Contingency Planning: Unexpectedly In Between Jobs

Our 2 Cents – Episode #106

Contingency Planning: Unexpectedly In Between Jobs

This week’s episode of Our 2 Cents covers an interesting topic impacting many Americans over recent years. What to do if you find yourself unexpectedly without a job? Whether layoffs hit your department, or you just decided you’ve had enough at your current job, we’re discussing the challenges and opportunities that exist when you’re in between work.

Then, we’re spending some time diving in-depth into three great listener questions.

  1. What To Do When You’re In Between Jobs:
    • Do you tap into your retirement savings for extra money while income is slowed or stopped?
    • Should you find a new job or start your own business?
    • How could retiring earlier than expected impact your financial plan?
  2. Listener Questions:
    • “I have a weird situation. I have been funding my IRAs and 401ks over the years and have close to $2 million in those accounts. But now I need cash for a home repair I wasn’t expecting and only have around $5,000 in the bank. Should I take the money from my IRA and pay the penalty on it?” – Jake 
    • “I think we are at the bottom of the market and will finish way up for the year. Time to load up on stocks. Do you agree?” – Mark
    • “I’m 61 years old and have never had a financial advisor. I have made it this far on my own, so I am probably fine without an advisor, right?” – Caroline

Tune in now to join us for this discussion!


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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: Hey guys, Gabriel here and Steven Lewit. Welcome. It’s a beautiful sunny morning day, at least for us here today.

Steve Lewit: Magnificent.

Gabriel Lewit: Hopefully it is for you, whenever you’re listening to our show here, and we just wanted to wish you a very happy week and summer and all sorts of good things.

Steve Lewit: And great things.

Gabriel Lewit: Great things, just as a way of just saying we’re thinking of you.

Steve Lewit: Have you been doing positive affirmations this morning?

Gabriel Lewit: This was my positive affirmations, I guess.

Steve Lewit: That was it. Folks, sap it in. I agree with you. Let’s give it out.

Gabriel Lewit: Yeah. Well, again, hope you’re doing great. We’ve got a good show lined up for you here today. We’re going to talk about a range of interesting and intriguing financial topics, of course.

Steve Lewit: But of course.

Gabriel Lewit: Of course.

Steve Lewit: Of course.

Gabriel Lewit: And to kick things into gear, we’re going to talk about, and this came from a client that happened to be in this situation, but what happens if you find yourself unexpectedly in between jobs? So, if you’re in between a job and you didn’t plan on it, what do you do?

Steve Lewit: Well, you can retire, you can play golf, file for unemployment. Let me see here.

Gabriel Lewit: Well, that’s exactly what we’re going to talk about. This came up for the client of mine that sparked this. He was not expecting to be let go and he got let go, and that can happen, unfortunately.

Steve Lewit: It do happen a lot.

Gabriel Lewit: It do happen. And there’s been a lot of companies with talk of a recession coming up that are starting to trim their expenses.

Steve Lewit: Unemployment is still very low, so we haven’t seen a big movement for letting people go, but you know those clouds on the horizon when you’re looking down at the meadow and there’s those clouds down there coming?

Gabriel Lewit: I see them.

Steve Lewit: They’re coming our away.

Gabriel Lewit: They are. And with that, the question comes up. What do I do, especially if it’s a big surprise? Let’s unpack that a little bit, Dad.

Steve Lewit: All right.

Gabriel Lewit: And what would you say if you walk into work one day and the manager calls you in and says, “Hey John, Jane, sorry.”

Steve Lewit: We want to let you know that we love you first.

Gabriel Lewit: We love you, but we’ve got to let you go.

Steve Lewit: We’ve been great. You’ve been the greatest for us.

Gabriel Lewit: You’ve been the best.

Steve Lewit: You’ve been the best.

Gabriel Lewit: What do you do first when this happens, because that’s going to be a big surprise, generally, for a lot of people when that occurs.

Steve Lewit: Yeah. Well, what you don’t do is get angry at the guy that just fired you even though you may not like him very much. Don’t act out your emotions because-

Gabriel Lewit: Take off your shoe and throw the shoe at him?

