The job of a good quality financial advisor is to come up with solutions that are oriented to someone’s specific challenges. When you sit down with a client, you’re wide open to tailoring what’s going to work best for that individual client. You are not specific to one way to find success for that individual. If that means the utilization of a reverse mortgage as a product, you’re not going to rule that out. In the past, reverse mortgages had been branded with negative impressions. Financial advisor Bob Hansen from Rever Mortgage says it’s actually a good solution whether we’re trying to maximize Social Security benefits, trying to find that additional income stream, or trying to fund that bucket of money when the market may go down. Bob deep dives into the investment portfolio and goes over social security benefits, reverse mortgages, taxation, stress testing, and the overall retirement plan.
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Reverse Mortgages with Bob Hansen
I’m glad to be here with an extended version of our show. David Bezar is joining us along with Bret Elam. David, I give you a chance to say hello.
We’ve got a great show lined up with lots of great information and some action items to take. We’re going to get a lot of good information out to our audience.
We introduced the book and we started to talk about the book. I want to applaud you and Bret for your work on the book.
We’ve had a wonderful response on the book, Roadmap to Retirement: Navigating Your Way to Peace of Mind and great items in the book. We’re going to have a book launch on Amazon.
Bret Elam is here with us. How are you?
I’m doing awesome, Krause. I’m excited to be back here.
The closer we get to the end of the year, the more questions come up.
We’re expecting a big announcement as we talk about taxes and see what the new taxes look like for 2018. My wife introduced me to this thing called Rotten Tomatoes. It’s this website, I can go on there and see the cliff notes of what all these different critics talk about these different movies. What I figured out on there was it is three sentences from all these critics. You’re only getting the broad-brush strokes as opposed to getting in-depth detail. If I’m a generalist who’s wanting to go see a movie, who knows what my tastes are, whether I like fiction, nonfiction, etc. it’s just going to give me those broad-brush strokes out there. You know what I compare that to? It’s what we do. We hear about all these different pieces of advice from all these other people. Does that necessarily mean that it’s good to get eighteen different opinions out there? No, but you always need to hear the whole picture.
Talking about us here at Thrive, it’s what we love to do. We sit down, talk with people who are looking to get that opinion where they may have questions on that overall plan. It’s something that we take seriously here at Thrive is sitting down, building that trust, understanding that everyone’s picture is a little bit different than somebody else’s. It’s this time of year where we’re not necessarily thinking about debt. If you’re looking for someone to explore, go deep into that financial plan, if you’re looking for a trusted second opinion, we’d love to have the opportunity to sit down with you. Our phone number is 1-800-516-5861.
I want to welcome back Bob Hansen. He’s joining us again. Bob is from Rever Mortgage. Bob, we welcome you back in. It’s nice to have you.
Thanks Joe. I’m glad to be here.
What’s on your agenda when we bring you into the conversation? What do you have highlighted for us?
I’m going to be playing off of what those guys are going to be talking about a lot. We’re going to be talking a little bit about Social Security and how that ties into how you can use the equity in your house through the reverse mortgage. I’ll give some inside detail and some more in-depth information about how you can take the concepts that they’re talking about and implement them by using the reverse mortgage.
We’re excited to have Bob back. We had him here before. We’ve been educating people when it gets to that reverse mortgage. There have been a couple of great studies out there. There’s a Professor Moulton out of Ohio State University along with Shelley Giordano who is the Chairwoman of the Funding Longevity Taskforce. Between the two of them, they’ve come out with some great information echoing some of the education and advocacy that Thrive’s been promoting. In terms of making sure people know about all the options that they have out there.
When we used to talk about reverse mortgages. People start rolling their eyes, especially people in our world in the financial advisory space. It was some of these changes that happened back in ‘13, and then again some of the reform that happened earlier this year. A lot of positive momentum about how people can utilize the reverse mortgage product. Can you see a lot more seniors from 1992 to the present? Over 40% more people have mortgages heading into their 60s. Sometimes that’s something that keeps them from hanging up the cleats. David and I sat down with a client where that happened too.
Another great way, Krause, is how to utilize the equity in the house? There’s a line of credit structure and that’s what we’re going to go with Bob. How to utilize that line of credit structure where it’s something we don’t need. Remember, the market doesn’t always go up. What comes up can come down. We’re on the longest streak of almost ten years of a market going up. That’s a strategy we’ve been utilizing with people is when the market goes down, the last thing you want to do is pull money out of those funds. Where it’s almost locking in those losses, where it’s having that lifeline out there where you can sometimes use that line of credit and pay it back out in the future. The second thing, Bob touched on it a little bit. David and I are going to chat about it. Another way we talk about the opportunity or the likelihood of success in retirement, is ensuring you maximize and understand how to utilize those Social Security benefits. Another way Bob’s going to speak about how we can utilize those products.
One thing I liked in one of our previous shows that you said is that you’re wide open when you sit down with a client. You’re wide open to tailoring what’s going to work best for that individual client. If that means the utilization of a reverse mortgage as a product, you’re not going to rule that out. You are not specific to one way to find success for that individual.
Joe, it’s critical. The job of a fiduciary, the job of a good quality financial advisor is to come up with solutions that are oriented to someone’s specific challenges, not to be a generalist. Not everybody walking through our door has the exact same experience. We have to know a broad base of information and see where these different types of solutions could potentially fit in. When we tell people the experiences we have either at our workshops or in our office visiting with people and hearing what they have to ask, what their perception of things is, it’s a huge treat for us. I tell people, they ask me, “What do you do?” I said, “It’s not what I do, I get to do a cool job where I get to go into people’s lives with something that is very intimate, powerful. This thing called retirement.”
