Life when you’re gone… an uncomfortable conversation most people prefer to avoid.

Why isn’t that a good idea? How can estate planning help you ensure that things are taken care of once you aren’t around anymore?

Listen to learn about big mistakes people make, the different elements that make up the estate plan puzzle, the three primary areas of cash flow, and the type of plan you should have in place.

• When it comes to end of life financial planning, many people tend to put it off because it’s an uncomfortable conversation to have.
• Even though the process for end of life planning is relatively simple in nature, Brian recommends getting professional help to deal with the details, which can be complex.
• Despite every situation being different, there are several core aspects of estate planning that everyone should consider.
• The first has to do with title and legal work. Brian has noticed that many people have a complete misunderstanding of the role legal work plays within their planning.
• Then, there’s life insurance. Many households rely on two incomes – or people – contributing to the family’s ecosystem.
• Their contribution to the family must be replaced when they’re gone, and that’s where life insurance comes into play.
• Another important, but often overlooked, aspect to an estate plan is budgets and cash flow. Brian doesn’t recommend planning in terms of weeks or months for it… rather, to plan in terms of years.
• “Your cash flow can be broken down into three primary areas,” says Brian. “Reoccurring obligations, irregular obligations, and savings.”
• Debts and investments are an additional area that makes up the estate plan puzzle.
• Brian stresses the importance of cash flow and shares a couple of examples that illustrate its key role.
• End of life planning is a difficult topic to address. Brian’s suggestion is to take steps to protect your loved ones by creating a custom comprehensive plan with the help of professionals.
• After that, the next step is to communicate the plan with your partner and family members – then, enjoy the peace of mind that comes along with knowing you have done everything in your power to provide for your loved ones.

 

 

Mentioned in this episode:

BrianSkrobonja.com

Estate Planning Checklist

 

 

 

Securities offered only by duly registered individuals through Madison Avenue Securities, LLC. (MAS), Member FINRA & SIPC. Advisory services offered only by duly registered  individuals through Skrobonja Wealth Management (SWM), a registered investment advisor. Tax services offered only through Skrobonja Tax Consulting. MAS does not offer Build Banking or tax advice. Skrobonja Financial Group, LLC, Skrobonja Wealth Management, LLC, Skrobonja Insurance Services, LLC, Skrobonja Tax Consulting, and Build Banking are not affiliated with MAS.   The firm is a registered investment adviser with the state of Missouri, and may only transact business with residents of those states, or residents of other states where otherwise legally permitted subject to exemption or exclusion from registration requirements. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training. Advisory services are only offered to clients or prospective clients where Skrobonja Wealth Management, LLC and its representatives are properly licensed or exempt from licensure.   This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be  rendered by Skrobonja Wealth Management, LLC unless a client service agreement is in  place.   Skrobonja Financial Group, LLC provides links for your convenience to websites produced by other providers of industry related material. Accessing websites through links directs you  away from our website. Users who gain access to third party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from use of those websites. Any references to protection, safety or  lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the  issuing carrier.   This is intended for informational purposes only. It is not intended to be used as the sole  basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Our firm is not permitted to offer, and no  statement made on this site shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and  opinions contained here in provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Any media logos and/or trademarks contained herein are the property of their respective owners and no endorsement by those owners of Brian Skrobonja is stated or implied. The awards, accolades and appearances are not representative of any one client’s experience and is not indicative of future performance. Each of these awards have set criteria for their nominations and eligibility requirements. “Best Wealth Managers” and “Future 50 Company” are annual surveys conducted by Small Business Monthly. The winner is chosen by an online vote of the general public and no specific criteria is utilized to determine the winner other than number of votes. Some voters may not be clients of Brian Skrobonja and Skrobonja Financial Group. These awards are not representative of any one client’s experience and is not indicative of future performance.

Did you know that a good part of American households haven’t thought about retirement planning?

When it comes to planning for retirement, there are some key concepts to understand and three traps you should do your best to avoid.

Listen to learn why a money increase doesn’t always equal a lifestyle enhancement, the three things people often look at but that come back to bite them later on, and how you can effectively plan for retirement and protect your money.

