Senior Care Academy
Senior Care Academy is a podcast dedicated to providing valuable information and expert advice on navigating the world of senior care for both senior care providers, and families with aging parents. Hosted by industry professionals, each episode covers a wide range of topics including healthcare options, legal considerations, financial planning, and emotional support for caregivers. If you are a healthcare provider, have aging parents, or are a senior adult, this podcast is for you! Tune in to gain valuable insights and resources to help you make informed decisions and provide the best care for your loved ones.
Senior Care Academy
Achieving Financial Stability for Retirement: Brad Bennett’s Strategic Insights
What if you could secure your family's financial future and achieve long-term stability, even amidst life's uncertainties? This episode of the Senior Care Academy podcast promises to equip you with actionable strategies from Brad Bennett, a former stonemason turned financial strategist at Fortress Wealth Architects. Brad's journey, influenced by his wife's family and his transition to becoming a coach for the Rich Dad organization, offers invaluable insights on creating a robust cashflow structure and prioritizing financial security by paying oneself first.
Brad discusses the importance of protecting your economic value, assets, and cash flow from potential threats, ensuring your spouse and children are taken care of in the face of unexpected events. He emphasizes the benefits of efficient cash flow systems over traditional structures, advocating for innovative ways to capture and allocate income strategically. Comparing financial planning to climbing Mount Everest, Brad highlights the necessity of personalized strategies that account for both success and safety, helping seniors navigate the evolving financial landscape and adjust their dreams to align with current realities.
From the history and evolution of Social Security funding and taxation to leveraging tax-advantaged financial strategies like 1031 exchanges and cash value life insurance, Brad sheds light on minimizing tax burdens and maximizing wealth. He also underscores the significance of financial literacy and comprehensive planning, illustrating the importance of building a financial fortress through diversified strategies and robust protection. Tune in for a wealth of knowledge and practical advice that can transform your financial future.
Hey everybody, welcome to the Senior Care Academy podcast, a podcast focused on the senior care and aging space industry. Today, we are joined by Brad Bennett. Brad is a distinguished financial strategist at Fortress Wealth Architects. With over a decade of experience, brad is dedicated to educating clients on wealth accumulation and preservation. He brings a unique approach to financial planning, focusing on the often overlooked details that can significantly impact long-term financial security. Previously a Rich Dad coach, brad has a proven track record of empowering individuals to take control of their financial futures. His innovative strategies help clients navigate complex economic landscapes and achieve their financial goals. Brad, thanks so much for being on the show today. Oh, thanks for the invite. Yeah, of course, tell us a little bit about your background, where you grew up, how you got started in the finance industry.
Speaker 2:Sure, I grew up in Salt Lake, in the Cottonwood Heights area. How I got into the finance industry? I met my wife, that's always a good start.
Speaker 1:That's really how it happened.
Speaker 2:I was working as a stonemason. My cousin is one of the biggest stonemasons in the country. I watched what he did. I love working with my hands. I grew up doing those sorts of things, so I was working as a stonemason.
Speaker 1:Yeah.
Speaker 2:And first date with my wife, she didn't like what I was wearing. Apparently, you're not supposed to wear shorts after a certain date, doesn't matter how warm it is. So we went shopping and got a new pair of pants. We get to dinner and she says so what do you do for a living? I says, well, I'm a stonemason. I don't want to marry a stonemason. Great, I don't want to buy dessert, Pay for a movie. So she says can I tell you a story? I said you can tell me anything you want. Yeah, because at that point in time I checked out, I was done, yeah, and she was kind of talking about both sides of her family, her mom's side and her dad's side. I was looking at it thinking that's really what I want for my family.
Speaker 2:It gave a lot more freedom and everything else, and so that was kind of when I made the shift and how I wound up with the Rich Dad Organization and that's where I've been ever since is kind of in the finance world. When I left the Rich Dad Organization I was told I was going to start working with her dad. I protested and said absolutely not, I will not be working with your dad. I'm still working with him 12 years later. But it's been an incredible journey. I learned so much along the way and I'm really grateful for what I've learned, because the more you dig into it and the more you understand how things work, the more you can see what's being missed and why. Sometimes we see the failure rates in people achieving their financial success, and when you start at the very beginning, you're able to fix the structural issues so that everything is built correctly, moving through and you get ultimately what it is that you are looking for.
Speaker 1:Right, I want to dive deep into working with your wife's father for 12 years. I'd love to dive into that. But I kind of want to get started on the Rich Dad organization. Tell us a little bit about that, what that is, how it functions.
Speaker 2:Yeah, so how that happened, there was after the date where I decided I wasn't going to be laying rock any longer. There were two girls at church where I was going that I had interest in. One was my wife, the other actually used to be Stephen Covey's personal assistant.
Speaker 1:Yeah, the author. Right Okay, yeah, stephen Covey's personal assistant. The author. Right Okay, yeah, stephen Covey.
Speaker 2:And so I went, talked to her, asked if they were hiring down at Franklin Covey yeah and she said well, yeah, they're hiring in the coaching department. All right, great, interviewed there, got the job in the sales department. I did sales for about three years and I just I'd had enough. We'd been investing in real estate, several other things that were going on. So I got to a point I was sick of doing that and I came home and I said I'm just burned out, we've got these things going on. And she says great, then quit.
Speaker 1:And okay.
Speaker 2:I went in, gave him my two weeks notice the next day and in the exit interview the girl that was doing that was just relentless. She would not let me leave because she found out what it was that I had been doing for the last couple of years, which was following all of Kiyosaki's coaching and investing in real estate and doing a lot of these other things. And she said we need a rich dad coach. I said, great, If I run into anybody that's good fit for you, I'll let you know. It's like, no, we want you.
Speaker 2:But I quit, yeah, and picked up the phone, called a couple of the people up in the coaching department. They came down into her office and and it was over. I coached for the next seven years. Wow, that was an incredible experience. What I was able to learn, what I was able to do during that period of time and helping people to discover what were the missing pieces and getting from point A to point B. And I'd say one of the biggest things that people miss from the very beginning is a cashflow structure where they pay themselves first. Beginning is a cashflow structure where they pay themselves first.
Speaker 2:Robert's always talked about it's not about how much you make, it's about how much you keep, and if you don't pay yourself first, nobody's going to, and that was a big it's a big struggle when I was coaching. It's been a tremendous struggle for people while I have been more in the financial realm, and so that's an area where we focused on solving that specific problem.
