Episode Transcript
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Speaker 1 (00:07):
This is News Radio seven to ten WNTM. Uncle Henry
here with John McNeil and Virginia O'Brien of Mobile Bay
Financial Solutions. You can find Mobile Bay Financial Solutions online
at MB financial Solutions dot com. That's MB financial Solutions
dot com. Telephone number two five to one sixty six
(00:30):
six five thousand if you'd like to call and make
an appointment or just call and ask a question. Two
five to one six sixty six five thousand. That is
the number for Mobile Bay Financial Solutions. The commentary presented
herein contains the opinions of Mobile Bay Wealth Management LLC,
a registered investment advisor. This information should not be relied
(00:50):
upon for tax purposes. Is based on sources believed to
be reliable. No guarantee is made to the completeness or
accuracy of this information. Mobile Bay Wealth Management LC shall
not be responsible for any trading decisions, damages, or other
losses resulting from or related to the information, data analysis,
or opinions contained herein or their use which do not
(01:14):
constitute investment advice. Are provided as of the date written,
are provided solely for informational purposes, and therefore are not
an offer to buy or sell a security. Investments and
securities are subject to investment risk, including possible loss of principle.
Prices of securities may fluctuate from time to time and
may even become valueless. This information has not been tailored
(01:36):
to suit any individual. John McNeil, how are things going
at Mobile Bay Financial Solutions.
Speaker 2 (01:41):
Uncle Henry? As we record this, we're in the height
of Mardi gross season. Yes, indeed, and it's almost summertime.
Feeling outside. It probably snowing next week. I kay, macaf
is from one day you've got ice on your windshield,
the next you have polling on you exactly, Yes.
Speaker 1 (01:57):
But it's beautiful.
Speaker 2 (01:58):
Everything here at Mobile Bay Finance is Uh, we're just
rocking along. We've got a couple of new employees and
just really really love what we do.
Speaker 1 (02:09):
Well that and that is fantastic. I think people can tell. Yeah,
I think people can tell. For one hundred and three
years now doing one hundred and four years. Wow.
Speaker 2 (02:16):
Trying to catch up with Lasey.
Speaker 1 (02:17):
Greer at Greer's Grocery Store, Well, it's going to take
a while.
Speaker 2 (02:20):
I think they've been in one hundred and ten years.
Speaker 1 (02:22):
Close to it. I think they're they're either in year
one O eight or one O nine this year. Yeah,
so uh uh. And it's great to have that continuity
of service here on the Gulf Coast for both of
your businesses. That's right.
Speaker 2 (02:34):
And we're related.
Speaker 1 (02:36):
Oh okay, yeah, my.
Speaker 2 (02:39):
The Greers are my first cousins. Okay, my mother and
her sister who married a Greer. My grandfather who started
our business was also their grandfather.
Speaker 1 (02:52):
Oh wow, okay, yeah, how about that? Yeah, I about that.
I didn't realize that.
Speaker 2 (02:56):
Uh huh.
Speaker 1 (02:57):
Now, and you the listener. Of course, we don't have
pictures for ready. We still don't have pictures in radio.
We're working on it. But when John McNeil said we're related,
then I could see the look on your faces. You
were trying to do the math. You were looking up there.
Speaker 2 (03:10):
Where did that tree branch go go?
Speaker 1 (03:12):
You know?
Speaker 2 (03:13):
All right?
Speaker 1 (03:14):
Well, you can find out more about John McNeill and
Virginia Brian of Mobile Bay Financial Solutions at their website
mbfinancial Solutions dot com. You can also email them. In fact,
we have some emails from listeners asking questions. If you'd
like to send a question in the email addresses info
at mobifs dot com. That's info at mobifs dot com.
(03:36):
Now let's start off with an email we've got from
Lynette in Satsuma, Alabama. Lynette writes, my husband does everything
regarding our finances, which has always workforce in our marriage.
The problem is that my adult kids are a little
worried about what would happen should one of us pass
and want to know what kind of accounts we have
set up. I feel so silly that I don't know
(03:59):
what to tell them, and I think they're hesitant to
ask my husband because he's always been so private and
protective about it. What's the easiest way to navigate this?
Speaker 2 (04:08):
This is not an unusual problem, Uncle Henry. It's not
men sexist or anything, but men have traditionally taken care
of household finances, so we see this a lot. One
thing I would suggest, even though Lynette's husband, as she said,
is kind of private, it may help her a great
(04:29):
deal help her and her family if she would set
an appointment, come in and sit down and talk to us.
