest the money and it’s in your Roth IRA. People miss this all the time.
Steve Lewit: All right, so now what we need to clarify, I don’t think we really clarified, is why that’s a mistake not to take advantage of a Roth.
Gabriel Lewit: I think we clarified that.
Steve Lewit: We did?
Gabriel Lewit: Well, the mistake is if you miss the opportunity, you can never go back and retroactively make up for it.
Steve Lewit: Okay, but why should I have all my money in the Roth if everyone’s telling me I’m better off putting it into an IRA and taking it out when I’m in a lower tax bracket?
Gabriel Lewit: In this case, I’m talking about money that’s already been taxed. It’s just sitting in your checking account. It’s easy, right?
Steve Lewit: We’re talking about, I think, two different things.
Gabriel Lewit: We might be.
Steve Lewit: We are.
Gabriel Lewit: We can move on to-
Steve Lewit: Mine is better.
Gabriel Lewit: Take point then, my friend.
Steve Lewit: Folks, look, what Gabriel is suggesting is you have cash get it into a tax-free account, which absolutely, 100% you should do. The other question is, if I already have an IRA, or I have a choice in my 401K of putting it into an IRA, which is tax-deferred or putting it into a Roth, why is it a mistake to put it into the tax-deferred rather than the Roth?
Gabriel Lewit: Because this all started about people having regrets about not having tax-free money. The mistake is that you’re later on in life and you’re in higher tax brackets and you have no tax-free money.
Steve Lewit: Exactly. Because the idea that you’re going to be in a lower tax bracket later in life is just an idea. It’s not true.
Gabriel Lewit: I’ve got an analogy for you. You know me, I love analogies.
Steve Lewit: Uh oh. I love them too.
Gabriel Lewit: If you never plant seeds, will you ever be able to harvest the crop?
Steve Lewit: That’s a great analogy about…
Gabriel Lewit: You’ve got to put money into the Roth to be able to harvest the tax-free money growth from it much farther down the road.
Steve Lewit: Especially if taxes grow up.
Gabriel Lewit: If you never put any money in, you’re never going to get any money out.
Steve Lewit: And it’ll all be taxable.
Gabriel Lewit: It’ll all be taxable, yeah.
Steve Lewit: Maybe at higher rates.
Gabriel Lewit: Yes. Okay, so that’s our first mistake. Mr. Lewit?
Steve Lewit: Yes.
Gabriel Lewit: Would you do us all an honor here and pick our next mistake that we would like to learn from here today?
Steve Lewit: Yeah. I spent too much during my peak earning years.
Gabriel Lewit: Ah. Never seen this before.
Steve Lewit: Never seen this before. Never went through it before.
Gabriel Lewit: Yes, yes.
Steve Lewit: You’re going through it now.
Gabriel Lewit: I do my best not to spend too much and make sure I’ve got enough save for the future, regardless. What’s the mistake here? The mistake, I’m assuming, because we hear this from people and pretty much what they tell us is “I wish I had more saved up at this stage of my life for retirement.” And the reason they don’t have this much saved, or as much as they’d like to have saved, is that they spent too much instead of saved.
Steve Lewit: And it’s really hard because when you’re in your peak earning years, you’re also probably in your peak expense years. Folks, if you’re a little bit older, like I am, our kids are going through… Gabriel’s my son, and he’s going through that now. He’s earning well, but you have expenses through the roof with three children and school and nursery care and help and buying a house and refurbishing the house. It’s really, really hard to save during those years.
Gabriel Lewit: It’s tricky. I try to put my money where my mouth is. I do have my savings first. 401Ks maxed, I’ve got some tax-free life insurance I invest and save in, I’ve got other investments that I earmark money to. That’s the challenge is a lot of people, though, they don’t do that. They do the spending first, and then they figure out if there’s anything left to save after the spending. That’s where if you can reverse that… No one’s saying don’t spend during your peak earning years, you just don’t want to have that regret 20 years later that you didn’t save enough for the lifestyle that you’re looking for.
