Episode 41: When was the last time you checked your Employee Benefits?
Whether you're dreaming of a retirement with sand between your toes and a cold one in your hand, hitting the road to chase the winds of adventure or spending time with your grandchildren, this show is intended to help you get there. Welcome to coasting in retirement with your host, Josh Knoll. You've worked too hard throughout your career to spend your retirement worrying, so sit back and kick up your feet because we've got lots of financial tips and tricks to share to help you get exactly where you want to be. Here's Josh.
Josh Null:
Good afternoon, everyone. Welcome to coasting in retirement. That's right. Thanks for joining us today. We are excited to have you. Josh Knoll here. Michelle is off again this week, so we welcome back one of our regular co-hosts, Mister Jay Stubbs, the director of Gulf coast for Providence Partners, which happens to also be the sponsor of this radio show. Jay, how are you doing?
Jay Stubbs:
Doing good, Josh. Good to be with you. A little fall weather in the air, but good to be in the studio.
Josh Null:
Yeah, we went from our 152nd day of summer, and we're now in our third of maybe five days of fall before we move right back into, it's called first fall. I thought this was a false fall. Yeah, false fall.
Jay Stubbs:
That's right.
Josh Null:
Well, you join us here. We're in a coastal college recording studio, beautiful downtown Fairhope, ready to put on another great show. For those of you tuning in, listeners, Jay and I are here today to discuss financial topics relevant to those of you in or near retirement, living your best life along our part of the Gulf coast. Here's what we got in store for you today. First segment, deep dive on our topic of the day. Second segment, roughly 25 minutes past the hour, we'll have our news headlines of the week. Roughly 45 minutes past the hour. Stick around for our third segment.
Josh Null:
We call it Josh's crystal ball and big mouth. And this time we're going to pick on Jay a little bit. But either way, we've got a lot to get to, so let's get to it quickly. Background on me for those of you new to the show. Again, my name is Josh Knoll. I'm a fee based financial advisor. I hold my FINRa series series 65 securities license, and I'm the owner of Gulf Coast Financial advisors. We are an independent investment management and financial planning firm.
Josh Null:
We have offices in Fairhope, Orange beach and mobile. You can find more information on me and Gulf coast financial advisors by visiting our website, gulfcoastfa.com, or feel free to give us a call at 251-327-2124 now if you dismissed that contact info. Do not worry. We repeat it several times throughout the show. So, Jay, let's get after our topic of the day. I'm going to start it with a question for you. I don't know if you coined this phrase, but I first heard it from you, so I'm going to credit you. When you say retirement red zone, what are you referring to? And did you make that up?
Jay Stubbs:
No, I did not make that up. Josh, thanks for giving me credit, but I have somebody that hired me a long time ago that I'm now business partners with, says that I like when I tell Jay things because I only have to tell him one time. And when I heard retirement red zone, it was at an educational event probably 20 years ago, and it was from prudential and their annuity platform. They were doing an education event and they rolled out the phrase retirement red zone. They may have trademarked it or done something with it, but since then, I have not seen it in their world. It really makes a lot of sense, especially if you follow any kind of football. You know that if you're inside the 20 yard line, you are in the red zone. The opportunity to score is right there.
Jay Stubbs:
So retirement red zone means, okay, if my hypothetical retirement age is 65 or 67 or even 70, then retirement red zone would be five years prior to your targeted retirement age. And that could be, you know, that's going to be different for everybody. Some people may choose never to retiree, but there is a moment in time where you do need to make some decisions specific to our world, Social Security decisions, Medicare and health insurance decisions during your retirement years, or your quasi retirement years, whatever you want to call them, and then some other decisions you need to make with respect to your group benefits that might be a part of your full time w two benefit package with your employer.
Josh Null:
All right, very good.
Jay Stubbs:
So retirement red zone just basically means, okay, I'm getting close. Do I go gung ho and stay aggressive in my portfolios with respect to accumulation of my assets and the money that's being managed there? Well, as you get into the retirement red zone, some of that may be backing down a little bit because you want to potentially avoid any downturns in the marketplace and make sure that some of your assets are preserved. So lots of things can come with that phraseology. I liked it, I remembered it, and I continue to use it 25 years into the business.
Josh Null:
Well, you said a couple of things there. So first, you talked about portfolios, investment portfolios. So I typically handle the investment management duties for most of my clients. Right.
Jay Stubbs:
Yeah.
Josh Null:
And I would say that with certainty. We are definitely paying close attention to the details of those accounts, and any other advisor would be doing the same. But you also mentioned benefits, which is what I wanted to talk about on this episode today. Are people paying attention to people that are in the retirement red zone? This is the next question for you. We know that they pay attention to their investments, right? Cause like you said, a lot of times there's, in some times, there's a dialing down of risk. But what about their existing employee benefits, their health insurance, their life insurance, long term care? Do people analyze disability?
Jay Stubbs:
Don't forget that one.
Josh Null:
Right. Do people analyze their benefits to the same level of scrutiny that they do their investments?
Jay Stubbs:
I think not. And here's why. Most people, if you're a w two employee with and you're driving down the road listening to this, or you're at home walking around, listen to this show. If you are two employees, you've been working for a company for an extended period of time. Let's just say I've been with this company 15 years, ten years longer. You have a one time of year enrollment period or re enrollment period, where you just sometimes check a box and say, no, keep everything the same. No changes. Next year rolls around, keep everything the same.
Jay Stubbs:
No changes. One of my kids is over age 26 now. They can't be on my health insurance plan, so I made that change. But at the end of that 130 minute session, you're not thinking about it ever again because it's a premium or cost that's being deducted directly from your paycheck, whether it's once a month or twice a month or once a week or however you're getting paid. And the beauty of employee benefits through your employer is you set it and you forget it. The beauty of employee benefits is you get that nice perk of that job, and a lot of that cost is offset by your employer. So thank you to all those owners out there and those listening. You understand it's important to have a good employee benefit package that you can attract and retain good employees.