Steve Lewit: Yeah, or worse, which is unfortunately in the news a lot. Look, it’s like an instant change of life. It depends, Gabriel, I think on how old you are, because if I’m 50 years old and I lose my job, it’s very different than if I’m 68 years old and I lose my job or even 61 years old because the market, they say there’s no age discrimination in the market, yet all of our clients that are in the mid-60s that are really looking for jobs that are really bright and have great careers and have a lot to offer, guess what?

Gabriel Lewit: They’re getting age discriminated, always. Always.

Steve Lewit: You bet. They can’t get a job.

Gabriel Lewit: Yeah. Well, some can, if they’re lucky to be in a position where they can be a consultant.

Steve Lewit: That’s right.

Gabriel Lewit: But generally, really, there seems to be, whether you want to believe it or not, the age discrimination out there for full-time jobs. Employers are choosing to hire younger people with lower salaries.

Steve Lewit: Yeah. It’s all about the money. Always follow the money. So, if I got to pay you 80 grand and you’re 64 and I can get a kid in for 35 even though I’ll lose a lot of knowledge and experience, employers don’t look at it that way. They look at, “Hey, how much profits did I make? And if I pay out less, I make more.”

Gabriel Lewit: Okay. So, we’ve decided you haven’t thrown a shoe, you’ve left peacefully.

Steve Lewit: And you know how old you are.

Gabriel Lewit: And you know how old you are.

Steve Lewit: Hopefully.

Gabriel Lewit: Hopefully you know that one. Now you’ve got some decisions ahead of you. And the first thing is, what do you do about paying your bills, Dad? That paycheck stops. Well, certainly, you could file for unemployment benefits if you’re planning on looking for new work.

Steve Lewit: Well, which you should, yep.

Gabriel Lewit: Okay, so you can do that, but then what do you do? Do you go right out and just find another job? Do you start pulling from your savings accounts, your IRAs, your 401ks? What do you do?

Steve Lewit: Well, look. There’s no money coming in unless you might have a working spouse, you may not, but the income in your family has just been cut in half, let’s say. So hopefully, you’ve accumulated emergency funds or savings funds for at least 6 to 12 months that are in cash or in something that you can access really quickly and then you go use that because that’s exactly what it’s there for. And that gives you breathing space to decide instead of reacting and saying, “Oh, I got to go out a job,” or “To hell with this, I’m just going to retire.” Instead of reacting, you take a little bit of time, maybe a week or two or even a month, and you say, “All right. That’s why I have these savings here. That’s exactly-”

Gabriel Lewit: Hopefully.

Steve Lewit: Hopefully.

Gabriel Lewit: Hopefully you’ve got those savings.

Steve Lewit: We’ll talk about if you don’t.

Gabriel Lewit: Or you get a severance or something that’s going to give you a little bit of time to think.

Steve Lewit: Yeah, because like I said, it’s a big emotional change so you need time. It’s like being diagnosed with a bad illness. It’s an instant change in life, so you have to … Why are you smiling?

Gabriel Lewit: I’m smiling because …

Steve Lewit: Folks, I said a great analogy.

Gabriel Lewit: Your analogies today are very, very negative.

Steve Lewit: Well, that’s a negative. What if it ever really happened? Okay. Suppose you have a new grandchild. Well, that changes your life.

Gabriel Lewit: Well, there you go. I like that one. That’s very positive.

Steve Lewit: Your daughter just got pregnant with triplets. That will change your life.

Gabriel Lewit: Yes. The good, positive vibes.

Steve Lewit: Okay. Sorry.

Gabriel Lewit: Remember I started this show saying, “I hope you’re doing really, really well today”?

Steve Lewit: Katie’s laughing at me, too.

Gabriel Lewit: I should have said that to you. I hope you’re doing really well today. Do I got to give you a hug over there?

