Author Archives: c01975725

Sheepdog Podcast Episode 8: Living a lemonade life with Zach Friedman

Zack Friedman is the author of The Lemonade Life and the founder and CEO of Make Lemonade, a leading personal finance company that empowers you to live a better financial life. Zack is a sought after speaker, writer for Forbes, and has an extensive and  impressive professional resume. Zack has degrees from Harvard, Wharton, Columbia, and Johns Hopkins. Zack talks to your host Scott Vance about some ways to survive transition from military service, gives his opinion on the recent stock market swings and talks about the fact that a decision making process is essential to ensure a happy life.

Episode Highlights:

  • The skillsets developed through your military service and how to advertise them
  • How Zack copes with failures.
  • Zacks opinion on what is essential to financial success in todays stock market
  • Each person has to find their own individual path.
  • Zack’s career and schooling timeline from Morgan Stanley to Make Lemonade.
  • How to Make Lemonade gives objective, independent advice to make simple investing decisions for the consumer.
  • The ideal client for Make Lemonade is anyone who is looking to improve their financial life.
  • You have to be authentic to develop better relationships.
  • The Lemonade Life Book is about living your own best life.
  • In order to get success, you really have to find happiness first.
  • Everyone can get better every day and it all starts with happiness.

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Sheepdog Podcast Episode 7: Life and health insurance

Sa El got started with insurance when his grandmother passed away from cancer and did not have any life insurance.  He is the Co-Founder of Simply Insurance and a licensed life & health insurance agent with over 11 years of experience.   Sa’s goal is to give accurate insurance education along with an easy insurance buying process.  He began working on Simply Insurance once he realized that customers wanted an option to purchase insurance, online, without an agent.  He has been mentioned in publications such as Forbes, Insurance News Net, The Ladders, & The Simple Dollar. In his free time he enjoys listening to Opera and Classical music, reading Webtoons and Manga, watching Anime or playing videogame

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Link to video referenced in the interview. 

5 best no exam life insurance companies

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Sheepdog Podcast Episode 6: Having the talk.

When’s the last time you sat your parents down and talked to them about their money? If you’re like most people, it probably hasn’t happened yet and you probably have no plan for it to happen in the near future. Talking to your parents about their savings, their will, their hopes for what happens when they get older or after they die is unpleasant but as today’s guest shares is vitally important.  Cameron Huddleston is an award-winning journalist with more than 17 years of experience in the personal finance field.

Cameron’s experience taking over her mother’s finances after her mom was diagnosed with Alzheimer’s inspired her to write a book on how to discuss finances with parents before it’s too late. It’s called Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.

Her articles have been published in Kiplinger’s Personal Finance, Business Insider, Chicago Tribune, Fortune, Huffington Post, Money, MSN, USA Today and more. She’s the current Life + Money columnist for GOBankingRates.

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Read the transcript below;

Intro:                                     00:10                     Welcome to Sheepdog Financial. You will get answers to your financial questions, learn to plan for your financial future and have the type of life that people dream of brought to you by Trisuli Financial Advising, a fiduciary financial advisor practice focused on military members and their finances. Your host of Sheepdog Financial is Scott Vance

Scott Vance:                       00:34                     Greetings and welcome to this episode of Sheepdog Financial podcast. When is the last time you sat down and talked to your parents about their money? Like most Americans, you probably never have and you hope to never have that conversation with your parents, but in reality it’ll probably happen a lot sooner than any of us think. Today, we’re lucky to have Cameron Huddleston who will speak about having that essential conversation with our parents. Cameron is the author of “Mom and Dad: We need to talk,” which is about having those tough conversations with our parents. She is an award winning journalist who has written about personal finance for over 17 years. Her work has appeared in Kiplinger’s, Fortune, Huffington Post, Money, USA Today, and many others. She is currently the life and money columnists for gobankingrates.com. Be sure to listen as Cameron talks about ways to ease into the conversation and gives examples of what happens if you don’t have that conversation. Lastly, she gives some good links to her website, which provides some resources to help as you speak with your parents about transitioning their financial lives.

Scott Vance:                       01:34                     Welcome Cameron, thanks for showing up.

Cameron H.:                       01:37                     Thanks so much for having me.

Scott Vance:                       01:38                     So Cameron, you’ve written a book that was born out of your own personal situation, a story that’s relatable to a lot of listeners and Americans today in general. With the growth of the sandwich generation and the number of people that deal with parents who are aging and they face those financial decisions, you’ve written a new book, and it’s called “Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents About Their Finances.” This is an issue facing many of us today and it is a question I get repeatedly from clients and listeners of this show. It has huge effects on the child and the parent’s financial situations, and it’s a tough conversation. So how did you start the conversation with your mother?

Cameron H.:                       02:20                     Well, the main reason I wrote the book is because I did not have the conversation early enough with my mom and I really regret that, that was a big mistake. I should’ve known better too because I am a financial journalist. I have been for more than 17 years and I should have realized how important it was to talk to my mom about her finances, but I just didn’t even see the need for having the conversation until she started showing signs of memory loss. I did have a conversation with her a few years before she was diagnosed with Alzheimer’s about getting long term care. I had suggested to her that she look into getting a longterm care insurance policy because she and my father had been divorced for several years. She was living on her own and I knew if she needed longterm care, which is care that you would get in a nursing home or assisted living facility or even in your own home. I knew that if she needed that sort of care that a longterm care insurance policy would help pay for it. So she took my advice and she talked with an insurance agent and unfortunately she had a preexisting health condition. It was not dementia at the time, it was something else and she was considered too high risk to qualify for long term care insurance. At that point I should’ve said, okay mom, let’s sit down, let’s look at your finances, let’s figure out how we would pay for care if you ever needed it, but I didn’t. Like I said, I didn’t talk to her about her finances until it got to the point where I knew I had to start stepping in. When I saw that she was having trouble remembering, I told her that we should meet with an attorney to update her legal documents, her will, her power of attorney. In Kentucky it’s called a living will in some places it’s referred to as an advance healthcare directive. These documents are so important and she was fine with it. You know, I suggested let’s do it. She was on board, we went and met with the attorney, we updated these documents and it’s so important that you have these documents in place. They have to be signed while you are mentally competent. So if I had waited any longer to get my mom into meet with an attorney, the attorney might’ve said, I’m sorry, but your mom is no longer competent enough because of her dementia. I can’t allow her to sign these documents. And this is to protect the person who’s signing the documents because you don’t want someone who has been influenced, by a family member or someone else, to sign. Basically when you give someone power of attorney, you’re allowing them to make financial decisions for you. And that’s, that’s a huge responsibility and people can take advantage of that. With my mother, if she had not named me power of attorney and my sister power of attorney, while she was still competent, I would not have been able to legally get involved with their finances. As her memory declined, I would have had to go to court and go through a very expensive, lengthy process to be named her conservator. There was a man I interviewed for my book who actually had to do that, and he spent $10,000 and nine months going through the court process.

Speaker 4:                           05:33                     And I just don’t think people realize this, that if something were to happen to mom or dad, you know, say your mother had a stroke and she’s in the hospital and she’s there and then she has to go to a nursing home and she, she can’t access her bank account to pay the bills. She can’t, you know, communicate with the doctor right now because she’s lost her ability to speak because of a stroke. You, the child cannot simply go to her bank and say, I need access to my mom’s bank account to pay her bills. She’s had a stroke. She’s in a nursing home getting rehabilitation right now. They’re gonna say, well, we can’t give you access unless you’re her power of attorney. The doctor’s not going to talk to you unless mom has already named you her healthcare power of attorney. All these things have to be in place ahead of time.

Speaker 4:                           06:19                     So this is just, this is just one of the reasons people should be talking to their parents. They’re plenty of other ones too. But, and this is, you know, this is what, because of these conversations I had with my mom and because of the conversations I didn’t have before, it became necessary. It made me realize there are a lot of people out there who are going to end up in a situation like I did, who, who need to know how to have these conversations, who need to know what sort of information they should be finding out from their parents. And you know, maybe your parents ever have a health issue, but maybe they didn’t save enough for retirement and they’re going to need support for you. Or maybe they’re never going to need your help while they’re living. But everyone dies. And if your parents die without a will, that can create a huge headache for the people who are left behind, who have to sort through everything. And sometimes families end up in court fighting over who gets what. And so having these conversations sooner rather than later is just gonna make things a lot easier down the road.

Speaker 3:                           07:19                     Well guess so the guidance that you gave out about it’s never too early to start is probably very good guidance. But with people living longer lives in older people having more healthy lifestyles, allowing them to kind of continue on to the end a lot more in a much more active lifestyle, it may not seem appropriate or pressing the bring it up. When do you see as the appropriate or most prime time in as far as age for this to conversation to occur. And then the second part to that is if you’re afraid or resistant, do you have any tips for how you break the ice or get them, get them in the mood to talk about this?

Speaker 4:                           07:58                     A lot of people I hear from when I, when I talk about this, you know, they say to me, well, I’m not at that point yet. My mom and dad are still healthy. I don’t need to have this conversation. It’s too soon. Which is the wrong way to think about it. This is the perfect time to talk to your parents when they are healthy, when they are not having any issues. Ideally even before they retired, so thinking, oh my parents are in their 50s I don’t need to have this conversation with him yet because they could live into their nineties no, this is the perfect time to have the conversation. Have it while your parents are healthy, have it. While they are not having any memory issues, like I said, have it before they’re even in retirement. If you’re young enough and they’re young enough to have that conversation, if they’re already in retirement, don’t wait to have the conversation.

Speaker 4:                           08:49                     There’s not going to be necessarily any magical moment when you want to have this conversation. Certainly don’t do it in the middle of a holiday meal because they’re going to be, and people think that, you know, the holidays are a great time because everyone’s there together, your siblings. But oftentimes they’re going to be other people, other family members who don’t need to be a part of that conversation. And you know, in a lot of families the holidays can actually be a stressful time. And so bringing it up during the middle of a meal, a family meal is not a good idea. At least wait until the day after the holidays. But you can look for cues from your parents. You know, maybe your parents talks about a family friend who you know had a health issue or who now has dementia or maybe they make a comment about their house, about how it’s getting difficult to take care of their house.

Speaker 4:                           09:43                     Or maybe they make a comment about how they wanted to travel more in retirement, but they haven’t been able to. All of those are doors that if you walk through them and you know, take advantage of that opening, you can start to have these conversations. The parents, you know, are complaining about all the maintenance our house is taking. You might want to use that opportunity to say, you know, mom and dad, I realize that, you know, you lived in this house for a long time and you love it. But maybe it would be easier for you if you downsize to a smaller place. You know, my siblings and I, you know, we’re not going to be upset if you sell the family home and, and it would free up a lot of time and money for you to actually do the things you enjoy instead of spending the money on taking care of the house and spending your time on taking care of the house.

Speaker 4:                           10:31                     Or if they talk about a friend you know who had to go into an assisted living facility, you can use that as an opportunity to say, well, if something like that were to happen to you, mom and dad, what sort of care would you want? Would you want to have care in your home? Are you okay with an assisted living facility? Do you have a way to pay for it? So listening for those cues from your parents can be a way to start the conversation. Now, they might not ever say anything along these lines and that means it’s going to be up to you to find a way to start the conversation. And I know it seems so scary because especially with people who are, you know, in their, their sixties their seventies you know, my mother is 76 years old now. They were raised oftentimes not to even talk about money.

Speaker 4:                           11:20                     Like I know my dad raised me to not talk about money. He said, you know, you don’t talk about money, it’s impolite. And so they think of money as a taboo topic. So how do you get through to a parent who thinks of money as a taboo topic? You don’t necessarily make the conversation about money. You talk about maybe a bigger picture issue, like their retirement, you know, mom and dad, what is, what is your, what is retirement going to look like for you? What do you have planned for it? Or now that you’re in retirement, is it what you expected? And they might say, well, you know, I’m kind of in retirement or we wanted to travel more, but we haven’t been able to, well why not? You know? And they might say, well we can’t afford it. And that can open the door to conversations about their finances.

Speaker 4:                           12:05                     You don’t want to say directly to them if you know money is a taboo topic. Okay, mom and dad, let’s, let’s talk about your finances, don’t you? You don’t want to ask for the details. You know right off the bat because that’s going to put them on the defensive and it’s not so much about [inaudible] how much they have in the bank account, but where do they bank? If something were to happen to you, how are the bills paid? Because if I need to step in and help you, I need some information. I need to know whether you’re writing a check to pay those bills or what, whether it’s set up to be paid automatically. I need to know what sort of legal documents you have. It doesn’t matter to me necessarily how much you have in your retirement savings account, but I at least need to know what sources of income you had in retirement. So talking about things in a more general and more general terms as opposed to let’s get into the nitty gritty details of you know, how much money is in your savings account, your checking account that’s going to turn them off.

Speaker 3:                           13:05                     Well, yeah, that’s good advice. Easing into that conversation. Two ways to reduce that friction is probably essential. I know from dealing with my own parents. So talking about older parents, we talked a little bit before, you talked about, you mentioned older people sometimes have a taboo against money. One of the things I see again in my own parents is kind of, they separate their jobs. So Dad, my dad tends to handle the money and my mom tends to handle other stuff and I’m sure other parents said separate tasks like that, jobs and a mom and dad’s based on preferences. Given a situation like yours where one or the other is no longer available, how do you have that conversation with just the remaining parent? Especially given the fact that the remaining parent may not have had any experience with money, they may not have any desire to have any, you know, work with money and the knowledge necessary requisite knowledge that goes along with it.

Speaker 4:                           14:02                     Well, certainly if you, if there’s only one parent who is still living and that parent has not been involved with the finances, there’s certainly a need because you might, for example, it’s often going to be the woman, the woman who, who lives longer, who outlives her husband. And I’m not, you know, I’m not saying that because I’m a woman. I’m saying that because statistics show that the women tend to live longer and in older generations it’s very likely the case that, you know, if the man was working and the woman stayed at home, which was the case for many years with my parents, my mother was a stay at home mom and then she did go back to work after my dad and mom got divorced. But you know, if, if the, the dad handled the finances and mom did not, she’s certainly going to need help, you know, getting acclimated the process of managing finances on her own and she might not know where everything is.

Speaker 4:                           14:56                     And so really that can be a great opportunity for you to step in if perhaps, you know, your father passed away recently, you can offer to help mom out with the finances. Mom, you know, I know it’s been really difficult for you after losing dad. I want to help you. Offering to help a parent can be a really good way to, to learn about their finances. It obviously you’re helping them, so you’re helping mom figure out what’s going on with, you know, the bills. However they pay. Let’s, you know, mom, let’s look at the bank account. You know, maybe, maybe dad never had an online account. And so what you can say is let’s, let’s set up an online banking for you. Let’s, let’s, you know, create an account you’ve got, you know, here’s the, here’s the checkbook and we can see, you know, the make it count in the routing number.

Speaker 4:                           15:46                     We can go online and set up online checking and we can look and see how things were paid. I can help you do this. I can help you set up online bill payment to make things easier for you. Offering to help is a great way to have the conversation. Now, both parents are still alive, but you know that one handles the finances more than the other. This can also be a way to start the conversation. You know, maybe you could say something like, you know, dad, I know you’ve done a great job of handling the family finances all these years, but let’s maybe talk about what would happen if you were no longer around and it was just, mom, let’s, let’s talk about how we can set things up to make it easier for mom. Because I know oftentimes you know, if, if the man has been in charge, you know, he’s, he’s very much thinking about what’s going to happen to his wife when he’s no longer there.

Speaker 4:                           16:42                     Maybe he hasn’t involved her with the finances all along, but certainly he doesn’t want his life. Wife left struggling after he’s no longer there. I know a friend of mine who’s my age, you know, his father said that to him. You know, we’ve got to make sure that you know, your mom’s gonna be okay if I’m no longer around. So pointing that out very gently can help start those conversations. You know, and certainly another way that you could do it is talk about your own experience. You know, saying something like, I just met with an attorney to draft a will power of attorney living will I want you mom and dad or mom, whoever’s left, you know, to know where these documents are in case something happens to me. Where are your documents? Do you have these documents? Okay, well let’s, you know, you can meet with my attorney and we can make sure you have them too. Using your own experience is a good way to start those conversations too.

Speaker 3:                           17:36                     Well, yeah. Good. So we’ve talked a little bit about issues facing mom and dad and sit in the separation. We talked a little bit about some of the documents. What are some of those documents that we’ll need to have in place? I kind of look at it. Basically three kinds. Essentially there’s the, what I call the, the legal elements that your will, your trust, power of attorney. I think about the second part of that is the, the dreams and aspirations. So what they want for their state, if they want to leave money to say charitable organization or their grandkids for school. And then probably the admin part of that is all the accounts, passwords, keys, auto payments, withdrawals from the account. So can you speak a little bit about how you handle that as far as putting all that into place and what you need to have?

Speaker 4:                           18:25                     Well, you’re certainly right. You need to know about all of those things. The more information you can get about your pine parents’ finances, the better. Now, of course, that’s easier said than done at the least. You do need to find out whether they have a will or a living trust. Either these documents will spell out where they want their assets to go when they die. And I know oftentimes people like plenty of people don’t even have a will. They don’t have a will, they don’t have a living trust. And I don’t think a lot of people even realize that if you die without a will,

Speaker 4:                           19:02                     The state has one for you. The state law will determine who gets what. And it might not be the person you want to get your stuff. You might be married, but in your state it’s divided equally between your wife and your kids. But maybe you want your wife to get everything and you might not realize that state law is going to give half your money, half your assets to the kids. And this can create a problem oftentimes if there step kids involved. So you want to find out, do your parents have a will or a living trust? Encourage them to get it. Do they have a power of attorney? Have they named someone to make financial decisions for them? If there comes a time when they no longer can, do they have a living will or advanced healthcare directive. This spells out what sort of end of life medical care they do or do not want.

Speaker 4:                           19:48                     And do they have someone they’ve made to make medical decisions for them if they have these documents? Great. Okay. Mom and dad, where are they? Where, where, you know, who have you named me to be executive. You’re well have you named me to be your power of attorney or healthcare? Power of attorney. Okay. If so, tell me where to find these documents because if something were to happen to you, I need access to them just because they’re there. It doesn’t do me any good. I have to have actual access to these documents. If they don’t, you want to make sure that they meet with an attorney to draft them. There are low cost options available online. Sometimes you can even get, you know, free will. If you go to your State Bar Association, look it up online and type in, you know, whatever state you live in, the Bar Association and free will and you can find documents that you can download.

Speaker 4:                           20:38                     Start there. Like I said earlier, you want to make, you want to find out how they’re, how they’re paying their bills. So are they paid automatically or they paid check because of course if something were to happen to your parents, you want to make sure that those bills are still getting paid. And then getting the details about, you know, what sort of insurance policies they have, what sort of debt they have. Do they still have a mortgage? Do they have credit card debt or they car loan debt? What sort of sources of income do they have for retirement? Or if they’re still working, what sort of sources of income do they have? Their usernames, passwords for their accounts. Now they might not want to tell you this information, but they might be willing to write it down and you could suggest that they write it down for you.

Speaker 4:                           21:25                     Put it someplace safe with those legal documents. And tell you how to access it if something were to happen to them, you know. But like you said, sometimes it’s easier to kind of talk about those, you know, what are your wishes? What sort of legacy do you want to leave behind? Because it could be easier for them to talk about that and start there than to talk about the details of their finances. You know what, it’s so important to let your parents know that you’re having these conversations because you’re looking out for their best interests, that you want to know what their wishes are so that you can follow through on them. And you also want to ask them, you know, what sort of plans do they have for longterm care? Because this is a really big issue. This is what happened to me personally with my mother.

Speaker 4:                           22:12                     You know, as people are living longer, there’s a greater chance that they will need some sort of longterm care. I mean, you know, more than half of adults who reach age 65 are going to need some form of longterm care in their life. And longterm care can be incredibly expensive. And so if your parents don’t have any way to pay for it, most likely that means you are there longterm care plan and you need to know this so that you can take steps to prepare your own finances for this responsibility. So you know, finding out the details of their finances, the legal documents, what their plans are for longterm care. All of these things you need to address with your parents. And I’m not saying that you need to do it in one conversation. This can happen over several conversations. It can happen over time. And if they’re reluctant to talk, like I said, ask them to write it down, put it someplace safe and tell you where to find that information if an emergency were to arise.

Speaker 3:                           23:13                     Yeah, leaving behind that information is essential. I know in my time in the army we had one instance, well and a couple of incidents, but where fellow soldier was killed in action and he had left behind a very specific outlined plan. So all his wills and documents, all his passwords were all in a three ring binder. He also include in there everything about his funeral. He had written his obituary, he had pictures and it made it really easy for the wife and family at that time to take care of it and just do what he wanted. So that prep work is essential too. Make that transition a lot easier for the family.

Speaker 4:                           23:52                     Certainly. And you can let your parents know that too. You know, it’s, you know, if something were to happen to you, mom and dad, it’s going to be very difficult for me. And you know, think of this as a gift to me or you know, you know, parents, both parents are still alive. Dad, if you did this, it’s gonna make things easier for mom. Mom, if you did this, it’s gonna make things easier for Deb. Like, you know, your, your friend in the military who it, I mean, because he was so prepared, it made things easier for his family, his loved ones who were left behind.