Jay Stubbs:
But as you near retirement red zone, you may not need all of the things that you are being paid for through your paycheck. Some of, I'm not saying you don't need this as you're driving down the road or listening around, but let's just say you have no young kids in the household and you have no vision problems, but yet you still have a small vision plan through your group employer and I'm not knocking it. I'm just saying. Why do you have that? Well, we had it because one of my kids, of my three kids, wore glasses. They ended up getting contacts. Well, now they're older. So you carried a vision plan that you really have no need for today. And we see that when you do a benefits review.
Josh Null:
Well, okay. So let's talk about that, Jay. So, and this is something I learned from you all to full credit here as part of our financial planning process. You know, typically when you're doing financial planning, you're looking at income, you're looking at employee payroll deduction summaries, you're looking at their retirement plans or qualified plans or 401k. You're looking at their expenses. You're looking at all these things. Right. You have always made a point when we'd have joint client meetings.
Josh Null:
Hey, bring your employee benefit statement and let's go through it. Right. So what I want to do today for our show is, without a doubt, without fail, the meetings I've been in, there has been, as you mentioned earlier, the ease and the convenience of choosing these benefits. Right.
Jay Stubbs:
And it's a positive.
Josh Null:
It's a positive.
Jay Stubbs:
It's a good thing.
Josh Null:
Right. But on the flip side of that, sometimes we see things that don't actually make sense. Again, we're talking about people, generally speaking, in their retirement red zone. Now, of course, this applies to all ages, just like Jay said. There may be somebody that our age saying they're paying for a benefit that there's not even anybody to use the benefit for. But for those of you all listening that are in the retirement red zone, coming out of a w two situation, we're going to be talking about some of those things. Like, for example, Jay, we're not going to mention any names, but we recently did a joint employee benefit analysis for a prospect, a client coming in the door. And you found it.
Josh Null:
Let's talk about the two things you found related to her existing life insurance and the potential of something that she was really, really adamant about and passionate about, which was providing for long term care, extended health care events. Let's start with that case study, if you don't mind.
Jay Stubbs:
Absolutely. So great case study here for everybody listening. This client had a pretty substantial amount of life insurance.
Josh Null:
Yeah. More than you normally see in, more.
Jay Stubbs:
Then you normally see. What we call voluntary life through the employer, you get to purchase an additional amount, you answer a few medical screening questions. Sometimes you have to do a little paramedic exam. No big deal. Kind of the same thing we do on the individual ownership side. But, you know, you get the policy and you realize, golly, that's a good amount. What's that for? Well, and we hear the reason why. Everybody's got unique reasons.
Josh Null:
She had great reasons.
Jay Stubbs:
Great reasons. Well, we look at the cost associated with carrying that much through the group employer, and again, all these rates are different per employer group. Different size groups get different pricing. That's just the nature of the business. That group benefits. So we started evaluating the cost coming out of her paycheck on a bi weekly basis. So that's what, twice a month, Josh. Right.
Jay Stubbs:
I always get that wrong. Bi weeklies twice a month.
Josh Null:
Bi weeklies every two weeks.
Jay Stubbs:
Every two weeks.
Josh Null:
Bi monthly is twice a month.
Jay Stubbs:
Bi monthly, whatever.
Josh Null:
So one has 24, one has 26. So she bi weekly has 26 pay periods.
Jay Stubbs:
All right, so she's getting drafted out of her pay. And that amount of money, when you double it up because it was twice a month, it comes to a pretty significant amount. All I simply wanted to know is, are you still healthy? You know, could you, will you be able to carry this from your employer? Meaning is it portable if you retire or when you quit working? The answers to those were, yes, I am still healthy. No, I don't get to carry it with me. Me. Does it make sense to have something in your own care, custody, in control, meaning you own a policy, and could you potentially save money by not having it through the group employer because the rates are a little bit different? Well, we put this person through the application process. Still. Still going on.
Jay Stubbs:
I'm under the impression, preferred as a risk class is going to come out, maybe even standard, but even in standard, she's going to save 50%, 50% savings. So that means she could put this new policy that she's got in her own care, custody and control, and put it in force. She could then not have to enroll in the voluntary life through her employer, thereby saving a pretty substantial amount that she can then redirect towards others, maybe even saving vehicles with you, Josh, or other benefits through her employer. So it made a lot of sense, but it simply was a review of what she had. And could we do something a little different that would benefit her personally?
Josh Null:
Well, for her, she's looking to retire young and maybe possibly change careers, but they took the portability question off the table. And then, Jay, you mentioned that it reduced the premium outlay by 50%. She was able to redirect that. The goal is, one of the things she wanted to do is, can I save money on the life insurance so then, now can I pivot and look.
Jay Stubbs:
At long term care?
Josh Null:
Long term care. So let's talk about that a little bit.
Jay Stubbs:
Yeah, so there's, you know, and we've done multiple episodes on long term care, but for those of you listening, there are several different ways to consider the expenses of an extended health care event during retirement. And that is on people's minds. It is worrisome to some. They might have experienced it with their own family members. Thus far, they've seen money go out the door. It's expensive. Whether you have care, skilled care at home or even in a facility, long term care is expensive. And it's the number one thing that if you go to Medicare dot gov comma, long term care is the number one thing not paid for by Medicare.
Jay Stubbs:
So there needs to be some sort of solution. There are different ways to go about it. Traditional, traditional long term care. Then there's hybrid or asset based, and then there's life insurance with a long term care or a chronic illness rider. We were able to use the cost savings differential and see if we could apply that to one or two different long term care solutions for this client. And we have. She's still in the evaluation process of it, but it's a great study . Can I repurpose these dollars, not out of money, out of pocket anymore, but I get an extra benefit. And that extra benefit is now a life policy I control.
Jay Stubbs:
And the potential for a long term care policy that gives me some peace of mind. Should I experience it? That can't do two of six activities of daily living or have cognitive impairment.
Josh Null:
And so in this case study, Jay, basically we were able to, for the same premium that she was spending on life insurance. As long as everything works out like it looks like it's gone to, she's going to have the same amount of life insurance. It's going to be totally. Portability is out the question because she owns it now, and she's going to have a long term care policy right alongside without any additional premium outlay.