Steve Lewit: I’ll take a hug anytime. (Singing)

Gabriel Lewit: So yeah, guys, the benefit of having that kind of time, whatever amount of time you can buy yourself, maybe it’s a couple weeks, maybe it’s a month or two, start to think through if it’s a good opportunity. In other words, there’s a silver lining that I’ve heard before. And I’ve heard this from clients that said, “Getting let go was actually a good thing for me because-”

Steve Lewit: Close one door and another door open.

Gabriel Lewit: “I was able to realize I didn’t even like that job, and I want to do X, Y, or Z instead,” or “I want to start a new business.” You might decide you just want to find a better, similar job. That’s okay too but take that time to sit back and reflect and digest and figure out what’s most important for you. I think it’s a really good thing to do if you can, if you feel like you have the time to do that.

Steve Lewit: Yeah. But if you’re a younger person with three kids and your wife is a homemaker, she’s working at home, there is a lot of pressure. It’s like, “I got to get back to work.” So, if you’re in that situation, but I suggest if you like your field, that’s when you call all your connections, the people you know, because the best jobs are not gotten through, what are the website that has … LinkedIn or-

Gabriel Lewit: Indeed, LinkedIn.

Steve Lewit: Indeed, you can find great jobs through there, but that’s not where the best jobs or the easiest jobs are. Most people that find great jobs find it through a connection. So, then you got to call everybody and say, “Hey, look, this is my situation. Can you help me out?” And you’ll be amazed. Most people will want to help you.

Gabriel Lewit: Yeah. No, that’s good.

Steve Lewit: Now, if you’re 65 or in your late 60 or early 60s or even late 50s, one of the considerations, Gabriel, should I kick it in and retire and just go do something else, like you said? Maybe I’ll fix computers part-time because I love that or maybe I’ll start a business on something else or consult, and that would be a totally different consideration. A lot of people just retire.

Gabriel Lewit: Yep. Well, let’s unpack that just a little bit because maybe you’re in that boat out there. You decided to explore this idea of working again or now you’re thinking, “Well, maybe I should just retire.” Well, the first thing you naturally need to do there is if you’ve got an advisor, give that person a call and start to take a look at your plan and say, “Can my plan sustain me if I scoot up my retirement by however many number of years earlier it might be?” One year, two year, three years …

Steve Lewit: Well, I know you do this too because when we do a plan, part of the plan is, “What’s the worst thing that can happen to these folks?” So, if somebody’s 63 or 64, the worst thing that could happen, he gets fired, can’t find another job, and we run scenarios to test the plan to make sure that it still works absent of that income.

Gabriel Lewit: Well, I just had a different client two weeks ago and we did a plan for the first time last year and good paying job, going to work there for another 20, 25 years. I had a conversation with him two weeks ago doing a review and he says, “Yeah, I don’t really like my job that much anymore.”

Steve Lewit: I’m going to quit.

Gabriel Lewit: “I think I might want to see about doing something on my own, starting up a side business, has been a side business, maybe turn that into a full-time thing.” And I said, “Well, that’s a big change.” I think his salary was $120,000 a year. And I said, “That’s a big change.” I said, “Did you talk to your wife about that?”

Steve Lewit: No, I’m just saying …

Gabriel Lewit: He actually said yes, which I said, “That’s good.”

Steve Lewit: Good for him.

Gabriel Lewit: Don’t surprise her with that one.

Steve Lewit: That’s a tough one.

Gabriel Lewit: Those are big, those money conversations. If you are exploring a new career, for example, we got to map that out. But yeah, those are the thoughts that are going out there. It’s a good time, as we talked about, to reflect and figure out, “What’s most important to me”?

Steve Lewit: And you just brought up something really interesting, Gabriel, because that’s a lot of stress on the family when someone loses their job, so we suggest always that, again, in our plan, I’m just saying this is what we do, folks. So, in the plan, if someone loses a job and we’re projecting that and we’re running that scenario and the couple is right there, I’m going to ask the spouse that is not working, the non-working spouse, how will she feel if Joe loses his job and decides to retire. So, you get a family dynamic where they’re sharing this prior to anything happening and that really means a lot in the long run because it’s not like you walk in and out of the blue, you’re discussing something you never discussed before.