Speaker 3:                           24:23                     Yeah. He had a plan. I mean, he even had the music he wanted played at his funeral. So it was just put it into action. It was really easy for his family. It’s awesome. Yeah. One last final gift. Okay. So we’ve talked a little bit about what to put in place if there’s no prep work done, what possible bad outcomes do you see come, I know you talked a little bit earlier about your friend that’s spent, I think you said about $10,000 over a year trying to get control of his mother’s finances. So especially the impact on the personal side for the family. So the child side

Speaker 4:                           24:59                     Certainly. So yes, if you, if you have a parent who you know develops dementia for example and can no longer manage his or her finances, you know, on their own. Then if you have not been named that power of attorney or the healthcare power of attorney, you do have to go through court to be named conservator or guardian for your parents. This basically involves putting your parents on trial to prove that they are no longer mentally competent and it’s expensive. You know, and I sit and I know some people would say, well aren’t those legal documents expensive? The will, the power of attorney, the the advanced directive. Yes there is a cost but it is a fraction of the cost that your family members will have to pay to go through the court process if those documents haven’t been drafted. So there’s that aspect of it.

Speaker 4:                           25:51                     If for example, your parents need longterm care and they haven’t planned for it, they don’t have a longterm care insurance policy, they don’t have savings set aside in addition to their retirement savings to cover it because Medicare does not pay for longterm care. A lot of people don’t realize that the only government program that will pay for it is Medicaid. But you have to have very few assets and very low income to qualify for Medicaid. So talking to your parents in advance about longterm care and how they would pay for it. And if you know they don’t have a way to pay for it, this is something you, you need to be thinking about right away. Because it might mean that if something were to happen to your parents, you might have to stop working to take care of them. Or maybe were thinking about downsizing now that your kids are older or they’ve gone off to college, you might not want to downsize because you might want to have room in your house to move mom in with you if something were to happen.

Speaker 4:                           26:54                     Maybe your parents don’t have enough set aside for retirement and again, they might need to move in with you. Having these conversations sooner rather than later allows you to develop a plan. It allows you to be proactive rather than reactive and you have so many more options when you’re being proactive as opposed to reactive. You mean I because I did not talk to my mom before she developed dementia about longterm care. The conversation if I had done in advance, could have been hypothetical. What would we do if it’s, you’re talking about a what if scenario, which is easier than we’re facing this now. It’s no longer a what if it’s we had to deal with this and how are we going to deal with it. And, and at that point, emotions are running higher and it’s harder to make rational decisions. And I had to make decisions for my mother hoping that I was making the best decision for her doing what I thought would be best for her.

Speaker 4:                           27:55                     Like at the point when we had to sell her house and move her in with me at the point where I had to move her into assisted living, I had to make those decisions for her because she was no longer capable of making them herself. And I didn’t like having to do that. You know, if I talked to her beforehand, before she was having memory issues, I would have had a clear picture as to what she would have wanted. And so just, it’s, it’s just honestly, it’s, the conversation might seem very awkward and very difficult, but the consequences of not having the conversation are a lot worse. You know, you’re making decisions for your parents without their inputs. You’re having to go to court, you’re having to, you know, maybe you never had to take care of them, but if they die without the will, then you know, you’re trying to figure out what they wanted. And you know, honestly, families that got along great before someone died. After someone’s no longer there, people start fighting over what’s left behind. I mean it, it happens. I’ve heard this from attorney after attorney, that families that got along great when someone dies, there’s all sorts of fighting and people can end up in court and so you are going to prevent some really ugly scenarios by having these conversations sooner rather than later.

Speaker 3:                           29:14                     Sure. So planning is key. But so now you’ve gone through, so say if you’re past the point of planning and you’re deep into it, do you have any recommendations for people that are beyond the planning that have to execute, for lack of a better term at this point where they’re making those decisions? Maybe dealing with siblings, with other family members, any idea, you know, maintaining finances. Do you mix them, those kinds of things? Yeah. The first

Speaker 4:                           29:42                     Thing you should do if you do have siblings is talk to them. All of you need to get on the same page. If you know you’re already in a situation where mom or dad is needing help from you as the child, you and your siblings need to talk about the roles you can play and are willing to play. Because if you’re not on the same page, there’s going there can be fighting. I’m not going to say there necessarily will be, but there can be fighting and you don’t want there to be any resentment. You know, if you step in and start taking over mom’s finances, you’re, you know, younger brother might be upset that you’re doing this without input from him. So talk to your siblings before you do anything. Come up with a plan that you can all agree on and, and make sure that you, when you have these conversations with your siblings, you point out, you know, this is not about us.

Speaker 4:                           30:35                     We need to do what’s best for mom or dad. This is what we have to keep in mind as we create this plan. So you talked to your siblings and then as you approach your parents, even if they are having issues already, you know, maybe they didn’t manage their finances well and they need help in retirement. Maybe they’re not making good decisions because they’re starting to have problems with their memory. You have to remember that these are still your parents. You need to be respectful and so you need to tread lightly. You don’t want to just kind of run in and start taking over. Find ways to gently start inserting yourself into their finances. Perhaps like offering to help mom and dad. Let me help you set up online banking because it’s one less thing you have to worry about paying those bills. You won’t have to worry about them being late or what I did with my mother, and this was easy for me because I lived in the same city with her.

Speaker 4:                           31:33                     You know, I offered to help her go through her mail store through it and get rid of the junk mail because she was getting so many solicitations for charitable contributions to organizations to which she had no ties. All of these sweepstakes entry forms and she was writing checks to all of these, you know, all of these requests for money. Every time she would get when she’d write a check because she was no longer making good financial decisions. And so just offering to help her go through her mail, I’m going to sort the junk from the bills, finding a way to help. Now if you’re not there in the same city, it makes a little bit more difficult, you know, so you might want to talk to your parents about scams. It’s a good way to kind of open the door to these conversations. You know, mom and dad, I just got one of those calls from someone claiming to be with the IRS.

Speaker 4:                           32:27                     You know, they said that that I owed money and that I’m, you know, subject to an audit. And if I don’t pay up right away, they’re going to send a sheriff over to arrest me. Mom and dad, this is a scam and you need to out for these things. Let them know about the red flags of scams. Have you, you know, mom and dad, have you gotten a call like this or mom and dad? If you ever get someone asking you to wire the money, this is a scam. Or if you get an email that tells you to click on a link you need to watch out for this. Or if someone comes and knocks on your door, it says they’re doing, you know, repairs and the neighborhood. Be careful, warn them about scams and then offered to help them out. Say, you know what, let me put your, your phone number on the do not call list.

Speaker 4:                           33:11                     Let, let’s go and check your credit report to see, make sure there aren’t any fudge related accounts that have been opened up in your name. Using that as a way to start getting involved. You don’t want to scare them, but you want to make them aware. Finding these ways to start inserting yourself Gentily because like I said, you don’t want to just run in and take over and you don’t want to, you know, issue ultimatums. You know, if you don’t let me do this, then I’m not going to help you at all because that’s, that’s not gonna help the situation out. It’s just gonna put them on the defensive and make them withdraw from you. So do get involved. The tread lightly.

Speaker 3:                           33:46                     Well good. So as we close, get ready to close this out. Some other questions I have for you. So you’ve got 17 years as a fat personal and financial reporter. What do you think is the most enlightening story that you’ve written in your time?

Speaker 4:                           34:01                     Oh Geez, that’s a tough one. I mean, I think one that I actually had people reaching out to me after I wrote it because surprisingly, I don’t, I don’t get a whole lot of response on things that I’ve written unless I write something that makes someone really mad. But I did write an article about this man who, when he was in college, made some really bad choices. He was a drug user and he had given a friend of his, some drugs. They got high and the friend overdosed and he was arrested and charged and his friend’s death. And ended up spending 10 years in prison. Hmm. But the thing is he, he didn’t give up like he decided and he was, he was a, he is a white man from an upper middle class family and realize that basically he had been living a life of privilege and because he was in jail, that privilege had been taken away from him and that he was up to him at that point to make sure that he did something, you know, with his life that he didn’t waste his time in prison.

Speaker 4:                           35:13                     He was, he continued to educate himself. He started writing and he got out of prison with a plan, you know, he was gonna move back in with his parents, find a job, save up money. And I think his, his story is really incredible because he went from a very bad situation, created a plan, turn it around and he’s now married, he’s on a path wealth. He started his own business. He is investing in rental property, building up income, you know, on the very straight and narrow path now. And I just think it shows that even if you are in a very bad situation, it doesn’t mean that you’re stuck there. There is still a chance to turn your life around.

Speaker 3:                           36:00                     Yeah. That’s a, that’s an aspiring to becoming from that all the way to being successful after dealing with that, which I’m sure was being in jail is terrible to start with. But being in jail for killing your friend is probably even more so terrible than it would be.

Speaker 4:                           36:17                     Right. Okay. Well thanks a lot. And how can my listeners reach out and contact you? So you can visit my website. It’s Cameron huddleston.com. There’s information about me and my book and there I even have a couple of resources that you can download for free. One is a, a fill in the blank inventory financial inventory that you can give to your parents so that they can write down all the information about their finances and their final wishes. Even their obituary. Give it to them. They can stash it away someplace safe. I even have a scam red flags sheet that you can download and give to your parents. Tell them to put it by the phone or on their refrigerator. Those are free on my site and there’s also links to all my social media accounts where you can follow me there. Yes.

Speaker 1:                           37:06                     Well, very good. Thanks a lot. Thank you.

Speaker 2:                           37:12                     [Inaudible].

Speaker 1:                           37:12                     We’ve just scratched the surface of this terribly important topic that is also very difficult. Doing some planning and having these hard conversations early and now can make it very trying time in your life. Just a little bit less stressful. Learn more aboutCameron@cameronhuddleston.com and get her recent book. Mom and dad, we need to talk in the show notes. We’ll have a link to those resources and thanks for listening. Thank you for listening to sheep dog financial. Visit us online@trishaleefinancialadvising.com for more military centered financial resources.

 

 

Sheepdog Podcast Episode 5: Help with the Survivor Benefit Plan.

Kate Horrell is a nationally recognized leading expert in the Survivor Benefit plan.

She is a military spouse, mom and wife.  She loves speaking about military specific financial topics and educating fellow servicemembers and spouses on ways to achieve financial success.  Kate educates the public through her writing.  She has written 2,200 blog posts for  Military.com’s paychcheck chronicles blog and continues to educate through her personal blog at www.katehorrell.com

Listen to it here. 

Survivor Benefit Plan Link

Kate Horrell Survivor Benefit Plan Blog Posts

Sheepdog Podcast Episode 4: The Blended Retirement System

In our fourth episode of the sheepdog financial podcast we do a deep dive into the blended retirement system.  One of the key benefits of the military is the retirement.  The retirement system used to be a simple 20 years and out pension.  The National Defense Authorization act of 2016 changed that and created a new retirement system for military members.  The new Blended Retirement System (BRS) blends the traditional legacy retirement pension, also known as a defined benefit plan, with a defined contribution plan known as the Thrift Savings Plan (TSP).  The BRS went into effect on January 1st of 2018.  The BRS significantly changes the military retirement system and for many will be their first opportunity to save and plan for their retirement regardless of how long they serve.

Listen Here.

Read the Transcription here;

Intro: 00:09 Welcome to Sheepdog Financial, you will get answers to your

financial questions. Learn to plan for your financial future and have the type of life that people dream of, brought to you by Trisuli Financial Advising, a fiduciary financial advisor practice focused on military members and their finances. Your host of Sheepdog Financial is Scott Vance.

Scott Vance: 00:34 Hello. Today we’re talking about the military retirement system. Most people know the military is being able to do 20 years and retire. That has changed recently with the innovation of the blended retirement system. So we’re going to talk a little about the legacy system. I’ll talk very briefly about that, see where we stood. The blended retirement system, we’ll talk in depth about that, and then the choices within blended retirement system. So the legacy retirement system, most military is being able to do 20 years and get out. That money was basically computed by taking 2.5 times the years served times your retired base pay.

Bad thing about this retirement benefit is that if you don’t make 20 years, you’d get nothing. So some studies have shown that 19% of active and 14% of reserves actually qualify for the military traditional military retirement. So this is something to keep in mind and there’s a key reason why we transferred over to a blended retirement system.

Scott Vance: 01:32 So before we get into comparing the blended retirement system to the traditional, it’s probably best if we define a couple of things first because this will probably include a lot of words and definitions that you don’t know off hand. The first word to understand in the blended retirement system is defined benefit. So defined benefit is essentially a retirement account that your service maintains so that they can give you a fixed payout when you retire. This is basically the way that the traditional or legacy retirement system or the annuity part of the blended retirement system works. It sets up the formula based on the number of years – your number of years, your final base pay times a percentage – defines the amount that you’ll receive, hence the defined benefit that you will receive through out your retirement. In comparison, defined contribution is essentially the amount contributed to the retirement plan is defined by yourself prior to retirement, so this is a retirement plan under which the service member and service contribute to an individual account, in military, the Thrift Savings Plan (TSP) and that their savings plan invests in equities and bonds to grow your account and provide a retirement benefit.
Scott Vance: 02:37 The next thing to understand is PFM and PFC, Personal Financial Manager or Personal Financial Counselor. These are accredited

 

managers or counselors. They provide information about the

blended retirement system, the Thrift Savings Plan, and other strategies to support the positive retirement financial choices that you make. They’re provided through your service at no fee and should be available at any base which you might be stationed at. The next definition to understand is service automatic contribution. Once the service member has served 60 days, the member’s service will contribute an amount equal to 1% of the member’s base pay. Each payday it goes into the Thrift Savings Plan account. If you have not set up the Thrift Savings Plan, account one will be set up for you and that’s where that 1% contribution will remain. The next definition is a service matching contributions. These are contributions made by your service to the Thrift Savings Plan, so on top of that 1% that goes in there, these are contributions made by your service to Thrift Savings Plan to match the amount that you contribute as well.

Scott Vance: 03:35 After the completion of your first two years of service, the first 3% that the service member contributes to the Thrift Savings Plan, is matched dollar for dollar, but then the next 2%, totaling 5% contribution by the service member, is matched 50 cents on the dollar. Well, this means if you contribute the full 5% of your salary to the Thrift Savings Plan, the service itself will contribute essentially 4% of that salary to your Thrift Savings Plan. The TSP has a traditional, or pretax account. This means that you basically defer paying taxes so you’ll get the deduction in the year that you contribute, but later on when those funds come to you in retirement, they’ll be taxed as income at that time.

This is different than the TSP Roth. You don’t get the upfront deduction, but the bonus is when you do take the funds out retirement, they come to you nontaxable. And the last term to discuss is called vesting.

Scott Vance: 04:27 The vesting is essentially the right for you, as a service member, to keep the money and interest earned in your Thrift Savings Plan, to include the money that the service contributed for you as a matching contribution. So under the blended retirement system, vesting is based on the length of time the service members in the uniform services. Once you’re vested, that amount of money in your account cannot be taken away from you. Well, we’ve talked a little bit about the legacy retirement system and then we defined some of the key terms to understand and now we’re going to get a little bit into the blended retirement system itself. The two key main parts of the blended retirement system are the defined benefit and the defined contribution part. We’ll talk first about the defined

 

benefit plan. The blended retirement system provides a defined

benefit plan. This is the monthly pension payment for life after 20 years or more of active duty service.

Scott Vance: 05:17 This is similar to the traditional legacy retirement system. Some of the key things to understand with the defined benefit plan in the blended retirement system is the multiplier. So that’s the percentage of your basic pay that you receive for each year service. For the blended retirement system, the multiplier is 2.0% and the traditional legacy system that number is 2.5%.

Now most people would think that 0.5 really doesn’t make that much of a difference, but when you figure those numbers out over years of service and over your salary, it does make a very big difference in your monthly pay. The key things to remember with that multiplier is, the longer you serve, the higher your benefit will be, but one of the, factors in your computation of your retirement benefit is obviously the multiplier. The second is the number of years of service. If you retire from active duty after 20 years of service, under the blended retirement system, you’ll receive 40% of the average of your highest three years of base pay.

Scott Vance: 06:14 That percentage increases by 2% for each additional year that you serve. So compare that to your legacy retirement system at 2.5% you would do receiving 50% of your base pay starting at 20 years of service. The other thing to keep in mind with the defined benefit is that it keeps up with inflation. Defined benefits get an annual cost of living adjustment, commonly referred to as COLA. COLA basically keeps pace with inflation so that the same dollar you receive today will be the same dollar 20 years down the road. The defined benefit plan is very similar to the legacy retirement plan of the military and it’s just changed just slightly, a little bit. Basically, the biggest change is that multiplier number from 2.5% under the legacy retirement to 2.0%. The next big change in the blended retirement system is the implementation of defined contribution portion. The defined contribution portion of the blended retirement system is a way for you, as the individual, to save for your retirement.
Scott Vance: 07:11 This plan can be used whether you plan to serve just for two years, six years, eight years or the full 20. Additionally, if you go beyond that, those 20 years, you’ll be able to save more. The way this savings is set up is through your TSP account. You have two choices there, whether you want to go to the Roth or a traditional TSP account. Like we talked about in definitions, the Roth lets you contribute money now with no tax deduction and then receive those funds in retirement and pay no taxes. The

 

traditional TSP allows an upfront tax deduction, but then 20

years down the road when you’re retired and you start taking funds out, those funds will be taxed to you as income. So one of the key things to understand with a defined contribution portion, once you’re in the service for 60 days, a TSP account is created for you.

Scott Vance: 07:56 Once that TSP account is created, you will start to receive an auto match by your service. So right up front, within 60 days we’ll get a 1% auto match, whether you contribute or not. That will continue throughout your time in service, and once you’ve served two years of active duty, you’ll be vested in that auto match. That amount will be available for you to use for your retirement whether you stay in the service after two years or not. The 1 to 4% match starts after you’ve been 25 months in the service. So once you’ve served those two years, you’ll be eligible to receive a one to 4% match. You’re invested in those matching funds upon deposit by your service. So say if this month you deposited 2% and your service matches that 2% deposit, when those funds are actually deposited, which generally would occur at the beginning of the month, just like your pay does, you’d be vested so you could leave the service on that next day and keep those funds.
Scott Vance: 08:51 Now those funds that are vested, your TSP is referred to a portable account, meaning that you can take it with you wherever you go. Depending on the amount in that TSP account, you could either leave it in there, which is a very good option. The TSP is known at the very low cost, very good retirement plan, or you can roll it into an IRA or if you have an employer plan, depending on the employer plan, they may allow you to roll it into theirs. So for example, if you took a new job with an employer that has a 401k. Some 401k employer plans will allow you to roll your TSP account into it. Probably the the main thing here is to simplify your life and have all your funds in one account. Now you’ve been in the service and you begin contributing, your TSP account has been started for you.
Scott Vance: 09:34 So there’s a lot of questions about where your funds will be invested. The services contributes to a age-appropriate life cycle plan. These are investments that are adjusted based on your age and expected retirement date to be more aggressive when you’re younger and to move to a more safer investment, as you get closer and closer to retirement. Should you want to move to something that you feel is better such as the C fund, which is a common stock fund or some of the other funds at the Thrift Savings Plan has, you could do that, but the L Fund that is

 

considered closest to your retirement point is where those

funds will be if you don’t make any choices to change those funds. So we’ve spoken a little bit about the two main changes with the blended retirement system. So far we’ve not spoken about two additional smaller parts to the blended retirement system.

Scott Vance: 10:25 The first is continuation pay. The members covered by the blended retirement system are eligible to receive continuation pay. This is a one-time, mid-career bonus payment in exchange for an agreement to continue serving for additional years. Each service is kind of specific on this, so we’ll keep it at the broad point, but continuation pay is payable between the completion of eight years of service, and before you complete 12 years of service, from your pay entry basic date. Depending on the service they determine when exactly you’ll become eligible within that 8 to 12 year window. So check with your service to specifically take a look at that. This is a one-time bonus and this is in addition to any other career specific bonus you may receive. Some of the things to keep in mind for eligibility, this is only eligible for active duty. AGR have their own formation of this, but is similar to this. The amount it can be is from two and a half to thirteen times your base pay, as determined by your individual service.
Scott Vance: 11:21 If you take a large continuation payment in a year, it may bump you into a much higher tax bracket, or make you ineligible for some tax credits and tax deductions. The service allows you to elect – elect means you have to choose – to receive that continuation payment in four equal payments over four years.
Scott Vance: 11:43 So we’ve talked about the two main parts of the blended retirement system, the defined benefit and defined contribution, and we’ve also talked a little bit about continuation pay. So the last thing to talk about the blended retirement system is the lump sum payment. Under the BRS, service members are eligible to elect to receive a discounted portion of their retired pay up front. For example, instead of taking $1,000 a month for the rest of your life, you elect to take

$800 a month for the rest of your life, but you get a $10,000 payment right now. Decision to elect a lump sum retirement totally up to you, but if you do not choose a lump sum option, you’ll receive your full retirement pay upon eligibility.

