At the end of the day, making a good decision is all about education and advocacy. With everybody using plastic and everybody is buying like crazy, we have to protect ourselves. When we’re using credit cards, at the back of our minds we should always be asking, “Is this a legitimate site? Is it going to be a safe for me to use my credit card?” That goes with everything else. The biggest thing that’s happened recently is the issue of security breaches. You can’t protect yourself from everything, but it’s worth it to be smart and to understand what’s going on out there and protect yourself. Your finances are critically important. Monitor yourself, your social security, your credit, checking, or savings account. Be your own self advocate. Do that due diligence work and get completely familiar with what’s being offered. After all, an ounce of prevention is worth a pound of cure.
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Social Security And Medicare
David, I’m going to start off to give you a chance to set the table about what we are going to talk about. I saw a lot of passion coming through in general conversation about misinformation.
We get feedback. We have done a hundred workshops around the Philadelphia metro area and it never fails. We get all these questions. It’s all that conversation that we keep talking about and there are a lot of times where people will come up with questions, either from their existing financial advisor or some other financial professional, whether it’s an attorney or a CPA or accountant, whatever it may be. We don’t claim to know every single thing you know about every single topic, but we do pride ourselves in being responsible about the information that we provide. When we hear inaccurate information, we don’t fly off the handle by any stretch, but it sets us off. When we’ve got together to form Thrive, one of the missions was we wanted to put quality information so people could make decisions based on facts, not in misinformation and not emotion, because we’re talking about some serious topics. These are things that impact people on a daily basis.
All good stuff falling under our tagline, “Flourish, prosper and success.” Karen Bezar will be along with a timely conversation on credit fraud. Karen, certainly that is a topic that is very important to know. You need to know to know what you don’t know.
We’re trying to help people protect themselves out there.
Bret, let’s jump to you on Medicare. Tell us about some of those changes. We talked about changes. We talked about tax changes at the end of the year. There are always changes that you need to know, talk about Medicare.
We can finally complete those puzzle pieces. Now we know what a Medicare looks like. Krause, if I told you on the surface that Social Security was going to go up by 2% next year and your Medicare costs are going to be frozen, that sounds like a good thing.
The assumption is it’s a good thing.
It’s good about getting the whole story. What you find is that 70% of people, people are already collecting Social Security. They’re going to see that increase because what happened over this past couple of years, there was a small cost of living adjustments where typically people were paying about approximately $109 a month. In 2017, the Medicare costs $134 while in 2018 it’s going to cost $134. However, that 2% increase that people are getting from Social Security is going to be eaten up by that increase in Medicare premiums on average of approximately $26. People need to realize when they’re hearing a 2% raise, I’m not necessarily getting it because that’s over 70% of the population are going to be affected with Medicare staying flat, but they’re going to have that cost increase to what those present levels are. The other big change that’s happened as well is that people are affected by IRMAA.
What is IRMAA?
IRMAA is something that the government uses. It stands for Income-Related Monthly Adjustment Amount, which is affected by about 5% of people that are on Medicare as well. A lot of our clients are affected by what they call IRMAA. It’s the same thing, there are five different levels of what we could pay for Medicare. The difference is they’re squeezing those brackets to make it easier to fall into those additional surcharge levels. For example, what used to be the third level and still is the third level at that price point where if I was an individual making $130,000, that’s a 60% increase in what they’re going to end up paying for Medicare.
On the surface, prices are staying flat. It’s like squeezing a balloon. It’s going to be paid for somehow, some way. They’re making it easier for people to pay these surcharges, it’s a gigantic change. It’s as simple as if there was a way and we do this all the time with our clients where you could avoid paying those extra costs for Medicare, isn’t it at least a worth exploring all those scenarios? It’s putting all those puzzle pieces together. In the past couple of shows, I’ve been talking about having a plan. We talked about debt and taxes and that plan for investments. We talked about planning for healthcare. We always top it off with that plan for legacy.
If there was a way of making sure that all those puzzle pieces were working together with all of your plans, isn’t it worth at least exploring how we can save money all the time? You’re getting those letters. If you are paying extra for Medicare, you just received your letter, it says on the bottom, “You have the ability to appeal.” We’ve been helping out a lot of clients over the years and being able to go through that appeal process and we will tell you probably 80% to 90% of the time they’re successful in that.