The overarching question that most people have, the reason they show up to our workshops in the droves and they decide to take us up on a complimentary consultation, that second opinion, is because they’re not getting that information either from their current advisor or where they’re doing their research. They come in with this question, and Joe the biggest question is, it’s two. One, “Do I have enough money to retire?” Two is, “How long is it going to last?” The big concern is that people think that the money’s going to run out before they do.Your job is not to lose. Your job is to fight. Click To Tweet
We’ll talk a little bit about the type of analysis that we do between Social Security, taxation, stress testing and overall retirement plan. Then, diving deep into someone’s investment portfolio and trying to identify the risk because that’s what we’re trying to control. Sometimes we talk to people and we tell them, “Risk is for people who don’t have what you have.” Your job is not to lose. They’ve got to fight. We’ve talked about those two emotions. One is fear and the other is greed. We see a lot agreed taking over. We want to be that balance. That quiet voice that says, “Do you need to take that additional risk? Don’t you have enough?” We’ll do that analysis. People come into our office for that second opinion analysis.
In an unsolicited conversation with a gentleman who walked-in on third and market. The subject or the conversation about retirement came up for him and he had no idea.
It’s not uncommon. I’ll tell you one of the other things and not that this is funny by any stretch. It’s an indicator. We have people who show up. We talk to everybody, Joe. We’re not snobs. We want to help anybody and everybody that we can. That’s why we open our doors through these workshops, where there’s a Social Security workshop or it’s a taxation workshop. We want people to come in and hear the story. If we instigate questions, awesome, if they already got them, great.
I had a woman come up to me in our workshop. She started talking about, “I don’t know if I should come in or not.” I said, “It’s entirely up to you. There’s no pressure on our part whatsoever. All we’d like to do is offer a sounding board for you.” She said, “I don’t have a lot of money, but the one question I have is should I be investing in bitcoin?” Literally, I wanted my jaw to drop. Being in this business 29 years, this is those little indicators when I start hearing people, common folks, who aren’t overly sophisticated with their investment choices. They’ve watched the news, they’ve read the paper, they’re on social media, and they see this thing called bitcoin being at an all-time high and breaking these barriers every day, they think they need to jump in on the bandwagon. That’s that greed emotion kicking off, which a lot of times can end up kicking you right in the teeth.
It’s the conversation, Bret, of being real. I don’t think you can get any more real than that. That’s what I love so much about Thrive Financial Services. Flourish, prosper, and success. It all starts with a conversation.
David talked about all the different steps. It’s coming in and getting that map, getting that blueprint, and putting all those puzzle pieces together. Does an annuity make sense for me? Does a stock make sense for me? Does a reverse mortgage make sense for me? There are so many different items that are floating out there. Coming in and know we’re fiduciaries, we’re a sounding board. If you’re looking for answers, we’ve got them.
We’re excited to have Bob back in here. Talking about educating, I know David’s going to go through some of the stories that he had with the clients. Talking about how the reverse mortgage can be utilized. Whether we’re trying to maximize Social Security benefits, trying to find that additional income stream, or funding that bucket of money when the market may go down to utilize that. Another big one we’ve been talking about is Medicare surcharge, premiums are changing, a way to have access to money. Utilizing that line of credit as well or doing Roth conversions. There are many ways that you can utilize that line of credit feature. With that being said, Mr. Bob Hansen.
Thanks, Bret. This is Bob Hansen with Rever Mortgage. You can reach me at 610-247-1400. Bret has mentioned a couple of times the line of credit. You’re probably sitting out there thinking, “What line of credit is he talking about?” With a reverse mortgage, there are two parts to it. The first thing to remember is that a reverse mortgage is like a traditional loan in the sense that you are borrowing money against your house. There’s a loan that’s going to be against your house. As opposed to a traditional mortgage, where you’re using your savings and your checking account to pay for your principal and interest payments every month.
With a reverse mortgage, what they do is you’re still borrowing a sum of money, but you’re using the equity in your house to make your principal and interest payments. Therefore, you don’t have a monthly principal and interest payment with that. You are still responsible for taxes, insurance, but you’re not responsible for the principal and interest part of it. Your home is taking care of that. When you get a reverse mortgage, there are a couple of different variations of it that you can get. The one that’s most popular is one that’s called a hybrid reverse mortgage. It’s broken up into two parts.
The first part is a lump sum of cash, which is what everybody is familiar with as how to get a lump sum out of their house. The second part is in addition to that lump sum. You can get a line of credit tied to the house. That grows month after month and year after year. That is money that you have that’s available to you that you can tap into for whatever reason it is that you might need it down the road. What’s nice about it is the way it grows is at a nice percentage. It’s growing at about 5.75% to 6%. If you look at what your money’s making in a bank in 0.25% and 0.5%. If you’re able to keep that money in your line of credit and let it grows as part of the reverse mortgage. You’re accelerating and putting yourself in a much better position for the future to be able to tap into an asset that you didn’t have right now.
You’re putting your home to work for you by getting the reverse mortgage. You’re allowing yourself to tap into that equity that down the road, you might not qualify for a traditional mortgage. With the reverse, it’s already there. It’s in place. It’s not going to go down and it’s not going to go away. You’re not going to lose your house. It’s there for those situations down the road that you needed to help you out with.