Scott Vance: 12:22 If you opt for a lump sum, you’ll need to decide if you want to take 25 or 50% of your future retirement payments that you receive in one lump sum or four equal annual payments. Then

 

once you hit 67, if you took that lump sum payment, monthly

retired pay reverts to the full amount. So if you hit 67 and you took the lump sum payment and you reduce down to that $800 a month, once you hit 67, that returns to that full retirement benefit of $1,000 per month. So some of the key trade-offs, and aspects to understand. The first is a trade-off, obviously, you take 25 or 50% of your retirement benefit up-front, you have to think if you’re going to need those funds in retirement later on, and then obviously what you’re going to use those funds for.

Scott Vance: 13:13 Maybe the idea of starting a business or buying your home, your forever home. I wouldn’t suggest taking those funds for a brand new car or something that’s maybe less than conducive to your happy retirement. So, the idea here, the key trade off is that you give up that future income for the money now and you would want to use that money now for something that’s hopefully will have payoffs in the future.
Scott Vance: 13:38 Next thing to keep in mind is the timing for active duty. So if you’re choosing a lump sum option, as an active duty service member, you have to notify your service no less than 90 days before your retirement date. So the funds are paid no later than 60 days from the retirement.
Scott Vance: 13:54 So essentially 90 days out, before retirement, you have to have had notified your service of your choice with the idea that funds cannot be paid later than 60 days from before your retirement date. It’s obviously to keep from messing things up and then you end up not getting the money. Just keep that timing in mind.
Scott Vance: 14:13 The last is the taxes. Again, talking about the income tax bracket, that big payment may place you in a higher income tax bracket. The service allows you to elect to receive that lump sum payment in up to four equal, annual payments, to help you reduce your tax burden.
Scott Vance: 14:30 We’ve spoken several times about Thrift Savings Plan. A lot of times I get clients that I ask, what is the Thrift Savings Plan? We’re gonna talk a little bit about the Thrift Savings Plan and understand how it works under the blended retirement system.
Scott Vance: 14:41 So the TSP, or Thrift Savings Plan, is retirement savings and investment plan for federal employees, and that now includes members of the uniform services. It used to just be for federal employees and around 2000 it opened up for military folks as well. It offers the same types of savings and tax benefits as

 

private corporations and businesses that offer to their

employees through 401k plans. So if you’ve been in the civilian world for a while before he came back to the military and you had a 401k, it’s kind of the same thing, just under a different name. The TSP is a defined contribution plan, and if you remember back to our terms, we talked about the retirement income you receive from your TSP will depend on how much you actually contribute to TSP, including the amount that the service matches for you.

Scott Vance: 15:26 So some of the key things to keep in mind with your TSP account. The TSP income depends on how long you make contributions and in what amount, and then also the matching contributions offered by your employer. Keep in mind, for 2018, the limit you can contribute to your TSP is $18,500 ($19,000 in 2019). So if you’re making enough that you get close to that limit, you want to be aware of that and make sure you don’t go over it. Some of the things to keep in mind is when you’re in a combat zone tax exclusion area or direct support areas, basically you’re deployed and your pay is tax freeand the money you contribute to your traditional or Roth TSP account is invested basically tax-free. Those will be held out in a separate line item, so you could see it on your TSP statement that shows the amount of funds that are subject to that. They’re in a traditional TSP account. The contributions that you contribute there, but not their earnings, those specific contributions made will be tax free when you withdraw them. If however you contributed to your Roth TSP account, just like standard, the amount you contribute and their earnings are tax free when you withdraw them.
Scott Vance: 16:34 Second thing about the combat zone tax exclusion is the

$18,500 contribution limit for 2018, if you’re in a combat zone, that limit does not apply. If you’re 50 or older the TSP account will allow you to contribute more. The IRS, for 2018, has allowed up to $6,000 in additional catch-up contributions, so this would take your total allowed, to $24,500. The key here is that we’re trying to get compounding. You’re trying to get your TSP account to grow through contributions and then compounding. That’s making money on the contributions that you put in there. Through compounding, you can grow your account, and then hopefully when you start pulling funds out in retirement, the bulk of the funds you pull out will be the growth through compounding, and so much less than what you’ve contributed is what’s your ultimate value is.

 

Scott Vance: 17:24 So we’ve talked a little bit about the value just to give you an

idea what we’re talking about here. So this is just an example, totally made up numbers, but let’s say your basic pay is $2,000 per month, and then you save 5% into your TSP account. That’s

$100 a month. So what does that equal out to over the years? So if you leave the military after 10 years you would have saved about $17,300. Even if you never add any more money after those 10 years, say you stay in the military, but you just stop contributing to TSP, that $17,300 grows to almost $100,000 at 25 years. Then also consider this, that’s not taking into account the matching contributions that your service would be providing.

Scott Vance: 18:09 So if you’re contributing 5%, your services matching that, that total is basically a 10% contribution or $200 a month. All those numbers in 25 years could mean you have almost $200,000.
Scott Vance: 18:23 We talked about the blended retirement system and the four components: defined benefit, defined contribution, continuation pay, and lump sum. If you have any more questions, make sure to address this with your pack section or your command financial. They have the resources necessary to help you understand and make sure that your blended retirement system works best for you. We did not speak very much at all about the Thrift Savings Plan. We’ll be doing that in a follow-up episode. We’ll discuss the basics of the Thrift Savings Plan and strategies to ensure you achieve the highest account balance as possible.
Intro: 19:01 Thank you for listening to Sheepdog Financial. Visit us online at TrisuliFinancialAdvising.com for more military centered financial resources.

 

Sheepdog Podcast Episode 3: Transition and landing on your feet

In our third episode of sheepdog financial podcast we have one of the nation’s leading experts in career transition for veterans and public service professionals. Matthew J. Louis is a graduate of West Point and retired Lieutenant Colonel, having spent more than 25 years in uniform and 20 years in the corporate world. Today he leads global strategy and transformation projects at Deloitte, the largest professional services firm in the world, and continues to serve several veteran collaboratives around the country. Matt is the author of Mission Transition, a practical guide for veterans in transition and their employers. He coaches individuals on their transition efforts and advises employers on hiring programs designed to successfully assimilate these valuable talent pools.

Contact him at his website www.matthewjlouis.com

Listen here.

Intro:                                     00:09                     Welcome to Sheepdog Financial. You will get answers to your financial questions. Learn to plan for your financial future and have the type of life that people dream of brought to you by Trisuli Financial Advising, a fiduciary financial advisor practice focused on military members and their finances. Your host of Sheepdog Financial is Scott Vance.

Scott Vance:                       00:34                     Hello. Today on Sheepdog Finance, we have Matt Louis. Matt’s retired from the Army and works in the corporate role for Deloitte.

Scott Vance:                       00:41                     Enjoys mentoring and helping other veterans as they transition from service to civilian life and has written a book on the topic mission transition, which will be released in September. Be sure to listen as Matt speaks to why transition from military service to civilian employment is hard. Usually a lot harder than expected for most veterans and be sure to pay close attention as he details the procedures outlined in this book to ease the financial aspect of that transition. Lastly, I was encouraged by Matt’s efforts to support and develop veterans co-operatives. Essentially as he terms it an in processing organization to help veterans connect with the appropriate veteran service organization. He has a co-chair of the Cincinnati My VA Community Veterans Engagement Board, serves on the Board of the Tri-State Veterans Community Alliance in Cincinnati and seeks to continue to serve his fellow veterans. Matthew J. Louis is a graduate of West Point, retired lieutenant colonel, and spent more than 25 years in uniform and 20 years in the corporate world. Today, he leads global strategy and transformation projects at Deloitte, the largest professional services firm in the world and he continues to serve several veteran collaboratives around the country. Matt is the author of Mission Transition, a practical guide for veterans and transitions and their employers. He coaches individuals on their transition efforts and advises, employers on hiring programs designed to successfully assimilate these valuable talent pools. Welcome to the show, Matt.

Matt Louis:                         02:07                     Hey, thanks Scott. I really appreciate you having me looking forward to our discussion today on Sheepdog Finance and talking about the book perhaps my transition and some of the financial aspects in transition that could be of use to your listeners.

Scott Vance:                       02:22                     Awesome. Yeah, I totally look forward to it, and I bet you have a bunch of good information to give out to our listeners. Tell us how you got here to be in the Army and also your corporate work.

Matt Louis:                         02:32                     Yeah, it’s been a, a long and winding road. You’ve kind of highlighted the overview. I spent five years on active duty. I used graduate school as my transition vehicle way back in 1996. I went to Indiana and got my MBA there two years full time and started in various positions around the corporate world initially at Procter and Gamble. Spent a few years there and jumped over to General Electric initially their aircraft engines division.

Matt Louis:                         03:03                     And subsequent to that there what they were called medical systems at the time. Today it’s called GE Health Care. It’s been a number of years there until I joined Deloitte about 15 plus years ago. So it’s a 20 plus years in the corporate world and counting learned something new every day. Along the way I started what I’ll call my side hustle. It’s titled Louis Advisors LLC. It oversees today, the purpose it serves, is all of my publishing related efforts. You mentioned my book that’s out there called Mission Transition. It will be published on the 24th of September this year and is available pretty much all of your standard retail sites out there. Your, Amazon’s, Goodreads. I have author pages on both of those, 800-CEO-read and several others. So check that out. It’s intended to be, as you said, a practical guide for veterans and their families that are in transition as well as those that would aspire to employ them. So that’s, that’s what that does. And looking forward to talk more about that.

Scott Vance:                       04:17                     Yeah. So good. So you’ve got a new book coming out in September, a Mission Transition like you’d said. Was that the right date, September?

Matt Louis:                         04:25                     September the 24th you guys.

Scott Vance:                       04:28                     Yeah. So talk just a little bit about this book. So you know, why you wrote it, who your target audience is. I think probably from the title we could get that, and what you hope the reader to get from it.

Matt Louis:                         04:41                     So why I wrote this, you know, again, flipping all the way back to 1996 when I left the service and I’m not alone every veteran of my generation that left around that time dealt with what I had to deal with in that the support that we realized in transitioning wasn’t much. I was an Army guy and an old tanker and at that point in time they had a course called Army Career Alumni Program. It was in its infancy. It was administered within literally within the last week of your time on active duty. And as you may recall, you’re busy running around doing hundreds of other things trying to get out the door. It truly became a check the block exercise, there was no differentiation by rank. And the, the four or five days it took to implement, it was quickly forgot and essentially little, none of it was implemented.

Matt Louis:                         05:43                     Well in light of that, I had to kind of make up my own way forward. And the good thing for me, I had two years in graduate school kind of deep program, so I called it. During that time frame I came across a book called What Color is Your Parachute, which is a perennial bestseller on job change. And I use that as the basis for my own personal process and knowing the frustration that I dealt with, I subsequently reached back to other veterans that were transitioning to kind of help them cross the transform into the real world. And this process evolved over time and my exposure to other approaches in the veteran community grew and grew over the years. Suffice it to say over the years as I was helping people with just on a one on one basis, there were two consistent points of feedback that I’d get.

Matt Louis:                         06:42                     One was a just gratitude, a message of thanks, thanks for doing this, and typically it resulted in some level of success for the individual. The other piece of feedback was, have you ever thought of writing a book? We’ve got to find a way to scale this thing to which I always kind of scoffed because I never considered myself a writer. Well, fast forward a few more years and now I have academy classmates who are leaving the service 28, 25 plus years on. You have literally dedicated their lives, their families lives to the service of the country. And while the support provided them has improved in the form of Transition GPS and the Soldier for Life Tap Program and it’s associated courses. The net impact in terms of helping them make their way to the real world hasn’t improved that much at all. And so that I think lit the fire seeing my brothers and sisters in arms, what they’re going through today in spite of what DOD, VA, DOL has attempted to do to finally put pen to paper, codify my view and approach to the process that has proven successful over the years and try to fill that gap.

Matt Louis:                         07:57                     And I tried to do it from three different angles and I’m jumping ahead a bit but in my way of thinking, transition is a bit of a three legged stool in terms of major stakeholder groups. The first obviously veterans and their families. And that’s where Mission Transition is focused. The intent is to help them find their optimal landing spot following their time and service and to help employers that would aspire to hire these veterans to better understand how to recruit, hire, train and retain this valuable talent pool. And so there’s a second book that I have in draft that’s focused on employers in light of the civil military gap. I’ll talk more about that in a bit. There’s lots that needs to be done there in terms of educating employers on what is available to them in the form of veterans and what they bring to the party.

Matt Louis:                         08:54                     And the third stool on that veteran transition stakeholder group is the government that created them in the first place. And while I have no vision that I will move the needle on the government side to change or improve what they’re doing. What I can do and what I am doing is advocating for something that can close what I view the gap and the warm hand off between the military and communities all around the country. And it’s my belief that organizations called veteran collaboratives can help us fill this gap and we can talk more about these collabers and what they are and what they do. But there’s a lot of activity in form of legislation weaving its way through Congress right now that your listeners can help support and help us collectively close this gap in a warm handoff.

Scott Vance:                       09:44                     Yeah. So veterans collaboratives, that sounds interesting. What is that like sounds kind of like a group of veterans get together to help people transition or veterans transition to a civilian job? Is that kind of the correct understanding of it or is there something different to it?

Matt Louis:                         09:59                     Yeah, so let’s go there. So what a collaborative is, these are nonprofit organizations that exist, in round figures, a dozen to 15 cities around the country. What they do, let’s use greater Cincinnati where I’m from as an example. The local veteran collaborative here is called Tri-State Veterans Community Alliance. I happened to sit on their board and their business form is essentially to bring together all of the veterans services organizations in this area and provide their services to the transitioning veteran when and where they’re best needed. So for example again Cincinnati as the case study, if you will, there are no fewer than 2,500, if you can imagine, 501(c)(3)s, which is a nonprofit, veteran service organizations that have the word veteran in their vision or mission statement in the 16 County area surrounding Greater Cincinnati. That’s a lot. If I’m a veteran, you know, matriculating to Greater Cincinnati, now I’m not gonna respond to 2,500 knocks on my door, nor am I going to go knock on 2,500 doors for services that I might need. What TVCA is, we call it. What they do is act as your single belly button, your single point of contact. They would, much as you in processed and out processed bases or posts in the military, they act as you’re in processing center to your local community. So someone leaving the service and wanting to settle here in Greater Cincinnati would in process into the Tri-State Veterans Community Alliance. Folks at TVCA would do an inventory in you, do an in processing checklist, understand what your particular needs are.

Matt Louis:                         11:53                     It could be anything from housing to employment to financing, to healthcare to you name it. Then the good folks at TVCA will reach back to that representative list of 2,500 veteran services organizations and pull forth the services that you need and provide them to you as the transitioning manner at a point time place that are optimal to help you get up to speed most effectively and efficiently in the local community. So that’s the function they serve in my view, in my experience. It acts as an optimal business model, if I can use that term. And so we’re looking to one, prove the concept. Once it’s proven, which should be easy enough to do, scale that business model such that we have a nationwide network of veteran collaboratives that can fill this gap between the military and communities across the country.

Scott Vance:                       12:51                     That sounds actually very awesome. Put it simply. I know when I transitioned, I retired so it was kind of easier and I kind of knew what I wanted to do, just accounting and working in tax. But going through that process, I saw a lot of those different groups that were there to try and help you. Like you said, the 2,500 groups within, I think you said, six counties around you there, it was similar here in North Carolina. I retired near Raleigh, North Carolina. It was just like you said. So what I’m understanding, if this makes sense, are you familiar at all with the United Way? This might put it into a much broader understanding of the United Way, how its kind of the same idea, how they take in people, they say, “Hey, you need housing? Here go to these people and these people give you clothes or something like that. Just on the veteran focused side of it.

Matt Louis:                         13:46                     Sure, absolutely. In fact, United Way is one of our partner organizations.

Scott Vance:                       13:50                     Wow. That’s, that’s actually astounding to me that there’s somebody that’s actually out there doing that and putting that together. And I think it’s very worthwhile.

Matt Louis:                         13:59                     Oh yeah, and there’s a handful out there. I profile any number of them in the book. I actually wrote a paper you’ll find on my website which is Matthew J Louis.com, Louis as in St Louis. Under “media” you’ll find some papers there and there’s a paper on veteran collaboratives and how to work your way through the convening process and eventually scaling that on a nationwide basis. So have at that, and I look forward to working with individuals looking to do that, to scale that business model across the country.

Scott Vance:                       14:33                     Yeah. Wow. Yeah. So that’s good. I’ve never heard of that. That’s the first time I’ve heard of it. It makes total sense when you explained it. So going through the transition, whether that’s, you know, going through retirement or you know, picking up the following on civilian job or government job I should say too as well. What kind of financial steps should veterans be prepared for?

New Speaker:                    14:53                     Well, I think this is one of the shortfalls of the current transition support that’s received. And I referenced several exercises in my book and that are live and available for free right now on my website, under the resources tab. Let me just walk you through the exercises for which I advocate, and the one that I’ve retained in the book. I had to cut them for the simple matter of word count. Harper Collins had a 70,000 word count limit and I was approaching 100,000 words. So your listeners out there, you’ve got between 25,000 to 30,000 words of free content under my resources tab on the website. Anyway, within there you’ll find three financial exercises that I expect that you’ll, you’ll go through in concert with the book. In my view, it’s a necessary part of your transition to make sure one, you’re set up for success, two, that you have a productive negotiation with whoever your eventual employer is, assuming that you go down the employment path.

Matt Louis:                         16:07                     So let me just kind of rattle these off here. The first exercise it all has to do with beginning with the end in mind and in this case, determine what your required retirement savings are. And in here you’ll find retirement worksheets that enable you to input any number of assumptions that go into that, what’s your life expectancy, what’s your retirement age, what kind of withdrawal rate you’re going to make investment fees, tax rates, marital status, from what your residency is and so on and so forth. Given your background and you’re very familiar with the assumptions that would go into what this would result in. Upon inputting all of these assumptions, it will spit out for you how much savings you’re going to need for your retirement as you see that taking place. Just running a couple of different scenarios, in the book and now on the website, I did it for both someone that has retired from the military and has a pension and someone that has not retired short of 20 years. As you would expect, those numbers are quite different. And then I provide a list of suggestions about how to further optimize or take advantage of the funds, that you’ll need going into retirement. For example, you could delay your retirement until a later date. For those that left active duty prior to 20 years, you could stay in the service longer to maximize or you could spend time in the reserves as a guard. For those that do have a pension, you could stay in longer to maximize the pension percentage. Try to optimize you and your spouse’s income prior to retirement so you can optimize social security. You could look at the state that you’re gonna retire to because some states have more favorable tax treatment for military incomes or military retirement incomes.

Matt Louis:                         18:04                     You know, maximize your employer sponsored 401k, 403b or better yet the Roth versions of both of those. If applicable, if your employer offers a 457 plan, optimizing that as well. You know, rolling over your thrift savings plan into a Roth IRA. Make an annual contributions to a Roth IRA. Minimizing your annual expenses before and after retirement, which gets to the budget, which is the fourth one I’ll get to. And minimizing any fees that a brokerage firm would assess against your expense. So that’s determine your requirement savings. Once you know what your required retirement savings are, it takes you to the second exercise, determine your annual salary. Again a worksheet here, a calculator, which again is fed by any number of assumptions, how many years you’ve spent in the service, what’s your current age, what’s your retirement age, and it builds upon the prior exercise, savings you plan on having available when leaving the service, annual investment fees and so on and so forth. A whole host of assumptions. Once again through the worksheet, it’ll identify what your must have annual salary is to realize your retirement savings goals. It’ll provide a number of thoughts to consider,uwhether you’re earlier on,uyou know, prior to getting out of the service or if you have a pension. Interestingly, comparing paystubs, both for the, I call them the JM Pay, the junior military professionals and the CMP, career military professionals. Obviously pension has a big impact there. It also may help explain to those retirees out there why some employers feel justified in low balling them in terms of an annual salary because they know that they’re also sitting on an annual pension from the military.

Scott Vance:                       20:06                     Yeah.

New Speaker:                    20:06                     Don’t fall for that. In any way, this exercise helps you get there and identify what you need going into retirement. Then the third exercise I’ll touch on is comparing military and civilian benefits. And this all feeds into the full negotiation you’re eventually gonna have with your employer. Many times, coming out of the military you tend to not think of all of the benefits that you have and you get. When you leave the military, these take the form of an entire compensation package that is the full value that the civilian employer is gonna look at you as eating, if you will. In the military you’re used to kind of thinking of salary and maybe some other allowances. You tend to not think of a host of other benefits that you have, whether it’s health care or education retirement relocation, et Cetera, et cetera.

Matt Louis:                         21:07                     The list goes on and on. In this exercise I list out and compare the military benefit you may or may not be taking advantage of and the civilian equivalent. And it’s interesting going through this list where there may be some military benefits, there is no civilian equivalent to things like BAS, BAH and some other allowances, flight pay, combat pay, et cetera. On the flip side, you know, there’s several other civilian benefits that you may we’ll take advantage of, such as flexible work schedules, accelerated vacation accrual, mortgaging fees, closing costs, getting covered, office furniture, office supplies, phone line, et cetera, et cetera. The list goes on and on. The point of the exercise is you need to identify what combination of benefits you are going to need and put a relative value on that and go into negotiation with your employer, with that list and be set to give and or take a little as part of that negotiation. Once you’ve nailed all that down with your employer then it becomes a matter of maintaining your month to month spending. And that’s the fourth piece of this. And this is included in the book and it’s a very simple monthly budget tracker and that your outputs don’t exceed your inputs on a monthly basis.

