Valuable Finance Insights from Tier 1 Capital

Olivia : Hello and welcome to the Control Your Cash podcast. I’m your host, Olivia Kirk.

Tim: And I’m your co-host, Tim Yurek. Today, we have a repeat guest with us, Bill Rainaldi. Bill, welcome back!

Bill: Thank you, Olivia. It was an honor to be here the first time, and it’s even more of an honor to be invited back. So, thank you very much.

Olivia: We’re happy to have you! So, Bill, a lot going on out there in the estate planning world, and obviously, last week’s election probably changes things or maybe moves things a little bit. But one of the things that, in anticipation of the Trump tax cuts sunsetting in 2025, there was a lot of positioning in the financial services industry. It seemed that the estate tax exemption was probably going to go down starting in 2026. With all of that noise that was happening at the time, I couldn’t help but think about your dad, Frank Rainaldi.

Tim: Yeah, your dad was an iconic figure in the financial services industry when I came in back in 1985. What I’d like to do is, if you can, let’s talk about your dad a little bit.

Bill: Sure. I grew up in his house, and eventually, I worked for him and became his business partner in later years. I’ll say this about him: I don’t think anything really came easy to him. He became one of the intellectual leaders in the estate planning business, which was amazing when you consider that he was basically a shy and quiet kind of guy. He had to overcome so much in his life to get to where he got. I know, for instance, he lost his own father at a young age, and I think that really brought out this determination in him that he used for the rest of his life.

Bill: For example, my dad was average size, about 5’1″, and yet he went on to become a Division One college football player — an offensive lineman at that. He was outsized by pretty much everyone on the team. He even had running backs bigger than he was, yet he played college football at that level because that’s the kind of determination he had. I’ll tell you one quick story involving me when I was 8 years old.

Olivia: Sure, go ahead!

Bill: Like every kid growing up in that era, I loved playing baseball. I loved going out and playing Little League. I remember this one game — bases were loaded, and I was playing center field. We were up by one run with two outs. The ball was hit to me, a base hit. I picked it up and saw the winning run looked like they were going to try and score. So I reared back and threw the ball as hard as I possibly could. I threw it so hard that I broke my arm in the process. I could hear it break; it was awful. To make matters worse, the catcher dropped the ball, and we ended up losing the game. I came back crying, holding my arm. The shortstop even told me, “It’s okay, Billy, you don’t need to cry. You made a good throw.” He didn’t realize I’d actually broken my arm.

Bill: So I went to the doctor the next day after going to the hospital, and he looked at the x-rays. I had this other problem with my arm. He concluded by saying, telling me that my baseball career was over. I couldn’t play baseball anymore at 8 years old, and I was devastated.

A couple of days later, after that, my dad came to me, and he said, “You know, I talked to the doctor. How about if you learn how to play baseball left-handed?” And I said, “What?” He said, “Play baseball left-handed.” So he took me outside, and I started throwing the ball left-handed. After about 10 minutes or so, I said, “I can’t do this. There’s no way I can do it.” But he insisted that I stick with it.

So I spent that entire summer learning how to play baseball, throwing the ball left-handed, and I came back the following year. For the next two years, I played as a left-handed outfielder, left-handed center fielder on my Little League team. Actually, there was one game the second year where I ended up saving the game by making this unbelievable catch at the end of the game. So I learned a valuable lesson about determination at that point from my dad. That’s a lesson I continued to learn from him all the way through the rest of his life, including the time when we were in business together.

Tim: Well, that’s a great story. You know, that was so creative, just to have him think that way, you know?

Bill: Yeah, that was one of his basic business principles too, that there’s always a creative way to find a solution to a problem you have. In fact, this also applied to me last week. I’ll tell you another quick story, if you don’t mind.

Olivia: Please go ahead!

Bill: I was meeting this new group of people last Friday, and it was a Zoom meeting — an initial meeting — and I really wanted to make a good impression on these people. After the meeting ended, I thought to myself, “Boy, you were really terrible.” I thought, “You really laid an egg. You were supposed to talk to them about all these ways you can help them solve their problems, and instead, you ended up talking all about yourself. You really blew it.” But then I remembered something else my dad had taught me. He said — this is a business principle I learned much later on — he said, “It’s better to have a bad meeting with good follow-up than a good meeting with bad follow-up.”

Tim: Oh, wow.

Bill: So you better believe I’ve already followed up with these people, and we’ll see what happens. But that was another valuable lesson I learned from him.

Tim: Wow, that’s awesome. You know, so I don’t know if we want to venture into this, but especially now that, with President Trump winning, there’s probably a better probability that the estate tax exemption will stay where it is. Is that a fair estimate, Bill?

Bill: I think all bets are off right now, Tim. Up until the election, for the last few years, the base assumption in the estate planning industry was always that the Tax Cuts and Jobs Act of 2017 would be allowed to expire. That meant not just the estate tax reduction or enhanced exemption but also the income tax cuts. The thought was always that by the time the law was set to expire, there would be some sort of divided government. You know, the Democrats would hold one house of Congress, the Republicans would hold the other, or the Democrats would hold the White House — or vice versa. There was always going to be that kind of balance in there to prevent changes. It was never thought that the Republicans would hold all three — the White House, the House, and the Senate.

Bill: Now that that’s the case, we’ll see what happens. I think there’s at least a halfway decent chance that some of the provisions are going to be renewed. I don’t know about all of them, but they’re going to have to get to work, and they’re going to have to get into committees and whatnot and try to figure out what to do. I think there’s a good chance that the estate tax, as you mentioned, the exemption right now is $13.6 million per person. So what that means is that any married couple who has less than $27 million doesn’t have to worry about the estate tax. If that’s allowed to expire, then that amount gets cut in half back to where it was when we used to do our estate planning work — to a much lower figure than that.

Bill: Now, even that lower figure is still not going to affect that many people, right? There aren’t that many people with $13.6 million as a married couple. But there are going to be more people affected if that rule changes. So, we’ll see what happens. I think there’s a halfway decent chance that now at least they’re going to extend that law and keep it at that higher amount, but we’ll see.

Olivia: Yeah, and even though there aren’t a lot of people, for those people who do fall into that category, it’s a big deal for them, right? Because the estate tax is, what, 40% of whatever is there, right? The government’s going to get 40%, so if you fall in that category or don’t fall in the category currently and are going to, that planning is important. Figuring out whether it’s going to impact you is a big deal monetarily for your estate.

Bill: Yeah, if it does expire, then a lot of the older concepts my dad used to talk about all the time are going to come back into vogue. So, we’ll see what happens. It could go either way. But you’re right, Olivia, in the fact that the estate tax rate is 40%, and that’s pretty steep. That’s going to get your attention — you could lose 40% of your assets in one shot.