We partnered up with Bob because when we started talking and looking for somebody to work with our clientele from a reverse mortgage perspective, we loved that Bob was in the education and advocacy side of the business like we were. That was a great sync up for us. One thing I’d like to do is ask Bob a few questions. What we see in our office is most of our clientele, I tell people that they respond to headlines. That’s the news business. These big, blast headlines and that’s what catches people’s attention. That’s pretty much what they read and that’s about it. A lot of opinions out there gets created or formed through the “headlines”.
We understand as financial advisors that a reverse mortgage is a good solution. I’ll tell you a story later on about what I call a retirement rescue. Where we have a client who might not be able to have the type of retirement that they want and they think that there are no solutions, there are no answers. I go through a little bit of a description without telling people what the solution might be. They’re like, “That’s an awesome sounding tool.” I said, “That’s a reverse mortgage,” and because of typical headlines of the past, in their mind, they’ve got this branding of reverse mortgages not being a good thing. Bob, I know you’ve been in the business a long time and you’ve dealt through that. Could you share with our audience what might have created those negative impressions? It’s changed, but we still have folks out there that it could be a great tool for that end up avoiding it because of what “they heard”.
One of the big problems from the past is the understanding that people had of it. The reverse mortgage, probably one of the biggest stories that people fell prey to was that if you get a reverse mortgage, you’re going to lose your house. Everybody knows somebody who lost their house. My grandmother got into a reverse, they lost the house. Everybody’s fearful that they’re going to lose their house. Prior to April of 2015, there were a lot of rule changes. I can go over some of those rule changes.
One of the rule changes that came about was as I talked about before, you’re responsible for your taxes and insurance. With the reverse mortgage, you don’t have to pay principal and interest but you’re responsible for your taxes and insurance. If you do not pay your taxes and insurance, the tax man’s going to come and he’s going to take your house. The tax man has first priority over your mortgage company. For whatever reason, if you fall behind on your taxes and insurance, you can lose your house. That’s one of the stories that predicated the bad news about how people lost their houses. They didn’t pay their taxes and insurance. In April of 2015, when they revamped the system and the qualifications, what they did is they require what’s known as a financial assessment. It’s a very loose guideline for qualifying people for their income and their credit.
If you’ve got great income and great credit that means you’ve been good for years and you’ve been able to manage your funds fairly well. We will trust that you’re going to be able to pay your taxes and insurance. On the flip side, if you’ve been a little rocky with your income, your credit’s been a little shaky. You’re not great with money management, what we’ve required for those types of people, let’s say in the lump sum you qualify for $100,000. Everything’s good. You’re income and credit’s great. You’re going to be able to get that full $100,000. If your income or your credit is a little shaky, it’s below standards and you’ve shown a history of not being able to handle your money properly, we’re going to take a set amount of money. It’s called the Life Expectancy Set-Aside, or LESA. There’s going to be a LESA that’s going to be set aside. Instead of getting $100,000, we’re going to look at how old are you?
Let’s say you’re 75. What’s your life expectancy? Maybe another ten years. How much are your taxes and insurance for the next ten years for as long as you live? We’re going to take that money and put it aside in a set-aside account. That money is going to be used to pay for your taxes and insurance for the rest of your life as long as you own that home and stay in that home. Therefore, there’s no way that you can default on something that we’re making the payments for you. You can no longer lose your house because you aren’t paying your taxes and insurance if you’re somebody that has a bad history of payments and income.
Bob, I’m sure you’ll agree with this too, it happens on the forward mortgage side. People think that’s only on the reverse side. If you don’t pay your taxes, the same exact situation is going to basically happen. As a matter of fact, in our book Roadmap to Retirement, we’ve got a section on reverse mortgages explaining the do’s and the don’ts.
Bret, I’ll give you the last word before we get to the topic.
I’ll call my myopic view of the reverse mortgage, whether it’s an annuity or reverse mortgage. A lot of the stigmas are out there from information decades past. No ifs, ands or buts, as a matter of what we’re talking about here. There’s always misuses of every single product that’s out there. It’s taking the time. Educate myself. How does this fit in for me? I hear a lot of generalities. It’s taking that time talking to Bob Hansen, talking to us. Taking that financial inventory and simply figuring out, “How do I take all these puzzle pieces and put them together?” It’s where we talk about that map, that blueprint, or spend an hour with us. Find that we’re likable people. We have lots of clients that have trusted us with their finances. We’d love the opportunity to sit down and dive deep into your personal financial situation.
We will close up 2017 with our final broadcast, David, which will take place. We’ll step aside for the holiday. We’ll then return for our final broadcast of the year before getting into 2018. That’s where the clock resets itself. That’s where you become important. That’s where Thrive Financial becomes important. That’s where Bob Hansen becomes important because that’s where we, meaning consumers, start to ask ourselves questions. That’s where we start to try and figure out, “What is our plan?” or, “How do we get a plan?” and then when we get it, “How do we stay on it?”People are starting to get more and more educated about what to look for in a financial advisor. Click To Tweet
I thought what I’d do if I would share what our workshops are like. This is where those questions can initially get answered. I want to also describe what a second opinion consultation, which is complimentary, is like. If we can take that fear away from people, because like Bob was talking a little earlier, the financial industry has had its black eyes over the years. A lot of times, consumers end up not seeking out information, but people are starting to get more and more educated about what to look for in a financial advisor. One, being a fiduciary. I thought I would explain that to pull back the curtain a little bit, so people wouldn’t be hesitant about potentially coming out to one of our workshops.
With taxes being on the front page, whether you’re on the Drudge Report or whether you’re reading Inquirer, it’s all about taxes.