Let us do a deep dive as far as what
they've got, put together the plan that they have, and
that way she knows kind of what's going on, she
knows who to come to if something were to happen,
and better yet, somewhere, maybe not the first meeting, but
(04:50):
somewhere down the road. We strongly encourage people to involve
their adult children, or at least one of them, somebody
else that knows what's going on, where the money is,
what the purpose of the money is for where it's
going to go when they pass away, all that type thing,
because it really makes it easier, speaking of the continuity
(05:12):
passing from one generation to the next. It lets them
know what's in place. And we may have several buckets
set up to provide for long term care for mom
and dead. Well, mom needs to know that. She meant,
I know it right now if they have such a thing,
but the kids certainly need to know that. And we
also talk to them about the legal planning. Does Lynette's
(05:33):
husband Do they have their legal stuff, their will, power
of attorney, healthcare directive, of all those things. We help
them with all that, making sure that the whole plan
is in place in case something does happen.
Speaker 1 (05:45):
Well, you've taught me that even if their financiers are fantastic,
if no one knows about it right and somebody passes,
it's going to be it's just going to slow things
down dramatically. If anybody needed access to funds.
Speaker 2 (06:01):
It does. And we have people who walk in and
that may not be a client, but they've heart us
on the radio or somewhere and they come to see
us and they bring in boxes of stuff, and you know,
maybe a third or half of the accounts that they're
finding aren't in existence anymore. And so it really slows
things down if they don't know where everything is and
(06:23):
how to access it. That's why the legal planning is
so very important, so that the next generation can get
to that before they go to probate or even going
into probate. They got to know where it is. If not,
they can drag on forever.
Speaker 1 (06:36):
Okay, we've got another email here. This one is from
Paul in Spanish fort and Paul wrightes.
Speaker 2 (06:42):
So.
Speaker 1 (06:42):
I'm seventy four years old and still working making about
one hundred and fifty thousand dollars a year. I have
over a million dollars in my four oh one K,
which I haven't had to start taking distributions from since
I'm still working and contributing to it. However, when I
retire in a couple of years, I'm thinking that my
rmds are going to be massive. Anything I can do
(07:04):
to start planning for that.
Speaker 2 (07:07):
Yeah, this is something that we talk to people a
lot about before they reach the RMD age, which right
now at seventy three. Unless you're a little bit younger,
it may be age seventy five before you have to
start taking money out. And like he says, he's not
because his money's in a four oh one K and
he's actively employed. If that was in an IRA, he
(07:27):
would have to even though he's employed, he'd have to
start taking money out. But we sit down with our
clients and say, look, you've got this tax time.
Speaker 1 (07:34):
Bomb sitting here.
Speaker 2 (07:36):
You're going to be forced to take money that you
may not need because the rm ds can be quite hefty,
especially with a portfolio of over a million dollars. So
we talked to our clients before they get to retop
to RMD age, they're not required to take it out,
but we may want to take some out. He says
(07:57):
he's making about one hundred and fifty thousand dollars a year, Well,
he can take out another He could take out fifty
thousand dollars out of for one case, slash IRA without
going to the next income tax bracket. We call that
tacket creep of bracket creep. So you know, you may
not need more income now, but it's better to get
(08:18):
it now, pay the taxes now, reinvest it in, or
to spend it and not have to jump up into
a higher tax bracket because you're taking it. So we
look at that as a planning opportunity. Also, if he's
charitably inclined, we can make qualified charitable distributions. You've SARTs
(08:38):
talking about qcds. If he gives money to charity, he's
probably like ninety five percent of everybody who just writes
a check to the church every week or every month
or at the end of the year or whoever. We
can send it directly from your IRA to the charities
and you don't have to pay taxes on it. So
there's a lot of planning that he can do to
(09:00):
mitigate this future tax bomb.
Speaker 1 (09:03):
All right, we have one more email here. This is
from Gary who says he lives on the western shore
of Mobile Bay. And Gary says, that's.
Speaker 2 (09:11):
Down the bay.
Speaker 1 (09:12):
Okay, oh, thank you. He lives down the bay. Gary,
down the bay, Gary, down the bay. Rights in his email,
long term care insurance is so expensive. I've always been
in good health, so I'm inclined to roll the dice
and do without. It Is that dumb, he asks?
Speaker 2 (09:33):
I hate to say Gary is dumb, but you're more
likely Gary, depending on his age. If he's like sixty five,
let's just pick an age, he's about twelve times more
likely to need long term care than he is to die.
And he's gonna die. But most everybody, one of us
(09:54):
is going to need long term care. If there were
three people here, two of the three are going to
need long term care right they die. We don't know
how how long they're going to need long term care.
Men need care before they die. They need somebody taking
care of them, whether it's at home or a nursing home,
for an average of about three point eight years. Women
need care for almost six years before they die. You know,
God made women different than men in a number of ways.
(10:17):
But it is. I'm not going to say you're dumb, Gary,
but there are ways to look at things. You mentioned
that long term care insurance is expensive, Well, I don't
know what long term care you're looking at. True traditional
long term care can be expensive, and it's kind of
like core insurance. You use it or you lose it.
