Wish Upon a Roth
by SGL Financial
Our 2 Cents – Episode #193
Wish Upon a Roth
Welcome back to Our 2 Cents with Steve and Gabriel Lewit! On today’s episode, the hosts share the most recent updates on the Fed, market trends, and key post-election takeaways. Then, they dive into some more top-of-mind financial wishes and review the current landscape of Roth conversions. Listen in now using a link below!
- Gabriel’s ‘Quick Hits’:
- Explore the potential market impact of the recent Fed rate cut and what key insights to keep in mind as Trump takes office.
- More of Our Financial Advisors’ Wishes:
- We’re adding more wishes to the financial pros’ wishlist with some fresh perspectives and strategies for listeners.
- It’s Roth Conversions Season!:
- Discover if a Roth conversion is still a smart move for your portfolio as we evaluate the trajectory of tax rates.
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Podcast Transcript
Announcer: You’re listening to Our 2 Cents with the team from SGL Financial. Building wealth for life. Steve Lewit is the President of SGL Financial and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.
Gabriel Lewit: Welcome everybody to Our 2 Cents. You’ve got Gabriel Lewit here, you’ve got Steve Lewit, you’ve got technical issues with the volume of our headphones.
Steve Lewit: They’re not technical issues. Director Katie was turning the knob and your voice got louder in my ear and you said that was impossible.
Gabriel Lewit: Well, we fixed it. Okay.
Steve Lewit: Yeah.
Gabriel Lewit: Good fun with technology, right? Always?
Steve Lewit: Always.
Gabriel Lewit: Always.
Steve Lewit: I love technology.
Gabriel Lewit: Funny enough, over a hundred… We’re now at 194 episodes. We’ve had very few in general technological glitches.
Steve Lewit: We’ve never done this exercise before. It’s the first time.
Gabriel Lewit: Well, I think only one show at 194 episodes where we accidentally somehow it stopped recording halfway through. Yeah, so generally speaking, these have gone pretty smoothly, which we’re very proud of here.
Steve Lewit: Yeah, they have.
Gabriel Lewit: We are technical masters.
Steve Lewit: Can I tell you what I’m really upset about?
Gabriel Lewit: You can certainly…
Steve Lewit: It has nothing to do with this.
Gabriel Lewit: As long as it’s appropriate.
Steve Lewit: What do you mean? What does that mean?
Gabriel Lewit: Oh gosh.
Steve Lewit: Yeah, so guess what? There’s going to be less snow this winter.
Gabriel Lewit: What’s wrong with that?
Steve Lewit: I love snow. You don’t remember. When I grew up, when I was a kid, we used to get these snow falls up to halfway up the light pole. They were fantastic and it’s been getting less and less with global warming and now they’re predicting less snow than ever for this country and this area is not the worst. We’re going to just have like 15 or 20% less, but some areas are going to have substantially more snow this winter, less snow this winter, and that’s very upsetting to people who like snow.
Gabriel Lewit: Well, do you like snow?
Steve Lewit: I love snow.
Gabriel Lewit: Yeah. Out here I’m kind of a snow averse because there’s not a lot to do with the snow.
Steve Lewit: Well, but you are a snowboard instructor.
Gabriel Lewit: I do like snowboarding, but the snowboarding here is kind of meh. Well yeah, so I think that’s good news for us this winter. Bad news if you like snow. But I’m very happy about that news, so thank you. Where did you hear that?
Steve Lewit: I read it this morning on Axios.
Gabriel Lewit: Well, it makes sense because it’s been very warm so far. It’s not felt like the middle of November to me.
Steve Lewit: Not at all. It did get cold all of a sudden.
Gabriel Lewit: Just a little bit colder. Well, a couple quick hits for you here, folks. Updates, Federal Reserve, we mentioned this, lowered interest rates. That’s of course the news to keep tracking, we’re not going to talk much more about that, but in case you were wondering, they did lower interest rates, 25 basis points.
Steve Lewit: To my surprise.
Gabriel Lewit: I said it last time, right?
Steve Lewit: You did. You were correct.
