Vacationing can seem like a task with all the stress that is associated with planning but when done right you will surely enjoy the most of it. The Thrive experts talk about booking your trip to retirement, using vacationing as a metaphor. There is just too much to know about planning for your financial future. And rightly so as it has been found out that homeowners over 65 have control over $7 trillion of money which they can tap into. With that huge amount, it is just right to plan well and get enough financial education. Bon Hansen shares his thoughts on that amount of money locked up in equity, while the Thrive experts tap into the new updates in tax laws and more.
Listen to the podcast here:
[smart_track_player url=\”https://soundcloud.com/livewiththrive/wpht-01212018\” title=\”Are You Under-Utilizing Your Funds? with Bob Hansen\” ]
Are You Under-Utilizing Your Funds? with Bob Hansen
We\’ve got a great show lined up. David, welcome.
Welcome back to you, Joe. I\’m excited to be here.
Bob Hansen will be joining us as one of our partners, a big profile on the show. Bob, we welcome you. There is an incredible amount, a large surplus of money locked up in equity. Tell us about it.
Joe, people over the age of 65 that are homeowners have control of over $7 trillion of money that\’s available, which they can tap into. $7 trillion blew my mind. I couldn\’t imagine that there\’s that much money locked up in the homes of people.
We also have Bret Elam. We send a shout-out to Karen Bezar who\’s not joining us. Bret, every time I bring you into the conversation, it\’s something new about the tax law. It\’s on people\’s minds right up front.
We introduced those changes that were in the new tax law that’s here. We went through some of those highlights and now we\’re going to continue that conversation of what matters to most of the people, our clients, the things that we\’re finding out as well and things that we need to be aware of. The earlier we find out about it, the earlier we could be adaptable to what makes sense for our particular situation. I\’m looking forward to diving deep into that conversation.
David, I’ll transition right over to you for some opening remarks in your opening monologue. The workshops have been phenomenal.
We\’ve been so excited about the reacceptance, the attendance, everything that\’s going on with our workshops. We had a workshop in Bryn Mawr at the library. That was awesome. We had one in Southampton, the attendance was packed houses. What\’s completely rewarding is that we do these workshops from about 7:00 AM to about 8:15 PM, but we tend not to get out of the workshop until after 9:00 PM because we get bombarded with questions.
People come up and say, \”That was awesome. I haven\’t heard that before. I didn\’t understand that. You gave me clarity there,\” and booking appointments for complimentary consultations at our local offices. That\’s been amazing. One of the things that we carried through from the radio show was for people who did schedule complimentary consultations with us, we were giving away our book, and the book has been received incredibly well.
As a matter of fact, we had our digital launch on Amazon. We were the number two most downloaded book under retirement planning in the nation. It would be number one but we got close, so it was exciting to see that. The book has been incredible. The reviews were phenomenal, all five-star, with tons of written reviews on it. It\’s interviewing different financial professionals. The people who were reading it are giving us that feedback, \”I never even thought about talking to my accountant about that. I never considered a reverse mortgage. I didn\’t know there were issues with long-term healthcare like you addressed in the book.\”
Congratulations, David, on the digital launch.
Thank you very much. What I want to do is talk about a concept about booking your trip to retirement. I\’m going to go back and forth with Bret a little bit on this because Bret and I get a chance to travel a lot, both family travels as well as business travels. I don\’t know how you are Joe with your travels. Bret is one of those guys who anticipates all the problems that can go wrong with travel. If the flight is at 10:00 AM, you can guarantee Bret is going to be at the airport by 5:00 AM.
[bctt tweet=\”When somebody puts a big trip together, you basically need a good planner to make all that happen.\” username=\”\”]
I don\’t know about 5:00 AM. I\’ll go at 6:00 AM.