Jay Stubbs:
That's correct.
Josh Null:
Right. Very good. All right, so let's pivot to one more case study. Now, this is one I did. You spurred the conversation, but this is one I conducted. I have a retirement client. Again, no names mentioned. They're one of my favorite couples to work with.
Josh Null:
They're awesome. But they were trying to figure very carefully, very particular with their budget. Budget number was coming up a little bit short on the income because it's definitely in the retirement red zone. Not retired yet, but it's not going to be. They're well within the five years when they're totally retired. Right. We're trying to figure out, you know, where, where can we find, do we, do we need to go ahead and start pulling from our investment accounts? Where can we find this money? Well, based on your example, I said bring in your, let's bring me all your deductions in and what we.
Jay Stubbs:
Deductions from your pay stub.
Josh Null:
Thank you. Correct. So what we found in this particular example is, and I want to preface this, Jay, there's a thing called indemnity insurance. Right? Indemnity insurance is where the insurance carrier pays you directly in the event of a specific incident happening. Think Aflac, think accidents, think heart attacks, think cancer, things like that.
Jay Stubbs:
Cancer diagnosis, first occurrence, loss of a limb, heart attack, stroke, that kind of stuff.
Josh Null:
They pay you directly irrespective of your health insurance.
Jay Stubbs:
Our industry calls that a critical illness event.
Josh Null:
Right. So in this particular case, and the reason I preface that, Jay, is I have previous experience in industry, and what I'm about to say is not to be critical of that industry. It's just that this particular client over the years had done what you mentioned earlier, where they would have their annual enrollment, and it did not help. There was no human help with it. It was just online and had seen a couple of buzzwords, you know, seen heart attack or seen, you know, something like that, and had dedicated a significant amount of money, premium towards a critical illness plan.
Jay Stubbs:
And coming away from his take home pay.
Josh Null:
Right. To the tune of almost $350 a month, if you can imagine. Right. So we looked at his current health status. We looked at how long they've held it. We looked at the percentages of claims in industry. We looked at all these factors, and we all felt very comfortable, hey, let's dial this down and let's relocate these dollars somewhere else. So that's something.
Josh Null:
Again, it's not that they were ignorant or made a poor choice, necessarily, because if those things had happened, they would have gotten a robust payout. But there comes a time where you've got to balance all of these wants and needs with what you're trying to do, particularly if you're in the retirement red zone and you're trying to figure out where every dollar counts in retirement. Right, Jay, where can I find all these dollars and what do I actually need? What is critical to me is keeping moving forward on the benefit side, and what can I statistically probably live without so that I can maximize my income and that, so that was a, that was a great example of something where we dived in on that.
Jay Stubbs:
And I would like to point out a critical illness policy, especially as an employer, employee benefit is fantastic.
Josh Null:
Absolutely.
Jay Stubbs:
If you're in your twenties, thirties, forties, even fifties, and you have a critical event that is designed to give you a lump sum should that event occur. And it helps you kind of stay on your feet financially.
Josh Null:
Right.
Jay Stubbs:
Your clients could certainly stay on their feet financially.
Josh Null:
Correct.
Jay Stubbs:
And that's a difference.
Josh Null:
That's a key difference.
Jay Stubbs:
That's a big, big difference. So they could certainly kind of absorb the financial impact of not being able to go to work for 90 days. He also had, I do believe, some long term, maybe even some short term disability.
Josh Null:
I want to talk about that next.
Jay Stubbs:
So, you know, he was covered and then covered some more.
Josh Null:
That's it. Yes. I am a huge fan of disability income, as you know, so are you. And he did have double coverage on a lot of these events and he had a very pretty robust disability income policy. And my thoughts were, listen, let's focus on that. Right. And let's dial these other things down. But you mentioned disability income.
Josh Null:
J. I want to talk to you about that. Now in his particular line of work, I don't believe the DI is portable, but I know that you have experience with people where they have dropped. Di, dropping indemnity insurance could have some potential downsides, folks. Right. So let's be fair there. But it's a very specific use case on the flip side of that, in my opinion, and I'm sure statistics back it up. One of the most used, most used policies in our industry is disability income policies. Agreed.
Josh Null:
Now what have you seen when someone has dropped that prematurely?
Jay Stubbs:
Let me also state this right out of the gate. It's the number two thing you insure the first. The first is to have a good health insurance plan. The second is to protect your income. If you can't work for a long period of time, you have to protect your paycheck. It's the most valuable asset. When you, that you have come into the household. When you add up the amount of money you bring home times the number of months in a year, times the number of years you're going to work, that is a big number.
Jay Stubbs:
And for those of you driving or walking around listening, you do the math in your head. You've got to protect that at least to a 60% protection ratio. And the reason I say 60% is if you own a disability income protection policy that comes to you income tax free if you own it outright now through your employer, if that is given an option, you definitely want to protect it. Whether you own it individually for your individual income protection or you have one through your employer or a little bit of both, you want to keep that for as long as you are working, period. The end. If your last clock out date is December 31 of the year you turn 65, you keep that disability running. I have heard horror stories and been partying and being friends with these people where the disability coverage for a 60 year old physician was dropped, but he still maintained work.
Josh Null:
Dropped, was dropped. William Volunteer chose to say, I'm not.
Jay Stubbs:
Paying that premium anymore. Well, short time after that significant critical illness diagnosis, now he goes into treatment for that critical illness diagnosis, that treatment is prolonged, he has complications, he's no longer working. If you're no longer working, but yet you dropped your disability income protection policy, you're not getting benefits. And this is a physician who was making hundreds of thousands of dollars a year, and it had a significant impact on him and on his family. So much so that I learned the lesson early on. If you are talking with anybody and they're thinking about asking, you know, dropping their disability coverage or reducing their disability coverage, the first question out of my mouth is, oh, you must be retiring soon. And if they say no, be like, you need to reconsider what you're thinking.