Steve Lewit: And it’s interesting because the idea is that everybody should be able to save something, but some people are really on tight budgets. They earn, they work hard. They’re not huge earners, but they’re diligent, and the expenses keep coming in.
Gabriel Lewit: In this particular example is people that probably had the money to save, but they chose to-
Steve Lewit: But they didn’t.
Gabriel Lewit: They chose to do other things. Buying-
Steve Lewit: Had to go to that football game.
Gabriel Lewit: Buying nicer clothes, keeping the highest new cars in their driveway, whatever the case might be.
Steve Lewit: It’s called having fun.
Gabriel Lewit: The problem is you can certainly do that, but if it feels hard to save more now, then when you push that back, let’s say you’re going to start saving in your fifties instead of your thirties, you’re going to have to sacrifice way more to get caught back up in your fifties if you start saving then, versus if you start saving consistently in your thirties, forties, and then fifties.
Steve Lewit: Yeah. If you’re a parent, you’re diligent, you might’ve been diligent in your savings and you’re looking at your kids and… I had a client in yesterday, “My son is 30, 32 years old, earns a good living.” She says, “I can’t get him to save anything.”
Gabriel Lewit: That’s very common.
Steve Lewit: It’s very common. And what’s going to happen is that person’s going to, or somebody like him, is going to show up at our door at about 50 years old to your point, and they’re going to say, “Hey, I’m going to retire in 10 years. I got nothing or very little.” And now they, over those 10 years, really have to work hard to save money, which will probably impact their lifestyle.
Gabriel Lewit: Exactly, exactly. We got a couple more here for you today. The next one here… Hopefully you find these helpful. The idea here is if any of this resonates with you so far, we talked about having taken advantage of Roth IRAs, maybe you’re earning good money and you’re spending too much, feel like you’re behind on your savings. These are the opportunities to self-reflect. And then if you recognize that in yourself, you can take action to implement some of the suggestions we made here.
Steve Lewit: And what action would you suggest they take?
Gabriel Lewit: For which one?
Steve Lewit: For any of them.
Gabriel Lewit: Well, we’ve talked about-
Steve Lewit: This is an opening for solicitation of our services.
Gabriel Lewit: Well, you could, of course, call SGL Financial if you’ve got questions of any kind. We’re always here to help.
Steve Lewit: There you go.
Gabriel Lewit: Here at (847) 499-3330.
Steve Lewit: Good job.
Gabriel Lewit: Or go to SGLFinancial.com. You can always do the advertisement, if you’d like to.
Steve Lewit: That was a great lead in, I must say myself.
Gabriel Lewit: All right. How about our next one here, which is I have heard regrets from people that have, basically, they’ve refinanced their mortgage so many times that by the time they get to retirement, they still have like 27 years left on their mortgage. Now, obviously right now, refinancing isn’t the hot buzzword it was two years ago, but it’s just something I had to put it on the list here because I see it a lot. Let’s say rates come back. Maybe you’re buying a mortgage today and it’s at 8% or 7.5%. It’s high. And in a year, two years from now, rates drop and you feel the opportunity presents itself to refinance. And you’re two years or three years into your 30-year mortgage. Now what are they all pitching you on when you go to refinance?
Steve Lewit: You’re going to have a lower monthly payment.
Gabriel Lewit: Lower monthly payment.
Steve Lewit: And what the idea of having a lower monthly payment is to save money, but most people that have a lower monthly payment take that extra money and do what, Gabriel?
Gabriel Lewit: They spend it.
Steve Lewit: They do.
Gabriel Lewit: And what they’ve done is they then re-extend to get the ultra-lowest monthly payment they can, they restart the 30-year clock on their mortgage. And I had a client once that told me that they had refinanced no less… And this makes sense because interest rates were dropping quite a lot over the last 30 years, but they had refinanced and kept pushing back to 30 years about seven times.
Steve Lewit: Remarkable. And then they wonder, “Why isn’t my house paid off?”