To our audience, did you get one of those letters? Do you know what the changes are for Medicare?
We’re fortunate we still have seven spots left through the rest of the year. That appeal window is not forever so we have a short window to be able to assist people and share how to make it through that process. Please explore the possibilities of how we can save that hard-earned money to keep it in your pocket as opposed to going into the government.
Can you explain or define the acronym IRMAA? What is it again?
Income-Related Monthly Adjustment Amount. The government is saying, “You’re making too much money. You can afford to pay more for healthcare.” It can be a onetime event that takes you over those income limits. It’s understanding how that appeal process wins and the success rate that we’ve had for our clients is very high.
David, I can hear even in the tease of what our subject matter is going to be that there is some real passion burning from within and it helps me even understand more about the philosophy of Thrive, about the willingness to provide accurate information for clients, potential clients and those that have a question.
It’s something we definitely pride ourselves on. We love that we’ve had this opportunity to share a lot of information, and there’s a following that’s starting to happen, whether you want to call it a tribe, you want to call it a mission, whatever it may be. We’re getting some loyal followers in our business. Our clients are becoming huge advocates for us because they see this transformation that they’ve been able to experience themselves. Most of our clientele are in that age category where they’re either about to retire or have retired. They have worked with financial advisers and other financial professionals for years.Get all the facts. Don't make an assumption. Click To Tweet
When they initially walk through our door, there’s no pressure on our part. This is free will. We start providing information. We start to dig into the weeds a little bit and they say very routinely, “This is the first time I’ve heard that. I’ve never heard it communicated that way or I’ve never heard about that strategy or that particular product.” Watching that process occur is important and I guess my frustration, whether you call it passion or frustration, is that we want to get that message out to so many more people because when we do these workshops, we see it. We get those questions coming up and it’s almost predictable of what the questions are going to be.
I have always prided myself on being and remaining a student no matter what it is I do in life, whether it’s athletics, spiritual, my practice, my business. I spend a lot of time being new to the radio, listening to other radio shows to hear how they do it, what they say, what they’re offering out to the community, so on and so forth. That has become a little bit aggravating because a lot of the times the shows are not educational, they’re not acting as advocates, or they’re just infomercials. We decided when we came on the radio that we wanted it to be the antithesis of that. We don’t want to promote. We wanted to offer if that makes any sense.
Some of the things I heard, and it’s all over, it doesn’t matter what talk station you tune into, are all oriented around finances. It’s very common. I’ll give you a couple of examples. I heard a lot about providers of products that they basically call alternative investments. These are things that might not necessarily and most probably are not regulated type products. I’ll give you some examples out there. We hear some people get on the radio and they talked about how bad this is or how bad this is and that they’ve got the perfect solution for it. A lot of times those solutions, they cover the basics, but they never get into the fine print. We’ve always lived by, “What the big printed gives, the little print takes away.”
When you’re dealing with folks at the later stage of life where they can’t have a mistake, the appeal, the emotion that they hear, they get sold on it. They typically opt in and we’ve seen situations. I’ll give you a perfect example. There’s a space of alternative products called life settlements. Bret and I, when we first started, we looked at the product, we did our due diligence. We wanted to understand it and see if it was a good offering. Our ultimate evaluation was it was definitely too speculative for the type of clients. After a couple of years after that review that we did, one of the biggest providers, the big wholesaler of the product a company called Life Partners, had some incredible issues. If folks in the audience wanted to find out, the easiest thing to do is to Google Life Partners and find out what the consequences are and what’s happening with people who invested large sums of money into those types of plans.
Bret, we talked about five mistakes that you’ll make in your 50s that potentially will show up in your 80s.
They talk about why you should be an “accredited investor” to get involved in those investments that David’s referring to. It’s putting those pieces together. We talked about all the different plans of investments, taxes, healthcare, and we need to be careful with these decisions we’re making in our 50s because as we need money, we talked about longevity. People living longer, we’ve got to have access to our money long-term.
David to your point, it’s so hard to understand the fine print. It’s so hard to understand the message in the details.
A lot of times people make the biggest decisions based on emotion, not necessarily all the facts, because they hear things that they hope and want to be true because it sells. We’ve always heard if it sounds too good to be true, it probably is. One of the other areas is annuities. Annuities have their place. Life is about moderation. If you hear somebody who absolutely 100% says, “Don’t buy an annuity,” you can’t listen to that person. If you have somebody who says, “You absolutely must buy an annuity,” you probably shouldn’t listen to that person either. It’s about balance. A lot of claims about annuities are mistruths.