But there are also all termsive that George Bush put
(10:38):
in tax law, making it an incentive for the insurance
industry to come up with other ideas where you can
invest in certain contracts where if you don't use it,
you still have the money, but if you need it,
it's there to pay for long term care and it
doesn't cost anything. It's your money sitting there. But it
can be used for long term care a lot. It
(11:00):
covers a lot and there's no cost to it. So
there are things that can be done that alleviate that
cost but still have the care you need to take
care of you. So I encourage Gary not to sit
around and do nothing.
Speaker 1 (11:12):
Jemmy Neil, I remember hearing a lot about long term
care insurance in the early two thousands. Yes, and I
think there was so much sticker shock for some people
that they heard about the concept and never wanted to
hear about it again. Yes, seriously. Yeah, they may not
realize that they have alternatives.
Speaker 2 (11:29):
Like you've talked about, they have alternatives. The Pension Protection
Act is what if George Bush put in place, and
so there are a lot of alternatives to the traditional
expensive long term care insurance. It's good. It's still good
if you're young and you buy it. People say, well,
I'm young, I don't you know, I don't need it
right now. Well, about sixty percent of the people that
(11:50):
need long term care or under the age of sixty,
so it may be and a lot of employers offered
is a payroll deduction that type thing. But for some
who does not want to pay a premium, we've got
some alternatives for that.
Speaker 1 (12:04):
You're listening to John McNeil of Mobile BAF Financial Solutions.
The website mbefinancial solutions dot com. You can call and
make an appointment to see John McNeil in Virginia O'Brien
by calling two five to one six six six five thousand.
That's two five to one sixty six six five thousand
to reach Mobile BAEF Financial Solutions. Now, let's talk a
bit about real estate in retirement. Real estate can play
(12:27):
an important role in some folks retirement plans. So I
want to ask you, John McNeil, about your general view
of some uses of real estate that I'm going to
throw at you, and I'd like to see what you
think of them. If you if you ever use these
or incorporate these into your client's plans. First of all,
rental property, what do you think of that?
Speaker 2 (12:46):
Very popular, very lucrative real estate has always well, that's
had some ups and downs two thousand and eight, but
overall it has been a very, uh well, very good
investment over time rental property. If people are buying individual
(13:07):
houses and reading them. We have a number of clients
that have multiple rental houses. They produce a lot of income,
a lot of tax benefits, but you've got to unwind
that at some point. People as they get older, they
get tired of the three t's, tenants, taxes, and toilets. Okay,
(13:29):
so there's some drawbacks to rental property, but it is
something that you can unwind. We have probably the fourth
quarter of last year, we probably helped people get out
of rental properties, whether it be commercial real estate or
individual home homes or multi tenant properties by creating a
(13:51):
trust and putting them putting the properties into a trust,
selling it and the trust does not pay any taxes.
So if you have a let's say you've got a well,
we have one client that had five hundred and fifty
thousand dollar house in California. He had properties all over
the place still does have. Somebody's slowly putting these into trust.
He had a cost basis of around one hundred thousand
(14:14):
and this piece this house had grown to five hundred
and fifty thousand. If he sold it, he was gonna
have to pay taxes on four hundred and fifty thousand dollars.
He didn't want to do that. His count said, this
is this is going to be bad. You need to
get some advice. So we put it into We put
that piece of probably it was the first piece we did,
because he's done several more since. But he put that
(14:35):
five hundred and fifty thousand dollars house into the trust
and sold it. When he put it in there, he
got an income tax deduction for the portion of the
value of the house, and he did not have to
pay any capital gains taxes. Income tax deduction was around
one hundred and sixty thousand dollars, so he didn't have
to pay any taxes on the five hundred and fifty
(14:57):
or four and fifty, which was his gain. He got
an income tax deduction of around one hundred and sixty
thousand dollars, and we use that one hundred and sixty
thousand dollars tax deduction to do an ira wroth conversion.
He had a big ira, so we converted one hundred
and fifty one hundred and sixty thousand dollars with an
ira to a roth ira which is not subject to
(15:19):
rm ds like Gary or whoever Geary was talking about
on his rm DS. And he gets an income from
the trust off of that five hundred and fifty not
the after tax money that he would have had to
invest for as long as he and his wife for
a life, very attractive income. And he's rid of the property.
(15:39):
He doesn't have to deal with tenants, taxes, and toilets.
So there are we're big on rental property, but buyer
beware because it can be a lot of work.
Speaker 1 (15:50):
All right. Here, here's another real estate, a use of
real estate in retirement home equity line of credit.
Speaker 2 (15:58):
Very very convenient way to get money out. You know,
if you've got a lot of people strive to have
their house paid off, their mortgage paid off before they retire.
Now they got all this equity in their house and
they want to do some remodeling, so sure do they
take it out of their investments, just out of their
savings or do you go in and get an equity
(16:19):
line of credit on your house. It's like a mortgage, right,
and they give you a check and you do you work.
It's not as popular right now because interest rates are high,
you know, mortgage rates, but the acquity line of credit
is typically a lower interest rate than a mortgage. The
payback schedule is very easy to design to meet your budget,
(16:41):
and you can tap into that equity that's built up
inside your home.