Gabriel Lewit: And I have a similar scenario, which is somebody adding a lot of debt really close to retirement where they were very close to paying off their home. They were almost debt free. And they made the decision to go and invest in a really big expensive house five years before they’re about to retire. And now they’re asking me, this was against my recommendations, but they’re saying, “I’m feeling like I’m going to have to work now till 70 to pay off this house that I took out.” Now, it was their dream house, and you can’t discount that. That’s important at some level. But I think more people end up realizing later on that, “Maybe it wasn’t worth it and I would’ve rather been more financially solid, versus taking on a huge amount of debt or having a huge amount of debt right before I’m about to retire.”
Steve Lewit: Exactly, yeah. Retirement… Your headset… I don’t know because I’m not retired, but from the clients, their headset changes. They don’t want any debt. They don’t want to have that burden. All they want to know. Most retirees, I think they just want to know, “Hey, I’ve got enough income. All my debts are paid. I feel free. I’m relaxed. My house is paid for. I can live in there for the rest of my life and I don’t want the debt.” But then they turn around, they got 30 years of debt and it’s like, “What do I do now?”
Gabriel Lewit: That’s a tough spot to be in.
Steve Lewit: It is.
Gabriel Lewit: And I will say, especially if you don’t have a lot of extra income and savings is tight for you… Hopefully, if you’re listening to this and you’re 15, 20 years away from retirement, aim to pay that thing off before you retire. Because if you have not a lot saved up, but you do have your house paid off…
Steve Lewit: Or not a lot of income in retirement.
Gabriel Lewit: It’s such a different story. And I do have some clients that they don’t have a lot of income and they still carry that mortgage and they’ve got mortgages and property taxes and HOAs and their… Money’s tight.
Steve Lewit: They’re living for the house.
Gabriel Lewit: And if that house had been paid off, it could be a total game changer.
Steve Lewit: Definitely.
Gabriel Lewit: That’s one of the things I hear a lot later on, is regret about that house not being paid off. Whether it’s not getting yourself back into debt near retirement, not refinancing to continue to push that out, or just timing everything so you’ve got that paid off right before you retire, that’s such a huge thing to learn from other people that are already there.
Steve Lewit: And you brought up the next point that I wanted to talk about is, “I’ve got all this debt and I retired and now I’m thinking I retired too early because I don’t have enough money to really support myself the way I want. I am worried about spending money all the time because I think I retired too early.” And folks, we meet people and that is a mistake that they make, that they actually do retire too early, where if they had worked an extra two, three, or four years, their life would be totally different.
Gabriel Lewit: That’s one of those balancing acts, because the opposite end of that is you retire too late. We don’t hear that too often. Usually people that work later-
Steve Lewit: The ones that retire too late usually are not here, so they can’t tell us.
Gabriel Lewit: I will say, most of the time people retiring later is just because they need the money. But there are people that retire too soon that then realize, “I should have worked a couple more years.” And that’s one where obviously, when you get to that point, we can help you analyze that. Big time. The numbers-
Steve Lewit: We do it all the time. I had a client last week, we ran three. She really does not like her job. And she said, “What if I retire today?” I said, “Let me burn the numbers.” “What about two years from now? What about four years from now?” So we just ran all the numbers and she could retire today and be well and have the lifestyle she want. And that gave her so much relief that she could walk out of her deal anytime she wants. She’s not married or locked into it, because she was thinking she had to work, where she doesn’t. It gives you a lot of freedom to have a plan and run through those different scenarios and see where you’re at.
Gabriel Lewit: Yeah. Wouldn’t you just want to work forever, though?
Steve Lewit: Yeah, I do. Now, Gabriel, if people want-
Gabriel Lewit: I know some people like that.
Steve Lewit: If people want to get scenarios like that, where would they go?
Gabriel Lewit: My goodness, I think they would go to SGL Financial, and they would call us at (847) 499-3330.
