ThimbleberryU 159 - The Hidden Costs of Doing Nothing

0:07

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Welcome back to Thimbleberry U. I'm John Jagay. I'm joined as always by Amy Wallace from Thimbleberry Financial. Amy, always good to be with you. Jagay, always great to talk to you. Today we're talking about the hidden costs of doing nothing when it comes to health care. If you work in health care, you're used to what happens when something gets delayed. A symptom gets brushed off. A follow-up gets pushed. A test gets postponed. Most of the time, nothing feels urgent in the moment until it is.

0:31

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

So what's interesting is how different that feels in your financial life. This gets into behavioral finance, Amy, which I know you love to talk about. Benefits get rolled forward. Cash builds up. Decisions sit. And in this case, nothing feels urgent, so nothing happens. Today we're talking about the hidden costs of doing nothing and how waiting on financial decisions can quietly create more risk than people realize. It's not something as obvious as unlike a test scan. So Amy, why is this so common for healthcare professionals?

0:59

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Yeah, because financially, nothing is forcing a decision. So at work for our health care professionals, there is a patient and there's a timeline. But at home, things look fine. They feel fine. Your stomach and energy levels remind you that it's time for some fuel. With your financial life, income is coming in. Accounts are there.

1:27

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Nothing feels broken. There's no symptom to see. So as a result, waiting is harmless when in fact it might not be harmless.

1:39

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

There are still decisions to be made, just ones that don't show up with consequences right away. And over time, those quiet decisions start to add up. That makes a lot of sense. So let's start there. I know you've said in previous episodes, deciding not to do something is a decision in and of itself. So when someone's waiting, what risks are they actually incurring?

2:01

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Most of the time, they're risking time, but time can equate to real dollars. So, for example, if someone has $100,000 sitting in cash because they haven't gotten around to investing it, that usually doesn't feel very urgent. But over time, the difference, and especially when you look back, is very real.

2:26

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

So at around a 6% rate of return, that money, that $100,000 could grow to be about $320,000 over 20 years. But if you waited five years to invest, instead of having $320,000, you might have around $240,000. We can say, I still have $240,000, but the five-year delay still cost you $80,000. That's real money. Yeah. Absolutely.

2:53

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

So the point is, and this is what's hard to recognize, nothing went wrong. There was no bad investment. There was just time and that time passed.

3:04

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

And so we can see these patterns in other areas, not just in cash sitting in a bank account. So maybe someone misses making HSA, health savings account, contributions for several years. That could be $4,000 to $8,000 per year in tax-advantaged savings that never happened. And so over time, those dollars could grow to $150,000 or more that simply now doesn't exist.

3:32

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Right. We don't miss what doesn't exist. We just miss opportunity when we miss what we could have had when we hear the numbers.

3:43

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

So another example is someone maybe has $200,000 spread across accounts. They don't even realize it's that much. And it's not invested within those accounts. It just looks like bits of cash that, oh, yeah, this account has some cash in it. But at moderate returns, that could mean missing out on $40,000 to $50,000 in growth. Jeez.

4:05

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

So individually, none of these items feel urgent, but together and when we see the impact, they become really meaningful. Yeah, that's the part that's so easy to miss. It doesn't feel like one big mistake, even though it adds up over time and those little bits. So how do you figure out, Amy, what actually needs attention now versus what you can wait, maybe kick the can down the road on a little bit? Well.

4:29

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Let's call it triage. OK, for our medical professionals, that's a good way to put it. Some things are going to have very clear deadlines. Open enrollment each year through your employer. That's one. If you miss it, you're locked in with probably what you had the year before for a full year. Tax planning is another. Once the year ends, those decisions are gone. You missed it. I didn't get to it. Maybe I'll do it this year.

4:55

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

It's like me making happen to make my contribution by SEP IRA by April 15th.

5:00

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Absolutely. The same thing. Then there are decisions that change based on timing. So income fluctuations are a good example. A lot of health care professionals have years where income might be a little bit lower. Maybe they took on fewer shifts, for example. Maybe they were part of a transition. Those years can be incredibly valuable for planning.

5:25

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

For example, if someone converts $200,000 of, let's say, a Roth conversion at a 24% tax rate instead of at a 32% tax rate, that's about a $16,000 savings just in federal taxes. And so that lower income year is a year of opportunity.

5:45

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

And so if it passes without action being taken, the opportunity is missed. It's a really good point. So also changes that depend on timing could be decisions tied to health. Right. Disability insurance at 45 looks very different than trying to get disability insurance at age 50.