Scott Vance:                       22:34                     Yeah. For my listeners, this is a huge issue. I mean when I went through my transition being somewhat familiar with taxes and finances you know, having an interest in it and then eventually working in it, I found that the services at the transition center really glossed over a lot of this. For instance, taxes. They really were almost scared to speak to different state taxes and how that affects. That’s the one that sticks out in my mind. They just kind of said, “hey, we’re not tax experts, we can’t give any advice on that, talk to your tax expert,” when it came to that. Which depending on where you go can have an outsize effect on what you receive. It’s important to understand, to get the best understanding of your finances, that your basic allowance for housing (BAH) or BAS, your basic allows for subsistence, that’s non-taxable, but people look at that in their LES as a payment. You know, they look at the net amount you receive each week. So just realize that when you transition, that’s probably gonna go away, and how do you get a taxable income to equate to that non-taxable chunk of money becomes a big analysis to figure out how you get there.

New Speaker:                    23:57                     Yeah, precisely. Right. And anytime I’ve done this exercise with people, it’s always eye-opening about how much they actually need to make on the outside to equate to what they were realizing or netting as part of the military.

Scott Vance:                       24:13                     Yeah. A lot of people don’t realize that for instance, health insurance is the one that I always see with clients that I’m working with. And it just amazes me how much health insurance costs. And then, you know, you compare the being in the military and not really paying anything.

Scott Vance:                       24:27                     Now there’s people that say that healthcare is not as good or whatever, but just sticking to the figures, it’s just shocking for people that have spent years in military and then come out and all of a sudden have to pay health insurance with deductibles and premiums, and copays.

New Speaker:                    24:45                     That’s right. I mean another big hitter sometimes is their state taxes depending on, you lived in the military versus where you’re relocating to and civilian world, you may be getting another hit at a state level, whereas you may not have had that before.

Scott Vance:                       25:00                     Yes, yes. When I went through retirement, I had never paid state taxes in my 23 years in the Army, and when I retired in North Carolina, all of a sudden, my first tax year, I had a big tax bill, and that was something, I knew it was coming, but still I could see how somebody that had no idea it would blow them up out of the water.

Scott Vance:                       25:21                     So moving on a little bit, you’ve talked a little bit about from the veteran’s side, how about talking a little bit to the employer side as to how all this transition works?

New Speaker:                    25:32                     Yeah, so let me go back again. Part of the, the reason why I wrote Mission Transition the first book you know, one of the key reasons I believe it’s needed is the civil military gap, as I call it. So let me define a bit why that is, throw some statistics out at you to quantify precisely what the transitioning veterans these days are running into, which is slightly different than when I left active duty, which was 23 years ago. That’s sounds crazy to say. Here’s the upshot. The percentage of people that run the corporate world, and by that, I’ll characterize that as the C-Suite, or let’s make it even bigger, board members of the fortune 1000. The percentage of those that have any military experience whatsoever is decreased by 90% in a single generation, specifically from 1980 to 2006. To the point now, just thinking of the C-suite to CXOs and fortune 1000, people in those positions, about 2.6% of them have any military expense whatsoever. If you expand it to include all board members, it’s still less than 5%. So flip that around, veterans coming out of the service today, and that aspire to have the jobs that the fortune 1000 has, there’s a 95% chance that the person sitting across the desk from them has no idea who they are, what they’ve done, what they can do, or what they have to offer that organization. So again, the challenge that veterans have today is increasingly more difficult as this civil military vide continues to increase and it’s projected that it will continue to increase over the next 20 or 30 years at least. This is driven by simple generational demographics the light of the all volunteer force from the mid seventies, and just that fewer number of people and percentage of the population serving these days.

Matt Louis:                         27:58                     So anyway, that’s one of the big challenges and why transition even once you’re into the employer side, is difficult. So let’s talk about why else transition is hard, and then I’ll talk about some of the cultural aspects of transition when you do matriculate into these organizations. Just to kinda echo some of the point around civil military divide, I think there’s four key reasons why transitioning veterans are systemically unprepared to enter the workforce and why it seems to take them repeated attempts to find a job within a career field of their preference. Which by the way, veterans, and studies reaffirm this, typically aren’t in a career field of their preference by their six most post-military job. It’s incredibly sustained rate to fail out. And why this is important, you’ll appreciate this with your financial background, those veterans transitioning from the service that are able to land in their preferred career field from the outset, will double their salary, their wealth, their happiness and retention in jobs over the course of their careers, their post-military career.

Matt Louis:                         29:12                     So incredibly important. Anyway, I’ll highlight four reasons why veterans are systemically unprepared. First, it involves that lack of appreciating a civil military divide. They don’t appreciate that Americans don’t understand military life. You know, I think we’re down to less than one half of 1% has served on active duty in any time post 9/11. Second, has to do with lack of understanding what you’re leaving behind. When you leave the military, there’s a huge loss that you incur as an individual. You leave behind your rank, you leave behind your words, the instant recognition that came with that the authority that came with that, you know, you can no longer bark orders, and expect that those would be carried out. You know, the uniform code of military justice doesn’t apply anymore. You lose camaraderie of peers, the challenges of service, combat or otherwise, you lose the certainty that a chain of command poses for the hierarchy in the organization.

Matt Louis:                         30:11                     In fact, that’s replaced, and many times it’s [inaudible] by competition. The sense of community, built in network that comes with everyone kind of living in the same area, visiting the same resources on the base or posts that you were at, whether that was the Px, the commissary, the movie theater, et Cetera. You know, there are no longer references, processes, manuals, SOPs for every aspect of your role. The training and common standards that come with military tend to be gone. Even more tangibly to the a point you made earlier. You lose the tax free nature of allowances or combat pay. So you know, the loss is significant. You’ve probably heard about the five stages of grief you go through. We’re going to go through this five stages of grief coming out of the military cause you’re losing so much and it’s all done simultaneously.

Matt Louis:                         31:03                     The third reason is around, you know, the existing support efforts and you know, I’m not here to throw water in the face of SFL tap, but the reality is the way it’s structured right now is not optimal in terms of supporting success following transition. I mentioned, what color is your parachute before, you know, and they quote in there job hunts that start with focusing on who you are and who you want to be first before you focus on your skills and how they translate in the market and putting together a resume. If you focus on who before what you’re going to result in success, 84% of the time. If you start with what before who you’re only going to be successful 28%. You’ve gone through SFL tap, as you know, it focuses on the what initially. And so, you know, I’m no genius, but if I’m going to Vegas, I’m gonna roll with the 84% versus 28, and that’s the way my book is structured.

New Speaker:                    32:00                     Lastly, I’ll point to, you know, military organizations, they’re mission focused and they tend to not allow sufficient time for you to prepare for transition. Now this has improved somewhat, at least there’s a lot of good talk out there in terms of letting people attend SFL tap up to a year or more prior to ETS, which is all good. It’s good directional, but I know that culture wise commanders in those units you know, they are pressed to do the mission first and what tends to happen, our individuals will forsake their personal planning and their personal success for the sake of the unit. So you know, the opportunities for individuals to accrue industry recognized certifications or licenses or take additional education those tend to fall by the wayside. And so those are key things that, you know, continue to make transition especially difficult.

Matt Louis:                         33:06                     So from there, let me segue into the cultural aspects or cultural dimensions. You know, we talked about loss, but this is another whammy that folks realize when they leave the service and they enter employers. It’s a whole new world. It’s a whole new way of thinking. In a word, it’s a whole different culture. Now the culture of the organization you’re going to join is gonna vary. Every different organization has a different culture, much as every military unit you ever belonged to had a different way of doing things, different way of thinking, different personality. It’s the same in the civilian world. But in the book I spend a good portion of the last two chapters focused on culture and all these various cultural dimensions that you’re going to have to understand and adjust to all simultaneously. There’s about two dozen of them.

Matt Louis:                         33:59                     I generalize them, a compare contrast between the military and either larger, more corporate civilian organizations or smaller, more entrepreneurial civilian organizations. Among again, probably close to two dozen different dimensions. You know, a key one is purpose, and I think this is one that individuals perennially struggle with. How does my personal purpose change? How do I reconcile what I did in the military, mission first saluting the flag all kinds of patriotic, with what is the purpose or my purpose in the new organization, be it larger, smaller, more corporate, more entrepreneurial. Which tends to be more focused on money, on the bottom line. That’s why organizations exist.

Scott Vance:                       34:46                     Sure.

New Speaker:                    34:47                     Um you know, leadership basis, in military, you’re operating as a team. Larger organizations, you tend to be more individually focused where a smaller entrepreneurial organizations are more team based and I could continue to go down the list here.

Matt Louis:                         35:02                     You know, dimension such as organizational structure, you’re going to be going from a hierarchy to chances are some sort of a matrix environment. In the military you had a formal power basis. Corporate organizations are gonna tend to be more personal power basis. The onboarding process is different. The way training is administered is different, the way compensation benefits are assessed is different, recognitions and reward is different. I go down the line again, there’s two dozen different aspects of culture, all of which are going to tend to be somewhat different, if not very different than the way in which you experienced in the military and all of which you’ll need to process and think through to come to terms with your own personal purpose and mission, if you will, in this new world and in this new organization.

Scott Vance:                       35:57                     Yeah. The shift is for me at least was mind blowing. I retired and I knew what I wanted to do and, but I’ll never forget. I went to my first conference with financial planners right after I retired and you know, the conference had started at eight o’clock and there were people still walking in, and shuffling in at 10 after and just blew my mind that these people were doing this compared to, you know, in the Army you had a briefing at eight o’clock, you were there 15 minutes earlier or you were late type of thing.

New Speaker:                    36:29                     That’s right.

Scott Vance:                       36:29                     Um and that was when I first realized some of the things I’d be going through earlier on in my transition.

New Speaker:                    36:38                     Yep. That’s exactly right. That’s a good story. We talked about stories. You care if I throw out a few stories that I’ve had through my transfer?

Scott Vance:                       36:48                     Yeah.

New Speaker:                    36:49                     So one of these, and I’ll demonstrate how it can relate to some of your listeners who are currently leaving the service. When I left the service, I mentioned I used graduate school as my transition, well in between the first and second years in graduate school, you’re offered the opportunity to do an internship now and so on. That was my first foray into the civilian world as an employee. I’ll spare the name of the organization. Suffice to say at the time it was a division of General Motors, it’s no longer a division of General Motors. But this organization happened to make the transmissions that went into my tanks, I’d mentioned I was an armor officer in the Army. So this organization made the transmissions in the tanks. Not only was it my first foray into the civilian world, it was my first foray into any sort of unionized environment. And General Motors like any of the big three, as you probably know, is fairly heavily unionized. So here I was less than a year out of the service, still very rough around the edges had not considered all of the cultural dimensions that I just referenced, had not gone through all of the exercises for which I advocate in the book and show up in front of a bunch of unionized workers who over time had negotiated rules that made very little sense to me.

Matt Louis:                         38:21                     You know, here comes the fresh out of the service, you know, snot nose person who still thinks he has some authority to make things happen, and low and behold, you know, there were workers asleep on the assembly line, but I couldn’t wake them up because of union rules and I was just beside myself. And no matter what I said, it didn’t change anything. And, and taking it up the chain to the supervisors, you know, I just, I couldn’t budge and this was just completely foreign territory to me. And as you might expect after a summer of this a couple things happened. One, I came to realize it was a good lesson in how the rest of the world worked the real world and how they weren’t going to change, and I was going to need to do some adjustments in order to succeed in this new world.

Matt Louis:                         39:17                     That was one outcome. The other outcome was, well, we’ve seen enough of this guy, we’re not going to offer him a job after a second year. So that was the other outcome, but you know, I chalked up my lessons learned and applied that to my next foray in the real world. Another very simple story I’ll tell you about my transition, you know, has to do with finances. We talked about budget. You know, I’d gone just as all of your listeners will leaving the service from having a regular paycheck to suddenly having none. You know, thank goodness I was married, and am still married, to the same good woman. At the time, she was in her residency following medical school. She at least had a trickle of income coming in that was able to keep us afloat. But you know that budget exercise, and because we had so little cash flow, was critical to making sure that we stayed on track and you know, weren’t bouncing checks and other things.

Matt Louis:                         40:27                     Just one simple story, I’ll tell you a way in which we did that. Every Sunday after church services, we would stop at a bakery on the way back home after church and this little bakery would always have day old donuts, and refer to them as DODs, which were half or less than half price of a regular donuts. So even on that simple a thing is, you know, ways that we would try to cut costs, you know, still maintain some sort of a lifestyle, but did everything we could to stay within the limits of our income. So I encourage all your listeners to do the same and to make sure one, you have a budget and two, that you’re executing against it appropriately.

Scott Vance:                       41:15                     Yeah, the military paycheck, I’ve often said that I can live off of any amount if I know I’m going to get it every two weeks. Not having that when I first transitioned, although mine was easier again cause I retired so I kind of went from one paycheck to another. To a lesser degree not having that paycheck every two weeks exactly, whether I was at work or not or sick or on vacation, caused a little bit of angst. Then just thinking about my friends that had never been in the military and they talked about how they couldn’t take a vacation for a week at a time or you know, a certain week because then their next paycheck is cut in half because they were not at work. That to me would be very hard to deal with if I did not have my retirement and went from a straight military job to a civilian job where my pay would be dependent on me being at work those two weeks or whatever the time period is.

Matt Louis:                         42:17                     Yep, it’s critical. All the more reason to start early and planning your transition and having a beat on what you’re going to go into before [inaudible].

Scott Vance:                       42:26                     Yeah. So, you talked a little bit about SFL tap, right? Cause that’s what they call it now, Soldier for Life Transition Assistance Program. And yet I found it to be a good attempt to help but in its practice wasn’t. It didn’t really help me in my transition. So a lot depended on me. In fact, in my last year before I retired, I was over in the US embassy in Nepal and I kind of worked it out that I could stay there until just before my actual retirement date, and I did SFL tap by the Internet. Since I was so focused on it, I knew what I wanted to do. So I was studying for the CFP exam, I was taking some online CPA courses. Maybe I’m kind of the outlier, but I found SFL tap to be more of an impediment cause I couldn’t just say to them you know, I’m good.

Scott Vance:                       43:27                     I still had to check that block that said, hey he went through the class on how to write a, you know, those basic things that I probably didn’t really need to, just extra time taken away from me when I knew what I was doing and what I wanted to, you know, the road I had in place.

Matt Louis:                         43:43                     That’s great. You are an outlier and you had a leg up over most of your peers who are not in that point in their transition.

Scott Vance:                       43:53                     Yeah, I was really lucky. I mean I knew I was heading out. I knew I had friends at branch that allowed me to go work an assignment. That isn’t really good for, you know, career wise at that time I should have been an XO, but I knew I was going out and kind of wanted to get there. But yeah. So all that to say it’s probably important to plan ahead, like you said, and work with your, you know, military assignments officer or branch manager to get you to a job that can help you get that transition the way you want it to go.

Matt Louis:                         44:28                     Yeah, absolutely and as part of that, part of the book, I refer to it as the five minute MBA and attempting to translate what you’ve done and have that mean something to a civilian hiring manager or executive. You have to understand some of the basics of the way businesses operate. And you know, again, I’ll refer you to the book but a very simple income statement and what the parts of that are and essentially you need to translate what you’ve done into a language that indicates how you can move the needle on certain aspects of that income statement. If that doesn’t clearly come across to folks on the other side of the table, you’re potentially dead in the water there. Some other advice I might offer to these military families regarding transition I mentioned starting early, work through the process in the book, especially those financial exercises we’ve been talking about, will have a critical impact.

Matt Louis:                         45:33                     Another is have an open mind. This is a whole new world, a whole new set of opportunities, and yeah, it’s going to get frustrating, but you know, look at it this way, this is the rest of your life and you’ve got a clean sheet and you can do what you want to do. It’s as one person told me that I interview in the book was called the curse of the blessing. It’s a blessing that you do have a clean slate and you can do whatever you want, but the curse is you have to figure out what that something else. But the fact matter, it is an opportunity. I encourage you to take the positive spin on that. In avoiding frustration, stay engaged with a tribe of your peers. Much as they say it takes a village, in terms of transition, it takes a tribe.

Matt Louis:                         46:18                     And the more that you can stay connected with others that have gone through it, you know, use guides, much as the one I’m pushing, so much the better. And then, on a very positive note, I would just urge you to use the old Army saying, or slogan, you know, “be all you can be,” but the future is yours for the taking. If nothings ventured, nothing gained. Go out and get it. You know, now is your time to reset, to reboot and go do it. There is a tribe of brothers and sisters out here on the other side of that transition awaiting you and waiting to help you. Please reach out. I’ve never had any fellow veteran turned me down when I’ve asked for help. Please don’t be afraid to reach out for help.

Scott Vance:                       47:07                     Yeah and just be all you can be. That is from a long time, not a long time. I guess it is a long time ago. Probably there’s a decent amount of listeners that have never heard that slogan. I mean I can still remember the videos on TV, the commercials with tanks driving around, as a kid.

Matt Louis:                         47:26                     You know my age.

Scott Vance:                       47:27                     Yeah, but like you said, finding your tribe of peers, that’s key. I know when I went through I got involved with the American Legion and VFW, veterans of foreign wars, and there’s others out there as well, but like you said, it’s key get a group of friends cause it’s a total shift when all of a sudden you go from being in a unit with your friends and coworkers and fellow NCO soldiers, it’s a shock to come out and be all on your own all of a sudden. That was one of the key things that got me through my transition was those folks in the VFW, American Legion.

Matt Louis:                         48:06                     So nice dovetail too into the second book that I mentioned before. About two thirds of the way right now, it’s focused on employers and it’s all about hiring veterans.

Matt Louis:                         48:18                     The premise being, you know, one given this civil military divide and employers not sufficiently taking advantage of veterans, in my view, it’s one of the more underutilized talent pools in the country. So, the point of the book is to educate employers on the proper way to identify, recruit, hire, onboard, train, retain veterans as a talent pool. And a key part of that bridging to your last point is teaching them how to build employee resource groups. In other words, bringing together the veterans within their organization to enable them, though allow them to have kind of their own internal tribe, let them come together and ensure a more effective, efficient transition for those just coming out of the service. So as you make your way to the civilian world, you know, look around at your employer, hopefully they have some sort of a veteran resource group or business resource to which you can join. Those folks are going to help you again.

Scott Vance:                       49:30                     Yeah, dealing with the employer side, I mean, they look at your job, you know, they probably look at a job like an infantry man or a tanker or artillerymen and they say, well, he was just an infantry men or a tanker and they don’t understand the underlying traits that are inherent to that job. Which could benefit them far more than if they had, say if it was a repair shop that needed a mechanic. Finding maybe an infantryman with those inherent skills underlying would probably benefit them far more than just looking specifically for the mechanic.

Matt Louis:                         50:08                     Yeah, it’s a great point, and it raises two items. One, is the fact that almost half of veterans are going to transition into a career field different than the career field they had in the military. The second point is, yeah, even if you were infantry or a tank or some other combat arms you bring with you a host of transferable skills and that tends to be more soft skills, but there’s been lots of studies on this. Let me just rattle off a number of skills that the Institute for Veterans for Military Families at Syracuse says justifies the value of a veteran in a competitive business environment. Veterans are, and I’m quoting here, they’re entrepreneurial. They assume high levels of trust. They’re adept at skills transfer across contexts and tasks. They have advanced technical training. They’re comfortable in discontinuous environments. They exhibit high levels of resiliency advanced team building skills, strong organizational commitment, cross cultural experiences and experience in diverse work settings. Now, I don’t know about your employer or civilians you’ve worked in, but for those that I’ve worked for, these are exactly the kinds of things that civilian employers are looking for and it’s precisely what you as a transitioning veteran bring to the party.

Matt Louis:                         51:32                     You just need to find a way to translate the things that you’ve done and to language just as I stated, that is going to mean something to the hiring manager.

Scott Vance:                       51:42                     Yeah, that’s the key to get them to understand that, how you quantify that and get that into the resume so they can see it in a way that makes sense to them to get yourself that job for the veteran.

Matt Louis:                         51:55                     Just for posterity sake, do you mind if I throw in one more story?

Scott Vance:                       51:59                     Yeah, go ahead.

Matt Louis:                         51:59                     Here’s one just about me. It may or may not relate to anything, but people always ask me, what did you do in the military? Anyway, this is one that I always pull out. So way back in 1994 I had a scout platoon. We were out doing a JTF six mission. It was a counter drug mission in Sequoia National Forest hunting down marijuana gardens, methamphetamine labs, and you’re really running a close line on posse comitatus, which means that you can’t utilize local government, can’t utilize federal resources as a police force.

Scott Vance:                       52:36                     Yup.

Matt Louis:                         52:36                     That’s the upshot on posse comitatus. So the way it worked was we would go out, we find a meth lab, marijuana garden, what have you. We’d surround it. We call up the local Park Rangers, police force, whoever they were, they would come in and be the ones to deal with it and then we would head off to do our next thing. There was a real handoff there. Anyway, I was out doing that mission and I get an alert from my colonel back at home base and he says, Louis, consider yourself on alert. Now remember the timeframe we’re talking about here. This is Somalia. He says, there’s a request, POTUS has a request for armor. This is Bill Clinton, has request for armor, on his desk and if he approves it, you know, we, our unit is going to send a contingent and you’re going to be the one commanding the contingent. Roger Out. You know, there’s only one response to that one. And Lo and behold, well as history shows us, the request for armor was not approved and thus we have today Black Hawk Down.

