Fortifying Your Finances: Balancing Insurance Protection and Future Security

Discover how to protect your financial future with insights from newly licensed insurance advisor Jonathan Foster on the Wolf Financial Podcast. Join us as we navigate the world of insurance portfolios and financial planning, exploring how to avoid becoming "insurance poor" while still safeguarding your income and assets against life's unpredictable turns. You'll learn the crucial role insurance plays in mitigating financial risks and hear real-life stories about the emotional and financial impacts of having—or lacking—adequate coverage, particularly as retirement looms. If you're curious about how to enhance your financial resilience, this episode promises to equip you with the knowledge you need.

We also dive into the essential function of life and disability insurance in ensuring financial security for families facing unexpected challenges. Jonathan discusses the delicate balance young adults must strike between managing high debt and securing life insurance. By the end of our conversation, with additional insights from Sara, you'll walk away with a comprehensive understanding of various financial strategies and the importance of consulting professionals to make informed decisions. Plus, we'll clarify why past performance isn't a guarantee of future success and remind you about the advisory services available through USA Financial Securities. Don't miss this opportunity to fortify your financial planning toolkit.

Learn more about Wolf Financial Advisory:
https://www.wolffinancialadvisory.com/

Disclosure: Robert Wolf, James Koenig, Sara Wolf, and Michael Rock are investment advisor representatives of, and securities and advisory services are offered through, USA Financial Securities. Member FINRA/SIPC. Additionally, Amanda Opulskas and Adam Wallace are registered non-solicitors of USA Financial Securities, A registered investment advisor. 6020 E. Fulton St., Ada, MI 49301. Wolf Advisory Services and Wolf Financial Advisory are not affiliated with USA Financial Securities.

The strategies and concepts discussed are for educational purposes only and do not represent specific investment, tax, or estate planning advice. Investing carries an inherent element of risk and it is in everyone’s best interests to consult a tax, legal, or investment professional. The opinions expressed herein are not meant to provide specific investment advice or serve as a prediction for future stock market performance. Past performance does not guarantee future results. Securities and advisory services are offered through USA Financial Securities, member FINRA/SIPC. A registered investment adviser. Wolf Financial Advisory and USA Financial Securities are not affiliated entities.

Transcript

Understanding Insurance Portfolios and Protection

Voiceover 0:00

The strategies and concepts discussed are for educational purposes only and do not represent specific investment, tax or estate planning advice. Investing carries an inherent element of risk and it is in everyone's best interests to consult a tax, legal or investment professional. Past performance does not guarantee future results. Securities and advisory services are offered through USA Financial Securities member FINRA/ SIPC, a registered investment advisor. Wolf Financial Advisory are not affiliated with USA Financial Securities.

Voiceover 0:33

Wolf Financial Advisory. When it's important to you, it's important to us.

Voiceover 0:40

This is the Wolf Financial Podcast. Here's your host, Rob Wolf. This is the Wolf Financial Podcast.

Rob Wolf 0:47

Good day everyone. Rob Wolf here with the Wolf Financial Podcast. Today I got Jonathan Foster, associate of mine with the firm. Hey, jonathan, how you doing.

Jonathan Foster 0:56

I'm doing good today. Thank you for having me.

Rob Wolf 1:04

So, jonathan, you just really started the next phase of your career. You just got licensed to do insurance products, and how's that been going for you?

Jonathan Foster 1:09

It's been a whirlwind of information. I'll say Really, it's opened my eyes a lot more to what we really do here and how much about the clients that we see. You actually have to learn in order to actually make these products make sense for them. Now, a lot of the time it's easy to say, oh, we had a conversation, I know enough about someone. Yet what I found is, with how detailed we really go into it, you come to find everything about those people.

Rob Wolf 1:44

You know, if you are looking at how do I bring a person to a better spot than where they're at now, right, it's important to get as much information about them, whether or not they've been a client of yours for for just a day or for years. We constantly need to be gaining more and more information about our clients so that we can always reassess their needs moving forward, as their needs change. So tell me a little bit about your experiences and maybe some of the conversations you're starting to have, as you're meeting with people now as an advisor, going forward.