Gabriel Lewit: So, we’ll continue to keep you posted on that. Again, what does that mean? Your bank accounts CDs, your interest you’re going to earn is going to keep dropping a little bit at a time. Market is up.
Steve Lewit: Market is way up.
Gabriel Lewit: Continuing to have… Had one of its best weeks in a long time.
Steve Lewit: Booming along.
Gabriel Lewit: I’d like to just of course put out that little asterisk there. That’s probably not going to be… Just don’t keep expecting to go up forever, folks. That’s all I’m going to say. You all know that.
Steve Lewit: Yes. And folks, we do not know when it’s going to go down.
Gabriel Lewit: Yes.
Steve Lewit: So please do not call and ask.
Gabriel Lewit: Because that’s the follow. Well, when’s it going to go down? When should I sell?
Steve Lewit: That’s the next phone call we’re going to get. So when is it going to go down, Steve?
Gabriel Lewit: Yeah. So again, keep in mind going up is good. We all want that, but make sure your plan is planning ahead for at some point a pullback.
Steve Lewit: Yeah. And if you’re concerned about a pullback, then you need to have a discussion with us or somebody about de-risking your portfolio a little bit.
Gabriel Lewit: Yeah. Well maybe, right? Here’s an interesting… We talked about on a couple of podcasts ago about the articles that we’re talking about a lost decade from Goldman Sachs and a few other things. Somebody came out with a rebuttal article against the Goldman Sachs article talking about why you should stay invested in stocks, but it wasn’t really quite a rebuttal. In other words, the point is, even if there is a lost decade ahead where you’re going to earn 3% or 4%-
Steve Lewit: Or less.
Gabriel Lewit: Stocks over the last 24 to 25 years, what have they returned? They’ve returned about 8%. So even including the lost decade of the 2000s. So the point is, what else could you be in for the next 25 years, assuming you’re a long-term investor mindset, which we will talk about just for a second? What else would you be in that would beat 8% over the last 25 years, other than an even more aggressive asset class potentially?
Steve Lewit: I don’t think there-
Gabriel Lewit: Or an even more aggressive individual stock. Some things have-
Steve Lewit: Well, you’d have to take more concentrated risks to do that.
Gabriel Lewit: Correct. And pick the right holding. But the point is, yeah, so there can be lost decades, but it doesn’t mean you should abandon stocks, especially if you are a younger investor.
Steve Lewit: Yeah, I was just going to say, older investors will say but.
Gabriel Lewit: But. I think that is where you are in your… So when you read articles like this, you have to always add onto that, but where am I in my planning journey?
Steve Lewit: That’s correct.
Gabriel Lewit: Because if you’re 75 and you don’t have a 25-year time horizon necessarily, or low likelihood of that, you just may not want to go through that kind of roller coaster.
Steve Lewit: Or you may not care. You could be the kind of investor that says, “Look, if it goes up, it’ll go up. If it goes down, I’ll live with it, but I know long-term whether I’m here or not, it’s going to be fine.”
Gabriel Lewit: Yep. Now what else we can unpack about this is what’s happening with the market. Cryptocurrency is up.
Steve Lewit: Crypto is Bitcoin.
Gabriel Lewit: Doge.
Steve Lewit: Doge.
Gabriel Lewit: This isn’t political per se, but Doge is a favorite of Elon Musk.
Steve Lewit: Yes.
Gabriel Lewit: It’s one of… He’s a Shiba Inu guy and Doge has a Shiba Inu on the coin, right?
Steve Lewit: This is all cryptocurrency, folks.
Gabriel Lewit: This is all… You’re right. No, people would really argue what’s the point of Doge? And I would somewhat agree with that. However, Elon likes it. Elon’s going to have a role now in Donald Trump’s presidential cabinet or department or something, which they’re calling the Department of Government Efficiency, which has the acronym-
Steve Lewit: Which by the way, has the acronym of Doge.
Gabriel Lewit: Doge. I just thought it was funny.
Steve Lewit: It is funny.
Gabriel Lewit: It might be a part of why Doge has essentially 3x’d itself over the last week.
