Handing Out Financial Superlatives

Welcome in to Mr. Stillman's Opus. I am Ben George, alongside the man for which the show is named, Mr. Stillman.

John Stillman. When you name the show yourself, you have these advantages. Call it what you want. How's it going? Pretty good, man. Glad to be with you on this show.

Always a pleasure. Welcome in. What are we, like, 50 episodes in? This is number 50. And this is your debut on Mr. Stillman's Opus. I got the call up. Pretty good. Yeah.

And I like this episode because you're probably familiar with this topic. It's I think I think when I think about you, I think about a guy that was probably voted most likely to succeed in high school. I was probably I'm going to assume I was second place on that. I didn't actually win it. So I can only assume I came in second.

They didn't release the vote totals, but I'll just assume that's the case. No class clown for you. No, but Molly did get that.

So I married a class clown. Okay. Yeah, I actually got most dependable.

Can you believe that? You're pretty dependable fella. Yeah, I can see that.

Okay. I'll take that. I still live up to that to this day.

I'm proud of it. So today we're going to take that same thought and apply it to finance. So let's say you're on the yearbook committee of the School of Financial Tools and Strategies, we'll call it. So you're like a lot of parties happen at that school.

It's a lot of extracurriculars that school. Your job is to name a winner for each of the following superlatives I'm going to give you. You got to apply it to financial tools and maybe investments and stuff that we might add to our portfolio. Today we'll play along that same that same mind frame. So let's start off with an easy one for you. Most underrated. Most underrated.

All right. Well, for that, I'm going to go with the Roth IRA simply because I see so many people who are at retirement age that wish they'd contributed more to their Roth. So when they were younger, you know, in the 80s and 90s and even early 2000s, everybody was pushing tax deferrals. Put the money in the IRA, the 401k. Don't pay taxes on it now because you're going to be in a lower tax bracket once you retire. And a lot of people, now that they're doing their retirement planning, are now kind of realizing, oh, that's not actually going to be true.

I'm going to be in the same tax bracket, if not a little higher for most people. And so now they're wishing they had more money in the Roth. On the younger end, people in their late 20s, early 30s, maybe even in their 40s, I don't see utilizing the Roth. As much as they should be, simply because you don't get that tax deduction when you put the money in now. And so there's sort of this immediate versus delayed gratification thing. And most people opt for the immediate gratification of putting the money in the 401k or the traditional IRA. Get the tax break now when really they should be getting the tax free growth for down the road.

Whatever money you have left over, you can put in the Roth. So I've started shifting my line of thinking as well. Number two, superlative. How about most overrated? All right. Well, this would not necessarily be a financial tool or strategy, but I'm going to go with expensive cars for most overrated. So the way this usually looks, I'm not as anti car payment as some radio hosts that you might hear nationally syndicated would be.

Okay. But I will say that car payments are an enabler, which allow you to buy a lot more car than you should. So when you think about how quickly cars depreciate, it really just as an investment doesn't make sense for you to put a lot of money into a car.

Well, a lot of people say, well, I know it's not an investment. I it's just an expense and I need a nice car. I need a reliable car. And people use this excuse of I need a reliable car to go spend $45,000 in the vehicle. You can have a reliable car. That doesn't cost that much. You don't have to have a new car. You don't have to have a luxury car. You can be just fine and something a lot cheaper. Now, if you want to spend more on that, that's fine.

I'm not telling you how to spend your money. All I'm saying is don't use these excuses that you give yourself of why you need that more expensive car. You know, quite frankly, depending on what your income and your assets look like, you probably shouldn't be in that more luxury type of car. So again, I'm not anti car payment.

Necessarily. But if you're gonna pay cash for a car and you're gonna spend 10 or 15,000 on a car, but by financing it and having a car payment for the next five or six years, it allows you to spend 35 or 40,000 on the car. Well, that's probably an indication that you're spending more in the car than you should. But a lot of people do that.

That's the most common way to do it. So that's why I'm gonna say that's the most overrated. You gotta have those heated and cool seats, John.

That's that's such an important. Well, interestingly, so we just went to see the lighting movie. And at the Southpoint Theater, they just got done renovating it. You now have heated seats in the movie theater. So they recline.

You can adjust the seat so they recline. You can turn the heater on on your seat. Had no idea. Yeah.

So heated seats are everywhere now. We are running through superlatives, financial superlatives with John Stillman, president and founder of Rosewood Wealth Management. Third one I want to throw at you is most likely to disappoint.

Do you have one for that? So for most likely to disappoint, which, by the way, imagine getting that as an award in school. Yeah, I'm gonna go with whole life life insurance. So very often I see people that have bought these policies years ago or maybe a parent bought it for them with the idea that they're going to build cash value.

And, you know, if something happened and they became uninsurable down the road, they definitely have this guaranteed death benefit. But quite frankly, I see a lot of people who get 10, 15, 20 years into those policies and they look at how much they've paid into the policy. Let's say you paid $100 a month and you just don't have the cash value that's built up to justify that. And you could have had term life insurance for that same period of time. The same death benefit maybe would have cost you $7 a month instead of 100. So what you have is $93 a month that you spent essentially pretending like it was an investment that you were building up this cash value.