6:06

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Sometimes it's more expensive and that's the difference, but sometimes it's not going to be available at all based on how your health has changed. You're not in my email by any chance, are you? I am not, Jag. It's so funny you use that as an example because I am 45 and got approved yesterday for disability insurance. That is wild that you use that as an example. A little freaked out right now, Amy. Well, good for you and congratulations. Thank you. I'm glad you took care of that.

6:36

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

You know, going back to this, the way to think about it is pretty simple. Deadlines matter. Health matters. And timing windows matter. All really good points. What are some of the decisions, Amy, that tend to get a little bit more expensive the longer someone waits? Well, Roth conversions that I already alluded to are one of the.

6:55

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

clearest and possibly the cleanest. If someone spreads out $50,000 annual conversions over five years at a 24% tax rate, that's about $60,000 in taxes total. But if they wait and end up doing the same thing at a 32% tax rate, that's closer to $80,000 in taxes. So we've got a $20,000 difference for the same strategy. Jeez, yeah.

7:24

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Okay. Savings delays work the same way. If someone starts investing $10,000 per year at age 45, they might have around $370,000 by age 65. But if they wait until age 50 to start, so we lost five years here, that total amount might be closer to $290,000. So again, an $80,000 gap. Jeez.

7:49

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

And as we just alluded to, insurance is different. It's not just more expensive. It can disappear. Yeah. OK. And then other things, there are rule changes. So, for example, starting in 2026, higher income earners who are over the age of 50 have to make their catch up contributions.

8:10

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

into their employer-sponsored retirement plans as Roth contributions versus pre-tax contributions. So up until December 31st, all those catch-up contributions went in pre-tax. Well, now the catch-up contributions, if your income's been over a certain limit, has to go in as Roth. So you don't make those changes. You could just miss out on even being able to contribute the extra dollars.

8:39

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

And then if someone was expecting to reduce taxable income with those contributions, you know, that option is gone, meaning you were contributing 15 percent of income into the 401k pre-tax. Now, because you hit that limit, really, you're going to hit your 24,500 basic contribution limit earlier. You will miss out on.

9:09

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

the extra money being contributed, but you also aren't getting the amount that's lowering your taxable income.

9:17

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

And that's not someone's decision. That's the IRS's decision, not a person's decision. But to not have looked at that and factored that in means you may also have missed another opportunity, right, to do something else that could help with those taxes.

9:47

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Rules can change. If there's a law or rule that is advantageous to you now, why not take advantage of it? Because it could change at some point. Absolutely. I think your point is, and my point is.

10:00

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Time doesn't just pass. Yeah. Outcomes pass. To sort of hone in a little bit more, Amy, we've alluded to this, but what mistakes do you see most often when people delay? Most of the mistakes are really quite simple. And I'd say it's probably that decisions never get revisited.

10:23

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

So, or a decision never gets made. So, for example, at open enrollment, listeners, how many of you are repeating the same benefits year after year without checking to make sure they still fit? I don't want to read through all these plans. I'm sure what I have is fine. Exactly. So HSA opportunities, those health savings account opportunities might get missed. Cash builds up in.

10:49

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Or across accounts. Beneficiaries don't get updated after life events. And these things matter more than people expect. Beneficiary designations override a will. Really important point. We also see missed planning windows. So like we just talked about, that lower income year comes and goes and nothing happens in it.

11:14

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

And then later, that decision sounds really good, but it's going to cost quite a bit more. Can I send this episode to myself in 2018 when I was between careers and really wish I'd done some prep when my income bracket was a lot lower? There are ways to do that.

11:34

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

And we talked about insurance, right? Just like it sounds like you did. You'd plan to get to coverage later and you did get to it. I can actually share that well before I was an advisor, I had a health issue that came up and it made me uninsurable. And so that option for individual disability insurance is gone for me and has been gone.

12:01

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

before I really even knew it existed. So the pattern of delays isn't about complexity. It's about I've got time to do this without realizing that the consequence could become real.

12:19

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Okay. Let's turn this into practical knowledge here, Amy. If someone's listening and their hand is up, yep, that's me. I'm making those mistakes. Where do they even start? Oh, Jag, you're always so good with your questions. I'm going to say start with the things that have the most impact and are easiest to fix. Now, it might sound like I'm going to contradict myself on that. First, beneficiaries. It's really quick to do and it matters. Now, you may not.

12:45

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

be here. We're talking beneficiaries. You're not going to be here. So it might be, well, that's not an impact to me, but it's the impact and the legacy you're leaving. So I think it's a great, easy place to start. And I also believe momentum begets momentum. So let's get started. And that allows it. So secondly, insurance, if your income supports your life, protecting that income matters.

13:14

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

So, for example, if someone earns $300,000 and they become unable to work for 10 years, that's a $3 million loss. Yeah, like your reaction, that's not a small risk. Third, look for idle cash.

