Jason and Emilia discuss February’s in depth focus with Tane Cabe on maximizing retirement income and HECM mortgages.


Below is the full transcript:


Announcer: Welcome back, America, to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now, here is your host, Jason Parker.


Jason: America, welcome back to another round of Sound Retirement Radio, and for all of the good people right here in Kitsap County in the Seattle area, thank you for tuning in. If you listen to us via podcast or iTunes, thank you for your reviews on there. You know that’s how people find this program. It’s because of your positive reviews at … iTunes will boost us up and help us look better to other people looking for retirement issues.


My name’s Jason Parker. As you know, we’re always looking to bring experts onto the program who we believe can add significant, meaningful value to your financial life. You’re listening to episode 086 this morning. “Retirement Income Summary” is the title.


One of the things we’re trying to do a little bit different is bring experts on every month and really dive deep into a specific topic, a specific area of retirement, with the intent of bringing you real value and then ending every month with a webinar. And so we’re going to talk a little bit about this month in summary. But before we get too far into that, let me just welcome back Emilia Bernard to the program. Emilia, welcome back to the Sound Retirement-


Emilia: Yes, thanks for having me back! It’s been too long.


Jason: I know. I love your voice. You have such a good voice for the radio.


Emilia: (laughs) I avoid it. No, I don’t listen to myself on the radio, but for all of you that have listened, I hope you didn’t miss me too much. We’ve been about three weeks since I haven’t been on, but … So, like Jason said, we’re here to kind of give you a recap, summarize everything that we’ve been working on, and I’m behind the scenes more than anything right now, but so … Jason mentioned, yeah-


Jason: Oh, I don’t know about behind the scenes. You do a great job serving people that call in here.


Emilia: (laughs)


Jason: You know, Emilia, before we get started with this show this morning, I always like to start with something kind of fun. Some people might be traveling this Saturday to go visit with one of their grandkids, and so we want to give them a joke to share, and so these are always kid appropriate. So here’s my joke: why did the girl smear peanut butter on the road?


Emilia: Smear peanut butter on the road. Hm.


Jason: To go with the traffic jam.


Emilia: (laughs)


Jason: (laughs)


Emilia: Well hopefully nobody’s in a traffic jam right now, but that would be funny.


Jason: I hope not. Yeah, if they are, I hope it’s not because they’re out smearing peanut butter on the road.


Emilia: (laughs)


Jason: (laughs) Okay, and then the other thing we want to do is renew our minds in the morning, and so we want to approach this differently. There have been a couple of times recently where I’ve had the opportunity to take one verse, just one verse, and think about it for an entire month. Now, that’s pretty awesome, and I tell you, when you really dive deep into the Word like that, it has the ability to really change your heart. So the verse today comes to us from John, chapter 12, verse 23: “Jesus replied, ‘Now the time has come for the son of man to enter into his glory.'” “‘Now the time has come for the son of man to enter into his glory.” All right. Something to think about, something to chew on, something to remember, and just a great way to get our day started. That being said, let’s go ahead and jump into our topic.


Emilia: Yes, yes, why don’t we? You mentioned we’re focusing on topics specifically for one month, and that’s going to be our goal for the next few months as we’re going on, but what’s your reasoning behind that, Jason? What do you think is going to be the focus of doing these types of monthly talks?


Jason: Deep dives. You know, what I know people want is, they want to have good information. What I’ve learned is the number one mistake, or the number one fear, people have in retirement planning is making an irreversible financial mistake. That’s the number one concern on people’s hearts, making an irreversible financial mistake. The way that we overcome making mistakes is through education, and when I started this program 7 years ago, I said, this is not … I mean, I know there’s a lot of these financial advisors around the country, and you listen to their program, and they’re really just doing … All they’re trying to do is get you to request information, ask for an appointment, do something like that, and that’s really not where my heart is. Where my heart is, I want to educate people. I want to bring them good information. I want to empower people. And I hope through doing that that someday people will look back and say, “Because we listened to this Sound Retirement Radio program, we made better decisions, we had a greater sense of confidence as we went into retirement, and it really changed our life.” I hope that’s the legacy that we’re creating here.


One of the reasons is I’m always trying to learn and trying to get better, and one of the ways we do that is through continuing education, so I’ve been involved in this college course right now specifically on retirement income-planning issues, which I just love filling up my mind with new information, and that’s been a fun process.