• As life expectancy increases, people will be finding themselves needing to save more money for retirement.
• Brian believes that it’s going to be possible to be retired for as many years as one has worked, because people are living longer than ever before.
• According to a 2019 retirement confidence survey by the Employee Benefit Research Institute, more than half of American households are at risk of running out of money in retirement due to the lack of savings and the unpredictability of the stock market.
• If you look back and think about how much money you were making when you first started working and compare it to today, you should see an increase.
• However, more than a lifestyle enhancement, the increase is just an inflation adjustment. And the crazy thing is that only 42% of Americans have tried to calculate how much money they will need for retirement!
• Brian has noticed that many people go into retirement because of eligibility, without having actually calculated how much money they would need – this is a problem, especially because of three things that are outside of their control: inflation, markets, and taxes.
• To offset inflation, you need to earn more on your money than the inflation rate that is eroding your purchasing power.
• Want to protect yourself from market losses? Then, you either need to not be in the market or work to insulate your portfolio through diversification strategies that are challenging for most people to leverage.
• As far as taxes are concerned, the best way to tackle them would be to focus on building tax-free assets and stop the propensity to kick the “tax can” down the road.
• Even though these may sound like obvious moves, Brian has seen people do the opposite – with things like funding their 401k accounts, parking money in the bank, or pouring it into the stock market.
• Brian warns against tapping into the stock market as a means to draw income because it’s the Government and Wall Street that have control over it, not you.
• There’s a key difference that some people tend to forget when it comes to retirement planning: accumulating money is done one way, drawing income for retirement is done another way.
• Brian stresses the importance of not taking retirement planning lightly.
• Remember: underestimating the amount of money needed to maintain a comfortable lifestyle in retirement, or relying on too many things outside of your control can be a significant financial risk.

 

 

Mentioned in this episode:

BrianSkrobonja.com

BrianSkrobonja.com/FamilyOfficeQuiz

Center for Disease Control

Pew Research Center

Employee Benefit Research Institute

Susan Powter

Chat GPT

 

 

Securities offered only by duly registered individuals through Madison Avenue Securities, LLC. (MAS), Member FINRA &SIPC. Advisory services offered only by duly registered individuals through Skrobonja Wealth Management (SWM), a registered investment advisor. Tax services offered only through Skrobonja Tax Consulting. MAS does not offer Build Banking or tax advice. Skrobonja Financial Group, LLC, Skrobonja Wealth Management, LLC, Skrobonja Insurance Services, LLC, Skrobonja Tax Consulting, and Build Banking are not affiliated with MAS.

Skrobonja Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clientsor prospective clients where Skrobonja Wealth Management, LLC and its representatives are properly licensed or exempt from licensure.

Investing involves risk, including the potential loss of principal. Any references to protection, safety or lifetime income, generally refer to fixed insurance products, never securities or investments.

Insurance guarantees are backed by the financial strength and claims paying abilities of the issuing carrier. This podcast is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

Our firm is not permitted to offer and no statement made during this podcast shall constitute tax or legal advice.

Our firm is not affiliated with or endorsed by the US Government or any governmental agency. The information and opinions contained herein provided by the third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm.

You can live without saving money, and you can live with debt, but you cannot live without cash flow. In fact, if you want your personal finance to flourish, cash flow is a key element you need to focus on – passive income too. Why is that the case?

Find out about critical personal financing missteps you should avoid making, what to focus on to measure financial progress and happiness, and the key traits you can learn from the happiest and most successful people to win more in personal finance.

• Just like many other areas of life, personal finance too is dependent on your own tank both from a mental, physical, and resources standpoint.
• Trying to do too much with their resources is one of the most common personal finance missteps people make.
• There’s a tendency of segregating financial goals into silos and of gravitating towards what looks easiest over what is often best – which typically leads to personal finance goals not being achieved.
• Brian believes that the key to maximizing your capabilities should be on building resources, and then creating cash flow from them to fund everything else.
• Passive income plays a crucial role in that it fills your income gap, allowing you to free up your time.
• Brian sees people often getting caught up in their silos and finding themselves beholden to their system of working to spend.
• It’s possible to live without saving money, and with debt, but it’s impossible to live without cash flow.
• How do you measure financial progress? To identify what makes them happy, people often go beyond financial aspects and look at things such as family, friends, faith, fitness, and free time.
• Once you have this aspect figured out, you can either do everything by yourself – with all the risks that this approach entails – or you can delegate.
• In The 7 Habits of Highly Effective People, Stephen Covey explains that the happiest and most successful people have figured out how to buy more time by relying on professionals with the knowledge and experience to help them manage their relationships, health, time, and money.
• Tom Rath, author of Stengths Finder 2.0, has found that successful people tend to leverage strengths and delegate weaknesses. They spend their time on things they’re good at and want to spend their time on, and they delegate the tasks they can gain more time from by not doing them.