Speaker 1:What type of people did you guys work with? Where was it? Young adults, married couples, older adults who did you end up coaching? It ran the gamut. Okay.
Speaker 2:I had kids. When I say kids, I was one of them back then you get old quick. So it does creep up on you Next thing you know you're stuck in that trap and say what happened? So I was. I was 28 when I started coaching and I had some that were late twenties, early thirties, all the way up to individuals in their late 60s trying to figure out how to retire because they didn't have anything at that point in time. So it really it ran the gamut all the way through.
Speaker 1:What would you say were some common issues that you came across. I know paying yourself is a big one. You guys set up that structure for individuals, but I'm not a finance expert in any way, and so my initial thought would be like what other structures are there in terms of setting up a financially secure person?
Speaker 2:So, understanding the difference between an asset and a liability Okay, we're constantly told your house is your biggest asset. I'm going to blow up some people's bubbles here. Your house is your biggest liability, okay. Okay, here's the reason Assets feed you, liabilities eat you. If you lost your income today, is your mortgage still due next month? A hundred percent A month after that, same thing. You quit making the mortgage payment. Do you sleep inside for very long? Not very long? Okay.
Speaker 2:That is why your house is a liability, not an asset. It becomes an asset the day you sell it and you harvest the equity Okay, that's when it becomes an asset. It becomes an asset the day you sell it and you harvest the equity Okay, that's when it becomes an asset. Even when it's paid off, it's still a liability because you have to pay the taxes. You got to pay the insurance, you got to pay the maintenance.
Speaker 2:Now, if you're going to sleep inside, which most people want to do, buy a house. It's much better than renting because of the tax deductions, the equity growth, it's a fixed expense instead of an increasing expense like what you have with rent. And so, understanding that assets feed you, liabilities eat you. And when you're investing in any sort of a portfolio. One of the primary things we focus on at Fortress Wealth are cash flow assets. Cash flow assets take pressure off of the paycheck. When you take pressure off of the paycheck now, you're able to increase your rate of savings and acquiring additional cash flow engines that are tax advantaged, and a market-based portfolio that's focused on dividends versus equity growth is a tax-advantaged cashflow engine because you're taxing a different tax bracket, okay and that will, on an annual basis, provide an influx of cash into your financial structure of cash into your financial structure, which takes pressure off the paycheck.
Speaker 1:Yeah.
Speaker 2:And as you repeat that cycle over and over again and you're acquiring more and more of those assets, you're able to take more and more pressure off of the paycheck Right.
Speaker 2:So that, when something happens, you're not in as big of a crunch as you would have been otherwise? Right, that's always a panic for people is well, you know what if I'm in as big of a crunch as you would have been otherwise? Right, that's always a panic for people is well, you know what if I'm in the middle of doing this and my income dries up? Yeah, what happens if you're in the middle of not doing this and your income dries up? Right, how much worse is it? Yeah, and that's that mental shift. So structural changes understanding difference between assets and liabilities, understanding equity versus cash flow, understanding how to build the emergency funds and resources. And the mental shift yeah, there's a huge, huge mental shift that begins to happen when you start taking the steps to put you in control, versus letting the banks and other institutions be in control, and it's liberating.
Speaker 1:Yeah, I like those topics. Those are things that you hear a lot about but maybe tend to be confused on. I know personally like it. Conf Dad has helped you in that regard.
Speaker 2:I've always focused on what is tax advantaged, what is what produces cash flow, what creates liquidity, what creates leverage, so that you are providing additional opportunities at the same time as you are in control. One one of the big things that Kiyosaki always talked about is if you're not in control of the asset, you lose, and, and so there's a lot of the traditional advice that we get that takes you out of being in control. You have no control over the cash or the money. You're hoping somebody else does a better job than you do and you have all these restrictions that go along with it. In addition to that, in some of these strategies, you've given up control over how you are taxed and you have no liquidity.
Speaker 2:So when we sit down and work with somebody, we want to look at what are your goals, what are your dreams? Where do you ultimately want to get to? How do you see yourself getting there? A lot of times, we find people have they've lost their ability to dream because of how the system is structured. We're told to do X, y, z, hoping to get this end result and, as a result, a lot of times people look at it and they begin to settle for what they've been told to accept versus what they dream to achieve. When we walk them back to the beginning and you ask somebody if something happened to you today and you are no longer able to earn a living, how much of your income do you want protected and guaranteed to be there for the rest of your career? How much of it would you like?
Speaker 1:Personally, I probably like I don't know, I wouldn't know what number to give. I haven't thought about that. What number would you want For the rest of my life? I don't. I've heard it takes like a million dollars to live comfortably, retirement post retirement.
Speaker 2:So think about the monthly income. Okay, okay. Do you want half of the monthly income? Do you want 75% of the monthly income? How much of your monthly income do you want protected?
Speaker 1:All of it, all of it, yeah.
Speaker 2:Why wouldn't I want it all protected? I want it all protected. As you sit here thinking about it, you're like, wait a minute, yeah, I want all of it. Yeah, I want all of it, yeah. Okay, once you begin to look at, well, I want all of it. Well, this is where the fortress begins to take shape. Okay, you're building a fortress around your wealth, and so we know that, in order for you to accomplish the goals that you have and the dreams that you have, your income has to be protected. Okay, so we'll look at how do we protect all of your income. Second thing we look at if you got hit by a bus today, if you're married with kids, what do you want for your kids and your wife? Security, your kids and your wife. Security. So you want your kids to be able to still play the sports, be in the band, do whatever.
Speaker 2:Yeah. Have the wedding. Go on vacations. 100. Go to the school they want to. Okay, you don't want your wife to be working no, raising the kids. No, that'd be tough, it's it's tough. So how much of your economic value should we protect? All of it? All of it.
Speaker 1:All of it.
Speaker 2:Yeah, all right. So now we're protecting what it is you ultimately want to create. We're going to put some pieces in place, sure, okay, protecting your assets and cashflow from predators. How much of that do you want to protect?
Speaker 1:All of it. I don't want anybody preying on my money on my security.
