4 Key Questions For Your Financial Advisor

4 Key Questions For Your Financial Advisor
On this week’s show Bruce explores four key questions you should be talking about with your financial advisor. (Here’s a hint, everyone of them could be helped with a reverse mortgage).”
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Hello, and thank you for joining me today on Reverse Mortgage Radio. I’m your host, Bruce Simmons. Today we’re going to be talking about financial planning and how reverse mortgages can help it. We’re not going to go into a lot of detail, but I read a recent article that was very interesting. It was written by a guy named Don Graves. He’s a retirement income certified professional, RICP. That’s a new designation for financial planners.

Really, I just learned at a training a couple of weeks ago that I went to in San Diego that that’s a designation that anybody can get. You don’t have to be a financial advisor to get it. I thought, you know, that would be a cool thing for me to get. But I found out it can take eight months or more if you’re doing it part time, and it’s a lot of work and a couple of thousand dollars. I thought, well, maybe I’ll just see what knowledge I can gain from him and not get the actual designation. Some other initials to put after my name. Right now I have CRMP after my name, which stands for Certified Reverse Mortgage Professional. This guy has RICP, Retirement Income Certified Professional.

His name is Don Graves. He talks about four important questions that retirement advisors should ask their clients. My thought in talking to you about this is that these are questions you should ask your retirement advisor. Ask him or her about these and let them know how you feel about these questions.

But before I do that, I do want to make sure you know how to contact me. You can reach me directly. My name again is Bruce Simmons and I’m the reverse mortgage manager with American Liberty Mortgage right here in Denver, Colorado. You can reach me at 303-467-7821. 303-467-7821. That’s my direct line. You can call me there any time. If I’m busy with a customer or something, you could leave me a voice mail. You can also reach me online at reversemortgageradio.net. That’s my website. You can go on there. There’s a lot of good articles on there. There’s video testimonials. I talk and explain some things on there as well in some videos. All these radio shows that I’ve been doing since May of 2017 are on there as well, so you can go back and listen to any of the other shows. I’ve got a brief overview of what they’re about.

But today, like I said, I want to talk with you about questions you want to ask your financial advisor. Now, in relation to reverse mortgages, reverse mortgage is a loan. It’s an FHA-insured loan that’s specifically designed for people that are 62 and over. It allows you to convert a portion of the value of your home into tax-free money that you never have to pay back as long as you live in the home and as long as you pay your property taxes, homeowner’s insurance, and maintain the home.

You can make payments on it. Some people do. You can make payments on it and that money that you pay down on the loan balance can be put aside to be used at a later date, sort of like a home equity line of credit. We call it just a reverse mortgage or a home equity conversion mortgage line of credit. Home equity conversion mortgage is the name the FHA uses for their reverse mortgage program. In the past, there’s been other proprietary reverse mortgages, not FHA loans. The majority of loans are FHA. So the HECM, HECM, home equity conversion mortgage, is the FHA version of that.

So as long as you live in your home, pay your taxes and insurance, you never have to pay the loan back. But you’re still charged interest. It is a loan. A couple of weeks, probably two to three weeks ago, we talked about why you’re charged interest on borrowing your own money. You’re borrowing someone else’s money but it’s secured by the equity in your house. Hopefully that makes sense. If you have any questions, feel free to call me.

You’re going to get a statement every month, and that loan balance is going to get larger and larger and larger. You have to be okay with that when dealing with reverse mortgages. On the flip side, depending on your situation, if you have a lot of equity in your home or you own it free and clear, you can also set up a reverse mortgage line of credit, the HECM line of credit like I talked about. One of the benefits of the reverse mortgage line of credit is that line of credit will get larger and larger and larger as well. It has a growth component to it so that the longer you keep it, the balance gets larger. It’s not interest. You’re not earning interest. You don’t have to pay taxes on it or any of that stuff. It’s not like a CD where you can pull out the money and not have to pay it back. It is just increasing the amount of money that you can borrow later in life.

If you get that loan set up today and you don’t use it for 10 years and now suddenly you’re diagnosed with Lou Gehrig’s Disease, heaven forbid, or something like that, where you need in-home care, or your body just starts failing you a little bit and you need some in-home or some help here and there, you can start drawing money from that line of credit and it will be a lot larger than when you originally set it up 10 years ago if you didn’t use any of it. And you don’t have to pay taxes on that money when you take it out, either. There’s a lot of really good benefits.