And more often than not, that cash value is nothing to write home about. So, you know, there are strategies where you would use a whole life policy, but they're much fewer and far between than the actual, in real life, how often they're used. Right.

If that if I can come up with a more confusing way to say that sentence, you could probably put them in the most overrated category if you wanted to, but I'll put them in the most likely to disappoint. Okay, we could go down a rabbit hole for life insurance, I'm sure. So we'll save that one for another episode. But I like the answer.

All right, one that reminds me of your group of friends back in high school, most popular. Of course. So I'll go with the 401k on this.

Okay. Now when I say 401k, that could just as easily, especially in our area, be a 403b for people who are working for a nonprofit or government entity, or maybe a university employee that's in the 403b plan instead of the 401k. It's a little hard to follow because a lot of UNC employees and Duke employees have the 403b. Some of them have the 401k. It all just kind of depends on, I think, when you started, what plan your grandfathered in under, whether you're a hospital versus university, all that stuff. But when I say 401k, I'm talking about all of that, the retirement account associated with your employer, if you're a federal employee, the TSP.

So obviously, it's the most popular because this is the one that's kind of in your face, right? It's hard to avoid having at least a conversation about the 401k if you're eligible for one. So very often you'll have seminars at work where they'll have somebody come in to talk to you about the 401k, things you need to know about it. And quite frankly, it is a painless way to say, I mean, you never see that money come home, you just you don't get used to it ever being in your checking account.

You never miss it. It's just easy to put the money in there. The problem is, let's go look back at our very first superlative that we gave out, most underrated, the Roth IRA. A lot of people should be putting money in the Roth, not necessarily in lieu of the 401k. But instead of putting 15,000 a year in the 401k, why not max out your Roth, get $6,000 in there and put 9,000 in the 401k. Now obviously, we want to go back to the 401k. We want to get all the free money that's on the table.

So if there's a company match that's happening, absolutely, let's get the company match. Don't forsake that. But outside of that, it's usually going to be better if you put additional contributions in the Roth. And then after you've maxed out the Roth, yeah, let's go back and look at the 401k after that. But a lot of people just get too hung up on doing that pre-tax deduction. Do you think we'll ever see the Roth overtake the 401k for most popular?

Do you see that anytime the next 10, 15 years? If people would figure out how tax rates are going to change over the years, then yeah, I think it would be a more obvious choice. But honestly, people are so lazy about this for the most part.

They're going to take the path of least resistance, the thing that's easiest to do. And so often, the thing that's easiest is to just tell your HR people at work, yeah, put 8% in the 401k for me. And really, for a lot of people, that might be the best thing simply because they're not disciplined enough to then put the money in the Roth themselves if they bring it home. A lot of people, if you bring that money home, it's getting spent. So you kind of have to know yourself and be able to coach yourself through the right decision there.

Yeah, it's not a bad thing. It's just your money could be better invested somewhere else. All right, our final superlative, financial superlative of the show, teacher's pet. A little bit of a different thought on this one for finance.

So the teacher's pet would be what? That's something that, I guess, advisors think are popular. Advisors like, but not necessarily the greatest thing. It's like the Eddie Haskell of financial products, right?

So, you know, yes, Mrs. Cleaver always says the right thing, dresses sharp, but at the end of the day, there's something not quite right. So for this, I'll go with the variable annuity. So I'm not anti-annuity. We use indexed annuities fairly routinely with a lot of our clients who are getting close to retirement and need a place to put money that's lower in risk or has no risk at all. But the problem is if you look at the annuities that are sold nationwide, 75% of them are variable annuities. Really high in fees, usually very high risk, and usually those fees aren't really getting you anything.

You're not really creating a benefit for yourself by paying those fees. So you're combining sort of an investment product with an insurance product, all mashed up together, and it just becomes a very expensive, inefficient way to invest your money. But the commissions that you make when you sell them, I guess, are pretty high. So you have a lot of advisors that like to use these as part of people's portfolio. So for that reason, I'll call the teacher's pet popular for advisors.

Therefore, they get pushed a lot, but not necessarily the greatest thing. So those are your class superlatives for finance. And of course, if you want to talk about any of these products and just get some more feedback on any of these and whether or not they're good for you, John's always available. You can check his website, rosewoodwealthmanagement.com. Also, you can call him or text if it's easier, 800-545-2991. And John, you guys have a seminar coming up, right?

Yeah. Always have classes coming up. So depending on when you're listening to this, there could be one next week. There could be one in a couple months.

But there's always one not too far around the corner. Those are most ideal for folks who are between the ages of, let's say, 55 and 65. Maybe you're getting ready to retire or you've recently retired and you're just trying to get all those pieces together. That's what those classes are focused on if you're younger and you'd like to come in and have a conversation about how some of this stuff fits into your life. Well, by all means, just come on in the office, no cost or obligation.

We'll sit down with you for 90 minutes and map it all out on the whiteboard and figure out what you need to be considering. Awesome. Well, I enjoyed this episode.

First episode in the books with you, but also a fun topic, class imperatives. John, I appreciate the time. We'll do it again. Absolutely. We'll come up with an award to give you at some point down the road. Thank you. You have to learn a little bit more about me before you hand it out. But until next time, this has been Mr. Stillman's Opus.