 

 

Mentioned in this episode:

BrianSkrobonja.com

BrianSkrobonja.com/FamilyOfficeQuiz

Chat GPT

The 7 Habits of Highly Effective People by Stephen Covey

Strengths Finder 2.0 by Tom Rath

 

 

 

Securities offered only by duly registered individuals through Madison Avenue Securities, LLC. (MAS), Member FINRA & SIPC. Advisory services offered only by duly registered  individuals through Skrobonja Wealth Management (SWM), a registered investment advisor. Tax services offered only through Skrobonja Tax Consulting. MAS does not offer Build Banking or tax advice. Skrobonja Financial Group, LLC, Skrobonja Wealth Management, LLC, Skrobonja Insurance Services, LLC, Skrobonja Tax Consulting, and Build Banking are not affiliated with MAS.   The firm is a registered investment adviser with the state of Missouri, and may only transact business with residents of those states, or residents of other states where otherwise legally permitted subject to exemption or exclusion from registration requirements. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training. Advisory services are only offered to clients or prospective clients where Skrobonja Wealth Management, LLC and its representatives are properly licensed or exempt from licensure.   This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be  rendered by Skrobonja Wealth Management, LLC unless a client service agreement is in  place.   Skrobonja Financial Group, LLC provides links for your convenience to websites produced by other providers of industry related material. Accessing websites through links directs you  away from our website. Users who gain access to third party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from use of those websites. Any references to protection, safety or  lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the  issuing carrier.   This is intended for informational purposes only. It is not intended to be used as the sole  basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Our firm is not permitted to offer, and no  statement made on this site shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and  opinions contained here in provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Any media logos and/or trademarks contained herein are the property of their respective owners and no endorsement by those owners of Brian Skrobonja is stated or implied. The awards, accolades and appearances are not representative of any one client’s experience and is not indicative of future performance. Each of these awards have set criteria for their nominations and eligibility requirements. “Best Wealth Managers” and “Future 50 Company” are annual surveys conducted by Small Business Monthly. The winner is chosen by an online vote of the general public and no specific criteria is utilized to determine the winner other than number of votes. Some voters may not be clients of Brian Skrobonja and Skrobonja Financial Group. These awards are not representative of any one client’s experience and is not indicative of future performance.

Emergencies and retirement. This is what we're taught to save for. But what if you created a different system, which allowed you to pay for the expenses you will incur between now and retirement age – without losing the ability to build wealth?

Find out why you may need to rethink your financial planning approach and what you should do about the “Missing Middle.”

• According to popular opinion, sound financial planning advice typically consists of two main steps: saving for emergencies and saving for retirement.
• Brian found this to be slightly misleading because of the phenomenon he refers to as “The Missing Middle.”
• Think about how life generally goes: there are car payments, furniture, credit cards, tuition… you also have money going into an account that you can’t touch until you’re 60 and then, before you know it, you have thousands of dollars of debt. And that’s by following general advice.
• However, opting for a less traditional and more customized approach allows you to pay for the expenses you incur between now and retirement – the middle of your life, without entirely losing the ability to build wealth.
• Brian believes that the real benchmark you’re going to use should be based on your personal needs, goals, and financial situation.
• When there are big expenses people don’t account for in their regular cash flow, one of two things happens.
• People either continually deplete savings in order to pay for the things in cash (constantly funneling money back into their bank account to replenish the emergency fund).
• Alternatively, they finance everything with bank loans and credit cards. Neither option leads to wealth being created.
• Brian is convinced that you should model your entire financial life around your actual life, instead of around arbitrary concepts or ideas that don’t fit into the puzzle of what you’re actually trying to create (Brian calls this Your Life Cycle Model).
• In the Life Cycle Model individuals allocate resources over their lifetime with the aim of avoiding sharp changes in their standard of living, while avoiding debt and simultaneously building wealth.
• Brian explains how using the so-called build banking instead of a traditional bank can help you leverage the Life Cycle Model (and why you shouldn’t compare it to the stock market).
• People tend to separate their money into two buckets: saving and spending. Brian explains why that may not be the best of approaches – and what to do instead.