Yes, maybe 6:00 AM. At least a four-hour window. Two hours for security and two hours to get calmed down from all the potential hassle, but that\’s great. That\’s why we\’re great partners because I\’m a little bit freer that way and I show up just as they\’re shutting the door. Bret is holding the door, so it\’s a good situation. It works out. My monologue is talking about that stress in booking trips and how it relates to making sure you\’re planning for your retirement. We here at Thrive always say that retirement is like a 30-year vacation, but the route to that 30-year vacation can be a very bumpy one.
Most people get very stressed when they\’re in transit, even when they\’re going on a trip they\’ve looked forward to it for a lot of years. What I want you to imagine is that you\’re about to set off on a vacation to travel to the spot of your dreams but before you get there, you have a layover for a few days in a far-off country. It\’s somewhere that you\’ve never been before where you don\’t have a clue about the culture. Where is it? It could be Portugal, Egypt, Nepal or something like that.
If people will put themselves in that frame of mind, you can see potentially the type of stress that would occur. Once you\’ve got that place in mind, I want you to think about all the challenges that you would face once you got there. You may not speak a word of the language or how to get from place to place. Perhaps you\’re worried about the local food upsetting you. You\’ve had this checklist and you got to keep making sure that you\’re knocking those things off.
In that way, the stresses of a long layover are a bit like the stresses of retirement planning. It\’s the way to get where you want to go, but it comes with its own complications. It\’s a whole new language that you need to understand. You\’ve got to understand how bonds are working, derivatives, and the ETF funds. There are customs to learn and decisions to make like how to balance your investments and adjust your portfolios at the right time. It can seem so easy to stumble over all of that. When somebody puts a big trip together, you need a good planner to make all that happen. We think the same thing. You need a good travel planner, someone who knows how to get around, what recommendations to give you, and what the experience is going to be like.
We use that as the analogy for that 30-year retirement. You need a good planner, somebody who understands the potential pitfalls, how to navigate them, how to avoid them if possible, all those things. For people who are interested in setting up that 30-year trip to retirement, they can give us a call at the office. Come to one of our complimentary workshops. Call us at (800)516-5861 or go to our website, ThriveFinancialServices.com. They can book a place to come out and see us at one of our workshops and get that planning started.
Close your eyes for a moment and visualize what David was talking about. How much of that $7 trillion that Bob Hansen talked about in the opening part of the show is yours? Bob, $7 trillion is such a big number. When you hear that number, it stops you right in your tracks.
Before I get into the $7 trillion number, I wanted to talk a little bit more about what David was talking about, the trip to retirement. I came upon the $7 trillion as I was looking on the Internet for interesting facts that most people don\’t know. I wanted to share one with the audience and everybody here and get your thoughts. If you go away to an exotic place, you’re thinking about your plans and what you\’re going to do. Then you think, \”It\’s an ocean, I\’m going to go swimming.” What\’s one of the things that people are most fearful of which will happen to them when they jump into the water in that exotic location?
Everybody\’s fearful of sharks. Why is that? Because they\’re fierce, they\’re evil, they eat everything. They\’re the garbage cans of the sea. This is a little on another topic. When you put your kid to bed at night, what is it that you usually give your kid in his crib to cuddle and snuggle with? Teddy Bear, his little-stuffed animal. Joe, what has killed more people over the past year? Vicious sharks or those cute little cuddly Teddy Bears?
The natural thought would be sharks because of how vicious they are.
You would think that and that\’s what most people think of because they have that fear of going into the water and being eaten by a shark. The numbers show that there were 22 fatalities due to Teddy Bears and stuffed animals. How many people died from sharks last year? One. That lets you realize that sometimes what we see as something that could be feared might not be scary at all. Whereas something that you think might be safe might not be as safe as you thought.
As I was looking at these numbers, it threw me for a loop that sharks are a lot safer to be around than Teddy Bears because fewer people have died from them. The other number that I came upon was the $7 trillion, which was more related to what we\’re talking about here. $7 trillion is the amount of money that the Americans who are 65 or older have locked up in their house in equity. Equity is the amount of money that you\’ve got between how much you owe on your house and how much the house is worth.