Josh Null:
Well, and that's a particular example. So, Jay, to wrap up that part of our discussion, having someone with the level of experience that you and I both do, I mean, we're 40 plus years, and this doesn't mean we're perfect, doesn't mean we know everything. But when it comes to reviewing these benefits, there's very little at this point on the risk management side and the insurance side that you and I haven't seen. And fortunately, clients and people that want to look at doing business with us at Gulf coast financial Advisors, you have access to both Jay and I to look through all these things and help identify what you should keep, what you should maybe look at, possibly getting rid of or dialing down. But you've got somebody by your side giving you actually qualified advice around these things. Speaking of that, Jay, as we start wrapping up segment one, let's pivot to the other side of it in your role with Providence. There's Providence Partners and there's Providence benefits.
Jay Stubbs:
That's right.
Josh Null:
So we've been talking about helping people identify benefits that are employed somewhere else. Do you all actually help provide benefits packages for those of you listening that are employers, your business owner?
Jay Stubbs:
Absolutely. Josh, part of our.
Josh Null:
Let's talk about that.
Jay Stubbs:
Yeah, there's two different sides of our house. One side is the individual planning, role life disability, long term care, annuities when needed, helping you out with your individual clients. And then the other side is the business side of the house, which would be the business succession planning for business owners, business protection planning, and then employee benefit offerings all the way down to ten lives. And we can even handle groups of two to 19 if they're small, really small, what we call mom and pop employers or two sisters or two brothers, own a company together, and they're looking to have something for them and their employees. We offer that, and it's pretty neat. Years ago, just the big employers offered the really cool benefits and the ability to go online and enroll and check out all your product matrices or matrices or whatever that plural is. You can look at everything online and you get a pretty nice little benefit package. It's very attractive.
Jay Stubbs:
Well, now, even the smaller employers, let's say 25 employees, 50 employees, can come in and ask us to price out or quote their benefit packages for the express employment of attracting and retaining good employees. And not only is it beneficial to the owners, it's beneficial to those key people that you have worked with and for you for many years. So, yeah, small to medium sized businesses, we handle group benefits, core benefits, if you want to call it, and then the ancillary benefits. And then on top of that, we are a very robust shop in the medical gap insurance world. So employers, if you're listening, driving, walking around, what have you, you'll realize that the health insurance provided to your employees is extremely valuable. I think we've got an article coming up in the next part of the show, Josh, where we know the most sought after employee benefit is health insurance coverage provided by the employer. But sometimes those get rate increases. And I'm not trying to say that's a good thing or a bad thing, but obviously, insurance companies put out rate increases based on their claims experience, and an employer has to shoulder that burden or they've got to make some changes or they've got to pass that cost off to the employees.
Jay Stubbs:
And sometimes they don't want to do that because it's cost prohibitive. Well, there's ways that we can mitigate that through gap medical insurance planning. And Providence benefits is a major gap medical insurance provider in the state of Alabama and the Southeast.
Josh Null:
So, folks, what you heard, Jay, lay out what the services that they offer Providence Partners Providence benefits. You can contact him directly. You'll have all his contact info in the show notes or two for you. Like Jay was saying, you business owners that are listening here as part of the services that we offer at Gulf Coast Financial advisors, Jay does serve as our strategic risk management consultant, does a fantastic job. A lot of times we'll come in, he will handle the group benefits side of the discussion. I will handle the group retirement plan part of the discussion, the 401K or the simple IRA or Sep. And that's a, we'll have a, we'll talk about that in another episode. Jay had one more thing.
Jay Stubbs:
Yeah, I just want to talk to a lot of business owners that might be driving or listening or you're the husband or wife of a business owner driving or listening. There are times when your business is your asset and you're trying to figure out how to succeed that to the next generation. What changes do you need to be making? Not only are you in your own retirement red zone, you have your business to think about. So we do a lot of consultation with respect to the business owners that are trying to succeed that one or maybe even sell it. So we've got valuation services that we can offer, not to replace those of a CPA, but we can help you identify what's the value of this thing today potentially, and is my buy sell up to date? Do I have key people I need to protect and what is this thing going to look like in three to five years when I'm trying to sell it?
Josh Null:
Very good. Well, listeners, if you want to continue this conversation about either your individual retirement planning needs or for you business owners listening, maybe talking about employee benefits and some of the things, things that Jay just laid out, give us a call, 251-327-2124 or you can reach us through my website. That's Gulf, like the Gulf of Mexico coast as in the show title FA as in financialadvisor.com. Now, on my site, you can choose to send me a direct message or you can click on the blue button, upper right hand corner. That will put a 15 minute introductory phone call on my calendar. If you want me to call you, please make sure you include your phone number.
Jay Stubbs:
And if they want to visit in person, you've got, come on, man, I.
Josh Null:
Got three places we can meet. Yeah, fair Hope, Orange beach and mobile. So folks, coming up next, there's a lot going on in the world, particularly the world of finance, investments and money. Every week we scour the Internet for financial articles related to our topic of the day. Special articles that pertain to those of you in or near retirement. So join us after the break to hear Jay and I discuss this week's relevant headlines in our new news headlines of the week's segment. Stay tuned.
Jay Stubbs:
A multidimensional financial services company, Providence Partners serves the needs of independent insurance, financial and employee benefit professionals. The team at Providence Partners serves other business professionals like property and casualty agencies, registered investment advisors, community banks, and benefit brokers to assist in their clients risk management planning. Whether an individual or business owner client, this planning includes income replacement protection, planning for extended healthcare costs, family needs and generational transfers of wealth. At Providence Partners, we give you access to industry specialists. Those specialists focus on business succession, business owner planning and household protection, estate planning, planning for that income loss or planning for long term care solutions. Providence Partners is an Alabama based company. We have offices in Birmingham and along the Gulf coast. Our website is providencepartners.org and you can reach us on any of the working days.
Josh Null:
Welcome back to coasting in retirement. Your host, Josh Knoll here. So, as we discussed before the break, every week we scour the Internet for financial articles related to our topic of the day. Special articles are pertaining to those of you in or near retirement. And especially we try to find articles from reputable sources. We can't vouch for the complete accuracy of everything, but we try to find. There's a lot of, there's a lot of noise out there, right, Jay?
Jay Stubbs:
And also, I like how you don't use the ones that maybe have a paywall.
