Cleaning Out the Financial Junk Drawer

INTRO MUSIC INTRO MUSIC INTRO MUSIC INTRO MUSIC INTRO MUSIC and we can get some value out of it. And that's the idea. So we're gonna look at a bunch of different financial products or investments that you might have made throughout your life that you've just kind of sat on and haven't done anything with.

And we'll see if we can make some sense out of them and figure out how to put them to better use. So before we get into this one, let me remind you about John. He's president and founder of Rosewood Wealth Management. You can find him online at rosewoodwealthmanagement.com. Also on Facebook as well.

Or you can call him 800-545-2991. He also texts too. He's a millennial.

So he takes care of that side of himself. Yeah. I'm right on the border.

Yeah. I don't like to believe. I don't claim to be a millennial. Although technically I think I am. You were born in 80... 81. 81.

And that's the cutoff. You're probably, yeah, like you could easily be the youngest of the Generation Xers. And I'm probably the oldest of the millennials. I was born in 83. So Molly argues with me about this all the time because she's convinced that she's not a millennial. I'm like, no, no. You were born in 85.

You definitely are. I don't care which demographer you ask. 85, you are among the older millennials. I don't relate. Like if you look at the younger millennials that are, I think it goes to 96.

Do you have anything in common with somebody born in the mid 90s? Well, and here's what Molly points out is that there is a very distinct difference between people who have always known life with the internet versus those of us who knew a time without the internet. I remember the first time I ever used the internet was in middle school and my French teacher wanted me to check the weather in Paris. And so I sat there in front of the computer and watched as this map slowly opened up and I could see the radar for the weather in Paris. And that was in seventh grade. It probably blew your mind too though. Yeah.

It's like going back to floppy disks, popping them in to play games and having to type in some code and actually to fire them up. So there's some sort of interpersonal skills that exist with those of us that lived before that time. We're more evolved.

It's different from the younger millennials. Yeah, I guess we are. Exactly.

All right. Well, let's get into today's topic, financial junk drawer, and I'm going to throw out a number of products to you that have been kind of left behind, hadn't really been thought about for a while. Let's try to repurpose these into something that might be useful for somebody. So let's start off with a really old life insurance policy.

Yeah. So a lot of times we'll see people who have these whole life policies that they bought years ago, maybe when they were young and in their twenties and just getting started in the working world. In some cases it's something that their parents took out on them when they were born and just wanted to establish some sort of life insurance policy on them. So we see it a lot where you have a policy that you've had for years and you've been faithfully paying on it for 10 or 20 or 35 years and in some cases you've built up a nice little cash value in there and it might be smart to use that cash value for something else, whether it's paying off debt or just investing it in a different way. Maybe you don't need that particular life insurance policy anymore and the cash value could be more valuable. It could be that we'd be better off to take that cash value and move it to a new life insurance policy because unlike everything else in the world, which has gotten more expensive, life insurance has actually gotten cheaper.

So let's explore the actuarial table reason for that. So you just said you were born in 1981. So your life expectancy, you're expected to live until the early eighties, your early eighties. Now if you'd been born 30 years earlier in 1951, your life expectancy would be early seventies. And so because life expectancies have gotten longer, life insurance has gotten cheaper because life insurance companies can now collect payments from you for more years before you die and they have to pay out that death benefit. So as life expectancies increase, life insurance actually is cheaper. So you could very likely, let's say on that old policy that you bought in the eighties, you have $100,000 death benefit. Well, you could probably get that same $100,000 death benefit in a newer policy much, much cheaper than what you're currently paying. And so it's definitely worth looking at those old policies and seeing if A, it's worth doing anything with the cash value that would be more efficient or if there's not much of a cash value there, can we just get the same death benefit, the same coverage more cheaply somewhere else? Or maybe you've just outgrown that policy. Maybe your kids are grown and gone, your house is paid off and you don't really need it for life insurance anymore. Maybe you just scrap it all together and stop paying on it. So there's definitely a lot of things to look at on that. Makes a lot of sense.

All right. What about an outdated will or an estate plan? This seems like something you should be evaluating fairly often anyway. But if you haven't looked at this in a while, what should we do with that outdated will? Well, so it could be outdated for one of two reasons. It could be because circumstances have changed in your life, like as an example, I know people who had a will done when they had two kids and thought they were done having kids. Years later they have the oopsie third child and never occurs to them until many years later.

Oh, you know what? We need to update our will to include all three kids instead of just two. So that can be one thing. It could go the other way where you're not wanting to add people to the will.

You're wanting to take people out. So I know a client who has three kids. She's got all three in the will that they made years ago. Her husband has since passed away and she's not on great terms with one of her daughters and doesn't really want that daughter still in the will. There will be some things that that daughter is a beneficiary on just so she gets something, but she doesn't want her estate split equally between three kids.