Steve Lewit: Yeah. This was worth like a penny and now it’s worth-
Gabriel Lewit: Well, it’s worth 8 cents four months ago-
Steve Lewit: Now it’s worth 40 cents-
Gabriel Lewit: And now it’s up to 40 cents. But again, I would still think something like Doge is highly speculative. Now, Bitcoin is also up. Now Bitcoin, I’m a bit more of a believer in for a small, risky, concentrated piece of your portfolio. That is reaching all time highs as of this morning, it’s up at 92,000.
Steve Lewit: Yes.
Gabriel Lewit: I think it was about a year or so ago, it was down to 20,000. So we’re talking substantial improvements in the price of Bitcoin. Now, why might Bitcoin and other cryptos be surging under Trump? Well, no surprise, he’s pro crypto, but why is he pro crypto? He wants the US to become a crypto powerhouse, and that could be a good sign long-term for people that are maybe on the fence about is Bitcoin real? Is Ethereum real? It may be something you do take another look at, again, for small pieces of your portfolio for added diversification. I’m not talking about huge swaths of your money.
Steve Lewit: No. You know I’m a believer in Bitcoin too and in crypto, and especially in the methodology behind it, blockchain methodology, which will lower transactions cost, which will do a lot for shipping. I mean, it’s an incredible area, but Trump’s position on this is that, as you said, the US should be the center of the crypto world. Now, folks, what that doesn’t mean that we’re going to have digital currency next year or that the dollar is going to lose its value or anything like that.
Gabriel Lewit: And it doesn’t mean that all cryptocurrencies are good.
Steve Lewit: It doesn’t mean that either.
Gabriel Lewit: So, you want to be very careful with a lot of the other things out there that at least in my opinion, have yet to really see a true use case. But I don’t understand a lot of the other ones out there either other than Bitcoin and Ethereum.
Steve Lewit: Maybe at some time we do a deeper dive into the whole crypto world because it’s really-
Gabriel Lewit: Yeah, it’d be an interesting topic, actually.
Steve Lewit: It’s very, very interesting and most people don’t understand it. I bring up to clients all the time, “Hey, have you ever thought of buying a little bit of crypto?” And they go, “Oh no, I wouldn’t touch that.”
Gabriel Lewit: A lot of people still feel that way, and it might be time to just suddenly start to learn a little bit more about that. They say even a 1 to 2 to 3% allocation as part of a diversified portfolio, you can gain some of the big advantages of that asset class, but minimize some of the risk and the volatility that it has.
Steve Lewit: And it is an asset class that most people ignore. I had a client… I think you told me this story about a client came in and said, “I always pick the best asset classes and that’s why I’m doing so good.” And you asked him, “Well, why didn’t you pick… Where’s the crypto? Because that’s the best performing asset class I think in the last 10 years.”
Gabriel Lewit: Yeah, it was a stumper for him for sure. I was like, whoa. Kind of to the point though is we don’t believe in market timing, but that’s a topic for a different day in a little bit more detail. Other quick hits, we had some comments about the egg recipes. Now this has nothing to do with the economy.
Steve Lewit: Nothing
Gabriel Lewit: Or the market. But everything to do with the quality of your eggs.
Steve Lewit: And your quality of your breakfast. Yes.
Gabriel Lewit: Leslie, one of our valued listeners here, wrote in a nice comment, Leslie said, “Just listen to your weekly podcast. I listen to it all the time and really enjoy it.”
Steve Lewit: Thank you.
Gabriel Lewit: “And I’ve learned some things along the way, so thank you.” Thank you, Leslie. We really do appreciate that. She was just going on to tell us she does prefer not the softer, slimy eggs-
Steve Lewit: Really?
Gabriel Lewit: Or soft-cooked or whatever. What are they called?
Steve Lewit: She likes the hard-
Gabriel Lewit: The slightly more firmer eggs, right?
Steve Lewit: Firmer eggs. Yeah.
Gabriel Lewit: So, it does go to show, everybody has a different opinion of what kind of egg that they really like.
Steve Lewit: Yeah.
Gabriel Lewit: I saw you staring out the window here.
Steve Lewit: Well, I’m sorry. They’re delivering the toy boxes.