Scott Vance:                       53:42                     Yup.

Matt Louis:                         53:43                     The reason my unit was selected is because we were the only one left in the Army that’s still had standard M-1 tanks that could fire the I’ll call it the beehive round.

Scott Vance:                       53:53                     Oh yeah.

Matt Louis:                         53:54                     Yep. Whereas the A-1 could not.

Scott Vance:                       53:57                     Yeah, cause that’s a sabot round right, that they fire, only?

Matt Louis:                         54:02                     Sabot is a different kind of [inaudible]. Beehive, as soon as the round exits the tube, it kind of disintegrates into thousands of different, yeah.

Scott Vance:                       54:09                     Yeah. When I was artillery, we used to shoot, well they called it killer junior. Same thing. Just a bunch of [inaudible] shots that, you know, 20 meters out of the tube, would just blow up and be a shotgun blast.

Matt Louis:                         54:24                     Yeah, exactly right. It’s precisely what it was.

Scott Vance:                       54:28                     Yeah. And you know, we talked a little bit about that, was it JTF mission?

Matt Louis:                         54:33                     Yeah.

Scott Vance:                       54:34                     Yeah. When I was in Nepal, I was a counter terrorism advisor working with the Nepalese army and their big mission was to go to… So I worked with, they only had one battalion I work with and train. They would go down to the tri, which is their area along India, and their big thing was counter poaching. So catching, you know, Indians poaching elephants, rhinos and tigers. And you know, when I first got there, I was like, wait a minute, you can’t do that, that’s posse comitatus and then I was like, oh wait, but I’m in a foreign country and that’s kind of not the same rules. But in the end it was cool. I got to go down there and see some rhinos and elephants and never did see a tiger, but it was interesting trip.

Matt Louis:                         55:21                     That’s cool. That’s one continent I haven’t hit.

Scott Vance:                       55:25                     Yeah, when I switched over to civil affairs. Went through SERE school, all that stuff. They put me in Spanish language school and I was like, oh, I guess I’m probably going to be in South America. And then nope, I got stuck. Not Stuck. I got sent to Asia so I never used my Spanish for anything. But good. So I guess as we wrap up, do you have any final thoughts that you can give to listeners and you know, contact information and whatnot for them to maybe reach out and speak with you?

Matt Louis:                         55:59                     Yeah. Well first of all, Scott, again, thanks for the opportunity. All the best luck with Sheepdog Finance. I look forward to this going live and listening to this and others that follow. I know it’s going to be a great venue. There’s certainly a need out there for what you’re doing and I’m sure it’s going to help any number of transitioning veterans. So thank you for what you’re doing and thank you for again offering me the opportunity to lend my 2 cents to the discussion. For your listeners, those that have an interest in checking out some of the exercises I talked about and finding out more about the book, check out my website and again, Matthew J Louis.com, Louis as in St Louis. My book, again, the title is Mission Transition. You will find it available in all formats as of September the 24th 2019 and please reach out if you’d like me to be a speaker at an organizational function you might have or any aspect of the topic, I’d be glad to acquiesce.

Scott Vance:                       56:59                     Good. Well thanks Matt for your time and for your expertise. We’ll make sure in the show notes to link to your website so my listeners can get a hold of you and we look forward to the book Mission Transition coming out in September.

Matt Louis:                         57:11                     Thanks so much Scott.

Scott Vance:                       57:15                     Matt gave us some good transition information and continues to work to ease the transition for other veterans. His book, Mission Transition releases in September. If you’d like to contact him, please contact him at Matthew J Louis.com. Thanks for listening to Sheepdog Finance podcast.

Intro:                                     57:33                     Thank you for listening to Sheepdog Financial. Visit us online at Trisuli Financial Advising.com for more military centered financial resources.

Sheepdog Podcast Episode 2: Buying a home

In the second Sheepdog financial podcast we have Erica Anderson. Erica is the owner and broker of Team Anderson Realty located in Holly Springs. Erica is an expert in buying and selling real estate. Listen as she talks about some of the local and national trends affecting home buying. Then gives good advice on how to buy a home, how to sell a home and the value of using a provider such as an agent or home inspector. I hope you enjoy Erica’s advice and expertise.

Listen to the episode at this link. 

Read the Transcription here.

Intro:                                     00:09                     Welcome to Sheepdog Financial. You will get answers to your financial questions. Learn to plan for your financial future and have the type of life that people dream of brought to you by Trisuli Financial Advising, a fiduciary financial advisor practice focused on military members and their finances. Your host of Sheepdog Financial is Scott Vance. Hello and welcome to Sheepdog Finance podcast. Today we have Erica Anderson on the show.

Scott Vance:                       00:40                     Erica is the owner, and a broker of team Anderson Realty. Her business is located here in Holly Springs, North Carolina. Erica is an expert in buying and selling of real estate. Listen, as she talks about some of the local and national trends affecting home buying, she then gives some good advice on how to buy a home, how to sell a home, and the value of using additional providers such as an agent or a home inspector. I hope you enjoy Erica’s advice and expertise. Welcome Erica.

Erica Anderson:                01:07                     Hi. Thanks for having me. So good to be here.

Scott Vance:                       01:10                     Yeah, I can’t wait to talk with you. So first, why don’t you give us a little bit of a background as to who you are and how you got here.

Erica Anderson:                01:17                     Well, I’m a third generation real estate agent and a graduate of the University of Central Florida. My bachelor degree has an emphasis in marketing. After I got my degree in 2008 I joined a team in Cary, North Carolina at Keller Williams Realty. I was an administrative assistant until April of 2009, when I got licensed. I am a Dave Ramsey ELP, a certified luxury home marketing specialist, and I started my firm about four years ago, but overall I’ve been in real estate for over 10 years now. I work along with my father as well, whose been a licensed agent since 1982.

Scott Vance:                       02:04                     Oh, that must be awesome working with your father?

Erica Anderson:                02:07                     It is. I really, really enjoy it and, my aunt is actually my office manager as well, which it’s been fabulous.

Scott Vance:                       02:16                     It’s keeping it all in the family. I guess that’s kind of a double edged sword at times, I bet?

Erica Anderson:                02:21                     Well, I only choose the best family members. I wouldn’t hire everybody in my family, I’ll put it to you that way, but I hire the best ones, or have the best ones on my team.

Scott Vance:                       02:32                     That’s great. So we’ve talked a little bit, so you’ve been here in Holly Springs for quite a while, so you’ve seen some of the changes. So I guess some of my first questions revolve around an overview of the real estate markets, both at the local level here in Holly Springs, which for my listeners that aren’t familiar with Holly Springs, it’s basically blown up the last 10 years. So the local trends as well as some of the future trends, if you could speak a little bit to that.

Erica Anderson:                02:57                     Yeah, well as a whole, not just in Holly Springs, with the whole triangle area, it’s been dubbed the mini Silicon Valley of the east coast. And because of that, because of all the tech companies that have come in and pharmaceutical plants as well, I think as a whole, we kind of live in a bubble. Even when I started during the economic downturn, there was still business people were buying and selling. The market did not crash like it did and the other parts of the country and it was relatively stable and since then it has only grown substantially. Holly Springs is interesting because it had almost delayed growth so it’s just outside Cary and Apex, North Carolina, but right now there is a lot of commercial properties being built up like the block at main and a lot of stuff. The downtown they’re starting to turn it into an actual downtown with more commerce and shopping and restaurants, which is pretty cool.

Erica Anderson:                04:00                     Then you have the main Holly Spring Shopping Plaza, which came in a few years ago and they have the movie theater, and the other shops as well, Target, a lot of anchor businesses that are back in there. And Holly Springs, there’s just so much in value, so much bang for your buck compared to say Cary, even parts of Raleigh like inside the beltline and Apex that the growth is, is just steadily increasing. So I think that Holly Springs and the Triangle Area is really good, but I had a really interesting conversation with the seller, and I kind of agree with him, the last two years were a sooner spring market than historically from what I’ve experienced, which means that we started having a lot of interest and, peak buyers starting to look in January versus historically, just after the new year. I would say February, March is when it used to be big,

Erica Anderson:                05:05                     and then after the new year, the last two years, is when I saw it started getting busier then. Anyways, I kind of feel like the market as a whole is a little sluggish. I really think that part of that is because they raised the rates, and the markets in general, they don’t like uncertainty, and we have a lot of tariffs, and I think that they’re trying to lower the rates again to spur the growth. My seller made a really interesting point that the baby boomers are retiring, so their spending cycle is scaling back and the millennials aren’t buying. Approximately, I think it was 80 or 84% polled, contribute the fact that they’re not buying to student loan debt, which I thought was really interesting. We do have a lot of national debt as well, I think it’s around $22 trillion. I don’t think that there’s a crash coming, but I do think there’s going to be a little bit of a market reset, especially while we’re negotiating trade deals with the other countries. Luckily in the Triangle Area, I think we’re going to be spared from anything dramatic.

Scott Vance:                       06:18                     Yeah, the external factors are huge with this current administration and some of the changes coming down the pike with interest rates. I think, like you said, specifically the Triangle Area continues to be like at the top 10 list of areas to move to. I just read an article yesterday listing top 10 places to move to, and the top 10 places to move from, and of the top 10, it was like two or three were the Triangle Area to move to. So, I think even in a downturn, with that growth, we’ll continue moving along.

Erica Anderson:                06:55                     Yeah, I would agree with that for sure.

Scott Vance:                       06:57                     Yeah, in fact, the interest, like you talked about Silicon Valley, Apple was just looking recently at coming here. I guess ultimately they’re not going to come, but just being on that [list].

Erica Anderson:                07:10                     Yeah, I was really hoping for that, but we did get Amazon, they have a distribution center that came in ,so that’s good.

Scott Vance:                       07:18                     Yeah. All the international, or large companies that are coming here just bodes well to future growth. So talking a little bit about the environment that we’re looking at, going forward, we’ve got a lot of my listeners are military folks, so let’s talk a little bit about some of the advantages and disadvantages of buying a home. A lot of them will be first time buyers, so if we just talk a couple of advantages or disadvantages,

Erica Anderson:                07:50                     Just buying a home in general?

Scott Vance:                       07:53                     Yeah, so some of the advantages, tax advantages, of buying a home and then also a home kind of ties you to an area. That’s kind of what I was thinking about.

Erica Anderson:                08:09                     So what I would say is, if they’re first time home buyers NC housing has a first time home buyer tax credit, and I’m not sure entirely of all the details, but what I’ve been told is they can get upwards of between, I think it’s $100 and $150 a month in value that they can either get a lump sum back in taxes or they can have it less taken out of their paycheck. So it just kinda depends on the route that they go, but there is a first time home buyer credit that should be for the life of the loan. That can always change, so I never guarantee anything like that. Even the lenders really don’t, but it should be. Even a hundred dollars a month for say five years, that can add up really quickly.

Erica Anderson:                09:00                     As a whole, I always tell people when they’re going to buy versus rent, and they’re concerned about being locked down, there’s always risk involved when you’re making an important purchase like a home, or purchasing a property in general, but you can always rent your home out. Worst case, the rental market is huge. So if they purchase a property that doesn’t need a lot of work, and that it would be pretty self sufficient if they moved away and rented it, that’s always an option. The buyer always just has to intend to live in a property. Things happen, so even if they purchase a home and say get a job transfer six months later, that’s still okay, they can rent it out. They’re not, you know, they weren’t doing any type of fraud in that situation.

Erica Anderson:                09:52                     Now a home buyer wouldn’t want to purchase as a rental in the guise of you know, first time home buyer, first purchase, getting a really great rate. So they should keep that in mind as well that they could rent it. I wouldn’t purchase it as a rental because that’s 20 to 25% down, but purchase it in the mind that if something happens, let’s say the market turns, and you can’t sell it, worst case scenario, you can rent it because when the markets do turn, there’s always more renters than buyers and I think that that’s pretty important to keep in mind. Now expenses, there’s always a roof, the HVC, the hot water heater, but they can get a home warranty. Third Party home warranty that the seller pays, cost approximately between $600 and $700. They can have their real estate agent ask that the seller pay for that.

Erica Anderson:                10:44                     That can be part of the negotiation, and if they do, usually you just go through the home warranty company. You pay, say a $75 fee and they have one of their vendors come out and repair or replace. Now if they have a 1982 HVAC and they get a home warranty on it, there could be a little bit of a fight with a warranty company to replace a unit. They probably will have the buyer bear most, or all of that expense. It just really depends. So you want an agent that’s going to do due diligence for them and if they have a home that say 15 years old where the A/C units functioning perfectly, they have a home inspection stating that it was operating as intended, considering normal wear and tear, then if something happens they can pay, you know, $75 fee, and maybe a $100 or $200 towards the repair but not have not bear the incredible expense of replacing a whole unit.

Erica Anderson:                11:44                     Keep in mind when you’re buying a home, a first time home buyer especially should, that shingles generally last five years less than their shingle…. You know, if you have a 25 year roof, expect to get 20 years out of it. If you have a 20 year roof, expect to get 15 years out of it. And I’m not saying that you can’t get the full 20 years, but you’re probably going to have situations, or you’re gonna have some leak. The vent boots on a roof need to be replaced approximately every 10 years, so that’s important to do, to keep in mind. But as a whole, as long as you do not get an aged out roof or the buyer is prepared for that expense in the near future, then they have that in mind. A hot water heater is approximately $500, they can always spend more than that, but as a whole they get that home warranty,

Erica Anderson:                12:36                     usually the hot water heater, the HVAC is covered with that. Not a roof, but you know if there’s any type of storm damage, that’s what homeowner’s insurance is for. I think it’s more convenient to own a home and get repairs on, and sure there’s more of a liability with expenses and risk involved, but as a whole, when you are renting and you’re calling a management company, I hear a lot of people say that they’re dissatisfied and the turnaround time for repairs and the quality of the repairs themselves because usually those companies are not hiring the best people to make repairs. So I think there’s a convenience factor with being able to call somebody immediately if you have a plumbing problem or an HVAC problem and not have to wait on, uh, the landlord or a management company, just somebody in the middle to get those things done.

Scott Vance:                       13:27                     Yeah, so you made some good points there, that North Carolina tax credit with some of my tax clients have that, um, that’s a pretty steep credit. Now, each state is a little bit different. Um, but it’s basically it’s a federal program that’s administered by each of the states. Uh, and that tax break, like you said, I mean, it was easily, I’m thinking through my, I probably have about five or six clients that have it and they probably get about, oh, probably about $150 or $200 a month worth of credit back from that program. Um, and that’s like, like you said, for the life of that loan. Um, so that’s really a good deal. The one thing you have to be careful with that is if you do sell within a certain number of years, you are limited. They’re gonna want to recapture some of that.

Scott Vance:                       14:07                     Yeah. Yup. So, yeah, so that those tax credits are excellent to take advantage of for buying your first home. Um, or just any old primary home. The other thing to keep in mind too, when you do turn it into a rental is for tax perspective. If you live in it the prior two of the five years, any appreciation is not taxed. Um, and for military folks, if you’re on orders and you have to move before those two years are up, you get a special, uh, exception to that rule, uh, make sure you talk with a tax person about that. Yeah, yeah. Yeah. There’s a couple of special exceptions. One is military. One I think is divorce and one is sickness. Um, so yeah. Yeah, yeah, it’s all helpful. That’s all good. Helps military gets some tax breaks. Um, and I know a lot of military folks, um, you know, accumulate houses over many moves and rental properties. Um, have you ever dealt with anybody as far as being a landlord, any recommendations around that? I know I use, for instance, my rental properties. I use a management company.

Erica Anderson:                15:15                     I like management companies, if you’re going out of state. If you live like, you know, I mean, and that would be the situation for a military, uh, buyer. I prefer that because they take what between 8 and 10%. They usually take the first month of rent and I believe between 8 and 10% of the rental payment. And they coordinate receiving payments, distributing that monthly payment to the homeowner, and then making sure that if there are any issues with, with things that need to be fixed, that they have their own vendors go out and coordinate the repair of that. I think it’s convenient. I personally have rented myself when I owned locally and it was still a headache because my tenant actually got ran over and killed by a car and it was just kind of, yeah, there’s definitely unforeseen things that occur with the rentals that every buyer should consider before they take that on.

Scott Vance:                       16:17                     Yeah. I’m, I’m an advocate of a management company. I have a property out in Colorado and they take 10% like you said, but a, there’s no nothing on me. It just comes, the payment comes to me. Every year they send me a statement, makes it really easy. Um, and then I also…

Erica Anderson:                16:33                     They’ll evict them too, right?

Scott Vance:                       16:34                     Yes. Yeah. That’s the next big thing. Cause I own some here in North Carolina and I have one kind of similar to you. I had a woman in there that, I mean she was a great tenant, but she ended up dying in the unit and I was, I was, as she was getting towards the end, I was really afraid I was going to have to walk in there and find her. Ultimately she went to the hospital. So, but uh, but yeah, there’s some definite times being a landlord… Okay. Well, so now we’ve talked a little bit about buying or owning a house. Can you talk a little bit about some of the credit and the financing factors that we have to think about?

Erica Anderson:                17:06                     For a military buyer or just the first time home buyer in general?

Scott Vance:                       17:10                     Oh, so there’s a, there’s a couple of different programs. There’s obviously the first time home buyer,

Erica Anderson:                17:14                     FHA, Conventional.

Scott Vance:                       17:17                     Yup. And then I can talk a little bit about the GI bill, um, if you need.

Erica Anderson:                17:20                     Yeah. So just in general, the different types of loans that they can get is that, or what I’ve been seeing with my clients. So there’s a lot of the FHA loans are really good for people that are a little over in their debt to credit ratio, you know, higher that pretty nice program about three and a half percent down and they are more lenient too with the credit. So if the credit is a little bit lower or I think if you had maybe a bankruptcy, you can actually get a loan within three years after the three year period of it being discharged. Yeah. And there’s a lot of people because of the financial crisis that utilize the FHA program just because of that. And I think that you can get FHA financing up to, it’s like $287,000 or something like that. And after that, then you have to pay the difference out of pocket.

Erica Anderson:                18:23                     I believe, and I could be wrong, because I’m a little rusty in my exact numbers, but it’s just a good program. So if you’re not, you know, a jumbo loan or anything like that, that’s good as well. And then there’s a conventional program. There are government, you can go as low as, I believe, 1% for conventional, if you use a government program to down payment assistance and I think FHA as well can be even less than three and a half percent. But conventional products as a whole is usually between, you know, 5% and up. And then there’s mortgage insurance, private mortgage insurance, unless you are putting 20 plus percent down. I, I like to run the numbers a whole bunch of different ways because homes are appreciating in the area relatively quickly and you don’t necessarily have to put 20% down to reach 20% equity sooner than most buyers are probably expecting.

Erica Anderson:                19:19                     So I like a good lender that will crunch numbers and just see is it better to be a little bit liquid especially if the buyers a little concerned about the market or perhaps needing to potentially move away in the future and float the mortgage payment while they’re trying to find a tenant or sell it and then have another payment as well. And then there’s USDA, which is 100% financing and that’s in the rural areas. The map changed I’d say about a year or two ago, so there’s a lot less USDA coverage in this area, but they’re still out there. Most of Wake County is not USDA eligible. A lot of Johnston, Harnett and other areas outside the cities are, and it’s a great program. I have somebody right now that’s purchasing with me, from that area, and they’re getting the USDA a hundred percent financing and every, I guess this the same for most government programs, but every county has a, you know, an income limit. They have to keep that in mind. You can’t make $500,000 a year and get a hundred percent financing. It just doesn’t work that way. So there’s other details involved. But as a whole, there’s a loan type for everybody. And of course VA, which VA is incredibly popular. They have the ability to utilize that.

Scott Vance:                       20:48                     Yeah, the VA loan is a good deal. I’ve done, I bought a home on that 0% down. You do pay a fee upfront, the VA funding fee. Yeah. But yeah, it’s really handy. No private mortgage insurance like you would pay with traditional loans if you’re below that 20%.

Erica Anderson:                21:04                     And the rates are really low.

Scott Vance:                       21:05                     Yeah. Yup. Yeah. Yeah. So it really works out well. Um, now for those who get, you do have to go through a traditional lenders, but they just administer the program. So, um, you do have to meet some of the, if I understand correctly, some of the underwriting requirements that traditional loan would have to minus the 20% down or the initial down payment.

Erica Anderson:                21:28                     I think that that’s the same for any type of loan program that really, even FHA and USDA, you don’t have to go through underwriting and they’re sometimes, you know, an additional step involved.

Scott Vance:                       21:38                     Yeah. Yeah. And then for people that are trying to get their credit straight, um, some of the things I would tell them is, is not to be applying for multiple types of credit as you’re going through that process. Um.

Erica Anderson:                21:50                     Oh yeah

Erica Anderson:                21:53                     Don’t buy a new car.

Scott Vance:                       21:53                     Yeah.

Erica Anderson:                21:53                     Don’t take out that equity line of credit, don’t do anything like that.