To clear it up a little bit, I’ll give you an example. I heard one radio person talking about annuities and he instantly said to the caller, “Do not buy an annuity. It’s one of the worst decisions you could ever make.” He touted that annuities have high fees. He quoted 3%. I’ll tell you, flat out factual, that there are annuities that we sometimes utilize for a certain portion of money that people have for guaranteed income purposes or protection of principal, whatever it may be, that have zero fees. When somebody goes out and makes an absolute claim that 3% is the average, that’s a blanket statement. It doesn’t have complete truth and people tend to shy away from annuities.
One of the others is that there’s no liquidity. We have annuities that we deal with certain times for a certain amount of money where you can get 100% of your principal back anytime that you want without penalty. That completely goes in the opposite of what most people say and that’s the example that I’m trying to bring to our listening audience, is get all the facts. Don’t make an assumption. Don’t just listen to the neighbor across the fence. Don’t listen to the radio personality who’s got an agenda behind the conversation and jump into something. Go find out all the facts. The thing that Thrive prides itself on is a non-biased approach, purely educational, no pressure conversation. If somebody wants to move in the direction of what we’ve said, God bless, shake hands, we’re going to do it, and vice versa. If they don’t, God bless, shake hands and we wish you well. We’re always here for you.
David, somehow in that last segment of conversation about information and learning the facts and the truth behind the facts, there’s absolutely no way you covered it all, but they were certainly good examples of it.
We had Bob Hansen on from Rever Mortgage. He did a job and it goes perfectly in alignment. That’s why we partnered up with him because Bob’s all about education and advocacy in a product space that typically has a bad reputation. When you find out the facts, you can find that it’s a wonderful solution for specific situations and those situations range. People who hear the word reverse mortgage typically default like it’s the last chance to get a financial house in order. In our private practice, we have utilized reverse mortgages with a very high net worth people to go out and purchase, whether it’s their vacation home or their ultimate principal residency.
They’re downsizing from here and moving south or west or whatever it may be. Initially, when the concept was brought up, they’re like, “That’s not going to work.” Then you go through the details and the details aren’t the selling points, the detail is the math. Math is an exact science. One plus one equals two all the time. When we go through that and people get educated, they go, “I understand why it’s probably good.” It’s the misinformation that causes people not to take typical things that could potentially be good. They totally discount them.Be careful who you give your information out to. Click To Tweet
That’s how the conversation started with Bob, it was the dealing directly with the misunderstanding of reverse mortgages.
There’s a lot of the misinformation out and once again, our encouragement is to go find out all the facts. We pride ourselves trying to find solutions for people. A lot of times that we introduce our solutions, Bret, Karen, and I will hear, “That’s the first time I ever heard that.” We’re independent, we don’t have a bias towards a particular product or particular company. We represent our clients. We’ll bring up things. There are solutions out there that utilize life insurance. There’s a special product called Single Premium Indexed Universal Life. It works for high net worth clientele. Sometimes it’ll work for people who are not high net worth. It is a life insurance product, but it operates in so many different ways. We’ll see times where a client wants long-term healthcare, but they can’t afford the product, so some of these insurance carriers have bundled the solution together and make it available to a much broader scope of people.
Just because you hear the word life insurance you maybe not want to shy away. It’s got good interest rate to it. It’s got a return to premium, it’s got liquidity and it’s a cool product. Annuities are not always a bad alternative. We don’t use them wholesale-wise, but we utilize them when they fit for an appropriate amount of money. That’s why we believe in ETF when we manage people’s money. because we like a low-cost alternative in investment management. We’ve seen mutual funds that will have almost 1.5% fees inside of them just to have expense management done. We tell people you could sometimes have an addition through subtraction. Meaning if we can get the same objective done using an exchange-traded fund and the expense fee for that is 0.6%, if they just perform equally, we do better because there are less expensive.
Karen, let me transition to you because it might be the most important subject or most important conversation that we have. Everybody is using plastic and everybody is buying like crazy.