The article that I want to talk about was written by Dan Graves. It’s called “Four Most Important Questions Retirement Advisors Can Ask Their Clients.” In your case, you want to talk to your retirement advisor or even adult children about this, too. They’re called the four core client concerns, or what they call the Four Ls. Longevity, lifestyle, liquidity, and legacy. Those are the four things that you want to be concerned about in retirement, when you are quitting work.

They’re simple to understand. Longevity. Will I have enough money in my savings and investments to meet my basic living expenses? This goal focuses on lifetime survival of your savings to meet essential living requirements, basically housing, food, things of that nature. According to a 2016 survey, the number one concern of retirees is how not to run out of savings. The bottom line here remains running out of money and not being a burden, we talked a little about that in the last program. Not being a burden on family is still at the forefront of most people’s minds when you’re retired. You don’t want to waste your money.

The thing is, too, you don’t want to go about not enjoying your retirement. If you have a chance to go to New York or Florida to visit family or relatives or take your grandkids to Disney World or something like that, you want to do that.

That’s the next L. Lifestyle concern. Will I have enough money to enjoy retirement on my terms? Not somebody else’s, but my terms. It’s one thing to have enough money to meet your basic needs: housing, food, and such. But it’s another to maintain your desired overall standard of living and not be forced to make moderate, or hopefully not drastic, lifestyle changes. That’s what I’m talking about. You want to be able to enjoy your retirement. Would you rather be taking your kids to Disney World or saying, hi, welcome to Wal-Mart? Personally, I’d rather go to Disney World. I’ve never been there. I’m in that retirement savings time frame myself. I’m in my 50s. So I hopefully can save a lot of money in the next 15 years or so. Who knows, I may never retire.

One of the things that’s interesting in this business, you’ll meet a lot of people who are over 65 that do reverse mortgage loans. They’re loan originators. They get a reverse mortgage and they say this is a great program. How do I go about doing this? Some people have had no mortgage experience at all and they become great loan officers doing reverse mortgages. Heck, my assistant, Mary, she’s fantastic. She’s looked into doing a reverse mortgage and that’s how I met her originally, talking to her about a reverse mortgage. There’s a lot of people who see the benefits of this and say this is a great program and I want to do it. If that’s the case, go for it. If you want to work into your 70s and 80s, do it.

I did a reverse mortgage for a lady. She was a loan officer with a bank that I knew. I’ve known her for years. I did a reverse mortgage for her. She’s a forward loan officer. She’s been at this bank for 30 years or more, probably, now 40. But I did a loan for her back in 2009. We reconnected earlier this year and she said, I didn’t know you were still doing this. I thought you’d moved out of state or something. I said I thought you’d retired. She’s now 79. We were able to refinance her reverse mortgage and get her more money. But she’s still working. The main reason is this poor lady, her kids are sponges and she’s helped them all out and she’s got some debt from that. But she likes what she does. She really does enjoy it. I don’t know how you could be in this business for that long and still enjoy it, but there’s a certain consistency, I guess, to her life. She loves it. So in that case, you say go for it.

One of the things that the article talks about is he says Dr. [Waitphau 00:10:28]. He’s written a whole book. I’ve got some of those, I’m in the process of reading it about financial planning. Some of the concepts that he talks about have changed since the October 2 changes. If you’re interested in the October 2 changes I’ve done a couple of programs, two or three programs about it. They’re all available on my site at reversemortgageradio.net. Reversemortgageradio.net. I think in the last show in August, the first show in September I talked about it, two or three times in September and October I talked about it.

You can also call me directly at 303-467-7821. My name is Bruce Simmons, I’m the reverse mortgage manager of American Liberty Mortgage, and I’m talking about an article that I read recently called “The Four Important Questions Retirement Advisors Can Ask.” I’ve kind of spun it saying you should ask your retirement advisor about that. So ask him or her, hey, am I going to have money, or do I have enough money, to make sure that I can meet all my needs between Social Security, pension, and my savings? Then the next step, do I have enough to live my retirement and enjoy my retirement on my terms? So that’s longevity and lifestyle.

