Thrive Retirement Planning Podcast Carl Woolston

Carl Woolston discusses eight critical steps to help you prepare for the retirement jump. He emphasizes financial security, peace of mind, and ensuring you retire to something, not just from something.

Highlights the importance of giving every asset a specific job in retirement planning, moving beyond the single-minded goal of asset growth. Discusses the seven crucial jobs for retirement assets, emphasizing that a well-thought-out approach can ensure financial security, a fulfilling lifestyle, and peace of mind during retirement.

Explore three common pre-retirement mistakes that can significantly impact your financial future. The transition to retirement can be filled with uncertainty, worry, and complexity. Making mistakes in the process can lead to running out of money, excessive tax payments, and market losses.

What are your Medicare options? When should you sign up? Do you need to sign up? What's the difference between Medicare Part A, B, C, and D? How much does Medicare cost, and how does it work? My guest Andrea Dover, CPA, lends her Medicare expertise to the podcast.

Reverse mortgages can be a financial tool to use during retirement in some situations. Technically, reverse mortgages are called Home Equity Conversion Mortgages or HECM by HUD, and have changed over the years, which has led to misinformation and some skepticism. My guest today is Alan Blood, a mortgage professional in Bountiful Utah, who has extensive experience with reverse mortgages, how today’s products work, and when they might be beneficial.



This article summarizes much of the discussion with Alan Blood. See the audio the complete discussion.

A LITTLE ABOUT ALAN BLOOD

Alan Blood is the owner and Lending Manager at CFG Home Loans. Alan has helped homeowners throughout Utah understand and obtain great mortgage financing. He graduated from the University of Utah College of Law with an emphasis in environmental and real estate law and holds a BA in Economics from Brigham Young University. Alan has been working as a mortgage broker since 1996 and served as the president of the Utah Mortgage Broker’s Association and a national delegate to the National Mortgage Broker’s Association.

PEOPLE GET PARALYZED

Those who are heading toward or are close to retirement might be feeling additional stress because of all the negative news because that is what is getting attention. The reality is that the market isn't as negative as people think and there is still a lot of opportunity for those who are wanting to make a move or explore different financing options. 



As human beings, when the boat begins to rock, we often hold and become paralyzed with fear. At times, inaction can be a good thing, but it can be a major mistake. We can mistakenly say that I shouldn't do anything until everything is ok. Opportunity can exist, even in the midst of uncertainty and chaos.



Doing nothing can be a good solution, as long as it is part of a plan and not the default. A great solution can be the decision to do nothing but far too often people don't really look at options or take action because they are paralyzed with fear. 

FIXED INCOME (SOCIAL SECURITY) AND REVERSE MORTGAGES

Some people may only have their Social Security and their home, but very few other financial assets. One of the options for a reverse mortgage is to supplement income in a situation where limited fixed income exists. Clearly inflation and the cost of living is increasing faster than most fixed income sources. Those who rely on fixed income from Social Security may be getting squeezed tighter and the budget that worked two years ago isn't working today.



For someone in retirement and on a fixed income, a reverse option may be a financial tool to consider. You can use a reverse mortgage to create a supplemental income source and make it so that you have non-taxable income each month, depending on your situation. You can also use the reverse mortgage as more of emergency fund, if the water heater breaks or other repairs are needed.



Also, if the mortgage is not yet paid off and you're in a fixed income situation, refinancing into a reverse mortgage can free up the need to make a monthly mortgage payment. 

WHAT IS A REVERSE MORTGAGE?

To begin, all reverse mortgage loans are not HECM (Home Equity Conversion Mortgage) loans, which go through HUD. Some reverse mortgages that are not HECM, could have negative components that are undesirable. Because it is a complex financial instrument, you need to be well informed.



Today, we're talking about a HUD reverse mortgage. It's a program where you can use the equity in your home to service debt or create monthly income. 



With the mortgages we are most familiar with you get a loan from the bank and then make monthly payments to the bank to service the mortgage. You then use your income or your assets to pay the loan. 



With a reverse mortgage, instead of using your income or assets to pay the debt,

The stock market in 2022 has been volatile due to rampant inflation, Russia’s invasion of Ukraine, and the Federal Reserve’s first interest rate increase since 2018. Knowing how to structure a retirement plan that works in volatile markets is key to your success. Creating a strategic plan that works in up and down markets can be life-changing. Timing the market or even overhauling investments every time the market and economy change isn’t a long-term solution. Taking all your money out of the stock market and creating a massive taxable event can be financially devastating. In this episode, I’ll share my market outlook for 2022, how a strategic plan can reduce financial risk, and my favorite method to create a retirement plan, whether the stock market is bullish or bearish.

THE VOLATILITY OF 2022

The market is attempting to catch its breath as the first quarter of 2022 ends. There was no shortage of events for the market to navigate, including the Federal Reserve’s first interest rate increase since December 2018, Russia’s invasion of Ukraine, and stubbornly high inflation pressures. The outlook calls for current market themes to last throughout most of 2022. The Federal Reserve expects inflation pressures to ease as the year progresses, but there is a risk inflation will remain elevated longer than forecasted due to rising energy prices.



There are many moving parts to pay attention to in the coming months. Investors will be monitoring economic data releases, corporate earnings, and geopolitical issues in eastern Europe for clues about the market’s next move. This year’s U.S. midterm elections will add another dimension as campaign season swings into gear over the coming months.

PASSING THE PILLOW TEST

In your primary earning years, you’re in the accumulation phase. The goal in the accumulation phase is to put away money in 401(k), IRAs, or other retirement accounts and let them grow. As you approach retirement, you’ll be moving into the distribution (spending) phase. In the distribution phase, the goal is not to exclusively increase your money but to limit significant and catastrophic losses.



If you lay down at night to sleep during retirement and the stock market is keeping you up at night, you haven’t passed the pillow test. The pillow test is to be able to be comfortable with the impact outside forces are having on your money. While I believe in the economy and markets, growing your investments is just one of eight parts of a comprehensive plan. Often those who are within a few years of retirement become increasingly uncomfortable with stock market volatility the closer retirement becomes.

THE POWER OF A PLAN

A typical instrument I use with clients to help them pass the pillow test is a three-bucket approach to planning. The first bucket is where guaranteed sources of income are allocated, such as Social Security and pensions. The second bucket is where the money used for income in the next 5-10 years, on top of Social Security and pensions, will be drawn from. Bucket two money is money that is invested or positioned with much less risk than growth-minded investments. One of the purposes of bucket two money is to reduce the sequence of return risk. Another purpose the bucket two is to reduce overall risk in a portfolio and utilize investments and products that are more conservative. There are numerous investment and insurance-based solutions for bucket two, and clients can weigh the pros and cons of each before making decisions.



Bucket three is used for money that a client wants to grow and most likely won’t be needed for ten years or more. Bucket three can be used later in life for health care expenses such as assisted living and nursing care. Money in bucket three can also be used to pass on to children or refill bucket two money later in retirement if necessary. Money in bucket three can also be converted to Roth IRAs strategically before Requi...