Gabriel Lewit: Yes. Oh yes, we’re doing a Toys for Tots Drive. We do this every year, folks. You heard it here first. They are literally delivering the boxes as we speak.
Steve Lewit: And I get excited about that because-
Gabriel Lewit: Yeah, we love giving toys.
Steve Lewit: We love giving the toys away.
Gabriel Lewit: To the tots.
Steve Lewit: Yeah. Sorry for the distraction.
Gabriel Lewit: That’s okay. Well, anyways, Leslie was talking about she likes to cook her eggs in butter or even some bacon grease. So the recipes out there, lots of them, right? And some people just, they try all sorts of different things. Now, I did try just out of interest to follow the article that we sent, or we were talking about, the recipes it was talking about kind of to a T. So here’s what I did. I just want to report back.
Steve Lewit: You actually did this?
Gabriel Lewit: I did. I took five eggs, I threw them in my Ninja blender and I blended them in the Ninja, because it’ll whisk them up, right?
Steve Lewit: Yes.
Gabriel Lewit: Then I put just a little bit of the spray on the pan, first and foremost. I picked a nice medium-sized pan, not too small, not too large.
Steve Lewit: Not too small because small doesn’t work.
Gabriel Lewit: I heated it for a little on medium. Then I took some butter, a tablespoon of butter. I melted it in the microwave in a bowl. And then as it said, to pour it, once you start cooking the eggs, you pour the butter. I poured the butter in the eggs on the thing.
Steve Lewit: After they’re cooked a little bit.
Gabriel Lewit: Yeah, a little bit in the mix. And then just kept stirring it like I said, until… And then I actually turned the temperature down a little bit more and it was the weirdest looking concoction, and it was all frothy and whatever. But when they finally cooked, they were actually really good. I would say these were my best eggs I’ve ever personally cooked.
Steve Lewit: I did not-
Gabriel Lewit: And I gave them to my kids, and I said, “What do you guys think?” They said, “They taste the same to me.”
Steve Lewit: Yeah. I did not get an invitation to see this event.
Gabriel Lewit: Oh, this was ad hoc. This was not a big event.
Steve Lewit: All right, so I had a client come in yesterday and she says, “Oh God, Steve, I forgot.” I said, “What did you forget?” “I was going to buy you a pair of chopsticks for your eggs.” So I think that was very popular.
Gabriel Lewit: I’m going to try that one next. I’m going to try the chopsticks next.
Steve Lewit: So maybe we should do a menu item every podcast.
Gabriel Lewit: Not every podcast. I actually, funny, I already have our next one picked out. I’m not going to talk about it today, but it’s titled No More Sad Lunches: Make a Better Sandwich with Chef Approved Tips and Tools. You’re going to have to wait for this one, folks. It’s not on the agenda for today, but I’ve got it ready to rock and roll here anytime we want to talk about it but that’s not going to be today.
Steve Lewit: Our 2 Cents food show.
Gabriel Lewit: Just a little-
Steve Lewit: For foodies.
Gabriel Lewit: Just a little… We got to have some fun on the show, right?
Steve Lewit: The financial food show.
Gabriel Lewit: There are people I think that do something like that. I don’t know. Any who’s, okay, well last time… Switching gears into some more financial topics here. Last time we were talking about a few things related to, hold on, hold on, wait for it. What we wish that investors knew.
Steve Lewit: Yes. What advisors…
Gabriel Lewit: What we-
Steve Lewit: We advisors.
Gabriel Lewit: We being advisors.
Steve Lewit: As advisors.
Gabriel Lewit: And so, we had gotten through a few of these, but there was more and we had ran out of time. So we thought we’d talk about a few more of these here today. So last time we talked about how we knew everybody knew what their real risk potential was in their portfolio instead of just focusing on growth. We talked about how we wish everyone knew the true value of long-term planning over short-term goals and short-term gains. And we wish everyone knew the importance and the significance of a truly diversified portfolio. Okay, so I’m going to start off with another one here. We wish, and we want everyone to know that retirement planning isn’t just for the uber wealthy.