The next L is legacy. This is what we talked about last week. Should you use all your equity in your house? Is it right to do that? If it’s important to you to leave a free and clear house to your heirs, you should not do that. Legacy is more than leaving something to your kids financially. It could be how your family remembers you financially. My wife’s grandmother passed away when she was 93, about five years ago. She left her three adult children a fair amount of money. She left her grandkids all $10,000 each. My wife and I took that money and we had a real nice porch of stamped concrete, made it look like flagstone, put on our porch. Every time my wife sees that she thinks of her grandma. She thinks so fondly of her. Her grandma was just a neat, neat lady.

This lady lived retirement on her terms. When she was in her 80s, she went on a trip to Nepal and flew over Mt. Everest. She didn’t climb it, she flew over it. She would meet people on cruises. She toured the world. She went to Paris and the Eiffel Tower. She was just a neat, neat lady. She lived life on her terms because she and her husband had planned.

Some people say reverse mortgages are for people who don’t plan. Nah. No. It should be used as a financial planning tool. Everything we’re talking about here, everything I’m talking about here today, can be assisted with a reverse mortgage. We’re going to wrap this up at the end.

So legacy concerns, that’s one definition of legacy. A lot of people say well, my house is my legacy and I don’t want to jeopardize that. Again, we talked about this last week, you can go to reversemortgageradio.net and listen to it. But if you’re a burden to your family now, what’s your legacy going to be, even if you leave them a free and clear house? Oh yeah, Mom, we had to take care of her so we weren’t able to go on our trip and we weren’t able to save for retirement ourselves, and our son had to get an extra $50,000 in student loans because we couldn’t afford to help him out in college. Whatever the case. You don’t want those clouds hanging over your legacy too. So keep that in mind.

The last one is liquidity. Will I have access to tax advantage money when I need it? The way the article puts it is: Maintaining additional assets that can be tapped quickly to provide funds for unexpected contingencies is critical in retirement. Ideally, these reserves should be accessible with as little taxable or opportunity loss as possible. They call them spending shocks. So if you slip and fall and you end up in the hospital, and now you can’t work or you’ve got a big copay or co-insurance bills start rolling in, that’s called spending shocks. This is money you did not budget for. Or your furnace goes out. Your car engine goes out. Whatever the case may be. These are spending shocks and you need to have that liquidity, and I like the way he puts it here, with as little taxable or opportunity loss.

Right now the stock market is rolling. It’s going good. We’ve had some ups and downs, but it’s been trending up. Let’s say you had to pull out $30,000 out of your investments five years ago. You would have missed all this run-up in the stock market. I think five years ago the stock market was probably around $12,000 or $14,000. Now it’s $23,000, the Dow Industrial. Now, in my mind, if I’m 80 years old, I’m not going to have a lot of money in the stock market anyway. But you’re missing out on some investments or things of that nature. If you have to cash in an annuity early and now you’re paying penalty because that annuity charges a penalty. Or as far as taxable money, let’s say you have to sell an investment that’s taxed to pay for this home repair or this medical bill, whatever the case may be. That kicks you into a higher income bracket. Now you’re taxed at a higher income than you would have been had you not had to pull that money out.

That’s what they call liquidity concerns. In here he says the two biggest out of pocket expenses or spending shocks are medical costs, which average $265 per couple throughout their retirement, I think, he didn’t specify that. But then he also said long-term medical care costs, which affects 70% of retirees, to the tune of $130,000.

I met with a couple just a couple of weeks ago. I met with the lady. The husband, he’s had a lot of medical issues. I think it was liver cirrhosis or something. The wife said that this created a chemical in his body that affected his brain and his decision making. He ended up spending a lot of money on credit cards and things that he shouldn’t have because he wasn’t thinking clearly because of this medical condition, in addition to the fact that he’d been to the ER three times over the last three months and he spent 21 days in recovery in a long-term care facility. I’m not sure it was long-term care. I don’t know all the details. Anyway, it cost a lot money. She doesn’t know how much she’s going to have to pay out of this yet, but she totaled up all these bills. She said there were bills from doctors she’d never heard of. Every time a nurse walked in the room, cha-ching, cha-ching, cha-ching, bills just racked up.