 

 

Mentioned in this episode:

BrianSkrobonja.com

BuildBanking.com

How Long Will My Money Last in Retirement

 

 

Securities offered only by duly registered individuals through Madison Avenue Securities, LLC. (MAS), Member FINRA & SIPC. Advisory services offered only by duly registered  individuals through Skrobonja Wealth Management (SWM), a registered investment advisor. Tax services offered only through Skrobonja Tax Consulting. MAS does not offer Build Banking or tax advice. Skrobonja Financial Group, LLC, Skrobonja Wealth Management, LLC, Skrobonja Insurance Services, LLC, Skrobonja Tax Consulting, and Build Banking are not affiliated with MAS.   The firm is a registered investment adviser with the state of Missouri, and may only transact business with residents of those states, or residents of other states where otherwise legally permitted subject to exemption or exclusion from registration requirements. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training. Advisory services are only offered to clients or prospective clients where Skrobonja Wealth Management, LLC and its representatives are properly licensed or exempt from licensure.   This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be  rendered by Skrobonja Wealth Management, LLC unless a client service agreement is in  place.   Skrobonja Financial Group, LLC provides links for your convenience to websites produced by other providers of industry related material. Accessing websites through links directs you  away from our website. Users who gain access to third party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from use of those websites. Any references to protection, safety or  lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the  issuing carrier.   This is intended for informational purposes only. It is not intended to be used as the sole  basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Our firm is not permitted to offer, and no  statement made on this site shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and  opinions contained here in provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Any media logos and/or trademarks contained herein are the property of their respective owners and no endorsement by those owners of Brian Skrobonja is stated or implied. The awards, accolades and appearances are not representative of any one client’s experience and is not indicative of future performance. Each of these awards have set criteria for their nominations and eligibility requirements. “Best Wealth Managers” and “Future 50 Company” are annual surveys conducted by Small Business Monthly. The winner is chosen by an online vote of the general public and no specific criteria is utilized to determine the winner other than number of votes. Some voters may not be clients of Brian Skrobonja and Skrobonja Financial Group. These awards are not representative of any one client’s experience and is not indicative of future performance.

Retirement isn’t a thing that happens. It's a time of life that needs to be planned for. When it comes to planning for retirement, there are a huge number of assumptions that people make about what’s going to happen and when, but what if those assumptions are wrong? Find out why you may need to rethink your retirement plans.

• Most people envision retirement as a destination. A fixed point in time where their pension or Social Security begins, but retirement is a transition, not a timestamp.
• Planning for the rest of your life requires certainty, not hope and optimism. Most retirees retire while relying on things that are out of their control, and on assumptions made in the past.
• They assume the rate of return, their income needs, their life expectancy, inflation rates and tax liabilities.
• Take longevity. The world of health and medicine is likely to make a major transformation. We are already seeing more people live beyond the age of 100. What if your retirement plan had to take into account you living an additional 10 to 20 years?
• The 4% Rule may make sense if you live an average of 30 years as a retired person, but if the average lifespan keeps increasing, the 4% Rule could lead to disaster instead.
• Any financial strategy that relies entirely on the stock market for support relies on performance that you have absolutely no control over.
• Looking at the past performance of the market doesn’t paint a great picture, and even averages can be misleading if you’re looking at a large enough time period. The problem is compounded when you add in withdrawals in retirement.
• Sequence of return risk is a major problem all retirees face. Making withdrawals during a down period can rapidly deplete your assets.
• Taxes are never going to go away. The government controls us using the tax code and there are 1000s, if not millions of jobs supported by having a complicated tax code. Every administration wants to either tax the rich or cut taxes on the middle class, and you can’t be sure what’s going to happen when you’re retired.
• We are guaranteed a tax increase in 2025 whether or not anything changes. Inflation is another constant that we need to take into account.
• It’s risky business when your plan is heavily reliant on consistent stock market returns, low taxes, low inflation, and a mortality that is historically in line with what is anticipated because all of this is outside of our control.
• Many financial advisors use probability analysis to offer confidence in a form of a percentage likelihood of money lasting until a predefined age. The trouble is the factors used in the analysis are based on the same risks.
• The core of every retirement plan is the fear of running out of money. You need to look at the worst case scenario and do what’s necessary to prevent that.
• Your goal should be moving more into your control, not giving up control.