But one of the other things I try to do, Emilia, is get out of my environment here and go and travel around the country to meet with other advisors and learn about the challenges that they are seeing when they’re working with clients, and the fears that people have when they’re putting together a good plan for retirement. And one of the things that I’m reminded is that retirement is all about cash flow. And it’s so hard, so many times, to get people to start thinking about their money differently when they’re transitioning out of the working years and into the retirement years, because in the working years, you’re in accumulation mode. How can I grow this pile of money? How can I get it bigger? And the reason that they’re trying to get that pile of money bigger is because when they get to retirement, they want to be able to go out and have cash flow. They want to be able to have income. They want to be able to live comfortably. But it’s really hard to get people to say, “Okay, I’m retiring, so now I got to shift my mindset. I got to think about money differently. I got to think about assets differently.” And this past month, we’ve been spending a lot of time with Tane Cabe, who is a expert in the HECM loan, home equity conversion mortgage.


Emilia: So, HECM, what exactly … You said it’s home equity con-


Jason: Conversion mortgage.


Emilia: Conversion mortgage, okay, because that word’s kind of … It’s new to me, and I think it’s probably not familiar to a lot of other people, so what are your thoughts on HECM mortgages and how it can help people that are coming into retirement?


Jason: Well let me say this. First of all, there are a lot of different financial products and a lot of different financial tools out there to help people accomplish their goals and objectives in retirement. This is one of them, and it can be a little bit controversial, and it’s not the right solution for everybody, so I’m not out there saying, hey, whatever product or whatever financial tool, whether it’s stocks, bonds, mutual funds, annuities, HECM mortgages, limited partnerships, real estate investment trusts … I mean, I don’t want to really go out and tell anybody that they should … Every financial tool has advantages and disadvantages, I guess is the point.


What we really want is somebody that we can trust, that’s going to give us good information, tell us the pros and the cons of these different financial tools, help us make educated decisions about them and understand whether or not they’re appropriate for their situation. And that’s what we try to do with the program, the home equity conversion mortgage.


Now the reality is for most, or for many, people, especially retirees today, one of their biggest assets is the equity that they have tied up in their home. We meet with a lot of people that have paid their house off, and if they have a $500, 600, 700,000 house, and they maybe have $500,000 to $1 million liquid net worth, that house represents a lot of net worth that isn’t really doing anything for them, so the whole idea behind the home equity conversion mortgage is, how do you take some of that value and turn it into a cash flow stream that can be tax-free income to people? Or, sometimes it’s maybe they sell their house, and then when they go buy their new house, they use a home equity conversion mortgage for the purchase of their home so that they don’t have a mortgage in retirement. I mean, that’s the whole idea, because again, retirement’s all about cash flow, not your net worth. And, that’s a tool that’s available to us.


Now does that mean I’m an advocate for it? No, not necessarily. Am I opposed to those tools? No, not necessarily. What I always tell people is, there are no bad financial products. There just … Sometimes people sell things aggressively to people that don’t really need certain financial tools, or maybe that’s not the best solution for them.


One of the things we did, and I really appreciate having Tane as an expert, because Tane is one of the best people in the entire country, with these home equity conversion mortgage purchase programs, especially. He agreed to come and do a webinar for all of our listeners around the country. We had a really great turnout on that program. We recorded the webinar, and so for everybody that wasn’t able to come to the live event, we now have that archived on the website. It’s only going to be up for a couple of weeks, just from a bandwidth standpoint. We’re going to have it on there so if people want to just plug in and watch that before we take it down, or maybe not take it down completely but just move it to a different area of the website. I want to remind people that that’s available to them, so they can just visit Sound Retirement Planning. On the right side of the screen it says “Watch the webinar replay” for those that weren’t able to make the live event. Maybe they signed up for the live event, and then something in life happened and they weren’t able to be there.


But really, really informative look to see real-life stories about how people are using those tools in today’s environment to generate tax-free cash flow for themselves in some instances, or in some instances how to buy that retirement home that they really are excited about, but not have a mortgage so that they can spend more of their income doing the things that are really important to them in their life. And again, I really want to emphasize these are not tools that are appropriate for everybody. It’s a financial vehicle that exists, and it’s important, I think, before you make any decision that you understand how those vehicles work, and they have pros and cons, they have fees associated with them, and there’s no magic bullet out there.