She said she saw the bill. Like I said, she doesn’t know how much Medicare is going to cover. But it was almost a million dollars in the span of about three months for her husband. It’s just terrible that we’re in this situation. Sometimes that’s the issue. She’s not going to have to pay all that, but she’s very concerned about losing his Social Security if he were to pass away. The way it works, I think, I’m not a financial planner but I think she loses her Social Security because if he passes away she can receive his Social Security and hers then goes away. But either way, she’s only going to have one income. She’s concerned about her savings, how much she has. She has a fair amount, but she’s not a millionaire. She can’t pay that bill out of her pocket.

So these are concerns that we have. A reverse mortgage can help with all of these. If you think about it, let’s go back. The four concerns that people have are longevity, lifestyle, liquidity, and legacy. You say, okay, longevity. Yes, a reverse mortgage can help you meet your basic living expenses. Definitely. We can provide you with additional income on a monthly basis if that’s what you need. We can pay off your existing mortgage so you have more money to pay for those expenses.

Lifestyle, same thing. You could set up a line of credit so you have money to draw upon if you want to take that cruise to Alaska that I’ve heard everybody in the world should take. My in-laws did that and they loved it. That was before my father-in-law passed away. He was just beginning to get sick at that time and my mother-in-law is so glad that they did that together. So things like that, you can take the money from a line of credit and not disrupt your normal, everyday budget.

Legacy concerns. I’m going to skip that because I’m going to come back to that in a minute. Liquidity concern, obviously, access to tax-advantage money when you need it. If you have a reverse mortgage line of credit, you can tap that money. It is not taxed. I’m not a tax advisor so I don’t want to say 100%, but I’ve never seen it be taxed. 99.99% of the time probably it’s not taxed. So I have to put that little disclaimer in for the consumer financial protection bureau. That probably just triggered something, now I’m going to get audited and they’re going to be after me and I’m going to be out of business. Either way, the way it works is that money’s available whenever you need it. It’s tax free and it’s when you need it. And it won’t cost you opportunity cost, you’re not having to sell a stock that’s on the rise, or it’s not going to kick you into a higher income tax bracket to do that.

Now legacy. Going back to the legacy thing, again, this is where people say I don’t want a reverse mortgage, I won’t have any money left to give to my family? Well, that’s not necessarily the case, because we don’t loan 100% of the value. Remember, reverse mortgage only allows you to tap into a portion of the value of your home. We don’t loan 80% or 70%. Typically it’s between 40 and 65% of the value. The older you are, the more money you can get from a reverse mortgage. Even if you took all the money out when you’re 85, the time that that money has to accrue interest is a lot shorter than it would be if you were 65.

That’s the reason why we loan less money to someone who’s 65 than to someone 85. If you live in your home for another 10 years when you’re 85, that’s 10 years worth of interest and mortgage insurance that’s accumulating on your loan. That’s if you pull all the money out, which most people don’t. We’re only loaning 65% of the value in that scenario, or 60%.

Keep all that in mind. Legacy is a concern, but odds are you’re going to have money left over. And if you have other investments you’re not having to pull money from those investments. That will go to your heirs as part of your legacy. That’s kind of the situation my wife was in when her grandmother left her about $10,000 that we were able to use for that patio.

And Bruce, I’ve heard you say on the show before that you’re more than happy to talk to the family members if you’re worried about your heirs’ reaction.

Always, yes. Yes. The thing is, too, a lot of people I talk to I explain all this and they say, oh yeah, this makes total sense. Then their heirs come over, oh, is this guy taking advantage of my parents? They start asking the parents questions. And they understand it but they don’t understand it well enough to articulate the details back to the child, the adult child who may be in a business that relates to finances but doesn’t know anything about reverse mortgages. But they’re really smart, because they work at this investment firm. And they are smart, probably a whole lot smarter than me.

That’s a very good point, Maria, I appreciate you pointing that out. It’s so much easier for me to meet with the whole family. Or I’ll meet with the parents and then I say, if you want to talk to your kids or if you have kids that are interested in this… I remember some people who are listeners to the show, they said their daughter in law was an attorney and she’d want to talk to me about this, they were sure. I kept saying have her call me. I’d be glad to talk to her. Eventually they said no, she doesn’t want to mess with it. She didn’t care. If they’re listening, I hope I’m not mutilating the story, I apologize.