Speaker 1 (16:45):
I remember after Katrina a lot of people getting home
equity lines of credit just in case there was another storm,
because their deductibles had gone sky high. Yeah, and they
wanted to have that home equity line just ready, just
in case as a storm and they needed to pay
a deductible.
Speaker 2 (17:02):
Yeah. It's very easy to set up, and you don't
have to pay interest until you tap into an equity
line of credit. You say, let's say you've got a
five hundred thousand mile of the house and you want
to go get an equity line of credit for one
hundred thousand dollars. Well, that one hundred thousand is just
sitting there. You don't pay anything until you actually draw
on that. So you may say, well, we're gonna remodel
the kitchen, were gonna spend twenty five thousand, So you
(17:23):
use twenty five thousand of your line of credit, still
have seventy five in reserve, and all you do is
pay interest on that twenty five thousand you took out.
So it is a safety net that you can fall
back on.
Speaker 1 (17:37):
Now, what about is it pronounced reachs? The real estate
investment trust reats? What do you think of those?
Speaker 2 (17:43):
Some are good, some are real bad. The rates are
think of them like a mutual fund. You're buying into
a rate. In these different rates, they have different types
of ruts where they the reate offering. They're going out
and buying real estate, whether it be multi like apartment complexes,
(18:06):
or warehouses or just a number of different things, and
the ret pays out the income from those properties to you.
And then also you have the appreciation.
Speaker 1 (18:17):
In the reats.
Speaker 2 (18:19):
If you're going to be buying putting money into reats,
it needs to be a registered rate, not an unregistered rate,
because registered rates or are supervised and they have to
follow certain guidelines. Unregistered roats, if you read the fine
print when you go into them, it's totally up to
the discretion of the holders of the reat, whether they
(18:41):
can make distributions or not, or whether you can sell
at any time. Those are very very you want to
shy away from those, but some routs are very popular.
We do ten thirty one exchanges into reats registered rates.
Where somebody has an apartment complex, they can ten thirty one,
(19:02):
which means they can they can swap that piece of
property for another piece of property. You don't have to
pay taxes until until you sell it way down the road.
But here we can take somebody who has multiple rental
houses and they can put those into a exchange ten
(19:23):
thirty one exchange into a big rate and may have
a billion dollars worth of property in it. And rather
than owning individual houses, you own part of this registered
rate and it kicks off income and you also have
appreciation of it. That way you don't have to deal
with the taxes tenants and toilets. Somebody else is doing
it for you.
Speaker 1 (19:42):
We only have a couple of minutes left. I can't
wait to hear what you have to say about reverse mortgages.
Speaker 2 (19:47):
Yeah, you see that on TV all the time.
Speaker 1 (19:49):
Yes, and I've all and I don't know that we've
only talked about it maybe once or twice in all
the years you've been on this show. What about reverse mortgages?
Speaker 2 (19:56):
Do your homework. We don't do those. You have to
go through through a reverse mortgage company, but they're heavily
laden with fees and it may not be the best option.
We encourage people to come talk to us, tell us
what you're what you're trying to do. Uh, it's a it's.
Speaker 1 (20:14):
A reverse mortgage.
Speaker 2 (20:15):
In other words, you borrow money to buy a house
and then you pay whoever you the mortgage company a monthly. Note,
a reverse mortgage is you're the bank and somebody buys
it and pays you a monthly either a lump sum
or a monthly distribution to you as long as you're alive,
and then when you pass away, the kids inherit, whatever's left,
(20:35):
whatever they hadn't paid out to you. So but there
are a lot of fees involved, and usually I have
not seen a good deal on a reverse mortgage. We
don't see them very often because people, once they get
the details, they shy away from it.
Speaker 1 (20:48):
Oh all right, hey, what we have time for one
one more quick one? What about house flipping.
Speaker 2 (20:54):
We've had clients over the years that really made a
lot of money flipping houses. Oh really, Okay, the beach especially,
you know where prices were going up by twenty five
and fifty percent a month, so they'd buy a house
either it was in distress. After two thousand and eight,
they were buying foreclosures and then flipping them and then
take that money and flip into another one, take that
(21:15):
and flip into another one. Well, eventually the flipping somebody
whoever owns that house last, or apartment or a condo,
they got burned and uh, now they're not worth what
they were when they first started. But taxes eat them
up because they're short term capital gains. But people were
making a lot of money, uh, in flipping houses, flipping
(21:37):
real estate.
