June 29, 2025 • 32 mins
The job market is more tumultuous right now, especially for college graduates.
Ask HTM: Wayne wants to know if he should lend his stocks in order to make more money.
More workers are reducing contributions to their workplace retirement accounts because they're worried about the economy. This might be good, but only if you're saving the money you aren't investing!
Ask HTM: Collin wants to know about buying life insurance, when to buy and how much?
Ask HTM: Wayne wants to know if he should lend his stocks in order to make more money.
More workers are reducing contributions to their workplace retirement accounts because they're worried about the economy. This might be good, but only if you're saving the money you aren't investing!
Ask HTM: Collin wants to know about buying life insurance, when to buy and how much?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Kay if I am six forty you're listening to how
to Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is how to
Money with Joel Lar's Guard and Matt allmakes.
Speaker 1 (01:03):
KFI AM six point forty live everywhere on the iHeartRadio app.
This is how to Money. I am one of your hosts,
Joel Larsgard.
Speaker 3 (01:11):
And I am that a mix. By the way, you
can always find more money saving information over at howtomoney
dot com.
Speaker 1 (01:18):
I want to talk about unemployment for a little while,
and we are not at great recession levels of unemployment.
We're far from it, in fact, I mean you think
about that. I remember I was graduating college in the
teeth of the Great Recession, and man, I just remember
havoc tumult all around. Shortly after graduation, and especially for
(01:43):
people graduating the year or two after me, the job
market just continued to get worse. But recent college graduates
they're getting more nervous about entering the job market right now.
They're kind of assuming and feeling like things aren't as
good as they have been. And I think biels worse
for recent college grads. Then it has been largely because
(02:05):
the job market was so worker friendly for the past
few years. When you think about just how good things
have been, that it makes sense that they can't stay
that good forever. And we've reached more of an equilibrium now, right.
So it's kind of like housing prices, they couldn't continue
to go up into the right at the insane rate
that they were, that they were traveling upward for the
(02:27):
coming years, like they had to come back down to earth.
Home prices couldn't outpace wage growth for forever, and that's
why I think we're starting to see a softening in
the housing market. But the same thing is true of
the job market. People jumping ship and being able to
get paid twenty thirty forty thousand dollars more because there
was such a shortage of workers. And so yeah, we've
(02:50):
reached this I think new place of equilibrium, which does
mean it's harder for new graduates to find work, even
as the unemployment rate remains low. And so recent data
found that the unemployment rates for people in their young
twenties is higher than average. It's six percent compared to
four percent, so still relatively historically low, but not as
(03:15):
good as the overall job market.
Speaker 4 (03:17):
So if you're.
Speaker 1 (03:17):
Graduating and you're ready to put that degree to use,
you're like, oh, I don't know, maybe am I.
Speaker 4 (03:23):
Actually going to get the job I want.
Speaker 1 (03:25):
Some even suspect that companies are leaning more heavily on
artificial intelligence. That's part of the reason why I think
there is some anecdotal evidence to that and potentially some
reality some beat to the ground for that claim. But
I also think it might be overblown, like the Shopify, No,
you can't hire anyone until you can prove that a
I can't do that job. That's few and far between,
(03:48):
at least at this point. Where that goes in the future,
that's a good question. I'm not an expert on that,
but I think, yeah, it's true that graduating into a
tougher economic climate it's emotionally difficult. It can have long
term personal finance consequences as well. So if you're graduating
into a down job market and you feel like you
have to take a job that you otherwise would not
(04:10):
have taken, or you might have you're more highly qualified
than the job your first job suggests, it could have
lifetime career earnings impact so I would do a couple
of things. I would suggest proactively reaching out to companies
you like and you want to work for. Don't just
lazily toss out resumes online. If you look at the
job boards of companies that you really dig, I think
(04:32):
that's a better way to go, and then just kind
of keep barking up that tree. Also, your network might
be small right now, but don't neglect it as your
job hunting. And also your school's alumni department they might
offer helpful resources. Hey, I just got a degree. Here,
I'm gonna hold your feet to the fire. You help
me find this job. What connections do you have for me?
(04:52):
I think that's always a good place to turn as well.
And this might sound counterintuitive, but if a graduate degree
would help your lifetime career earnings and you can mostly
avoid debt, you don't have to take on loads of
debt to get that an extra degree. And at the
same time, you feel like you're having trouble securing the
kind of job that you want, and you feel like
you should be capable of achieving in a better job climate,
(05:16):
consider getting more education. I think it's a way to
wait out a potential recession and to come out better
on the other side. Again, is a recession going to happen?
I don't know, But if the job climate, if you
feel like you are having a harder time finding the
job that you deserve, or you think your education and
experience level qualifies you for this is a kind of
(05:40):
a normal approach for a lot of people over time
has been you know what, I'm gonna hunker down during
the tough economic climate, get that education. I'll come out
on the other side a little bit better, a little
bit stronger, ready to get that fancy your job. But
also this was making me think, is unemployment worse than
maybe the headline number suggests. And there's this new study
(06:02):
that found that what they called functional employment in the
US is closer to twenty five percent, And I was
like dumbfounded when I read that statistic twenty five percent.
No that I have not seen any sign that we
are experiencing unemployment at those levels. And this study it
made for shocking and clickable headline, but I just don't
(06:23):
I just don't think it's accurate. I think the real truth, though,
lies maybe somewhere in the middle. We see the headline
rate four point two percent unemployment rate, and that headline
rate that gets the vast majority of the headlines right,
But maybe that's not quite as accurate as we would
assume either, And so maybe now is a good time
for me to quickly put on my point hat not
(06:46):
really an economist, but I'll play one for just a
second and dive into different stratifications of the unemployment rate
in what they might mean. So there's the headline rate,
that four point two percent that I just mentioned is
known as YOU three. But there's this other unemployment called
U six, and it might be a better indication of
what's really going on in the job market because U
(07:07):
six includes another segment, multiple other segments of folks that
YOU three does not. And so U six says, actually,
we're gonna include just beyond people who are just actively
looking for work, who don't have work, that's U three,
We're going to actually include people who have part time
jobs wo wish they had a full time job. And
if you look at U six, then that unemployment rate
(07:30):
is currently at seven point three percent. So is unemployment
four percent? Is unemployment twenty five percent? Well, if you're
to ask me, I would point to U six and say, ah,
it's probably closer to the low sevens. That's likely a
more accurate state of what's happening in the labor market
right now. So U three that's what hits the papers.
U six is more reflective of real employment conditions. And
(07:54):
actually U six is still historically low when we're talking
about it. So where does the job market stand? Certainly
not as good as it was a few years ago,
but I think there's still opportunity for people who are
go getters. And yeah, it's also helpful to realize that
maybe the U three if you are working hard to
find a job and you feel like it's harder to
(08:14):
get don't be demoralized. The unemployment rate not quite as
rosy and glossy as it seems in some of the headlines.
Speaker 5 (08:22):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (08:29):
If you have a money question, we'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at how toomoney dot com.
Speaker 1 (08:40):
Forward slash ask let's get to a question now about
maybe a prompt you've received inside of your investing app
and whether or not you should follow through and make
it happen.
Speaker 6 (08:51):
Hey, there, Matt and Joel, this is honorary best friend
Wayne from Philadelphia contacting you with yet another question.
Speaker 3 (08:59):
So.
Speaker 6 (09:00):
I have a roth Ira account open with m one
and recently I noticed that I had a interest payment.
I did a little digging and found out that M
one Finance has a fully paid security lending program which
they automatically sign everyone up for and that you can
(09:22):
opt out of. I should also note that you are
not always lending out your assets, and it seems to
be some kind of lottery system that decides whose assets
are lent out and when. So onto my question, how
do you guys feel about the lending of retirement securities?