If you owe $100,000 and your house is worth $200,000, the equity is $100,000. If you owe nothing, then you\’ve got $200,000 of equity. Of that $7 trillion, how much of that is yours that you can tap into? In order to do that, you need to know how much equity you\’ve got and how can you tap into that equity? What you need to do is you can go to the website, www.HowMuchIsMine.com. On that site, it will give you a little calculator that you can tap into and it\’ll tell exactly how much of that $7 trillion is yours to tap into. If you\’re not tech savvy, you can always call (484)905-1800. We have people online who will talk to you and explain how much of that equity is yours. It\’s based on the house value; how much you owe and where you live.
The point in it, Bob, is that so much money is locked up in equity which is there to be utilized.
That\’s part of why you want to find out how much is yours because as you\’re planning your trip to retirement, you want to know how much money is available. Some people are fearful that they\’re not going to have enough money to retire with. If they\’re in retirement, they might become a little stingy and fearful that if they did want to go on a trip other than booking their trip to retirement, if they wanted to book a trip to Cancún, they might hold off on that because they don\’t think that they\’ve got enough money to be able to do that. They don\’t want to touch their very tight retirement plan.
[bctt tweet=\”Money can’t buy you happiness, but being broke can’t buy you that either.\” username=\”\”]
That\’s something that David and Bret work with everybody on, explaining how to be set financially so that you don\’t have to worry about it. For the people who might be a little bit anxious about it, that\’s where you need to find out how much of that money that\’s tied up and locked up in your equity can you take along on that vacation with you so that you can enjoy that money instead of it sitting in your house as bricks and mortar and windows and shingles. You can\’t take that to the store with you and you can\’t take that on vacation with you. You need to find out exactly how much you can get and how much of that is yours.
HowMuchIsMine.com is the destination where you would go. Punch in some numbers and from that, you\’ll determine under this surplus of locked up equity, you\’ll at least answer the question and get a starting point. Bob, when people realize that they have equity, is it unusual for people to know that they don\’t have equity or they don\’t know how much equity? When they realize they have that, what happens? Does it create opportunity? Does it create options for them?
It creates the options because somebody said that money can\’t buy you happiness but being broke can\’t buy you happiness either. Not realizing that you\’ve got a big pile of cash sitting in your house that you can tap into is something that can inhibit people from, I don\’t want to say happiness, but having options. Money doesn\’t buy you happiness, but it does buy you options. It gives you the ability to be able to do things that you might enjoy doing.
If you\’re on a tight budget and you didn\’t realize that you had a big nest egg of money sitting in your house that you can tap into, you might not go on that vacation to see your grandkids. We were talking about Cancún or something exotic, but something as simple as if your family lives out of state, you might not go because you might not think that you can afford it and you don\’t know where that money\’s going to come from.
I highly recommend whoever is interested in doing anything and finding out how much of that money is theirs and that they can tap into, so they can go and see a family, so they can go on a vacation, and they can support their retirement. I suggest you call now and find out. One of the biggest things that I find in the industry is that people wait too long to find out how much they\’ve got available and sometimes if they need it, it\’s too late and they can\’t get it.
It’s a simple process. Do it at your leisure and figure out how much money you have or figure out the surplus of what that locked up equity is and how that applies to you. Bob Hansen, thank you so much. We\’ll transition out of the equity in your home and deal with taxes. Bret Elam has the task of answering the questions about the ever-changing tax laws and how they apply. Bret is going to talk about changes or what\’s new in the new tax law. I\’m not quite sure if we\’ll ever get to the point where we\’ve covered the entire subject of the new tax law, but it is part of the conversation on a daily basis.
The most drastic changes to the tax law in a decade. We\’ve been talking about some of these changes and even in the tail end of 2017, some of the proposed things that are out there. As things are continuing to be \”released\” and the government is still trying to figure out, the IRS is trying to figure out some of the things they throw out there as exactly how that all comes into play.
