Low Hanging Fruit

Welcome to another edition of Mr. Stillman's Opus.

Walter Storholt here alongside Jon Stillman. Jon, hope you're doing well, sir. Good to see you. Doing great. Good to see you.

Yep, looking forward to our conversation. Today we're talking about opportunities for improvement. It's kind of funny. In addition to helping people here in the Triangle, Jon, we also talk with financial advisors all across the country who, you know, have radio shows and stuff like that. So we get all sorts of really unique stories and opinions from so many different sources.

It's kind of one of the unique things that we get to be a part of. And a lot of times we get feedback that, you know, after advisors give a second opinion to somebody on their financial plan, a lot of the times what we're finding is that it's not necessarily somebody needs a complete overhaul of their plan. And a lot of the times it's just a little tweaking that needs to be done, little areas for improvement that need to be addressed.

Well, and for a lot of people, the idea of having a complex financial plan is a little bit overwhelming, and that's a tough step for some people to make. And so what we're talking about here today is just some of the low-hanging fruit, if you will, some of the things that are easier to do and not quite as overwhelming as the big step of, okay, let's look at the big picture, just some little almost transactional things that you can check off and say, all right, well, I did that and I improved my situation. It's kind of like trying to lose weight, if you think about it, of dieting and then you also got to add exercise and then you've got to add discipline in these other areas of your life. It all gets overwhelming.

But if you're trying to just improve things one by one, it becomes a lot more manageable. What's the old saying? You eat an elephant one bite at a time or something like that? Yeah.

And I always wondered why anybody wanted to eat an elephant in the first place, but... Is that a delicacy anywhere? Maybe so. I don't know.

Seems like it'd be pretty gamey, pretty tough meat. It would be. I don't know.

Depends on what part of the body you get it from, probably. Another conversation for another day. So let's talk about some of those common areas for improvement that are relatively easy to address. One has to be, and I'm sure this is maybe pretty popular, especially right now, way too much money in cash for folks. That's identified a lot of the times as one of the top areas of improvement for folks.

Yeah. Very often we see people with a lot of money in the bank and they're intending and they have intended for a long time to do something different with it. They just haven't done it yet. And if you put it off too long, suddenly that cash starts piling up. So for some people, as a matter of their monthly cash flow, they're putting two or three thousand dollars a month over into the savings account at the bank. Well, you do that for a few years and next thing you know, you've got a hundred thousand dollars sitting in cash.

I have a lot of clients with rental property and they have a lot of rental income coming in and certainly they need a bigger emergency fund than the average person because of all these properties. But very often they've got five or six thousand a month going into the bank account and they're piling up cash. Maybe to buy a new property at some point, but if they don't buy that new property, suddenly they have a lot of cash on hand. Sometimes you get an inheritance and you just kind of park the money there in cash or it could be any sort of windfall that you get. Maybe you sell a piece of property or something and you stick the money in cash intending to do something with it, but you never get around to doing it. And so what we find is that those are very easy opportunities for somebody to say, all right, look, I know this cash is sitting there collecting dust. I can do something more efficient with it. And so, you know, that's where there's some opportunities to be more efficient. Having a lot of money in cash isn't a bad thing.

It's just very inefficient. Yeah, it's certainly better than having nothing in cash. But certainly you don't want to overfund that bucket. Yes, that's a good way to put it. Don't let that bucket runneth over, in other words.

It's very King James version. Yes. In other ways where we see this kind of happen, where people sort of maybe just by not paying attention or just it gets kind of pushed under the radar, because this is one of those things that you just sort of, you know, you purchase and then sort of forget about it and you never really look at it again. That's life insurance policies. And some of those old policies you have hanging around could be kind of in that same vein. It could be working more efficiently for you. And it's counterintuitive because everything has gotten more expensive over the years, right?

Eggs and milk and cars, real estate. Maybe electronics, like big screen TVs have actually gotten cheaper. They still are expensive when they come out, but then as they're out for a couple of months, yeah, they do go down. But if you compare a 64 inch TV, I don't know, is that a thing that exists? If you compare that a decade ago, it's actually cheaper now. Probably 65, not 64. Whatever.

You get the point. So the other thing that's actually gotten cheaper over the years is life insurance. So life insurance and TV.

Big screen TV. For a couple of reasons. Life insurance companies run a lot better, more efficiently than they used to be 20 years ago. And secondly, actuarial tables. So we used to call it life expectancy tables.

Now they're more often referred to as longevity tables because people are living longer. And so what does that mean for life insurance? Well, the longer you live, the longer the life insurance company has to collect premiums from you before they have to pay out a death benefit, right? So life insurance has actually gotten cheaper. Well, what does that mean for that old policy you have?

Very often, we'll see people come in and they have a policy that they got in the 90s or even the 80s or maybe even just 15 years ago, or it could be a policy that their parents got for them when they were kids. And they build up a cash value of, let's say, $50,000 within that account. Well, very often, let's say they've got $50,000 as a cash value and they're paying $2,000 a year as their premium. Well, very often, we can take, and let's say they've got a $275,000 death benefit.

