Who Needs Life Insurance?

Dave and Ryan get ready for football season, explain a practical way to look at life insurance, and play another round of Ryan's favorite game — What If Dave Gets Hit by a Bus Tomorrow?

David Smyth and Ryan Petrunyak talk about family, finances and fun. Learn more about Family Financial Partners at familyfinancialpartners.com.

Securities offered through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794. David Smyth is an Investment Advisor Representative offering Investment Advisory services through O.N. Investment Management Company. Estate planning services provided in conjunction with your licensed legal advisor.

Transcript

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Hey everybody. Welcome back to In My Day with Ryan and Dave, and today it's just like old times. It's just Ryan and Dave. No guest today. How you doing, Dave? Just the two of us. Alright. Please don't do that. No, no. Oh, come on now. That's just weird. Well, hey look, I'm in my weird mode. Okay? The kids are back in school. Summer vacations are over. I'm waiting on that Cool. Crisp fall weather, which of course means trips to the apple orchard. Football season, football season. Can you believe, I mean, what days do of the week do we not have football? Well, there's, Thursday night football. Thursday night football. My wife loves that one. Louisville plays on Fridays, Louisville Friday, Saturday's, Kentucky Day. Yep. Sunday, Sunday's, Ravens and Seahawks Day, N F L and a few Ben-gals out there, right? Yeah. Monday Night Football. Okay. And Tuesday there's MAC games. We got matching. Oh, there are. I forgot about that. Yeah. You know, you gotta watch Toledo play. Are there any games in central Ohio? Are there any games on Wednesdays? I think there's more MAC Games on Wednesday. Is so technically that doesn't start till later, but you could find a football game every single day of the week. This time of year. Yeah. Katie's so excited. So am I. She's gonna just lose you for a season, right? No, not for a whole season. Okay. Just when the Ravens are playing, which, which depended on it. Could be for a while. Yeah, hopefully. Hopefully Lamar stays healthy this year. Seems like a long shot, but hopefully yeah. Well, I just watched that that Netflix quarterback, the Johnny Manzel one. Yeah, the, well, they had the Johnny Manzel, which I cannot believe he told the truth like he did. That's amazing. He basically just said, I cheated, and, and everyone was like, wow, this is funny. Like He put all the current n i l money in perspective pre n I L, right? Yeah. Yeah, absolutely. Amazing. And then the cousin was just like, yeah, this is what we did. Yeah. Oh, absolutely insane. Absolutely insane. What a piece. But then the, I watched the quarterback one on Netflix. Have you seen that one? I haven't seen that one, no. Oh, gr it, it covers Marcus Marietta last season with the Atlanta Falcons. Okay. The second storyline is Kyrk Cousins with the Vikings and his Epic run last year. And the third is Kansas City Chiefs and Patrick Mahomes. You actually watch this and go through into their life, and it's actually very, very interesting to just watch the storylines of, how each of them approaches game play and prep, and their family life and their locker room life, the lifestyle that goes around it and everything. It's absolutely amazing to see. And just the different cerebral approaches to the game even. Yeah. Like that Kyrk Cousins takes versus Patrick Mahomes, you know, versus. Marietta's. Yeah. You know, former Oregon player, right? Yeah. So, but it's, I, I really enjoyed it. So I'm ready for this season now. I just can't wait for football season. And of course, as of as of this recording, we're undefeated. I, I love it. Love everybody's undefeated, Kentucky football's undefeated. First place SEC for now. Ravens Super Bowl contenders for now, Seahawks gonna see the Ravens in the Super Bowl. Well, I mean that, that might be a stretch. Definitely for now. Definitely. For now, we're supposed to win our division. So Are you really? Yeah. According to who? According to Seattle Seahawks Digest, seattle fans.com. Okay. I was gonna say, so, so what is our topic for September? I mean, everyone's bored to death of this football talk. Yeah, fair enough. Well, September is life Insurance Awareness Month. So, I figured we would talk about who wants life insurance. What do you think, Dave? Nobody wants life insurance. You don't wanna pay an extra bill every month on something you hopefully will never need. I would rather pay extra for DirecTV or the red zone for football or something like that, or just take a hundred dollars bills and just burn them in the air and let them drift off like small little clouds of loveliness right then. Than buy more life insurance. I do have life insurance though. Yeah. But, but no, I mean, you have life insurance. I do, I do. Since I've been married I do. But it's kind of important. Yeah. I don't want it either. It's not, it's not fun paying the bill. No. So that was a quick episode. That was easy. That was nobody, nobody wants life insurance. Let's just go back to football. I mean, there we go ,back to football. Or we could talk about like who actually. May need life insurance. Yeah. Right Now, it's not that we know none of you want it, none of us want it, but we do. We do have some because we, there's someone out there we love. Right? Yeah. I think the really simple answer to that question and it, it gets a lot more complicated, but if you really had to simplify who needs life insurance, if somebody relies on you financially, In any way, that's the