At Thrive, we take our clients’ information and it’s very important to us. It’s a top on our list. We were very compliant with that. I’m always thinking at the back of my mind when I’m using a credit card, “Is this a legitimate site? Is it going to be a site that’ safe for me to use my credit card?” The biggest thing that has happened recently, if you’ve been watching or listening to the radio, is that there have been security breaches. The biggest one was the Equifax breach. That’s very scary. Almost 50% of the US population was exposed and they have information, dates of birth, Social Security Numbers, and information like that. I heard Uber had also a security breach and waited about a year to let people know about that.
I almost found that to be offensive that they waited so long to let everybody know.
It also makes you not want to use them. What are some ways that you can protect yourself? One of the smartest things to do is check your credit card statements. We check ours on a weekly basis. Check everything that’s charged on a credit card. Check your checking and savings account statements, online check that. Make sure there are no unusual charges there and make sure the amount of money that you think is in your checking account is definitely in there.
Would you say that a lot of people take for granted that it is, and they don’t do that? That simple process, they don’t do it.
You’re protecting yourself. You have to monitor yourself. You’re your best advocate. Also, get a regular credit report. You have to get through all three agencies, which the big ones are Equifax, Experian, and TransUnion. At least once a year there’s a website you can go on and I think it’s a free, AnnualCreditReport.com. You can pull your own credit reports, make sure there’s no another credit card that was opened in your name or make sure that no small loans were taken out. The scary thing is we’ve had clients come in who have been through this process. It’s very important to keep monitoring your own situation.
I also tell people that when you give out information, be careful who you give your information out to. You’re not going to get a fax or texts from us asking for any personal information. You’re not going to get a text or an email from your bank asking for Social Security Numbers or account numbers, especially senior citizens. My mom, being one of them, is in the new digital age and she has her new phone and she’s texting everybody. I told her if you get a text or anything from a bank saying, “We need to this account number,” do not answer it. Another area people don’t think about is if you have children or grandchildren, a big area where fraud is taking place is they’re stealing Social Security Numbers of teenagers or young children and opening up credit cards. How often do you think do I have to check my sixteen-year-old’s credit report? You never do. We have children and I tell them, “It’s very important when you’re doing anything, do not give your social security number out.”
If you’re applying for a job, do not give your whole social security number out, just give them the last four digits. Another important area, which is a possibility, not in everybody’s case, but you can actually freeze your credit, you can do that. You have to contact each agency, but you can freeze your credit. You don’t want to do that if you’re going to apply for a loan or you’re going to open a credit card, but if it’s pretty safe to say that nothing exciting is going on and you and your future that you need to apply for credit, you can freeze your credit.
Freezing means what? Putting it in a holding pattern?
It’s not going to protect you against something that’s already happened, and it’s not going to protect you on a credit card that you currently have, but if someone wants to try to open up a new credit card or get a loan, it’s not going to happen. There’s going to be a freeze on your account and you were the only one that can be contacted to unfreeze it or allow them to do what process needs to be done to open a credit card along those lines.Protect yourself. Be your own self-advocate. Click To Tweet
That’s pretty good stuff at a time during the year when it’s more relevant perhaps than it was. The advice is well-thought and well-presented. Take a moment to check. Just myself, I decided to log on this morning and check the charge and there wasn’t fraud, but the company hit the card twice for the one purchase. I don’t know if it would’ve ever self-corrected itself, but when you’re spending $464 and they hit it twice, I certainly think it’s good advice at this time of the year if you’ve never done it. Take Karen’s advice and do some of those steps to monitor yourself and protect yourself. Be your own self-advocate.
That’s the least you can do. You can’t protect yourself from everything, but it’s worth it to be smart and to understand what’s going on out there and protect yourself.
That’s very good stuff from Karen Bezar, part of our Thrive Financial Services team. Bret, I want to come over to you. When you follow up and you absorb David’s a conversation about information and the facts, you do get a lot of information out of the workshops
Knowledge is power, Krause. We made that decision when we started the company. It’s all about education and advocacy. There are no tapes or CDs at our workshops, just homemade cookies and coffee.
David, let me come to you and start to you as we move into our final segment or our final block. One of the most important statements made by you was the clarification of the minor details versus the big print, the small print versus the big print. It’s very important.