Steve Lewit: How am I doing on the lead in?
Gabriel Lewit: Oh gosh, you’re doing excellent.
Steve Lewit: This is turning out to be a massive advertisement.
Gabriel Lewit: Well, you’re doing a great job.
Steve Lewit: Thank you.
Gabriel Lewit: How about one last one here, or maybe two? We’ll see. We’ll see if Steve wants to pick one last one. But I do want to talk about some listener questions.
Steve Lewit: Yeah, I’d like to.
Gabriel Lewit: Here is one that I hear regularly, right about now, actually. This last few months here of this year. But even just in general, I’ve heard it multiple times in my career, which is “I probably should have been a little bit safer with my money.” And here’s what I mean by that-
Steve Lewit: Especially as I got older.
Gabriel Lewit: We provide options for our clients when we are first building and designing a plan. We provide safer options, we provide medium options from a risk perspective, and we provide aggressive options. And it’s interesting because I have a handful of clients that, a couple years ago, we suggested they be a little more conservative and they said, “No, no, no. Market’s doing great. We love the stock market. We’re going to stay in the stock market, and we’re okay with the risk that we’re going to see. We understand. It goes up and down.” And then fast-forward two years and the market’s been down now for a year and eight months or nine months, and they’re saying, “Maybe I should have been a little bit more conservative.”
Steve Lewit: “The market actually went down, and we don’t like that. Why am I losing money if the market went down?”
Gabriel Lewit: “I really wish I hadn’t been losing money.” Here’s what I mean. It can be really hard for us humans to do this, but if you can pretend and imagine yourself in a future scenario where you’re looking at your investment dollars and you’re saying, okay, my million dollars is now $800,000. Truly try to imagine how you’re going to feel in that scenario. And if you say to myself, “No, I don’t think I would like that,” then listen to that response that your hypothetical future self would give to you, and then build a plan that’s going to be truly reflective of your risk tolerances in the future.
Steve Lewit: Because you might say today, “Oh yeah, I can live with that. I know it’s going to come back. The market has been good and it always does.” But then in that moment, when you look at your statement and it says $800,000, it’s like, “Oh my God, I just lost 200 grand.”
Gabriel Lewit: It’s not just that. And then six months later it’s up and then it’s back down again.
Steve Lewit: Back down again.
Gabriel Lewit: Then six months later it’s up and it’s back down again. And then you start saying, “Is this ever going to get back to… Like, yeah, I was okay losing 20%, but I thought it’d be back by now.” You’ve got to imagine yourself in these future scenarios to help you assess really how much risk is the right choice for you before you’re in it.
Steve Lewit: You might test for one risk profile, but then when the reality hits you, you might find you have a very different risk profile.
Gabriel Lewit: Happens a lot.
Steve Lewit: A lot.
Gabriel Lewit: We do our best to, I don’t know, sense who you are as an investor, I guess, and try to position you regardless of what you’re saying, more so on what we hear and see from our conversations with you.
Steve Lewit: Because at the end of the day, we all want peace of mind. We know you folks out there want peace of mind. And if you are in the wrong risk profile, even though you might test for one, if you’re in the wrong risk profile, that peace of mind is very elusive.
Gabriel Lewit: Indeed.
Steve Lewit: Indeed.
Gabriel Lewit: Surely.
Steve Lewit: Surely.
I haven’t used “surely” in a long time. I’m going to do one more real quick here. Because this happens so often, keeping the kids on the payroll too long. Have you seen that?
Gabriel Lewit: My kids are young and they’re still on the payroll, so I guess it hasn’t been too long yet, for me.
Steve Lewit: But imagine you’re a parent and your kids are still on the payroll, and they’re 32 and 34 years old.
Gabriel Lewit: That’s probably too long.
Steve Lewit: That’s probably too long, yeah. This is-
Gabriel Lewit: Baby bird’s got to leave the nest at some point.