Josh Null:
We try to avoid paywalls because it's very irritating.
Jay Stubbs:
No offense to those companies that are out there that have a paywall because your content is really good, especially those sports writers and stuff. They have paywalls. I want you to pay for that exclusive content. But stuff like this, man, we just need to go find a person's needs.
Josh Null:
To be able to click and read. So, Jay, I'm going to kick it off. Michelle's not here to read the headlines like normal, so I'll be reading and let's discuss them. We're going to start off with, this is a site, no paywall. And I've always found it to be pretty even handed. Of course, we make a stupid eighties hair metal joke, but Kiplinger is the site, the article, and it's pretty fresh off the press here. It's titled, and we get this question all the time. So it's a great article.
Josh Null:
If you're retired, do you still need life insurance? Do you get that question? I get it. All the time.
Jay Stubbs:
Oh, absolutely.
Josh Null:
Okay. Well, so what we're going to walk through here on this article, Jay, is it talks about math. You know, is there, is there a life insurance need? There's math. But as you and I both know, when it comes to these things, there's the math component and there's the human component. Right. And so one of the things that I think is really important for those of you all that are in the retirement red zone and you're trying to figure out not only can, can I afford to retire, do I have enough investable assets, but also what do I need to protect on the backside? Do I need life insurance? Do I need long term care? Do I need all these things? You really want to reach out, whether you reach out to us at Gulf coast financial advisors as comprehensive, holistic financial planners, if you don't reach out to us, find somebody that does the same type of thing, because if you just are with someone that only does the investment management side, that's a very critical component. But there's never going to be a discussion around what I do, you know, you can, you can plan my upside, but how do I protect my downside? So back to the article, Jay. I think it does a good job.
Josh Null:
It lays out some of the reasons for carrying life insurance into retirement and also, to be fair, because, again, they're even handed, it talks about the reasons for nothing. What do you, what's yours, what's your thoughts?
Jay Stubbs:
Well, the same reason that I would ask somebody in the retirement red zone, or, you know, just retired, do I still need to carry this policy, is, do you still have things or people that you need to protect that you love? And that's the, that's the only question I should be able to ask.
Josh Null:
Okay.
Jay Stubbs:
If there's still a significant mortgage on the house or a mortgage on a vacation property, what's the status of that? Should you predecease your significant other? Do debts need to be taken care of? Are there still young children? Maybe it's a second marriage. Maybe it's a third marriage. Maybe there's, you know, kids that are in the mix, or maybe even there's taking care of grandkids while your own kids maybe hit, start a second career or go to school again for another, another opportunity. There's lots of things. So I'm going to say it depends. Do you still have people or things that you want to protect that you love? And that's how we'll start that conversation. So we'll do the, obviously, the financial analysis. We'll look at the debts versus the assets.
Jay Stubbs:
Are there still things that need to be paid off if you die prematurely? Are there still people that would need an asset to help them live and pay for things in a short period of time while you were still around or even a long period of time? Are you married to somebody that has never worked a day in their life? You've been the sole breadwinner, and they are not going to know what to do if they don't have the asset position if you die prematurely. So there's lots of things that we want to ask people. They may have some policies that they are going to lose when they retire through their employer. We've talked about that before. You want to maintain a policy that you have that's portable. That's always a good question to ask. Can I take this with me when I retire? The answer is no. Then you might want to.
Jay Stubbs:
And you still see a need. You might want to consider getting something that you can have care, custody, and control over.
Josh Null:
So our case example, in the beginning, she was retiring young. She had still had to take care of some family members, both older and younger.
Jay Stubbs:
Right, right.
Josh Null:
And even though she'd done a great job accumulating assets, the fact of the matter is there was a potential need to set aside a bucket of money if she was to pass, especially prematurely. There was potential for somebody that counted on her to need 20, 30, 40 years of care. And you're going to need a lot of money to do that.
Jay Stubbs:
That's right. And so we were able to give some pricing on having a policy that you own and carry that into your retirement years.
Josh Null:
All right, very good. Well, I'm gonna pivot to our next episode. We're gonna stay on life insurance speed. Okay.
Jay Stubbs:
You mean our next article?
Josh Null:
Next article. What I say is an episode. This is why Michelle does this part. All right, our next article, Jay, it's gonna come from nerdwallet again, this is, we don't use this as much as Kiplinger, but it seems to be a pretty fair site.
Jay Stubbs:
It's been around a while.
Josh Null:
It's been a while. We like the sites that are fair and balanced, and we like the sites that have a paywall. This one is something that I think anybody that's dived into the life insurance world, particularly, again, I think some of those of you in the retirement red zone have probably had this, these, both these products presented to you, particularly the second product I'm going to mention, and you've probably got a lot of questions about it. The title of the article is called term life versus whole life insurance, key differences and how to choose. So, Jay, I want to bring this up for two reasons. One, I want to give you the opportunity in broad terms to discuss the difference between the two types of insurance. Right. And then actually three things.
Josh Null:
And two, I want to talk about maybe the timing of having these types of insurances versus young versus old, kids versus grown ups, all that. Right. And then thirdly, and I'll remind you, I want to talk about the alternatives to whole life that are out there. Okay. So let's start with just broad terms. What's the difference? And this article talks about it. Your, your words, difference between term life.
Jay Stubbs:
And whole life, term life, short term or even now, a longer period of protection. My premium is guaranteed. My death benefit is guaranteed. For that specific term period, we can get one year protection periods. Five, the most common are 1015, 20 and 30. We can even go out to 35 and 40 year protection periods. You're locking in a premium. You get nothing for that policy other than a death benefit when you die.
Jay Stubbs:
If you died during that term period, it is the most common and used and affordable way to protect against premature death, especially in family and business settings. So in my opinion, term life, young families, temporary need, don't want any emphasis on cash value accumulation, which is what whole life and universal life do. I'll talk about that in a second. We see a lot of term life insurance and we see a lot of competitiveness in the term life insurance world. I will always say the number one ranking premium may not always be the absolute best company, so don't be a rate shopper with your term life. Come to professionals and say, is this company a good company? Do they have a long, do they have good customer service? Do they have a history of paying their claims in a timely manner? There are things that you just don't want to go online or buy life insurance from the radio when they're talking about term, no offense to the big al or whatever. Big Lou. Big Lou, look, who's the agent on that, and where are they located? It ain't big Lou when your family needs some coverage or protection or they need to make a change to the policy or you, God forbid, you die prematurely and they've got to get answers.