 

 

Mentioned in this episode:

bubblegumlogic.com

Would you rather look back on the past and regret what happened or would you rather look to the future and make plans so that you can choose the outcomes you want? The latter of course! But when it comes to taxes, most people take the first option without even realizing there are better choices. Learn about the difference between tax preparation and tax planning, and how you can create a comprehensive wealth strategy for your future, but you have to start now.

• There's a huge difference between a tax preparer and a tax planner. Generally speaking, a CPA is a historian who's looking backwards over the last year's tax situation using tax software for determining whether you owe or whether you'll receive a refund.
• If you’re getting a refund, they give you the good news with a smile. If not, they make the suggestion of an IRA contribution to lessen the pain.
• With a tax deductible account, you are allowed to defer taxes on contributions until the age of 59 and a half. You can’t access that money before that age without a penalty and are required to take distributions by age 72.
• By imposing a 50% penalty for failure to follow the rules, the government taxes 100% of the contribution and any gains at a rate to be determined in the future. This level of trust in the government to manage your finances is not always the most comfortable deal.
• You exchange paying taxes today for paying taxes in the future at an unknown rate. Deferring taxes is not saving you from having to pay taxes.
• However, tax deferral makes sense in two scenarios: You are a high income earner now and will drastically reduce your lifestyle in retirement, or if you don’t already have large, well-funded retirement accounts already.
• The desire to reduce taxes is never going to go away. You will pay the taxes owed now or you'll pay them later. If you choose to pay them later, you are gambling that both your income and tax rates will be lower.
• When you’re working with a tax preparer, remember that funding a retirement account does not actually save you on taxes.
• As a W2 employee, there is not a whole lot you can do to reduce your tax burden. Business owners and people with larger amounts of assets can benefit tremendously from digging into the tax code.
• There are 5800 pages in the tax code, and less than 30 of them are about raising revenue for the government. The majority deals with how business and investment incentives can actually lower taxes.
• Most tax preparers only focus on those 30 pages, and that’s why their clients miss out on opportunities that exist in the other 5770 pages.
• Most people and business owners work with tax preparers, but spend very little time with tax planning.
• The government uses these incentives to encourage businesses and investors to invest in ways that are beneficial to the goals of the government, but many tax professionals narrow their focus and don’t know what the possibilities are.
• For any of these professionals to break away from the status quo training they receive, they have to do the hard work of learning for themselves what they need to know, then moving out of the center lanes to professionally guide their clients. Partnering with a skilled wealth advisor is the secret to creating a comprehensive tax planning strategy for clients.
• The way to go about this is to find a team that has already been assembled because it costs a lot of money and time to form such a team.
• For tax professionals that want to find a team to plug into, go to qualifiedtoworkwithbrian.com to see if you’re a good fit.

 

 

Mentioned in this episode:

takebriansquiz.com

qualifytoworkwithbrian.com

Social Security can be a maze of rules, exceptions, and formulas and can feel  almost impossible to navigate for most people. That’s why Rich Grawer is back to talk about making sense of Social Security and the common sense guidelines that allow you to maximize your Social Security benefit and minimize your tax liability while in retirement.