Speaker 1 (21:39):
All right, Well, John McNeil, were out of time. If
you want to make an appointment with John McNeill and
Virginia Brian, give them a call. The number for Mobile
Bay Financial Solutions is two five to one sixty sixty
six five thousand. That's two five to one six six
sixty five thousand for Mobile Bay Financial Solutions. John McNeil,
thank you, and roll tide, Old Tad, Uncle Henry
This is News Radio seven to ten WNTM. Uncle Henry
here with John McNeil and Virginia O'Brien of Mobile Bay
Financial Solutions. You can find Mobile Bay Financial Solutions online
at MB financial Solutions dot com. That's MB financial Solutions
dot com. Telephone number two five to one sixty six
(00:30):
six five thousand if you'd like to call and make
an appointment or just call and ask a question. Two
five to one six sixty six five thousand. That is
the number for Mobile Bay Financial Solutions. The commentary presented
herein contains the opinions of Mobile Bay Wealth Management LLC,
a registered investment advisor. This information should not be relied
(00:50):
upon for tax purposes. Is based on sources believed to
be reliable. No guarantee is made to the completeness or
accuracy of this information. Mobile Bay Wealth Management LC shall
not be responsible for any trading decisions, damages, or other
losses resulting from or related to the information, data analysis,
or opinions contained herein or their use which do not
(01:14):
constitute investment advice. Are provided as of the date written,
are provided solely for informational purposes, and therefore are not
an offer to buy or sell a security. Investments and
securities are subject to investment risk, including possible loss of principle.
Prices of securities may fluctuate from time to time and
may even become valueless. This information has not been tailored
(01:36):
to suit any individual. John McNeil, how are things going
at Mobile Bay Financial Solutions.
Speaker 2 (01:41):
Uncle Henry? As we record this, we're in the height
of Mardi gross season. Yes, indeed, and it's almost summertime.
Feeling outside. It probably snowing next week. I kay, macaf
is from one day you've got ice on your windshield,
the next you have polling on you exactly, Yes.
Speaker 1 (01:57):
But it's beautiful.
Speaker 2 (01:58):
Everything here at Mobile Bay Finance is Uh, we're just
rocking along. We've got a couple of new employees and
just really really love what we do.
Speaker 1 (02:09):
Well that and that is fantastic. I think people can tell. Yeah,
I think people can tell. For one hundred and three
years now doing one hundred and four years. Wow.
Speaker 2 (02:16):
Trying to catch up with Lasey.
Speaker 1 (02:17):
Greer at Greer's Grocery Store, Well, it's going to take
a while.
Speaker 2 (02:20):
I think they've been in one hundred and ten years.
Speaker 1 (02:22):
Close to it. I think they're they're either in year
one O eight or one O nine this year. Yeah,
so uh uh. And it's great to have that continuity
of service here on the Gulf Coast for both of
your businesses. That's right.
Speaker 2 (02:34):
And we're related.
Speaker 1 (02:36):
Oh okay, yeah, my.
Speaker 2 (02:39):
The Greers are my first cousins. Okay, my mother and
her sister who married a Greer. My grandfather who started
our business was also their grandfather.
Speaker 1 (02:52):
Oh wow, okay, yeah, how about that? Yeah, I about that.
I didn't realize that.
Speaker 2 (02:56):
Uh huh.
Speaker 1 (02:57):
Now, and you the listener. Of course, we don't have
pictures for ready. We still don't have pictures in radio.
We're working on it. But when John McNeil said we're related,
then I could see the look on your faces. You
were trying to do the math. You were looking up there.
Speaker 2 (03:10):
Where did that tree branch go go?
Speaker 1 (03:12):
You know?
Speaker 2 (03:13):
All right?
Speaker 1 (03:14):
Well, you can find out more about John McNeill and
Virginia Brian of Mobile Bay Financial Solutions at their website
mbfinancial Solutions dot com. You can also email them. In fact,
we have some emails from listeners asking questions. If you'd
like to send a question in the email addresses info
at mobifs dot com. That's info at mobifs dot com.
(03:36):
Now let's start off with an email we've got from
Lynette in Satsuma, Alabama. Lynette writes, my husband does everything
regarding our finances, which has always workforce in our marriage.
The problem is that my adult kids are a little
worried about what would happen should one of us pass
and want to know what kind of accounts we have
set up. I feel so silly that I don't know
(03:59):
what to tell them, and I think they're hesitant to
ask my husband because he's always been so private and
protective about it. What's the easiest way to navigate this?
Speaker 2 (04:08):
This is not an unusual problem, Uncle Henry. It's not
men sexist or anything, but men have traditionally taken care
of household finances, so we see this a lot. One
thing I would suggest, even though Lynette's husband, as she said,
is kind of private, it may help her a great
(04:29):
deal help her and her family if she would set
an appointment, come in and sit down and talk to us.
Let us do a deep dive as far as what
they've got, put together the plan that they have, and
that way she knows kind of what's going on, she
knows who to come to if something were to happen,
and better yet, somewhere, maybe not the first meeting, but
(04:50):
somewhere down the road. We strongly encourage people to involve
their adult children, or at least one of them, somebody
else that knows what's going on, where the money is,
what the purpose of the money is for where it's
going to go when they pass away, all that type thing,
because it really makes it easier, speaking of the continuity
(05:12):
passing from one generation to the next. It lets them
know what's in place. And we may have several buckets
set up to provide for long term care for mom
and dead. Well, mom needs to know that. She meant,
I know it right now if they have such a thing,
but the kids certainly need to know that. And we
also talk to them about the legal planning. Does Lynette's
(05:33):
husband Do they have their legal stuff, their will, power
of attorney, healthcare directive, of all those things. We help
them with all that, making sure that the whole plan
is in place in case something does happen.
Speaker 1 (05:45):
Well, you've taught me that even if their financiers are fantastic,
if no one knows about it right and somebody passes,
it's going to be it's just going to slow things
down dramatically. If anybody needed access to funds.
Speaker 2 (06:01):
It does. And we have people who walk in and
that may not be a client, but they've heart us
on the radio or somewhere and they come to see
us and they bring in boxes of stuff, and you know,
maybe a third or half of the accounts that they're
finding aren't in existence anymore. And so it really slows
things down if they don't know where everything is and
(06:23):
how to access it. That's why the legal planning is
so very important, so that the next generation can get
to that before they go to probate or even going
into probate. They got to know where it is. If not,
they can drag on forever.
Speaker 1 (06:36):
Okay, we've got another email here. This one is from
Paul in Spanish fort and Paul wrightes.
Speaker 2 (06:42):
So.
Speaker 1 (06:42):
I'm seventy four years old and still working making about
one hundred and fifty thousand dollars a year. I have
over a million dollars in my four oh one K,
which I haven't had to start taking distributions from since
I'm still working and contributing to it. However, when I
retire in a couple of years, I'm thinking that my
rmds are going to be massive. Anything I can do
(07:04):
to start planning for that.
Speaker 2 (07:07):
Yeah, this is something that we talk to people a
lot about before they reach the RMD age, which right
now at seventy three. Unless you're a little bit younger,
it may be age seventy five before you have to
start taking money out. And like he says, he's not
because his money's in a four oh one K and
he's actively employed. If that was in an IRA, he
(07:27):
would have to even though he's employed, he'd have to
start taking money out. But we sit down with our
clients and say, look, you've got this tax time.
Speaker 1 (07:34):
Bomb sitting here.
Speaker 2 (07:36):
You're going to be forced to take money that you
may not need because the rm ds can be quite hefty,
especially with a portfolio of over a million dollars. So
we talked to our clients before they get to retop
to RMD age, they're not required to take it out,
but we may want to take some out. He says
(07:57):
he's making about one hundred and fifty thousand dollars a year, Well,
he can take out another He could take out fifty
thousand dollars out of for one case, slash IRA without
going to the next income tax bracket. We call that
tacket creep of bracket creep. So you know, you may
not need more income now, but it's better to get
(08:18):
it now, pay the taxes now, reinvest it in, or
to spend it and not have to jump up into
a higher tax bracket because you're taking it. So we
look at that as a planning opportunity. Also, if he's
charitably inclined, we can make qualified charitable distributions. You've SARTs
(08:38):
talking about qcds. If he gives money to charity, he's
probably like ninety five percent of everybody who just writes
a check to the church every week or every month
or at the end of the year or whoever. We
can send it directly from your IRA to the charities
and you don't have to pay taxes on it. So
there's a lot of planning that he can do to
(09:00):
mitigate this future tax bomb.
Speaker 1 (09:03):
All right, we have one more email here. This is
from Gary who says he lives on the western shore
of Mobile Bay. And Gary says, that's.
Speaker 2 (09:11):
Down the bay.
Speaker 1 (09:12):
Okay, oh, thank you. He lives down the bay. Gary,
down the bay, Gary, down the bay. Rights in his email,
long term care insurance is so expensive. I've always been
in good health, so I'm inclined to roll the dice
and do without. It Is that dumb, he asks?
Speaker 2 (09:33):
I hate to say Gary is dumb, but you're more
likely Gary, depending on his age. If he's like sixty five,
let's just pick an age, he's about twelve times more
likely to need long term care than he is to die.
And he's gonna die. But most everybody, one of us
(09:54):
is going to need long term care. If there were
three people here, two of the three are going to
need long term care right they die. We don't know
how how long they're going to need long term care.
Men need care before they die. They need somebody taking
care of them, whether it's at home or a nursing home,
for an average of about three point eight years. Women
need care for almost six years before they die. You know,
God made women different than men in a number of ways.
(10:17):
But it is. I'm not going to say you're dumb, Gary,
but there are ways to look at things. You mentioned
that long term care insurance is expensive, Well, I don't
know what long term care you're looking at. True traditional
long term care can be expensive, and it's kind of
like core insurance. You use it or you lose it.