When we got started with the show, we had mentioned that were a little bit geeky in those types of things. We’d like to drill down on the details. We’re going to do that due diligence work, getting ourselves completely familiar with what’s being offered. Some people want to know that, and we have the ability to share all that, but a lot of people just want to know that it’s been done and can be proven out. Somebody’s done that work to vet out a solution or a strategy or a product or whatever it would be, and that’s what Thrive does.
Bret, you have the question.
It seems like we’re building a tribe. We’re actually getting able to choose a lot of different questions that are coming into the mailbag. The appointments that came out to the show too, it feels like we’re given a good content. The question we received was, “I know you can deduct certain retirement savings contributions. We are talking about taxes but not others and how do these tax benefits work?” When we talk about retirement plans, we have 401(k)s IRAs, Roth IRAs, 457, 403 plans. They sound very different, but a lot of them are the same as well.
With what I shared there, 401(k)s IRAs, 457, 403, when we’re contributing money into those plans, if I made $80,000 and I contributed a $10,000 into my traditional 401(k), it means that I just took $10,000 off income so I’m only paying Federal Income Tax on that $70,000 difference. We’re able to deduct those. However, when we go to start taking withdrawals, sometimes we can take them out tax-free, but a lot of times we’re paying taxes on them at that point in time. We’re not paying taxes on the way yet. It grows tax-deferred, and ideally, we’re going to be paying taxes on the way, not all the time, but typically.
On the contrary, we hear a lot about Roth IRAs or Roth 401(k)s. They work a little bit different. If I made $80,000 and put $10,000 into a Roth 401(k), I’m still paying Federal Income Tax on $80,000. However, that money is still growing tax-deferred, but when we go to pull that money out, we’re now pulling it out, tax-free, and that income does not show up on the tax return, which is a big deal. We talked about some last-minute ways that you can save some money for taxes. It’s talking about that saver’s credit. We talked about it during our workshops as well. We talked about if you’re earning under $31,000 as a single taxpayer, $62,000 as a joint couple, you may be able to deduct up to $0.50 up to a $2,000 credit. A credit goes directly against our income.Second opinions count. Click To Tweet
Let’s say I made a $4,000 contribution to an IRA, maybe it’ll deduct that off my taxes. $30,000 just went to $26,000 but in addition to that, the government will give me a credit of $2,000. Any taxes that I owed is being directly taken up just by simply putting money away into an IRA or Roth IRA. Do you have any questions about reducing your taxes? We are passionate. You’ve heard it over the shows, people that are coming out to our workshops. We have a lot of passion regarding taxation out there.
If we don’t read your question, David, all questions that come into ThriveFinancialServices.com, you’ll get an answer. There’s no cost for the information. That’s what we want. We want you to have the information. Get yourself educated.
We want to become a resource for folks out there. We won’t always be able to return your phone call instantaneously, but we’ve got a team of people here and they’ll jot down the question. They’ll get us sometime during the day. We’ll get a question back. I’m going to give you a phone call or an email or text message, whatever communication that you like. Better yet, take advantage of a complimentary consultation with us. Get a second opinion. Second opinions are a big darn deal, Joe. I got diagnosed with cancer. It totally disrupts your entire world. I was young. I was 49 years old at the time and had two young kids and a lovely wife and all that good stuff. You start things circling around in your head and you instantly want to say, “I’m going to beat this.” I went and did my due diligence. I asked a lot of questions. I went to a lot of different resources and ultimately ended up having my surgery, which saved my life down at Johns Hopkins University.
The reason I decided doing it when I walked into the Oncology Department, there was a big sign that said, “Second opinions count.” That hit me. After I had my surgery, and my surgeon was a PhD in research oncology as well as an MD in surgery, he told me that the doctor who diagnosed me and wanted to do my surgery told me that that surgery had not been done in thirteen years in a teaching hospital. To me and resonating out to our audience, a second opinion accounts because it can be lifesaving.
Your finances are critically important and a little different than your health but take the time. Find out. You may love your advisor, you may love your accountant, but see what’s happening. Have somebody give a non-biased opinion that maybe generate some questions that you can take back to your account, back to your financial advisor. If they give you a good quality answer, then applaud them. If you get a shady answer, if you get an answer where it doesn’t look like they understand it, then you’ve got to start making some evaluation at that point.
On behalf of Karen Bezar, David Bezar and Bret Elam, I’m Joe Krause, we’ll see you next time.