ANNUITY OPINIONS, 401(K) LOANS, AND STREAMING BUNDLES

This week on Upticks, join me and Cory as we discuss updates to our team structure, using 401(k) loans, and the good, bad, and ugly about annuities.

Inflation is easy to blame for financial hardships, but how is it affecting you? Know how to use your parachute before jumping out of a plane. Last but not least, create your own streaming bundles!

Thank you for joining us this week! If you have a topic that you would like us to discuss or debate live on Upticks, please email it directly to Luke at?[email protected]?and he'll be sure to ask us to bring it up on the show!

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Read a summary of the conversation below:

Introduction

Jake shares his experience from a recent golf tournament at Southern Hills Country Club in Tulsa, Oklahoma, mentioning he feels “golfed out” after playing several days in hot weather. He also talks about receiving a mini-lesson that led him to purchase a new driver! Cory updates Jake on his new baby, Daisy Lou, who is just over two weeks old! He jokingly mentions playing Jeopardy and podcasts while she naps.

Team Structure Update

Jake and Cory discuss their evolving roles over 14 years of working together. They explain how they’ve grown from rookies to experienced professionals, now surrounded by a handpicked team of technical individuals. They emphasize the importance of our team in handling tasks they previously managed themselves, such as trading. They stress the high expectations and selectivity in their hiring process, helping ensure a quality team at Falcon Wealth Advisors.

When to Treat Your 401(k) as a Bank. And When to Keep It Locked Up.

Jake and Cory discuss 401(k) loans, noting that 13% of working people have such loans. They highlight the risks, including a 62% default rate if borrowers lose their jobs. While 401(k) loans seem attractive due to paying interest to oneself, they point out drawbacks: the borrowed money isn’t invested and growing, interest is paid with after-tax income and eventual distributions are taxed. They also mention high fees, sometimes up to 1%. Jake advises against 401(k) loans unless absolutely necessary, recommending building emergency savings instead.

Source: [Wall Street Journal / As of: 6/27/2024] https://www.wsj.com/personal-finance/401k-loan-borrow-how-it-works-taxes-interest 14c84268?mod=panda_wsj_custom_topic_alert%C2%A0%C2%A0%C2%A0

Annuities Are Soaring in Popularity. They’re Not All as Safe as They Seem.

Cory reveals that total U.S. annuity sales in 2023 reached $385 billion, a 23% increase from the previous year. Jake expresses surprise at this figure. Jake notes that in his experience, most new clients who own annuities don’t fully understand what they’ve purchased. He often finds that after explaining the annuity’s performance, fees, and penalties, clients are surprised by what they’ve gotten into.

Source: [Barron’s / As of: 6/27/2024] https://www.barrons.com/articles/annuities-risks-retirement-sentinel-atlantic-coast-a-cap-ec9dbba5?st=88d681ch2he2dqs%C2%A0%C2%A0%C2%A0%C2%A0%C2%A0

Inflation Puts More Retirees at Risk of Running Out of Money

Jake discusses how inflation impacts lower-income groups more than higher-net-worth sectors. He emphasizes the importance of reviewing spending habits with a financial planner, especially for those struggling with inflation. Jake introduces the concept of “personal inflation,” where individuals experience different impacts based on their specific circumstances, such as commute distance affecting gasoline costs. He encourages listeners to examine their budgets and identify areas where they can cut expenses to improve monthly cash flow.

Parachute Training After Jumping

Cory shares insights from Carl Richards’ LinkedIn post about market turbulence. The post emphasizes the importance of preparing for market crises before they occur, likening it to learning how to use a parachute before jumping from a plane. Richards argues that it’s too late to hedge against something that has already happened. He advises putting a plan in place and recognizing that market declines are normal occurrences. Jake and Cory discuss why people still panic during market downturns despite preparation, concluding that looking at performance less frequently, and your financial plan more frequently can help reduce perceived volatility.

Forget the Rules: How People Are Building Streaming Bundles to Save Money

Jake and Cory discuss an article about families creating their own streaming bundles by sharing passwords and logins across various services like Netflix, Hulu, and YouTube. This practice allows families to access multiple streaming platforms while each member only pays for one service. Jake notes that while this likely violates service policies, it doesn’t seem to be heavily enforced. Cory mentions that some companies have started cracking down on this practice by monitoring device locations to ensure users are within the same household.

Thank you for tuning in, we hope you have a great week!

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