13:35

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

I met with clients recently who had, unbeknownst to them or to me, had been opening a variety of bank accounts over time and they had lost track of them. Wow. They were sitting on a lot more cash than anybody knew about.

13:57

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Look for that, not because it necessarily needs to be invested immediately, but because unintentional cash is usually a sign that decisions have been delayed or they were made unintentionally. That's a really good point. From there, create a short list of what's outstanding, what has a deadline, what affects your family, what gets more expensive if it waits. I'm also going to say if you're someone who has been.

14:25

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

struggling to make these things a priority, it's okay to seek accountability. Yeah. And with that combination, that's really enough to get moving.

14:36

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Okay, so a lot of our listeners and a lot of your clients that are in the medical profession, they're very busy. They might be a little bit overwhelmed with everything we just threw at them in the last 15 or so minutes. Sorry. It's all good information, but it can be a lot to digest at once. And so in the interest of eating the elephant one bite at a time, what's the minimum that our listeners need to do to stay on track? Well, there's no hard and fast.

15:00

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

rule here. So know that like normal on our podcast, I am speaking in generalities, but I have to call it out for this. And this doesn't take constant attention. What it requires is an intentional attention and some discipline. Okay. Okay. So maybe it's one to two annual reviews of your overall financial situation.

15:26

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Right. Doing a scan of accounts. How much cash do I have sitting here? That sort of thing. Obviously, an open enrollment review if you're still working. A tax planning check before year end. So that combination, that's a few hours each year. Yeah. And for those listeners with a partner spouse, although you could also do this individually, and I think it's a great exercise. It's do a monthly check in.

15:54

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

on the things that impact either of you, especially in a couple. Or maybe if you're single, it's do a monthly check-in on the thing that has or the two things that have the biggest impact in your life. Maybe, for example, you know that, hey, I make more than enough money.

16:18

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

I really enjoy these extra things that are, I haven't been taking care of myself. I'm going to do a lot of self-care for a while, but it would be really easy to go overboard on that, budget-wise, compared to everything else. Maybe put that on your list as a thing to check in against was, did I stay within kind of what I deemed reasonable? Because if we're talking about this, we probably aren't paying attention along the way.

16:47

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

It's funny, long-time listeners of the show will know how financially illiterate my wife Ellen is, and we've joked about it on the show before. We will often do a weekly check-in. If we're sitting around on the weekend, she'll look at me and she'll say, do you want to do finances? Well, want might be the wrong word. I don't really want to, but yes, if you want to compare notes and see where we are with stuff, yes, I will do it. Yep.

17:09

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

My husband and I try to have a weekly Monday meeting. Many of my clients know about our weekly Monday meetings and we'll throw financial topics into this. But on these monthly check-ins for a bigger purpose, set an agenda of the things that are on your short list to focus on. And I'm a huge fan of going to a coffee shop somewhere neutral.

17:34

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

because at home has the emotions and run through your agenda in that neutral space. And I know clients who have done this say they get a lot more progress and are able to communicate a lot better with each other by doing that. I love it. All right. So key takeaways as we wrap up, Amy. You know, first one, doing nothing feels neutral, but it's not neutral. It has cost, as we've talked about.

18:03

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

But the problem is those costs are generally quiet, so we don't recognize them. Second, the goal is not to do everything. We don't need to overwhelm ourselves any more than we already are. It's to notice what's been sitting for too long and take some sort of action to move it forward. And that's all because the biggest financial costs are often the result of the things that never happen.

18:32

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Yeah, I think it's a good place to leave it. So as we said at the outset here, if you work in health care, you already understand what delays can do. It's just whether you're applying that same thing into your own financial life. And again, the symptoms may not be as overt as in health care. But thanks for walking us through this, Amy. How do our listeners get a hold of you at Thimbleberry Financial?

18:52

S… Speaker 2 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Yeah, they can reach us online at thimbleberryfinancial.com or by giving us a call at 503-610-6510. Great stuff, Amy. We'll talk again in a couple of weeks. Sounds great. Thanks, Jag.

19:07

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Securities offered through registered representatives of Cambridge Investment Research, Inc., a broker-dealer member of FINRA SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and Thimbleberry Financial are not affiliated. Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research, Inc., a broker-dealer member of FINRA SIPC.

19:32

S… Speaker 1 (ThimbleberryU 159 - The Hidden Costs of Doing Nothing)

Advisory services through Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and Thibbleberry Financial are not affiliated.

ThimbleberryU 159 - The Hidden Costs of Doing Nothing

Résumé

Demandez à l'IA à propos de cette transcription