{Podcast} Tom Hegna on Optimized Retirement and the Role of Reverse Mortgages


Today’s Podcast was Awesome!  I met Tom Hegna several years ago as we shared a small platform at a conference.  Tom shared his signature talk on the 7 principles for an Optimal Retirement and I shared how Reverse Mortgages have changed Retirement Income Planning.  Tom’s information and presentation were outstanding, but what most captured my attention was point #7 in his talk Use Home Equity Wisely. In that final section, he talked about Reverse Mortgages, which was taboo for many advisors and consumers, but not for Tom. He was truly ahead of the curve.  After that talk, I got to take Tom on a deeper dive, and we have continued the Reverse Mortgage discussion over the years (he still includes the topic in his talks). He even had me re-write the Home Equity chapter in his book.  I am proud to have Tom as a friend and an advocate of an optimized and balanced retirement.  Enjoy the podcast and please let me know what you thought in the comments section below.

Discussion Highlights

  • 3 Things You Need to Retire Optimally (1:31)
  • Tom Hegna’s Healthcare Will Cost $1 Million…Your’s May Too (3:14)
  • 3 Things Keeping Advisors Up at Night (4:28)
  • {Case Study} The 3 Phases of Retirement (5:39)
  • Why Tom Hegna Isn’t Leaving His Kids Money (7:27)
  • 3 Killer Questions Every Advisor Must Ask Their Clients (11:10)
  • What Reverse Mortgages and Annuities Have In Common (13:30)
  • Why Most Kids Don’t Want the House (14:37)


Don Graves: Welcome to this week’s podcast. This is Don Graves, and my guest this week is noted platform-speaker and bestselling author Tom Hegna.  As a former senior executive at New York life and retired lieutenant colonel, and economist, Tom has delivered

Tom Hegna: I was in a debate last week with co-founder of the DOL fiduciary standard, and in that call I said, “It’s interesting that nobody knows what is going to be the best.  You can ask 100 different financial advisors, and no matter where they put you, I promise you that in 20 years it will have not been the best.”

Bit coin goes to $100,000; we should all put our money in bit coin.  Oil goes to $10,000 a barrel; we should put our money in oil.  If the stock market goes to $200,000, we should all put our money in stock market. Nobody knows what’s going to be the best.  What math and science do when presented with many variables is look for the optimal solution, which will be the best more often than anything else and it will never be the worst.  I can never tell people what the best way is to retire, but I can show them the optimal way.

Don, I’d say I spend about 20%-25% of my time now, educating and training advisors, but now about 75%-80% of my time is in front of their clients.  I am speaking to the general public in seminars and I don’t sell any financial products (I don’t have a horse in that game), but I show them mathematically and scientifically why they need to have life insurance, annuities, and long-term care and why you cannot retire optimally without those products.

Click Here to Download Related Article: 18 Risks of Retirement

Don: Repeat those, Tom.  You said it real fast; say those three again.

Tom: Life insurance, annuities, and long-term care.  You just cannot retire optimally without using those products to remove risk.  Then, as you know, I also talk about step number 7: use your home equity wisely.  That’s where you have made your living—in the reverse mortgage market, being an expert in that—and that can play the key role in helping people retire.

Don: Tom, in terms of retirement income planning and the years you’ve been into that—for many folk that’s a fairly new term because it focuses on the decumulation phase—but in terms of retirement income planning, what are you finding that’s keeping retirees up at night?

Tom: Well, it really deals with the fear of running out of money.  They’re afraid they’ll run out of money, and that fear is founded because many of them haven’t saved enough money.  We’re in a low interest rate environment—basically in a 1% interest rate environment.  The stock market is at an all-time record high, which if you know anything about the market, you buy low and you sell high.  But people are not getting into the market, which is very dangerous.

They are also worried about healthcare and long-term care.  Some will say they are fine; they’ve got Medicare, but if you have seen what has been happening to the Medicare—now based on how much money you make—you have to pay way more than what you used to have to pay.  Somebody sent me a projection on what my healthcare costs are going to be between now and the day I die, and it’s over a million dollars.  That would be of concern and then the long-term care.  Seventy two percent of all people are going to need some form of long term care.

So those are really the key concerns: running out of money, the cost of healthcare, and the cost of long-term care.

Don: You said we are living in a 1% interest rate environment, and I can hear some people listening to this saying oh no Hegna, where do you get that from?  How did you come up with that, Tom?