By the time we’re back on the air, we’ll have some tax reform that we’re going to probably dive deep into. We’ve been going back and forth with House, Senate. We’ll find out what it’s going to look like.
It’s a one-hour workshop. We get deep into taxes. If people want to register for that workshop, they can go to our website ThriveFinancialServices.com/events. They’ll get a confirmation phone call and an email explaining a little bit, time, date, location. They’ll get to meet Bret and me at that workshop.
It’s relaxed, it’s informative, and it’s an educational-type of a workshop. It’s not a big meal. It’s not one of those events that are overwhelming for the participant.
That’s a great point to bring up, Joe. We decided when we started to do these educational workshops is that we wanted to do them in a venue where people understood it was about education. I don’t have anything against doing seminars at the Mortons and The Capital Grilles of the world. There’s probably a good chance that we’ll do some of those because we’re getting asked about them from our existing clients. They said, “I’ve got a lot of friends. I’d love for them to hear you. Would you consider doing a dinner type thing?” We’re happy to help. If I got to suffer through a Capital Grille meal, so be it. We’ll definitely suck it up and take one for the team. The workshops that we currently do are at public libraries, college campuses, community centers. We want to invoke the spirit of education. That’s what it is. We go into it deep.
We start out on our Taxes in Retirement Workshop talking a little bit about ourselves and explaining we do take things seriously as fiduciaries. We have a lot of our advisors within our firm who get certified and accredited by an organization called the National Social Security Advisors Association. It’s a course in a curriculum that they have to go through. They have to take an actual exam that they pass and then they get that certification. What that does is it makes them completely qualified to speak about Social Security and Medicare. During our Taxes in Retirement Workshop, we pepper that in because Social Security is an income that’s taxed like no other income that you’re going to have over your lifetime.
We want to make people understand that Social Security is very unique from a taxation standpoint. We go through who we are a little bit. We talk about our background. We do pat ourselves on the back a little bit that we were awarded a Five Star Professional, Top Financial Advisor awarded both by Philadelphia Magazine and by The Wall Street Journal. That helps people get a little bit of comfort that we didn’t pull up in the back of a turnip truck type situation. Bret comes up and goes through the meat and potatoes of the workshop. He covers the tax brackets and the potential changes. He talks about the actionable items. He’s going to talk a little bit about first in, first out, which is a big change in the tax code.
He goes through how taxes will impact a spouse after the first spouse in a couple will pass away. It’s a big, dramatic deal. Obviously, it’s probably the most emotional thing you could go through but from a financial impact, it’s huge. We’ve got someone who’s filing as a single individual and that person still has substantial income. They’re going to get moved up in tax brackets. They’re going to get Medicare surcharges that are going to be increased. A lot of times we find out that this was not anticipated. If we can plan in advance for that, that’s a big deal. I usually come back up at the end of the workshop and talk a little bit about taxation within retirement plans. We talk a little bit about the market. I know Bob and I are going to talk a little bit later on about bitcoin and litecoin.
I’ve got my 21-year-old daughter with us. I’m going to talk a little bit about hopefully not supporting an adult child, but the process of what it is. Unemployment’s at the lowest, it’s been in 40 years. I sit with my daughter, Samantha. We talk about her friends and people who have graduated and still have not gotten jobs. They’re accepting jobs that are way below what they’re qualified for. These are the types of things that come up in conversations that we have.
In reference to Samantha, the millennial perspective sometimes is very different than ours.
You can’t typically blast Millennials and say, “They’re lazy and not focused. They want everything handed to them.” My daughter, for one, and lots of her friends and people that I’ve engaged in conversations, they’re no different than we were when we were 21. Our eyes were wide-open. We were excited about our future. The economy’s a little bit different. It is a little bit more challenging, but these kids are sharp. They bring a great perspective. They bring these ideas of technology that we never heard. One of the most interesting things and I know we’re off topic, but it’s a good thing to point out. The one big thing that Millennials bring to the equation is good because I see the opposite with Baby Boomers, is they’re not greedy.
A lot of times they’re working to make a difference. They don’t even talk much about the money. They’re focused on doing something special, doing something that helps people and makes an impact. Some of us, as Baby Boomers, can learn a little bit because we’ve all been through the Me Generation, the 1980s and the early ‘90s, where it was always, “What about me?” We’re seeing it all over again, Joe. I’ve been doing this for 29 years. I remember the ‘87 market crash. I remember ‘91, ‘92 with a little bit of crazy recession going on. I remember the dot-com bust and certainly remember the Great Recession. People’s minds drift off and don’t think that could ever happen again. We see the Dow making new highs every single day. I hear people with no money asking me about bitcoin. “Should I invest?” You have no money. It’s the most speculative thing that has ever been created. You want to put whatever you’ve got left for your retirement into that. We’ve got to bring that back in check a little bit, Joe.
Bret, it’s interesting to listen to David talk about the workshop. As he speaks and explains, I put myself in the chair. I put myself there not understanding all of the details. On this show, I’ve learned so much to this point about the process and about the details.
We have that disclosure at the workshops that we apologize about. We hope we’re not going to have your drinking out of a fire hydrant by the time you leave here because we start talking fast. We get fired up. We get excited about education and advocacy. It’s why our team, we have them being part of that National Social Security Advisors. It’s why we’ve taken it upon ourselves to be the Chapter President of the Society For Financial Awareness. It’s why we’re licensed fiduciaries. It’s why we take our time from an education advocacy standpoint. We hear it time and time again, people leaving the workshop saying, “Thank you. This was not an infomercial of selling some stocks, some life settlement, and some annuity. I learned something here.” Between the Society For Financial Awareness, us being fiduciaries. Where do you turn to put all these different puzzle pieces together? We love seeing highly-educated, hardworking people, blue collared, white collared, people having questions. Earning their trust and then helping them navigate, putting that roadmap, putting that blueprint together.