Tim: It’s especially troubling, you know, being a steep tax, and it’s progressive as well, right? So the larger your estate, the higher the rate.

Bill: Not really. I mean, the maximum is 40%, but we assume most people are going to be at that 40%.

Olivia: Right, right.

Bill: But here’s the thing I have trouble with on the estate tax. We’re already taxed on our income, and then with that after-tax money, if we build a business, are successful investing, or save money, we build a significant estate. Then they come back and get you again. It’s like there’s no incentive to be successful financially.

Tim: Yeah, I mean, I think the government’s answer to that is that what they’re taxing is your right to give your property to whoever you want. And that’s… you know, I tend to agree with you, Tim, on that. I think… and the other thing I would also point out, besides that, is that if you look at where the government gets its money, it’s primarily income taxes and payroll taxes. This is like a third-step cousin when you talk about the estate tax. In other words, it doesn’t generate that big of a percentage of their overall revenue, so they wouldn’t be giving up that much to extend those exemption amounts.

Bill: But I just want to say, Tim, I agree with you 100% in the sense that you give someone an incentive to go out and work and to build an estate, and if you take away that incentive, all of a sudden it has consequences.

Tim: Yeah, and it seems to me that the estate tax, because we’re not talking about a lot of money on an annualized basis that comes into the Treasury through estate taxes, it’s almost like it’s a dog whistle to say, “We’re going to make the rich pay their fair share.” The only problem is, you know, with all due respect, yeah, $13 million is a lot of money, but it’s not like “screw-you money,” right?

Bill:

Tim: So, you know… and again, when you think… like, we see it because we’re on the front line working with successful business owners, successful people, and we see how hard they work. And it’s not just how hard they work to build their business or their lifestyle, but it’s how hard they work to try to maintain it as well. You know, I had one of my first clients going back to 1986. He said something to me that I’ve remembered to this day. He said, “You know, having money or having wealth is like having teeth.” And he said, “You know, when a baby is born, it’s born without teeth, and then for the first year or two of its life, it works as hard as it can to make those teeth or to have those teeth come out so that they can use them. And once those teeth are there, that child has to work the rest of its life to keep those teeth.” And he said, “That’s how it is with wealth. Nobody…” And this guy was a self-made guy, and he said, “Nobody handed me anything. I had opportunities, I took advantage of them, some didn’t pan out, and the ones that did put me where I am today, and I’m grateful for that. But nobody saw the blood and sweat and tears that had to go in and the anxiety when some of the things that I was trying to do didn’t work out. And I bore that risk as well as the reward of the ones that were successful.”

Olivia: Yeah, and whose money is it, right?

Tim: Exactly.

Olivia: Isn’t it yours? Don’t you have the right to do what you want with that money? Isn’t that basic freedom that we have?

Bill: Ostensibly, you would think

Bill: And just to evolve the discussion a little bit, Tim, I know one of the things my dad used to say when we talk about protecting your assets is that sometimes it’s better to control money than to actually have it. And that gets into the concept of a life insurance trust and what a great vehicle that is to protect your assets for future generations. If you control the money but don’t actually own it, then guess what? Your creditors can’t get to it because it’s not your money. And if you got divorced, for example, your ex can’t get to it because it’s not your money.

Bill: And that’s one of the key concepts we always used to try to get across: how to use that estate tax exemption to put the money someplace else where it’s going to continue to grow for the benefit of your family. At the same time, it’s protected, and you don’t have to worry about what’s going to happen to that money. You might have a child—and this is certainly not you, Olivia—but you might have a child who spends money like crazy and ends up spending the entire inheritance. With something like a life insurance trust, you have that double measure of protecting some assets from being spent down unnecessarily.

Olivia: Yeah, absolutely. And that also keeps it a little more private than having it in your will or going through your estate. You could have a separate policy or a policy divided a certain way for individual children, and they don’t necessarily have to know what the other one’s getting, which is obviously a big deal.

Bill: And again, the concept of a life insurance trust fits very well in there too, because it’s managed outside of all the other issues you might have to deal with. I agree 100%, Olivia. That’s right.

Olivia: Absolutely. And then it doesn’t add to your estate, right? The amount of money in your estate, so hypothetically…

Tim: Right. So, how do people… because I know a big issue if you’re facing an estate tax burden is having the liquidity to fund those estate taxes. So, when it comes to that, how should life insurance be positioned to help alleviate that burden without adding to the amount that’s going to be paid in taxes?

Bill: Well, again, that gets back to the concept of third-party ownership. If it’s owned by a trust, and there are estate taxes due, that trust can provide that money. For example, we used to talk a lot about what’s called a joint life policy, a second-to-die life insurance policy. If you have a married couple, usually what happens is when the first spouse dies, the bulk of the assets go to the second spouse, and there’s never an estate tax. There’s what’s called an unlimited gift or bequest to the surviving spouse, so there’s no estate taxes due. But when that second spouse dies, then all of a sudden, there may be an estate tax because that first spouse isn’t there anymore.

Bill: With the second-to-die or survivorship life policy, it’s on two lives — the two spouses — and it’s payable when that second spouse dies. So if there is an estate tax, that money becomes available when it’s needed for that estate tax and not before or after.

Tim: I’m glad you brought that up because, you know, my experience with survivorship or second-to-die life insurance has really not been that great. Let me explain: In general, the husband ran the business, and because of the size of their estate, they would purchase second-to-die insurance. But generally, the life expectancy of a business owner is a full five years less than the average American.

Bill: Never heard that, wow.

Tim: Yeah, so I’m glad I sold my business and got my life back. But the point is that, in general, the husband will die before the wife because, just because of genetics, females have a longer life expectancy than males. And in general, the wife is usually a couple of years younger than the husband. My point is that when the husband dies, there’s usually a lack of income for the surviving spouse, and the surviving spouse can’t afford to pay the premiums on that second-to-die policy. Consequently, the policy ends up either not being funded, reduced, paid up, or lapsed. That’s the experience I’ve seen over 40 years in financial services.

Tim: What I’m seeing is that those policies aren’t literally being paid out because of that issue. I don’t know what your experience is, but I bring that up because it’s something that, in general, people should look at, or at least be considering a regular life insurance policy on the husband as well as a survivorship. What are your thoughts, Bill?