Emilia: I’m really glad to hear you talk like this, Jason, because it makes me understand things easier, and … You really focus on, like you said, educating yourself on a topic before you take the next step. And so I just want to remind our listeners that they can call us. They can get some more information if they have any questions from the webinars, our past radio shows … I know Jason’s always available to do those kinds of things, and I think that’s great because the more you learn, the more you educate yourself on these topics. Then it’s … You feel more sound in making those decisions, like you said. So to any of our listeners, we want to let you know they … Give us a call. Give me a call. We’ll get you in contact with Jason, with Tane, whoever we need to.


Jason: Absolutely. We offer this all the time. If somebody has a question, maybe they’re thinking about retirement … Again, the number one fear people have is making an irreversible financial mistake, so why not get a second opinion, especially in the world that we live in right now today, where oil prices are at ridiculously low prices, our national debt is at extremely high rates, the stock market has again become very volatile. I know that there’s people out there that delayed retirement back in 2008 because they saw their 401(k) become a 201(k) and they said, “I can’t retire now,” so they had to work longer, and now they’re at that point, their portfolio finally recovered, they’re thinking about retirement again, and now they’re seeing all this volatility hit, and they’re like, “Oh maybe this isn’t the right time”? Let’s get a … Let’s just sit down, have a quick 15-minute phone call. Maybe I can answer some quick questions, and if nothing else, we can explain our process which I’ve created, called “The Sound Retirement Planning Blueprint.”


We have on our website a video tutorial that actually takes people through a process to show them what a good retirement plan should look like so that they can look at what they’re currently doing and say, “Is what I’m currently doing really match up with what Jason thinks a good retirement plan should look like?” And I’m not saying I have all of the answers, but I will say that we’ve worked with hundreds and hundreds of people, helped them put together a very good cash flow plan in retirement. It’s not the right plan for everybody, but at least it gives them a baseline, something to look at, and again, that’s … There’s no cost for that. You go to soundretirementplanning.com. On the right-hand side it says “Sound Retirement Planning Blueprint — Envision Your Retirement.” We used “vision” specifically because that is a video tutorial. We want to show people, not just tell people, but actually show them the different components they should be thinking about and looking at as they’re trying to make this decision.


Emilia: And you know one thing I’ve noticed, Jason, from some of the phone calls I’ve been getting recently? I’ve had a lot more people say that they’ve developed plans themselves, or they have a plan laid out and they just want someone to take a look, give them some more advice, and I told them that’s great, and I said, “Jason can definitely help you with that, and we can provide some added support or advice to that.” If you do have a plan and you’re just not sure, just give us a call.


Jason: And one of the things I want to emphasize too, because so many people out there, they don’t really want to help people plan. What they want to do is, they want to manage all the clients’ investments, manage all the clients’ assets, and so they won’t do any work for people unless they are willing to move everything over to them, and that’s not what we’re … That’s not what we do for people. We say, “Look, let’s help you create a plan.” If you want our help managing investments after the fact, because we’ve got some really good ideas for you on that front, well, we can talk to you about that, but that comes second place. Diversifying a portfolio in your investments, that comes after you’ve created a really good plan. And what so many people have a hard time finding, Emilia, is somebody that’s willing to create a plan for them without this commitment that they have to have all their money managed by them.


I understand that that’s what drives our industry. I mean, that’s ultimately what people want to be able to do as a financial advisor, is they … You know there’s especially from the fee-based side of the world, so many people are in this money-management world. We work in that world, but what I want people to have is a really good plan. I want them to have a really great sense of confidence. Once you have the plan, once you have the confidence, if you need help with the money management, we’re there to help you with that, but you don’t have to use us for that.


I mean, we can just help people with a plan. Maybe they are do-it-yourselfers. Maybe they just say, “Jason, we appreciate the radio show. We appreciate the experts you bring onto the program.” Maybe they don’t want our help, but they at least want to know what it looks like, and that’s what the “Sound Retirement Planning Blueprint” video series does for people. It says, “Get a vision for what this should look like. Are you doing this currently?”