David and I, we met a client. Let’s dive into it a little bit and it’ll tie perfect in with Bob. A lot of times when we sit down with people, we talk about having monies in different buckets. We’ve got an income bucket, a growth bucket, and a protection bucket. Sometimes when we sit down with people, they don’t have $2 million where they have some money that they can earmark for emergencies. We had a client who were in their early 70s. Both still working part-time, so they’re earning two Social Security checks. They’re about $30,000 of income between the two of them working part-time. Remember that the numbers are up 40% from 1992 to the present of people over the age of 65 still maintaining some debt in retirement.
It was about $350,000 in assets they had. They said, “How can we use those assets?” Their fear was, “How can I get rid of $30,000 of income by simply utilizing this $350,000 of assets?” The big deal out there and the big challenge was, “I have this debt hanging out there.” We’re big fans of, “We have that excess cash.” When the market’s going down or I don’t have enough income that’s going on, that’s the assessment. No plan looks alike. We custom tailor it. You can almost call it a retirement rescue. We were able to utilize some of their existing assets to provide a little bit more of that guaranteed cash flow to help make up that $30,000.
Where that retirement rescue comes in, I’ve talked about it, is having a reverse mortgage like almost having an annuity. We were able to give them an annuity with part of that $350,000 that they had out there. They had a little bit of liquidity left and we were able to make some dent in that $30,000, $2,500 a month of income they needed to make up to stop working. They start having some health concerns, some kidney issues there, where they’d like to hang up the cleats and enjoy life while they are somewhat still healthy. We have Bob talking with them as well, saying, “If I’m making a part of that income by utilizing my assets, if I can also make up some of that income gap by not having my mortgage payment, that’s something I want to learn about.” That’s where we had Bob getting ready to sit down and chat with them. They’re scheduled to come back in and talking about how putting all those puzzle pieces together work.
One of the things David hit on earlier. What happens at the Thrive workshops if you show up? What I’d like to talk about is what happens when you deal with me? I’m Bob Hansen from Rever Mortgage. Who is that? What am I about? I do things the old-fashioned way. I don’t do a lot of internet marketing. The way I do things is I like to meet with people. I sit down with them. I’m going to come to your kitchen table. If that’s where you want to meet me, I’m coming to your house. I’m going to sit down with you and we’re going to take a look at your existing situation. With David and Bret, they’re going to have a pretty good idea about the people’s finances before I meet with their clients but some of my own personal people that I deal with, I have no idea what I’m going to find when I get there.
One of the great things about my job is I get the chance to sit down with people who are older. They’re over 62. Some of them are 75, 80, and 85. I had one woman who was 91 years old. What’s amazing is some of the stories you can learn from them. We talked about the difference between the Millennials and the Baby Boomers and everybody’s got a great story about their past. I love to sit with people and learn about where they came from and what they do. Then, transition that into a little bit about their finances because that’s why I’m here to help them maximize their biggest asset.The biggest thing everybody spends is money on their house. Click To Tweet
What’s the biggest thing everybody spends money on? It’s not a car. It might be education if you’ve got a lot of kids. For the most part, it’s your house. You’re going to spend a lot of money on your house. How are you going to finance it? What you find out is, when a lot of these people first got their mortgage, they said, “30, 40 years ago, I get a 30-year fixed rate.” That’s all that was available back then. For 30 years, they worked to their bones to make their mortgage payment. They’ve used a lot of their money spending their mortgage to buy their house so that at the end they can have a deed-burning party. They want to get rid of their mortgage.
What happens is they’ve hit retirement age and like, “We’re going to live a lot longer than we thought. We don’t have as much money as we thought we’d have available. We’ve got this huge asset that we’ve spent the last 30 years of our lives paying off. What are we going to do now? We don’t make a lot of money. Let’s go down to the bank and let’s see if we can get a line of credit or a traditional mortgage.” They show up and don’t make enough money to get anything out. Even if they did, they’re going to have a monthly payment again which is what they worked 30 years to get rid of. That makes no sense.
When I’m sitting with people, I’m learning about them. I try to explain the process of the reverse mortgage, how they can use their house and tap into it. If you need money and you don’t qualify for a traditional mortgage you’re over 62, you can tap into the equity with a reverse mortgage. You can’t go down to the store and bring one of your windows or some bricks and mortar from your house to pay for food. You can tap into your house with the lump sum upfront. You can get some money and stick it in the bank. You can invest it somewhere. You can get the line of credit. In five, six, seven years down the road if you need even more money, it’s still available. I show them how they can turn their house into cash.
That’s what I do when I meet with them. I like to sit face-to-face, dig into their story, and find out about them and see if this makes sense for them because this isn’t for everybody. There are some people that don’t need it. There are some people that do. There are some people, especially the people that we talked about with retirement rescues. There are some people that are even deeper into trouble and they don’t know where to turn. There have probably been a dozen people that I’ve saved their homes from foreclosure. The reason is that they fell behind on their mortgage payment. They were living on a fixed income. They didn’t have enough money to pay for it anymore. They felt ashamed and didn’t know who to turn to. They turn to the worst place they can go, it’s like, “We’ve got to talk to a bankruptcy attorney. We might lose our house. What can we do?”