She wants one of them to only get a little bit. So she needed to update her will because circumstances have changed. Sometimes it's just that you've moved. I have people who have a will that they got drafted when they lived in Ohio and the laws are different in Ohio than they are here. You need to have a will drafted that reflects the fact that you live in North Carolina. Same thing if you'd moved from a state like New Jersey or New York or Pennsylvania where the state itself has an estate tax. We don't have an estate tax in North Carolina. You only have the federal estate tax to worry about and that's only if you have like a $12 million or more estate.

Most people aren't ever going to deal with an estate tax, but if you move from New Jersey where there is an estate tax in the state as well as at the federal level, well then your will probably needs to be changed to reflect the fact that you live here now. So a lot of reasons you might want to update that will that you haven't looked at and in some cases decades. Makes sense. We're going through the financial junk drawer with John Stillman. Next up is a Social Security estimate that maybe you originally received during the Clinton administration. Is that outdated?

So it's funny. A lot of people will bring in their Social Security statements that they have from years and years ago and want me to look at it and say if I think it's still accurate. Well your income has probably increased a lot since 1994 so that's probably had an effect on your Social Security benefit.

Yeah, let's look at a more updated statement. Now what has happened with this is that the Social Security administration has basically stopped sending these out. You used to get one every year. Now and I can't even figure out the rhyme or reason behind it because some people do actually still get one in the mail. Most people don't though.

So it's not like they've stopped it across the board. It's just that they've mostly stopped it but for some reason a few people are still on the list and get one. You can still get your statement. What you do is you go on the Social Security website which is ssa.gov slash my account. You can set up an account. Now they'll ask you all the security questions so you can prove that you're you and some of them are pretty tricky like you know what make and model car was parked in your driveway for 45 minutes in August of 1998.

I've seen those. But you have to get all those right and then you can get your new statement. It's the same statement they would have mailed you it's just that you get it online and you can get updated numbers that reflect what your current benefits look like which is very helpful and crucial in the retirement planning process. So we don't want to be trying to construct your income plan based on a statement that you got 10, 15, 20 years ago.

And you can find what we'll put that that website in the show notes so you can track down your Social Security estimate and you can find that at rosewoodwealthmanagement.com we'll put it there for you leave it there so you can track it down. All right next up would be a 401k statement from your last three employers that is just sitting in that financial junk tour. Yes so generally rule of thumb is when you leave a company you want to take your 401k with you don't leave your money behind and way too often we see people that have left a job and they just kind of leave their 401k over there not really paying much attention to it.

Now in some cases they're still making adjustments to it but in a lot of cases they just kind of forget about it all together. I've had actually three different cases where people left a job years ago in the 80s or 90s left a 401k behind stopped getting statements for that account along the way and years go by they forget they even had it. So I've had three different people on the verge of retirement who as we're going through the inventory and thinking about all their assets have suddenly realized wait you know what I have an account from company X from years and years ago. Although it wasn't much it was only about $25,000. Okay well that was 30 years ago so we check it now and it's $150,000 once we track it down and this is $150,000 of found money so obviously it's nice to get that surprise but probably could have had a lot more in that account if you'd had it and been paying attention to it and managing it over the years. That's one reason to not leave it behind because you don't want to forget about it and a lot of people say well I'm not gonna forget about an account I have. Okay well still you're better to roll that money to an IRA where you have more flexibility and control over your assets instead of just that menu of 13 mutual funds that they give you at work. You move that money to an IRA and you can invest in whatever you want stocks bonds mutual funds ETFs what have you so just gives you a lot more flexibility and control. Well speaking personally I mean I know it's easy to forget about that stuff because not that I have a count of you know significant amount that I have forgot about but you don't get into a lot if you don't have an advisor that's you're checking up with and kind of refreshing your plan it's easy to forget about that if you're not making changes I mean that's something that I've had to deal with like let's get in this sort of often and just see where we are and make adjustments if we need to but the one thing I have learned from this new job John is I have rolled over an old 401k into an IRA I have made that move since I've gotten really proud of you yeah that's the one thing I picked up so far now I just got to make the adjustments inside the account yeah but I've taken the first step one thing at a time right exactly one thing the cool thing was when I rolled it over I had forgotten that some of that money was Roth 401k money so it moved into my Roth IRA then I was feeling pretty good about that yeah tax-free money coming up that's where you want to be that's where you want to be so yeah that's got to take it one step at a time and I'm trying to do that I've done that here in this job the one step you can take towards clearing out your financial junk drawer which is important for all of us as we've learned today it's a contact John Stillman you can do it by caller by phone or text 800-545-2991 you can catch him online at rosewoodwealthmanagement.com his team is ready to help you out answer that call and set up a time to come in and just see him and speak with him about some of these items because they are important and they can be repurposed and put you in a better position towards your retirement so John thanks for helping us clean it out man hopefully we will get organized we do it doing our best to keep it straightened out that'll do it for this episode of Mr. Stillman's Opus we will talk to you next time.