first reason you would need life insurance and that, that the first obvious way that people rely on people is their income. So if you are breadwinner or one of the breadwinners, you know? Okay. Yeah. In our, my current life, my wife and I both rely on each other's income. So we both need a little bit of life insurance in case something happens to one of us. Mm-hmm. So it, there's a lot of different. Reasons that you would need it, but that's kind of the upfront in your face, most obvious one. But, but let's say there's you, you are in a household and, and one person's pay is significantly different than the other person's pay. Are you both gonna need life insurance? Possibly. It, it depends. If, if one spouse is relying on the other or. If a kid is relying on your income, then you need it in some way. It doesn't necessarily mean you're gonna need the same amount but you do need it in some way. And And the reality is the, the, you know what I'm thinking is you definitely do, and the thought there is, is that even if we lose someone's income, we hear this all the time, right? People say, well, if I die, then my spouse will just move into a smaller home and the kids can go to community college and they'll trade in the, the cars that we have loans on or lease payments on and just buy a beater and, you know, they'll be fine. You know, or I've had some people that I can't even believe they say it. They say they'll be fine, they'll remarry. I'm like, wow. That was quick. That was really, yeah. They really missed you for a while. But, truly, I, I do think that the way we've seen it in the real world that I've seen it in my career and over a quarter century doing this is the bills do not stop when someone in the family passes away and that someone in the family doesn't always even have to have a paycheck, right. It could be. The homemaker, it could be the person who is the c e o of the household whose contribution to the household isn't necessarily a paycheck. It's in all the other immeasurable things. Yeah. That would have to happen if that person was no longer there. Absolutely. I grew up, my mom stayed home when I was growing up, and I guarantee if she wasn't around there would've been a lot more cost for my dad because she did, she did it. She did so much that there's a lot of. Value not only to the family, but also economically that that provides. So that's definitely something provide, you know, and the thing is, I don't wanna put you on the spot here, but Oh boy. But when you think about that, I mean, hey, football season, we're all about making picks, right? Yeah. Who would be harder to replace in your family when you were a kid? Was it your dad or was it your mom? Well, they might listen to this, but, so, but you gonna throw one under the bus here. I'm, I'm. I'm gonna say that they both would've been immensely difficult to replace. Oh, that's a, that's a, that's a narrow right down the center of the lane answer. But if I had to lean one way, Uhhuh, I don't think mom's replaceable, so, oh, wow. Dad, there we go. Boom, boom. So, I love it. I love it. We got a little, we got a little first and second place there. Yeah, that really, you really put me on the spot there. That was not, so the first one is we've gotta replace, we've gotta replace. Either, either economic value in the household, right, of losing the person that's running the household. Mm-hmm. If the, if, if we have someone who's a stay at home parent and on the other side we have to replace that paycheck, if we lose the person that can no longer earn, earn the paycheck. Yeah. That's a primary thing. And but what about for like you and your spouse right there, there's no kids there to worry about. So the big thing for you guys would just be in your case, You've got life insurance because, because of why? Well, I mean, several reasons, but the, the main one I look at is when we went to buy our house a couple years ago. Mm-hmm. The way we qualified for the mortgage was by having both of our incomes on there. If we wouldn't have both been earning money there, we wouldn't have been able to afford the house we're in. So I take that to mean if something happens to me or her, then individually we're not gonna be able to afford the house and. I have no idea if something tragic were to happen, if I would wanna move or she would wanna move, but I don't wanna be forced to, if that makes sense. You know, I, I, I wanna be able to make that decision for what's best for an already difficult situation. I don't wanna be forced to because of financial reasons. So, you know, I, I think that's kind of a good way to look at it when you're in a position where if you own a home together and the only reason you qualified for the mortgage is 'cause you were both on it, the mortgage company also thinks you need both your income. Well, one, just in case, you know, Katie's listening, we know she already knows this, but A, you'd be impossible to replace right? As a spouse but me, but yeah. I mean, oh yeah. She would never be able to remarry. I mean, it is just impossible. Right. I'm not sure if she would, after being married to me, she'd been there and done that. But also you've done a lot around that house right. To, to kind of make it what you want it to be, so Oh, absolutely. I do. At least 25. Or 20% of the work around there. So, yeah, absolutely. Yeah. Okay. Well, I see it like father and son. I see there's a pattern here. There's a pattern here happening. Apple doesn't roll too far. Right. All right, so, so the second area we've got right, the second area to, to, to consider outside of paycheck is, is a different topic that