Financial Spring Cleaning

by | Mar 13, 2024

Capture the Upside Podcast

About this episode:

In this episode, we delve into the essentials of financial spring cleaning. We begin by discussing the easy-to-overlook costs of unused subscriptions, illustrating how small expenses can accumulate into significant opportunity costs over time. The conversation then pivots to a compelling client story emphasizing the importance of comprehensive estate planning and the hidden pitfalls in financial management. Highlighting the issue of “orphaned” 401k accounts, we discuss the complexities of retirement planning in the U.S. and the benefits of consolidating these assets for a more secure financial future. Wrapping up, we provide actionable advice for initiating financial spring cleaning, helping to navigate wealth management’s intricate landscape.

Episode Insights:
WSJ – The Real Reason You’re Paying for So Many Subscriptions

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Hello, everybody. I’m Sean

I’m Kevin. This is Capture The Upside, a podcast brought to you by Hill Island Financial for families with $2 million or more in investible assets.

Kevin, this last weekend I did a little work this weekend. My wife wasn’t too thrilled about it, but I had to get all my books caught up, right? The tax season is coming up, business accounting. I had to make sure that all the expenditures were categorized correctly and, in the right spot. And that was kind of a very nice time to look back at the year and, and see things like at all the subscriptions that I forgot that I had, you know, I’m at the ballgame and you get a free, free T-shirt if you send it for subscription.

How much does Apple storage cost?

Exactly. And, and oddly, the one that really stuck out was a $90 a month charge for the Chicago Tribune, a digital subscription, which is like a thousand dollars, right? Um, over the course of 12 months…

You know, I love this because we get this all the time, right? Like this is one of those like, Hey, by the way, blah-de-blah. And if you think about how much you effort you put into spending a thousand dollars, right? Like, this is why subscription models work, right? They’re great businesses. This is why we as investors love it, right? Like people get on ’em, we’re lazy, we never get off. And I will tell you, I did some math on that. If we take a look at your age, if you would’ve taken that $1080 is what it is exactly. Mm-hmm. ,right? Invested it, put it into the stock market, it would’ve cost you right around $32,000, right? Thank God, $32,000 for high quality Chicago Tribune, right? Ha ha. But if you’ve just taken that and shoved it into a Roth, right? The end value is actually kind of astounding.

$177,653. Wow. I mean, that is like, not, so this is not that podcast, but it is that kind of opportunity cost and the importance of actually doing that spring cleaning. So, I mean, I will say just getting your stuff in order is kind of an achievement.

Mm-hmm, right?

That’s not a thing that happens every year. You’re like, ah, it’s kind of this. And when you think about our clientele and the families that we serve, when we talk about spring cleaning and cleaning things up, it has unbelievably huge consequences. I can’t begin to underline for anybody who is listening to this, every single one of you has this problem and needs another set of eyes to come in and say, Hey, did you really check that? Did, did you really go and and do this or take a look at it? And I wanna underline, I had a client who was referred to me, oh, probably 15 years ago and stands out and names will be changed to protect the innocent.

Let’s just say this client was Susie and Susie’s husband had passed away. Susie also had a daughter that had passed away. And they’d all passed away from some kind of painful stuff. And, mom now had, something where she had a diagnosis that was not great, right? But it was not necessarily terminal at the time that we met. So there were some life insurance proceeds, there were multiple properties. It was a fairly complicated estate. And we had gone through and we had changed all sorts of things cuz now we’ve got trust issues because it was a blended family, it was a second marriage. And again, when you start thinking about this, you’re like, maybe that applies to you, maybe it doesn’t, but you know, over the years you’ve picked up this piece of property. Well wait, was spouse there for the signing or is it only your name?

Right? Did we put this in the trust? Did we even have a trust? Do we know what we’re…right? So you go through all this stuff and there was a lot of work. I wanna say we had nine separate meetings. And again, same charge. The very first year putting things together for this client while Susie ended up getting a terminal diagnosis about four years after we started working together on our investment portfolio and cleaning everything up, and in the context of spring cleaning, we had discovered through a piece of mail that there was a life insurance policy on her that she had taken out at work and had never brought up to us. It was a paid up policy. He had named a sister to whom she was close at the time, as the beneficiary of the policy because the sister was gonna be the custodian of her babies. Sister had become an alcoholic and they hadn’t spoken for 10 years.

Sister didn’t attend the funeral, and now sister is named as the beneficiary of a $750,000 paid up life insurance policy.


…and we’re in a spot where our office negotiated between, again, blended family, right? So you’ve got step kids, you’ve got bio kids, you’ve got bio sister who is not operating in a healthy space, right? She’s already got acknowledged addiction diagnosis, negotiating because by law sister gets, it doesn’t matter what the trust or what the will says, right? And I bring up that anecdote because it has really served as a personal drive when I am dealing with people who have achieved a lot in their lives or have been in a position to have the responsibility of an inheritance. I am personally mission driven to go in there and solve for zero. And one of the things that often comes up when we talk about spring cleaning, and we’ve got about 17 different things that we do when we really look and say, Hey, let’s find out, because now we can go and look internally, we got, we became insurance licensed as a result of Suzy. And we can now go look at the insurance database and find out, does anybody have you, have you ever crossed through this database? And we can find it and we can find that even if the client forgets about it or doesn’t know it. Secondly, one of the things that we bring up is old 401k’s. And so the United States of America has organized unique in the world. If you live somewhere else, more often than not, that country’s government has some sort of a pension for you or requires the company to have some sort of a pension. So in the world, we have essentially said, this is a really hard thing to figure out; pensions and retirement, right? We’re not gonna necessarily force the individual to do that, but not in the United States. We have said, look, we are going to totally decentralize that, right? So you have F.D.R back in the forties saying, we’re gonna start a pension, right?