This is some good news, some of the things that we\’ve been chatting about on the tail end of 2017 where we talked about when we sell stocks are that things were changing where you didn\’t have that choice of first in, last out when selling stock. That was put in the initial provisions of the new tax code, but we can still go in and now sell any lot of stock that we want to. We talked about it in late 2017, about maybe some last-minute changes to things that they threw out there about first in first out is that rule did not stick. That\’s a big deal.
The second thing is there have been no cuts to any of the maximum contributions into the 401(k). There were some rumblings about that as well so that stayed the same. We talked about some of these tax bracket changes. Another big one that we\’re hearing a lot about out there now is about how home equity loans. We\’re not going to be able to deduct that interest anymore.
Now, it\’s starting to roll out as well. When we’ve got a home equity loan or home equity line of credit, it\’s figuring out how much of that home equity loan or home equity line of credit was pumped back into the house and how much was it to refinance debt. I don\’t know who\’s going to come up with that formula and figure that out because we\’ve talked about we can\’t deduct it. However, if it was used to put home improvements back into the house, yes, we can deduct that portion.
That\’s a mess that they\’ll have figured out by the end of the year to be continued as we find that information out. here are some things that we do know. These are some of the big changes especially when we talk about standard deductions that have increased up to $24,000 for a couple or $12,000 for an individual, were things that we are still able to itemize now. Let\’s talk about some of the things that we are not. We get down to the bottom of when we file a schedule, we can no longer deduct investment expenses.
Previously, investors could claim a tax deduction on those investment expenses along with tax preparation fee and safety deposit fees. All those were grouped together on the itemization of the taxes. That line item is now gone, which is a big deal. It\’s important to understand how these ramifications will all come into play because estimates are 94% of people will no longer be itemizing anymore. Does it make sense to pay off my mortgage? Does it make sense to refinance? Does it make sense to go and get a reverse mortgage? Does it make sense to change some strategies with all these changes? Little by little, we\’re talking about a lot of these changes that are being locked out.
[bctt tweet=\”Money doesn’t buy you happiness, but it does buy you options.\” username=\”\”]
Another big change, Roth conversions. When you do a Roth conversion now, they are now final. We used to have the ability to do a Roth conversion and if we wanted to change our mind, we always had the ability to go back and do that. That is done, and we need to think about it. For those of us, we have this conversation all the time with our clients of what makes sense from a Roth conversion standpoint. That\’s one of the things we talk about during our workshops. How great would it be to pull money out of an IRA converted to a Roth IRA and pay no taxes? If you\’re interested in that, we\’re happy to sit down with you here at the office or come out to the workshop. We do some demonstrations there as well.
How easy it is for us to go through those calculations dynamically with people.
We talk about in generalities during the workshop. We have fun. We have people come in and they share their information with us. We use a dynamic software, that tax clarity report that we\’ve been talking about in particular to your situation where we\’re telling you, “Let\’s go take $18,000, let\’s go take $8,000.” A young lady down on the main line, we did $28,000 where she was able to convert $28,000 from her IRA into a Roth IRA and paid zero taxes. That\’s still happening this year. None of that\’s changing but when we do those conversions, they are now final.
I was talking about 529 plans. Now we can utilize those to pay for schooling between Kindergarten and twelfth grade. It does not necessarily just need to be used for college. Now, we can use up to $10,000 in that 529 plan to pay for \”elementary, middle or high schools.\” The belief is there is something that was called a Coverdell savings account, which was used for those younger years in school, where the thought is that they\’re going to start being phased out because of the lower contribution limits that we were going to have as well.
Another big deal, and we talked about this a lot during our workshops, is capital gains. They\’re defined a bit differently now. Before, depending upon a tax bracket that you\’re in, that determined what you are going to pay from a long-term capital gains standpoint. As if that topic wasn\’t confusing enough, they\’re now tied to a different economic indicator. Previously, it was at 0%, 15%, or 20% depending upon what tax bracket we\’re in.