Jay Stubbs:
Who are they going to call?
Josh Null:
Yeah, big loss on his third wife and his fourth heart.
Jay Stubbs:
He's not answering that 1800 number on a Saturday like a local agent or a local professional is.
Josh Null:
You and I have been in the business long enough. Unfortunately, we've had clients.
Jay Stubbs:
So if you're driving or listening, don't, don't buy online from those folks. Use a local professional. And there are so many good ones.
Josh Null:
Out there and it doesn't cost you any more money.
Jay Stubbs:
It's all the same.
Josh Null:
It's all the same.
Jay Stubbs:
It's all the same.
Josh Null:
That's a big thing.
Jay Stubbs:
Plenty of reputable professionals in your market. Okay, so what is the alternative to the term? Well, it's, it's, it's what we call in the industry permanent. I don't like to use the word permanent because sometimes a plan may not be permanent, especially if you like to miss a premium or we don't have a dividend participation that works. So I like to say longer than term. Okay, I like that. So longer duration, longer duration life insurance. We look at life and we look at universal life. Now you asked specifically, and the article references specifically, whole life.
Jay Stubbs:
Whole life is a product put out by a bunch of different insurance companies. And they're all good ones, where you have a policy that guarantees a death benefit. It has a guaranteed cash accumulation, cash value accumulation opportunity, and it has a dividend rate that pays on an annual basis based upon the investments experience of the insurance company that owns that you have the policy with. They then pay out a dividend rate. Those dividend rates are public knowledge. You can go look it up and see what those companies are. And that dividend rate is a return on your equity inside the contract. Now I'm not getting into the weeds of life and all the different ways that you can design it, but your whole life gets its term from the fact that you have the policy your whole life.
Jay Stubbs:
You have a policy, you pay a premium, you get a death benefit, and it's an opportunity to make sure you get some cash accumulation at the same time. So that is the policy comparison in the article, term versus whole life.
Josh Null:
Well, let me jump back to two quick questions around that then. In broad stroke terms, if somebody is in their accumulation still earning years, they've got a wife or husband and kids and things like that. In general, you're going to recommend the term right now, on the flip side, on the other side of that coin, whole life has been, it's the granddaddy of all the permanents, right? It was kind of the first origination of permanent.
Jay Stubbs:
Yes.
Josh Null:
Okay. Or like you said, longer than the terminal. But as we close this article out, what are some alternatives to whole life? Because the insurance industry has changed. It is dynamic.
Jay Stubbs:
It has. When I've been in the business 25 years. I've seen lots of different formations of different product designs come and go, but the most recent one, that kind of stuck in the mid two thousands, was no lapse. Guaranteed universal life.
Josh Null:
I think I've seen the white coat investor be the one type of insurance he recommends outside of term.
Jay Stubbs:
So that's also called gulley, or guaranteed universal life.
Josh Null:
How's that working?
Jay Stubbs:
It guarantees a death benefit, but it has zero emphasis on cash value accumulation, and it pays no kind of dividend or return on the cash value that's housed inside of the policy. So if I pay a premium, I get a death benefit and I can design a gul policy all the way out, Josh. To age 125 years old.
Josh Null:
Wow. That's even longer than a whole life, typically. Right.
Jay Stubbs:
And a lot of gul is placed inside of trust for the express purposes of making sure that an estate has liquidity. If there's an estate tax issue or a charitable needs trust, you want to make sure that the charity of choice is getting their benefit after you pass. Or special needs trust that's come up recently with Josh, you and me, where special needs trust needs to be funded specifically, and they do it with a gul policy. Pay a premium, get a death benefit. The premium's locked in. The death benefit locked in.
Josh Null:
Not worried about cash value.
Jay Stubbs:
And you can actually design it to age 85, age 90, age even, all the way out to age 125, and you're not worried about cash value. Now, trick with universal life. Guaranteed universal life. Always make sure you're paying that premium in a timely manner, because if you miss a premium after 30 or 60 days, depending on the carrier, you could jeopardize the guaranteed duration of the policy. They may say, oh, you missed that premium. So, yeah, you're still enforced, you're still covered, but our guarantee has now been reduced from age 100 down to age 97. It's all the numbers played by the insurance companies. So if you have a g, well, great.
Jay Stubbs:
There's very little flexibility in it, but it is locking in a premium and locking in a death benefit.
Josh Null:
Well, we're available to continue that conversation. All right, last. Last article today, Jay, it's come from Forbes again, another site that I use quite a bit. It is called the best employee benefits in 2024. Right. And this ties into our conversation today. This one, I really like this article. It's got a lot of statistics in it and it talks about, like, key findings, what are the most important benefits to workers? So, Jay, I'll ask you, you've obviously seen this article, but if you hadn't, I walked up and asked you, what is the number one most important benefit to employees?
Jay Stubbs:
Health insurance?
Josh Null:
Okay, what would be number two?
Jay Stubbs:
You think life insurance plans are. Am I right?
Josh Null:
You are. That's right.
Jay Stubbs:
All right. So life. Keep quiz. Keep quiz.
Josh Null:
Well, number three is something that I do. So you, in your role at Providence benefits can come in, you can help facilitate health insurance, right?
Jay Stubbs:
Yeah.
Josh Null:
You can help facilitate life insurance, disability income. All the bells and whistles, right.
Jay Stubbs:
All the protection.
Josh Null:
All the protection. Thank you. I can come in. Number three was pension and retirement plans, which I appreciate that they lumped it in, probably for brevity, but you're talking about two different things. A story, a conversation for another day. But we can come in and we can do pension and retirement plans, 401 ks. We can do defined benefit plans. We can also look at simple iras for some of you, smaller employers, small.