I will tell you what most people are doing, because I meet with so many people. What most people are doing is they’re sitting down with a broker, they’re buying mutual funds, they have 60% bonds and 40% in stocks, or maybe they have 60% in stocks and 40% in bonds. They have a diversification strategy, and they think that’s a retirement plan. And I’m sorry, that just does not cut it, and that is why people have a lack of confidence when the stock market gets wobbly, because having a good retirement plan is like having a good compass on your boat when the fog rolls in. You know, you’ve got something to guide you and tell you where you should be going in the bad times. You make a plan in the good times so that when the bad times hit, you know what you’re supposed to do, and you know where you’re going.


It doesn’t have to be complicated, but people do have to take action. You can’t just sit back and hope that this is going to get better, hope it’s going to go away, hope that oil prices are going to come back, go try to buy alternative investments to get a lot of income and then be exposed to a bunch of risk that they shouldn’t have been exposed to in the first place because they didn’t have a good plan, they just had somebody selling them products, and … It drives me nuts, frankly. It really bothers me that that’s … There’s some good stuff happening. There’s a lot of this big push for … The Department of Labor’s coming out with this new fiduciary rule where they’re going to start holding people accountable to the advice that they’re giving.


Emilia: They should! (laughs)


Jason: It’s about time! I mean, we’re dealing with people’s financial futures. People need to be held accountable for the advice that’s being given, so I’m really excited that all the sudden the playing field’s going to be level to some degree, and I think that’s a really good thing.


Emilia: That’s great. Our focus again is educating our listeners, and Jason is always open and willing to help anybody out with that kind of information. We just want to keep reminding you that we’re going to try to focus every month on topics that relate to you, and we want to give you an opportunity to … If you have any specific topics that you want to learn about, you want more information on, and you think would give us a good radio show to go on, please give us a call, send us an e-mail, go to our website, get in contact with us, and we’ll go from there. Maybe we can find some more guests for our radio show too.


Jason: Absolutely. Let’s talk a little bit because I’m excited about next month. We’re going to be bringing on a whole new set of experts. What are some of those topics that we’re going to be bringing up?


Emilia: We’re going to be talking about federal and state retirement systems. We have some guests lined up. We have Dan Jamieson from the [Furs Guide 00:17:20]. We’ve had him on before. He’s great. And we’re going to hopefully be doing a webinar with him as well, so those are things to look forward to. And we also have Shane McGraw coming on next month, talking about VA loans. So just any other topics you … along those lines, state, federal, that’s what we’re focusing on.


Jason: I think one of the questions along those lines that I hear from a lot of people that are retiring from state or federal government has to do with their pension and when they should take that income, and then also questions around whether or not they should elect survivor benefits for their spouse. I was just meeting with a gentleman this morning in the small that group I attend, and he came up to me with a question about Social Security. This is one of those federal benefits that everybody had that’s paid into the system is going to have access to, and he was saying that his wife was really kind of pressing him to start taking his benefits early, and he’s not sure if that’s the right thing to do or not, and I told him exactly what I tell everybody else. I said, “Listen, I know that’s a hard decision, and I know sometimes the temptation is there to start benefits early.” But I would be able to just like to answer the question for people about starting Social Security simply and say just start it early or start it late. But without actually going through the process of creating the retirement plan, it’s so hard to know, should you take an election of a survivor benefit on a pension? Should you start Social Security early, or should you wait?


Again, the retirement plan is what determines that. That’s our guiding light. That is the lighthouse on the shore that helps us avoid hitting the rocks when we’re coming in. I get up on my soapbox sometimes because, again, I spend a lot of time educating myself, not just reading, not just studying, not just taking continuing education courses and college courses to get better at what we do, but I go around the country to meet other … some of the top financial advisors around the country to learn how they’re serving people the best they possibly can, and the hurdles and challenges that they’re running into out there.