when you're in at your stage of life, you're not necessarily thinking about it, but a lot of the clients that we have that are kind of in that. I'm getting ready to claim my social security. What age should I take it? Or I'm getting ready to select my pension, right? Or my retirement pension. Like whether I work for a Fortune 500 company or whether I work for the state or I'm a, I'm a your teachers out there, a teacher out there, right? What do I do and, and how do I claim? And a lot of times there's options, for example, on pensions where you can take for your life only. Or for you and your spouse, as long as you're both alive. And oftentimes those, those options, right? And there's a variety of options between those. But just the two, your life only or joint there'll often be a significant difference in the monthly payment that you'd receive if you choose to have a second person on there and on the same side. So in, in that case, additional life insurance can be taken out, for example. On that teacher. Right. If he or she chooses to take their life only, so if something happens to them, the money that they were receiving monthly would then go to the spouse as a life insurance settlement. Right. And would basically be there to replace that income stream that the family budget, the family retirement budget has just lost. Yeah. Right. And the same applies to people that are Fortune 500 companies if they work for a local company here in town. There's a lot of people that, you know, worked for Lexmark or worked for Valvoline. You know that where there was, where there were pension plans or Kroger up north. And in those cases there was a difference in taking your life only or you and your spouse. So life insurance could work for that. The second way though is for social security planning and because a lot of people don't have pensions anymore, right? People are starting to look more and more at what age do I take social security? And I know we're not gonna go on the social security train of, we could get down the rabbit hole on that. We get down a big rabbit hole. But I guess the thought is, as I always say, like people always say, when should I take my social security? And there's a lot of factors. But I, what I always tell people is, if you know exactly when you're gonna die, the exact date of death, I can tell you guaranteed exactly when you should start taking your social security. Yeah. Right. Because what everybody's concerned about when they take their social security is, is everybody tells me, right? I want to take it as early as possible because I'm gonna die young. So I wanna start it at 62 because I may not make it to 80. That same person in the same breath will tell me when I say, well, what about life insurance? They'll say, I don't need life insurance because I'm gonna live forever. Yeah. And so I always tell people, I said, there's a little disconnect there. You've just gotta decide which it is. And if you can, we can, we can construct a perfect plan for you. Right. Yeah. But we can't have a plan, you know? In, in general terms where you die early, right? Or you live long. Unless, unless we put a life insurance policy in place that simply says if you take your social security, no matter what age you take it at, or if you defer your social security late, and so maybe it's maximizing the long-term benefit of social security for you and your family, right? And therefore you forego some of those benefits if we put a life insurance policy in place on that person. They do die the day after they start their social security. That life insurance policy will make the remaining family members or the estate completely whole on what was missed by not taking social Security early. So in that case, we're able to plan for you to live forever and yet pass away at any moment. Yeah, and believe it or not, there's a lot of people out there that when we suggest that to 'em, they're like, that's brilliant, because that's exactly what my mind says is gonna happen to me. Mm-hmm. One of the two. Everyone's always convinced they're gonna die tomorrow, but also live forever. 100%. And I love as a planner to be able to like say like, well, you know, where's your family's health history? Let's look at longevity. You know, let's look at your health history. Right. Because that's as much the planet as genes. Mm-hmm. And if not more in today's world with all the medicine and and medical procedures that are available to us that the previous generations didn't have. Mm-hmm. We can look at that and we can say, okay, well we're gonna plan for you to live to 85, right? And that person says, oh, I'm not gonna make it past 80. And we'll say, well, our plan will make sure that even if you make it to 90 or 92, right, you're gonna be okay. Even though, you know, general human longevity is at 85 and you think you're only gonna go at 80, but we still want you to get a paycheck just in case you're still alive. And I can't tell you the number of people that when we've come up with that plan, they out, they, they. Significantly outlive the age that they ever imagined that they lived to. Yeah. Yeah. And I think it's just because generationally there's a different level of quote unquote old that's out there. Are you saying that you define old differently than me? Is that what you're saying right now? Well, here's the thing. At your age, I know you think a 48 year old, which I just had a birthday, so Yeah, I know you're thinking the gray hair is getting a little more pronounced now. I know you're thinking I'm old. Okay. Outside of having my first child in college, which does make me feel old because