Would you opt out or would you stay involved? Apparently
(09:43):
you get ten percent of any of the profits they
get from the lending, which seems really on the low side,
especially since it sounds like we as the customers, are
taking the majority of the risk. Also, while making this recording,
I found out that Fidelity has its own lending program.
How does that compared to M one? Are there other
lending programs out there? Am I leaving money on the
(10:04):
table by not participating in these types of programs. Thanks
again for taking my question, and I look forward to
your answer. Best Wayne out, Best Wayne out.
Speaker 3 (10:15):
You know, j'all, I'm gonna go out on a limb
and say, Wayne, this Wayne is my favorite Wayne friend
that I have.
Speaker 4 (10:23):
Have you met Wayne?
Speaker 3 (10:24):
I R L no, okay, but I don't know any
other Wayne, you know, like he automatically gets the number
one spot.
Speaker 4 (10:29):
Sorry, Wayne, this is the competition.
Speaker 3 (10:31):
Wasn't super super stuff, but I feel like I would
also be friends with Wayne.
Speaker 4 (10:35):
IRL.
Speaker 1 (10:36):
That also means that this Wayne is easily going to
get bumped if you do meet someone.
Speaker 4 (10:39):
I RL no, no this Wayne. This Wayne's way cooler,
your top notchway. So no joke.
Speaker 3 (10:43):
I actually I just looked at my phone and I
do have a Wayne in there, but I don't know
who that is. It says it says like Wayne like
Wayne Lania or something like that. I'm like, I don't
know who the heck is this.
Speaker 1 (10:52):
I don't know. Maybe that time you met Wayne Gretzky,
you guys are palseright, No, was not him, But Wayne,
thank you for this question. It's it's one that we're
gonna hear more and more as brokerage firms make their
customers aware of securities. Stockland, also known as stock lending,
folks are going to be enticed by the language they use.
Speaker 3 (11:10):
Right, who doesn't want to earn more money on their investments?
Why not earn a little bit, a little, big, little,
some side money on my side.
Speaker 1 (11:17):
Let me let my securities have a little side hustle
bringing me more money in right, it sounds like, not
only are they just earning me the regular sort of dividends, maybe.
Speaker 4 (11:25):
I can also do some of this on the side.
What's not to like? What's not to like?
Speaker 1 (11:29):
There are some pitfalls that we do need to cover
before we send way and all in on this direction
and say, yeah, lend your stocks out, no worries. Well, ye,
stock lending is available to a whole bunch of people now,
and there are so many fewer hurdles to lending out
your stocks. And you know, onlike some of the riskier
types of investing you can do, you don't need to
(11:50):
be an a credit accredited investor. So usually there's this
hurdle you have to overcome, which involves a network that
you have to have, or you have to have a
super high income. That's how you're able to make more
risky types of investments. But on when it comes to
stock lending, that's not the case. You just have to
make more than twenty five thousand bucks I think with
an accredited investor it's usually two hundred and fifty thousand,
(12:11):
or you have to check a box on the back
end of your account saying hey, I know the risks.
And so with most of these brokerage firms who are
offering this, like getting into stock lending is easyps. Anybody
can do it, but that's not necessarily a good thing, right,
you know, stock lending, it's it's kind of in some ways.
Speaker 4 (12:28):
Like owning a rental property.
Speaker 1 (12:30):
Right, the property is yours, but you lease that property
to someone for a specified period of time, most of
the time over a year basis, right, So you make
a little money while you rent to that person, but
you retain ownership of the property. And so at the
end of that year you can say you're out of here,
or I'm uping rent, or please stick around. But there
(12:50):
are reasons that stock lending is unlike investing in real
real estate. And if we're going to give the short answer,
I'm going to say, I just don't know that I
will would participate.
Speaker 3 (13:00):
I don't know that it's the best idea for most folks. Agreed,
I don't think it's worth the squeeze. And the reason
being is because oftentimes folks want to borrow your stocks,
typically because they want to short the stock that you own.
They're basically betting that the price for that stock is
going to go down, and if it does as they hope, they.
Speaker 4 (13:17):
Make some money. So do you, so everyone wins.
Speaker 3 (13:20):
But if the short seller is substantially wrong, there is
a chance that you could actually lose money. Even when
lending your stocks out against you still retain the stock
in your account while you're lending it out. But you know,
this is an actual legit way to make some money.
That being said, the safety is a bit questionable, and
I think we will see this becoming a bit more
normalized with the different brokerages out there, especially once who
(13:43):
are counting on I don't know that I feel like
you tend to see it more. He mentioned Fidelity specifically
they do this, but also with Robinhood folks who are
leaning into because the other side of this you got
securities lending, but then you also have margin investing. That's
the other that is what is made available because of
stock lending, and the part I just don't like the
aspect of it that it's all it feels like it's
(14:04):
built on a house of cards. Yeah, that sort of
approach it. I want you to be careful.
Speaker 1 (14:08):
It's not all about the passive investing approach that that
you and I are typically fans of, Matt, And most
of the time you'd be fine lending out your securities
ultimately under in one or Robin Hood's program, or fidelities
really whoever's But when you look at the disclosures, it
can also raise eyebrows, and so you typically encounter a
clause about risk of default. I would read that clause carefully.
(14:29):
Most of the time, Matt, when we're agreeing to terms
of service, we're not looking at that stuff. We just
like scroll down to the bottom and we click okay.
But Robinhood and in one they've got, by the way,
their own cash collateral in the case of an event
where there's some sort of abnormal market behavior, but even
that may not be enough to cover your losses. They
Robinhood in particular, almost didn't have enough cash during some
(14:52):
of the massive meme stock trading days where there was
just incredible volatility and specific stocks. So if you were
lending out let's say your Game Stop stock, well, there
was a chance that you were gonna get screwed, you know,
and and that Robinhood wasn't going to have the collateral
to cover your losses. And so in addition, you know
your stock portfolio, it's typically ensured by the SIPC, but
(15:14):
securities you've leant out, they're not covered, which adds more risk.
Speaker 4 (15:17):
To this whole endeavor.
Speaker 1 (15:18):
So there are risks here that are are meaningful, and
when you look at some of the terms, it frightens me.
It makes me want to not participate well in this.
Speaker 3 (15:29):
Process, especially because we're not talking about making a ton
of money.
Speaker 4 (15:33):
If the reward was sky high.
Speaker 3 (15:35):
Like you mentioned real estates, you know, there is some
decent money to be made in real estate when you
invest in rental properties or just different types of real
estate investing. If that was the case here when it
came to securities lending, it might be worth the risk,
but the rewards are actually pretty paltry. We don't have
personal experience, so Wayne, I should tell you again this
(15:56):
reinforces our opinion that this is not something that we recommend.
But if you dig a and you look at like,
for instance, over on Reddit, some folks have shared that
with a two hundred and fifty thousand dollars investment balance,
they're making somewhere in the neighborhood of one to two
dollars a month.
Speaker 4 (16:10):
And so that's the kind of conversation we're having here.
Speaker 1 (16:14):
They make it sound so much better when the pop
up happens and it's like, do you want to turn
off securities lending? Like you could make money on your
stocks that you own. Part of that is because it's
not like your entire portfolio is going to be lent
out at the same time, because it's often the riskiest
stocks that are likely to be borrowed, Basically folks that don't.
Speaker 3 (16:31):
Want to borrow bland ole, boring, Voo, the s and
P five hundred ETF. You mentioned it being a lottery
as to who it is that gets chosen, who gets
the honor of being chosen to participate in securities lending.