Gabriel Lewit: Well, in a way it’s contingency planning for a possible big change, so that’s a good thing, definitely, to do in advance. Well, what about funding? What if you don’t have or maybe you do have money in checking or cash or savings. Should you tap that first? Should you tap a credit card with a low interest rate? What should you do? Obviously, I’m asking that rhetorically. I could talk about it too, but I’m asking that to you there, Dad. And what would you say to folks?

Steve Lewit: I would say, well, it depends on a few other things. It’s not a clear yes or no. I always go for the cash first. That’s my first inclination is, “Okay. We built into your plan. You have $75,000 in this savings account just for this reason. Let’s begin there and see how long it takes you to find a job.” Or even if you’re interested in going for a job, just take some time and let it settle in. And then we can look at, depending on what information comes back to me, we can look at if I can get a zero-interest credit card for a year and if finances are in great shape, maybe that might be a good idea.

Gabriel Lewit: Yeah. It just depends, depends how much you need and how much you’ve got saved and a few other key considerations there. But yeah, there’s options, folks, and if you have questions on this, if you find yourself in that situation, maybe you’re not, as you’re listening today in that boat, but you could be in the future. Hopefully not, but if you do ever run into that, it’s good to start thinking ahead for these scenarios because they do happen, unfortunately.

Steve Lewit: Yeah, and if you’re a parent, these are conversations that I’ve never had with you, Gabriel, when you were growing up, but I really should have. Folks, I didn’t do a lot of family discussion about finances because when I grew up, parents have the attitude, our money is private and the kids shouldn’t know anything about it, where that attitude today has really changed and shifted a lot. But I would suggest that’s a conversation that a parent should have with a son or a daughter or son-in-law and daughter-in-law and say, “Hey, what are your contingencies if you guys lose a job? Look, you’re planning. You’re buying a house. You’re planning on getting pregnant or you have three kids. Hey, what happens if you lose your job?” And just open that door and have that conversation.

Gabriel Lewit: Yeah. Well, you could always tap the parents for funding if you lose your job. Mom, Dad …

Steve Lewit: Well, how many clients do you have where the kids are still on the payroll?

Gabriel Lewit: Well, gosh.

Steve Lewit: Too many.

Gabriel Lewit: Yeah, definitely more than a handful.

Steve Lewit: I had a client in the other day. She says, “I got to get my son out of the house. He does everything around the house and everything.” And I said, “That’s great.” I said, “How old’s your son?” She said, “Well, he’s 35.” I said, “Yeah. It’s time for him to get out of that house.”

Gabriel Lewit: Probably time to leave the nest.

Steve Lewit: Yeah, probably.

Gabriel Lewit: All right, folks. Well, if we can help you in any way there or maybe you’re just thinking about switching to a new job, some of the same things could apply. Maybe you’re just fed up and you’re ready to put in the notice. You can give us a call. We can talk you through that, map out how to make that transition smooth and easy, and most importantly, less stressful, I think, would be the big thing, having someone to talk to about those kinds of questions. You can call us 847-499-3330 or go to sglfinancial.com, click contact us. And speaking of contacting us, we’ve had a few questions that have-

Steve Lewit: I just want to say, Gabriel, that was a really positive session that we just had. Katie, was that … Give me a thumbs up or … Thumbs up.

Gabriel Lewit: Well, thank you.

Steve Lewit: That was really positive.

Gabriel Lewit: That was the goal, to make it seem something not so positive seem more positive. Well, we’ve got some questions, as I mentioned, that have trickled in, and I want to cover these on the show just to make sure we don’t fall behind on our questions and some of the answers that we’ve got prepared for those and so let’s dive on in here. And folks, we love your questions. Just as a review, give us your questions, send them in, sglfinancial.com. Contact us or info@sglfinancial.com and write in your question and we absolutely will talk about it on one of the next shows.

Steve Lewit: Sooner or later.