Speaker 2:All right. So now we're building the moat that protects the castle behind it, okay Okay, and we have a drawbridge that we're going to let down so that we can pass back and forth to do trade as we need to. But if something comes running, that drawbridge comes up. They got to get through the mountain, then they got to be able to get over the walls. That's a tall order. It is a tall order Tall order if you're protected. It is a very tall order if you are protected. And so we're going to go through and we're going to look at all those steps Now. Now there's something that we got to do to fund all of this, and that is your cashflow. What sort of a cashflow structure.
Speaker 1:Do you currently? Work with Personally Uh-huh Just income. So like every two weeks I get paid, yeah, so I guess that Everybody gives me the exact same answer, okay. Okay, good.
Speaker 2:You're sitting here. Oh man what. Everybody gives me the same answer. I gave the same answer for a long time, and for that reason we have more money passed through our hands than we ever imagined. We can't figure out where it went.
Speaker 1:That happens very frequently.
Speaker 2:Yeah, when we were first married, my wife and I made a lot of money. We had no kids. I can't tell you where it went. Okay, made a lot of money. We had no kids. I can't tell you where it went. That's because of the cashflow structure that we've been given. You sit down with the HR director and they say what checking?
Speaker 1:account do you want to deposit it into? Yeah, I've seen that like where you can choose, like the percentage of where it goes and how much.
Speaker 2:Most people, we have it going straight into our checking account. Well, what kind of an account is a checking account?
Speaker 1:That I don't know, I couldn't tell you. Okay, has it ever made wealth?
Speaker 2:for you? No, no, does it spend money for you Easily Really? Well, really, it's good at that. Yeah, we have these little plastic things. We just beep, beep, there it goes out the door. Yeah, okay, a checking account is a spending account. It was never designed to help you build wealth, invest, save or anything else. So now it takes tremendous energy and focus, discipline to slow down some of the unconscious spending that we're all very good at and move it over into the savings. Yeah, and we have to do that on a monthly basis. Physically, we've got to do that. What happens when we wind up getting some extra in our savings?
Speaker 1:I feel really good. It feels great.
Speaker 2:Yeah, because now you're looking at it and you're going I've got this extra pile of cash, we're okay, life is good, it's 100 degrees on the 1st of June and the AC dies. Are you going to?
Speaker 1:fix that you should.
Speaker 2:You have to If my wife's going to be happy, I'm paying to fix that air conditioner. Yeah, and I like a happy wife. The saying is true, it is very true. So what happened to the savings account? It's gone. You just raided the savings. Yeah, it goes back into the check-in. It's out the door. And now we got to start over.
Speaker 2:And we do it over and over and over again, and this is why we wind up on a never making the progress that we actually wanted to make. So, in order to fund your dreams and accomplish what you want to achieve, we have to reroute the cash flow and build a structured system that pays you first, that moves your financial freedom from the bottom of the food chain the last thing to the first thing, the very top of the food chain. And we do this through currents. It's kind of like a current in a river that flow, okay. Okay. We reroute the income so that now, instead of the direct deposit going into the checking account, the direct deposit goes into your currents reservoir. What's the purpose of a reservoir? It just holds water. It's exactly what it does. It captures spring runoff, yeah, and then now you send the water downstream at its highest and best use. So you're in control. Essentially, that's it. Now you are in control.
Speaker 1:You turn the spigot Yep, you close the spigot Yep, you set the flow Versus the other way around, just kind of like leaving it open, hoping it rains.
Speaker 2:It is wide open and we're hoping for hurricanes.
Speaker 1:Yeah.
Speaker 2:Because we need a lot of extra. So by doing that, you set the flow, you determine how much is going downstream on a monthly basis, okay, and the excess it's unconscious at this point. It was automatically captured in the reservoir. The day it hit Right and you sent downstream how much you figured that you were going to need, and it takes a month or two to really fine tune the flow so that you know how much has to go downstream. Really fine tune the flow so that you know how much has to go downstream.
Speaker 2:This is where people the short that you were looking at, yeah, of the client where he looked at, he's like I don't know how I'm ever going to accomplish my goals. I may be able to save a hundred, couple hundred dollars a month. Yeah, end of the first month there was thousands sitting in the account. It's an extreme example, right. But what he discovered and what he saw was like holy cow, I can't believe how much unconscious spending I had going on. Interesting. And we begin to make different choices on our own, because now we have this dopamine hit as we're watching that reservoir grow and it's exciting and you begin to see your goals becoming a reality, like I can really accomplish this now because the cashflow is under control. I'm paying myself first and I'm actually building the resources to acquire the cashflow engines that are going to give me what I want.
Speaker 1:Right.
Speaker 2:If you were working with, and this, this is all the time I mean very common. I have clients making a hundred thousand dollars a year, aside from what they're dropping into a 401k. They can't figure out how to save another penny. On average, income goes up by about 4% a year.
Speaker 1:Okay, okay.
Speaker 2:If I have somebody mid-30s $100,000 a year income, if they capture just 2% of the annual increase of income in their savings account, this number is going to blow you away. Let me back up a little bit. Number is going to blow you away. Let me back up a little bit. If you're saving 3%, 5% a year, making a hundred thousand dollars a year, no rate of return yet Just income is stagnant At the end of 30 years you've saved $150,000. Just by saving 5%. Just by saving 5%. If income increases, like what I was talking about, at 4% a year and you're continuing to save at that 5% rate at the end of 30 years you've saved $337,000. If we capture 2% of your annual growth, take a wild guess as to how big that number is at the end of 30 years. At the end of 30 years.
Speaker 1:Like 3.6 million.
Speaker 2:I can't believe you threw that number out there.
Speaker 1:Am I wrong or am I right? It was a guess.
Speaker 2:That is the most amazing guess I have ever had. That is the most amazing guess I have ever had. So, without any rate of return no rate of return, you're at 2.2 million. Wow, at a 5% annual rate of return, it's 3.7.
Speaker 1:Whoa I was close.
Speaker 2:You were like spot on.
Speaker 1:After 30 years, with the 5% return, 5% rate of return Rate of return you are at $3.7 million.
Speaker 2:Yeah, If you started with $100,000 a year, getting a 4% annual rate annual increase and capturing 2% of the increase and spending the other 2%, you're at $3.7 million 2% is super.
Speaker 1:Gives you a lot of room to spend.
Speaker 2:It does, it does. You're still increasing your lifestyle.