Jay Stubbs:
Medium, large employers, even solopreneurs, seps.
Josh Null:
Yep. And all that. And then number four and five on this. Four was mandatory. Mandatory pay. Time off.
Jay Stubbs:
I need my time off. I need to go down to the islands for vacation. Give me two weeks a year, and if I've been there for a long time, give me maybe three weeks.
Josh Null:
I haven't been two for 30 years, so I don't even know what that means. But the last one was mental health.
Jay Stubbs:
Assistance, big time issue.
Josh Null:
Why don't you touch on that?
Jay Stubbs:
Well, I think with all the stuff that's going on in the world, especially post Covid, it helps to be able to pick up a phone and maybe have a visit with some sort of counselor. Whether it's a life issue going on, issues with kids, issues at home, issues at work. Mental health is really, really important. And especially with me with four kids and, you know, a very busy life, sometimes you just need a break and you need somebody to talk through something. And if it becomes more serious than that, they can walk you through what kind of medications you might need or extra counseling you might need. So I think a mental health and wellness benefit is extremely important. It. And, you know, you and I talked about it the other, just a little while ago, telemed companies being able to offer that through their employer packages as a benefit.
Jay Stubbs:
Telemed saying, you know what, I'm a little, got a little cough, Josh. I don't have time to go to the urgent care, and I don't have time to run down and wait in the waiting room to see my physician. Can I call somebody, tell them what my symptoms are? Not even zoom. Call them, video, call them. They diagnose right there on the spot and they give you the prescription medication. You need to get well soon. You can get back to work quickly. So, or go on your vacation next week, whatever you want to do.
Jay Stubbs:
Telemed is really important. So mental health, mental and wellness benefits and then potentially telemed, I think those coupled with the retirement plan and pension potentially. And then, of course, all the insurances. And that includes health insurance.
Josh Null:
Well, last thing on the article, I had a friend that always talked about medical or mental health, he would say, you could walk up to any person on earth and say, I'm here for you. I know what you're going through and I'm here for you. And he said, now the person may not react properly, but they're immediately going to think about what they're going through.
Jay Stubbs:
Right?
Josh Null:
Everybody's going through something, right? Even the people that appear, they don't. Everybody's going through something. So great job. Great job with the headlines, folks. If you're interested in some of the things that we were talking about there, particularly around the employee benefits, both on the offering side that Jay does and then also on my side with the financial planning and the reviews, again, I've got Jay as a resource on that side as well. Why don't you give us a call? It's 251-327-2124 or again, you can find contact information on our website, gulf coast fa.com dot. Don't forget to click on the blue button, the upper right hand corner puts a 15 minute introductory phone call on my calendar. All right, folks, coming up next, Joshua's crystal ball in big mouth, which we're going to call this one J's crystal ball and big.
Josh Null:
Actually, we're going to look back on not predictions so much, but things you wish you had known, right?
Jay Stubbs:
Absolutely.
Josh Null:
Because, I mean, you think about it, Michelle and I were talking about this in closing this segment. I told her, I said, in our industry, it's okay to be a little bit ignorant and inexperienced when you're new. What you want to turn to in that regard is mentors and actually reading what's in the contract. It's not okay to be willfully ignorant as you gain experience. And you've been doing this 25 plus years. I'm 16 plus. I look back on those first handful of years, I'm like, man, I wish I had known that. So we're going to talk about that next.
Josh Null:
Everybody, stay tuned. Whether it's building a business from scratch with your own two hands, and wanting to maximize the financial impact of those sacrifices, growing a great nest egg by being a dedicated and reliable worker for years or choosing to live a life well within your means in order to accomplish a lifelong dream of retirement. The last thing you want is to go with the wrong financial advice. After you've worked so hard to accumulate your assets, you've also probably spent most of your life putting others' needs ahead of your own. And now it's your turn. We can help. Gulf Coast Financial Advisors is a locally owned, independent, fee based financial planning, investment management and tax planning practice. We have offices in fair hope and Orange beach.
Josh Null:
We serve all of Alwyn county and the Gulf coast. We also have an easy to understand fee for service model with no sales quotas, no proprietary products. Our ultimate responsibility is to our clients goals and dreams. You can reach us at 251327 or find us online@gulfcoastfa.com. that's g u l f, like the Gulf of Mexico coast. Fasfinancialadvisor.com. Welcome back. Your host, Josh Knoll, here alongside my guest, co host, Mister Jay Stubbs.
Josh Null:
So, Jay, I'm going to jump right in this. Regular listeners know this is the segment that typically Michelle picks on my big mouth and some of the things I've said in the past. And a lot of times, to be honest with you, a lot of times I was actually proved right because I can be kind of skeptical about our own industry. What it does, it kind of shows that I'm willing to admit that I can be wrong and I'm human and that I've learned from my experiences and yada, yada, yada, right? But yours, we're gonna, we're gonna pick on yours. You actually have, is this on your site? How do you, how do people find this, this thing I'm about to read?
Jay Stubbs:
They're gonna have to call you and get access to it. I haven't published it yet. I showed you just because I think it's neat that I've been working on it. It's just, it's a neat way for me to kind of catalog things that I've learned over the years. It's almost like a diary, folks.
Josh Null:
Well, it is. It's called Die J's diary of wish I knew that. But in the insurance, this is yours.
Jay Stubbs:
Back office, and if you're driving and Orlando, we're driving down the road or walking around the house, you always, something happens day in and day out, maybe week in and week out, you're like, huh, didn't know that. This is a compilation of.
Josh Null:
Huh.
Jay Stubbs:
Didn't know that or I wish I knew that.
Josh Null:
Well, I'm going to, I'm going to pick a couple from this as we wrap up the show. First we have talked about what we did today and then we have in the past, and I particularly have talked about when you're dealing with insurance carriers, you want to make sure that you're dealing with a reputable, highly rated insurance carrier. Right. That's all you represent in your business. That's all I represent in my business. But I, you know, a lot of times people that they don't know, like, okay, well, how do I find that out? I guess, Jay, I didn't realize this either. I just would always go to the individual rating agencies. I tended to skew towards my best.