Steve Lewit: Yes. Well, it used to be you needed to be wealthy to have a trust, you needed to be wealthy to enjoy all these tax savings programs that are around. And none of that’s really true.
Gabriel Lewit: So, we believe truly, no matter who you are, and in fact, if you don’t have a lot of money saved up, gosh, you really need to focus on retirement planning so you do have a retirement. If you have a little bit of money, you’ve got to save a little bit more. How you manage your money is even more important. Maybe adding that little allocation to Bitcoin could help make you that extra return over the next 10 or 15 years that you wouldn’t do without an advisor or a plan. And so from my vantage point here, I just want to reiterate, our firm, our advisor team that we have, we will work with everybody. We have the capability to help you if you have a $25 million estate with the risks of federal and state estate taxes, and we can help you if you have $100,000 and you’re a younger investor trying to grow for your future retirement in 30 years and a whole range in between.
Steve Lewit: And I think if you think about it, the person that actually has less money is probably more, it’s more important for that person to have a plan because they don’t have room for making mistakes. If you’re really wealthy and make a mistake, it’s like-
Gabriel Lewit: Well, you and I know this, we have a lot of very wealthy clients, and when we talk to them initially and oftentimes in reviews say, “Hey, any concerns?” “No, I’m doing pretty good.” It doesn’t mean they don’t want improve and be more tax-efficient, or maybe generate a little more income or focus on an estate plan. But when you have excess money, you’re in pretty good shape.
Steve Lewit: Well, it’s the person you talk to that’s wealthy, and you say, “By the way, what do you spend every year?” And if they say, “I don’t know.”
Gabriel Lewit: Yeah, they don’t need to track it.
Steve Lewit: “We don’t track it. We just spend what we want to spend.” So they don’t have a plan, but they’re wealthy enough to get by. But if you’re a modest to earner or a modest to saver or less than that, that becomes even more important to have a plan.
Gabriel Lewit: So that’s what we want you to know. We want you to know that big or small, having a plan is important. Having a retirement goal is important, and we can help assist you with that.
Steve Lewit: We can.
Gabriel Lewit: All right, you picked the next one, Mr Lewit.
Steve Lewit: Yes. I have it all picked out. Are you ready?
Gabriel Lewit: Drum roll is virtually rolling.
Steve Lewit: Virtual. I hear it in my ears. We wish everyone knew that a well-known company with a national brand isn’t automatically the best option for you because you know the name.
Gabriel Lewit: You sounded very robotic with that reading of that item.
Steve Lewit: I was being very careful to enunciate my words in a proper elocution.
Gabriel Lewit: Well done, sir.
Steve Lewit: Thank you.
Gabriel Lewit: Yeah, so we wish-
Steve Lewit: Next time I will sing it.
Gabriel Lewit: You know everyone’s waiting for you to sing, right?
Steve Lewit: Yeah, I know.
Gabriel Lewit: So, what does that mean, Mr. Lewit? We wish everyone knew that a well-known company with a national brand doesn’t mean they’re the best option for you just because you happen to know the name.
Steve Lewit: It goes back to the hurting mentality that we have as human beings, that we like to hang out with people that do… We get caught in the frame of people that are doing and are comfortable with a certain thing. So if everyone’s shopping at Target, then most people will run to Target and that name becomes familiar with them. It’s like I have my money at Schwab. Well, why do you have your money at Schwab? Well, everybody knows how good Schwab is, but it may be great, but that doesn’t mean because it’s a nationally known brand that it is the best brand or that it’s the best for you.
Gabriel Lewit: I’ll be a little bit more direct than you, if I may.
Steve Lewit: I’m trying to be nice here.
Gabriel Lewit: Yeah, so many of these big, in the financial space, the big names Schwab, Fidelity, Chase… If you say, okay, well these are big names, I do my banking with them. They got private client, whatever that means. That term’s thrown around a lot these days. But you find out that they just do… If you really get digging into there and you talk to a lot of people that have had experiences there, many of these places just do investments. And if that’s all you’re looking for, then maybe it’s a good fit. But there’s so much more to financial planning, retirement planning, tax planning, estate planning than just an investment portfolio. And that’s where that big name, maybe isn’t really the best choice.