Jonathan Foster 2:31

Yeah, it's experiences different or differ by every single client that you see. Of course, that is to be expected, with them being their own personalities. A big thing is that you find that every situation is unique and no matter what it is, you could be doing the same thing every single meeting, talking about the exact same things, yet the details from those people is what changes.

Rob Wolf 2:55

And you mentioned to me the other day. Somebody asked, jonathan, are we going to be insurance poor if we do that? Right, because I've heard that a lot. You know people, let's face it, nobody likes writing an insurance check. You know, I don't like writing a check for my auto insurance, my home insurance, my disability insurance, my long-term care insurance, my life insurance, the building insurance. I mean, we go on and on and on.

Rob Wolf 3:23

And I understand why people think, man, we're just insurance poor until something happens, especially if something happens and you don't have an insurance for it, right? So a fire happens and you're underinsured or you don't have full replacement cost on your home, then we find out how important insurance is. Or, even more devastating, a young parent passes away, leaving several children left behind with a spouse that may have made less money, right? How are these children provided for if there's no insurance? So I've been on both sides of the equation where I've seen people where they've had a devastating life event that had insurance and having a devastating life event without the insurance. The emotional issues, especially surrounding a death or disability, they're the same. But then when you add in the complexity of a financial concern on top of that, if they don't have the insurance just accelerates the anxiety and fear to the a very difficult level of just so much unknown. And then you add money on top of it. It's just a really difficult thing. So my response to people is can you afford not to have the insurance? Right? I mean, even as we get older and I'm thinking about life insurance right now if you think about all the income streams that come in during your lifetime, they don't just stop when you retire, right? Okay, so I retire, I might have a pension. Right Now there's not a lot of pensions anymore, but some people still have pensions.

Rob Wolf 5:29

Well, when you retire, if you have to take your pension in a monthly amount, you have to choose whether or not you want a survivor benefit on that. If you choose not to have a survivor benefit, you get what's called the straight life pension, which is the highest amount available to be paid out for the rest of your life. And some people like to do that because they say well, you know what? I'm healthier than my spouse, I should be the one that lives longer anyway. So I'm just going to do the straight life.

Rob Wolf 6:00

Well, then a month into it, a car accident happens and that spouse getting the pension dies and now we have the surviving spouse that not only lost that pension check, but they also lost a social security check, right? And if you're a married couple and you've been in the US and you've been paying in social security taxes all along the way, you're both going to be receiving social security checks until the first spouse dies and then you don't. Now you're down to one check and a lot of people forget the financial impact of the loss of that social security check. Now, for some people, the social security isn't a lot because it's based on the smaller of the two checks. So if I have a family where one spouse was bringing in $1,000 a month and the other spouse was bringing in $2,500 a month, regardless of who passes away, the survivor is going to keep the $2,500 a month. So there's $1,000 of net income lost for the month or $12,000 for the year. But what if both spouses were bringing in a significant amount of social security? They were both bringing in $3,000 a month, $36,000 a year, $72,000 between the two of them and one of them dies. Well, going from 72,000 down to 36,000, that's a pretty big chunk, right?

Rob Wolf 7:32

So, regardless of your situation, sometimes it does make sense to carry forward insurance In this case carrying forward potential life insurance or perhaps you know. The other thing is you know we retire, we don't necessarily carry disability insurance anymore, but then our thoughts go on to well, what if I get sick and I have to go into a facility? Right, and then my thoughts go from disability over into chronic illness, long-term care. How do I protect the assets that I built so that, if I do get confined to a facility, I can continue to pay for my needs without blowing the money that my spouse might still need to live off of and or my potential legacy that I may want to leave to my beneficiary?

Rob Wolf 8:20

So there's so many reasons why having a good insurance portfolio matters. Obviously, you got to put food on the table, you got to live your life, we got to have experiences in our life and we don't want to be paying so much in insurance premiums that keep you from living your life, because if you're doing that, you're living in fear. There is a balance, but it's so important for people to understand there's purpose behind protecting what you have. You cannot build until you protect and have a solid foundation, and that's why I'm such a big advocate of making sure younger people have appropriate life insurance, term insurance if need be, to cover those income years that our older clients look at that, the long-term care aspect, the legacy planning to protect what they've built. It could be as simple as having the correct auto coverage for your liability limits, because I don't know anybody that's lived a really long time, that's drove a real long time, that probably hasn't used their auto insurance at least once. Right, you only need to use it once to know how valuable it can be.

Rob Wolf 9:41

Okay, so again, if you think you're insurance poor, you really need to be thinking about what are you really saying? Are you saying that you're paying so much in premiums that you're not taking care of your other basic needs? If that's the case, you probably need to reconsider your insurance portfolio. But if you just don't like what you're paying for insurance but you're living your life and you're living it quite comfortably just remember the protection that that insurance is providing you, that if and when you end up utilizing it, it's going to be there and it's going to do what it's designed to do, which is to provide income to either you or your spouse and or pay for expenses that otherwise you would have to draw down from your portfolio and joining us now is Sarah Wolf, a certified financial planner. Sarah, have you had anybody talk to you about being insurance poor, and what's your response to them?

Sara Wolf 10:45

Yeah, so obviously most people don't use that term, but I do find a lot of people are insurance poor and my response to them is always going to be that they're never guaranteed the next day. So no matter who you are, what age you are and at what health, you are never guaranteed tomorrow. So I say it's better to just have a plan, put something in place and then better to do that than not have a plan at all.

Financial Planning and Insurance Protection

Rob Wolf 11:14

You know that's a good point, because a lot of people are sort of all or nothing, right. So they say well, you know, I was told I was supposed to have X amount of insurance. Well, I can't afford that, so I'm just going to put it off. Well, guess what, if you're short, you're short. Something is better than nothing. Get that insurance in place that your budget will allow for so that you do have something right.

Rob Wolf 11:40

So if you do a financial plan and the financial planner says wow, you know, you make some really good money here, but your family really depends on that paycheck and you're really short on life insurance and you really need a couple million dollars more of life insurance, and he throws he or she throws out a premium, he said I can't afford that. You know we got too many things going on. Well, how much can you afford? Can you afford to add $500,000 to the insurance portfolio? Maybe it's not covering the whole amount, but I've never met a widow that said her husband had too much life insurance. Right, it just doesn't happen.

Rob Wolf 12:20

And I will tell you from personal experience dealing with clients that where a tragic event happened, where a spouse passed away when there was life insurance in the portfolio, the amount of stress caused by the finance portion there just isn't the stress. It's still trying to overcome the emotional loss of a spouse. But at least they know their house is fine. They don't have to worry about the mortgage payment, the car payment, because everything's paid off right. They don't have to worry about do I have to go back to work? Those things are taken care of. I'll add on to that as well.

Sara Wolf 13:07

It's also really important A lot of people don't think about. They have to cover the cost of child care if you lose a spouse. What if one person is staying home? If they die? Well, the other person's not going to stop working. They need someone to take care of the child. So all of a sudden there's a childcare expense, same with the other spouse. If the spouse who was staying at home, their spouse, dies, the person who's staying at home has to go back to work. Someone's going to need to take care of those minors.

Rob Wolf 13:33

And then the question is if I have a breadwinner and the family has chosen to have, let's say, in the traditional family model, husband goes to work, wife stays at home helping raise the children, right, they've made that decision to sacrifice a two-income household for them to have that parent always at home with the child. Father passes away or mother passes away let's say mom passes away. If it was important enough for mom to stay home and be with these kids during their formative years, shouldn't mom have enough life insurance on her? That would allow dad now to be able to stay home during those same formative years and also help these children process what is probably one of the biggest traumatic issues in their life up to that point a loss of a parent. Or do we have to put it where mom passes away and dad's got to go right back to work and now grandma and grandpa are watching them or whoever?

Rob Wolf 14:54

That's not what the plan was. The plan was to have someone there all the time during these kids' formative years, and that's why I'm as big of a proponent of having enough insurance on the spouse at home as the spouse that's working, because I want to give both spouses the financial opportunity to be able to make that decision of do I want to stay home, right? Do I want to have a house that's paid for, right? That's what the power and the miracle of insurance can do.

Sara Wolf 15:37

It's all about taking off a burden.