Tom: Go down to the bank, tell them you want to open an account and you want interest.  See what you get.  You’ll be lucky to get 1%. I mean what’s considered a safe rate—the 10 years treasury—is just a little over 2%, so you can say we’re in a 2% world, but for anything over 2-3%, you’ve got to take risks.  There is no risk-free investment paying 3%, 4%, 5% in a normal investment market, so that’s why I say we are in a 1% or 2% interest rate environment.

Don: You work a lot with advisors and piggybacking on this question, what do you find is keeping advisors up at night?  Or what are their biggest concerns and challenges?

Tom: Well, number one ever since the history of the world is finding new prospects—getting in front of more people.  They are always worried about where they are going to find the next person that they can help, so prospecting has always been probably their number one concern.

But I think they are also worried about the stock market.  It’s at an all-time record high, if they put a bunch of people in and then market crashes, they’ll look like a bum.

And then the third thing is the DOL fiduciary standard going in.  That’s going to be lawsuit heaven because, just as I said, nobody knows what’s going to be the best.  So no matter where you put your clients, no matter where you put them, that wasn’t the best.  And there will be some attorney that is going to sue you because you didn’t do what’s best. Nobody knows what’s going to be the best and that is why I am saying it shouldn’t be best anything.  It should be optimal because I can’t tell you what’s going to be the best.

Don: One of the questions that wasn’t on the list, Tom, but I love when you talk about it, is the three phases of retirement, Go Go, No Go, and Slow Go. Can you talk about the three phases of retirement, what they mean, and how to optimize them?

Tom: A lot of people think retirement is going to be 30-40 years of golf, tennis, cruises, and line dancing.  I tell people that’s not true.  You are going to go through three distinct phases.  the first phase is what I called the Go Go years.  Now during the Go Go years, you are playing golf, you are playing tennis, you are going on cruises, you are line dancing, and everyday it’s happy hour somehow.

But make no mistake about it.  The Go Go years are going to be followed by this Slow Go years.  Now during the Slow Go years, you can still do everything you did in the Go Go  years, you just don’t want to anymore.  In fact, you don’t want to go downtown after 4:30 because Dad can’t see when it’s dark out.  That’s the Slow Go years.

And the Slow Go years are going to be followed by the No Go years.  The No Go years are those years where you are probably not leaving the building until you’re leaving the building, if you know what I am talking about.  So you’ve got Go Go, Slow Go, and No Go.  This is what I learned watching my parents go through these phases.

I have learned that the Go Go years are all about income, not assets.  Income.  And, Don, 100% of my purchases are going for income in my Go Go years.  Now I define my Go Go years as age 60-80.  Your listeners can pick their own, but watching my parents age 60-80.  During that time, I am literally loading up with as much income as I buy.  Now this income goes for the rest of my life, but I will be honest, I am not taking inflation protection on all of it—some of it, but not all.  You know why?  Because I don’t want to have a bunch of income when I’m 117.  I want to have a bunch of income between 60 and 80 when I can do something with it.

The Slow Go years are all about long-term care, and what I tell people there is any plan is better than no plan.  If you are not going to buy long-term care insurance, then I recommend you to buy a life insurance policy with a long term care rider.  And if you can’t qualify for either, then you use one of those annuities that springs up in your 70s and 80s that can give you a bunch of income.

The No Go years are about life insurance.  I’ve had people say, “Tom, life insurance has nothing to do with retirement.”  No, life insurance has everything to do with retirement!  It’s the life insurance you bring into retirement that gives you the license to spend your money.  See many people are not enjoying their retirements because they think they’ve got to leave their kids some money, so they deny themselves retirement to leave money for their kids. What I tell people, Don, is don’t leave your kids any money.  I want you to spend your money.  I want you to leave them life insurance because you can do that for pennies on the dollars.

Let me use myself as an example.  We have four kids.  One day we are sitting around saying, “How much do we leave the kids?”  I don’t know, what do you think?  I don’t know.  I said, look if we buy a 1 million dollar second to die life insurance policy, when we are both gone, the kids get a million dollars tax free.  That is $250,000 apiece.  Let’s start there.  So we bought a million dollar second to die life insurance policy and it’s all paid up.  Do you know what the total cost of that was?  A $150,000.  Now think about this: for $0.15 on the dollar, we transfer a million dollars tax free to our kids.  Who gets to spend the rest of money?  We do.  I tell people you spend your money; leave them life insurance because you can do that for pennies on the dollar.