For example, if we\’re in a 25% tax bracket, it meant that we\’re in the 15% long-term capital gain bracket. With the new law, with these income tax changes, lawmakers still wanted to hold those thresholds pretty much intact, so they\’ve changed things quite a bit. For example, if you don\’t file your taxes jointly, meaning if we file as a single taxpayer and we earn up to $38,600, you don\’t owe anything from a capital gains standpoint.
A general rule of thumb is if we approximately double that number for a married couple or filing taxes jointly, it\’s that same thing. We don\’t pay any long-term capital gains. We see that all the time, especially people in their 60s. David just popped in there and spoke about how great it is when we sit down with people and show them how much money they can do from a Roth conversion standpoint, just as we see the same excitement when we\’re sitting down with our clients and sharing with them how much they can take in long-term capital gains and pay no taxes on it.
The one thing that I\’ve learned since I\’ve been a part of Sunday Night Live with Thrive is that there is so much that we don\’t know. There is so much to your point of educating the readers and educating us as consumers and individuals, you need to be self-aware. You need to be smart enough to know what you don\’t know so you can learn.
That\’s the biggest challenge because unfortunately, the industry has a black eye. Historically, there are a lot of issues within our industry and it sometimes causes people to be a little bit hesitant in having those conversations, but if you don\’t have those conversations, it doesn\’t allow us to identify for you those things. Having Bob talking about $7 trillion in untapped equity, if you learn what to do about that, that could change your retirement picture. Bob talked about a lot of the good stuff. We get the unfortunate situation sometimes to see the bad stuff, like a healthcare crisis or something like that and you didn\’t have the right amount of assets available, you didn\’t have a long-term healthcare. $7 trillion sitting in an untapped resource, your portion of that could be a big deal.
Bret, I\’ll give you an opportunity to finish up on this segment on the new tax law. There is so much to learn and so much to know.
The Trump era, whether you like it or not, it\’s well underway. While we can\’t be 100% sure of what\’s to come, one thing that holds true is the need to plan. Call us to schedule your free review. We\’ll assess what you have now, where you\’d like to be both now and in the future, and come up with those savings and investment strategies to help you get there. Visit us at ThriveFinancialServices.com.
Thanks to managing partner, Bret Elam, for that information on the new tax law. It can be overwhelming to the point that you almost tune out, you almost turn off, or you almost don\’t want to have that conversation. I would encourage our audience to have the conversation, to go to the workshop. It is so worth it. Everybody in the studio, Bob Hansen, David Bezar, Bret Elam and Karen Bezar who\’s not here, are all about advocating for you. They\’re all about providing education to you. That\’s what it\’s all about. That\’s why this show exists. I encourage you to call and wrap your arms around some of these details.
Krause, what makes us feel great in what we do is when we meet people who have no advisor, when we meet people who have financial advisors, when we meet people who are self-managed, we don\’t throw a book at somebody and say, \”Here you go, here\’s your tax code.\” We take it and break it down into layman\’s terms and the gratitude that people leave the office with is what gives us enjoyment in what we do every single day. It continues our theme of education and advocacy. I’m reading all these changes and it\’s our job to deploy and communicate to people about the things that apply to them because there are so many things in the tax code that don\’t mean anything.
Thank you so much, Bob Hansen. It\’s nice to have you in the studio, it’s fitting that the conversation referenced a large amount of equity sitting in homes. You used the number $7 trillion. We talked about it and referenced a few times, whether it\’s for a positive in your life, for a trip or for something like that, or for a medical situation that perhaps would come up unexpectedly like they normally do. That opportunity is there for the individual once they understand what it means and what that equity means in their home.
One of the things that Bret referenced is something that I\’m familiar with. I\’ve been in the real estate financing and mortgage business for over 30 years and there\’s an interesting occurrence back in the mid-90s to the mid-2000s. That was in this area in particular. There was a period of time when the growth of house values went up almost exponentially.