Steve Lewit: Yeah, you would think. It’s significant because what I find is parents love their kids, and their kids are having trouble. They can’t keep a job or they can’t find a job or they don’t want to find a job or whatever, and they just support them. How would you counsel someone like that?
Gabriel Lewit: Baby bird’s got to leave the nest at some point.
Steve Lewit: But emotionally, it’s really hard.
Gabriel Lewit: Of course, if you’re Mama Bird and you’re looking at pushing your little baby bird off of this nest, so they might fall to the ground at risk of them getting hurt. You want to protect them from getting hurt, so you leave them in the nest.
Steve Lewit: Which really hurts them worse.
Gabriel Lewit: Which hurts them worse because then baby bird never learns to fly.
Steve Lewit: Or feed himself.
Gabriel Lewit: And it’s one of those things, as parents, you can struggle with, but at some point, you’ve got to get yourself… Obviously, you want to make sure you feel that they’re ready and prepared to tackle that.
Steve Lewit: They may not… Well, if some 30 years old, when are they ready? I must admit, I’m really tough on people that come in and tell me their kids are still at home. I just don’t… It’s like, “No, tell them to leave.”
Gabriel Lewit: Other cultures, man, it’s normal. But not so much here in the US.
Steve Lewit: Not here. Too productive.
Gabriel Lewit: Okay, well, our friends out there, our listeners, we hope that that was helpful. And once again, these are things that we’ve seen, we’ve experienced, we’ve talked to people, we’ve heard their regrets shared later in life. And let’s see if any of these can be helpful and valuable for you in changing your ways sooner rather than later, so that you feel like you’re making the right choices.
Steve Lewit: Or helping your kids do the same.
Gabriel Lewit: Yeah, exactly. If you’ve got questions on that, this is where I would say…
Steve Lewit: I didn’t give you the lead in.
Gabriel Lewit: Yes, this is where I would say, give us a call.
Steve Lewit: Gabriel, if they have questions, what should they do?
Gabriel Lewit: They should give us a call at (847) 499-3330 or go to our website, of course, SGLFinancial.com, and we would love to chat with you at any point in time.
Steve Lewit: Let’s get to some listener questions.
Gabriel Lewit: Yes, we’re not done yet, folks. We have some listener questions. Now, some of these are also client questions. In other words, sometimes people write us, other times we just take questions that we have from people in our actual meetings and we share them here on the show. And these are real questions that come from real people just like you. And our goal here is that you can maybe relate to these. And they’re little tidbits here, of course. Our first question comes from… Hold on, hold on, hold on. I changed the names for privacy purposes here, but we’ve got James. James recently asked me, “I’ve got a CD offer for five and a quarter for one year. Should I go ahead and pull the trigger on that?” His CD was coming due, and he had an option to renew it for one year for 5.25%. And should he renew that CD for one year was James’s question.
Steve Lewit: Let me think about that.
Gabriel Lewit: What say you, Mr. Lew?
Steve Lewit: Well, what’s say me is, yeah, why not? That’s a pretty good rate of interest. My question would be, why don’t you go out longer term? Because interest rates right now are starting to stabilize. They won’t go down at least for another year, in my opinion. And they probably go down in 2025 and they’re going to start heading downwards.
Gabriel Lewit: One year is kind-
Steve Lewit: One year is okay, but then when you go to renew a year from now, that 5.25, five and a quarter, might be four and a quarter or four. So why not go out three, four, or five years? You can lock in a rate of 5.6% for five years right now.
Gabriel Lewit: 5.75%.
Steve Lewit: 5.75%. And that’s a great rate. In some ways, that might be better than the stock market.
Gabriel Lewit: There’s different things here I think that come into play. And James, what you want to focus on is exactly what Steve said. Do you need this money in one year? If you do or if you don’t, one year, you might be safe. If rates might come down prior to that, you could lose a couple 50 basis points, half percent, in other words, maybe when you go to renew that in a year. It shouldn’t be too bad. But next year, for sure, a lot of people should be looking at locking in longer terms because if rates drop by two points, then your 5.25% CDs might only be offering 3.25%.