Oftentimes it is those risky as stocks because there is
not stock available when it comes to the clearing of
the stocks. So they're trying to facilitate in the purchasing
(16:53):
and the selling of these different securities, which means most
hot of money listeners they're not going to receive much
benefit from participating. And the brokerage firms, as you alluded to,
they are the ones who stay to profit the most.
Speaker 4 (17:05):
Here. Yeah, you're spot on, my friend.
Speaker 5 (17:07):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (17:14):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Are Worries about the state of the economy
are leading workers to reduce four one K contributions right now?
There's this new Morgan Stanley survey and it found that
four in ten employees are reducing what they're contributing to
their workplace retirement accounts because of the uncertainty that they're feeling.
(17:37):
They're like, things just don't feel good. It's a vibes
based approach to how much they're setting aside for their future.
And so the vast majority are still contributing something, right,
They're not dialing all the way back to zero, but
they are cutting back how much they invest. And the
first thing I thought of when I read this was
(17:59):
that's actually my be the worst news. If people are saying,
I'm gonna invest a little bit less, I'm gonna stick
some money into my savings account. I'm shoring up that
liquid savings because that's what I need to.
Speaker 4 (18:10):
Be worried about.
Speaker 1 (18:10):
If I really do have concerns about the economy in
the near term my own employment, Like, am I going
to have a job six months from now? I don't
know if you're worried about that. Having more cash on
hand makes sense. But sixty seven percent of folks in
this survey said they're not prioritizing savings either, So they're
not dialing back on retirement of contributions to sticking in
(18:32):
a high healed savings account, they're funneling it into their
monthly spending. You know, I don't want you investing a
big chunk of your paycheck if you haven't prioritized liquid savings.
Go look up the money Gear's got to have the
money dot com click start here. You'll find our money
gears there. See where you're at and what the next
step is for you. But if your job or industry
right feels particularly vulnerable. Airing on the side of more
(18:56):
savings could be wise. It's okay to dial back in
order to bulk up savings for a limited time, but
I also don't want you to cut back on contributions
because you're worried about the stock market, right. That is
the classic mistake that so many people make. I was
literally just reading about there's this old adage of when
(19:17):
it comes to investing in the stock market, and we're
in June now, but it's it's you know, go away
in May, like, don't don't invest in May because stock
market doesn't usually perform as well as it does in
other months. And actually, when you look at the historical
performance of the stock market in May, it's pretty dark good.
It's not as good as the average stock market returns,
(19:38):
but it's still pretty good. And if you look at
what happened to the stock market in May twenty twenty five,
it was pretty awesome too. And so even with all
of these concerns, even with all the tariff concerns and
the steep stock market declines, we've seen a recovery and
then some. And so to change your investing goals, attitude
(19:59):
and percentage because of headlines and vibes and uncertainty. Well,
if you did that, if you follow that advice, it'd
be like shooting yourself in the foot from an investment perspective.
And instantly there was this other study from Fidelity that
came out this week and it found something really different
(20:20):
than what this Morgan Stanley survey found. It found that
people are saving a record amount in four to one case.
So where is there? It feels like there's this dissonance
to these two separate findings that came out in the
same week. Fidelity says people are saving almost fifteen percent
in four to one case, which is the minimum recommended
(20:41):
amount to invest for your future from most personal finance nerds,
myself included. I want to see people hit that as
like a minimum threshold for what they're contributing to their future.
Speaker 4 (20:51):
And I think these.
Speaker 1 (20:53):
Things are actually not mutually exclusive, And let me explain
why I think they actually fit together in an interesting way.
I think the reason that both of these things are
true is that more folks are being auto opted into
their workplace retirement accounts in record numbers, and so like
the bulk of folks who were contributing nothing to their
(21:15):
retirement accounts are now contributing three percent or five percent
whatever their employer has said, Hey, this is like the
minimum amount we're going to auto opt you in at
A lot of the people who get auto opted in
don't end up changing that back to zero, which is
something I love to see because more people investing for
their future is a good thing, even if it's kind
(21:37):
of against their will but they're too lazy to change it.
I think that's awesome. Then other people are taking their
contribution amount down because of economic worries, and so you
can have this effect where yes, some people are dialing
back retirement contributions and other people are saving more than
they and investing more than they otherwise would have. So
both of those things can be true at the same time.
It's just kind of fascinating to see both of those
(21:59):
come out simultaneously and be.
Speaker 4 (22:01):
Like, oh, yeah, okay, yeah.
Speaker 1 (22:03):
As I noodled it out, I was like that there
really can be possible.
Speaker 5 (22:06):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (22:12):
If you are over on Facebook and you want to
join a group of like minded folks who have money
questions and insight. Please go ahead and join the how
to Money Facebook group.
Speaker 1 (22:22):
All right, let's get to a question from listener Colin,
specifically about life insurance, when to buy and how much.
Speaker 7 (22:29):
I'm at Joel, This is Colin from Leancaster, Pennsylvania. I
just wanted to get your guys input on life insurance.
My wife and I currently are renting and do not
have any children, so we don't have any life insurance
apart from a small group life plan that I have
through my employer, and the next year or two we're
probably going to start looking to buy a home and
(22:51):
start having children, so I wanted to make sure we
got everything squared away as far as life insurance goes.
So I just wanted to get your guys' input on
what you guys recommend. I've heard from most experts that
they recommend term life insurance. We also have friends that
are in an index universal life plan called Kaisen. What
(23:14):
we'd love to hear your input on that kind of idea.
Right now, my plan is to just to term life
insurance and keep it simple, but I just wanted to
hear what your guys thoughts were on that. I also
wanted to get your guys input on what kind of
level of coverage we should get. Currently, our household income
is ninety thousand dollars a year. I make about sixty
(23:37):
percent of that, So I wanted to just hear your
thoughts on, you know, what kind of strategy we should
have for the coverage and what kind of coverage we
should get on whom. So yeah, I would just appreciate
your guys' advice. As always, I appreciate everything you guys
do for us, and just yeah, the way you guys
(24:00):
make finances sound simple and enjoyable, we just I just
really appreciate that. So yeah, I would love to hear
from you guys, and thanks again, Bye, Jill.
Speaker 3 (24:12):
Did you notice how Colin just slipped it in casually
there that he's got this group life insurance plan that's
provided by his employer for free.
Speaker 1 (24:19):
I'm not bitter. Yeah, no, okay, that's not abnormal. I
will say when I worked for the Man, I had.
Speaker 3 (24:27):
Life insurance for the man. Actually, I did work for
the Man for a small stint.
Speaker 4 (24:30):
It's a long time.
Speaker 3 (24:31):
Again's a smaller man though, it wasn't like a big,
big man, which means I didn't get some of these
sweet benefits. And so I like the fact that Colin's
got this available to him, but like he's realizing that's
not enough to you know, that's a good point. It's
not enough mustard to cut it. What is that the
term for the mustard.
Speaker 1 (24:46):
Yeah, let's talk about workplace plans for just a second,
because some people think, oh, maybe that's the best place
to buy life insurance. And the truth is, most of
the time it's not. Take the free amount that you're allotted,
which is often half or one x your your current salary,
which is nice, that's a nice perk, but then if
you want to buy more, it's typically going to cost
you more, especially for somebody like Colin, who's so young,
probably so healthy. I can tell Colin, you listen to
(25:08):
Andrew Kuberman's podcast and that you're just an incredible shape,
which means that you're probably going to pay a whole
lot less on the open market than you would to
get additional insurance through your employer. So be glad that
you have a little bit. But the truth is, in
the near future, you're probably going to want to have
more insurance because as you take on more financial obligations,
as your family continues to grow, it's going to be
(25:29):
important to increase the amount of insurance that you have
to protect that growing family in your growing assets.
Speaker 3 (25:34):
But specifically, what kind of insurance should he have, Joel
let's sing.