• Social Security as the system is an income replacement system. It is not meant to be your sole source of income in retirement. The first thing to understand is that the system is not meant to replace your whole income, and earners can expect to receive between 35% and 54% of their working wages in retirement.
• There are three different ages you begin taking Social Security. The first is age 62, the second is age 65 when Medicare becomes available, and the third is your full retirement age.
• The advantage to waiting until your full retirement age is that you can work and earn at the same time as receiving your full Social Security benefit.
• One recent change in the past few years is that if you were born after January 1 of 1954, unless you’re the surviving spouse, you must take the highest benefit available to you when you file for Social Security.
• The most a spousal benefit will be is 50% of what the spouse will get at their full retirement age, so if your own benefit is higher, you have to take your own. It also doesn’t count if your spouse waits beyond their full retirement age, the calculation remains the same.
• Another key point is that every year before your full retirement age you take your Social Security, the more it’s reduced, and each year you wait your benefit is increased by 8% for each year it’s delayed.
• At age 70, those Delayed Retirement Credits stop accumulating so there’s no rational reason to wait past the age of 70.
• For widowers, the spousal benefit is 100% of the spouse’s full retirement age amount unless the Social Security was started early. The lowest amount is 71.5%. It’s also possible for widowers to start receiving one benefit and switch to another if the circumstances make sense. It's very important for people that are involved in a death and receiving a survivor benefit to get sound advice on this and not try to do it themselves.
• There are exceptions to every rule, and with 2700 rules, there are plenty of exceptions to the rules of Social Security.
• The Social Security Administration can only give you the facts. They can’t advise you on the best course of action, so it’s important to seek out sound financial advice from an advisor you trust.
• When it comes to retirement planning, or even the death of a spouse, pulling in the resources, and pulling the team together to make sure that everything is being looked at from multiple angles is critical for optimizing everything.
• Many government employees don’t pay into Social Security, and for them the WEP was created to balance the benefits between pensions and Social Security.
• Social Security is intended for low wage earners. Firefighters and policemen working additional part time jobs don’t fit that description, which is why the WEP was introduced. The more years of substantial earnings you have, and the definition of substantial changes from year to year, the less the impact of the WEP.
• The WEP can’t completely eliminate your Social Security benefit. The GPO (Government Pension Offset) can greatly reduce a widower’s benefit to the tune of ⅔.
• Social Security always starts calculating your benefit based on your full retirement age. One common myth is that Social Security looks at your last 10 years to make the calculation but that’s incorrect. They look at 35 years of earnings.
• If you don’t have 35 years of work history, the calculation defaults to 0, so it’s a good idea to work at least 35 years prior to retiring.
• You are unable to leave your Social Security benefit to anyone other than your spouse. If both spouses die, the Social Security benefit for both stops.
• People often rely on Social Security and pensions for income in retirement without planning for what happens when a spouse dies and some or all of that benefit goes away. That scenario is where life insurance can come into play to make up for the income gap.
• Social Security has been doing more online since the beginning of Covid. The best way to begin your application is to go online to ssa.gov and avoid waiting on the phone. Applying for widower benefits must be done in person or over the phone.
• Always emphasize when you want your benefits to start when applying online. You can’t apply for benefits any earlier than four months from when they would start. You won’t get the final calculation right away, it has to go through a human being first but you should receive your benefit calculation roughly ten days after filing your application.
• Don't plan for retirement two weeks before you get ready to retire, you really need to be looking at that at least two years leading up to retirement to know what your timelines are.
• Social Security uses something called provisional income to determine if any, some or all of your Social Security benefits will be federally taxed. Provisional income, by definition simply means your adjusted gross income plus one half of your Social Security benefits. The highest your Social Security can be taxed is 85%.

 

 

Mentioned in this episode:

ssa.gov

questionsforbrian.com

brianskrobonja.com

It’s no secret that entrepreneurs and real estate investors are responsible for the majority of the wealth creation in the world, but did you know it’s possible to take the same strategies they use and apply them to your own investments? Learn how to multiply your wealth through the power of leverage and how to use the idea of internal and external rates of return to acquire assets that not only appreciate but generate cash flow at the same time.