Houses were gaining value at 25% a year. If you had a house that was worth $300,000 or $400,000, it was worth $600,000 or $700,000 a few years after that. There was a period of time when a lot of people started refinancing and taking money out of their houses. That presented a little bit of an issue with the tax situation because the interest on your house is tax deductible. When you take an amount out above the sales price of the house, there are some limitations as to how much of that money is tax deductible.
What Bret was talking about is that the interest deductions on home equity lines of credit is going to be taken away except for the amount that was applied towards home repairs. Back in the mid-‘90s, what they ended up doing with the tax rolls was they came up with a flat amount, a flat percentage of the sales price of your house, above and beyond the sales price is what you are allowed to write off as far as the interest was concerned.
What\’s probably going to happen, if I was to speculate ahead a little bit here, is that the deduction for home equity lines of credit is probably going to end up being a percentage of that loan amount or it might just be a flat amount. Back in the late ‘90s, they said $100,000 over the sales price of your house would be tax deductible, anything above that would not. Don\’t hold me to that number as it was around that. That\’s the same thing that\’s going to happen with the home equity lines of credit also. I wanted to touch on that because Bret did hit on that and I wanted to expand on it.
[bctt tweet=\”While we can’t be 100% sure of what’s to come, one thing that holds true is the need to plan.\” username=\”\”]
David, I\’ll give you the last few moments of the program to end the broadcast. I don\’t know how you follow up on being number two on Amazon, on the release, and all the five-star reviews. To me, it represents who you are and who Thrive Financial Service is, what your meaning is and why you\’re here. The book is a good example of that.
It did put us in the similarities with the Philadelphia Eagles being the underdogs. I was listening to one of the radio stations and they had a Minnesota newscaster and they had a travel planner. It was on Tom Show and they were giving warnings because they put packages together for the Minnesotans to come down to watch the game and they were giving warnings about when they enter Lincoln Financial, if they should have their shirt on, if they shouldn\’t, if they should be inebriated, not inebriated, and then what ends up happening if the Eagles won or they didn\’t. I like the underdog position and our next book will be number one. We\’re going to work on that and get the follow-up to this.
There are three things that financial advisors may not be telling the people that they\’re trying to serve. According to the Department of Labor and Statistics, there are 200,000 financial advisors out there now. I\’ll give you the headlines on it. One is, this is a financial advisor talking, \”I\’m giving you beneficial advice, but I may not be giving you the best advice.\” That relates a little bit to where financial advisors work and whether they\’re independent or whether they work for a firm because a lot of times financial advisors are guided, I\’d say that loosely, but maybe more encouraged, to build books of business versus giving the best financial aid. Maybe we\’ll cover that in our next show, Joe.
That\’s going to do it for the broadcast with Thrive presented by Thrive Financial Services. On behalf of Bret Elam, David and Karen Bezar and Bob Hansen from Rever Mortgage, I\’m Joe Krauss. We\’ll see you next time.
About Bob Hansen
My Name is Bob Hansen. For over 30 years I have been working in the world of Real Estate Finance. I have always worked to promote and educate current and prospective Homeowners about the lesser known yet extremely powerful Programs available to them.
About 5 years ago, I decided to devote my time exclusively to educating homeowners and prospective homeowners about the many advantages of the very misunderstood Reverse Mortgage. I truly feel it is one of the Best programs available today to any homeowner age 62 or older.
My business and purpose are clear and simple. I am on a mission to provide anyone interested in learning about Reverse mortgages the opportunity to learn in a comfortable and stress-free manner from a person that puts learning and Education First.
I do not SELL mortgages, I am not a Salesperson. I will not tell you what to do.
Instead, I will help guide and assist you in your pursuit of knowledge and information. I am an Educator First!
I will personally meet with you. Together, we will work to obtain a clear understanding about the many benefits of the Reverse Mortgage program. I will help you understand the Pros and Cons of the program.
Once you have obtained a clear understanding about the program. I will then ask you to make the decision as to whether you feel a Reverse Mortgage is the right choice for you.