Speaker 1 (25:38):
The praises of term life don't make me sing, I
really will.
Speaker 4 (25:42):
I'm glad that that's what Colin's considering.
Speaker 3 (25:44):
It easily makes the most sense for the overwhelming majority
of folks out there, and almost every other type of
insurance you buy is overly complicated, costs way too much money.
You might get a pushy salesperson who tries to sell
you on the benefits of something like Index Universal Life
like your friends have.
Speaker 4 (26:01):
May it sounds so good, just like the timeshare salesperson. Exactly,
it's very similar.
Speaker 3 (26:06):
Or even some you've I've heard of even funk your
life insurance products out there.
Speaker 4 (26:10):
They're gonna talk about.
Speaker 3 (26:11):
The tax advantages, how you can borrow from it, but
the monthly premium is often more than ten times what
your simple term life.
Speaker 4 (26:19):
Premium is going to be.
Speaker 1 (26:20):
But it's okay because you're gonna be able to borrow
from yourself down the road, and man, the tax benefits
are incredible, so don't do it.
Speaker 4 (26:26):
It's worth a much higher premium amount, right, I don't
think this is the right product for you, Colin.
Speaker 3 (26:31):
It can possibly make sense for some folks who are
incredibly wealthy who have very high incomes, like Matt, but
like not like for ninety nine percent of folks. I
think it comes down to term life and instead what
you do, instead of paying ten times more, you save
that money, and those extra dollars would just then be
better put to use investing in tax advantaged accounts like
roth iras like your HSA, even workplace workplace sponsored retirement
(26:55):
account like a fourwin K and so in this case,
the bare minimum product term life insurance, it should provide
you all that you need and more, which is a
simple death benefit during your most vulnerable financial years.
Speaker 1 (27:07):
No more bells and whistles needed. I love, by the way,
when I make comments about how absolutely loaded you are, Matt,
you just ignore me.
Speaker 4 (27:13):
Now, you just you just chalk it up to Joe
being I just I just try to keep on talking.
Should we should probably just answer the question?
Speaker 1 (27:20):
I know if you're watching the clock, right, yeah, they
probably we can talk about how long can we talk
about life insures for people turn us off?
Speaker 4 (27:26):
Well?
Speaker 1 (27:27):
Yeah, the goal is to to, like you said, cover
yourself and your family during those most vulnerable financial years.
And the other problem, Matt, when people sign up for
the more expensive policies, one, they're typically unnecessary bells and whistles,
and they're paying more than they need to. And because
of that, many people end up ditching that policy before
(27:48):
they end up using it, and and because they realize, oh,
it's eating up too much of my budget, they're like,
they can't sustain it. This life insurance is too expensive.
I've got if I have to cut something, this is
what I'm gonna cut. They forked over a lot of
money over the years, and then it turns out they
don't have coverage when they need it. We don't want
you in that position. That's just another check mark in
the hey go for term life insurance in its dead category.
(28:10):
And it's just important for us to mention also that
you don't have to get all the coverage you might
ever need in one fell swoop. You know, partly because
that can be hard to predict ahead of time. You
don't know what your insurable need is going to be.
You don't know where your income is going to go,
you don't know what sort of assets you're going to have,
and so you know, life insurance laddering can be a
great way to allow you to have some coverage now
(28:32):
but not feel like you have to go all the
way and just like get a multimillion dollar term life
insurance policy, forking over more than you want to, because
you can always add on more during years when you
have a higher insurance need, and then later on in
your life you can essentially kind of reduce coverage as
let's say kids are leaving the house and your insurance
needs decline because your net worth has increased and you
(28:55):
have just you have a higher net worth, you have
more cash at you're just and so that becomes less necessary.
So we have a whole article about life insurance laddering
that will link to in the show notes. But I
think that's such an important thing for people to consider,
and it's often it's often not thought through enough, because
it can help not only reduce premiums, but ensure that
you have the coverage you need during the times.
Speaker 4 (29:17):
When you need it most.
Speaker 3 (29:18):
Totally, I prefer personally the term layering as opposed to laddering,
because I envision you stepping out into a rainstorm or something,
and you're like, oh, let me get the umbrella. But
then you're out there with the umbrella walking around and
you're like, holy oh man, I'm getting soaked. I actually
need to put the rain jacket on. So you put
the rain jacket on and you've got the umbrella. Maybe
you're like, I don't want my legs to get wet,
you know, my pants are getting wet, and then you
(29:40):
put on like the the full on. I don't even
know what you call a rain suit or something like.
Speaker 4 (29:44):
That, but you have one of those rainsuits. I've got
a rain jacket. I don't have any rain pants. I
thought about getting them though.
Speaker 3 (29:50):
Commuting to you know, riding the bike to work, I
want to be protected from the rain. If you're a
bike commuter, you gotta have a pair. But for most
people who are just walking in the rain, you probably don't. Yeah,
or you just get wet. I mean that's what I do.
I'm like, I'd bring a change of short and just
don't whine about it. Yeah, I'm tough buddy. I'm a
tough guy. I'm a tough boy. So I only give
an example. Imagine you want to have the five hundred
(30:10):
thousand dollars of coverage now and you're like, great, that's
what I can afford. That kind of aligns with our
needs right now, we're one of us to croak.
Speaker 4 (30:18):
And then maybe you're saying.
Speaker 3 (30:19):
I'm gonna add another five hundred thousand dollars or maybe
even a million dollars of coverage five ten years from
now as your net worth grows, as maybe you take
on more responsibilities with let's say a house, right, you've
got a fat mortgage, maybe you've got a bunch of
kids on hand.
Speaker 4 (30:34):
Yeah, depending on your needs.
Speaker 3 (30:36):
And you are specifically asking too, how much should you
have on you as opposed to.
Speaker 4 (30:42):
Your wife or your partner. Well, it's not just about income.
Speaker 3 (30:45):
It's certainly a factor because he mentioned did he say
he brings in like sixty.
Speaker 4 (30:49):
Percent of their overall income? You do want to take
that into account.
Speaker 3 (30:52):
But even non working spouses, they should also be insured
because of the valuable services that they provide for the household,
for the for the family, and the increased costs that
you're likely going to be faced with if they were
to pass away early. And it also comes down to
your life circumstances and your family situation. I know, for
us early on, that's something we talked through and we
(31:13):
kind of came to the realization that like, Okay, I
think one of us would likely get the parents involved,
and then they're young enough and would want to be involved.
They were retired and I think would gladly step up
into that.
Speaker 4 (31:25):
Role to say help out with the kids.
Speaker 3 (31:27):
But then subsequent conversations led us to say, you know, what,
things are changing a little bit, let's make sure that
we are set in a more independent way. When it
came when it came to the kids, like you just
have different needs and that and even those needs change, right,
Like we're dynamic over time.
Speaker 1 (31:40):
And says it's something willing to adjust. Yeah, it makes
me something worth Reevaluating of mothers. Mother's Day was about
a month ago. I'm ember seeing this cartoon and it
was like, hey, we gave you the day off today, mom,
and we hired everyone else to do all these tasks
for you. And think about all the people you would
have to hire to replace the tasks that to stay
at home spouse crew does, Like I mean it's incredible,
Like there's chef, there's taxi service. I mean, there's all
(32:01):
of these things that would not to mention just the
time that you might want to spend grieving or working
less yourself because your spouse has passed away. Like, those
are big things that also have a financial angle to
them totally.
Speaker 3 (32:13):
But the typical suggestion there is a good rule of
thumb out there, and that's to get ten times your
income in life insurance, which is a helpful starting point.
But policy genius they actually have a solid calculator that
takes your savings into account, it takes into account how
much debt you have, and then again, ultimately some of
this kind of comes down to you and what it
is that you and a have.