Scott Vance:                       21:59                     Yeah. I know people sometimes also worry about when they shop around for loans, but so as long as you shop, I think within 30 days of different lenders, they count that as one inquiry on your credit report inquiry. So that’s where you don’t get hit. So if you’re going to apply with a couple of different lenders to kind of see what works good for you, you kind of want to do it within a 30 day window to help protect your credit.

Erica Anderson:                22:24                     Good point. I like that.

Scott Vance:                       22:27                     Okay. So we’ve talked a little about financing. Obviously things happen, sometimes people can’t pay. Um, have you worked with anybody that couldn’t pay or how they handle that situation?

Erica Anderson:                22:38                     Yeah, I’ve had short sales and I have had situations where the seller was in default and they came to closing with, you know, a couple thousand dollars or they broke even. The one thing to really consider if a buyer is defaulting, you probably should, if you have any equity in it, sell it really soon because the banks and the institutions have a lot of fees that they roll in that you will be obligated to pay and they can change week to week. I had a seller where we were going to break even, but he was maybe gonna make a little bit of money but then there was like a $3,000 fee because they took them to court or they were going to and he had to bring money to closing that he wasn’t expecting, but that was outside of my control and I can’t see every single thing that the bank is doing behind the scenes.

Erica Anderson:                23:37                     The only thing I can do is the minute they say I need to sell it is try and get it sold as quickly as possible and to try and get a pay off and have that updated pretty frequently. I would say every two to four weeks while it’s on the market or under contract, just to make sure that the seller can bring that additional money to closing because in the event that they cannot and they can’t sell it, then they could be in breach and then there could be a whole bunch more legalities involved with that when they have it under contract.

Scott Vance:                       24:07                     Yeah. I’ve worked with a couple clients that are having trouble paying and one thing I’ve seen a lot, and this is the one piece of advice I would give, is not to hide from it. You may avoid the mail, you may avoid the sheriff come knock on your door, but they’re going to get you eventually, and you’re better off dealing with it up front and it’ll save you more money that way. As painful as it is.

Erica Anderson:                24:28                     Yeah, absolutely. A lot of people when they are confronted with stressful situations that they tend to kind of put their blinders on and they don’t face it and then it turns into a big ugly monster in the background that they will eventually have to face. And there is a lot more involved. If you face it early on and you don’t push it to the side, you can usually tackle that if you have the right people in your camp. And I think that that’s really great advice for people in that situation. And then of course if you are more than, I think it’s three months late on your mortgage payment and you are in the foreclosure process, and you don’t have any equity, you can always petition for a short sale. And I really don’t enjoy selling them and I don’t enjoy having buyers buy them.

Erica Anderson:                25:12                     But I have had situations, especially with the credit unions and the smaller banks where they’re relatively smooth and seamless, but larger national banks can be a nightmare. There’s a bit of a disconnect with say Wells Fargo or Bank of America. I almost think that there might be incentive for them to go into foreclosure and they’re not as incentivized to do a short sale. I mean that might just be speculation on my end, but they just don’t seem to be very motivated. A lot of times buyers will go under contract with the short sale. The seller says, yes, I’ll accept this amount, but the bank comes back after an appraisal and they want much more money, almost retail value of a home that’s in better condition than the current one is. It’s better to avoid that at all costs and sell it quickly. But if you must an experienced agent who knows short sales and can navigate that for you is great and then use a short sale attorney when you’re coordinating this process and a good agent will have connections with that.

Scott Vance:                       26:16                     Yeah. Using those specialists helps a lot along with that advice of not digging, not ignoring it, getting somebody that’s specific to that area. While it may cost a little bit more upfront it will probably save you a lot of money on the backend.

Erica Anderson:                26:29                     Yeah, and headache. You know, there’s stress involved with those types of things. It’s just not worth it.

Scott Vance:                       26:36                     Sure. We’ve talked a little bit about sad stuff. How about some advice you could give to people that are buying their homes? So probably one of the first things is how to go about finding themselves a good agent to buy a house that’s good for them.

Erica Anderson:                26:49                     Well, what I do is I would definitely do due diligence. I would have you check reviews. Reviews are important to me because some of these websites, agents don’t have profiles and some of the websites are so popular that they should have profiles. And I think a really good indication of an agent that’s doing volume and is competent and is relevant and in the current market is somebody that has their profile on many various websites. They do not have to be paying to be, you know, have a service but just have a competent updated profile with their bio, and a headshot. You want an agent that clearly has attention to detail and is doing something like that, and then I would also look at the reviews. They might have Google reviews or reviews on Zillow, or Realtor.com or anything like that.

Erica Anderson:                27:43                     Even Angie’s List has reviews for real estate agents. So I would check out the reviews, and every once in a while you’re going to get a bad review on somebody’s rating. I would not discredit an agent that has one bad review because there’s a lot of people that are disgruntled and they’re more likely to write a review than those that are very satisfied with the service. It’s just challenging to get reviews in general, so if you see a negative review, read it and then see if that agent has responded to that negative review. I think that’s important because that shows their level of professionalism. You cannot make everybody happy, you’re not going to always be the perfect fit for a client, and you just want to know that the person that you’re gonna work with is professional.

Erica Anderson:                28:31                     I love seeing, if they’re not an older agent who’s been in the business for 20 years, I like seeing somebody that has a degree. I just think that there’s a level of professionalism with people that it doesn’t have to be a four year degree, but just some sort of trade degree or some sort of schooling because I feel like that will set that agent apart. If they have 20 years of experience and have no degree, then by all means that that’s a great feat in and of itself. So as a whole, just check out the reviews, look at their profiles, see if you’re connecting to what they say and then call them or email them and set up an interview. Ask them how long they’ve been doing it, how many homes they’ve closed in the last 12 months, and as a first time home buyer, a second time home

Erica Anderson:                29:19                     buyer, ask some questions like what they do that sets them apart from other agents, where they work, and where they operate. I’m actually a member of five MLSs, so even though I’m located in Holly Springs, I have listings in Fayetteville, in Rocky Mount, I mean just everywhere, honestly. So people shouldn’t just assume that I’m only working in Holly Springs. I have agents all over the area. So it’s important to find the best agent and not just a local agent. Local is good, but there are some areas that really just do not have great agents in the area. So consider going a little outside the area to find the right agent as long as that agent is familiar with the area and willing to go and work for you in the area that you’re looking at.

Scott Vance:                       30:09                     Sure. So in addition to the MLS, I know when I searched for homes I kind of look ahead of time on, um, was it Trulia, I think, or Zillow, that’s what it is. Does that comparable to the MLS or what are you looking at that? Is that a good way to get a kind of an approximation of what people would be looking at for certain neighborhoods?

Erica Anderson:                30:30                     So it is popular, I will say that I have heard that Zillow’s estimates are 40% accurate within 10% of the price. So don’t look at the estimates, I guess what I’m trying to say because there just external factors that a computer cannot calculate. They don’t, you know, there could be three foreclosures in a community and they’re using the foreclosures as comps toward the subject property. Zillow is very easy to navigate. That’s why it’s the number one search engine. They do a lot of marketing campaigns. They own Trulia as well. They’re the same, essentially the same company. I think Zillow is fine to look at. Just keep in mind that not all real estate firms syndicate to Zillow. Most do. Not all, not all do. And a lot of times Zillow makes, properties that are in pre-foreclosure look like they’re for sale and the contingents and pending properties, which means that they’re in their contract still look active. So if you have a good agent, it is better just to go off the MLS search itself because it’s going to be more updated.

Scott Vance:                       31:46                     Okay. Yeah. Good information. I didn’t know that they kept stuff that was already sold, or not sold, but under contract, on their website.

Erica Anderson:                31:56                     They do, but it’s kind of challenging. People see pending and contingent, but they don’t really understand what that is. And so just having an agent sending them a direct search, I remove contingent and pending when I’m doing a search for a buyer. And if I always say, if you see something that’s not on my list, send it to me because I’ll research it. But nine times out of 10 it’s because it’s already under contract.

Scott Vance:                       32:19                     Okay. And then so talking about buying homes, for sale by owner or FSBOs, do you recommend that buyers look at that route or are there some traps there?

Erica Anderson:                32:32                     Buyers in general, I don’t hate for sale by owners. I think that for sale by owners are shooting themselves in the foot because they historically sell significantly less than working with an agent. I actually just had an associate or somebody that I know outside of this area and the home appraised for 20,000 or 30,000 more than they were under contract for. And the seller was the for sale by owner. So the buyer got a great deal. But the seller trying to save about $6,000 in commission lost $20,000 to $30,000. So keeping that in mind, you can find a good deal. It can be challenging for an agent to work a for sale by owner because we have to communicate with both sides. We have to present the offer, we have to inform the seller on the process and everything like that.

Erica Anderson:                33:29                     I wouldn’t rule it out. A lot of times the for sale by owners get inundated with phone calls from agents, trying to get them as a listing. So they get disgruntled. They can be harder for us to coordinate it’s showing. I wouldn’t rule them out, but I would ask the agent, that the client is working with, what they think about it. If they have an agent that writes off for sale by owner completely, my opinion is they’re being lazy so they need to reconsider who they’re working with. I always try and call a FSBO to see if they’re willing to work with a buyer’s agent and if they are, I try and gather as much information as I can. I’m always willing to show them. I’m always willing to take that step. But if it takes me 10 phone calls and I’m not getting returned phone calls, I would say move on.

Scott Vance:                       34:22                     Yeah. I’ve had clients talk about going and selling their home for sale by themselves and I always advise against it. You know, you save a little bit of money but I think you end up losing more in the end. I tell them (my clients), I used to change my oil on my car growing up, but now I pay somebody $30 because it would take me a weekend and a bunch of curse words and buying a new tools I don’t have to do it. So, I think it’s better.

Erica Anderson:                34:52                     Oh yeah. It’s all about leveraging your time. You cannot be everything to everybody. And honestly, the amount of money saved, if you find a really good person to market your property, it’s not worth it. Because it cost me over a thousand dollars to put a listing in the MLS and that is, that’s basic expenses and I’m putting all that risk up front. If I don’t sell that property for how much a seller is wanting and willing to pay for it, I eat that expense. So I bear that risk. I pay for that upfront. And if the seller doesn’t want to sell it for less than they’re willing to sell it with an agent, then that’s my risk. And I don’t see, if you listed with an agent and you want X amount because you were using an agent and the agent feels comfortable with that amount and they feel like it’s supports market value, then what do you have to lose? And you just are leveraging your time. You’re making everything more streamlined. You have somebody as an advocate working for you. When I’m representing a buyer with a FSBO, it’s easy for me to say, offer less due diligence and less earnest money because I’m working in the buyer’s best interest. Whereas if I was listing agent, I would advise a client to make sure that they’re getting enough money, so that if the buyer walks away, they have a little bit more skin in the game than the average person.

Scott Vance:                       36:12                     Sure. Yeah. So speaking a little bit about buying homes, how about home inspections. Some people I’ve seen talking say that you should have a home inspection. Some people say you shouldn’t. New homes, some say that you don’t need it. Um, where are you at on home inspections?

Erica Anderson:                36:28                     So I always recommend a home inspection. There are so, okay, technically an agent needs to recommend every type of inspection under the sun and home inspections in general I think are almost non-negotiable. You need to account for a $400 to $500 expense for a home inspection. There are things such as foundation issues and fungal growth in the crawl space, water intrusion issues that I think are very important too, even if the sellers not willing to make the repairs, for the buyer to be aware of them. And I have had many, many, many buyers save so much money, four or five, $6,000 by doing a home inspection and finding a substantial issue that really was not easy for even the agents and notice. And then I really, especially in North Carolina, I really recommend termite inspections with the home inspection because subterranean termites. I want to say there’s like at least 14 colonies on an acre, of subterranean termites in the state of North Carolina, on average.

Erica Anderson:                37:32                     And it could be more than that, but that kind of blew my mind. And I even have a termite issue in my own office because it’s a 1935 farmhouse. The importance of having a competent company inspect is number one. And using a real estate agent that has people, I like home inspectors and vendors that cause deals to fall apart because I know they’re doing a good job and you know, of course the seller would love a home inspector that’s a little bit more lax than not as attentive in terms of attention to detail, but I like them. I mean I would rather the deal blow up and know that the buyer’s buying a sound property than not. There’s also radon tests that are important. Uh, and surveys, property surveys are great because there can be easements that you’re unaware of that aren’t even visible from the front or backyard.

Scott Vance:                       38:27                     Yeah, I had a home inspection on a home I almost bought, and the inspector found out that the person, the people that owned it ,were taking the stuff to make fake wood to try and hide the termite damage. So they were trying to like hide that and he found that , and gave us a good reason to back out and not even deal with the rest of the headache that might’ve come with that.

Erica Anderson:                38:53                     I had an agent tell me locally that there were, there was a buyer that bought a home or the home inspector notice that there is a false wall built in the attic to hide damage. A completely false wall that looks like a legitimate wall. And it was a fake wall that was put there by the seller to deceive the buyer about damage. And that blew my mind. And that right there told me that, most people are inherently good and they’re not deceptive, but you can never be too careful and what is four or $500 to find something like that.

Scott Vance:                       39:31                     Yeah. Even if the inspector doesn’t find something like that, they always come back with recommendations on little things to fix. So if you do buy it, it’s a good place to start.

Erica Anderson:                39:40                     New construction, I’ve never had a clean new construction home inspection. And when people don’t get them with new construction, it just makes me unhinged, because you know, there might be a one year warranty as a whole, but a lot of things like roof issues are not necessarily going to show after a year, might be two, three, four years down the road. And I’ve just seen some really sloppy work done and things missed by the local inspectors before they get their CO and during the inspection process. So people rely so much on the builder and the local inspectors that they’re really inundated with new construction builds and they’re just humans just like everybody else. And having another set of eyes is very important.

Scott Vance:                       40:23                     Yeah, that’s, I would advocate always to have a home inspection. Um, so speaking a little bit about new homes, do you prefer new or old homes?

Erica Anderson:                40:32                     Me personally or just as an agent?

Scott Vance:                       40:35                     Well, for working with your clients, do you see an advantage to newer homes? I think there’s probably an advantage if you have some choices that you could make upfront as opposed to an older home where you’ve got, you know, basically what you’re buying is what you’ve got.

Erica Anderson:                40:52                     I’ve found that most spec homes, which means that homes that are built already with a buyer can’t make choices. They’re more likely to be motivated to give the buyer a better deal because they have sitting inventory that’s costing them holdover costs. And I see, you know, if they’re actually doing a spec home or not a Spec home, but at pre-sale they can, they can choose all the finishes that they want. And that can be, I mean it can get kind of expensive when you go into the design center, but as a whole you can choose things like the foundation type. Do you want a basement? Do you want granite or quartz in your kitchen? Do you want the upgraded, you know, the gourmet kitchen? Do you want certain things? So I think that the flexibility of new construction is really nice. They’re relatively smooth in terms of contract to closing.

Erica Anderson:                41:39                     But I get into it with the superintendents because there’s usually too few superintendents working these new construction communities and things are missed so it’s good to have another set of eyes and people that are used to seeing where they cut corners. And I’ve had to be an advocate for my buyers countless times where I just call people out for being unprofessional or not having the house ready. And I’m talking about significant stuff. I’m not saying, you know, a little nail hole here and this and that. I’m talking about filthy property where we’re doing a final walk through and the door hinges not set properly in a pre hung door. Just stuff like that where I had to really just kind of get on the individual, the superintendent and tell them that that was just not acceptable and they would have just closed and they were pressuring the buyer to just accept it the way it was and that it would be done later.

Erica Anderson:                42:38                     But I made them write it down, hold them accountable. I like new construction. I also really love resale because usually the lots are a little bit more spread out. You know, you’re not on top of your neighbor, you have more mature landscaping, you have sometimes not all the time a better construction quality overall, but you can get accustomed built product with new construction as well. So there are pros and cons to everything. You’re usually paying top dollar for a new construction home compared to resale. So you want to consider that as well. If you buy one, two or three or four years old, you still have an almost new product. It’s just like buying a car that’s from a lease, you know, three years old, you pay half. That’s not the percentage that you save when you’re buying a house, but you could save 30,000, 40,000 possibly more if you buy a home that’s a couple years old versus brand new. So there’s just a whole bunch of factors and the agent that the buyers using should be aware of this and brainstorm with the buyer to see what’s the right fit for them.

Scott Vance:                       43:45                     Yeah, like you said, I can see a lot of advantages both ways. You know, buying a resale, it’s not brand new grass, it’s not brand new bushes out front, but you probably can figure out some of the drawbacks and things that are bad on it as opposed to a newer home where everything is brand new and it’s kind of hard to figure that out. But then also it is a newer home. Um, and then also the reduced costs. So talk a little bit about cost. Do you have any recommendations as far as how a buyer should negotiate the cost or that they ultimately pay?

Erica Anderson:                44:22                     Closing costs and down off the purchase price?

Scott Vance:                       44:25                     Yeah, the purchase price and all that. Sometimes the sellers will pay for closing costs

Scott Vance:                       44:31                     or things like that.

Erica Anderson:                44:34                     So if the home is just listed, it’s zero days on market or it’s one day on market, you’re seeing 20 million people at the home during your showing, chances are you’re not going to get seller to pay closing costs. You might even go 20,000 over list. It just depends on the market that you’re in. You need your agents to navigate it. But I like to write a letter. You know, if you have a multiple offer situation, a little letter about why the buyers love the property, that can make a difference. If it is an investor selling a property, forget about the letter. They are numbers. There’s no feelings involved. It’s just like a builder. For the most part. It’s a business transaction. It’s going to give them the most and who’s going to give them the smoothest closing. Your loan type is going to be really important, and I will say that the VA buyers can be at a disadvantage when you’re in a multiple offer situation.

Erica Anderson:                45:26                     If they’re not putting a good chunk of money down as if it were conventional loan. Some VA buyers, put 10 – 20% down and there’s not an issue with the appraisal, but when it’s a hundred percent financing, I have found that if we get these multiple offers situation, the VA appraiser are held to a higher level, more strict standard, and I hate to say this, but some of the worst comps in the community, and I’m not saying that they shouldn’t, but it makes a lot of deals fall apart and they just have a liability if they don’t, and they have to be conservative with their appraisal. So you need an agent that if you are a VA buyer in a multiple offer situation, let’s say you’re putting 5% down, your agent needs to go to the listing agent and saying, look, this is a VA buyer.

Erica Anderson:                46:18                     This is somebody who is working with a local lender or a lender that I have used in the past and they always get me to closing and this VA buyer is putting 5% down or 10% or 20% or whatever it is. And so they are essentially like a conventional buyer, just using the product of the VA loan. That could be a real advantage. So if you want, if the property has been sitting on the market, let’s say it a spec home, I just had one in Carey and we ended up negotiating. I told them, I said, ask for everything, ask for closing costs, ask for money off price, ask for blinds in the property because new construction doesn’t usually have blinds, they don’t have window screen. And this one happened to have a refrigerator, but I said ask for everything. And then when you go to the builder and you presented, or the seller, you see where they want to be, where they want to land.

Erica Anderson:                47:12                     I actually asked for a fence too. I mean why not? Because you just ask for everything because most times they don’t want to lower. If it’s in a new construction community, they don’t want to lower the comp value but they’ll give you concessions. They’ll do the closing cost, they’ll do the blinds, they’ll do the French door refrigerator, they might even do a fence for you and all those things add up. And so I went in and we negotiated, ended up being $15,000 off list price. We got $5,000 in closing costs. We got windows screens and we got a couple light fixtures switched out because you know if it’s new construction they have the ability to do a little bit more. They’re more used to having certain things requested. And then if it’s just a resale seller and it’s been on the market a little bit, have the agent run the comps because you need to know is it on the market because it’s overpriced, is that on the market because it just doesn’t show well or is there another factor involved?

Erica Anderson:                48:07                     Is five 40 going to be in the backyard, you know, is there a highway that’s going to be built in the near future, or close by the affecting the resale value or the current property value? There’s just so many things. I always say go in and ask for a little bit of everything within reason. You don’t want to insult. You can be a little bit more aggressive with the builder and with an investor because they just care about numbers. With the seller unless they’re incredibly motivated, you have to tread a little lightly with your tactic and what you’re asking for.

Scott Vance:                       48:42                     Yeah, I had heard that VA home buyers are sometimes at a disadvantage in a hot market, um, because of the additional requirements placed on them. So we spoke a little about buyers. What about sellers? What can you say about people that are about to sell their homes, some recommendations there? Staging? I’ve seen like 3-D videos, things like that.

Erica Anderson:                49:04                     What I do or what I personally do is I have a network of people. I’m actually a Zillow premier agent and a premier agent direct and I have a 3-D tour that I can do on all my listings and it’s paired with Zillow but Zillow is the number one search site. So we do 3-D tour and before the property is photographed, we’ve prepped the home so we can do it ourselves or there can be a stager that comes in. Now my father has a background in interior design and staging in Boca Ratone. He used to have an interior design company, and so he has an eye that most real estate agents do not in a lot of real estate agents have to rely on, say, an actual professional stager, which I think is great because if you don’t have the eye, that the stager does, don’t, don’t try and be the stager, don’t try and save some money.