There’s a lot of people who say they’re interested, but they just want to make sure that it’s legitimate. They don’t want to know all the details, all the ins and outs, they just want to know that their parents aren’t getting ripped off. This is a legitimate program. You can come to my office and meet with me, see that I’m legitimately, I have an office here in Denver that I work out of in the Lower Highlands part of town. It used to be a big Italian mob area, I guess. There’s a restaurant called Gaetano’s that used to be kind of a mob hangout. I’ve eaten there before. It’s pretty good. I like it. It’s like 38th and Tejon, that one is. Just giving a little free blood to Gaetano’s Italian restaurant. That’s the neighborhood where my office is. It’s amazing, the number of people I talk with, oh, I grew up in that area! All this stuff. One person’s father was a big politician in that area and big in the community, everybody knew him. It’s kind of funny.

Maybe he’s the reason the mob’s not there anymore?

Maybe. Yeah. Hopefully. You can come visit me. I like to go meet people in their homes because a lot of times, I can see the quality of the home and it helps me give a better idea of the appraised value. What happens when we do a reverse mortgage is the first step is meeting with me. I don’t meet with everybody in person but I like to meet with most people in person if I can.

Then you go to talk to a reverse mortgage counselor, which is an independent third party that’s approved by HUD. Then if you still want to move forward with it, that’s when we start the paperwork. Just so you know, the training I went to a couple of weeks ago, I’m in the process of getting set up for an e-sign now. There’s about 50 signatures for the application for a reverse mortgage. It’s terrible. It’s just stupid. It’s crazy. Stupid crazy.

I’m in the process of figuring out how to do an e-sign, so if you have an email address, I can email you the documents. Then it’s very simple to set up this password and you go in there and basically, instead of signing every document, you click, click, click. Just push a button. Much easier for people, especially someone who might have Parkinson’s or arthritis. It’s amazing the number of people I help out that have arthritis and I just feel terrible making them go through all this.

Then we order the appraisal. But by meeting you in person, at your house, I can say you know what? That peeling paint is going to be an issue for the appraiser. They’re probably going to want to require that to be fixed. I explain how that works. I should do a show on that, what happens if your home needs repairs? Because a lot of people get loans to fix up their houses. That’s a great idea. I should make a note of that. We’ll look into doing that.

Today’s show, though, like I said, I wanted you to talk to your financial advisor, your family, somebody. Think about the longevity, the lifestyle that you want and the longevity of having money available for needs. Lifestyle, how you want to spend the extra money you have. Liquidity, being able to tap into money when you need it. And legacy, what you’re going to leave to your family. Think about all those in relation to reverse mortgages. Formulate a plan. Think about this. I’d be happy to go over how reverse mortgages work with you. Feel free to call me any time at 303-467-7821. 303-467-7821. That’s my phone number. My name is Bruce Simmons. I am the reverse mortgage manager with American Liberty Mortgage.

I’ve got my own website too at reversemortgageradio.net. Reversemortgageradio.net. You can check out some testimonial videos, you can read other articles. Listen to all the past podcasts of this show. I’d love to talk with you sometime about reverse mortgage so please contact me.

Thanks so much for listening today and I hope you have a fantastic day.

Call reverse mortgage specialist Bruce Simmons of American Liberty Mortgage directly at 303-467-7821 to begin drawing equity from your home. Bruce will come to you anywhere in the Front Range for an in-person, no-obligation consultation. Learn more about reverse mortgages and watch testimonial videos on reversemortgageradio.net. NLMS number 409914. Regulated by the Division of Real Estate.

Bruce Simmons

Bruce Simmons

I absolutely love what I do - working with senior homeowners to help them live a more comfortable, flexible and secure retirement. I have the absolute best customers in the world, and even though I worked in the forward mortgage business for a number of years, I could never go back to doing conventional loans. I'm a 100% reverse mortgage specialist.

Bruce Simmons

Bruce Simmons

I absolutely love what I do - working with senior homeowners to help them live a more comfortable, flexible and secure retirement. I have the absolute best customers in the world, and even though I worked in the forward mortgage business for a number of years, I could never go back to doing conventional loans. I'm a 100% reverse mortgage specialist.

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