Speaker 1 (32:32):
Yeah, that's exactly right. We've got a lot more to
get to on today's show. You've been listening to How
To Money with Joel Larsgard. You can always hear us
live on KFI AM six forty twelve pm to two
pm on Sunday and anytime on demand on the iHeartRadio app.
Kay if I am six forty you're listening to how
to Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is how to
Money with Joel Lar's Guard and Matt allmakes.
Speaker 1 (01:03):
KFI AM six point forty live everywhere on the iHeartRadio app.
This is how to Money. I am one of your hosts,
Joel Larsgard.
Speaker 3 (01:11):
And I am that a mix. By the way, you
can always find more money saving information over at howtomoney
dot com.
Speaker 1 (01:18):
I want to talk about unemployment for a little while,
and we are not at great recession levels of unemployment.
We're far from it, in fact, I mean you think
about that. I remember I was graduating college in the
teeth of the Great Recession, and man, I just remember
havoc tumult all around. Shortly after graduation, and especially for
(01:43):
people graduating the year or two after me, the job
market just continued to get worse. But recent college graduates
they're getting more nervous about entering the job market right now.
They're kind of assuming and feeling like things aren't as
good as they have been. And I think biels worse
for recent college grads. Then it has been largely because
(02:05):
the job market was so worker friendly for the past
few years. When you think about just how good things
have been, that it makes sense that they can't stay
that good forever. And we've reached more of an equilibrium now, right.
So it's kind of like housing prices, they couldn't continue
to go up into the right at the insane rate
that they were, that they were traveling upward for the
(02:27):
coming years, like they had to come back down to earth.
Home prices couldn't outpace wage growth for forever, and that's
why I think we're starting to see a softening in
the housing market. But the same thing is true of
the job market. People jumping ship and being able to
get paid twenty thirty forty thousand dollars more because there
was such a shortage of workers. And so yeah, we've
(02:50):
reached this I think new place of equilibrium, which does
mean it's harder for new graduates to find work, even
as the unemployment rate remains low. And so recent data
found that the unemployment rates for people in their young
twenties is higher than average. It's six percent compared to
four percent, so still relatively historically low, but not as
(03:15):
good as the overall job market.
Speaker 4 (03:17):
So if you're.
Speaker 1 (03:17):
Graduating and you're ready to put that degree to use,
you're like, oh, I don't know, maybe am I.
Speaker 4 (03:23):
Actually going to get the job I want.
Speaker 1 (03:25):
Some even suspect that companies are leaning more heavily on
artificial intelligence. That's part of the reason why I think
there is some anecdotal evidence to that and potentially some
reality some beat to the ground for that claim. But
I also think it might be overblown, like the Shopify, No,
you can't hire anyone until you can prove that a
I can't do that job. That's few and far between,
(03:48):
at least at this point. Where that goes in the future,
that's a good question. I'm not an expert on that,
but I think, yeah, it's true that graduating into a
tougher economic climate it's emotionally difficult. It can have long
term personal finance consequences as well. So if you're graduating
into a down job market and you feel like you
have to take a job that you otherwise would not
(04:10):
have taken, or you might have you're more highly qualified
than the job your first job suggests, it could have
lifetime career earnings impact so I would do a couple
of things. I would suggest proactively reaching out to companies
you like and you want to work for. Don't just
lazily toss out resumes online. If you look at the
job boards of companies that you really dig, I think
(04:32):
that's a better way to go, and then just kind
of keep barking up that tree. Also, your network might
be small right now, but don't neglect it as your
job hunting. And also your school's alumni department they might
offer helpful resources. Hey, I just got a degree. Here,
I'm gonna hold your feet to the fire. You help
me find this job. What connections do you have for me?
(04:52):
I think that's always a good place to turn as well.
And this might sound counterintuitive, but if a graduate degree
would help your lifetime career earnings and you can mostly
avoid debt, you don't have to take on loads of
debt to get that an extra degree. And at the
same time, you feel like you're having trouble securing the
kind of job that you want, and you feel like
you should be capable of achieving in a better job climate,
(05:16):
consider getting more education. I think it's a way to
wait out a potential recession and to come out better
on the other side. Again, is a recession going to happen?
I don't know, But if the job climate, if you
feel like you are having a harder time finding the
job that you deserve, or you think your education and
experience level qualifies you for this is a kind of
(05:40):
a normal approach for a lot of people over time
has been you know what, I'm gonna hunker down during
the tough economic climate, get that education. I'll come out
on the other side a little bit better, a little
bit stronger, ready to get that fancy your job. But
also this was making me think, is unemployment worse than
maybe the headline number suggests. And there's this new study
(06:02):
that found that what they called functional employment in the
US is closer to twenty five percent, And I was
like dumbfounded when I read that statistic twenty five percent.
No that I have not seen any sign that we
are experiencing unemployment at those levels. And this study it
made for shocking and clickable headline, but I just don't
(06:23):
I just don't think it's accurate. I think the real truth, though,
lies maybe somewhere in the middle. We see the headline
rate four point two percent unemployment rate, and that headline
rate that gets the vast majority of the headlines right,
But maybe that's not quite as accurate as we would
assume either, And so maybe now is a good time
for me to quickly put on my point hat not
(06:46):
really an economist, but I'll play one for just a
second and dive into different stratifications of the unemployment rate
in what they might mean. So there's the headline rate,
that four point two percent that I just mentioned is
known as YOU three. But there's this other unemployment called
U six, and it might be a better indication of
what's really going on in the job market because U
(07:07):
six includes another segment, multiple other segments of folks that
YOU three does not. And so U six says, actually,
we're gonna include just beyond people who are just actively
looking for work, who don't have work, that's U three,
We're going to actually include people who have part time
jobs wo wish they had a full time job. And
if you look at U six, then that unemployment rate
(07:30):
is currently at seven point three percent. So is unemployment
four percent? Is unemployment twenty five percent? Well, if you're
to ask me, I would point to U six and say, ah,
it's probably closer to the low sevens. That's likely a
more accurate state of what's happening in the labor market
right now. So U three that's what hits the papers.
U six is more reflective of real employment conditions. And
(07:54):
actually U six is still historically low when we're talking
about it. So where does the job market stand? Certainly
not as good as it was a few years ago,
but I think there's still opportunity for people who are
go getters. And yeah, it's also helpful to realize that
maybe the U three if you are working hard to
find a job and you feel like it's harder to
(08:14):
get don't be demoralized. The unemployment rate not quite as
rosy and glossy as it seems in some of the headlines.
Speaker 5 (08:22):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (08:29):
If you have a money question, we'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at how toomoney dot com.
Speaker 1 (08:40):
Forward slash ask let's get to a question now about
maybe a prompt you've received inside of your investing app
and whether or not you should follow through and make
it happen.
Speaker 6 (08:51):
Hey, there, Matt and Joel, this is honorary best friend
Wayne from Philadelphia contacting you with yet another question.
Speaker 3 (08:59):
So.
Speaker 6 (09:00):
I have a roth Ira account open with m one
and recently I noticed that I had a interest payment.
I did a little digging and found out that M
one Finance has a fully paid security lending program which
they automatically sign everyone up for and that you can
(09:22):
opt out of. I should also note that you are
not always lending out your assets, and it seems to
be some kind of lottery system that decides whose assets
are lent out and when. So onto my question, how
do you guys feel about the lending of retirement securities?
Would you opt out or would you stay involved? Apparently
(09:43):
you get ten percent of any of the profits they
get from the lending, which seems really on the low side,
especially since it sounds like we as the customers, are
taking the majority of the risk. Also, while making this recording,
I found out that Fidelity has its own lending program.