Erica Anderson:                49:59                     So either have a stager come in, a professional stager, you know, it’s usually about $300 for two hours of their time and it could go up if you’re actually using their services for light staging. We actually offer staging ourselves. So I have warehouses of, it’s kind of soft staging. I have a lot of art. I have table, chairs. Uh, I do have one bed that is kind of on a bed frame and it’s a mattress. It has actual bed linens, but it’s not heavy staging. It’s not sofas. It’s not anything like that. I’ll do a dining room table, I’ll do plants, I’ll do little things like that. But as a whole you need the agent or the stager to come through. You need to declutter, you need to depersonalize and you need to get your home prepared because you’re competing with new construction and you’re competing with model homes.

Erica Anderson:                50:50                     So you go in and you neutralize the property and you have it all prepped for pictures. You need a professional photographer and the agent of course needs to be competent enough to use a professional photographer to take these pictures. If you have a really nice lot, you might use, the agent might use aerial and drone photography to kind of get a really good vantage. If you’re on a hill and where you’re looking up from the street at the home. The drone photography can be really nice because then the main picture doesn’t look like you’re looking up Mount Everest, deterring future buyers. Then you need a professional video and then we do the 3-D tour on top of it with the video. And then aside from that, I think I do not like outdoor fliers. They get wet. They just are not something that I think is a good representation of the home because even a little dew in the morning can just kind of make it wet and soggy.

Erica Anderson:                51:53                     So I like to do indoor folders that are professionally printed on a stand. And I think that if people want to see the home, they will call us on the signs. They will schedule an appointment and then they can get an indoor folder or they will call us and we’ll capture the lead. Either get them in the home or send them the information so that they can see it in a really nice format on a computer or in a nice folder. And as a whole, I think sellers need to make sure too that they price it appropriately.

Scott Vance:                       52:24                     Yeah, that whole selling process can be daunting. Um, and the help with staging is a huge thing. I know from my experience in selling my homes. So any other advice for sellers as far as selling a home?

Erica Anderson:                52:38                     I think a lot of sellers need to understand that our job as the agent is to get it out there in front of everybody. So I do social media paid campaigns, I have it featured on Zillow, I have it on all the social media, I have it, you know, just in the eyes of even local agents. If your home is, has been staged and prepped properly, the marketing is excellent and superior to, you know what the other agents in the area do and your home is sitting, it is going to be the price and a lot of sellers need to stop blaming the agent, that it’s the agent’s fault. Now sometimes it is the agent’s fault. They’re not doing a good job. But a lot of times those sellers didn’t hire the right person for the job to begin with. So I always say if the marketing’s right and you have too many showings and no offer or you have very little showings or no showing, that’s a reflection of the price.

Erica Anderson:                53:33                     And even the smallest amount over market value I have seen in my career, buyers will not make the offer. They just, for whatever reason, they just don’t like to, if you price it appropriately and you hold on your price, that is the best way to get an offer and to get it sold. It is not good to overprice it, test the market and have those days on market. Just reflect that it’s overpriced and you just have to have a really grounded reality in that every one to two weeks, if we don’t have an offer, we need to drop the price. It doesn’t have to be $20,000. It doesn’t have to be dramatic. It could be even $1,000 so you need to just keep it refresh and you need to hit it until you get that sweet spot.

Scott Vance:                       54:22                     Well. Good. Thanks for all that. That’s been good information. As we close out, do you have any final advice that you’d like to give to listeners as they’re thinking about buying a home, selling a home or renting a home or anything with a primary home?

Erica Anderson:                54:35                     I would just recommend that you speak to a really good lender and you speak to a competent real estate agent and just brainstorm and figure out where you want to be, where you need to be in the whole process from contract to closing. And if you find, if you’re a seller and you find a good agent, have that agent set realistic expectations for you, because a lot of agents will kind of feed a little fluff, and you know, get you all in the field, but you need somebody that’s just going to tell you how it is in a very professional manner. But I’m the kind of person I like to be direct and I don’t like to tell people that I can give them more than I think I can for home. And sometimes I don’t get a listing because I’m not telling them that they should overprice their home. But I think that if buyers and sellers go to their agents, get a really professional, competent agent and ask them for their experience and have them help guide them, they will find that they will get an overall much smoother, more professional, more incredible experience for the home buying and planning process versus somebody that is blindly doing it. You just really need to professional in your camp. That’s on the lending side too, because you do not want somebody that’s west coast when you’re east coast and vice versa because the time difference.

Scott Vance:                       55:57                     Yeah. All good advice. Well, thank you Erica. Uh, and for my listeners, I want to get a hold of you. How could they get ahold of you?

Erica Anderson:                56:03                     So you can go on my website, it’s teamandersonrealty.com/. Of course you can also call me and you can even text my number is (919) 610-5126 and you can find me on Instagram and Facebook at team Anderson Realty.

Scott Vance:                       56:22                     Well, thanks again Erica. It’s been good time

Scott Vance:                       56:24                     and good information.

Erica Anderson:                56:25                     Yeah. Well thank you so much for having me and it was a pleasure speaking to you. Been fun.

Scott Vance:                       56:30                     Thank you.

Scott Vance:                       56:34                     I hope that you enjoyed the show, and the advice that Erica has shared. If you would like to contact Erica, check out her website at www.teamandersonrealty.com and I will link to it in the show notes. If you found this episode interesting, feel free to share it with friends and subscribe to hear more. I would love to hear your feedback and suggest topics that you’re interested in listening to. Thanks for listening.

 

Sheepdog Podcast Episode 1: Health insurance for military members

In our first episode of Sheepdog financial podcast we have Danielle Roberts a nationally known expert on Medicare and Health insurance. Danielle is the co-owner and vice president of Boomer Benefits a Texas based insurance agency specializing in Medicare-insurance related products. Her agency ranks among the top national medicare supplement producers for Blue Cross/Blue Shield, Aetna, Cigna and others. Danielle gives us an update on the health insurance landscape as it stands today. She speaks about Tricare and specifically about the Tricare for life integration with medicare. She also addresses health insurance alternatives for military members who don’t retire and gives some tips and tricks of HDHP’s (Hight Deductible, Health Plans) and HSA’s (Healthcare Savings accounts) and lastly she explains the often misunderstood coverage that Medicare provides for long term care.

Listen to it at this link.

 

Episode Transcribed below

Intro:                                     00:09                     Welcome to sheepdog financial. You will get answers to your financial questions. Learn to plan for your financial future and have the type of life that people dream of brought to you by Trisuli financial advising, a fiduciary financial advisor practice focus on military members and their finances. Your host of sheepdog financial is Scott vance.

SV:                                         00:35                     Welcome to the first episode of the sheepdog Financial podcast today.

SV:                                         00:39                     Today we are lucky to have Daniel Roberts she will be speaking to us about Medicare and health insurance. Daniel is the co owner and vice president of boomer benefits, a Texas based insurance agency specializing in medicare insurance related products. Her agency ranks among the top national medicare supplement providers working with big companies like blue cross blue shield, Aetna, Cigna, and others. A recognized Medicare expert Danielle was a member of the Forbes Financial Council and frequently writes Medicare articles for forbes.com be sure to listen to as Danielle gives us an update on health insurance landscape. As it stands today, she speaks about tri-care and specifically about tri-care for life’s integration with Medicare for military retired folks. She also addresses the health insurance alternatives for military members who don’t retire and give us some tips and tricks of HDHP’s aslo known as high deductible health plans and HSA’s healthcare savings accounts. Lastly, she explains the often misunderstood coverage that Medicare provides for long term care.

SV:                                         01:46                     I’ll let you in on a secret. It doesn’t cover longterm care. Listen closely as she explains the difference between the Medicare covered short term care and the private longterm care insurance. Covering longterm care is a co owner with her brother and vice president of boomer benefits. It’s insurance [inaudible] specializing in Medicare products based out of Texas. Boomer benefits aims to educate Medicare beneficiaries about their supplemental insurance options so that they can constantly choose the insurance plan that best fits them. Danielle is a recognized insurance expert. Uh, welcome Daniel to my podcast.

DK:                                         02:25                     Hey there, Scott. I’m so excited to be here with you on your inaugural podcast. Awesome. Yeah, yeah. I chose to have insurance because medical insurance is a huge thing with military folks. Oh yeah. That transition can be really tough and go on from the tricare to some other civilian form of medical insurance can be quite a shock for us for sure. And then Medicare is confusing anyway, just even for anyone when you add the whole military element, I get it. It’s confusing stuff. Sure. So sure. So tell us a little bit about yourself. Sure. So I am an insurance,

DK:                                         02:59                     didn’t know when I began the agency that we would end up in the medicare sector, but what happened is we were working in group and individual health markets back in 2005 and we had a lot of people asking us about their parents. So we would finish up with helping them with their normal under 65 insurance for their families, a lot of self employed people. And we would get people saying, you know, this seems pretty straightforward, but I’m trying to help my mom with Medicare and my dad with Medicare. And wow, this is really crazy confusing. How do we do get this done? And after heard that complaint a few times, then we went and learned Medicare and found that low. And behold, it is absolutely one of the most confusing beasts on the entire planet. And we studied it and got to know all the different pieces and parts and started helping people with it.

DK:                                         03:43                     And over time it slowly morphed into our primary product here at our agency. So now almost a hundred percent of the business that we write is related to Medicare. We might do a little bit of dental and some supporting products like that, but as you can imagine, a lot of what we do is not just the insurance piece, but educating people on how Medicare works, what it covers, what it costs, because these are the things that nobody knows when you don’t spend your life on a national health insurance program. And we are striving to be out there in front of baby boomers to make this transition a little easier for them.

SV:                                         04:16                     Sure, sure. So I’m sure with everything changing in the health insurance landscape today, why don’t you give us an update kind of where we stand as far as ACA, Obamacare, kind of those things that are changing coming down the pike.

DK:                                         04:29                     Yeah. And, and probably will continue to be changing right here as we head into another election next year. No one really knows what will happen. But for right now, the lay of the land is the affordable care act. And so if you don’t have insurance through an employer or the military before you get to age 65, you can buy insurance on the healthcare exchange. So the easiest way to get there if you need a plan is just go healthcare.gov and this is where now anyone can apply. So back when I started my agency, if you wanted to buy individual health insurance for yourself under age 65, you would apply for that. And if you had health conditions those would either be preexisting and therefore not covered or they would make you declinable, which means insurance company doesn’t have to cover you. So when the affordable care act came along, this improved this of course, because now everyone is eligible to purchase the insurance.

DK:                                         05:22                     But because the insurance companies now then have to take on people who have preexisting health conditions, it’s made the insurance very expensive. So, especially for the group of people that I work with a lot who are 63 64 getting ready to age into Medicare. If they don’t have insurance through an employer or like your folks military, then they’re out there buying these individual health insurance policies on the exchange. They may have a subsidy from the federal government that makes that insurance more affordable if their income is below a certain point. A lot of people with just kind of standard middle income don’t qualify for that and so they might be paying 00012001400 dollars a month for insurance before they become eligible for Medicare and they’re doing that with six and $7,000 deductibles just to be able to make it as fordable as possible. So it’s not a good situation in the premiums monthly premiums piece, but it is good that anyone can qualify for this no matter if you have a health condition that’s existing or not, you just have to apply during a valid election period.

DK:                                         06:27                     There is an open enrollment for the ACA plans every fall and you can get into a plan at that time.

SV:                                         06:33                     Sure, sure. So that sounds good. So right now we’re going through, you know, the lead up to our election and we’ve heard people talking about Medicare for all possibility or does that make sense to you?

DK:                                         06:45                     So I think that there’s probably some middle ground in there, which is a more likely possibility. So Medicare for all the way that Bernie Sanders proposes Medicare for all would be a single payer national health insurance system where everything is free, you don’t pay any premiums for it, there’s no copays at the doctor, there’s no copays for prescriptions. And that’s not how Medicare exists in its current form. So right now, people who are eligible for Medicare, and this is close to 60 million people, they have this health insurance and it is a national health insurance program.

DK:                                         07:22                     If you think about it, it’s just for people age 65 and older. And for some people that are younger due to a disability, but they pay premiums for Medicare and everything is not free. Medicare covers about 80% of their costs and they’re going to have copays and deductibles and coinsurance that they pay. So I think the challenge would be to figure out, we have medicare already growing broke. Um, with the way it is now, where people were the 60 million people who are on it are contributing premiums. How do we go to a system where we’re providing insurance for 300 million people and charge absolutely nothing for it and have no cost sharing whatsoever. This would be something that would be pretty hard to pass I think because if a tax increases, there’s another proposal called Medicare 50 where you would be able to buy into Medicare as early as age 50 and what this does, it solves the problem of people who are either laid off earlier than they expected or they’re doing a late career transition or they want to be self-employed, but they can’t quite afford the insurance premiums on the ACA.

DK:                                         08:27                     Being able to buy into the Medicare program at 50 and pay some premiums of course to get into, but maybe premiums that are nowhere near as high as what you would spend on the affordable care act. That bill would be a sort of a stepping stone and maybe that’s more likely to be something that will be passed here in the next couple of years that could later lead to something like Medicare for all. I do think that’s sort of the inevitable. Ultimately we may end up with some type of national care system because that’s just what the rest of the world has, but I don’t think it’s probably something we’re going to see enacted here in the next year or two. But Hey, let’s circle back two years from now when you’re on your a 600 episod. Maybe it’ll be your hundredth episode, but we’ll see where we’re at. We can compare notes.

SV:                                         09:15                     Yeah, that sounds, uh, that sounds like a plan. I don’t know what the way our politicians were. We’ll see where we get with this.

DK:                                         09:21                     Yeah, that’s right. They’re going to keep us on our toes, aren’t they? Yeah. Yeah.

SV:                                         09:25                     So one of the things you mentioned was military folk coming out, you know, tricare for life and then transitioning into Medicare. A lot of us are probably not real familiar with that. So specific for Tricare, for life to Medicare, how does that whole transition work?

DK:                                         09:40                     So whenever you become eligible for Medicare at age 65 you can enroll in tricare for life. And what that is is a medicare wrap around coverage. So Medicare, what we call original Medicare is made up of parts a and B and you would enroll in those as you turn 65 and then you get tricare for life to sort of function as your medicare supplement. So why that’s great for people is that an ordinary citizen who is not in the military like myself, come from a military family, but I’m not a vast military member myself. I would be buying a medicare supplement or a medicare advantage plan, some sort of plan to help me fill in those deductibles and copays and coinsurance that are not covered under Medicare. The gaps in Medicare, and these shouldn’t be scary to anyone because if you think about any insurance you’ve ever had in your life, people are used to having deductibles on certain things or copays and certainly on the military, those copays are far lower than what you would find in the private insurance market, which is good, but people know that you know everything isn’t completely free once we get onto Medicare.

DK:                                         10:50                     So you buy a medigap or medicare supplement to cover some of those items that normally you would have to pay. Well, people who have tricare for life don’t have to enroll in a medigap plan because the tricare for life can be supplemental coverage for them. So the most important thing to know about that is you have to have both Medicare parts a and B and about 99% of all people out there have paid taxes throughout their working lifetime that have gone to pay for prepay for their medicare part, a hospital benefits. So when you turn 65 typically you’re not going to pay anything for Medicare part A. However, part B, which is your outpatient coverage, the current premium for that is $135 and 50 cents a month for the standard base premium, which is about 95% of all Medicare beneficiaries pay that. If you happen to be in a higher income bracket, then you might pay more for that.

DK:                                         11:45                     But most of the people that we see that are electing tricare for life, they’re paying that medicare part B base premium $135.50 a month, and then that covers 80% of their outpatients insurance and the tri care, uh, wraps around that and covers all of the deductibles and copays and coinsurance that normally you would need a medigap plan to pay for. One great thing about tricare for life is obviously it’s going to include drug coverage. So what’s good about that is you would not need to enroll in Medicare part d, like in drug. So medicare part d is The pharmacy program under Medicare. And if you want to have help with your cost of your prescriptions, your average American is going to sign up for a part d plan. And you might pay anywhere from $10 a month for a plan like that to well over $150 a month depending on the plan’s formulary.

DK:                                         12:40                     And people try care for life. Don’t have to worry about that because you’re going to have those drugs already built into your tricare for life benefit. And so you would not need to go ahead and sign up for separate part d insurance. I really think that it’s great for people who are in the military because they’re already used to tri care and then that work there and the contracted providers. And so only thing that’s really changing is that tri care becomes your secondary insurance and Medicare is your primary. And when you put the two together, it’s pretty powerful. Powerful insurance. It’s very comprehensive. And typically when we’re dealing with someone that has tricare for life and Medicare, we tell them, take it and run for the hills. You don’t need to sign up for any additional medigap plans. You don’t need to buy any additional supplemental coverage.

DK:                                         13:27                     Um, some people with tri-care will look at, sometimes we get them looking at the Medicare advantage plans and that might be because they want to have an additional way to get medications or they want to have a network of civilian doctors that they can see in addition to the tricare for life. But I actually, although I’m probably talking myself out of sales when I do that, I actually try to encourage them to just stick with the standard tricare for life because that’s a great network of providers and there isn’t really a lot outside of that that you’re going to be able to add to that package. So unless you have a problem with the network, then there’s no reason for you to need to enroll in anything else. Okay.

SV:                                         14:08                     Very good. Yeah. Tricare for life is, so far my experience on it has been, I like it. Um, yeah, of course I don’t have anything really to compare to, but uh, just, just on my observation compared to some of my friends and family, it really makes, it’s really an easiest system to use. Yeah. So we’ve talked a little bit about those of us that have retired from the army, which obviously military I guess I should say. As we know, most people never retire. So a little bit of a question is integration with VA medical benefits specific to obviously medicare but also regular health insurance before you hit Medicare.

DK:                                         14:43                     Sure, so I definitely can speak to this because my dad is a Vietnam vet and he could have the option of course of just going with his VA insurance. So with VA coverage there’s different levels of coverage and it’s based on your means. So they’re going to look at things like your income and assets and determine a level of coverage that you get. But all veterans can use the system to a certain degree. As my understanding with my own dad, when he became eligible for Medicare at 65 his first inclination was, I’m just going to keep my VA coverage because why would I want to pay for Medicare when I could just go to the local VA clinic? Well, I had been doing this for about 10 years at that time and I encourage them, dad, go ahead and sign up for Medicare parts a and B.

DK:                                         15:31                     You want to have those because if something happens and you get rushed to the hospital and they don’t take you to a VA clinic, you don’t want to deal with the backend stuff that’s going to result from trying to get that covered. So it’s good just to have that original medicare a and B so that if something like that happens, you’re not running around without any coverage and you’re going to have pretty good coverage for Medicare a and B. Even if you did have a hospital stay, the portion that you’re going to pay out of pocket is going to be something, but it’s not going to be as much as if you had gone and treated somewhere to civilian hospital and you didn’t have any medicare benefits at all. So we enrolled him in both Medicare parts a and B and then I put him on what’s called a high deductible plan f supplement.

DK:                                         16:17                     And this is a low cost insurance plan. I think he pays around $50 a month for it. And if his out-of-pocket on medicare were to go over a certain limit each year, which currently I think it’s around $2,400, then the plan kicks in and covers 100% of his medical costs for the rest of the year. So although he would have some out of pocket on that, we don’t have to worry about the fact that he would spend hundreds of thousands of dollars. And also, um, I did enroll him into a medicare part d drug plan. And this is something I would recommend for veterans even if they don’t do the part B, they don’t want to pay the premium. For Part B, you could at least get a part d drug plan because although the VA does cover medications, it doesn’t cover all medications. And so sometimes you might have an expensive medication that you need.

DK:                                         17:06                     Like we see a lot of these with diabetes where you might need a medication that really works for you. That’s $400 retail costs. And the VA has plenty of medications to treat diabetes, but they’re more generic medications. And if you’ve got something that’s working for you that’s keeping your blood sugar in check, you’re not going to want to change to something else just because the VA doesn’t offer that medicine. So you can pick up a drug plan. I think they want to have my dad on his round $30 a month. And this was perfect because he did end up having two medications that would have cost him about 700 plus dollars out of pocket and he’s able to get them for $41 a month on the pa drug plan that we chose for him. So I’m a proponent of making sure you’re covered it kind of across all your bases.

DK:                                         17:50                     And another thing to consider for veterans is what is the wait time like in the clinics and your area? So in some areas there’s not a problem, but there’s others where you’ll go and you wait five hours for an appointment. Well, if that’s going to, you know, make your hair fall out, then it’s kind of Nice to have some backup coverage that you can use without breaking the bank. So we like that for people in the VA and for people under 65 that are not on Medicare. Kind of the same thing. You could pick up an affordable care act plan and you can have that as a backup and you know, you can either use the VA or use your ACA insurance provided that you can find one that’s affordable for you.

SV:                                         18:27                     Yeah, I know I don’t, I’ve got a couple of VA medical benefits, but I don’t bother to go to the VA hospital just because of the times and it just, it’s just easier to stay with my tricare for life and doctors that I’m used to and deal with it that way. Pay those, those little premiums or excuse me, deductibles that go along with it.

DK:                                         18:45                     Exactly. That’s a perfect example of what I’m talking about. Just, you know, to have this something else that you can use. So if there’s an emergency, you know, you’re not waiting around for an appointment.