Gabriel Lewit: Sooner or later, we will get to it.

Steve Lewit: Sooner or later.

Gabriel Lewit: We will. All right. So Jake, we’ve got, you said in your own words, a weird situation. You’ve been funding your IRAs, 401Ks, but that’s all the money that you have, is only in IRAs and 401ks, close to $2 million. First and foremost, congratulations.

Steve Lewit: Congratulations, Jake.

Gabriel Lewit: You’ve done a great job.

Steve Lewit: Absolutely.

Gabriel Lewit: But here’s his question, folks. He says, “I’m only 54 and I find myself needing cash for a big home repair and I only have $5,000 in cash and all the rest of my money is in IRAs and 401ks. What should I do? Should I take out funds from my IRA and pay the penalty and the tax?”

Steve Lewit: Nope.

Gabriel Lewit: “What would be my best options here?”

Steve Lewit: Equity line. Home equity line.

Gabriel Lewit: Do you want to …

Steve Lewit: Expand on that?

Gabriel Lewit: Expand upon that, Mr. Lewit?

Steve Lewit: That’s the option. If you can get a home equity line, Jake.

Gabriel Lewit: Home equity line.

Steve Lewit: Jake, this is a three-word answer, home equity line. Borrow from parents, all three-word answers.

Gabriel Lewit: Find more money, I was thinking.

Steve Lewit: Find more money. There you go. Yeah, I like that one, too. Listen, the last thing you want to do is take out of your retirement savings and pay a penalty. That’s got to be the lowest on the list. Do you think, Gabriel?

Gabriel Lewit: Sorry. I was taking a sip of coffee. I think you caught me.

Steve Lewit: I know. I was trying to.

Gabriel Lewit: You caught me stepped away from the mic. Well yeah, definitely last on the list. Guys, anything where you’re paying a penalty is generally undesirable unless you have to. And so, in this case, we would go down through the list of options. And certainly, Jake, you probably don’t want to take on debt. I think that’s probably the angle that, if I’m guessing, that you’re approaching here. You’d rather pay it out of money you have, and you feel like you have enough money. It’s just we still don’t want to see you pay that kind of penalty with your assets. So, if you took out $50,000, you’d also have to pay taxes on it because it’s an IRA or 401K, and then you’re also going to pay a $5,000 10% early withdrawal penalty. Why? Because you’re under 59 and a half, folks, and so that $5,000, you might be able to calculate taking a home equity line of credit. Maybe you’re going to pay a lot less than that in interest and you can buy some time until you’re 59 and a half and you could repay that back.

Steve Lewit: Or you could take a personal loan if your credit is good. Loan rates, right now, are a little bit higher, probably get a personal loan.

Gabriel Lewit: Well, and that would be the problem, because those are around 10%, right now.

Steve Lewit: 10%. Yeah. They’re a little high.

Gabriel Lewit: So, if you waited a whole year … Yeah, so that wouldn’t be your best. You’d want to figure out the interest rate options on any loans. Can you keep that really low? Maybe an interest only HELOC, calculate what that’s going to cost you between now and the time you can access your money, and then basically find out which one’s going to come out better. We can run a cost analysis.

Steve Lewit: Try a zero-interest credit line for a year to fund it as long as you have it in your plan. How am I going to pay this back? Right.

Gabriel Lewit: Well, that’s what we don’t know, Jake. Do you have good cash flow? Are you retired? No cash flow? So, there’s some other questions there, but generally the rule of thumb is try to avoid that penalty if you can, just because nobody should pay a penalty if they can avoid it.

Steve Lewit: It’s a lot of money. 10 percent’s a lot of money.

Gabriel Lewit: Exactly. All right. So Jake, if you have other follow ups to that, let us know any time. And then we will move on to our next question here, which is from Mark. And Mark, you said …

Steve Lewit: I need to interrupt you. So Jake, I just want to say one more thing. You’ve done a great job of accumulating 2 million in your 401k. I wonder if you’ve considered or how much of that is a Roth. If the 401k has a Roth option, I would start contributing into the Roth option, assuming as I do and Gabriel does and most economists do, that taxes are going to go up in the future. Putting your money in the Roth option in your 401k might be a great idea for you.