Steve Lewit: If you’re really conservative, you could lock in a 10-year rate at what, Gabriel, six?
Gabriel Lewit: Six, yeah.
Steve Lewit: 6%. Vanguard’s prediction of the stock market over the next 10 years.
Gabriel Lewit: Four to 6%.
Steve Lewit: Is four to 6%. So as far as Vanguard is concerned, if you locked in 6%, you probably beat the market.
Gabriel Lewit: But we all know in most humans don’t do that because of the other side of our brain, which is-
Steve Lewit: Well, we hope to get more, sure.
Gabriel Lewit: We hope to get more, yeah.
Steve Lewit: Of course.
Gabriel Lewit: That was our question from James. James, hopefully that helped. Let’s see. Dad, I know you said you had a question here from Mary. This was recent. How do all these world events that are happening impact us? And I believe she meant… I’ll let you clarify because it was your client.
Steve Lewit: It actually came up at a seminar I was giving, and we spent almost the entire seminar talking about the events of today. Well, you think about-
Gabriel Lewit: We have a couple minutes here, so we can’t-
Steve Lewit: Yeah, I know. I know.
Gabriel Lewit: Talk about it for 30 minutes.
Steve Lewit: I won’t. I know. Thank you.
Gabriel Lewit: Just gives you a little-
Steve Lewit: My son is watching over me, folks.
Gabriel Lewit: Well, I’m looking at the clock and we’re running towards our time.
Steve Lewit: Real quick. What’s going on today? We have two wars, we have inflation, we have political mess, we’ve got rising interest rates still. We have, I said two wars, right?
Gabriel Lewit: You did.
Steve Lewit: What didn’t I say? National debt is through the roof, the interest on the national debt is through the roof, and that’s what we have. We have a country that is doing okay economically, international’s not. China is doing a little better, but they’re in terrible shape. Russia’s in terrible shape. When you have all of this going on and your money has to last, or you’re growing your money for retirement and it has to last 30 years in retirement, the question was, “How does that affect me?” Well, it affects you because there’s market volatility. Where do you invest your money? What’s the best place? Where do you get a balance of safety and growth? How can you isolate yourself financially from all of these things that are going around? And that’s all what a plan is about. A plan is about isolating myself from the difficulties I might face and then having enough room in the plan that if something comes up out of the blue, the plan can adjust for it.
Gabriel Lewit: To paraphrase, and maybe put a bow on this here for today-
Steve Lewit: Bow me up.
Gabriel Lewit: Is yes, these things will impact you, most notably in forms of markets, economy, volatility, risk. But the best way to navigate through all that uncertainty is having a plan.
Steve Lewit: It’s like going down the rapids. Have you ever gone down the rapids in…
Gabriel Lewit: I’ve been on rapids. They were mild rapids.
Steve Lewit: Yeah, but there’s a plan, because they know where the rocks are.
Gabriel Lewit: I think we just bounced off of rocks. I don’t think we were really navigating too well. But they were mild rapids.
Steve Lewit: Well, let me ask you, were you a do-it-yourselfer or did you have a guide?
Gabriel Lewit: No, this was a DIY raft.
Steve Lewit: There you go.
Gabriel Lewit: But it was mild enough rapids that we were probably going to survive either way.
Steve Lewit: Yeah, but if they were… You know what I’m saying? The point is-
Gabriel Lewit: By the way, I like your analogy, there. That was a good one.
Steve Lewit: Yeah? Thank you, thank you.
Gabriel Lewit: Well, our friends, we hope that you had a good time here joining us here today on our show. That’s Our 2 Cents here from Mr. Lewit, G Lewit, and Mr. Lewit, S Lewit. And we are wishing you and yours a very wonderful happy week and weekend. And stay well, and we will talk to you on the next show.
Steve Lewit: Stay well, everybody. Be safe.
Gabriel Lewit: Bye now.
Steve Lewit: Bye.
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