And then you have the eighties saying, we’re gonna take, take as much of that off there, we’re gonna get out of pensions, right? Companies are gonna stop doing pensions and now it’s up to each, you know, each of us to figure out if we’re gonna save up, if we’re gonna delay gratification, right? And so as a result, we’ve got this whole 401k IRA system that’s really hard. It is really complicated and it’s unbelievably easy to make mistakes. So because it’s really hard, you’ve got 1.35 trillion worth of orphaned four oh 401k accounts; money that people forget about. So when we take a look at that 1.35 trillion that is in 401k’s, right? Even if you’ve got 20 grand out there, 20 grand is gonna grow on its own or not if it’s left in a 401k. So if the one thing you take away from listening to this podcast is I bet you there is an old account out there, right?

I bet you there is something that you can find. Whole businesses have been made around consolidating these orphaned accounts out of plan sponsors. Because if the business, if you have a 401K and IRA under $5,000, they can discharge it, right? They can shove it off to somebody else who wants it. They’re paying the aggregator is paying for that IRA so that they can now have it on their books pretty well guaranteed that you’re gonna forget it and charge fees on it. And so as we go through spring cleaning, and again, we’ve got our detailed checklist, I want to really include in that a few other things, that are gonna be really impactful in terms of wealth. One of those is taking a look at, how you invest in your employer-sponsored retirement plan or any tax plan. Inevitably tax law changes occurred December 30 or December 31st of the year before they go into impact.

This past year there was the secure Act 2.0 which made sweeping changes, right? Change the requirement of distribution rules, allowed individual businesses to start up 401ks. One of the things we do in, right around now spring cleaning March and April, is you have an idea of what your taxes are. You have your taxes back. Let’s look and see is there’s something that has changed that we should do. For instance, every year, the 401k contribution amount changes, right? Every year the amount that you can put into your HSA changes, right? All of these different ways. And we know that putting in this cash allows you to put away an additional 20%. Similarly, distributing the cash out of them rules for Roth conversions, rules for what you can put into what type of a location, right? Do I put it into an IRA? Uh, or a Roth, a non-qualified.

All of those things have changed. And then we can also look ahead from a spring cleaning perspective and do some forecasts and say, right now, for instance, the estate law is going to radically change in 2026. Well, it’s 2023. Is there anything that we wanna do about your current gifting plans? Well, let’s kind of sure that we go through that beneficiary review checklist. Let’s make sure that we’re taking a look at 401k’s. Let’s make sure that we’re maximizing our opportunities. Doesn’t mean we have to change. This is not a way to say every year I want you to increase by 10 bucks. It does mean look, if you’ve got that $90 subscription that could turn into $200,000 in retirement, hey, let’s address it and let’s make sure that we’re on top of it.

And I think those things, Kevin, having your house in order, checking things off a list, they always make me feel good. I feel fantastic clearing $90 a month, which is not a big sum of money, but it wasn’t wasted now, right? Um, we feel good when we have those things done and our house is in order, whether, you know, we’re cleaning out the garage in our spring cleaning or we’re, you know, recouping that life insurance investment. How long does, is this a long process? Is talk a little bit about how to get it started.

Yeah, that’s a really, really good point. I wanna build on what you said is, look, it’s not like people don’t want to do it, but we’re busy. We kids, we got marriages, we got work, we got yard work, we’re retired, or we don’t even know where to start. It’s all very complicated. If you’ve ever tried to do your own taxes from TurboTax and anything weird comes through on a 1099, you’re like, I don’t know, I hope I answered it right. Uh, and so it’s really helpful to have a coach, to have a guide to hire somebody. Uh, and again, you know, whether that’s a professional organizer in the house to figure out your closets, or in your financial life, they we’re gonna pay for ourselves, right?


…going and looking through all of these different things. And so to your point, it does feel good and you know, you’re not doing it.

You get started into it and then let it go, right? I mean, you know how this is something else comes up and you don’t get finished. Well that’s what we do. You delegate to our team. You’re like, look, take all this junk, sort it, organize it and make sure that there’s nothing wrong. I don’t want any surprises. And so I would say, when you take a look at how long some some of this takes, we do need some interaction from the client. But it’s just unbelievably helpful. And I think a big change, from a comparison to our competitors, we have one of the lowest client to advisor ratios into the, in, in the industry. So right around 62-to-1. So you get an actual advisor who is a partner owner who is fully licensed, who’s been in the business on average 25 years and can look and say, I know exactly what’s going on.

And then underneath that, advisor, there is a support staff that can make sure that things do get signed, that things do get organized, the things get the way they want to be. And so you’re essentially hiring, your own family office. You’re hiring somebody to be like, I wanna make sure that this gets taken care of. And every year it pays to go back and go through all the details and say, where are we at? Uh, what can we change? How can we get rid of something in, uh, as Marie Kondo would say, is this still bringing you joy?

I was just about to say you’re the Marie Kondo of the financial industry. Her branding people would be so happy right now, , we think spring cleaning. We think Marie Kondo. Fantastic. Kevin, um, thank you so much for everything. Absolutely. I think this is all very helpful and um, made me feel a little better about the, the start I got on my financial spring cleaning. But, um, we will see you next week.

Uh, and I’ll be looking for that 90 bucks to start coming into your 401k. You let me know. Thanks. Take care.

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