Don: Powerful, Tom.  Go Go, Slow Go, and No Go.  Go Go focused on income; you said 60-80.  Slow Go, you didn’t give kind of the Hegna timeframe for that.

Tom: That’s the long-term care.  You’ve got to have a plan for the long term, and I don’t know when it is going to kick in.  It could kick in your 70’s, 80’s, 90’s, but you have to have a plan for long-term care.

And the No Go, that’s when they take you out of the building and, Don, you know we are all going to get taken out someday.  We just don’t know what day that is.

Don: We just don’t know.  Thank you, Tom.  I want to talk about something that connected you and I and I’ve appreciated it in the last few years.  You write about reverse mortgages in your bestselling book and talk about it in your PBS special.  How did you first become interested in reverse mortgages as a retirement income planning resource?

Tom: We wrote it in a book because using home equity wisely is very important, and there are several ways you can do it.  You can sell the home and downsize and move to Arizona.  If you are single you can capture $250,000 tax-free in capital gains; if you’re married you can capture $500,000 tax-free in capital gains.  You can take a loan against the equity, or you can do a reverse mortgage.

Now when I first wrote about it, I was not necessarily in favor of reverse mortgages, but I wasn’t against them either.  I was just kind of neutral, but when I went through some of your trainings (we met at Curtis Cloke’s Thrive University, and Curtis is a super smart guy on retirement income).  Like I said, I wasn’t anti-reverse mortgage, but I was little skeptical of reverse mortgages.

Then I learned about what about reverse mortgages can do—how when you are 62, you can literally buy a house for a half price and be done with it.  Or you can take a reverse mortgage line of credit that goes up every year by 5% or 6%.  If your house crashes in value like we saw in Arizona, it can literally protect you from that.

So I learned a lot more from you and then I also read Doctor Wade Pfau, and you’ve done a lot of work with The America College.  Respected sources like The American College, PhDs, and then your training really solidified, there is no doubt in my mind, many baby boomers will use their home equity.

Don: I appreciate that, Tom.  A high net worth advisor called me today and they said, “Don, I was told to talk to you, but I am not a fan of reverse mortgages.”  I said that I understand; thanks for calling me.  Can I ask you three questions, but you’ve got to be completely honest with me?  She said absolutely.  I said what percent of your retiree-age clients (70% of whom are in the distribution phase) would you think have a need for a reverse mortgage.  Be honest.  She said maybe 10%.  I said thank you; that’s honest.

I said the second question, if you are to ask those clients if they are 100% certain that they will have a great retirement, what percentage of them would say they are 100% certain?  She gave a fairly high number of 50%.  That’s pretty high when I am talking to people; I bet it’s pretty high with you.  Most retirees have a little bit more uncertainty, but she has a higher net worth client.

Let me ask you the third and final question.  I said if there was proven resource that allowed those clients to increase cash flow, reduce their risks, preserve assets, enhance liquidity, and even add retirement dollars back into their savings, what percentage of those clients would want you to tell them about it?  She says 100%.

I said great, so what we have is 10% of your clients think they won’t need a reverse mortgage, but 100% want you to tell them what it does.  Let’s start right there.  And that was the bridge I built and the bridge I continue to build.  I thank you, Tom, for weekly mentioning this.  You mention my name and I am always so happy and about that.

Why do you think advisors have been reluctant to explore the reverse mortgage as a viable retirement income planning tool?

Tom: Well, I think reverse mortgages and annuities have a lot in common.  The press loves to hate annuities and they love to hate reverse mortgages.  While there were bad annuities back in the day and there were probably some bad reverse mortgages, that is not the way it is today.

I will tell you that is not the way it is with annuities.  You’ve got to have an income annuity in your portfolio to take longevity risk off the table.  And I would say if 100% of retirees understood everything they should know about a reverse mortgage…and it wouldn’t take that long to learn—less than 15 minutes—you could really give the basics to every retiree.  If they all knew the options that were available to them, full disclosure, if you get that house for half price, let’s say a $400,000 house for $200,000 and you paid $200,000 cash, it’s done and you don’t have to make any more payments.  You have to make your tax payment; you have to make home owners’ insurance just like if you owned the whole $400,000 house, but you only get $200,000 in there.  And when you die, that house may not go to your children, it may go to the bank, but look what you could do with that other $200,000.