Speaker 1:Right.
Speaker 2:You're still, and that's just a stagnant 5% rate of return. Yeah, that doesn't really take into account. We're focused on helping you build cashflow engines.
Speaker 1:Yeah.
Speaker 2:And so there's a lot that goes into that. But just making numbers simple, right, that's amazing. Oh, it's huge. That's huge, having been in the in the financial world between rich dad and in working with my clients individually and everything. People are hoping and praying to wind up with a million yeah, most people wind up with half a million and you change the cash flow structure and your world changes in ways that you never imagined. Wow, and it becomes easy and automatic. What do?
Speaker 1:you often see with like older adults. Let's just say I'm 54 years old, coming on 55. I retire in 10 years. Yep, I have a 401k. I don't really know how big my you know the rest of my treasure chest looks like, but I have a rough idea of what I could do in my retirement. But it's not looking very pretty. What do you tell that person?
Speaker 2:Okay, same thing. We're going to start at the same place. We're going to build the fortress, we're going to create the moat, we're going to start working with that cashflow structure, because what you're going to wind up with by starting there and then working the rest of the way through is astronomical in comparison to where you were at. And then we're going to look at the resources that you currently have put together and we're going to talk about efficiency of each one. Yeah, is it doing for you what you want it and need it to do? If it is great. If it's not, then how can we improve it? Okay, what are the steps there? When you are, you know, in in your mid fifties, this is when people really start looking at it and getting serious as to oh, I only have 10 years left.
Speaker 1:I'm behind the eight ball.
Speaker 2:I got to get working on this. There's a lot of headway that we can make. There's a lot of improvements. Can we get you ultimately to where you want it to have been? I don't know.
Speaker 1:Sure.
Speaker 2:There are a lot of cases. Too much time has passed and we're too far behind.
Speaker 2:What I do know is we can get you a whole lot closer to that than you ever imagined Right Then, where you know if you stay on that same track when you're getting into your retirement years. This is where there's some shifts that begin to happen. So what you want to think about is right from the very beginning. Let's say, I sit down with you and I say, alex, we are going to go climb Mount Everest. Okay, and you're like cool, this is exciting. Yeah, we're at base camp, 14,000 feet, and I ask you what is your ultimate goal?
Speaker 1:with Everest To hit the summit.
Speaker 2:Get to the top Right. That is the pinnacle, that is the goal we want to hit the summit. So I, the top Right, that is the pinnacle, that is the goal we want to hit the summit. So I say, all right, I'll be back in a minute. I go talk around, I'm looking for the best Sherpas. I come back and I say I found two Sherpas. Yeah, they are the best in what they do. The first Sherpa has summited more people than any other Sherpa in history. You're going with him. You want him Right? Do you want to hear about the second Sherpa? Sure, okay, the second Sherpa has returned more people home safely than any other Sherpa in history. Do you want to stick with the first Sherpa?
Speaker 1:You have me thinking now. Okay, you have me thinking about the way down. Okay, you have me thinking about the way down. Okay, you only think about I only thought about the way up, getting to the summit. Taking a nice picture Right. Oxygen mask.
Speaker 2:How many people do you want to see that picture? Everyone. You want everybody to see the picture. Okay, so what Sherpa would you like to use?
Speaker 1:Probably the one that'll take me home now. Okay, so now you want to get home, yeah?
Speaker 2:Okay, so really, the ultimate goal in climbing Mount Everest isn't to get to the top, it's to get home safely, and the way the traditional structure is built in financial planning and all of these things, is to climb the mountain. Nobody prepares you to get home safely.
Speaker 1:The mountain can look different for everyone. Is it like work until 65? Is it earning? Earning a hundred thousand dollars a year, those that that seems to be like a staple of a lot of people's dreams it's.
Speaker 2:The mountain is different for everybody. Okay, okay, the mountain is going to depend upon what. What are? What's the income level? What are we working with? Yeah, okay, so for some it's going to be a lot taller, for some it's going to be a bit shorter, but ultimately, we need to build a plan and we need to pack from the beginning not just get to the top, but to get home safely. Yeah, so that every time there's an avalanche or rock slide, fall off a cliff, whatever it may be, we have protections along the way that are going to save you from that fall.
Speaker 1:Yeah, you mentioned earlier, people kind of stop dreaming, they stop having that vision. I know oftentimes for seniors their children handle their finances and it can be difficult for maybe an older adult to admit like I'm not in control. What do you say to like motivate them or how do you get them out of their? You know, shameful thinking about it.
Speaker 2:You can only do the best with what you have and what you knew what your tools were.
Speaker 1:Right.
Speaker 2:Think about you know, way back in the day when they dug the Panama Canal.
Speaker 1:Yeah.
Speaker 2:They started out with pickaxes and shovels and these big long metal rods banging them. You know sledgehammer smash them in the rocks to break them apart. Everything was done by hand. It's absolutely amazing what they accomplished.
Speaker 1:Yeah.
Speaker 2:Is there a better way to do that today? A hundred percent, yeah, yeah we. We have some really cool chemicals that go bang, yeah, and in a big way, some great ones, and then we have machinery that is just absolutely colossal.
Speaker 1:Have you seen those big boring machines?
Speaker 2:My kids love watching that stuff on YouTube.
Speaker 1:Oh yeah.
Speaker 2:In the coal mines and stuff. Where they got those, those rotating shovel buckets? Yep, and yes, I, you know all about it. Yep I have younger kids. It's kind of funny I'm old with young kids. Old with young kids. Everybody thinks I'm a lot younger than I am, because when they find out how old my kids are, they're like oh, you're like what Late thirties? No, I'm almost 50.
Speaker 1:That's late thirties for most people, right? That's not bad.
Speaker 2:Yeah, you're in a great spot, I like to think I'm late thirties, but my body keeps telling me no, you're not. With the knowledge that we have the skills, the tools, we do the best we can with what we have.
Speaker 1:Okay.
Speaker 2:The. The world changes. Technology changes, systems change what we can do with what has been given changes. Yeah, been changes, and so, when it comes to looking at where am I at financially and being a little embarrassed about where you're at, you have to remember you did the best with what you were given, yeah, and the next step is to get different. Or here's, here's I got this from Don Blanton All the knowledge that we. So when new knowledge, new information comes along, we have a choice.