But there are also all termsive that George Bush put
(10:38):
in tax law, making it an incentive for the insurance
industry to come up with other ideas where you can
invest in certain contracts where if you don't use it,
you still have the money, but if you need it,
it's there to pay for long term care and it
doesn't cost anything. It's your money sitting there. But it
can be used for long term care a lot. It
(11:00):
covers a lot and there's no cost to it. So
there are things that can be done that alleviate that
cost but still have the care you need to take
care of you. So I encourage Gary not to sit
around and do nothing.
Speaker 1 (11:12):
Jemmy Neil, I remember hearing a lot about long term
care insurance in the early two thousands. Yes, and I
think there was so much sticker shock for some people
that they heard about the concept and never wanted to
hear about it again. Yes, seriously. Yeah, they may not
realize that they have alternatives.
Speaker 2 (11:29):
Like you've talked about, they have alternatives. The Pension Protection
Act is what if George Bush put in place, and
so there are a lot of alternatives to the traditional
expensive long term care insurance. It's good. It's still good
if you're young and you buy it. People say, well,
I'm young, I don't you know, I don't need it
right now. Well, about sixty percent of the people that
(11:50):
need long term care or under the age of sixty,
so it may be and a lot of employers offered
is a payroll deduction that type thing. But for some
who does not want to pay a premium, we've got
some alternatives for that.
Speaker 1 (12:04):
You're listening to John McNeil of Mobile BAF Financial Solutions.
The website mbefinancial solutions dot com. You can call and
make an appointment to see John McNeil in Virginia O'Brien
by calling two five to one six six six five thousand.
That's two five to one sixty six six five thousand
to reach Mobile BAEF Financial Solutions. Now, let's talk a
bit about real estate in retirement. Real estate can play
(12:27):
an important role in some folks retirement plans. So I
want to ask you, John McNeil, about your general view
of some uses of real estate that I'm going to
throw at you, and I'd like to see what you
think of them. If you if you ever use these
or incorporate these into your client's plans. First of all,
rental property, what do you think of that?
Speaker 2 (12:46):
Very popular, very lucrative real estate has always well, that's
had some ups and downs two thousand and eight, but
overall it has been a very, uh well, very good
investment over time rental property. If people are buying individual
(13:07):
houses and reading them. We have a number of clients
that have multiple rental houses. They produce a lot of income,
a lot of tax benefits, but you've got to unwind
that at some point. People as they get older, they
get tired of the three t's, tenants, taxes, and toilets. Okay,
(13:29):
so there's some drawbacks to rental property, but it is
something that you can unwind. We have probably the fourth
quarter of last year, we probably helped people get out
of rental properties, whether it be commercial real estate or
individual home homes or multi tenant properties by creating a
(13:51):
trust and putting them putting the properties into a trust,
selling it and the trust does not pay any taxes.
So if you have a let's say you've got a well,
we have one client that had five hundred and fifty
thousand dollar house in California. He had properties all over
the place still does have. Somebody's slowly putting these into trust.
He had a cost basis of around one hundred thousand
(14:14):
and this piece this house had grown to five hundred
and fifty thousand. If he sold it, he was gonna
have to pay taxes on four hundred and fifty thousand dollars.
He didn't want to do that. His count said, this
is this is going to be bad. You need to
get some advice. So we put it into We put
that piece of probably it was the first piece we did,
because he's done several more since. But he put that
(14:35):
five hundred and fifty thousand dollars house into the trust
and sold it. When he put it in there, he
got an income tax deduction for the portion of the
value of the house, and he did not have to
pay any capital gains taxes. Income tax deduction was around
one hundred and sixty thousand dollars, so he didn't have
to pay any taxes on the five hundred and fifty
(14:57):
or four and fifty, which was his gain. He got
an income tax deduction of around one hundred and sixty
thousand dollars, and we use that one hundred and sixty
thousand dollars tax deduction to do an ira wroth conversion.
He had a big ira, so we converted one hundred
and fifty one hundred and sixty thousand dollars with an
ira to a roth ira which is not subject to
(15:19):
rm ds like Gary or whoever Geary was talking about
on his rm DS. And he gets an income from
the trust off of that five hundred and fifty not
the after tax money that he would have had to
invest for as long as he and his wife for
a life, very attractive income. And he's rid of the property.
(15:39):
He doesn't have to deal with tenants, taxes, and toilets.
So there are we're big on rental property, but buyer
beware because it can be a lot of work.
Speaker 1 (15:50):
All right. Here, here's another real estate, a use of
real estate in retirement home equity line of credit.
Speaker 2 (15:58):
Very very convenient way to get money out. You know,
if you've got a lot of people strive to have
their house paid off, their mortgage paid off before they retire.
Now they got all this equity in their house and
they want to do some remodeling, so sure do they
take it out of their investments, just out of their
savings or do you go in and get an equity
(16:19):
line of credit on your house. It's like a mortgage, right,
and they give you a check and you do you work.
It's not as popular right now because interest rates are high,
you know, mortgage rates, but the acquity line of credit
is typically a lower interest rate than a mortgage. The
payback schedule is very easy to design to meet your budget,
(16:41):
and you can tap into that equity that's built up
inside your home.