• Many investors have a contradictory attitude when it comes to investments and leverage. With their investments, they favor risk but when it comes to leveraging they adopt a scarcity mindset.
• Entrepreneurs and real estate investors are the biggest wealth creators in the world, but the typical investor can benefit from using the same strategies they use.
• There are two primary reasons those two types of people create so much wealth. The first is they effectively leverage other people’s money. The second is they create cash flow using internal and external rates of return.
• Rarely do real estate investors purchase a house in cash because the more money that is tied up in one property, the less there is to purchase another.
• By using the bank's money to leverage the purchases, they have the ability to use the same amount of money to acquire multiple properties. This allows them to grow their wealth using internal and external rates of return.
• What many people fail to understand about real estate is that the property is worth the same whether or not it has a mortgage. The investor benefits from the appreciation of the property, not the bank.
• A $100,000 property with a $75,000 mortgage on it that appreciates 5% is the equivalent of a 20% yield on the investor's $25,000 investment. That’s the internal rate of return.
• Real estate investors also have the ability to create cash flow from the investment. The rent collected can vary, but assuming a rent payment of around $1200 per month or $14,400 per year, using the same example as above, $14,400 would equate to around 14% of the value of the property and a whopping 57% on the investor's $25,000. Even factoring in the interest on the mortgage, the total rate of return is still exceptional.
• This is why it makes more sense to leverage $100,000 to buy four separate properties than to buy one $100,000 property in cash.
• The concept of external and internal rates of return can be applied to anyone who owns real estate or cash value life insurance policies.
• The challenge many people face is that they dislike the idea of holding a mortgage and would prefer to pay it off quickly. If you can leverage the mortgage to get a higher rate of return, the logic doesn’t support the decision to pay down the mortgage quicker than you have to.
• There are very few subjects more misunderstood than the subject of life insurance and with so many options it’s easy to see why, but when a dividend-paying whole life insurance policy is designed and funded correctly, its benefits mirror that of most real estate.
• Both are properties that build equity, grow tax-deferred, allow for tax-free access to cash, and can be owned free and clear. Both are conduits for internal and external rates of return.
• With insurance, cash values will appreciate the same whether or not there's a loan. That's an internal return, and you can use tax-free loans to leverage as capital and generate cash flow.
• Using your home equity to make home improvements can increase the home’s value and possibly increase the overall cash flow, while essentially costing you none of your own money. Taking a loan from a life insurance policy and leveraging it into an investment or property accomplishes the same thing.

 

 

Mentioned in this episode:

buildbanking.com

The sale or transition of a business is a messy, complex, and time consuming process. If you want to make sure it’s a success and doesn’t tear your family apart, you have to make sure it’s done right. Randy Long reveals the biggest misconceptions around selling a business and how to make sure your children still want to eat Thanksgiving dinner together afterward.

• Randy is a lawyer by trade with a background in finance, having practiced for the past 25 years. Around half way into his career in law, Randy started working with the father of exit planning, John Brown.
• Around 9 years ago, Randy and his daughter started a separate consulting firm focused on helping multi-family, multi-owner businesses get prepared to sell.
• Many business owners have no idea what it takes to prepare a business to be sold. Working in the business and getting the day-to-day tasks done can make it hard to step out of that role and plan for the future. That’s typically where Randy comes in.
• Transition periods can be quite long, with most businesses working with Randy for more than a year. Some families contract with him for multiple years when the situation involves transitioning between generations.
• One of the biggest misconceptions is business owners don't understand that buyers are going to look at their business differently than they do. They don't look at it with the same set of eyes.
• The business owner has to be able to put on the glasses of a buyer to look fresh at their company, which can be a major challenge. Many business owners struggle with transitioning their business to their kids without causing a lot of conflict and strife among the other family members.
• Randy uses the Thanksgiving Test to judge the success of a business transition to the next generation. The first year after the parents are gone, will the kids still have Thanksgiving dinner together and be happy to be there?
• Not communicating with the family can be devastating after a parent’s death.
• Another major misconception is the belief that a person’s business will sell for a hypothetical average multiple, but the truth is each business is unique and sold on their pros and cons.
• Many business owners also find themselves in trouble after selling their business where they no longer have the income, benefits, and insurance they used to be able to deduct.
• There are a lot of variables when it comes to selling a business and no two sales are going to be quite the same.
• The business and merger and acquisition cycles also have an impact on the sale of a business. Ideally, business owners time the sale to maximize the value. Don’t wait until you absolutely want to get out of your business, plan around the business cycles instead.
• Service-based businesses can be sold too, they just need to be structured in a way that the business owner isn’t physically necessary to get the work done. Those types of business owners need to shift their thinking from the down to earth job of getting things done to higher level strategies like joint ventures.
• Randy usually starts working with those business owners by eliminating their tasks and slowly delegating them out to employees, which frees up the owner to do what they are good at: finding new business and inspiring employees.
• You’ve got to get away from the day-to-day grind to give yourself time to think and get your head around the future.
• Business owners often desire control, which can prevent them from scaling past a certain point. The most successful multiply themselves and expect progress instead of perfection.
• The first step is finding the work the business owner hates doing. Once those tasks are identified, they become the job description of the next employee.
• Randy prefers to keep his consulting business small and work with around 15 clients at any given time.
• Most financial advisors are W2 employees, not business owners. Those employees can be integral to a business and are often targeted during a transition to encourage them to stay on.
• One of the keys to the sale is identifying key employees. Randy tries to put a package together for them to stay during the transition that’s beneficial to them and to the future owner.
• Buyers are always looking to eliminate risk, and locking in key employees is one of the most important ways to mitigate risks of the purchase.
• Randy usually takes businesses through a sale over 6 to 12 months and works with companies earning anywhere from $2 million to $100 million annually.
• You have to reinvent the company as you move forward. You’re not going to run the company that your father ran because the world has changed.
• Just like how there is more to retirement than a 401k, there is more than just the dollars and cents in the sale of a business.
• The secrecy of money is an obstacle that many families face when trying to leave a legacy. Open lines of communication are crucial to the success of a generational business transition.
• One of the big benefits of working with Randy is his company brings a lot of things to light that might have previously been completely unknown.
• Randy works with business owners to figure out all aspects of their financial life prior to the sale of the business, and that can include closing the gap on what the business needs to sell for in order to fulfill the client’s needs.
• There are ways to limit tax exposure, especially capital gains taxes, but it requires extensive planning and time prior to the sale.
• The problem is business owners typically aren’t qualified to decide what they really need in this arena, but some professionals take the easy way and just do whatever the owner wants. This can lead to silo-style planning that causes more problems than it resolves.