Speaker 2:We can either get a bigger box so that we can fit more in, okay, or we can say nope, block it out and stay where we're at. And that's really kind of where you're at in life is the box of knowledge that you've been given over those 65, 70 years is full, based upon what you had, and so we can either get a bigger box to expand the knowledge, expand the capability, or you can stay with where you're at. If we go get a bigger box, your opportunity's just expanded. What you have just got expanded Right, and that's really the key to it is we can only do with the best that we, with the information that we have.
Speaker 1:Yeah, it kind of sounds like I don't know, maybe it's just me, but if I were in that position, I'd still be dreaming of, like, having a nice retirement going around the country in RV, right. Kind of sounds like what you're saying is what you've been given in terms of knowledge and what you've done in terms of application is set in stone and you just have to face what you're currently the reality of your situation, and it can get better. It can, yeah, it can get better, but it may not be the superstar dream that you used to have.
Speaker 2:Correct, correct. And the world has changed, yeah, over the last 20 years, holy moly. You know I have a hard time keeping up with it. My kids are just looking at me like, well, duh, yeah, this is quick and easy. It's amazing the shift in how everything functions and the changes of technology, the changes of life expectancy. Life insurance companies have had to address their mortality tables.
Speaker 1:Wow.
Speaker 2:Because we're living longer longer. And so that's another retirement risk. Longevity is a retirement risk. It used to be back when we were given social security from the great new deal that you worked until you were physically no longer able to work.
Speaker 1:Right.
Speaker 2:Which then they said okay, retirement age is 65. Do you know what average lifespan was back then beyond the age of 65?
Speaker 1:Wasn't it like? It was like only a couple of years after 65, wasn't?
Speaker 2:it, it was two years, 67 years.
Speaker 1:Yeah, that's crazy, it was two years, 67 years.
Speaker 2:Yeah, that's crazy, it's 67. You sailed off and that was it. And so you look at the system and the way it was structured from way back then the funding of social security. It was never intended as a retirement vehicle. Yeah, it was a rig. This will blow your mind. Social Security was originally voluntary.
Speaker 1:Really. Yeah, that's not blowing my mind, that's making me upset, it's making you upset.
Speaker 2:I'm really going to make you mad here in a minute. Okay, social Security originally was voluntary Right. You paid it with after tax dollars, wow, as you do today. Yeah, okay, you're paying for your so your Medicare and social security benefits with after tax dollars still today. Wow, okay, the maximum you could put in was 1%. So when you receive the benefit, it was exempt from taxation and it was there for the rest of your life. Up until Richard Nixon, it was a fully funded program 100%, fully funded.
Speaker 1:Okay.
Speaker 2:Okay, even though people had started to live longer then. Well, the government was doing then what they do today, and they're really good at it. Okay, wasteful spending. Oh, yeah, yeah.
Speaker 1:Okay.
Speaker 2:They can spend anything into oblivion. So they were trying to figure out how do we have more money to spend without raising taxes, without incurring more debt? Yeah, and somebody's like have you seen the Social Security fund over here? Yeah, they just happened to point it out and they raided it. This is what's put Social Security in such jeopardy today. Now, it's a Ponzi. I mean, it's a pay as we go. You are paying into it, still with after-tax dollars. Your employer's putting in 7.5%, you're putting in 7.5%. That is, on an after-tax dollar basis, up to a little over a hundred thousand dollars. During the Reagan administration, when he passed the tax bill, social security was still exempt from income taxation. Under his bill, up to 50% of it could become taxable. Wow, bill Clinton. He fixed that. Up to 85% of it now becomes taxable.
Speaker 1:Nice.
Speaker 2:Right, same thresholds. So think about this. Those thresholds were set back in the 80s.
Speaker 1:Yeah.
Speaker 2:So back in the 80s if you had more than $44,000 a year of provisional income, then up to 50% of your social security benefit became taxable. The thing about what income was back in the eighties. Comparison to what it is today, that was a huge amount of money. Today Not so much so with Clinton. Up to 85% of it becomes taxable at the highest marginal tax bracket. So if $1 falls into the 24% tax bracket, 85% of it is taxable at 24%. Wow so what does a dollar?
Speaker 1:look like after.
Speaker 2:So it greatly curtails how much you get to spend out of that. And $44,000 a year married filing joint, that's not a huge amount of income. So when you look at what comes out of your Social Security, 50% of your Social Security is counted as provisional income and then, as you're taking things out of 401ks or other sources of income pensions and so forth, that's how they assess provisional income.
Speaker 1:Yeah.
Speaker 2:And why so many people today are seeing their social security benefits becoming taxed and it's crazy. If you take now, you got me off on a tax tangent.
Speaker 1:I'm not quite sure how we ran down this road, but here we are.
Speaker 2:If you take a family, three kids, married filing joint, a hundred thousand dollars a year, right, and it was a couple years ago when, when we ran all the numbers on this but their, their income tax liability for the state of utah and federal, you were paying about twenty three hundred dollars in taxes. Wow, five hundred thousand dollar income, okay, okay. Everybody says, well, when you retire you're only going to need 25% of your income or, excuse me, 75%. So it's a 25% reduction of income. I have to admit about that too. But let's just run with the 75,000 a year. Married filing joint, their income tax liability is about 5,800. Interesting Goes up, goes up. Isn't that the opposite of what we've been told?
Speaker 1:Yeah.
Speaker 2:Yeah, somebody forgot to do the math. A lot of somebodies. It's the simple tax code, how it functions. Yeah, when you first get married, what's your income like? Very low, very low. Okay, in fact, a lot of young people, when they get married, aren't even paying income taxes because they don't even make enough money to pay income taxes. Yeah, okay, then income starts going up, but what else happens?
Speaker 1:Taxes go up. Naturally you have kids, oh okay, that too.
Speaker 2:They're expensive, but they're also tax deductions For a while. For a while, up until a certain age. Yeah, you're starting to catch on. Buy a house tax deduction, charitable giving tax deduction. What if you start a business? Huge, huge tax advantages. So your income is going up but you're getting all of these tax advantages along the way.
Speaker 1:Okay.
Speaker 2:Okay, now you start getting old. You're into your fifties. What happened to your kids? They grew up. Yeah, it doesn't matter if they're in the basement. Still they are too old. They're not a tax deduction. So now your tax deductions are going down, but your income is way up.