Steve Lewit: Well, people become comfortable with things they hear about all the time. Now, Gabriel, when you go to Walgreens and buy your Tylenol or whatever it is, do you buy the Walgreens brand or do you buy Tylenol?
Gabriel Lewit: I like the bright blue Advil bottle on top. It’s got the little blue top.
Steve Lewit: But you can get the Walgreens Advil. Walgreens has knocked off everything. When I go shopping it’s like I’m-
Gabriel Lewit: I’m pretty sure the Advil is better.
Steve Lewit: Well, yeah, right.
Gabriel Lewit: I said that just to elicit a response. It is a good point.
Steve Lewit: When I go to Walgreens, I always buy the brand name and I ask myself, well, why do I do that? Well, because I’m used to it. So if you hear Schwab or you hear Merrill Lynch or you hear all of this say, “Oh, they must be good because I know that name for 20 years.”
Gabriel Lewit: It’s a true phenomena. And it’s one of those things where maybe you think twice about that when it comes to your investments.
Steve Lewit: Well, especially your investments, because that has to be custom tailored.
Gabriel Lewit: Exactly. So let’s pick maybe one more of these so we can make sure we talk a little bit about Roth conversions and how that may or may not have changed now that we know Trump is going to be the president and it is Roth conversion season, but let’s pick one more of these first, Mr. Lewit. I’m going to pick here. I’m going to go with this one. We talked about it. I hinted at it. I’m going to talk about it again. Stock market timing is not a successful long-term. I’m going to preface that with long-term strategy.
Steve Lewit: Yes.
Gabriel Lewit: We wish people knew this.
Steve Lewit: We wish-
Gabriel Lewit: So many people just really struggle to accept this. A lot of people get it. I feel like it’s 50/50, maybe it’s skewed a little bit more, but a lot of people are like, “Oh yeah, I would never market time. I get it. I tried it. It doesn’t work, blah, blah.” A lot of people are like, “Oh no, no. What do you mean you didn’t pick the best asset class? You can’t tell me when to sell? When’s the market going down?” It’s like no matter how many times you try to say, well, nobody knows that. You get met with this sense of resistance like well, someone should know that.
Steve Lewit: Well, they do know it. I have a different take on it. I think they do know it.
Gabriel Lewit: Who knows what?
Steve Lewit: The people know long-term investing long-term is a winning proposition. And that timing is very difficult. I think people know. I think what happens is people start to believe, well, I can do what everyone else can’t do. And they have this bravado about their investments and God forbid they get it right once and then they’re like geniuses.
Gabriel Lewit: Well, I had a client recently, they’ve had some very good success with Nvidia and it is done very well, and their portfolio is a handful of individual stocks. And we were talking about using this for long-term, and we SGL would for the most part, recommend a fund-based portfolio because picking individual stocks is extremely difficult long-term to pick the winners. And I was talking about this and I was explaining things, and then I just was met with crickets.
Steve Lewit: What’s a cricket?
Gabriel Lewit: Chirping.
Steve Lewit: Oh, chirping.
Gabriel Lewit: Like silence with chirping.
Steve Lewit: Oh, silence.
Gabriel Lewit: You’ve never heard this phrase, met with crickets?
Steve Lewit: No, I met with crickets.
Gabriel Lewit: Gabby, Katie, you’ve heard this phrase, right? I’m not crazy.
Steve Lewit: You’ve heard this?
Gabriel Lewit: Yeah. Crickets.
Steve Lewit: Director Katie’s never heard it.
Gabriel Lewit: She’s heard it. Yeah. I’m not crazy.
Steve Lewit: Talking with crickets?
Gabriel Lewit: No, met with crickets.
Steve Lewit: Met with crickets.
Gabriel Lewit: Yeah. Well, what I meant by that is usually if someone agrees with you, they’re going to nod and be like, “Yeah, that makes sense.” And when you’re met with crickets, it’s just like you can tell right out of the gate, what you just said is not jiving.
Steve Lewit: You mean the empty stare in their eyes.