Okay. So $50,000 built up cash value, they're paying $2,000 a year into that account, death benefit of $275,000. Right. Very often, we can take that $50,000, move it to a new policy, get rid of the $2,000 in premium altogether moving forward. So just done it at the 50 you put in. Right. And then have that same death benefit still in place. That's completely possible.

That's pretty nice. Or it could be that you reduce the premium or maybe you say, look, I want to keep everything the same, keep paying what I'm paying, but move it to a new policy and suddenly now get more death benefit. That could go either way. So it's certainly worth an analysis on those things. If you have old cash value life insurance policies, very, very often, there's an opportunity to have the same thing more cheaply or pay the same and have a better policy. The other thing is you can add the accelerated death benefit to those policies.

Those didn't really exist a couple of decades ago. But now you can add the accelerated death benefit if you move it to a new policy. For instance, if you've got that $200,000 death benefit, that basically means you have $200,000 to go toward long-term care if you need it. Obviously, it no longer is a death benefit if you spend it on that, but it allows you to get the death benefit earlier to pay for your care. But people might be thinking, well, this is a policy back from the 90s. I'm 20, 25 years older than I was back then.

How is that going to be viable? It seems like it would be miles more expensive, even if over time it has decreased because I'm so much older. Well, if it was a permanent policy, your age has nothing to do with it because when you got the policy, they were banking on you paying for your whole life and then paying you out whenever you die. It's not a term policy. It is a permanent policy. So they're still going to pay you out when you die.

It's just now they're expecting you to live longer than they were expecting you to live in the 90s. Fantastic. Yeah, very interesting. It's just interesting to see all the flexibility. We won't go further down the life insurance rabbit hole, but very interesting discussion about something that you would think would be so simple. Right.

And there's lots of different directions. But again, that's low-hanging fruit. It's an easy thing that you can do to improve your situation.

Excellent. These are the low-hanging fruits, I like that, of financial and retirement planning, other way to put that, easy opportunities for improvement in your financial plan, too much in cash, old life insurance policies, two good examples. Speaking of old things, old 401Ks left with a past employer, very common thing that people kind of encounter, I guess.

See it all the time. And it's one of those things where it's just so easy to make that something you'll do later and then a few years go by and that old 401K is still sitting there. A couple of problems with that. One, you just have that limited menu of investment options. What that company says you can invest in, those 10 or 12 mutual funds are your only choices. I've seen some situations where once you're no longer with the company, you don't even have access to the account. You can't log in and make changes to it in some cases. Not in all cases, but in some cases, you can't even change your allocation. So, it's truly on autopilot and you can't touch it. In those situations, it makes so much more sense to roll that over to an IRA where you can invest in whatever you want and you can control the costs instead of being at the mercy of that menu of choices and the administrative costs of those funds. So, again, low-hanging fruit.

Really easy to take that old account that you're not contributing to anymore. Nobody's managing it. It's just kind of dangling out there. A vestigial organ, to use a biology term. Wow, I didn't think we were going to come across that today.

So, very often you can take that money and be much more efficient with it. Vestigial? Yeah. So, they have snake skeletons from supposedly millions of years ago where the snakes had feet, but supposedly the feet evolved away and so it's a vestigial organ. A no longer needed organ?

Is that the true definition of it? That's probably a bad example. Because feet aren't really organs. You're right. That's basically how I remember it from biology. A vestigial body part doesn't have to be an organ.

If you're listening to the podcast, then you know the true definition of a vestigial organ. I guarantee you somebody does. Write in to Jon and please educate him on the absolute proper way to put that. But that's good. That can be the clue question this week. Call in and you get a free something. What can we give away? You get a free snake skin. A free snake skin? My dad's a bug man. He has plenty of those lying around. Yeah, that'd be great. Get a snake skin from dad.

We'll hook you up. Well, those are some really good tips. Very, very easy opportunities to improve your financial plan. There are other ways as well, but those are three quick tips on some of the things that might be dangling in your financial plan that are easy to grab, that low-hanging fruit, and improve it.

Those three easy steps really will put you on the path to a much better financial plan if you have those opportunities to improve. Jon, thanks as always for the help. I believe the human appendix would also be a vestigial organ. It was at one time theoretically used for something, but now it's just kind of there. But now we can take it out, right? It just causes problems now.

No. So don't let other vestigial organs that might cause you problems, like appendicitis in your body. You don't want appendicitis in your... We're really stretching here. Oh, male nipples. Another example.

Vestigial body part. All right. I'm reminded of the Meet the Parents clip where I have nipples. Greg, can you milk me?

Maybe in the past, but not anymore. All right. Those are your opportunities for improvement. We're going to get out of this before it gets dodgy. That's another episode of Mr. Stillman's Opus. Thanks, Jon, for the time. I'm Walter Storhold. We'll talk to you next time.