I also have to say I feel really blessed because we do have amazing people, and like you said, Emilia, I really want to hear from folks, because the only way we can really make this program better is when people contact us and they say, “Hey Jason, we hear you’re going to be talking about federal benefits. We’d like to know about … Maybe it’s health insurance, you know, how do we bridge the gap for covering our health care coverage until Medicare starts.” Or whatever their concern may be. If you don’t bring that to me, if you don’t share it … Again, Emilia, I think the easiest way, if they just call you and maybe leave a quick message, or actually we can give them the 800 number. I’ll give the 800 number so if people want to call in, you don’t have to leave a long message. You don’t have to identify yourself. Just tell us what topic you’re interested in hearing about. We’re going to bring experts from around the country to support the concerns that you have and give you good information. The telephone number that people can call is 1-800-514-5046. Again, that’s 1-800-514-5046. Give us a call. Tell us what’s important to you. Let us help bring experts to this station to make your life better as you’re preparing for retirement.


Emilia: That sounds great. So we look forward to hearing from you, and if there’s anything else that you would like to learn about, again, just get in touch with us. And next month look forward to our topic on federal and state retirement systems with Dan Jamieson, Shane McGraw, and hopefully a new guest if we get some more information from you all.


Jason: Yeah, and the other thing, just getting back to the basics, retirement’s all about cash flow. It’s your income that determines your lifestyle in retirement, not your net worth. You’ve got … If you’re thinking about retirement, you have to change your thinking about your money. You have to get into this mindset, what you’ve saved has to produce income now for the rest of your life. How can you do that without having to rely on this very volatile world that we live in? Or at least reduce some of that volatility. I mean, there’s always going to be some of that volatility. How do we reduce it as much as possible? How do you make sure you have a good budget, because a good budget is going to be part of a good income plan. Unless we know how much money is going out the door, it’s hard to know how much money we need coming in the door. So unfortunately that takes some work on people’s part, and we want to have a good income plan. You got to have a good budget.


You want to have a good understanding of Social Security. It’s a wonderful benefit, and Social Security decisions should not be made in a vacuum. It’s part of a comprehensive cash flow plan. It’s tax-efficient income. It’s inflation-adjusted income. It has a benefit for a surviving spouse. Make sure that Social Security is coordinated with all these other benefits.


I just talked to some people recently, and it was so fascinating. One of the reasons they did not … They retired young, retired early, and one of the reasons they hadn’t started their Social Security yet actually had to do with the Affordable Care Act. Because they’re taking income from non-qualified assets that had already been taxed, it’s keeping their income tax rate at this really low level, and so they’re not having to pay hardly anything for their health care benefits in retirement. If they started their Social Security income, it would actually increase their health care costs up to about $1,000 a month, and so what they … They’re so smart. They said, “Jeez, if we can just keep our expenses, our cash flow, low, our taxable income low …” I mean, they still have good cash flow coming in, but it has to do with where they’re pulling that cash flow from. It means that they have to pay less money for health insurance benefits, and that’s part of this decision on Social Security. If you start it, what are the consequences? Maybe the consequence is you’re going to have to pay higher health insurance premiums. So that’s a important part.


I think the other important part is when you think about diversifying your money, it’s remembering that diversification is a two-step process. It’s first you diversify your time horizon. Again, we’re thinking about money different now in retirement. So your time horizon says money you need in the short term, you do not risk. It’s not worth losing. You don’t want to be pulling money out of an account that’s falling in value. So you diversify time. Time is the cure to the volatility of the stock market. The more time you have, the more risk you can afford to take. So money that you need in the short term is safe, secure, and guaranteed. Money that you don’t need for 5 years is, again, still relatively safe. Money that we don’t need for 10 years, we can start taking more risk with, and money that we don’t need for 10-plus years, that’s where we say, “Okay, we have time on our side. The market’s going to go up and down. Let’s create a diversified portfolio using …” I like to use tactical and strategic asset allocation to do that, but I know I’m kind of getting off on a tangent, and we’re out of time.


Emilia: No, it’s great information (laughs).


Jason: This is episode 086. If people want to listen, they can revisit the program online at soundretirementradio.com. Thanks, Emilia.


Emilia: Thank you, Jason.


Announcer: Information and opinions expressed here are believed to be accurate and complete for general information only and should not be construed as specific tax, legal, or financial advice for any individual and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed on this program. Parker Financial, its representatives, or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance-related discussions are subject to the claims-paying ability of the company. Investing involves risk. Jason Parker is the president of Parker Financial, an independent, fee-based wealth-management firm located at 9057 Washington Avenue Northwest, Silverdale, Washington. For additional information, call 1-800-514-5046, or visit us online at soundretirementplanning.com.