Bill: Yeah, I understand exactly what you’re saying, Tim. It’s almost like a hierarchy of needs, right? I think paying off or figuring out how to deal with an estate tax with a second-to-die policy is a priority for people who are in that financial situation. But obviously, the first priority — and the reason people get life insurance when they’re younger — is to protect their spouse and children when the money is needed. That’s the first priority: to make sure they have enough money to survive if the business owner dies. So, that’s number one.

Bill: Number two is that a second-to-die estate planning policy is more of a pure financial play, a cheaper way to deal with this estate tax issue in the future. So, I think they’re two separate considerations. But I agree with you in the sense that the first priority is to make sure that your survivors are going to be okay for the rest of their lives if you’re not there anymore. This second-to-die policy is a higher priority for a higher-income individual who already has that taken care of. I probably should have clarified that, but that’s really where this type of plan belongs.

Tim: Absolutely. And again, I understand the logic of it, but the practice of it… what people didn’t maybe count on was the husband dying not too long after the financial crisis when their estate got cut by 40% — assuming they sold their business and had their money invested. Then, their investable assets got cut by 40-50%, and now they’re looking at the prospect of possibly running out of money and having to fund a life insurance premium.

Bill: Yeah, then under those circumstances, I wouldn’t blame anybody for not funding that life insurance premium — or delaying it, if you can. This is where a professional like you and Olivia can really be of value to someone, to try and navigate that, figure out the best way to deal with it, and keep everything together. At the end of the day, it all comes back to that creativity — the ability to solve problems for different situations. No one product is good or bad; it’s how it’s used, how it’s applied, how it’s funded, and how it’s maintained over the lifetime of a client.

Olivia: Right, and as circumstances evolve as well.

Bill: Absolutely. And another thing that I’ve been seeing a lot of lately is clients — some of my dad’s old clients — who live well into their 90s, and all of a sudden, the life insurance they had becomes more difficult to fund. It might have been guaranteed to age 95, but what happens if you get past age 95? That’s another area where serious financial professionals like yourselves can help navigate and try to address that a couple of years ahead of the looming issue.

Tim: Exactly. And we’ve seen that. We’ve seen some horrific situations that have come from people not planning to live as long as they did, and now they have issues. Longevity increases the risk of all the other risks that are on the table.

Bill: One of the keys is what Olivia said before about funding and maintaining those policies. We had a client where he hadn’t properly funded his life insurance policy, and the way the policy worked — it was called a universal life policy. The way it worked was that if he reached age 95, he’d get the cash value of the policy, not the death benefit, and the cash value was almost zero. I don’t know how to say this because it sounds kind of rude and awkward, but the guy died when he was 94 and a half. It could have been worse. If he had made it to 95, that policy would have essentially disappeare

Bill: So, you really have to be careful and make sure you’re addressing this along the way to make sure it’s properly funded.

Olivia: Bill, that is such a great point because we’ve seen a lot lately of people who have purchased universal life policies specifically for estate planning or business planning purposes. We have one case now where the woman is 91 years old, and a $2 million death benefit — right now, if she lives to 92, it’s going to be cut to $800,000. If she lives to 93, it’ll be cut to $200,000, and if she lives beyond 93, it’s zero.

Bill: Yeah, and I think that’s a classic situation where the product doesn’t fit the concept or the solution. The universal life product was supposed to be a permanent solution, but it really isn’t, and I think that onus falls on the agent for literally selling an inferior product.

Tim: Right, I mean, I think people always assumed that whatever interest rate they were paying back then — back in, say, the early ‘90s — was going to continue. They had no idea the bottom was going to fall out of interest rates, and as a result, there’s not as much money inside the policy. That’s what made it work.

Olivia: And the crime of it is that they could have purchased the right product for not much more or probably the same as what they paid for the inferior product, but it wasn’t proposed to them.

Bill: Yeah, and at the end of the day, it does come down to making sure you’re educated and making informed decisions because those universal life policies do end up transferring a portion of the risk — like we saw in that example — to the insured, the policy owner. With that, you know, it gives insurance a bad name because people hear about these experiences where people had “permanent” insurance that wasn’t actually written to deliver what they thought they were going to get. I think it’s a lack of education sometimes on the agent’s side, especially because they’re the ones communicating what to expect to the client.

Olivia: And I would add to that too, Bill, I think when those policies are presented, the first issue people look at is “How much does it cost?” They’re likely to take the cheapest initial premium price without realizing what implications that might have in the future. That’s why we end up in situations like this, because of that cheaper premium cost initially.

Bill: Absolutely. And a lot of times, they’re presented as this new shiny thing, and they illustrate so much better than the whole life policies. So as the client, it seems like a no-brainer: “I want this new shiny thing that’s going to perform better than this old dinosaur.” What happens is it doesn’t actually end up happening that way for the client, and you don’t find out you’re making those mistakes until so far down the line with so much money in the policy that you’re like, “Oh God, what did I do? How do I fix it?”

Olivia: Hopefully, there’s enough cash in there where you’re able to resolve it. And hopefully, you have enough health left in you to resolve it with a better, more stable, longer-lasting policy with guarantees

Bill: That’s a great point, Olivia, because those policies aren’t necessarily bad, but they definitely need to be monitored along the way. I think that’s where we’re seeing the issue: nobody’s watching it. Nobody’s monitoring it, testing it, or making sure that what they wanted to have happen is going to happen. The problem is, again, nobody’s overseeing it. Those policies tend to require a little more checking, testing, and monitoring along the way, and most agents aren’t willing to do that.

Tim: Well, as the agent, from the agent’s side, that testing and monitoring is going to mean, “Okay, I sold you this policy, I said it’s going to cost this amount of money per year to get you this amount of death benefit and this amount of cash value, but this year we need more money to achieve that.” Who wants to have that conversation?

Olivia: Well, then the answer is don’t sell it! Which, by the way, we don’t. Our clients never have that problem with stuff we sell because we sell the guarantees. We do worst-case scenario planning when we make our recommendations, and that’s a huge difference.

Tim: So, Bill, thank you so much for joining us on our podcast a second time. You’re in elite company because I think you might only be the second or third person that we’ve had back for a second round.

Bill: Well, listen, thanks to both of you, and I would love to do this again because there’s a lot more we can talk about, not just related to insurance but related to other financial concepts as well. I’m thrilled and honored to be part of this and to work with both of you, so thank you for the opportunity.

Olivia: Thanks, Bill. We’ll see you next time in that case.

Tim: Bill Rainaldi, thank you!

Olivia: Hello and welcome to the Control Your Cash podcast. I’m your host, Olivia Kirk.

Tim: And I’m Tim Yurek. And we have a special guest today, Bill Rinaldi, who is the Senior Financial Consultant for Security Mutual Life Insurance Company of New York. And Bill is a specialist in Social Security planning. Bill, welcome to the show.

Bill: Thank you, Tim. This is great to be here. You know, uh, you were a guest on my podcast at Security Mutual a few years ago, and it was one of the best perceived podcasts we’ve ever had, so I’m hoping to do the best I can to, to, to match that today. So, we’ll see.

Tim: <laugh> Awesome. Well, I know we have a lot of great information in store for us today. And, and thank you again, Bill, for, for joining us.

Olivia: So, Bill, um, let’s talk about Social Security because it seems to me that Social Security is probably one of the most misunderstood benefits, misunderstood pillars, if you will, of our retirement planning. So if you could talk to us about what are some of the biggest mistakes that people make as it relates to their Social Security claims or their strategies?

Bill: Well, first of all, Tim, I agree a hundred percent with what you said. Um, I have this economic theory, which is that any time you have a government program, uh, that stays around for a long time and becomes very popular, it’s inevitable that at some point it’s gonna get so complicated that nobody understands it. And unfortunately, that’s what’s happened with Social Security. Now, there are a lot of nooks and crannies, a lot of little special things you gotta know, and it is incredibly complicated, but at the same time, it affects everybody. Everybody has a Social Security benefit pretty much, and everybody wants to get the most outta Social Security. So the simple question people ask is, well, when should I claim my benefit? That’s the one thing that people want to know. Now, if you ask me, I think the biggest mistake people make is that they don’t seek professional help when it comes to figuring out what to do.

This is so tricky and so complicated, and there are so many things. For example, there might be children’s benefits. There’s almost always what’s called a survivor benefit in Social Security. Uh, there could be disability benefits that, that have an impact. There’s so much to know that it’s almost impossible for an ordinary person to know everything they need to know about when to claim. Um, the one biggest thing I think people miss is survivor benefits on Social Security. That’s huge. And when you understand that, you might be inclined to collect a little later than you otherwise would. So…

Tim: Yeah, absolutely. So, Bill, when it comes to Social Security, what, in your opinion, is the most important thing that, that someone needs to consider? Right. So there, there are so many moving parts when it comes to Social Security—you know, the benefits, the age, um, the spousal benefits. What, what needs to be focused on when you’re making that, that big decision?

Bill: Well, the age difference between the two spouses is really important. Uh, one of the other things that’s incredibly important is life expectancy. Um, so many people, for example, are inclined to collect their Social Security as early as possible. And usually it’s because they believe—or I shouldn’t say usually—most of the time, a lot of the time, it’s because they believe that it’s not gonna be there in the future. Uh, so, “I’m gonna get mine while I can” seems to be the general philosophy. Well, that’s fine. If you’ve got a life expectancy and you think, you know, you might not make it past age 70, then maybe you would wanna collect at age 62. However, the majority of people seem to be living longer now than they initially expected. And if you’re gonna live into your 80s or perhaps your 90s, you’re better off waiting as long as possible to start the actual collection process.

So that’s a huge one, Olivia. I would also add to that one thing that people miss, and I just mentioned this a few minutes ago about survivor benefits. Survivor benefits are one of the only simple things about Social Security. Okay? If, if you’re married and both spouses, let’s say, live past age 67, then survivor benefits are fairly, uh, easy to understand. But it’s the one thing that people don’t even consider when they’re trying to collect or trying to figure out when to collect. They collect based upon their own life expectancy, and they don’t consider their spouse. Now, let me give you a quick example of how survivor benefits work. Let’s say my benefit is $2,000 and my wife’s benefit is $1,000. Now, she’s three years younger than me, and she’s also female. You know, women tend to live longer than men by about two or three years.

So you factor all that in. But if I collect, that means that if I collected at my age 67, I would get $2,000 a month. If I waited until age 70, I would get an extra benefit because I would get 24% more money or $2,480 a month by waiting until age 70 to start. Uh, now I might think, “Well, I’m probably gonna live to, I don’t know, 75 or something like that. Why would I do that? That doesn’t make any sense ’cause I’ll never make up that difference.” But with a survivor benefit, my wife would take over my benefit because hers is lower. She would take over my benefit if something happens to me. So I might live to 75; she could live to 95. So when I make that claiming decision to start at age 67, it’s probably not gonna just affect me. It’s also going to affect her, and she’s gonna get stuck with that lower benefit if something happens to me. That’s probably the most basic concept I think people miss, Olivia, that, that they need to understand about Social Security.

Olivia: Yeah, that’s, that’s huge, and it’s a huge difference for so long. So I imagine that even comes into effect if, say, you know, you were to die before you started claiming. She would still be able to claim that higher spousal benefit going forward, right?

Bill: Uh, in most cases, yeah. If I were, let’s say I died at age 68 and I wasn’t collecting yet, I would be frozen at age 68. My benefit would be frozen at that point. That’s still gonna be higher than her $1,000. But, uh, you know, so, so yes, but, uh, it’s not gonna be the full age 70 benefit because I didn’t make it to that age.

Olivia: Okay. Yeah. And that’s still gonna be higher than, let’s say, if you started collecting at age 66 or 67, you know? Um, so that makes a, a huge difference. And I imagine that’s one of the biggest mistakes that people make when they’re, they’re processing these claims, um, and starting their Social Security benefits.

Bill: Oh, absolutely. And there are, there are plenty more, but that is, that is the one I see most commonly. So, yeah.

Tim: Bill, does it ever make sense? You know, so, you know, it seems that the, a prudent strategy might be to consider your life expectancy as well as the life expectancy of your spouse when making your claim. With that in mind, does it ever make sense in your opinion, uh, to claim, let’s say, at at age 62? Is there, is there an argument that one spouse or the other should claim at age 62?

Bill: Sure. Well, first of all, if you’re a single person, then you don’t have to deal with the other spouse, right? So under those circumstances, it’s strictly a, a play on your life expectancy. If you’re in bad health and you turn 62 and you’re not working—I’ll talk about that in a minute—but, and if you’re not working, uh, then yeah, you would probably want to collect as early as possible. Uh, now there is another situation for a married couple. Let’s say the, um, the unmarried, the, the, the, uh, the younger spouse is age 62, and, and that spouse has a much lower benefit than the older spouse who’s going to wait until age 70 because that becomes the survivor benefit. You follow? In, in those circumstances, if that older spouse is willing to wait and can afford to wait till age 70, then it doesn’t make that much of a difference when the younger spouse collects.

And if the younger spouse wants to collect at age 62 under those circumstances, that’s fine. The only thing you gotta watch out for is what’s called the earnings test. And the earnings test basically says that if you’re gonna collect your Social Security early, uh, you better not be working, earning a wage and making a lot of money because the, it’s gonna disqualify you from collecting any Social Security benefit. Uh, the earnings test amount in 2024 is, uh, $22,000 in change. And basically what happens is, if you make more, if you as an individual make more than that amount in wages—not interest income, not withdrawals from an IRA or anything like that—but if your wage income is more than $22,000 in change, your Social Security benefit, should you try to collect it, will be reduced $1 for every $2 over that limit. So let’s say you’re still working and you’re making $70,000 a year or something like that, um, you really don’t have a choice. You either have to give up your job or you can’t collect Social Security. Realistically speaking, those are your two choices if you wanna continue working and make that kind of money. So, other than that, yeah, there are, there are definitely some circumstances where it makes sense to collect at 62.

Tim: Now, Bill, let’s say you’re earning $40,000 and the threshold is $22,000. So in that scenario, you’re giving back $1 of benefit for every $2 over the threshold. So roughly it’s $9,000 that you would be giving up. And that’s in that example.

Bill: That’s, that’s correct. And if you have a small personal benefit, remember at that circumstance you’re starting at age 62. So remember I said you get more when you wait till age 70, you get less at 62. Right? So it’s quite possible that that $9,000 could significantly reduce and in some cases even eliminate that Social Security benefit entirely. So yeah, I mean, sometimes if you’re making $40,000, it’s just not worth applying for, uh, that Social Security benefit. And some, some people will, Tim, they’ll, they’ll work part-time or whatever just to get up to that $22,000 threshold and then not go above that threshold. So that happens as well.

Tim: Yeah, I, I’ve seen that quite a bit, but that is probably one of, in my estimation, Bill, just dealing with people on a daily basis and talking about their retirement planning, that is probably one of the most misunderstood aspects of Social Security. The fact that, hey, yeah, you know, I’m still working and I’m gonna, I’m gonna collect at 62 because I don’t think Social Security’s gonna be there and I wanna make sure I’m getting mine. And I understand that philosophy. But then when you explain to them that, hey, you’re not gonna be able to earn more than $22,000, well gee, I make $50,000. Well, now you have this giveback that you have to consider. And people don’t under—you know, they, they, up until that point, they were completely unfamiliar with it. And you know, I, I would explain it to them and then I would suggest that they call the Social Security Administration and just get verification on that. And sure enough, they do and they come back and say, “Okay, now what do I do?”

Bill: Well, yeah, you do have the option to withdraw within 12 months too. And I’ve seen people do that. Um, the problem with withdrawing is that you gotta give ’em back whatever you have already collected. So, but so, it, it, it’s really kind of a hassle to deal with with, uh, with all that. I’ve also seen situations, Tim, where people have, uh, just, you know, you fill out when you, when you apply for Social Security and let’s say you’re age 62, you fill out a form online and you tell ’em you’re not gonna make any money, and you know that’s not true, but you just figure out they’re gonna tell ’em that and that get, and, uh, they’ll never figure it out. Well, guess what, uh, they do talk to the IRS and they do find out what money you’re making. So, uh, that can get into an ugly situation where they’re gonna demand money back from you, uh, with what’s called a demand letter. So you don’t wanna deal with that. You wanna be honest with them and tell them the truth and make an honest decision about whether you should be collecting at 62 or not, or 63 or 64 or 65, you know?

Tim: Right. And, and you know, Bill, that makes sense. I mean, for us to be honest with the government, ’cause they’re always honest with us.

Bill: <laugh> Uhhuh. <affirmative> Sure. Well, understand, Tim, just to follow up on that, I just wanna make—just follow up on what I just said earlier too. The, this is the Social Security Administration. Okay. It is not the IRS. Okay. The Social Security Administration can’t garnish your wages. They can’t send an auditor to your house or anything like that. They don’t have those powers. However, it’s not like they don’t talk to each other, okay. And they don’t find out whatever they need to find out from each other. So just keep that in mind. I think the SSA is actually a little bit more efficiently run than a lot of other government agencies. So.

Tim: Yes, for sure. Um, so, Bill, talk to us about, um, the, you know, we talk about life expectancy planning when we’re making our decisions. Talk to us about where life insurance fits into the equation when making your Social Security claiming strategies.

Bill: Well, sure, there are probably about a, a dozen different situations that I can think of where life insurance can help with the decision. But I’ll give you just one example, uh, of where life insurance can make a huge difference. Go back to that example I gave you before where I’m collecting $2,000 and my wife is collecting $1,000 a month, let’s say. Um, we do the right thing. We, and I don’t collect early, so I’m getting that $2,000 for life. Uh, if something happens to me, the good news for my wife is that she gets a, a bump in her benefit, right? She was collecting $1,000, but now if something happens to me, she goes from $1,000 to $2,000 a month, right? That’s the good news. But there’s bad news too, isn’t there? The bad news is that collectively, the two of us were collecting $3,000 a month as a married couple in our household.

Now, something happens to me, it goes down to $2,000 a month. Uh, you know, what’s gonna happen with the household expenses? I mean, I mean, in my case, there’d be a lot less food in the house, all right? But <laugh>, but we might make it up because <laugh>, we might make it up because, uh, she’s gonna have to pay someone for maintenance on the house, the stuff that, you know, maybe I do around the house. What’s gonna happen with the real estate taxes? Are they gonna go down because I’m not there anymore? No, they’re gonna stay the same, right? Mortgage is gonna stay the same, right? None of that is gonna change, but there’s less income coming in to pay those expenses. And my experience with older people has always been that once you get past a certain age and you’ve been in your house for a while, you wanna stay there for as long as possible.

You’re not in any great hurry to go and, uh, move into assisted living or anything like that. So how do you solve this problem? You have less income and the same expenses. Well, a life insurance policy could create that pool of money. So you could write a, a, a life insurance policy on me, you know, and it wouldn’t have to be that much in terms of with the way life insurance is normally valued, you know, $300 or $400,000 and I would buy that at a younger age. But what if something happens to me? You have that extra money there and that can help, uh, offset those extra expenses, um, after I’m gone. That’s one basic idea.

Olivia: Yeah. And, and so not only to offset those expenses, but to replace the lost Social Security benefit.

Bill: Exactly. Yeah. Yeah. That, that, that’s exactly right. ‘Cause you have a pool of money now that you can draw from as needed. Uh, so, and uh, and it would just, it would just, uh, set my wife’s at ease knowing that, that that’s there, that she’s not gonna have to move out of the house because something happens to me.

Tim: Yeah, and that’s a good point, right? Because most people are under the mistaken idea that I won’t need life insurance after age 65. And the, the fact that there will be an income reduction at the first death because of the loss, Social Security, uh, benefits at the first death. Now, funding for that eventual loss is probably a prudent thing. And therefore keeping your life insurance benefits in effect post age 65 probably makes some sense.

Bill: You know, I, yeah, Tim, it’s interesting ’cause I, I’ve dealt—and I’m sure you’ve found this similar to in your situation—I’ve dealt with hundreds of people who have life insurance and get past a certain age. And I don’t remember ever any one person when they get to that point saying, yeah, I don’t want this life insurance anymore. Uh, ’cause first of all, they probably got it when it was a lot cheaper at a younger age than it is now. And, uh, for some reason, there’s always a use for that life insurance, even once you get past retirement age. So that’s been my experience anyway.

Tim: Yeah, that’s, that’s a great point because people in their 50s and 60s are not looking to get rid of life insurance. They are actually looking to purchase more because they see now—they see the value and the need is probably more pressing, let’s say, you know, their, their runway is much shorter than it was when they were in their 30s and 40s.

Olivia: Yeah, absolutely. And I, I think about like the term policies on, on young couples, um, being put in place, you know, for the benefit of the kids, right? So if one of the, one of the parents dies, they’re gonna need money to raise the kids. Um, and really it’s, it’s true. You do need money to raise the kids, but there’s also the, the longer term planning that also often isn’t considered. Um, and I feel like a lot of times, you know, we have that class of people who, who don’t want to get rid of the life insurance at, at a certain age right after they get older. But then there’s the other ones who are, are looking at their investments being paid for by the life insurance. And I feel like they, they don’t necessarily see the benefit that is life insurance, right? Being able to pay pennies to get those dollars tax free when they die is, is a huge benefit, um, that often is overlooked in this industry, unfortunately, you know, by other advisors.

Bill: Yeah. You know, it’s funny, I, I think of my friend Marty Smith who always likes to say to people, uh, “Well, you know, if you have enough life insurance, then you don’t have to worry about spending down their inheritance and you want to go on a trip around the world. Go ahead.” <laugh> So it certainly has its advantages.

Tim: So, Bill, let’s talk about the, uh, let, let’s call it the, you know, the eight-hundred-pound gorilla in the room, which is, will Social Security be around? What, what’s your take on that? What’s your opinion? Because that’s, you know, everybody’s, everybody talks about that.

Bill: Yeah. How many hours do you have, Tim, to talk about it?

Tim: <laugh> Uh, listen, I, I I, I, I’ve, uh, I’ve looked at this in a good deal of detail and, uh, I just don’t believe that it’s ever—first of all, if you look at the projection, people say it’s gonna disappear or it’s gonna go bankrupt. That’s not quite true. What they say is, if nothing changes between now and the year 2035, benefits will be reduced by about 20%. That’s what they say. It’s never, it is never gonna go to zero because people are always gonna be working and they’re gonna always be collecting Social Security withholding from people’s paychecks. Um, so the, the real question is what’s going to happen between now and 2035? And I, I don’t know, but I I would absolutely be stunned if there’s ever gonna be any reduction in people’s Social Security benefits. I mean, I, I just think there would be rioting in the streets if that ever happened.

Um, so they’re gonna have to fix it somehow. And if you look at what, uh, the two main, uh, the main nominees are to how, on how to fix it, it’s either A, raise full retirement age, or B, increase the withholding taxes in some way. That might mean increasing the percentage or increasing the number of people who actually pay it, increasing the income limit or something like that. Um, so I, I, as I said, I’d be shocked if something, if, if they didn’t come up with a solution like that, one of those two things. Now it’s not gonna happen tomorrow. Okay. And I don’t think anything’s gonna happen for the next three or four years because people forget this, this happened once before, back in the early 80s, in 1983, the Social Security Trust Fund got down almost to zero, and they were within a year of, of bankrupting that trust fund. Uh, and what they did was a combination of things, you know, they raised full retirement age and they increased the withholding tax. Now that was supposed to last 75 years. And, uh, <laugh> it looks like we’re gonna be a little short on that, so they’re gonna have to do something. But, uh, I would be, I would be, uh, really surprised if, if they didn’t do anything to fix this at, at some point.

Tim: Well, I, I think that’s a great point, Bill, and thanks for addressing that. ‘Cause a lot of people don’t want to touch that question. Uh, so I, I appreciate you going out on the limb and answering that question, but I, I think another thing that they’ll probably do is they’ll just print more money to pay for the benefits and, you know, further kicking the can down the road, so to speak.

Bill: Well, yeah, I mean, technically, Tim, in order to do that right now, they, they legally can’t do it, which means they just have to change the law and then they could do it. So, you know, <laugh> eventually, eventually they, they, they certainly could do that. A, another possibility, and I was thinking about this too—you remember about, I don’t know how long ago, it was maybe 15, 20 years ago—they got in a situation, the government did, where they decided there were too many military bases in this country, and they had to close some of these bases, and they tried to—Congress tried to work it out themselves, and that became impossible because every congressman who had a base in their district would not allow a closure. So what they ended up doing was appointing this blue ribbon commission to do the dirty work, and that commission decided which bases were going to close, uh, without offending the members of Congress. You know, something like that could conceivably happen in the future, I think, with Social Security as well. So, we’ll see. I don’t know. It, it, it’s just a guess, but something, something’s gotta happen. I think so.

Tim: Yeah, for sure. Bill, is there any other questions you think we should be asking?

Bill: Uh, no, I, I think we, we’ve got a good idea. I mean, the only other thing I would say is understand, uh, one of the reasons that you need professional help when you decide when to collect Social Security is that Social Security’s not gonna tell you about certain things. For example, you might have a child under the age of 18. Social Security is not gonna tell you that, hey, you can collect a, a benefit for this child. Or you have an adult child who’s disabled—hey, you can collect a benefit for this child. So there are so many other extra benefits that you might not be aware of that you really do need to get, get a pro, uh, to help you with this, this sort of thing. So it’s not as easy as it first seems.

Olivia: Yeah, it’s funny. I have some friends who work in the Social Security field, like at, at the offices and they’re in the call center, and when they go through the training, they just learn how to search for the questions on the website and then read the webpage to the people. So if you don’t know the right questions to ask, you’re not going to get the right answers, because half the time they don’t even know the follow-up questions that you should be asking, and they’re not going to give out that information because they’re just going and searching and reading you what they have off the page these days.

Bill: Oh, yeah. And in fact, the, uh, their manual, their, their training manual, Social Security Administration’s training manual is online. It’s thousands of pages long, and it, it’s very difficult. I, I don’t lie, I have to look at it sometimes. I don’t like using it because it, it, it, it ends up confusing a lot of situations. But, uh, uh, yeah, that, that’s exactly right. It, you, you do need to know to have someone who knows the ins and outs of the system either way.

Tim: Now, Bill, I know in the past you have helped me and hundreds of other agents with helping their clients make the best decisions for them, and I think it’s important to understand, like, what special software or programs do you have to help our clients make the best decisions possible for them?

Bill: Well, we use a program called SS Analyzer, uh, and, uh, I, I’ve, I know you’ve seen that, Tim, and you know what it, what it looks like. It, um, it addresses all the issues or, uh, every issue that, that pretty much anybody would, would come across when it comes to Social Security, like the children, like I talked before, um, there’s another issue for state and local government employees where their Social Security benefit might get reduced if they’re getting a pension from that state or, or government agency or a local government agency. Uh, it also addresses that. Uh, but as I said at the beginning, the, the basic question everybody wants to get an answer to is, when should I collect? And that seems to, uh, and this, this program does a great job of, uh, addressing when you should collect, when you should start, and, uh, uh, I’m happy to share that with you, Tim, and other people. So.

Tim: Yeah, absolutely. And, um, it is important to have financial professionals because as so many things in this financial world go, you don’t know what you need to know until, until it’s too late in a lot of cases. So taking those steps, um, preemptively, um, consulting with a professional who, you know, has more knowledge and also has more resources of knowledge, right? Because not everyone knows all the answers, but they should know where to get the answers and be able to communicate that to you in, in a clear and concise way.

Bill: Yeah, and Olivia, I would add something to that, which is, if you make a mistake, it’s gonna cost you money every month for the rest of your life, so you gotta get it right.

Olivia: Yeah, absolutely.

Tim: Yeah. And you definitely don’t wanna leave any money on the table, and that, I think, is ultimately what everybody is trying to accomplish, not wanting to leave any more, any money on the table from our government benefit.

Bill: Well, especially when you look at how much money you put in in the first place, right?

Olivia: Yeah, exactly. That’s a great point, Bill. Well, Bill, it’s only a matter of time before this podcast goes viral and, and certainly this episode. And, uh, I want to thank you for joining us today. We really enjoyed your company, and hopefully you had a good time as well.

Bill: Well, I always enjoyed talking to both of you, as you know. So this has, this has been great. And, uh, I hope people get some benefit out of what we’re talking about today. That’s the main thing.

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Tim: When it comes to finances, no one wakes up in the morning and says, “Man, how can I mess up my financial situation today?” On the contrary, we’re all doing what we think is best for our specific situation, given our specific resources. But the truth of the matter is that a lot of times, conventional wisdom—whether that be from the media, your family members, or mentors—a lot of the advice that we hear is actually giving away control of our money and giving away control of our cash flow.

What we do is help our clients, and help you, to become more in control of your cash flow and to make the most of your resources by making your money as efficient as possible. The reason we do this is simple: whoever controls your money controls your life. So here’s a 30,000-foot view of how our process can help you to make your money more efficient. It all starts with this circle right here, your circle of wealth.

Olivia: That’s right. One thing we all have in common is we all have a circle of wealth. Some are larger than others, and others are larger than ours, but we all have one simple thing in common: we want that circle to grow. Now, there are many ways that you can grow your circle of wealth, but what we have found is that every dollar that’s in or going through your circle of wealth is broken up into three areas: there’s accumulated money, that’s the money you have saved and invested, then there’s lifestyle money, that’s the house you live in, the car you drive, the things you do, the vacations you go on, and it’s the schools your children go to because that’s a lifestyle choice for Mom and Dad.

Tim: And the third type of money is transferred money. Do you know what transferred money is? Well, it’s money that we’re giving up control of unknowingly and unnecessarily. It’s things like interest on debt, it’s things like taxes, it’s things like fees and planning inefficiencies. And the key here is that we focus on the transferred monies. Why? Because we feel that is the best way to help our clients make their money more efficient—focus on not losing money rather than taking risks to get a higher rate of return.

So what we’d like to do is sort of show you what differentiates our process from the rest of the financial services industry, and it’s real simple. Do you know that in 2023, according to the Bureau of Labor and Statistics, there were over 272,000 financial advisors in America? And I would be willing to bet that less than a thousand focus on wealth transfers. The rest of them focus on moving the money that you have, because that’s the grease that makes the wheels operate in the financial services industry—moving money.

Olivia: The conversation basically goes, “Hey, you have X amount of money earning 5%, we can show you how to get 7%. Now, you have to take some risk to get there, and you may lose, but at least you’ll get a higher rate of return, hopefully over time.” And then you’ve got to buy into whether or not that’s a strategy you want to implement, but see, there’s no guarantee that you’re going to make more money.

Tim: The second way the financial services industry could help you is to discuss how you could live on less, how you can reduce your lifestyle in order to save more money. Now, that’s a conversation that I don’t want to have with my wife, and I’m sure a lot of people don’t want to have that conversation with their spouse or themselves, especially these days. As you know, the cost of everything is going up between inflation, interest rates, and let’s face it, the salaries that people are earning can’t necessarily keep up with the spending and that lifestyle inflation that came back in the COVID times. So it makes it challenging, and maybe more challenging than ever, to make your money more efficient on your own.

And that’s why we’re here, educating people as to ways to make that money last, make sure it’s accessible to serve you and your family, and help you accomplish your goals all along the way.

Olivia: So how we do that is to focus on these wealth transfers. And basically, our process has four steps. The first step is to identify exactly where you’re giving away control of your money, and when we show you that logically, it will all make sense. The second step is the hardest step in the process—you’ve got to stop doing what you’ve been doing for 10, 15, 20, even 30 years, and it’s a hard habit to break.

Tim: The third step is to show you where to put your money so that you’re in complete liquidity, use, and control of your money. We call it the L.U.C. Factor—putting money in a place where you, and only you, could access it. And then the final step is really where the magic happens, where you borrow money from yourself to fund your lifestyle and pay interest back to an entity that you own and control. And if you take a look at that, basically your money never leaves your control. And that’s the lens through which we look at things to make sure that you’re in control of your money at all times.

Olivia: Now, when we focus on these wealth transfers, again, it’s things like interest on debt, it’s things like planning inefficiencies, it’s things like taxes. But you see, if you paid a dollar in taxes this year that you didn’t have to pay, you don’t only lose that dollar—you lose something more valuable: you lose opportunity cost. You lose what that dollar could have earned for you, and you lose it for the rest of your life.

Tim: So we focus on opportunity costs because every move we make financially eliminates choices that we could have made had we not made that choice. Exactly. And we always say we’ll never see the interest we don’t earn on our money. You know, so a lot of people pay cash and they do it in order to avoid paying interest to outside entities. But what happens is we get a hole in the bucket, if you will, because we lose the opportunity cost, and that’s the unseen.

So we quickly identify where you’re giving up control of your money in six key areas: mortgages, how you’re paying for your real estate, taxes, how you’re funding your retirement, protection areas, insurances, college funding, how you’re paying for your children’s college, and then how you’re making major cash capital purchases. Because what we’ve found is it’s not what you buy—it’s how you pay for it that is going to make the difference in your financial life.

Olivia: So what we try to do is put you in control of your own money. Right now, a lot of the time, you know, depending on your situation, it may be the mortgage companies, the banks, the credit companies, the government, or those major capital purchases like cars and paying for education—all of these entities seek to gain control of your money and your cash flow. And that’s where the rub comes in.

Tim: So by putting yourself in control, you really regain control of your entire life because now you control all of that cash flow. And I would argue that most of life’s frustrations come from not having access to money when you really want or need something. Now, it might sound overwhelming, it might sound impossible, but the fact of the matter is it’s very simple. Do you remember when you first learned how to play this game, tic-tac-toe? It’s a simple game with simple rules, and the conversation went something like this: the person who showed you how to play basically said, “Hey, here’s a new game, it’s called tic-tac-toe. You’re X, I’m O. You have to get three in a row.”

Olivia: And because that person taught you the rules to play, but not the rules to win, you lost and you lost and you lost until you figured out how to prevent your opponent from getting three in a row, and then nobody won. So then you went and showed somebody else, and you taught them the rules to play, but you didn’t teach them the rules to win. Our process teaches you the rules to win the financial game.

Tim: And it’s funny because, you know, those financial institutions are the ones who are advertising, who are luring us in with all of those offers and giving us the information to make our financial decisions. So it makes sense that they’re winning right now, right? And you know they’re winning because a lot of times you’ll feel stuck, frustrated, unable to do the things that you want to do even though you earn a great income. And that’s how you know it’s not how much money you make, it’s how much money you’re keeping at the end of the day that’s really going to make an impact on what you’re able to achieve in this life and the impact that you’re able to have.

Olivia: And you see, conventional wisdom teaches us that we need to focus on getting a higher rate of return on our savings and investments. But here’s the problem—those products that we own are just that: products. Nobody’s showing us how to utilize those products to make our financial life better. And that’s the problem. If we only focus on getting a higher rate of return, and we completely ignore opportunity cost, taxes, and interest on debt, our total circle of wealth can grow, but these problems are going to grow as well.

Tim: So the best analogy that we make to differentiate our process from others is the fact that other advisors are focusing on getting a higher rate of return and selling you the best product—we’ll call them the golf clubs. Our approach is to focus on how you’re using those products—we’ll call that the golf swing. And if you wanted to get better in golf, there are two approaches: you can go out and buy the best clubs, and by virtue of that, you’ll be the best golfer, or you can figure out a way to improve your golf swing. And that’s what we do. We take you down to the practice range, find out how you’re using your money, and then make adjustments to make your money more efficient.

Tim: Here’s a great example of how we help our clients make their money more efficient. We’re going to use an example of a family earning $102,000 per year and they’re saving $6,000 per year, and they’re getting 6% on their savings. Now, it would be a fair estimate to say that up to this point in their lives before they met us, 100% of their financial planning focus was on getting a higher rate of return on this amount of money every year.

Tim: So, if they’re putting away $6,000 and earning 6%, they’re earning $360 per year of interest on their annual savings. And if they increase their rate of return by 50%, they now earn $540. And here’s the question: is that really moving the needle for them? They just increased their rate of return by 50%, and it didn’t necessarily move the needle for them financially.

Olivia: Well, they increased their rate of return, but they also increased the risk that they were taking in order to get that rate of return.

Tim: Exactly. So it comes down to, was it worth it for less than $200? So the question becomes, how can we increase the amount of savings or the amount of interest earned on your savings without taking on additional risk? And our approach is to focus on the $96,000 of expenses. And we’re not talking about, you know, stop going out for dinner three nights a week and only go out two nights a week, and you’ll save $100 a week. No, we’re talking about, how can we reduce your expenses without reducing your lifestyle? I want to repeat that: how can we reduce your expenses without reducing your lifestyle?

Olivia: That’s where we focus on the wealth transfers, because the wealth transfers are already baked into your cash flow cake. So here’s the benefit of reducing your expenses without reducing your lifestyle: if we reduce your expenses by 1%, that’s $960, and that is the equivalent of earning 16% on your $6,000 of savings. That’s how you move the needle.

Tim: Now, here’s the thing: we’ve all been told that the higher the risk, the higher the what?

Olivia: The higher the return.

Tim: That’s right, the return. Well, have we ever taken risk and not gotten a return?

Olivia: Unfortunately, yes.

Tim: But here’s the deal—how much risk do you have to take to stop an expense?

Olivia: Zero.

Tim: All you have to do is stop doing it. What does it cost to stop an expense? It doesn’t cost anything. So that’s how you win this financial game, and this is how we help our clients make their money more efficient: reducing their expenses without reducing their lifestyle.

Olivia: You see, we can prove that this works because 16% of $6,000 is $960. So that’s what makes us different, and that’s how we help our clients.

Tim: Now, if you had a bucket that had holes in it—things like debt, opportunity costs, taxes, interest—and you had a faucet trying to fill up that bucket, how long would it take to fill up your bucket?

Olivia: Well, it would never be full because all of the money would continue to leak out.

Tim: Exactly. So when it comes to filling up your leaky bucket, there are two methods: number one, turn up the water pressure, and you know, eventually maybe it’ll overflow. It’ll continue to leak, but as long as you keep that water flowing, you’ll be fine. But the second method is to plug the holes in your leaky bucket, and then that bucket is going to fill up even if you only have a trickle.

Olivia: And here’s the point: conventional wisdom tells us that we should save more into that leaky bucket. It doesn’t make sense. Why try to increase the flow? You should never increase the flow unless and until you plug the holes.

Tim: So our first step will be to see if we can find areas where you may be more efficient without the need to reduce your current lifestyle.

Olivia: Now here’s the question: on a scale of 1 to 10, how does what we do meet with what you’re looking for from an advisor?

Tim: If you’d like to learn more about how we put this solution to work for our clients, we’d be happy to take a look at your situation. Visit our website today at Tier1Capital.com and schedule your free strategy session. We look forward to speaking with you soon.