Gabriel Lewit: Well, I guess if we were to expand upon Jake’s situation, it does speak to an important point that it’s really a good idea to have money in different tax buckets. So, a lot of people will max out their 401k, they’ll max out their IRA, but they won’t put any money in a Roth or a nonqualified account. And if you will, the downside of doing that, there’s lots of benefits of that, but if you’re in a scenario like Jake, you don’t have any money you can draw upon that isn’t going to be taxed or inaccessible.

Steve Lewit: Unless he has life insurance with cash value in it that he could tap.

Gabriel Lewit: Right, but the idea is you always want to make sure you’ve got a bucket of money that you can pull from in case you need it, savings funds, emergency funds, cash value, life insurance you can access before 59 and a half, Roth IRA contributions you can access before 59 and a half. And of course, if you have nonqualified funds that just have short-term or long-term capital gains, you can also access those funds any time. And so, if you give yourself more flexibility that way, by purposefully saving into those three different tax buckets, you’re going to have just a lot more option to do various things when they occur in the future without worrying about those kinds of penalties.

Steve Lewit: Excellent, positive point.

Gabriel Lewit: Thank you for your positive feedback, Mr. Lewit.

Steve Lewit: You’re welcome. Sorry to bring you back to Jake, but it’s always important.

Gabriel Lewit: Yeah. No, that’s okay. No, that was a good side note there. Okay. Mark, your question is a little shorter here. I’ll read it verbatim here. “I think we’re at the bottom of the market and we’ll finish way up for the year.” Very positive outlook. “Time to load up on stocks. Do you agree?”

Steve Lewit: Mark, send me your crystal ball. I’d like to look into it myself. Look, Mark. Come on. You think we’re at the bottom of the market, but you don’t know if we’re … Am I being too tough here? You don’t know that you’re at the bottom of the market, so what’s the risk here?

Gabriel Lewit: Well, I guess I would phrase the question back to you, Mark. You do agree because you wrote it, you think. You think we’re at the bottom. Well, if we’re not at the bottom, would you still load up on stocks? And if the answer to that is yes, then load up on stocks.

Steve Lewit: Then why take it out in the first place? Where is this cash coming from?

Gabriel Lewit: Well, sounds like he’s got some cash somewhere, but …

Steve Lewit: I hope it didn’t come from selling as the market was going down.

Gabriel Lewit: Yeah. Well, we don’t know the answer there, but if you think that bottom is here, then yes, load up on stocks. And if you think we may not be at the bottom, but you still think it’s a good time and you would otherwise load up on stocks, then go ahead.

Steve Lewit: Well, if you want to look at it that way, Gabriel, then you could dollar cost average into the market. Let’s say you have a million bucks. You could put $200,000 in for the next five months, dollar cost average because …

Gabriel Lewit: You have a million sitting in cash?

Steve Lewit: I have client that has a million six in cash.

Gabriel Lewit: That’s a lot sitting in cash.

Steve Lewit: God, I can’t get them to part with … It’s like, “What are you doing?”

Gabriel Lewit: I think it’s such a good situation to be in.

Steve Lewit: I must be a lousy advisor, though. It’s like, “No, I’m not parting with my cash.” What’s the emotional connection here?

Gabriel Lewit: Well, so Mark, I think the question that really it boils down to is you know this. Everybody knows this. Nobody knows when the bottom is. You might think it’s the bottom, but you don’t know. And so, either way, if you think it’s a good time, because stocks are down …

Steve Lewit: Even if they go lower, it’s still a good time.

Gabriel Lewit: Well, in other words, if you thought it was the bottom right now, then it’s a good time to buy in, even if they go a little lower after you buy in and then come back.

Steve Lewit: Yeah, because you’re still buying into a depressed market.

Gabriel Lewit: It would take you a little bit longer for that to recover but if you still think it’s a good price point, then yes, buy on in. That would be my answer or to your point, dollar cost average it.

