Podcast Episode 248: Cleaning Out the Financial Junk Drawer

Today’s Wisdom:

Everyone has that one drawer in their house that seems to collect all of the things you think you might use one day but never do. Much like the random paper clips and old pens you’ll likely find, there’s also a financial junk drawer that we use to keep all of those old accounts and statements just in case we need them in the future. Let’s talk about how to clean out this drawer and make the most out of everything in our portfolio.

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What You’ll Learn:

We’re all guilty of having that one drawer in the house where you put everything you don’t really know what to do with. In it you’ll likely find a few batteries, a couple of dry highlighters, and maybe even some birthday candles.

Much like that random junk drawer, we find that most people also have a financial junk drawer of sorts. This is the place they keep old statements and policies and investments but rarely check back up on these things.

On this episode, Eric Hogarth joins the show to help us get organized. Let’s clear out this junk drawer and talk about ways to better utilize the things we normally find here.

Let’s start off with that old life insurance policy you have stashed away. It could be one that your parents took out on you years ago and you really haven’t bothered to find out if it’s worth anything. It might take a little work to track it down, but there’s a good chance it has some value. And any extra money helps, right?

The next item we see that often gets forgotten about is the will. We meet clients all the time that have a will but haven’t bothered updating it in many years. That might be okay but so much changes through your life that needs to be included in an estate plan like children or grandchildren or even moving states from where the will was drafted. The best advice we can give is to have a conversation with an attorney and get a consultation at a minimum. We have relationships with attorneys that will do that at no charge, and it will give you peace of mind should something happen to you.

Another thing you might find in the financial junk drawer is an outdated Social Security estimate. The government doesn’t send these out anymore and there’s a good chance yours could be outdated. The good news is you can visit SSA.gov and create an account for yourself that allows you to see your updated benefit estimates at any time. And this is important because you need to have accurate numbers in order to build a retirement plan and Social Security will play a key role in your income.

Speaking of income, you’re going to rely quite a bit on your retirement accounts later in life so you want to maximize your contributions. You aren’t able to do that if you ignore old 401(k) accounts from past jobs. When you leave an employer, you have a great opportunity to move that money to an IRA or a new 401(k). The goal is to pick the best option for you and that’s ensuring that each piece of your plan is adding value. Pull out those old statements and take them to your advisor to find out if shifting the money in those old accounts would make sense for you.

Savings bonds are another investment that you usually buy and stick in a file somewhere. But some of these old savings bonds you have might actually pay you interest and the rates could even be carrying over from the time when they were bought. If that’s the case, the rates will likely be much higher than you can find today. Make a list of what you have and go to your local bank to see if they are generating interest. Once you know that, you can determine whether it’s best to sell them and pay taxes or hold onto them and earn more interest.

As you can see, there might be ways to build your portfolio just through the things you already own. Take time with your advisor to look through your financial junk drawer to see what you might be able to improve upon.

[1:22] – Mailbag question on IRA fees

[3:49] – Old life insurance policy

[5:33] – Outdated will or estate plan

[7:03] – Social Security estimates

[7:56] – 401(k) statements from old employers

[9:00] – Savings bonds

[9:48] – Random investments

[11:09] – Help organizing this drawer

Thanks for listening to this episode. We’ll be back again next week for another show.


Final Thoughts:

“Fees are an easy subject to focus on but you’ve got to make sure, regardless of what you’re paying, you’re getting good value for it because someone’s making money somewhere along the road and you need to make sure number one is still you.”

– Eric Hogarth

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