Speaker 1 (16:45):
I remember after Katrina a lot of people getting home
equity lines of credit just in case there was another storm,
because their deductibles had gone sky high. Yeah, and they
wanted to have that home equity line just ready, just
in case as a storm and they needed to pay
a deductible.
Speaker 2 (17:02):
Yeah. It's very easy to set up, and you don't
have to pay interest until you tap into an equity
line of credit. You say, let's say you've got a
five hundred thousand mile of the house and you want
to go get an equity line of credit for one
hundred thousand dollars. Well, that one hundred thousand is just
sitting there. You don't pay anything until you actually draw
on that. So you may say, well, we're gonna remodel
the kitchen, were gonna spend twenty five thousand, So you
(17:23):
use twenty five thousand of your line of credit, still
have seventy five in reserve, and all you do is
pay interest on that twenty five thousand you took out.
So it is a safety net that you can fall
back on.
Speaker 1 (17:37):
Now, what about is it pronounced reachs? The real estate
investment trust reats? What do you think of those?
Speaker 2 (17:43):
Some are good, some are real bad. The rates are
think of them like a mutual fund. You're buying into
a rate. In these different rates, they have different types
of ruts where they the reate offering. They're going out
and buying real estate, whether it be multi like apartment complexes,
(18:06):
or warehouses or just a number of different things, and
the ret pays out the income from those properties to you.
And then also you have the appreciation.
Speaker 1 (18:17):
In the reats.
Speaker 2 (18:19):
If you're going to be buying putting money into reats,
it needs to be a registered rate, not an unregistered rate,
because registered rates or are supervised and they have to
follow certain guidelines. Unregistered roats, if you read the fine
print when you go into them, it's totally up to
the discretion of the holders of the reat, whether they
(18:41):
can make distributions or not, or whether you can sell
at any time. Those are very very you want to
shy away from those, but some routs are very popular.
We do ten thirty one exchanges into reats registered rates.
Where somebody has an apartment complex, they can ten thirty one,
(19:02):
which means they can they can swap that piece of
property for another piece of property. You don't have to
pay taxes until until you sell it way down the road.
But here we can take somebody who has multiple rental
houses and they can put those into a exchange ten
(19:23):
thirty one exchange into a big rate and may have
a billion dollars worth of property in it. And rather
than owning individual houses, you own part of this registered
rate and it kicks off income and you also have
appreciation of it. That way you don't have to deal
with the taxes tenants and toilets. Somebody else is doing
it for you.
Speaker 1 (19:42):
We only have a couple of minutes left. I can't
wait to hear what you have to say about reverse mortgages.
Speaker 2 (19:47):
Yeah, you see that on TV all the time.
Speaker 1 (19:49):
Yes, and I've all and I don't know that we've
only talked about it maybe once or twice in all
the years you've been on this show. What about reverse mortgages?
Speaker 2 (19:56):
Do your homework. We don't do those. You have to
go through through a reverse mortgage company, but they're heavily
laden with fees and it may not be the best option.
We encourage people to come talk to us, tell us
what you're what you're trying to do. Uh, it's a it's.
Speaker 1 (20:14):
A reverse mortgage.
Speaker 2 (20:15):
In other words, you borrow money to buy a house
and then you pay whoever you the mortgage company a monthly. Note,
a reverse mortgage is you're the bank and somebody buys
it and pays you a monthly either a lump sum
or a monthly distribution to you as long as you're alive,
and then when you pass away, the kids inherit, whatever's left,
(20:35):
whatever they hadn't paid out to you. So but there
are a lot of fees involved, and usually I have
not seen a good deal on a reverse mortgage. We
don't see them very often because people, once they get
the details, they shy away from it.
Speaker 1 (20:48):
Oh all right, hey, what we have time for one
one more quick one? What about house flipping.
Speaker 2 (20:54):
We've had clients over the years that really made a
lot of money flipping houses. Oh really, Okay, the beach especially,
you know where prices were going up by twenty five
and fifty percent a month, so they'd buy a house
either it was in distress. After two thousand and eight,
they were buying foreclosures and then flipping them and then
take that money and flip into another one, take that
(21:15):
and flip into another one. Well, eventually the flipping somebody
whoever owns that house last, or apartment or a condo,
they got burned and uh, now they're not worth what
they were when they first started. But taxes eat them
up because they're short term capital gains. But people were
making a lot of money, uh, in flipping houses, flipping
(21:37):
real estate.
Speaker 1 (21:39):
All right, Well, John McNeil, were out of time. If
you want to make an appointment with John McNeill and
Virginia Brian, give them a call. The number for Mobile
Bay Financial Solutions is two five to one sixty sixty
six five thousand. That's two five to one six six
sixty five thousand for Mobile Bay Financial Solutions. John McNeil,
thank you, and roll tide, Old Tad, Uncle Henry
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