SV:                                         18:55                     Sure. So, yeah, so we talked a little bit about VA medical benefits and Medicare is, like I said, a lot of military folks will get out of the military, uh, and they’ll have to deal with civilian health insurance. Um, being in the military we’re used to acronyms, but some of the acronyms with health insurance like HSA is, and Cobra, um, confused the heck out of us. Uh, so can you talk a little bit about civilian health insurance and what, what goes on there for those that actually make that break from the military? Uh, I’d have to look at civilian health insurance.

DK:                                         19:27                     Yeah, you got it. So you’ve got the military lingo down, but the insurance lingo, nobody wants to learn back. Right. It’s not an exciting stuff. I’m, let me tell it to you in a quicken easy ways to try to make it as painless as possible. So an HSA is a health savings account and if you enroll in a high deductible health plan, which you can get a lot of times through certain employers, you can also get them, um, through certain ACA plans. So as long as you have a plan with a high deductible and it’s an HSA qualified plan, you can go and open up this health savings account and you can do it either. Sometimes your health plan will have a certain group that they deal with, but you can also go right down to your local bank. I mean, I bank at Chase, I could open my HSA there and this is an account that’s tax advantage.

DK:                                         20:16                     So the money that you contribute to it right now is the top of the line. Write off for you at the end of the year on your taxes. And in 2019 you can contribute 3,500 a year as an individual, 7,000 a year as a married couple and an extra thousand dollars a year if you’re 55 or older as a catchup contribution. And I know a lot about this plan because this is exactly the insurance that I have for myself as an entrepreneur. I’m always looking for tax breaks because I pay a lot of taxes being a business owner and I can contribute $7,000 a year for my husband and I into my HSA. And that reduces our taxable income by the 7,000 that I put in. So I’d never pay taxes on that money. And I get this little debit card that comes along with my HSA account. And so when I go to the doctor, I can just swipe my card and I can use money that’s in that health savings account to pay for qualified medical expenses like deductibles, copays, coinsurance, as well as dental vision and hearing expenses.

DK:                                         21:16                     Um, and those can be paid for them with that tax free money. So if you think about it, if I, if I have something medical that costs me 100 bucks and my tax rate is say 30% when I use that HSA money to pay for that service, I’m really only paying $70. So this is something that’s really good for savings. And I like it even better than an IRA, Scott, because when you turn 65, you can take that money out of your HSA account with no penalty, even if you don’t use it for medical. So you could be saving up money in this account. You can invest the money, it compounds and earns interest over time. And then if you get to age 65 and you’ve got say you know, 30 or $40,000 saved up in there I would recommend that you keep it kind of as your medical nest egg and you can use it to pay for your medicare part B premiums.

DK:                                         22:09                     You can use it to pay for all of your dental vision and hearing expenses with that. Medicare doesn’t cover in your, in your years that you’re older, you can use it to pay for your immediate family members if they need any of those things. And so it’s really great to have that as a something just money that you can spend down on medical expenses in your retirement. But if you had a lot and you just weren’t using the money for medical expenses, well then you could just pay ordinary tax on it and use it for whatever you like. So no penalties like you would get for say, an early withdrawal or nonqualified withdrawal from an IRA. So all around, totally loved the HSA plans. You just gotta make sure that you have the right type of account, right type of the health insurance, I should say, to be able to purchase or enroll in an HSA plan.

DK:                                         22:56                     Now for people on Medicare, medicare is considered a type of health insurance. So once you enroll in Medicare, you can no longer keep contributing into that HSA account, but you can spend down the dollars that are in it for all of the things that we talked about that are medically qualified. So that’s kind of your first acronym, which our HSA is a super positive thing. Now, Cobra is a law that allows you to extend group health insurance that you’ve had prior to leaving a job. So you might retire or leave from work and you’ve had this great health insurance plan and you decide that you want to pay out of pocket to extend that insurance on your own. Now when you do that, you’re going to pay not only what you’ve been paying as an employee, but you’re gonna pay the employer portion as, and a lot of times we get some sticker shock when we see that number because you might have an employer that’s paying $600 a month for your coverage.

DK:                                         23:53                     Maybe your portion is only $50 a month that they take out on a payroll deduction. When you go to enroll in Cobra, you’re going to pay both pieces yourself. So sometimes cobra can be a little too costly. And if you’re looking at options between extending group health insurance coverage or enrolling into plan through the affordable care act, you’re going to want to compare the premiums and benefits of those plans to figure out which one is going to be most cost effective for you. But it’s just a way that you can extend that coverage for usually up to 18 month or some limit of circumstances working up to 36 months I believe. But that’s a way for you to continue that health insurance. So if you’re worried about trying to find coverage, you could always do cobra for a couple of months until you figure out what you’re going to do on the private market.

SV:                                         24:38                     Sure. Cobra sounds a lot like self employed taxes where most people don’t see that half that tax. And then when you go into business on your own, all of a sudden you’re paying the full boat. And it’s a quite a surprise. Most of my cash run into.

DK:                                         24:50                     That’s right. And we see people that sometimes will be afraid of Medicare, so they’ll enroll in Cobra and there’ll be paying, you know, $800 a month for coverage when they could get medicare and a full coverage supplement for less than half that. So I always tell people, you know, do your research, find out what the costs are, compare it to all of your options because it would be very easy just to go with what we know. Sticking with Cobra, because it’s the health insurance we’ve always had through our employer, we know how it works and we see a lot of people extend, do Cobra out of fear. And a lot of times they’re paying a lot more than they need to. So, you know, consult with an insurance broker who can help you compare the numbers and then enroll in whichever thing’s going to be the most cost effective.

SV:                                         25:31                     Sure, sure. So a little bit, we talked about preexisting conditions. Do you have any recommendations for how to deal with preexisting conditions that might put health insurance out of reach for some people?

DK:                                         25:43                     Yeah, so fortunately as long as you don’t have a gap in coverage, we don’t have to worry so much about the preexisting conditions anymore. So one of the things about the ACA is that when you lose other coverage, you generate what’s called a special election period, which gives you essentially two months to enroll into a affordable care act plan through the health care exchange. And you won’t have to worry about any preexisting conditions. So they can’t look at you and say, Oh, you know, you have COPD or emphysema and we’re going to rate you up 50% or we’re not gonna cover that health condition. Fortunately, we don’t have to deal with that anymore. With the ACA law, there’s, there’s no rules about that. You can’t have a preexisting condition. And Medicare is the same way when you’re aging in at 65 so no matter what health condition you have, as you’re coming off of your prior coverage, whether that coverage is from the military or from a spouse or from private and employer that you’ve had, when you become eligible for Medicare, there’s no health questions to get Medicare.

DK:                                         26:48                     You’re just going to go down and when you turn 65 you’ve got a seven month window that starts three months before your 65th birthday. Last three year birthday month. That goes for the three months after and you’re just going to sign right up for Medicare and there is no health questions at all. It is literally just a election of benefits that you’re eligible for. So you don’t have to worry about Medicare. I’m telling you that something’s not going to be covered, that they’re going to charge you more. And then you also have a six months from the date that you activate your part B, your medicare part B. So when you enroll in Medicare parts a and B, that part B effective date that appears on your id card, that triggers your six months to sign up for any medicare supplements with no health questions asked. So everybody has an opportunity when they come off of other insurance to either sign up for individual health insurance if you’re under 65 or for Medicare in a medigap plan without having to worry about those health conditions being preexisting like we did prior to the ACA passage.

SV:                                         27:50                     Sure. So talking about Medicare, one of the things I see is people that need skilled care towards the end of their life in a rest home or retirement home. I know my uncle, before he passed, spent about a year, in the VA funded a retirement home. So what are the, how does Medicare pay for those expenses and what’s what’s required there?

DK:                                         28:11                     Such a great question. I’m really glad you asked that because I feel like sometimes I’m shouting this from the mountaintops, trying to let the public know that Medicare does not cover longterm care. So what Medicare does cover is short term care when you are expected to recover. So let’s say that you go into the hospital on Medicare and you have a hip replacement, you’re in the hospital for at least three days and you’re recovering, but you need some wound care. These are things that needed to be provided by a skilled nurse. And so instead of going home, the doctor sends you to a skilled nursing facility where you are going to recover for a few days and you’re going to get either that skilled nursing care, the wound care, or maybe it’s physical therapy that you need to learn how to work with your new hip. There’s lots of reasons why people go into these skilled nursing facilities and it can be anything from a surgery like that to something really serious like a stroke.

DK:                                         29:06                     But as long as you are recovering and you’re expected to regain your independence, you have a hundred days of that coverage from Medicare. So you’ve got a hundred days to get in and out of the skilled nursing facility and you will have some coverage. Um, during that period when you need longterm care, meaning you’re not expected to recover. So now you’ve entered the facility and it’s because you’re not able to live on your own anymore. It’s, you can’t perform all the daily tasks of living, like bathing, dressing, feeding, transferring from one room in your house to another, toileting. All of the things that normally you would be able to do independently. If you are unable to do two or more activities of daily living, then you’re in a position where you really need longer term care than what Medicare would provide. So this is something that you would either private pay for yourself, which is very expensive, thousands of dollars a month to be in longterm care or you can spend down your assets and apply through your state to get a medicaid bed, which is usually not a good situation because you don’t necessarily get to pick the hospital or skilled nursing facility that they’re going to put you in.

DK:                                         30:19                     It’s a semiprivate rooms so you share that room with someone else and you also have to spend down all of your assets so it leaves you in a position where you’re not leaving things behind that you may would rather have given to your children or grandchildren. So a lot of people will look at longterm care insurance. This is type of insurance that I do not sell, but that I have purchased for both of my parents. And I think it’s important because they say that statistically one out of two people is going to need some type of longterm care and you might need that for a few months but you may also need it for a few years. Now I will say if you do have military background, some people who have like VA coverage can qualify for help with the cost of longterm care through the VA. I know that we did this for my grandfather who was a World War II vet and I want to say that we got like $950 a month for the cost of his assisted living facility through the VA getting that longterm care.

DK:                                         31:17                     So that’s another route that people could go. But if you don’t have that, you want to look into longterm care insurance in the sweet spot for buying. That is typically in your late forties through the year, age fifties so say from age 48 to maybe 58 this is a time when is considered a good time to apply for longterm care insurance cause you’re still young enough so that the premiums are not going to be that high. But you also were hopefully healthy enough to be able to get it because you are going to have to answer some health questions. You can’t go out and buy a longterm care insurance if you already have dementia or something that’s making you unable to live by yourself. So that’s coverage that you want to check into before that day comes. And just be aware that Medicare doesn’t pay for it. So this is one of those costs of health care retirement that we need to be preparing for ahead of time. There was a fidelity study that said this’ll be approximately $300,000 for your average 65 year old couple that they’ll spend on healthcare expenses in retirement. You know, we’re living longer these days and we used to, and a piece of that is that longterm care. So you know, the more planning you do, the better.

SV:                                         32:22                     Yeah. Longterm care seems to be an essential thing nowadays, especially once you have that insurance, that longterm care insurance, there’s some additional choices you get to make such as possibly staying at home and having skilled nursing care come in as opposed to going to, you know, the old rest homes that we all think of.

DK:                                         32:39                     Yeah. That’s something that I, when we purchased my parents policy, we bought the type of policy that allows you to choose, so you can use the funds to either have someone come in and help you stay in your own home or you can use it toward a facility. So that’s a great point because I think some people say, I never want to live in a place like that, so I’m not going to buy that insurance. Well, you know, that insurance might be what allows you to stay in your home for a few years longer than you otherwise could have because it’ll pay for that skilled person to come out and help you, not just with your skill needs but also with some of the custodial care of like, you know, cleaning up and making meals and those kinds of things. Yeah.

SV:                                         33:15                     Some of the other things like some of the things I’ve seen is they allow you to ensure both the husband and wife and whoever uses it first is the one that uses it. Um, that helps to alleviate some of the concerns people have with buying insurance and never using it.

DK:                                         33:30                     It sure does. Yeah.

SV:                                         33:32                     Okay. Well at this point I don’t have any other further questions.

DK:                                         33:36                     I know that it’s not the most exciting topic, but I’d be happy to answer any further questions that your listeners have down the road. Um, I know that these are the types of things that even when you listen to a podcast, you might hear it and it Kinda gets filed away for a rainy day. But it is good information to learn as early as you can.

SV:                                         33:52                     Yes. Well, thank you for your time and we look forward to hopefully you have any back again.

SV:                                         33:57                     Yeah, I appreciate being on here. Thanks so much. Thanks a lot.

SV:                                         34:01                     We’ve just begun to scratch the surface with health care and I look forward to having Danielle back update us as his health insurance life landscape changes. You could find out more about Danielle by presenting her website, boomer benefits.com also on the show notes, you’ll find additional resources to help you as you navigate the healthcare landscape. If you liked this episode and would like to hear more, please subscribe to us. You produce some release the show on a weekly basis, and we’ll have future episodes between real estate experts, choose stories of successful military transitions and financial experts who will help you navigate your financial life.

Outro:                                   34:39                     Thank you for listening to sheep dog financial. Visit us online @trisulifinancialadvising.com for more military centered financial resources.

Set your TSP investments on autopilot to reach your retirement

Common questions I get from clients regarding their TSP is;

  1. Which funds should I be invested into?
  2. How many should I spread my money across?
  3. Is there an easier way to do this?

The TSP is great in that it automatically withdraws funds from your pay, almost without you seeing it.  Additional funds are added almost transparently to you based on a percentage of your pay that you pick.  This is great, when you get a raise, you automatically begin putting more into retirement savings.  So with the contribution portion of the TSP on autopilot, why not put the investing side on autopilot too?

Automating asset allocation is the purpose and goal of the lifecycle fund.  What is a life cycle fund? You may ask.  It is relatively simple.  A lifecycle fund automatically adjusts your investment mix to match a model that is based on your expected retirement date.

The L funds in the TSP allow you to pick a fund that is closest to your expected retirement date.  All you do is invest funds into that particular fund.  When you are younger the fund would be more aggressive to take advantage of time in an attempt to get you a better return.  As you become closer to retirement the fund becomes more conservative with the idea of protecting your money as you enter your final couple years before retirement.

A fault that I see many clients make when using the L fund is to have their money invested into many different funds.  The whole idea of the life cycle fund is that you invest all your money in that fund and let it do the spreading across different assets.   By picking individual funds in different asset classes you may become over weighted in a particular asset class when combining the amount the L fund has invested in that particular investment class.

Tea Plantations at Cameron Highlands Malaysia. Sunrise in early morning with fog.

So to recap.  The TSP is a great investment plan. It allows you to put your investment contributions on “Autopilot”.  Putting your asset allocation on “Autopilot” is the next logical step allowing you to meet your retirement goals and not spend the night worrying about what you have your investment account invested in.

How to Benefit from the New Tax Law

You can love it, or you can hate it. But the Tax Cuts and Jobs Act is now a reality. Yes, absent some serious future spending cuts (unlikely) it is projected to add substantially to the national debt. But it does offer some planning opportunities as well.

Emphasize Roth strategies. While the business tax cuts are permanent (until Congress revises the tax code, anyway), the personal income tax cuts are not. They are scheduled to sunset with the 2025 tax year.  This means it may make sense to emphasize Roth IRAs over traditional IRAs. Remember – Roth IRAs have you paying taxes on amounts you contribute now, at reduced tax rates. But since distributions from Roth accounts are tax free (provided the assets have been in the Roth at least five years), you’ll avoid the higher income tax rates that are scheduled to take effect in 2026 when the TCJA ‘sunset’ provisions kick in, and the tax cut for individual taxpayers is effectively revoked.

Meanwhile, emphasizing Roth IRAs over traditional IRAs also means avoiding required minimum distributions (RMDs) in retirement, which means you can benefit from indefinite compounding as long as the assets stay within your Roth IRA.

The benefits aren’t limited to just Roth IRAs. Those of you who are self-employed or are owner-employees of your own corporations may consider establishing a Roth option for your 401(k) plans. You may also consider converting traditional IRA assets to Roth assets – especially if you can pay the income taxes from outside the account. If you have assets in an old 401(k) or other qualified retirement account, the tax cuts give you an opportunity to start converting them to Roth accounts.

Increase 401(k) contributions. The IRS increased the 401(k) allowable employee salary deferral contribution to $18,500. If you’re age 50 or older, you can contribute even more – up to $24,500.

Track medical expenses. Good news for those of you who have significant out-of-pocket medical expenses! More medical expenses may be tax deductible. Prior to 2018, you could only write off medical expenses to the extent they exceeded 10 percent of your adjusted gross income. But the new tax law lowers the threshold to 7.5 percent of AGI.  This means if you have an AGI of $100,000, and medical expenses of $10,000, your potential deduction goes from zero last year to $2,500. That means a significant reduction of your tax bill.

It’s a good idea to track all your medical expenses from the very start of the year – even if you expect not to itemize, and even if you think you’re healthy now. That could change in an instant. So track these items:

  • Doctor copays
  • Coinsurance
  • Prescription drugs
  • Medical equipment
  • Health insurance premiums (the portion you pay yourself)
  • Long-term care insurance premiums paid out-of-pocket
  • Payments to dentists, chiropractors, psychologists and non-traditional medical practitioners not covered by insurance.
  • Residential or inpatient nursing home care costs
  • Alcohol or drug addiction rehabilitation costs
  • Insulin costs paid out of pocket
  • Eye exam and prescription glasses costs
  • Service animal costs
  • Costs of transportation to medical appointments and treatment locations, including tolls and parking
  • Ambulance charges

Note: Non-prescription (over-the-counter) drugs don’t qualify for the deduction, nor do most prescription drug charges or costs paid by your insurance carrier. For more information, see the IRS link here.

Be careful about taking out that home equity loan. Previously, you could write off the interest on up to $100,000 of home equity loan debt on your personal residence. Not anymore. The new tax law eliminates that deduction – unless they are used to buy, build or substantially improve the property that provides security for the loan.

So, you can’t deduct the interest on a home equity loan on your personal residence to buy a car, fund a business or pay off high-interest credit cards. But if you use the proceeds to add a much-needed bedroom to the home providing the collateral for the loan, you can still take the deduction for interest on balances up to $100,000.

Don’t rely on the home mortgage interest deduction for high-dollar homes. Previously, taxpayers could deduct home mortgage interest on balances of up to $1 million (or $500,000 for married individuals filing a separate return). The new limit for home mortgage balances that qualify for the home mortgage deduction is $750,000 ($350,000 for married individuals filing a separate return). So if you’re buying a home and taking out a mortgage for more than $750,000, then only part of your mortgage interest will be deductible.  If you took out the mortgage prior to December of 2017, don’t worry: The old limits are grandfathered in for you. The lower home mortgage deduction limit only applies to new home loans.

Reduce unreimbursed business expenses. Last year, you could deduct unreimbursed business expenses if they exceeded 2 percent of your income. That’s not true for 2018 and for future years. If you’re an employee with significant work-related expenses you’ve been paying out of pocket, speak with your employer about setting up an accountable reimbursement plan. This allows you to receive reimbursement for expenses tax-free.  If you have employees, you may want to set up an accountable plan for your employees, too, so they aren’t stung out of pocket for expenses they can’t deduct. Call us if you have questions about setting one up.

 Claim the child tax credit. Be sure to claim the tax credit for any eligible children. Under the new law, this credit is worth up to $2,000 per child age 17 or younger, as of the end of the year. Up to $1,400 of it is refundable. That means you can still benefit from claiming the credit, even if you expect to get a refund, or if your taxable income is below the standard deduction – or if you expect to have no tax liability at all for the year. This is a big benefit even for those earning lower incomes, so we encourage anyone with children under 18 at home to claim the credit.

There is a catch: Congress limits the refundability of the credit to 15 percent of your earned income over $4,500.

Congress has also increased the income cap on qualifying for the child tax credit. For 2018, the credit for single taxpayers and heads of household begins phasing out at an adjusted gross income of $200,000 and phases out completely when your AGI reaches $240,000. The limits are doubled for married couples filing jointly: $400,000 to $440,000, respectively.

Military families: Keep track of moving expenses. You may read some reports that moving expenses are no longer deductible. But that doesn’t apply to families moving on military orders. So keep careful track of any and all unreimbursed moving expenses, to include mileage on your personal vehicles!

Take advantage of the special deduction for certain small businesses. If you have a sole proprietorship, LLC, partnership or S corporation, the new tax law allows you to take a special deduction on certain kinds of income.

Specifically, you may be able to deduct the greater of:

  • 20 percent of the qualified business income from your trade or business, OR the greater of:
  • 50 percent of the total W-2 wages of the business paid to all employees, or
  • 25 percent of the W-2 wages, plus 2.5% of the original acquisition cost of the business’ real property.

Consider incorporating.  The Tax Cuts and Jobs Act includes a dramatic tax cut for C corporations: The top corporate tax rate is lowered from 35 percent to 21 percent. If you were on the fence about becoming a C corporation before, it may make sense to revisit that decision. Give us a call today.

At Taxvanta, we have particular expertise in helping our customers minimize their short-term and long-term tax exposures. It’s our familiarity with federal and state tax taxes and their impact on small businesses that sets us apart from the crowd. To schedule an appointment, give us a call at 919-589-7760. Or visit us on Facebook or on the Web at www.taxvanta.com.