Steve Lewit: Yep. And don’t try and predict the market, Mark, please.

Gabriel Lewit: My guess is he’ll probably keep trying to predict it.

Steve Lewit: Most market predictors, it’s like a habit. How many times have we read all the pundits, “We think the market’s going to go up. We think …” I just read another one, “The market’s going to recover by the first quarter of 2023.” Now, how can they say that?

Gabriel Lewit: Well, we had a market outlook webinar last week for clients and we pick on, well, pundits, people who predict the market.

Steve Lewit: Everybody.

Gabriel Lewit: Well here, the one that I thought was the most interesting was you’ve got the CEO of JPMorgan Chase, Jamie Dimon.

Steve Lewit: JPMorgan Chase.

Gabriel Lewit: Jamie Dimon, Dimon, I don’t know which one it is, saying that we’re in for an economic hurricane of unprecedented proportions and just going on this whole negative thing. And then I’ve got an article from the same exact day or week from JPMorgan Chase top economic researcher saying that everything’s going to look really rosy, and the GDP is going to recover and we’re not going to get into a recession, literally contradicting the exact opposite thing that the CEO of his company just said.

Steve Lewit: And what’s sad is that most of us are headline listeners. We hear a headline, and we think we got the whole picture and a guy that is in an influential position like this says, “I think we’re going to have a market hurricane or an economic hurricane,” people get scared when they hear that course and folks …

Gabriel Lewit: Well, those are strong words.

Steve Lewit: If you feel fear, call the fear busters, which would be Gabriel and me.

Gabriel Lewit: Oh boy, we need a new music jingle to go along with that. Who you going to call?

Steve Lewit: The fear busters.

Gabriel Lewit: Oh, man.

Steve Lewit: What is Carolyn going to ask us?

Gabriel Lewit: Well, okay. Well Mark, hopefully that helped answer your question and if you’ve got follow ups there, give us a holler. One last one while we’ve got every … I think we got to them all, finally. That’s good.

Steve Lewit: Unusual.

Gabriel Lewit: Well, we gave ourselves more time because we always cut them short. We’ve got Caroline. You said, “Hi, Gabe, Steve. I’m 61 years old. I’ve never had an advisor. I’m honestly thinking if I’ve made it this far on my own, can I make it the rest of the way or should I engage with you or an advisor?”

Steve Lewit: Oh, Carolyn, you could probably do both. It’s hard to say without knowing the details of your finances, but let me talk generally, Gabriel. Here’s the problem. Before retirement, you’re just saving money and investing it and hope it grows and that’s basically it. Now after retirement, you got to figure out, “Okay, where do I get my income from? Should I be aggressive or conservative in the stock market? How do I reduce my taxes because most of my money is in IRAs and 401ks, and then how do I take care of long-term care and health costs? What do I do about market volatility and how do I pass my money to charities or kids? Now, that’s six or seven different things that you didn’t have to deal with and that takes an awful lot of expertise, so you can handle it yourself and let’s say you’ll probably be okay. We always run the numbers and let’s say we ran your numbers, and it says, “Yeah, you’d be okay, and you could do it yourself.” The problem with that is that you really don’t know, so you’re always insecure about it because you don’t have a real plan. So, if the market drops, you’re going to look and just say “Can I keep spending that money? What try to do now?” You’re going to worry.

Steve Lewit: And the second thing is that without a plan, you don’t know where you’re going. You just don’t know where you headed so you’re in this quagmire of very, very difficult things that we think you need a professional to help you with. You’re not going to build your own house. You’re not going to fix your own electricity.

Gabriel Lewit: Well, what’s interesting is, as I always look at, this is not an unusual question. Let me put it that way. There are a lot of people out there that question whether or not they need an advisor. Why pay somebody a 0.85% management fee or 1% management fee? I could just do this all on my own.

Steve Lewit: And they can, for the most part.