Speaker 2:Your Now your tax deductions are going down, but your income is way up. Your house is getting where you're getting close to having it paid off. You know you have these things and so we're starting to see the phase out of these tax deductions. Well, what happens when you retire?
Speaker 1:They all, well, all your tax deductions go away.
Speaker 2:They're gone. Okay Now you've been putting all this money in a tax postponement account all of your working career you succeeded. The government now comes back and wants to charge you taxes retroactive to the day you put the first dollar in, based upon your success at the end so okay, you, that just sounds super fraudulent.
Speaker 1:The way you just described it made it just seem like like whoa, let's back up here okay it kind of feels like. It kind of feels like, yeah, you're invading me. Feels like the castle just got burnt to burnt down from the inside.
Speaker 2:There's an inside, there's an inside job.
Speaker 1:That's what it feels like someone gave away the know, the key to the crypt.
Speaker 2:Yeah, that's what happens. That is, that is how these qualified accounts work.
Speaker 1:Wow.
Speaker 2:I'm not saying they're bad.
Speaker 1:Sure.
Speaker 2:I'm just saying you you may want to work with them a little bit different, yeah, than how you were originally planning, because a lot of times people are wanting to max them out because I get a tax deduction.
Speaker 1:You're getting a tax postponement Right Like at the end of your when you retire, and all your deductions go away. It's no longer. It's not like that deduct, that deduction is going to like save you that much in terms of what else you have to pay.
Speaker 2:You just hit something so critical that a lot of people don't realize. Because we're not taught.
Speaker 1:Yeah, this is the first time I'm here to realize.
Speaker 2:yeah, you're making perfect sense now, okay, we're taught that it's a deduction, it's a postponement, sometime in the future and and during your working years, that's when you have the most deductions.
Speaker 1:Yeah.
Speaker 2:That's when you have the interest expense on the house, that's when you have the kids, that's when you have the most deductions, that's when you have the interest expense on the house, that's when you have the kids, that's when you have the most charitable giving. That's when you you know if you start a business. It's when we have the greatest number of deductions. And we're being told to postpone that tax to sometime in the future when you've had the pinnacle of your success. You're enjoying the greatest lifestyle you've ever had and you want to maintain it. Now you can pay us taxes on what we let you postpone previously.
Speaker 1:Dang. So that's why having that cashflow system being able to pay yourself, build up your reservoir kind of does it prevent or make it easier to deal with, like post retirementretirement taxes it makes all the difference. It makes a huge difference.
Speaker 2:It makes a huge, huge difference If your income is derived from income W2, that is, the highest taxed income that there is. Okay If we're able to start moving over to the other side of the column, where the things are tax advantage whether it's investing in real estate, whether it's a dividend paying portfolio, whether it's municipal bonds, whether it's there, there's there's so many different assets that we can work with cash value life insurance that what that will do for somebody's portfolio. If you want to achieve your ultimate maximum wealth potential, you've got to have whole life insurance as a part of it, and I'll get to that here in a little bit.
Speaker 1:Sure.
Speaker 2:But dividends. In today's tax world the highest that most people will pay on their capital gains is 15%. If you're investing in real estate, those first years that you have real estate you have the, your greatest interest expenses. You have the depreciation you have. You should be holding it inside of a, an entity to protect you from it and it from you. So there's additional parts of the that are associated with the property itself.
Speaker 2:When you get to a point where you've exhausted a lot of the tax deductions associated with the property. There's several different things that you can do. A lot of times what people will do is sell it and 1031 exchange into the next property. What that does is it allows for you to roll all of the deductions that you took to the next property yeah, without having to pay what's called recapture. Recapture is when you get to pay back a portion of the depreciation. Interest is a tax-free tax deduction. There's no recapturing it Depreciation. They will recapture if you don't 1031 exchange. There was a big thing when I was coaching and we dug into the tax code associated with it. There were some CPA firms out there that were saying oh, we're going to help you avoid that. We're just not going to take the depreciation. The IRS doesn't care.
Speaker 1:Yeah.
Speaker 2:Whether you took it or not, they're going to ding you for recapture when you sell it. So you take it. Yeah, okay, cashflow off of those properties is going to be taxed at a much lower rate. Yeah, and you just 1031 exchange all the way through. When you die, the property is passed to your kids or the trust. However, you have things set up and you should have the trust in the business entities, and all of the deductions that you have taken die with you. They get a step up in basis. So if you started with a $100,000 house and you end with a million dollar property and you've taken all of those deductions along the way, when you die and it passes to the trust and moves forward, all of that dies with you. And now they started a million.
Speaker 2:Yeah, that is a tremendous tax advantage. Provides cash flow and all of these other things that come along with it. Municipal bonds the interest on those are. Usually there's some rules that you have to follow in order to get it, but the interest on that is exempt from federal income taxation. Your stock portfolio, like I talked about, being based on dividends. Max of that's taxed at 15% for most people. Cash value, life insurance there's a reason why the government really bashes whole life, and it's because of how it is taxed. Once money is into a whole life contract and the cash value builds up, if you don't ever cash that policy out, the growth and the death benefit are never taxed again. It doesn't exist.
Speaker 1:Yeah, I can see why they wouldn't like that.
Speaker 2:Right. If everybody used whole life insurance, the revenue to the government would fall off a cliff, and so it's a funny way to put it. It's they don't like it. It's not about the internal rate of return, it's about everything else that it does.
Speaker 1:Yeah.
Speaker 2:Okay, okay, remember, we want to get off the mountain safely.
Speaker 1:Right. Like all of these practices help you summit the mountain and get off the mountain.
Speaker 2:And get off the mountain. So, as you're climbing the mountain, if you're holding money inside of a whole life contract, you have. You know. Let's say you've got $40,000 built up inside of it and there's this awesome property deal but you've got to do a down payment. Well, you can borrow against that contract and the down payment on the property. Now your money is working in two places at the same time. Yeah Cause, even though you took a loan against the policy, it's still growing as if you'd never taken a loan policy.
Speaker 2:It's still growing as if you'd never taken a loan, and now you also have this rental property that goes with it. This is what we call velocity of money, and they work in conjunction with each other. If something happens to you and you're no longer able to work, we're able to put waiver of premium on the policy, so now the insurance company pays the premium for the rest of your life.
Speaker 1:Whoa, that's pretty cool, kind of cool, that is kind of cool.
Speaker 2:Okay, so that reduces your outflows, because now the insurance company picks up that portion, right, okay. You've also protected your economic life value. You've also given yourself a tool so that, when you retire, you shift and this is something that a lot of people don't understand. When you are in your working years, this is income protection. When you retire, this is asset protection. Okay, so let's look at it from the basis of our income. We didn't quite get to where we wanted to be, and we don't have the income that we thought we had.
Speaker 1:Right.
Speaker 2:So I'm going to do a reverse mortgage on my home, but it really kills me to do it because I want to be able to leave something to my kids. How do we still leave something to your kids? I don't know the death benefit on that whole life policy. Just took care of the house.
Speaker 1:Wow.
Speaker 2:You insured the asset, now you can go spend it.
Speaker 1:You should be an insurance salesman. I'm buying from you today. Let's get a plan going, all right.
Speaker 2:When you go into retirement, we're not only climbing, we're coming off the mountain.
Speaker 1:Yeah.
Speaker 2:Okay. So and this is a question that a lot of times I'll ask people way back in the beginning why do you save money for the future?
Speaker 1:Enjoy life, that's what I would say.
Speaker 2:What do you mean by enjoy life?
Speaker 1:Being able to go out, live the same kind of lifestyle I've had, maybe take more trips. Okay, buy something nice for the wife.
Speaker 2:All right. Are you talking about that in your working years or at the end of your working years? End of my working years, end of your working years? So, in essence, what you're telling me is Brad, I'm saving all of this money so that someday I can spend it.
Speaker 1:Yes, that's the whole reason, that's the whole reason and spend it.
Speaker 2:Yes, that's the whole reason. That's the whole reason. Yeah, I love it.
Speaker 2:So I go to conferences and stuff all the time to learn and gather as much information as I can. And I'm at this one and the speaker comes out on stage and there were some really expensive acronyms in the room with me and they wanted to make sure that you understood that they'd spent a lot of time and money getting these acronyms. Yeah, I found this when the presenter asked the question and it was that why do we save money for the future? He goes I'll give you a minute, give me your answers. So there are these people crafting out these incredible answers to this question and and I'm sitting there listening to him and I'm watching like man. I wish I was that smart man. I wish I could you know articulate something like that. After about 10 minutes he said I want to thank everybody for your participation on that. Isn't the whole reason we save money for the future is to spend it.
Speaker 1:It was just silence and I was like oh man, now you're just as smart as everyone else. Right, he leveled the playing field.
Speaker 2:He leveled it for me and I felt so good about myself after that. Yeah, because that was always been our focus, is the whole reason. You're saving for the future so you can spend it, so shouldn't we be protecting and maximizing your ability to spend?
Speaker 1:Yeah, definitely Okay.
Speaker 2:A 401k is a growth tool. Ira, whatever acronym they want to put behind it it's an accumulation tool.
Speaker 1:Okay.
Speaker 2:Okay.
Speaker 1:So these growth accumulation tools, workplaces usually provide them. They're just that. They're just for you to accumulate wealth.
Speaker 2:They're growth and accumulation. Okay, if they were meant for spending, here's what I want you to think about. What do they tell you is the average rate of return that we get in these portfolios?
Speaker 1:I don't know like below 10%.
Speaker 2:It is below 10%. We typically hear 8% Okay. On average we get 8%, Okay. So if we average 8%, why does all of the data tell us that the safe spending rate to give us a 95% chance of not running out of money before you run out of birthdays?
Speaker 1:4%? Hmm, that doesn't seem to make sense that doesn't make very much sense.
Speaker 2:No, yeah, you're looking at anything. Wait a minute. If it's averaging eight and I can only spend four, shouldn't it be growing? It should be, should be, it's not how it's designed.
Speaker 2:It's not his purpose. It's designed to accumulate. There's a difference between average versus actual. The next time you fill up your gas tank, I want you to look at what the dashboard tells you was the average fuel economy and then, after your tank's done being filled up, take the number of miles divided by the number of gallons that you put into it and see what your real fuel economy is. So my son and I, we just got back from Wyoming. There was a competition out there last weekend. My dash told me in the truck I was averaging 24.3 miles per gallon. It's pretty solid. That's pretty dang solid. Okay, yeah, because I've got the big V8 in in my half ton. Yeah, but when I did the math I only got 21 and a half, which is still pretty killer. Yeah, it's a couple miles off, but for that truck. But you look at that and you're like wait a minute, that's three miles per gallon different yeah on 24 gallons of gas.
Speaker 2:That's another 70 miles that I should have been able to pick up. Think about that. On every tank it adds up.
Speaker 1:Every year. That adds up, it adds up.
Speaker 2:So if the average is eight and the actual is closer to six than what just happened to your portfolio Over your lifespan, when you thought you were going to get a million because of the average of eight, you wind up with half a million.
Speaker 1:Yeah that makes a big difference.
Speaker 2:It makes a huge difference, huge difference. That's just for market volatility. In addition to that, you have asset management fees. Okay, okay, people talk about their uh, the funds that they have purchased and they say, oh, I don't have fees, I bought the no load funds. We don't understand what no load means.
Speaker 2:When I was first starting with Kiyosaki and my wife is, she was at one of the major brokerages. She was a financial planner. What had happened is they had exposed the sales loads commissions associated with all these different funds, and when people began to see and understand how astronomical they were and the detriment that it had on the portfolio, there were a few fund managers out there that were really smart and they said we're no longer going to pay sales commissions, so there's no longer a load. These are mutual funds, are no load funds. What did people hear? No management fees. Yeah, there's still management fees. There's still management fees. They charge you 0.05% for market research. They charge you 0.05. Don't think about them very much, but they add up. See these fund managers they didn't become billionaires by being missionaries. Yeah, okay, they made billions by managing massive amounts of money with itty bitty fees associated with it.
Speaker 1:Interesting.
Speaker 2:On average, you're looking at about 1%, right, okay. And then you have the management fee, because you got to pay the financial advisor and the brokerage house and you've got to pay for everything to be taken care of, and that's going to range somewhere between 1.5%, 2.5%. Yeah, so a lot of people really. When you go through and you find everything, they're closer to about 2%.