I realized I went to college and graduated. My first day in college was 31 years ago at age 17. Yeah. Which is kind of scary almost to the day. But I look at myself as a 48 year old and I still think of myself as a young person. It's all state of mind, right? It's 100% a state of mind. So I also look at people we plan for that are in their eighties or 85. And I'm thinking, and just from my own family, I'm thinking my target's 95 and, but I don't want to be just 95 in age. I want to actually live where actually live. Yeah. I wanna live the next, you know, 47 years and really enjoy it. Yeah. Joking aside, besides you being old, I mean, we know you're old, but outside of you, I can appreciate that. I know a lot of 75 year olds that act young, that you know, yeah. Go out and they do all kinds of stuff. And I know some 55 year olds that act old, you know, and it's like you, you see, you see all the in-betweens there too. Yeah, it absolutely comes down. I mean, there's certainly, there are different character traits and also people take care of their bodies differently. Yeah, absolutely. So it makes a difference. But, but the idea being life insurance, just to kind of recap one right. Replacing a form of a paycheck, right? Whether it's an earned paycheck or a pension paycheck or a social security paycheck. Mm-hmm. Right? So we're looking at replacing some type of economic value and the, and the fourth area that we're we'd replace within those kind of economic values is the value of the homemaker. Mm-hmm. And that's the c e o of the, of the household. And that is literally an immeasurable. Cost. Yeah, right. When you break, if you were to break it down now, what other areas, Ryan, would you, would you think of kind of that life insurance would fit? Well, I mean, I guess we should go back to everybody's favorite topic. If Dave gets hit by a bus tomorrow, oh, let's kill me again. Yeah, I mean, I just told you how long I was gonna live, and yet you've just once again killed me. So just in case Dave gets hit by a bus tomorrow, let's just play that game for a minute here. If. We already went over how we need to take care of your family and kids and Yeah. And Carrie and everybody. Yep. And done that. But on the business side, you're also a business owner. Yes. With a partner. Yes. Who? Alex also owns part of this business. That's right. So now your kids are great, don't get me wrong, but I'm not sure a lot of our clients would be thrilled if your 15 year old who's taking algebra one right now. Were to, were to come in here. Tomorrow and start running the business sidebar. I'd be scared to death. Yeah. Yeah, that would, that would not be great. No. Now that being said, if something were to happen to you, there's still your heirs and they're still gonna get the value of this business. So the way that you can do that, if you're a business owner with a partner, you can buy a life insurance policy that pays out upon your death to your heirs, and then your partner takes over to control of the business. So that's one other way that you can go about doing that. Just to make sure that your heirs are taken care of as they should and as they deserve, but also that the business is passed on to the right people at that time. That's right. That, that's another thought there. And, you know, I just like playing that has Dave. Well, and for everybody that worries about that, you know, years ago in my career when there was just like four of us right in the office, this is many, many years ago, I remember actually having some of my retiree clients asking me what my contingency plan was. Right, because they were looking at me and at that point I probably weighed a hundred pounds more too. So looking back at the old self, right, that weighed a lot more if I somehow now saw somebody that weighed as much as I weighed. A decade ago, I probably would've asked that same person what their contingency plan was. So, valid question. Right? Because I don't think the bus was gonna be what was gonna kill 'em. It would've taken a bigger bus. Right, right, right. It's gonna take a much bigger bus. So the the other side though of that is that over the years we have built up our team here, right? Yeah. So we've got 12 of us now, plus some interns, and we've got a great group of people. And so, Absolutely. If something happened to me, the reason why Alex and I do have a buy, sell or if something happened to Alex, right is, is so that you're absolutely right. The business is kept within the right hands and nobody else's family member who doesn't have any experience within our business. Suddenly become someone who would have a say so in how the business was run. Yeah. And I think that's really important for just the continuity of the business and taking care of our client families. Yeah. Now, on the other hand, for those listening that say, well, I don't have a business, like yours, Dave, but I, I do have some type of business out there, right. Where I have a family member that is active in the business. But not all of my children, let's say, are active. One of the two kids is helping out. Yeah. One of the two kids. Well, we've actually helped clients over the years where you know that one of the children is the primary person who's now taken over the business and is active. Right? And we'll call them child A and child B lives in a whole other state. Yeah. And if you even ask them, do you want to have a piece of this business? If something happened, they would say, absolutely not. No interest. Yeah. I have a totally different career. I am, I do not wanna relearn this business in this small town in Kentucky. Yeah. Right. I