Gabriel Lewit: It’s like hmm. So then I tried a little bit more. I said, “So there’s data reports, there’s research. A lot of big companies go out of business.” “Yeah, but Gabe, there’s no way this company won’t keep growing. I mean the AI and the this, and I really think we should keep this.” And you just reach a point where it’s like, well, we agree to disagree. I mean, I’m a father now with children. You are a father.
Steve Lewit: I’m still the father.
Gabriel Lewit: You were a father with younger children at one point.
Steve Lewit: I didn’t grow out of fatherhood.
Gabriel Lewit: And I feel like you try to teach your kids stuff like… Okay, I’ll use this example. When my kids were three. Kids, please do not run on the concrete pavement. Why? Because every time they would run on the concrete pavement, what would they do? They would trip and fall and skin their knees and come up crying, running to me. And they would do this over and over and over again. And I’ll just be like, “Just don’t run on the pavement.” But what happens is they skin their knees enough where then they learn-
Steve Lewit: Then they won’t.
Gabriel Lewit: Or they of course figure out how to actually run without falling. But the point is, sometimes people need to learn things, I hate to say it, the hard way before they’ll really truly accept it. And yes, we’re going to sit here and say the data shows it. And even then you might be able to pick a winning stock once, maybe even twice. But doing this forever long-term with all your money-
Steve Lewit: Impossible. So we wish you knew that or people knew that because not only will you have a better life, but you’ll have a richer life and worry less.
Gabriel Lewit: And then to your point, it’s the greed. But people say, “But what if? What if I do pick that winner? Other people are picking winners.”
Steve Lewit: Yeah, my buddy picked winners.
Gabriel Lewit: Well look, 200 million people play the stock market and somebody wins, or not the stock market, the-
Steve Lewit: Lottery.
Gabriel Lewit: The lottery tickets and somebody wins. Sure. But the percentage of people that wins very low. I think everyone would agree with that. Okay, well that’s what we wish you knew between last week and this week. While we’ve got you for the rest of our… Well, if you have questions on those first, call us, 847-499-3330 or go to sglfinancial.com and click contact us.
Now, this is the peak of Roth conversion season as one of the key tax planning strategies. We’ve talked about Roth conversions before and the value, especially if you believe that tax rates are going to rise in the future. And up until this point before Trump got elected for the second term, the current Tax Cuts and Jobs Act of 2017 is set to expire in 2026. Now, who implemented that Tax Cuts and Jobs Act?
Steve Lewit: Mr. Trump.
Gabriel Lewit: Mr. Trump. So there’s a very good likelihood that those tax cuts will get extended.
Steve Lewit: I can almost… I would be very surprised if it didn’t.
Gabriel Lewit: So, I’ve had one question already from a client, which I think is why this is relevant for the show. That was then asking, “Well, is a Roth conversion still a good idea since tax rates aren’t going to go up in 2026 or aren’t likely to go up in 2026?”
Steve Lewit: Well, here’s the point is that I’m not worried about tax rates in 26 or 27 or 28. I’m worried about tax rates 10 years from now, 15 years from now.
Gabriel Lewit: Can I just clarify that?
Steve Lewit: You can.
Gabriel Lewit: I would say I’m not just worried about tax rates in 2026, but also the longer-term ones.
Steve Lewit: Yes.
Gabriel Lewit: Because both short-term and long-term can have an impact.
Steve Lewit: Can I clarify that?
Gabriel Lewit: You can clarify my clarification. Absolutely.
Steve Lewit: So, I’m more worried-
Gabriel Lewit: There you go.
Steve Lewit: About the longer-term tax rates than the shorter-term tax rates.
Gabriel Lewit: Yes, yes.
Steve Lewit: Now do you need to clarify that?
Gabriel Lewit: No, but my thought is that both are important, right? Because if you have an RMD coming due in 2026, whether or not the tax brackets themselves increase, you could still be in a higher tax bracket in the current-
Steve Lewit: That is true.
Gabriel Lewit: Set of brackets.
Steve Lewit: But my idea-
Gabriel Lewit: I know what you’re talking about. I’m saying both are correct. Both are correct.