 

 

Mentioned in this episode:

questionsforbrian.com

brianskrobonja.com

There is a key mindset shift that many people fail to make when they retire and it can cost them thousands of dollars from their investment portfolio. Hear about Hypothetical Helen and how her plan to pay off her mortgage with money from her 401k once she retires actually puts her further away from her goals, and what the most optimal solution for cash flow in retirement is.  

• Retirement in its purest form is simply the creation of passive income sources used to support your cash flow requirements.
• Everything revolves around your cash flow in retirement, yet many people lose sight of this fact and overcomplicate their investment strategy.
• Take the example of Helen. Helen was to have $40,000 per year to supplement her Social Security income. She has a million dollars in a 401k and has a mortgage of $200,000 with a payment of $14,400 annually, and her home is valued at $500,000.
• Her plan is to eliminate her mortgage with funds from her 401k as well as make some renovation while living off a 4% draw each year from the remainder.
• The 4% Rule is not necessarily the best strategy for income in retirement. The assets to income stacking method often yields better results, and can often create an additional $20,000 a year in cash flow from the same $1 million investment.
• Using the 401k triggers a tax liability on the full $200,000. Using an estimated 25% tax rate, Helen would end up with a distribution of $262,500, leaving just $737,500 to draw from at 4%.
• Factoring in the home renovations, Helen would be paying around $75,000 in taxes and reducing her annualized income by $5,100. Every one of those decisions moves her further and further away from her goal.
• Every decision you make flows downstream to your cash flow, which is why everything should be about maximizing that amount.
• Giving up control over your money is usually a bad idea. Whether that’s a bank or the government.
• Many people get hung up on paying a mortgage, but in Helen’s situation maintaining the mortgage would be the best solution to getting the most income from her assets.
• To satisfy Helen’s $40,000 retirement income goal, she could designate about $667,000 at 6%. The remaining $333,000 could be invested long term to help offset inflation or other cash needs along the way.
• She could also refinance her mortgage and pay roughly the same each month, but also get access to $50,000 tax-free with which to make those renovations.
• Instead of using her 401k which will cost her $75,000 in taxes to obtain, while also lowering her income by over $5,000 for the rest of her life, she can just use her home equity to give her the cash she needs while maximizing her income potential.
• A few key takeaways: tax-free money is better than taxable money. Home equity and life insurance values are tax-free sources of money. A home will appreciate whether or not it has a mortgage and has inflation as its tailwind.
• Once money is spent, it's gone forever and is no longer able to create income, and there's opportunity cost for every dollar spent.
• The mindset shift from accumulation over to utilization is where most people struggle in retirement.

 

 

Mentioned in this episode:

CSF episode - The First Domino

questionsforbrian.com