A lot of the people that I work with, along with financial planners, are people that help solve these problems with people that have hit the end of their line. One of the things about a reverse mortgage is that it used to be called the loan of last resort. For some people, it still is. They don’t have any other option, so they’ve got to find a way to do it. With a reverse mortgage, we’re able to do that. As well as some positive things that tie into the financial planning world about using it to start your Social Security later. Using it as a hedge against your portfolio if you’re in a situation where you’re making enough money and trying to maximize your finances. Which is what Bret, David, and the guys that Thrive all do.
David, would you characterize it as a tool belt to consider, listen to, and react to? Is that how you would look at it?
It’s like one of those tools that you see on the infomercials. You buy one thing and it can do numbers of different activities. At reverse mortgage, definitely, there are folks whom we talked to and that is what we call a retirement rescue. That doesn’t mean they’re destitute. It means that they’re running short on the number of funds that they need, that pool of investments that will generate income. Remember, at the end of the day, what we have to do is replace income sources.
That’s what people want you to do.
Sometimes it’s challenging. That’s why this particular couple is still working in their 70s. They’re making $30,000 from part-time incomes. They don’t see a tool or a resource that they currently have to provide the replacement for that $30,000 a year. Bret brought up the word annuity. We don’t love annuities, but there are certain annuities that we love what they do. What we’ll do in the next segment is we’ll talk a little bit about annuities, so people can get an understanding. We’re going to give them an education on annuities and not listen to the headlines of why not to get an annuity.
There are plenty of reasons where it has an appropriate fit. It can generate that $30,000, for this particular couple, for the rest of their lives, contractually. The reverse mortgage, in this particular situation, allows them to go use those funds that they currently have to fund the annuity. To create the guaranteed income and the reverse mortgage, no mortgage payment, but it gives them the ability to have liquid available funds. If emergencies pop in or life happens, they’ve still got another bucket that they utilize their house to pull that equity out to create that liquid bucket of cash for them. It’s a wonderful solution for this particular couple. They had their hesitancies until we educated. That education, Joe, as you well know is zero pressure. It’s talking, having a conversation, explaining the pluses, explaining the negatives, and if it’s an appropriate fit, they’ll make that decision on their own.
ReverMortgage.com, Bob Hansen is with us. The book, Roadmap To Retirement, David, doing very well.
Bret and I had been sitting down talking about our next book. That was our first attempt. We covered a lot of great topics in the book, but we’ve gotten many more questions. We’ve got much more on our mind that we want to share. I mentioned at the top of the show we’re talking to the publisher. We’re trying to figure out how to get a book launch on Amazon. The idea is going to be that folks will be able to download that book for free, for one day to a Kindle. We’re going to get that accomplished. People can go to Amazon for the book. It’s $17.95. What we’ve decided is we are going to be donating all proceeds of the book sales to an organization called BeatCancer.org. That’s a website people can go and see. I was unfortunate to contract cancer back in 2013 and now fortunate I’m in my fourth-year cancer-free. I got one more year to go before deemed 100% cancer-free. I was asked to be on the board of directors of an organization called BeatCancer.org. It’s a wonderful organization with great people, everybody on a mission. All the people on the board have been touched by cancer in some fashion.
These are folks on an education path, on an advocacy approach to helping people via nutrition, naturopath, assistance, education, counseling when people get cancer. It’s such a kick in the head when you first get it. You don’t know where to turn. Your mind’s in 100 different places. You want to make sure that you beat it. The topic I wanted to talk about, Joe is a little bit about the annuity. It’s a little bit like annuities. When people hear the word cancer, instantly fear, scared, so on and so forth goes in. People don’t know where to turn. They don’t know where to go to get valuable information, true information, and correct information. All proceeds from the book Roadmap to Retirement: Navigating Your Way to Peace of Mind will be donated to that charity. Please, if you’re looking for a book as a gift, go on to Amazon and get that. We’ll make sure those proceeds get over to BeatCancer.org.
More than just a book purchase. A great stuff from an individual who lived the process. That’s somebody who wrote a book and decided to donate.
We wanted to talk a little bit about annuities. I wanted to ask you because you’ve been our cohost. When we first met, you knew we were in the financial field, but we never talked about it. We were looking for a professional who could help us launch a show. When you found out that there are times that Thrive Financial and Thrive Capital Management will utilize certain annuities for our clients, what was your initial thought on that?Don't say no until you know. Click To Tweet
The term annuity was, from my perspective, one of fear, one of concern. One that the initial thought is to avoid. That’s being real. That’s my perspective of what it means based on either what I know or don’t know or based on the headlines.
This is a perfect example of our process on an appointment. We ask people that. If we feel an annuity is appropriate as a solution to some financial challenge that a client or prospect has, and we want to bring it up, we ask the question, “What do you know? What do you think about annuities?” It’s changed over the years. I would tell you years ago it was no way, no how. Now, it’s about 50/50. 50% of the people say, “I’ve heard about annuities. I’ve done some research. I’d like to hear more.” We still have people say, “I heard from my brother-in-law, whose guy told him that annuities are the worst thing going. Don’t do it, no way, no how.”