How does that compared to M one? Are there other
lending programs out there? Am I leaving money on the
(10:04):
table by not participating in these types of programs. Thanks
again for taking my question, and I look forward to
your answer. Best Wayne out, Best Wayne out.
Speaker 3 (10:15):
You know, j'all, I'm gonna go out on a limb
and say, Wayne, this Wayne is my favorite Wayne friend
that I have.
Speaker 4 (10:23):
Have you met Wayne?
Speaker 3 (10:24):
I R L no, okay, but I don't know any
other Wayne, you know, like he automatically gets the number
one spot.
Speaker 4 (10:29):
Sorry, Wayne, this is the competition.
Speaker 3 (10:31):
Wasn't super super stuff, but I feel like I would
also be friends with Wayne.
Speaker 4 (10:35):
IRL.
Speaker 1 (10:36):
That also means that this Wayne is easily going to
get bumped if you do meet someone.
Speaker 4 (10:39):
I RL no, no this Wayne. This Wayne's way cooler,
your top notchway. So no joke.
Speaker 3 (10:43):
I actually I just looked at my phone and I
do have a Wayne in there, but I don't know
who that is. It says it says like Wayne like
Wayne Lania or something like that. I'm like, I don't
know who the heck is this.
Speaker 1 (10:52):
I don't know. Maybe that time you met Wayne Gretzky,
you guys are palseright, No, was not him, But Wayne,
thank you for this question. It's it's one that we're
gonna hear more and more as brokerage firms make their
customers aware of securities. Stockland, also known as stock lending,
folks are going to be enticed by the language they use.
Speaker 3 (11:10):
Right, who doesn't want to earn more money on their investments?
Why not earn a little bit, a little, big, little,
some side money on my side.
Speaker 1 (11:17):
Let me let my securities have a little side hustle
bringing me more money in right, it sounds like, not
only are they just earning me the regular sort of dividends, maybe.
Speaker 4 (11:25):
I can also do some of this on the side.
What's not to like? What's not to like?
Speaker 1 (11:29):
There are some pitfalls that we do need to cover
before we send way and all in on this direction
and say, yeah, lend your stocks out, no worries. Well, ye,
stock lending is available to a whole bunch of people now,
and there are so many fewer hurdles to lending out
your stocks. And you know, onlike some of the riskier
types of investing you can do, you don't need to
(11:50):
be an a credit accredited investor. So usually there's this
hurdle you have to overcome, which involves a network that
you have to have, or you have to have a
super high income. That's how you're able to make more
risky types of investments. But on when it comes to
stock lending, that's not the case. You just have to
make more than twenty five thousand bucks I think with
an accredited investor it's usually two hundred and fifty thousand,
(12:11):
or you have to check a box on the back
end of your account saying hey, I know the risks.
And so with most of these brokerage firms who are
offering this, like getting into stock lending is easyps. Anybody
can do it, but that's not necessarily a good thing, right,
you know, stock lending, it's it's kind of in some ways.
Speaker 4 (12:28):
Like owning a rental property.
Speaker 1 (12:30):
Right, the property is yours, but you lease that property
to someone for a specified period of time, most of
the time over a year basis, right, So you make
a little money while you rent to that person, but
you retain ownership of the property. And so at the
end of that year you can say you're out of here,
or I'm uping rent, or please stick around. But there
(12:50):
are reasons that stock lending is unlike investing in real
real estate. And if we're going to give the short answer,
I'm going to say, I just don't know that I
will would participate.
Speaker 3 (13:00):
I don't know that it's the best idea for most folks. Agreed,
I don't think it's worth the squeeze. And the reason
being is because oftentimes folks want to borrow your stocks,
typically because they want to short the stock that you own.
They're basically betting that the price for that stock is
going to go down, and if it does as they hope, they.
Speaker 4 (13:17):
Make some money. So do you, so everyone wins.
Speaker 3 (13:20):
But if the short seller is substantially wrong, there is
a chance that you could actually lose money. Even when
lending your stocks out against you still retain the stock
in your account while you're lending it out. But you know,
this is an actual legit way to make some money.
That being said, the safety is a bit questionable, and
I think we will see this becoming a bit more
normalized with the different brokerages out there, especially once who
(13:43):
are counting on I don't know that I feel like
you tend to see it more. He mentioned Fidelity specifically
they do this, but also with Robinhood folks who are
leaning into because the other side of this you got
securities lending, but then you also have margin investing. That's
the other that is what is made available because of
stock lending, and the part I just don't like the
aspect of it that it's all it feels like it's
(14:04):
built on a house of cards. Yeah, that sort of
approach it. I want you to be careful.
Speaker 1 (14:08):
It's not all about the passive investing approach that that
you and I are typically fans of, Matt, And most
of the time you'd be fine lending out your securities
ultimately under in one or Robin Hood's program, or fidelities
really whoever's But when you look at the disclosures, it
can also raise eyebrows, and so you typically encounter a
clause about risk of default. I would read that clause carefully.
(14:29):
Most of the time, Matt, when we're agreeing to terms
of service, we're not looking at that stuff. We just
like scroll down to the bottom and we click okay.
But Robinhood and in one they've got, by the way,
their own cash collateral in the case of an event
where there's some sort of abnormal market behavior, but even
that may not be enough to cover your losses. They
Robinhood in particular, almost didn't have enough cash during some
(14:52):
of the massive meme stock trading days where there was
just incredible volatility and specific stocks. So if you were
lending out let's say your Game Stop stock, well, there
was a chance that you were gonna get screwed, you know,
and and that Robinhood wasn't going to have the collateral
to cover your losses. And so in addition, you know
your stock portfolio, it's typically ensured by the SIPC, but
(15:14):
securities you've leant out, they're not covered, which adds more risk.
Speaker 4 (15:17):
To this whole endeavor.
Speaker 1 (15:18):
So there are risks here that are are meaningful, and
when you look at some of the terms, it frightens me.
It makes me want to not participate well in this.
Speaker 3 (15:29):
Process, especially because we're not talking about making a ton
of money.
Speaker 4 (15:33):
If the reward was sky high.
Speaker 3 (15:35):
Like you mentioned real estates, you know, there is some
decent money to be made in real estate when you
invest in rental properties or just different types of real
estate investing. If that was the case here when it
came to securities lending, it might be worth the risk,
but the rewards are actually pretty paltry. We don't have
personal experience, so Wayne, I should tell you again this
(15:56):
reinforces our opinion that this is not something that we recommend.
But if you dig a and you look at like,
for instance, over on Reddit, some folks have shared that
with a two hundred and fifty thousand dollars investment balance,
they're making somewhere in the neighborhood of one to two
dollars a month.
Speaker 4 (16:10):
And so that's the kind of conversation we're having here.
Speaker 1 (16:14):
They make it sound so much better when the pop
up happens and it's like, do you want to turn
off securities lending? Like you could make money on your
stocks that you own. Part of that is because it's
not like your entire portfolio is going to be lent
out at the same time, because it's often the riskiest
stocks that are likely to be borrowed, Basically folks that don't.
Speaker 3 (16:31):
Want to borrow bland ole, boring, Voo, the s and
P five hundred ETF. You mentioned it being a lottery
as to who it is that gets chosen, who gets
the honor of being chosen to participate in securities lending.
Oftentimes it is those risky as stocks because there is
not stock available when it comes to the clearing of
the stocks. So they're trying to facilitate in the purchasing
(16:53):
and the selling of these different securities, which means most
hot of money listeners they're not going to receive much
benefit from participating. And the brokerage firms, as you alluded to,
they are the ones who stay to profit the most.
Speaker 4 (17:05):
Here. Yeah, you're spot on, my friend.