Speaker 1:It seems like these averages are kind of far off. What would you say to the individual, the senior or younger type of person who wants to learn more about these things? Like where would you kind of point them? Because I feel like there's no fine print that tells you or, like you know, it's all finer print it is finer print.
Speaker 2:It's confusing print. Yeah, so here's the thing. It's all in there, sure, but it's confusing and it was written in lawyer speak for a reason.
Speaker 1:Yeah.
Speaker 2:I don't understand that crap. Most people don't. Yeah, I don't understand that crap. Most people don't. Yeah, you know, if you ever can't sleep at night, just pick up the you know proforma on your 401k and start reading. I guarantee you'll be gone in 10 minutes. Either that or you're going to be taking Excedrin for a migraine.
Speaker 2:It's really confusing and there's. It's hard to decipher, it's hard to pick it apart, sure, and so we don't always see what is actually in there. You are starting to get some good information that is out there, but a lot of it is still based on the stump that somebody's beating. Okay, okay, like you know, there's some YouTube channels out there regards to life insurance. That, like Caleb Gillian I think is how you pronounce his last name Mr Burr and several others that they give some really good information on how the contracts actually function, sure, but then nobody wants to talk, you know. Then you have a group of people that talk a lot more about managed money, but I don't know that they really get into the fine details and everything, and so what ends up happening is you have people beating the stump in one specific area Instead of looking at it saying, no, actually we kind of need all of these different areas.
Speaker 2:If my employer is going to give me a 3%, you're going to match 100% of my contribution up to 3%. I'm going to put in my 3% contribution Because I'm going to get that match straight out of the gate. That's something I'm not going to give up. Where I'm going to put the excess money that I've captured in my reservoir? Now I want to look at something that's going to create additional cash flow that is tax advantaged, so that I can do some of these other things when I get to retirement and I look at how is my 401k going to spend? Do I want to spend it out of my 401k that only lets me spend 4%, or do I want to look at a contract that guarantees me 6% and it will go up in value as far as my income? Every year the market goes up. Every year I have a birthday.
Speaker 1:Wow.
Speaker 2:Right, yeah, you would definitely want that, and yet there are people out there that say it's the biggest scam in the world. Huh, yeah, maybe they don't get paid on them. Um, I didn't say that. You got to look at where the where the money is being, where it's going. Yeah, okay, I've. I've seen some really big names out there swear up and down. I would rather rot in hell than sell a client an annuity. Why would you do that when you can increase their distribution by 50% and guarantee they'll never run out?
Speaker 1:Yeah.
Speaker 2:Why would you do that? Hey, that doesn't make sense to me.
Speaker 1:No.
Speaker 2:I would rather make a whole lot less money off of that account and guarantee my client has a 50% greater income distribution that will increase every year for the rest of their life, than take a higher commission Right. And the higher commission comes out in little tiny increments every single year in a management fee, right.
Speaker 1:We've, I guess, kind of like looping back to coming down on the mountain and wrapping up here. You mentioned a lot of things that I really liked on and touched on that we touched on. We touched on cash flow. We touched on building your moat, building your fortress. We touched on the building your reservoir and controlling the output of it. We touched on taxes. We touched on retirement strategy Of all of these pillars of finance. If you were to have like a magic wand and wave away one issue people come across or one thing that really sets people back, what would you wish away?
Speaker 2:I don't know that we could really wish anything away, and that's why we build a fortress.
Speaker 1:That's a solid answer.
Speaker 2:Because we don't know what life is going to throw at us.
Speaker 2:Yeah, we just don't. People look at it and they're like why would I buy millions of dollars in death benefit coverage from a life insurance policy when I'm 30 years old? Well, I know there was a group of guys that my father-in-law was working with back in the real estate boom was around 2006. They were business partners and one looked at it and he's like you know what that makes sense, I'm going to do it Right. And the other couple of business partners said that's absolutely stupid, it's a waste of money, we're too young. Blah, blah, blah. Right, they were coming back from putting a land acquisition deal together in a plane that one of them owns. They hit a wind share over Utah Lake, killed all three of them. When it went down Dang, only one of them left their family in the house with the cars, with the ability to fund the education with the you know what's the likelihood of that happening?
Speaker 1:Not really big, but still they were able to do that.
Speaker 2:But if it happens, what do you want for them? How many people actually get disabled on a month on it, you know, each year and are unable to work. It's not real huge. But if it did, how much of it do you want to protect your auto insurance? Everybody drives around with the minimums, not understanding that if you cause an accident that exceeds those minimums, the insurance company is going to cut a check instantly and then you're getting sued. For the rest, you self-insured to pay those damages on your own, yeah, and that's going to come out of the equity of your house. It could be coming out of your future income. It could be coming out of you.
Speaker 2:You cause the damage. They're going to come and collect in one way or another. So it an extra $30 a month. I've hired. I've got the insurance company on retainer because not only I put my limits at the minimum that I needed to get the umbrella policy, yeah, so that's kind of the deductible to get to the umbrella. If the insurance company is on the hook for a few million dollars, how many attorneys are they sending? All of them, all of them.
Speaker 2:All of them. Okay, who pays for them?
Speaker 1:You do no.
Speaker 2:No, who does the insurance company?
Speaker 1:does. That's why they're sending. They are yeah, because they're on the hook for millions. They're sending in the Calvary.
Speaker 2:They are sending the Calvary to save your bacon because if they lose, they lose, not you, them them. Yeah, 30 bucks a month extra, heck, yeah, I'm paying that, definitely. So I've created that moat, that's that, you know, making sure they didn't get to that drawbridge. I've protected my wealth.
Speaker 1:Yeah.
Speaker 2:And that's why we create a fortress. We don't know what's going to happen. Yeah, what we can do is structure your cash flow to make sure that not only are you able to fund the construction of the moat and all of the protections, but you're also able to build the fortress that contains all of the wealth inside of it.
Speaker 1:I think you kind of perfectly summarized kind of the main ideas that we went over today. I loved that. I really did. Thank you Everyone. This has been Brad Bennett, financial wizard. Building you a moat, building you a fortress kind of selling me on insurance, but it's been a pleasure. Building you a moat, building you a fortress kind of selling me on insurance, but it's been a pleasure. Brad, thanks so much for coming on the show.
Speaker 2:Thank you, I appreciate the invite.