do not, I, it's not my thing. Right. I'm built a whole different way. And so mom and dad want to equalize Right. Their estate and, but in most businesses, right. Especially family owned and smaller businesses. That aren't like giant Fortune 500 companies, we don't typically see millions of dollars of cash just sitting in the business. Yeah, right. It it, a lot of times it's in the people in the business, it's in, it may be in the building that the business operates in, it may be in the inventory of the business. It's not a liquid asset, but it's not a liquid asset value. Yeah. So if mom or dad die and they go to, you know, kind of do a Solomon split Right. And equally split the business, you know, if the. The, the child B is gonna end up with a whole bunch of just random things that they just, you know, yeah. Some chairs, some tables, a few computer monitors, the baseball card collection, right? Whatever. And anything and everything that they're like, I don't know what to do with it. So in that case, what we can do is we can also do life insurance and use that for just equalizing the business. So if the, if the value of the business, let's say, is a million dollars, then we may say, okay. What we want to do is we need a policy that will cover gifting half a million dollars. Mm-hmm. Right To the other child or whatever number they arrive at. If they look at it and they say, well, half a million, we wanna do three quarters of a million because we're putting some of the money of our cash flow into this and this and that, but that way they get something similar, right? It doesn't have to be perfect, but something similar. And then, Child B who gets that life insurance proceeds tax free, which is a very important part about life insurance because it's paid with after tax dollars. If it's coming outta your personal account, then it's, it's tax free to the beneficiary. Child B can do whatever they want. They could start their own business in whatever they're doing. Something else. Yeah, yeah. Or they could buy a small island or a boat. A boat or race horse. Yeah, you could little everything. Some football tickets for a season to see an N F L team. Yeah. I mean, if it's in the millions of dollars or hundreds of thousands of dollars, I would get you a couple seasons. Right? Yeah. Good tickets. Unless you're like a Seahawks fan, then it's pretty cheap, you know? Yeah. It's very, very cheap. So not like Bengals tickets now. So the there's no beating that Joe Burrow this year? There is. Okay. Alright. That brought back some bad memories. Yeah. I don't wanna talk about that. No, I understand. I understand. As a football fan. Okay. So to summarize, you wanna summarize life insurance for us? Just the, the purposes of it? Yeah. I mean, You know, without diving into the weeds of every single thing we talked about. Yep. The main purpose of it is to replace economic value, whether that be income, whether it's your social security, whether it's the value you provide to your family, the value you provide to your business, or equalizing your estate for your kids. Any way that you provide value to the people you love and you wanna make sure that's still there, even if you're not, that's where life insurance comes in and life insurance isn't fun. It's not fun paying the premiums. It's not fun thinking about, but it's also one of those things that once it's done, you don't forget about it, but it's in the back of your mind that it's there, but it's not something you have to worry about anymore. You don't have to worry, oh God, if something happens to me, is Katie gonna make the mortgage payment? That's not, it's not in the back of my mind. So it's just one of those things that once you do it once and you're done, you can review it and makes things a lot easier. So, And we all need one less thing to worry about at night, don't we? I I could use a couple. Like, you'll lay your head on your pillow and you're like, just the things start going through your mind. It's not sheep jumping over a Yeah. The moon. It's, it's just a list of like, oh, oh. So check that off, check that box off, be done. Fair enough. So if someone's interested in trying to figure out like, do I have the right amount of life insurance or Ryan, I don't. I don't have any life insurance. I'm embarrassed to even say that I just have a little bit through my employer and I don't even know if I've taken full advantage of that. I need someone to kind of do a review with me and see if I'm appropriately covered and or educate me a little bit more on my situation. How would they get ahold of you? Yeah, I mean we can absolutely. Just to cover that real quick, what we do for people is we take a look at. Figuring out, trying to put real numbers to that economic value that you're providing, whether it be, again, the business income, whatever it might be we can take a look and figure out real numbers and put real math to it. And if you wanna get ahold of us, same as always. Give us an email at team@familyfinancialpartners.com or 8 5 9 2 1 9 1 0 0 6 is our number. Dana is up front and she's awesome. So she will get you the right person and really anyone here can help you. Point you in the right direction on that. So we'd be happy to talk to you and thank you for doing just an episode of just you and me today, Dave. That was a little weird. Oh, I appreciate it. We're back to the old days. Now we can get back to like more appropriate life and death topics. Yeah, like the football season. Absolutely. Let's do it. We'll do it all air. Thank you everybody for listening to another episode of In My Day and we will catch you next time.