Just a simple disclosure like that, I bet there would be a lot of people who would say I could use that money.  My kids don’t want my house anyway, and I have life insurance going to my kids.  What do they want my house for?  They’d have to go through my furniture and then sell all the stuff.  Most kids don’t want the house to be truthful and they’d rather see their parents live an enhanced retirement.  Then the parents can buy life insurance for the kids. I think it’s a win-win-win all the way around.

Don: I think so too, Tom.  I really do.  You mentioned something earlier, I want to go back before we land the plane.  I have heard you speak, I have got all your books, tapes, CDS, DVDS, and everything you’ve written is sitting on my book shelf.  You talked about annuities—life time annuities—and I know that there are some folk who really take exception with that. There is one fella, I won’t mention his name, but his commercials on television start out with “this person hates annuities.”  What do you say to that, Tom?

Tom: I have a couple of things.  Number one I say that Suzy has her opinions, Dave has his opinions, Ken has his opinions.  They all have their opinions.  But Tommy’s got the facts.  And the facts beat opinions 100% of the time.

If there is anybody out there who does not believe in annuities, I can give them a simple to way to prove me wrong.  Here is all you have to do.  Put together a portfolio that has both stocks and bonds.  Take some of the bonds out and put a lifetime income annuity in.  Do you know what that will do to every single one of your portfolios?  It will lower the risk and increase the returns. If you don’t believe me, prove me wrong, but here is why you can’t.  Inside of a portfolio with the way that income annuities work—it works like a triple, A-rated bond with a triple, C-rated yield with zero standard deviation.

So now let me rephrase my challenge.  You take a portfolio that has both stocks and bonds.  You take some of the bonds out.  You insert a triple, A-rated bond with a triple, C-rated yield with zero standard deviation.  What will that do to every single portfolio?  It will lower the risk and increase the return.  That is a fact.

Then people say the fees are so high.  Not in income annuity.  An income annuity is not even a fee product.  It’s called a spread product.  Just like they have misunderstandings about reverse mortgages, they have misunderstandings about annuities.  That’s what we do, you and me.  We go out and correct people and show them the facts versus the opinions.

Don: Tom, that’s fantastic.  Where can our listeners learn more about you and what resources do you suggest they look into first when they find you?

Tom: The easiest thing to do is to go to  It’s easy to find.  We have a store there where we have all of our products, all my books, audiobooks, my DVDs, my whitepapers, we have package deals.  I’ve got online training and coaching where literally every single day I can coach these people.  I put my whole brain online, sorted in short video clips—3 to 5 minutes—on life insurance, annuities, long term care, social security, sales ideas, and combinations of sales ideas.  There are over 10 hours of video clips sorted.

But there is also a coaching site.  For example, let’s say they get to their appointment 10 minutes early, they get on their phone, they go to the coaching site, a video of me pops up saying, “Tell me about this appointment.”  Is your client single or married?  They click single.  How old is this person?  She’s 72.  Once you click those two buttons, a video of me pops up and I coach them for 5-8 minutes.  Okay, so you’re going on to an appointment with a 70-year old widow, here are her key concerns.  Here are her questions.  Here are her objections.  Here are the products you’re probably going to use.  Here are the questions you need to ask her.  I coach them for 5- 8 minutes before they go on appointment.

The next day they are going on an appointment with a 45-year old couple.  They are married and 45, so I coach the advisor very differently.  You’ve got all those products available on my website.  They can go to YouTube.  There are some free YouTube videos that I have as well, so I am pretty easy to find on the internet.

Don: Tom Hegna, I appreciate you being my guest and I really appreciate you being my friend.  This is Don Graves with this week’s podcast with Tom Hegna.  Tom, thanks again.  We’ll talk to you real soon.

Tom: Thank you, Don.

Don: By now.

Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP® is a Retirement Income Certified Professional and one of the Nation’s Leading Educators on the Emerging Role of Reverse Mortgages in Retirement Income Planning. He is president and founder of the HECM Institute for Housing Wealth Studies and an adjunct professor of Retirement Income at The American College of Financial Services. He has helped tens of thousands of Advisors as well as more than 3,000 personal clients since the year 2000
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®

Categories: Advisors, Financial, General/Misc, Podcast

Tags: , , ,

Leave a Comment

%d bloggers like this: