What Can Be Done About Debt

This episode covers essential financial planning topics including savings rates, debt management, long-term care, and investment strategies. Joe Yocavitch shares practical insights on protecting your wealth, planning for longevity, and making informed decisions to secure your financial future.

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SPEAKER_01 0:00

Welcome to the Heart of Your Money with Joe Yakovic, president and founder of JML Financial Group. We hope today's show can help you on the road to your financial wellness. Now, here's Joe Yakovich and the Heart of Your Money.

SPEAKER_02 0:15

When you're dealing with the saving rate out there today, I don't know if you know this. Back in the 50s and 60s and 70s, people would save 15% easily. You know what that number is today?

SPEAKER_00 0:27

A lot lower.

SPEAKER_02 0:28

Oh, I bet about 3%.

SPEAKER_00 0:30

Three?

SPEAKER_02 0:31

3% people don't save. And one of the reasons they got themselves in a pinch with all this debt. Remember, you got student debt. You got car car loans. Can I just share with you something about a car loan? One of my clients just purchased a car. I don't know if you know this or not. Back in the day, and you remember this not too long ago. Cars were the loans were give or take $450 a month.

SPEAKER_00 0:56

And the low the longest you could do it for was like five years.

SPEAKER_02 0:59

Correct. Today, that was only 10 years ago, Sari. Today, that same car loan is over $750.

SPEAKER_00 1:06

And you can extend it for seven years, my aunt just bought a new car. She didn't ask anybody. She's single. She doesn't have to ask anyone, but she didn't ask anyone for their help or their opinion. And she shows up at her birthday celebration. She's like, I bought myself a new car. And she starts telling us about the payments, only $250. We're like, wow, that's great, you know? And I said, is that four or five years? She said seven.

SPEAKER_02 1:29

Seven.

SPEAKER_00 1:29

No, she's almost 70 years old.

SPEAKER_02 1:33

Think about it.

SPEAKER_00 1:33

Yeah.

SPEAKER_02 1:34

So with us, we are big believers of principle protecting your money, making sure you never have a negative year looking backwards. I mean, these are some of the things that we do with our clients all the time. Uh, and because of the big beautiful bill, things have changed on terms of how we are taxed, how we are going to be taxed in the future, what the best strategies are presently, and will they change? Who knows? All I know is income planning and not running out of money, and making sure inflation does not erode our purchasing power and not to be a burden on our families, and people don't understand it. Because that's why I do a lot, a lot of traditional life insurance. Why? Because built into the life insurance products and strategies, you know what happens? There's a long-term care, chronic care built into it at no cost. So when you're going in to really help someone and really share with them what the best strategies for them to leave money or protect themselves against a catastrophe, like a long-term care situation, because everyone's living longer. That's what AI has done. It's made us live longer. And because of health, we're gonna only live longer, but you better have enough money and you better be in a situation where you're not spending too much too soon and you have a game plan going in. You really have a budgeting conversation that we have, and we do that by asking the right questions.

SPEAKER_00 3:12

I want to throw in the view of not being a burden on your family with this long-term life care because I just had this conversation with my dad this morning, and he was talking about how much money they've saved and how he thought it would be so much. He's like, But I don't feel like I'm rich. And I said, Well, because you're not rich, dad, you've got enough, but you're not rich. And he was talking about Medicare paying for the expenses. I said, Yeah, but I know for a fact they don't have anything for long-term care. And he says to me, Well, your grandfather, he didn't need anything. Your grandmother, you know, they didn't need anything. And I said, Yeah, but dad, that's not a guarantee that you're not gonna need anything. And what that does, I try to explain to him, that places the burden on me and my siblings and my husband, the next generation. And because he never had to deal with that, he doesn't think about it. So I'm just saying if you were lucky enough to not have to take care of your parents or your aunts and uncles in that way, it's not a guarantee. And think about what you're doing to your children.

SPEAKER_02 4:14

Oh, yes. And by the way, lucky for you, you're able to do it because you're still healthy. Yes, but let's suppose we fast forward this. I'm not saying you're not gonna be healthy in the next 15 years or so.

SPEAKER_00 4:26

Right.

SPEAKER_02 4:26

I just went to a viewing to one of my uncles through my wife. He was 98 years old.

SPEAKER_00 4:34

So his kids are like in their 70s.

SPEAKER_02 4:36

Well, no, no, he he had he had kids late. Their kids are in their 60s, but guess what? He passed, but he was in great shape. He was one of those human beings that you really want to be like. I mean, he's sitting there having dinner at 98, and all of a sudden they're talking to each other, and all of a sudden just dozes off, and that was it. And his wife, which happened to be, again, my wife's aunt, just said, Listen, we're gonna still enjoy dinner with the two boys. It was almost like nothing happened. Don't forget, he's 98 now.

SPEAKER_00 5:12

You don't have to be sad, but you might call 911.

SPEAKER_02 5:15

Well, you're 98, 99, it sat, he had a really full life.

SPEAKER_00 5:20

Of course.

SPEAKER_02 5:20

And that's one of those things that you hope and pray that your father would go through. Right. You don't want to go through nightmares of hospitals and you know, ailments and issues that you have to really, you know, kind of do everything for them.

SPEAKER_00 5:36

But you don't want to add the nightmare of the finances on top of that. I've already told my dad, I said the plan is I've got a pillow for you, daddy. That's how much I love you. And we'll just handle it that way.

SPEAKER_02 5:47

That was my line. That was my line in the back. I'm the pillow guy. But you're right. It's it's a really and I talked to clients like this way before this happened. I'm going 20 years before it happened. Do we have a plan for this? Because another issue, the train, the financial train is coming, meaning that there's debt because of the population and the system. Who's gonna take care of some of these things for your father? Now, maybe he's he has a good plan or he has Medicare, but it Medicare does not cover everything. No long-term care, no long-term care, no chronic care. And if you had to go into a facility, who's paying for it? Obviously, you want to try to keep them home as much as possible. And if mom's still alive, she might not be able to do so. So the money has to come out of their own savings, and that's can draw upon that very quickly if he has a longevity being in that situation. So, you know, we look at all the avenues, we make sure the clients absolutely know about it. We talk about it all the time with our clients. We make sure they're they have a plan in place, we give them some options. You know, a lot of advisors don't talk about this. Either they don't know about it, they don't know how the insurances work, they don't understand how the guaranteed premiums on what they own work, they don't understand distribution because they've been putting money away for you know for 15, 20 years, and the market's been very, very good. We all know that. But how do you spend it? How do you withdraw it without running out? And how do you protect it? To me, that's so important. And and I've seen scenarios where, like you, you know, you're might you might be local, but you might have a sibling that lives in another state, and maybe they don't want to do that.

SPEAKER_00 7:38

You know, then it falls on one child.

SPEAKER_02 7:40

Correct, correct. Yeah, you know, so that's a big concern. And by the way, Sari, you know, if you think about it, let's suppose that would be the case, you might be taken out of the workforce immediately. That might jeopardize your own Social Security. So you we don't know until we start to plan properly. And these are the type of questions that I ask all my clients and let them know. And we use the master plan. We check off boxes to say, are you aware what would happen if do you want me to look at these things? Can we incorporate two or three different strategies within one vehicle? A lot of these things today have changing, and because of AI, uh it makes my my profession so much more gratifying because you're able to really truly help people. I mean, you can see it in their faces when I'm there speaking with them about the certain strategies they might have never even heard of, unless I bring it up to their attention.

SPEAKER_00 8:38

That's what I wanted to ask. When you start, because let's face it, long-term care, not something fun to talk about because we don't want to think about if that happens to us. But do you find that when you start to really get into it and dive in with clients that it's really not as complicated as they thought it was gonna be?

SPEAKER_02 8:57

Absolutely. And I make it, you can tell, I do my best to make it simple. It's not it doesn't have to be complicated, but it has to be talked about, it has to be mentioned, it had to for me, I lay it out for them. I let them know the options that are available now. Let them know how Social Security works, let them know what the best time to take it and not taking it. Let them know what Irma means, you know, how Medicare could increase their dollar amount they have to pay out of pocket depending on their income that they're gonna get coming in. I have to look at their obviously debt. How much debt do they have? Do they have good debt or bad debt? Are they spending too much and maybe not enough? What is good debt? Good debt is having debt. I don't like debt at all, but good debt is having debt such as um your mortgage debt, where it's tax deductible and you have decent ways to access the money if necessary. That's good debt. Bad debt or credit card debt.

SPEAKER_01 9:58

Right.

SPEAKER_02 9:59

You know, you got 25, 29 percent, and if you pay it and it's not taxable, you know, it becomes a burden on your overall plan. That's why we're always talking to people about besides that. You also have to consider student debt, mortgage debt. I mean, these are a lot of debt people have, but they don't understand how to get out of debt. And if you think about it, you have a credit card, it might take you, you know, if it's it could be a ten or twelve thousand, fifteen thousand dollar credit card, it might take you ten years to get out and pay it completely off if you don't plan correctly. We uh also do all these things for our clients. We call it debt snowballing. We make sure you pay off the debt as fast as possible so we can continue to put that money in action. Because if you're used to paying, for instance, a credit card or a car payment and you're done paying for it, we still believe you continue to pay whatever those dollars are back into your own bucket, back into your own investment bucket. So you continue to have money working for you that you can access down the road if necessary. So again, it's just not a one-shot deal here. It's a long-term objective for ours to make sure people understand what we do and not it doesn't have to be complicated, but we're always thinking about long term, not just the short term. We need to look at the long game going into retirement because again, as you said before, we don't know how long you're gonna be around for, my girl. So what do we do? We got to prepare for these things.

SPEAKER_01 11:33

Securities and investment advisory services offered through Integrity Alliance LLC, member SIPC. Integrity Wealth is a marketing name for Integrity Alliance LLC and is not affiliated with Integrity Wealth. Joe Yakovich is an investment advisor representative and registered representative with Integrity Alliance LLC, a registered investment advisor and member SIPC. Integrity Wealth is a marketing name for Integrity Alliance LLC. Integrity Wealth is not an affiliated company. Opinions expressed on this program do not necessarily reflect those of Integrity Wealth. The topics discussed and opinions given are not intended to address the specific needs of any listener. JML Financial Group does not offer legal or tax advice. Listeners are encouraged to discuss their financial needs with the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results. Fixed annuities are long-term insurance contracts, and there is a surrender charge imposed generally during the first five to seven years that you own the annuity contract. Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation of any of a stock market index. Such contracts have substantial variation in terms, cost of guarantees, and features, and make cap participation or returns in significant ways. Investors are cautioned to carefully review an indexed annuity for its features, cost, risks, and how the variables are calculated. Any guarantees offered are backed by the financial strength of the insurance company. Surrender charges apply if not held at the end of the term. Withdrawals are taxed as ordinary income, and if taken prior to 59 and a half, a 10% federal tax penalty. Converting an employer plan account or traditional IRA to a Roth IRA is a taxable event. Increased taxable income from Roth IRA conversion may have several consequences, including what not limited to a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA. Rebalancing reallocating can entail transaction costs and tax consequences that should be considered when determining a rebalancing reallocation strategy.