I always ask people if they’re going to make a decision do they want to base that decision on some of the facts or all the facts? They say, “I want to make a decision on all the facts.” I said, “Let’s take some time. Let’s go through it. Tell me what you know.” They start telling me what their perception of an annuity is. Just like any other thing out there, there are good annuities and there are bad annuities. I will tell you with all honesty, there are more bad annuities than good annuities. If appropriate, we would want to make sure people understand it. Let me tell you a little bit of some of the annuities that we use in our practice. We are not fans of variable annuities for lots of reasons that I won’t go into. We’re not fans of them and it’s that simple. We’re fully licensed to sell them. We made a decision from a fiduciary perspective, we did not feel they were appropriate.
A fixed annuity sometimes is appropriate. The typical client for a fixed annuity would be somebody that we see who might be in their 80s. They’re in good health and suspect that they’re probably going to live another ten, twelve, or thirteen years. Their fear is they start to see their investment pool starting to dwindle. A solution for that is a fixed annuity where you can exchange that sum of money, lump sum, for a guaranteed income stream for the rest of your life. That way it’s predictable. It’s like a pension, you’re going to get some type of an income payment on the 1st or the 15th of the month, and it’s going to last the rest of your life. That’s what a fixed annuity would do. Sometimes in our practice, if it’s appropriate, we would use a fixed annuity.
Another type of an annuity, Joe, that’s out there, is called an indexed annuity. There are different ways to use indexed annuities. We primarily use them in two different ways in our practice. One is to create a guaranteed income for both husband and wife if it’s a married couple until the second one of them passes away. Let me give an example. Let’s say we had a couple that had $300,000 sitting in a CD. They wanted to draw income off of that CD that it would last their lifetime. We know, eventually, by withdrawing steady amounts of money with taxes and inflation, they’re eventually going to run out of that bucket. They could use an annuity in that case, that same $300,000, would ultimately start generating an income. The big point, Joe, is even after that bucket of money runs out, the principle is exhausted, the payment from the insurance carrier is guaranteed to last until the second spouse passes away.
One other big misperception about annuities is people forget that an annuity can provide for a beneficiary. Let’s say that couple put $300,000 into an annuity and they were tragically killed. That money can pass to their beneficiaries. A lot of people think there is no legacy out of an annuity. That’s one reason that we use it is that guaranteed income. Some people, “You could do better doing this. You could do better than that.” The reality is it comes down to the comfort level of the client. Do they want guarantees? Do they want non-guarantees? It’s that simple. If somebody is willing to take the risk, that annuity’s probably not appropriate. If it’s someone who doesn’t want to take the risk, the risk is for people who don’t have what these people have. They don’t want to lose anymore, and then an annuity could possibly be appropriate.
The one common theme for everyone to absorb is that the individual plan is going to be created. It is going to be presented, or explained based on the details, based on the individual, based on the life of success or failure, or where they are in the process. If you can be perfect in the scenario, that’s perfect.
You said it, Krause. When we sit down with people, you start talking about all the jargon and all the financial tools that are out there. I’m going to steal a line from David, and David says it a lot. It’s like, “What’s always popular isn’t always what’s right. What’s right isn’t always what’s popular.” When we talk about our buckets of money, we have three characteristics of growth, safety, and liquidity. If somebody can call our office and tell us an investment that has all three, we’re all ears. We’ve been doing this collectively between David, Karen, and I and our team. David, Karen, and I, almost 80 years collectively, we haven’t found anything yet that has all three. We always got to leave one out. Sometimes it’s growth. That might be a certain segment of solutions out there. Sometimes people are willing to sacrifice liquidity. There are some other options that are out there as well. You said it, it’s digging deep.
On the show, we’re talking about broad brushstrokes or when we’re at our workshop. We’re going deep into it, but then it’s figuring out how all these different tools apply to me. The fact that we have the opportunity to be a fiduciary, which means everything we talk about better be in the best interest of the people that we’re serving. We take that to heart. The government said it’s a big deal. We wanted to put ourselves in that position so that people would know that we have the right licensure. To know that we’re truly acting in someone’s best interests with the words and the solutions that we’re offering to people. Everything needs to be personalized. It’s not you have the same exact plan with the same exact dollars for every single person that lives on 123 High Street. You dive deep and personalize.
David Bezar, Bret Elam, Bob Hansen with us. Samantha’s with us as well. Sam had an opportunity to listen and observe us. You’ve also had an opportunity to watch your father in all of your years that you’ve been able to handle or absorb what he’s done. Give me your perspective. What questions do you take, perhaps one, perhaps many out of sitting in with us?
I’ve been watching my dad do this since I was born basically. You’ve been doing it forever it seems like. He’s always been giving me financial advice. One of the questions that came up when you guys were discussing your topics was bitcoin. I remember hearing it briefly when I was in high school in my Western Civilization class and that was about it. If anybody wants to tell me what bitcoin is?
Bob, you referenced it.
Bitcoin is a form of cryptocurrency. Are you confused now? Hopefully, because bitcoin, litecoin, ethereum, IOTA, ADA, all of those things, those cryptocurrencies, it’s a new form of money. Along the lines of money, that’s what I do. I deal with money pertaining to borrowing it, using it to buy houses with, and for reverse mortgages. Along the same lines of reverse mortgages and bitcoin is it’s a headline right now. Right now, the headline of bitcoin is a great headline. Everybody hears about it. Here are all these great things about it. When you start digging a little deeper, you find out, “That’s not as great as I thought it was. Maybe it was if you bought it three years ago when it was a dollar. Now, you see it’s worth $18,000. You buy it now, it costs you $18,000. That would make no sense. Probably it’s got more downside potential than upside potential.