Rob Wolf 15:40

Absolutely, because there's enough burden when a loss happens to begin with. Last thing we have to do is add even more burdens on top of that. So I'm a big proponent of making sure you're covered for the right amount. No more, no less.

Rob Wolf 15:56

Okay, so again, life insurance, disability. Too many people have too little of disability insurance. Your chances of becoming disabled are far greater than you having a premature death, but yet you know same issue You're a walking ATM. I unplug you whether you die or become disabled. Okay, we got the same issues. We got the financial hardships that's created because you're not able to earn income anymore, right? So disability in some cases is as important as life insurance, because the chances of you becoming disabled are so much greater than a premature death, although we do know that death does occur.

Rob Wolf 16:46

There's no guarantee of a disability. There is a guarantee of death. So we just know it's going to be a matter of when, not if, with life insurance, but with disability, there's a whole other host of factors that go into that. Everybody needs car insurance, everybody needs home insurance, renter's insurance, right? So you know, you guys are fairly young, you're 25 years old, right? And you guys are on a budget, right? You're still trying to build your lives. So what are some of the things that you guys struggle with as you move through your financial careers?

Sara Wolf 17:26

when it comes to money, Well, I think I can speak from a place of privilege, actually. So I'm a 25-year-old who's not in a circumstance as most 25-year-olds. I do own my own home. I have extremely little debt, so the main things I'm worried about is, of course, paying my mortgage and making sure I can sustain my lifestyle. I like to go at least once a year to go see my in-laws in Washington State, but other than that, I don't have much to worry about. But Jonathan, I think, can speak a lot more as to probably more the regular struggles of a 25-year-old more of the regular struggles of a 25-year-old.

Jonathan Foster 18:06

Yeah, so the generic generation for us is really anywhere from, I'll say, 21 to 26, where you don't have a home yet, because right now the pricing of homes are just outrageous, especially with the interest rates.

Jonathan Foster 18:18

I do have a lot of credit card debt, mainly because the career path that I chose before this was an automotive industry where you make money by paying for your own tools. So that's a lot easier to do when you're put in that position than you think. And as of right now, it's not at the top of my mind for life insurance yet I know if something was to happen to me, my significant other would suffer. So it's bittersweet to hear things like this, really, because I know that I have nothing on me other than what we have here through our work and I know that in some cases that's all some people can really afford. Yet with having the debt, with having pretty much a home search right now, it's if I was to have a life insurance policy that would ensure that they could go out, pay off their own debt, pay off the debt that I might have left behind, or go and get a home that's what would be probably the miracle maker for me.

Rob Wolf 19:23

Insurance is an important part of an overall financial plan. It's not the sexiest thing to talk about, but boy is it important. You know it's a lot more fun to talk about investments and rate of return and what money can do for you for down the road. But boy, it's hard to build when you haven't protected. And it's like building a house on quicksand If you don't build on a firm foundation, when something happens because something usually does that house that you've spent so much time and energy to build is going to come crumbling down.

Wolf Financial Podcast Wrap-Up

Rob Wolf 20:07

So if anyone out there listening is struggling with this issue, I would encourage you to talk to a financial advisor. If you don't have a financial advisor, come see us at Wolf Financial Advisory. Visit us at our website, wolffinancialadvisorycom. Give us a call on our phone, 269-982-1988. Come talk to someone that can relate to what you're going through. Okay, because we've all been in the position. We've all had struggles. We all have an idea of what that life cycle looks through. We can match you up with the advisor that makes the most sense for you, that you can have a good relationship with, that you can relate well with. So with that, jonathan, sarah, thank you for joining us today and we look forward to having you join us on our next podcast, wolf Financial Podcast.

Voiceover 21:11

Thank you for listening to the Wolf Financial Podcast. For additional information about our firm, please visit our website, wolfadvisorieservicescom. The strategies and concepts discussed are for educational purposes only and do not represent specific investment, tax or estate planning advice. Investing carries an inherent element of risk and it is in everyone's best interests to consult a tax, legal or investment professional. Past performance does not guarantee future results. Securities and advisory services are offered through USA Financial Securities Member, finra SIPC, a registered investment advisor. Wolf Financial Advisory are not affiliated with USA Financial Securities.