Speaker 5 (17:07):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (17:14):
Don't forget to sign up for the how to Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Are Worries about the state of the economy
are leading workers to reduce four one K contributions right now?
There's this new Morgan Stanley survey and it found that
four in ten employees are reducing what they're contributing to
their workplace retirement accounts because of the uncertainty that they're feeling.
(17:37):
They're like, things just don't feel good. It's a vibes
based approach to how much they're setting aside for their future.
And so the vast majority are still contributing something, right,
They're not dialing all the way back to zero, but
they are cutting back how much they invest. And the
first thing I thought of when I read this was
(17:59):
that's actually my be the worst news. If people are saying,
I'm gonna invest a little bit less, I'm gonna stick
some money into my savings account. I'm shoring up that
liquid savings because that's what I need to.
Speaker 4 (18:10):
Be worried about.
Speaker 1 (18:10):
If I really do have concerns about the economy in
the near term my own employment, Like, am I going
to have a job six months from now? I don't
know if you're worried about that. Having more cash on
hand makes sense. But sixty seven percent of folks in
this survey said they're not prioritizing savings either, So they're
not dialing back on retirement of contributions to sticking in
(18:32):
a high healed savings account, they're funneling it into their
monthly spending. You know, I don't want you investing a
big chunk of your paycheck if you haven't prioritized liquid savings.
Go look up the money Gear's got to have the
money dot com click start here. You'll find our money
gears there. See where you're at and what the next
step is for you. But if your job or industry
right feels particularly vulnerable. Airing on the side of more
(18:56):
savings could be wise. It's okay to dial back in
order to bulk up savings for a limited time, but
I also don't want you to cut back on contributions
because you're worried about the stock market, right. That is
the classic mistake that so many people make. I was
literally just reading about there's this old adage of when
(19:17):
it comes to investing in the stock market, and we're
in June now, but it's it's you know, go away
in May, like, don't don't invest in May because stock
market doesn't usually perform as well as it does in
other months. And actually, when you look at the historical
performance of the stock market in May, it's pretty dark good.
It's not as good as the average stock market returns,
(19:38):
but it's still pretty good. And if you look at
what happened to the stock market in May twenty twenty five,
it was pretty awesome too. And so even with all
of these concerns, even with all the tariff concerns and
the steep stock market declines, we've seen a recovery and
then some. And so to change your investing goals, attitude
(19:59):
and percentage because of headlines and vibes and uncertainty. Well,
if you did that, if you follow that advice, it'd
be like shooting yourself in the foot from an investment perspective.
And instantly there was this other study from Fidelity that
came out this week and it found something really different
(20:20):
than what this Morgan Stanley survey found. It found that
people are saving a record amount in four to one case.
So where is there? It feels like there's this dissonance
to these two separate findings that came out in the
same week. Fidelity says people are saving almost fifteen percent
in four to one case, which is the minimum recommended
(20:41):
amount to invest for your future from most personal finance nerds,
myself included. I want to see people hit that as
like a minimum threshold for what they're contributing to their future.
Speaker 4 (20:51):
And I think these.
Speaker 1 (20:53):
Things are actually not mutually exclusive, And let me explain
why I think they actually fit together in an interesting way.
I think the reason that both of these things are
true is that more folks are being auto opted into
their workplace retirement accounts in record numbers, and so like
the bulk of folks who were contributing nothing to their
(21:15):
retirement accounts are now contributing three percent or five percent
whatever their employer has said, Hey, this is like the
minimum amount we're going to auto opt you in at
A lot of the people who get auto opted in
don't end up changing that back to zero, which is
something I love to see because more people investing for
their future is a good thing, even if it's kind
(21:37):
of against their will but they're too lazy to change it.
I think that's awesome. Then other people are taking their
contribution amount down because of economic worries, and so you
can have this effect where yes, some people are dialing
back retirement contributions and other people are saving more than
they and investing more than they otherwise would have. So
both of those things can be true at the same time.
It's just kind of fascinating to see both of those
(21:59):
come out simultaneously and be.
Speaker 4 (22:01):
Like, oh, yeah, okay, yeah.
Speaker 1 (22:03):
As I noodled it out, I was like that there
really can be possible.
Speaker 5 (22:06):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (22:12):
If you are over on Facebook and you want to
join a group of like minded folks who have money
questions and insight. Please go ahead and join the how
to Money Facebook group.
Speaker 1 (22:22):
All right, let's get to a question from listener Colin,
specifically about life insurance, when to buy and how much.
Speaker 7 (22:29):
I'm at Joel, This is Colin from Leancaster, Pennsylvania. I
just wanted to get your guys input on life insurance.
My wife and I currently are renting and do not
have any children, so we don't have any life insurance
apart from a small group life plan that I have
through my employer, and the next year or two we're
probably going to start looking to buy a home and
(22:51):
start having children, so I wanted to make sure we
got everything squared away as far as life insurance goes.
So I just wanted to get your guys' input on
what you guys recommend. I've heard from most experts that
they recommend term life insurance. We also have friends that
are in an index universal life plan called Kaisen. What
(23:14):
we'd love to hear your input on that kind of idea.
Right now, my plan is to just to term life
insurance and keep it simple, but I just wanted to
hear what your guys thoughts were on that. I also
wanted to get your guys input on what kind of
level of coverage we should get. Currently, our household income
is ninety thousand dollars a year. I make about sixty
(23:37):
percent of that, So I wanted to just hear your
thoughts on, you know, what kind of strategy we should
have for the coverage and what kind of coverage we
should get on whom. So yeah, I would just appreciate
your guys' advice. As always, I appreciate everything you guys
do for us, and just yeah, the way you guys
(24:00):
make finances sound simple and enjoyable, we just I just
really appreciate that. So yeah, I would love to hear
from you guys, and thanks again, Bye, Jill.
Speaker 3 (24:12):
Did you notice how Colin just slipped it in casually
there that he's got this group life insurance plan that's
provided by his employer for free.
Speaker 1 (24:19):
I'm not bitter. Yeah, no, okay, that's not abnormal. I
will say when I worked for the Man, I had.
Speaker 3 (24:27):
Life insurance for the man. Actually, I did work for
the Man for a small stint.
Speaker 4 (24:30):
It's a long time.
Speaker 3 (24:31):
Again's a smaller man though, it wasn't like a big,
big man, which means I didn't get some of these
sweet benefits. And so I like the fact that Colin's
got this available to him, but like he's realizing that's
not enough to you know, that's a good point. It's
not enough mustard to cut it. What is that the
term for the mustard.
Speaker 1 (24:46):
Yeah, let's talk about workplace plans for just a second,
because some people think, oh, maybe that's the best place
to buy life insurance. And the truth is, most of
the time it's not. Take the free amount that you're allotted,
which is often half or one x your your current salary,
which is nice, that's a nice perk, but then if
you want to buy more, it's typically going to cost
you more, especially for somebody like Colin, who's so young,
probably so healthy. I can tell Colin, you listen to
(25:08):
Andrew Kuberman's podcast and that you're just an incredible shape,
which means that you're probably going to pay a whole
lot less on the open market than you would to
get additional insurance through your employer. So be glad that
you have a little bit. But the truth is, in
the near future, you're probably going to want to have
more insurance because as you take on more financial obligations,
as your family continues to grow, it's going to be
(25:29):
important to increase the amount of insurance that you have
to protect that growing family in your growing assets.
Speaker 3 (25:34):
But specifically, what kind of insurance should he have, Joel
let's sing.
Speaker 1 (25:38):
The praises of term life don't make me sing, I
really will.
Speaker 4 (25:42):
I'm glad that that's what Colin's considering.
Speaker 3 (25:44):
It easily makes the most sense for the overwhelming majority
of folks out there, and almost every other type of
insurance you buy is overly complicated, costs way too much money.