Josh Null:
But there's four primary rating agencies and apparently you can get fine where they give you one scale, one rating for everybody. Yeah.
Jay Stubbs:
It's called the Comdex.
Josh Null:
So explain that real quick.
Jay Stubbs:
So there are all kinds of different rankings out there for insurance and annuity companies. Am best, standard and poor, S and P, Moody's, Fitch. Those are the big four. A Comdex rating takes a composite of those plus a standing on a scale of one to 100 in relation to all the other companies that are using those same rating services. So basically it was formed years ago as a composite number. Comdex ratings, typically anything above an 80 is going to be a very solid company. I'm not saying the companies that might have a Comdex rating today of 77 aren't good companies. It just means that maybe they've had a little downturn in their financial situation.
Josh Null:
Maybe they were, had a PNC exposure to a hurricane. Right.
Jay Stubbs:
Anything like that can, and Comdex ratings are, can change and fluctuate throughout the course of a year. But typically if you see anything in the 75, 80 range or higher, then you're dealing with very reputable, good companies. Comdex ratings in the nineties. Obviously you're dealing with companies that are extremely strong.
Josh Null:
La creme.
Jay Stubbs:
Yeah, extremely strong. Financial doesn't mean the company with a Comdex rating of 82 isn't a good way to go. It just means that you need it, it's a way for you to keep tabs of the company's financial strength.
Josh Null:
It's a. Yeah, very good. And that is important. All right, one more thing, Jay, really quick. This one I think is really important. We don't have time to fully flesh it out, but we're going to leave a little teaser for our next conversation, the total amount of life insurance owned by a person is considered part of that individual's estate. I know there's more context of this, but a lot of people associate tax free benefits with being out held outside the estate. That's not accurate.
Jay Stubbs:
That is not accurate. If you own a life insurance policy. If I own a life insurance policy for $5 million and I died today because I owned it, it wasn't held in a trust and it was owned by me individually, then my estate immediately on the date of my death is $5 million, plus whatever else I own.
Josh Null:
Very good. Yeah, that is really important.
Jay Stubbs:
A lot of people.
Josh Null:
We're going to flesh that out more.
Jay Stubbs:
Well, it takes a lot of, you know, takes a little deep dive into the planning and the overall position of the clients. But if they're in a potential estate tax situation and they say, oh, I've got plenty of life insurance, I got a $10 million policy. Well, all the other stuff you are in.
Josh Null:
And the current estate tax exclusion is pretty high right now, but that's not a guarantee moving forward.
Jay Stubbs:
That'll be sunsetting unless legislation passes, which I doubt will happen.
Josh Null:
Right.
Jay Stubbs:
That'll be sunsetting at the end of 2025.
Josh Null:
Well, folks, if you've liked what you've heard today and you want to continue the conversation, why don't you give us a call? We'll ask one last time. 251-327-2124 or go to the website. If you prefer to click versus calling gulfcoastfa.com dot, you can send a message there. You can put a calendar link, upper right hand corner. Put something on my calendar. If you want me to call you, make sure you include your phone number. Or you can do all three, which I've had happen. I will give you a note.
Josh Null:
If you all do decide to call, I pick up the phone. I know when radio shows, people are calling and it's a lot of fun. So give us a call and we'll have a conversation and see what we can do to help you. So anyway, folks, that's it for this here, this week in coast room retirement. I want to give a huge thank you to my guest co host, Mister Jay Stubbs. Thanks for coming, bud.
Jay Stubbs:
Oh, absolutely, Josh. Always good to be here. And gosh, somebody outside in downtown Fairhope is going to get excited because I'm about to leave my parking space.
Josh Null:
That's right. Thank you. Also, too, thank you for facilitating your company, being the show sponsor. That's Providence Partners and Providence benefits. If you folks want to reach out to them. Just go to my website. There's their contact information there as well. Thank you to your awesome radio station.
Josh Null:
That's fm talk 1065 out of mobile. Many thanks to the provider of our show, music, that's local band Sloth Racer. Thanks to our show producer, that's my son, Mister Peyton Knoll, freshman at Auburn War Eagle. And as always, my sincere appreciation for all of you out there that have been listening and joining us on this journey. We'd love to be part of your journey as well. Until we talk again next Sunday, have a wonderful and productive week. This has been coasting retirement with Josh Knoll Gulf Coast Financial Advisors, LLC, known as GCFA, is a registered investment advisor offering advisory service services in the state of Alabama and in such other jurisdictions where it is registered, filed the required notices, or is otherwise excluded or exempted from such registration and or notice filing requirements. Registration does not indicate or imply that GCFA has attained a particular level of skill or ability, nor does it constitute an endorsement of the firm by the Securities and Exchange Commission or any other state securities regulator.
Josh Null:
The Coasting and retirement radio program serves mainly to disseminate general information, including those pertaining to GCFA's advisory services, together with access to additional investment related information, publications, materials and links. The publication of this radio show should not be construed by any client and or prospective client as GCFA solicitation compensation to effect or attempt to affect transactions and securities nor should be interpreted as GCFA providing personalized investment advice or any type of professional advice for compensation. Wherever this program is broadcast, any subsequent direct communication by GCFA with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. Certain information, news stories, headlines, data, charts, graphs, figures or statistics presented on this radio program may have been obtained from third party sources that are believed to be generally reliable, but which GCFA may not have independently verified. GCFA does not and cannot guarantee the timeliness, accuracy or reliability of any such third party information and undertakes no obligation to update or correct any information that may become obsolete, unreliable, or inaccurate. This radio program also contains the opinions, views and perspectives expressed by Josh Knoll and any other GCFA representative which are solely their own and do not necessarily reflect the opinions, views or perspectives of GCFA. Such personal views and opinions should not be construed as endorsements or professional advice from GCFA. GCFA makes no representation or warranty regarding the accuracy, completeness, or reliability of any information on this radio program and disclaims any liability for any direct or indirect loss or damage incurred from using or relying on such information.
Josh Null:
GCFA and Providence partners are not affiliated, nor are any of their respective representatives.