Steve Lewit: Yeah. So in the way I see this Gabriel is that you can buy the government out of their share of your IRA or 401k or 457 because if you have a million dollars or a hundred thousand in an IRA, you do not have a million dollars or a hundred thousand in an IRA. It’s on your statement but that’s not all your money, part of that money-
Gabriel Lewit: But what do you mean about that, Steve?
Steve Lewit: What do I mean?
Gabriel Lewit: I have a million dollars right here on my statement.
Steve Lewit: Yeah, this is what we get back.
Gabriel Lewit: Right here a million dollars.
Steve Lewit: Look at my statement here. It says a million dollars. I said, “Yeah, I know that’s on your statement, but that’s not all your money. You have a partner there that you’re holding money for and that’s Uncle Sam.” So if you have a million dollars in 20% tax bracket, you only have 800,000. Give or take.
Gabriel Lewit: Well, if you took out the full million, you’d actually have a lot less.
Steve Lewit: Give or take. So if the government has this ownership in your IRA and prices are low now, the value of their government’s ownership of your IRA is at the lowest point in history. Why not pay off the government now, give them their share now before taxes rise either in two years or three years, but more especially if taxes double or go up 30%, 10, 15 years from now because we have a $36 trillion national debt?
Gabriel Lewit: Well, and it’s also important to remember that the current president, they serve four-year terms, and they rotate through Democrats, Republicans. So we really don’t know the tax rate in 10 to 14 to 20 years. So to your point, tax rates are at historic lows still. And the good news is they may continue to be now for the foreseeable future. So we may now have an extended runway to really take advantage of raw conversions-
Steve Lewit: To convert.
Gabriel Lewit: And I think that’s very good news for people because I don’t think anywhere in the future the likelihood of individual tax rates being even lower than they are today-
Steve Lewit: Not likely.
Gabriel Lewit: Is likely, very unlikely. But at some point in the future, they may need to increase or will increase or have a possibility of increasing. Hence, the conversion is a good idea as you were talking about.
Steve Lewit: Well, there comes a point where the nation cannot sustain a national debt of that is far bigger than the gross domestic product.
Gabriel Lewit: Don’t put your economist hat on Mr. Lewit and talk economist to us.
Steve Lewit: I have it on. Do you see the big E in the front?
Gabriel Lewit: Yeah. I mean that is the million trillion dollar question, right?
Steve Lewit: Well, the trillion-dollar question is the interest on the national debt, which is a trillion dollars. And the government has to keep coming up with this money and it’s just going to get bigger.
Gabriel Lewit: All right folks, well, as we said, we’ve talked Roth conversions on the show, today isn’t a super deep dive on that. But with some of the changes that are pending with the past election results here, is a Roth conversion still a good idea, Steve?
Steve Lewit: Absolutely.
Gabriel Lewit: Gabe?
Steve Lewit: Absolutely.
Gabriel Lewit: Yes.
Steve Lewit: You changed your voice.
Gabriel Lewit: Yeah, we just wanted to clarify that. And this is the time of the year. So if you have questions on your Roth conversions, call us, 847-499-3330 or go to sglfinancial.com or you can email us info@sglfinancial.com.
Steve Lewit: You bet.
Gabriel Lewit: Well, that’s what we have for you today.
Steve Lewit: We do.
Gabriel Lewit: We hope you enjoyed your time here with Our 2 Cents.
Steve Lewit: We did.
Gabriel Lewit: We appreciate you and every listener that we have. Send us your thoughts, your opinions, your questions, your concerns, so we can talk about them on the show.
Steve Lewit: Absolutely.
Gabriel Lewit: All right, well thank you all. Have a wonderful rest of your day. We’ll talk to you on the next one.
Steve Lewit: Stay well everybody.
Announcer: Thanks for listening to Our 2 Cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at 847-499-3330 or visit us on the web at sglfinancial.com and be sure to subscribe to join us on next week’s episode.
Prerecorded Voice: Investment Advisory Services are offered through SGL Financial LLC, an SEC Registered Investment Adviser. Insurance and other financial products are offered separately through individually licensed at appointed agents.