You might get a pushy salesperson who tries to sell
you on the benefits of something like Index Universal Life
like your friends have.
Speaker 4 (26:01):
May it sounds so good, just like the timeshare salesperson. Exactly,
it's very similar.
Speaker 3 (26:06):
Or even some you've I've heard of even funk your
life insurance products out there.
Speaker 4 (26:10):
They're gonna talk about.
Speaker 3 (26:11):
The tax advantages, how you can borrow from it, but
the monthly premium is often more than ten times what
your simple term life.
Speaker 4 (26:19):
Premium is going to be.
Speaker 1 (26:20):
But it's okay because you're gonna be able to borrow
from yourself down the road, and man, the tax benefits
are incredible, so don't do it.
Speaker 4 (26:26):
It's worth a much higher premium amount, right, I don't
think this is the right product for you, Colin.
Speaker 3 (26:31):
It can possibly make sense for some folks who are
incredibly wealthy who have very high incomes, like Matt, but
like not like for ninety nine percent of folks. I
think it comes down to term life and instead what
you do, instead of paying ten times more, you save
that money, and those extra dollars would just then be
better put to use investing in tax advantaged accounts like
roth iras like your HSA, even workplace workplace sponsored retirement
(26:55):
account like a fourwin K and so in this case,
the bare minimum product term life insurance, it should provide
you all that you need and more, which is a
simple death benefit during your most vulnerable financial years.
Speaker 1 (27:07):
No more bells and whistles needed. I love, by the way,
when I make comments about how absolutely loaded you are, Matt,
you just ignore me.
Speaker 4 (27:13):
Now, you just you just chalk it up to Joe
being I just I just try to keep on talking.
Should we should probably just answer the question?
Speaker 1 (27:20):
I know if you're watching the clock, right, yeah, they
probably we can talk about how long can we talk
about life insures for people turn us off?
Speaker 4 (27:26):
Well?
Speaker 1 (27:27):
Yeah, the goal is to to, like you said, cover
yourself and your family during those most vulnerable financial years.
And the other problem, Matt, when people sign up for
the more expensive policies, one, they're typically unnecessary bells and whistles,
and they're paying more than they need to. And because
of that, many people end up ditching that policy before
(27:48):
they end up using it, and and because they realize, oh,
it's eating up too much of my budget, they're like,
they can't sustain it. This life insurance is too expensive.
I've got if I have to cut something, this is
what I'm gonna cut. They forked over a lot of
money over the years, and then it turns out they
don't have coverage when they need it. We don't want
you in that position. That's just another check mark in
the hey go for term life insurance in its dead category.
(28:10):
And it's just important for us to mention also that
you don't have to get all the coverage you might
ever need in one fell swoop. You know, partly because
that can be hard to predict ahead of time. You
don't know what your insurable need is going to be.
You don't know where your income is going to go,
you don't know what sort of assets you're going to have,
and so you know, life insurance laddering can be a
great way to allow you to have some coverage now
(28:32):
but not feel like you have to go all the
way and just like get a multimillion dollar term life
insurance policy, forking over more than you want to, because
you can always add on more during years when you
have a higher insurance need, and then later on in
your life you can essentially kind of reduce coverage as
let's say kids are leaving the house and your insurance
needs decline because your net worth has increased and you
(28:55):
have just you have a higher net worth, you have
more cash at you're just and so that becomes less necessary.
So we have a whole article about life insurance laddering
that will link to in the show notes. But I
think that's such an important thing for people to consider,
and it's often it's often not thought through enough, because
it can help not only reduce premiums, but ensure that
you have the coverage you need during the times.
Speaker 4 (29:17):
When you need it most.
Speaker 3 (29:18):
Totally, I prefer personally the term layering as opposed to laddering,
because I envision you stepping out into a rainstorm or something,
and you're like, oh, let me get the umbrella. But
then you're out there with the umbrella walking around and
you're like, holy oh man, I'm getting soaked. I actually
need to put the rain jacket on. So you put
the rain jacket on and you've got the umbrella. Maybe
you're like, I don't want my legs to get wet,
you know, my pants are getting wet, and then you
(29:40):
put on like the the full on. I don't even
know what you call a rain suit or something like.
Speaker 4 (29:44):
That, but you have one of those rainsuits. I've got
a rain jacket. I don't have any rain pants. I
thought about getting them though.
Speaker 3 (29:50):
Commuting to you know, riding the bike to work, I
want to be protected from the rain. If you're a
bike commuter, you gotta have a pair. But for most
people who are just walking in the rain, you probably don't. Yeah,
or you just get wet. I mean that's what I do.
I'm like, I'd bring a change of short and just
don't whine about it. Yeah, I'm tough buddy. I'm a
tough guy. I'm a tough boy. So I only give
an example. Imagine you want to have the five hundred
(30:10):
thousand dollars of coverage now and you're like, great, that's
what I can afford. That kind of aligns with our
needs right now, we're one of us to croak.
Speaker 4 (30:18):
And then maybe you're saying.
Speaker 3 (30:19):
I'm gonna add another five hundred thousand dollars or maybe
even a million dollars of coverage five ten years from
now as your net worth grows, as maybe you take
on more responsibilities with let's say a house, right, you've
got a fat mortgage, maybe you've got a bunch of
kids on hand.
Speaker 4 (30:34):
Yeah, depending on your needs.
Speaker 3 (30:36):
And you are specifically asking too, how much should you
have on you as opposed to.
Speaker 4 (30:42):
Your wife or your partner. Well, it's not just about income.
Speaker 3 (30:45):
It's certainly a factor because he mentioned did he say
he brings in like sixty.
Speaker 4 (30:49):
Percent of their overall income? You do want to take
that into account.
Speaker 3 (30:52):
But even non working spouses, they should also be insured
because of the valuable services that they provide for the household,
for the for the family, and the increased costs that
you're likely going to be faced with if they were
to pass away early. And it also comes down to
your life circumstances and your family situation. I know, for
us early on, that's something we talked through and we
(31:13):
kind of came to the realization that like, Okay, I
think one of us would likely get the parents involved,
and then they're young enough and would want to be involved.
They were retired and I think would gladly step up
into that.
Speaker 4 (31:25):
Role to say help out with the kids.
Speaker 3 (31:27):
But then subsequent conversations led us to say, you know, what,
things are changing a little bit, let's make sure that
we are set in a more independent way. When it
came when it came to the kids, like you just
have different needs and that and even those needs change, right,
Like we're dynamic over time.
Speaker 1 (31:40):
And says it's something willing to adjust. Yeah, it makes
me something worth Reevaluating of mothers. Mother's Day was about
a month ago. I'm ember seeing this cartoon and it
was like, hey, we gave you the day off today, mom,
and we hired everyone else to do all these tasks
for you. And think about all the people you would
have to hire to replace the tasks that to stay
at home spouse crew does, Like I mean it's incredible,
Like there's chef, there's taxi service. I mean, there's all
(32:01):
of these things that would not to mention just the
time that you might want to spend grieving or working
less yourself because your spouse has passed away. Like, those
are big things that also have a financial angle to
them totally.
Speaker 3 (32:13):
But the typical suggestion there is a good rule of
thumb out there, and that's to get ten times your
income in life insurance, which is a helpful starting point.
But policy genius they actually have a solid calculator that
takes your savings into account, it takes into account how
much debt you have, and then again, ultimately some of
this kind of comes down to you and what it
is that you and a have.
Speaker 1 (32:32):
Yeah, that's exactly right. We've got a lot more to
get to on today's show. You've been listening to How
To Money with Joel Larsgard. You can always hear us
live on KFI AM six forty twelve pm to two
pm on Sunday and anytime on demand on the iHeartRadio app.
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