Gabriel Lewit: Well, there’s a few questions. The first question is, do you want to do it on your own? In life, there’s always a question of, I could mow my own grass and yard, or I could hire somebody. I hire somebody. You know why? Because I don’t enjoy having to do it every single Saturday on clockwork and I like to have a little more flexibility and freedom so for me, that’s why I choose to do it. Could I do it on my own? Sure. That’s one of those questions, too. Do you want to deal with all of this stuff yourself? If not, then yeah, you’ve got to pay somebody one way or the other because you’re buying a service.

Steve Lewit: Or you’re buying your freedom.

Gabriel Lewit: And your freedom of time and you’re buying the peace of mind knowing you don’t have to worry about it. You’re buying all these things with that fee that you’re paying, assuming you find a really good advisor. But the second part also is people then say, “Well, are you going to make me more than I’m paying you for the fee?” Well, what we just talked about is part of what you’re paying for is the service itself. But to answer that question, yes, a good advisor will more than make up their fee that they’re charging you in all those different ways that you mentioned, all the things that you’ve never had to deal with, tax planning, healthcare planning, long term care planning, social security timing, market volatility while you’re drawing money out of your portfolio. Making one wrong mistake there over the 30 years of your retirement could absolutely cost you a huge amount of money and a good advisor could help you eliminate multiple different mistakes and help optimize your plan.

Steve Lewit: Yeah. You raise a great point. I had a potential client come in and he’s doing great, and he is doing great on his own and I ran his numbers. I said, “Let’s say you continue doing exactly what you’re doing and let’s put in there a worst-case scenario. Let’s put in all the market losses between 2013, which the market made no money. Let’s put that in this scenario and see how you come out.” And he came out okay. He came out okay and he could do that. The problem is at the end of life, he’ll say, “I did pretty good,” and he did, but what he doesn’t know is what he doesn’t know.

Gabriel Lewit: How much better it could have been.

Steve Lewit: And I showed him where he could take his ending balance from 2 million five and the way we would do it, we would triple that, he would have 6 million, and he would never know he left that money on the table.

Gabriel Lewit: Yeah. And it’s so interesting to me because people, I think they’re skeptical to think that someone could really help them. So, if it’s a skeptical question, ask yourself, “Assuming I had total confidence in this advisor, would I still hire the advisor?” So, is it really the fact that you don’t think an advisor is valuable or that you’re skeptical that they’re going to deliver? And if the answer is, “I’m just skeptical, I’d love to find a good advisor. I’m just skeptical, though,” that’s where you’ve got to go in. You’ve got to interview advisors, whether it’s us or anybody else, really get to know them, build up your trust factor. But if you can get to that point where you’re confident that they can deliver on the goods and really improve your quality of life and your numbers and your financials, that’s a good deal.

Steve Lewit: Absolutely.

Gabriel Lewit: Good deal for you.

Steve Lewit: Absolutely.

Gabriel Lewit: Well, I think we got a little excited on that one. I’m very passionate about that. Obviously, it’s what we do for a living, but …

Steve Lewit: I was going to say the same thing. I’m very passionate about it. We love doing this and the more complex the puzzle, the more fun it is.

Gabriel Lewit: Yes, exactly. Well, let’s see. Caroline, Mark, and Jake, if you’ve got follow up questions at any time, give us a call or anybody listening to this show here today, give us a call at 847-499-3330. We’re here for you. And if you’ve got, of course, anything you want to share with us, any new questions you want us to answer on the show, you can send us an email. Info, I-N-F-O, @sglfinancial.com or go to sglfinancial.com/contact.

Steve Lewit: And everybody, you all have a positive, wonderful, amazingly, fantastic …

Gabriel Lewit: An amazingly wonderfully positive rest of your day.

Steve Lewit: Just like we’re going to have.

Gabriel Lewit: Of course.

Steve Lewit: I feel better already.

Gabriel Lewit: This is good.

Steve Lewit: This is great.

Gabriel Lewit: All right, guys, we’ll see you on the next show. Thanks so much for tuning in and have a great rest of your day.

Steve Lewit: Stay well, everybody.

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

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