Along those lines, David’s got his saying that Bret talked about. I follow the mantra of, “Don’t say no until you know.” Same with don’t say yes. Don’t jump into something without being educated first. Learn about it.” I dove deep into bitcoin, litecoin, and all that because I’ve got people who are starting to ask me about it. I want to be educated in my answers to them about what I know about it. You’ve got to learn. Education, that’s what we’re all about here at Thrive and at Rever Mortgage. We pride ourselves in teaching people what they want to know about. Everybody’s different and everybody’s got different questions.
If you’re somebody who’s sitting out there who’s over 62 and you’re even thinking about a reverse mortgage or a HECM. They’re called both things, a Home Equity Conversion Mortgage or reverse mortgage. If you have any interest in learning more about that and you’re a little techie, go to my website. It’s ReverMortgage.com. Go to the section that says, “How Much Can You Get?” That’ll give you a little place where you can put in a little bit of information and I’ll tell you roughly about how much you would qualify for. If you want to do it the old-fashioned way, which is the way I love to, I’ve got my phone available. If I’m not available to talk to you directly on the phone, leave me a message. I’d love to get back to you. You can reach me at 610-247-1400. With a little bit of information from you, I can give you a pretty good, broad stroke about how much you’d be able to qualify for the lump sum, for the line of credit. Maybe we can set up a time, sit down, and we can dig into your personal situation and you can learn about it. That’s what it’s all about.
Well done from Bob Hansen, that’s 30 plus years of experience. David, I certainly understand in just two sessions with Bob. He falls in line with that thought process that you have, that Bret has, and that Karen brings on a daily basis. It’s all about educating who’s in front of you so can create something special for the individual.
It’s fun that way and truthfully it makes our life a whole lot easier. We love getting people up to a point that they can have that conversation with us. Sometimes they walk through the door and are unclear. They don’t know the answer and sometimes don’t even know the questions. We like working with Bob because he has that same advocacy approach. There’s no pressure in what we do. We’ve all been blessed with successful organizations. It’s giving our time. If people decide to work with us, it’s gravy on top. If they don’t, we shake hands. We wish each other well and God bless.
Bret, I come to you as you close out your workshop tour for the year with one more workshop. The long journey of all of the workshops that make up the year, and there were a lot of them. What do you take from that? What’s the one thing that you take or that you’ve learned from all of the workshops?
We’re going to finish at 103 workshops. We feel great about it, that educational piece. Krause, we changed our topic in the spring where we specialize for a long time talking about the Social Security planning side of things. We decided to make the shift to Taxes In Retirement. It’s been mind-boggling. Some things to take action on before the end of the year, talking about the changes to the tax roll. We’ll be talking about that next. There’s something coming in called FIFO, which stands for First In, First Out. Here are three quick action steps for the end of the year.
If you don’t understand what that means, I hope you can call your advisor. Maybe you can get a little bit deeper into what it means. If you’re having troubles there, give us a call. There may be some opportunity to sell some stock this calendar year because the rules are changing next year that you’re not going to have the ability to take advantage of it come the New Year, almost through 2025. Which is what they’re talking about this new tax law is going to take into account. Educate yourself as to what FIFO means. You have the opportunity to go in there, pick certain blocks of stock, and go sell it.Don't jump into something without being educated first. Click To Tweet
Another thing to take action on if you do have a mortgage out there. They’re saying that 94% of Americans are going to file what they call as a standard deduction. 94%, which means you’re not going to be itemizing is prepay your January mortgage payment in December. At least that interest, you can write that off in this calendar year where you might not be itemized in a minute at all. The last action step is to find out how much can I take out of my IRAs and long-term capital gains at a tax advantage situation? Where most times we’re sitting down with people 0% is what they paid. I was on the phone Friday afternoon with someone we met from the Easttown Library, Krause, with a lot of money, great assets working with one of the big brokerage firms on the main line. She asked me what I shared with her, speak to her account. Which is what we do all the time is collaborate with our clients’ accountants.
What we discovered was she wasn’t getting any advice from where she was at previously related to putting all the puzzle pieces together. What we found that she was going to be able to take out $30,000 from her IRA, convert it to a partial. She was going to do what they call is a partial Roth conversion. Where is she going to put that money in her savings account? It doesn’t matter, but in addition to that, she was able to take another $20,000 of long-term capital gains and also realize them at 0%. That’s what we pride ourselves in, education advocacy.
Bret, why don’t you share real quickly with the Tax Clarity software? People can come to see us at the office with that.
It’s the live demonstration for the workshop. We utilize that software, that Tax Clarity. We’re getting so much momentum with that report there because people are not getting that guidance. We love our accountant partners, but a lot of times they’re reporting what just happened. The advisors that our clients already have, they’re not getting any guidance other than the management side of things. We always talk about taxes in retirement. That story looks completely different than what the taxes looked like while I was working. 1-800-516-5861. If any of those three things I spoke about, you’re unclear of. Looking at for a little bit more guidance or you’d like to take advantage and sit down with us and explore how that Tax Clarity map will fit you. Even with these tax changes happening, it’s going to mean that much more in understanding how putting all these puzzle pieces together work.
The Tax Clarity Map software that we use, I don’t know if people heard, real quickly. $20,000, $30,000, $40,000, sometimes $50,000 pulled out of IRA accounts at no taxation.
For David, for Bret, for Bob, for Samantha, I’m Joe Krause.
- Roadmap to Retirement: Navigating Your Way to Peace of Mind
- Rever Mortgage
- Funding Longevity Taskforce
- National Social Security Advisors Association
- Society For Financial Awareness
- Tax Clarity
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.