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Tax Planning: No Pain, No Gain

Finishing Well / Hans Scheil
The Truth Network Radio
September 19, 2020 8:30 am

Tax Planning: No Pain, No Gain

Finishing Well / Hans Scheil

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September 19, 2020 8:30 am

Hans and Robby go over why you need a tax preparer, like a CPA, and a tax planner, like a financial planner and what the differences are between the two. 


Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on for free!


You can contact Hans and Cardinal by emailing or calling 919-535-8261. Learn more at 


Rob West and Steve Moore
Finishing Well
Hans Scheil
Rob West and Steve Moore
Rob West and Steve Moore

Hello this is Matt slick from the match look like podcast right defend the Christian faith and lay out our foundation of the truth of God's word chosen Truth Network podcasts starting in just a few seconds. Enjoy it, share it, but most of all, thank you for listening and for choosing The Truth Podcast Network. You're listening to the truth and welcome to finishing well brought to you by Cardinal guy, certified financial planner long Shiloh best-selling author and financial planner helping families finish well for over 40 years of finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes.

Now let's get started with finishing well welcome to finishing well certified financial planner Hans file today show's title in my book, taxes and tax planning. Specifically, tax planning, no pain, no gain, and there is just it's a shame you know calms that that there's so much of life that has to do with delayed gratification and taxes are no different.

Will yeah walk in the faith is a lot about delayed gratification. Yeah, we've been thinking really the last few weeks, John Elder challenge me with this in our people ambivalent about the return of Jesus and and and really you know talk about delayed gratification in her Jesus is coming.

That's the good news and if I begin with the end in mind, knowing that I the Jesus is coming back if I really want to look at the moment that that happens. I went wait a minute I got a few things I need to attend to you. I have these friends that I really haven't witnessed to. I have my kids and them and praying for them and all these things that I'm not absolutely certain about so it is interesting with massive change. You know calms some fear of loss will comes with a lot of fear loss. That's why people don't change and you know when you relate that to my work doing financial planning it takes a big person to say you know what I'm gonna incur some pain right now, which is a sitdown doing this stuff, making myself vulnerable to a financial planner and to the whole system and knowing making some changes in how I'm doing things that's going to come with gains and unfortunately we as financial planners we we want to tell you all the wonderful things that are going to happen to you when you do financial planning and what you're thinking about down in your heart is man I got to go meet with the lawyer asking all these tough questions. I can show them how poorly I've managed my staff.

Overall, I could tell by my mistakes.

I met doesn't sound like a lot of fun and it's not and that's what's stopping people from doing the things that they need to do to get ready for retirement is is is is the pain involved in just engaging in the process making themselves subordinate to the root really to the process and incurring some short-term pain or medium-term pain, short medium for long-term gain right and in the beauty likely talk about his Jesus's competence can be absolutely unbelievable but there's to be tears that have to come get wiped out Verizon as a result of something and when really began to process that it that's a huge huge change that's coming and really it's like that change is coming to our life as I've discovered just this week with Medicare. My thyroid two weeks ago, I discovered that with Medicare all on my own. Wow there is a big change coming in my life and and whether I wanted to or not. There is your turning 65 in October will ensnare in soap when we get to tax planning. I mean, the first thing I want to do is I want to just define that he and many times it the best definitions, the opposite so you get tax preparation, which is what most CPAs do H&R Block will do it for you. Many people are preparing their tax returns themselves now are just using the online programs the tax preparation is a history lesson coming so your your repairing your taxes and it has involves a lot of certainty.

You just it's real clear you made this much income in this particular year and you had this much and deductions and this is what you taxes and this is how much you had withheld, and so it's all about certainty. And so when we talk about tax planning were not talking about 2020 and 2019 and 2018 were talking about 20, 21 through 23rd. And it's it's it's a little late to be planning out 20, 21, we can still do something we could actually do some things about 2020 if you came in to see us, but by and large, were talking about the future and the future years, which is your retirement and then when we get down and we finished the process, financial planning and the tax planning section. It's probably can involve some short-term pain Simple, that's what I short-term pains that are that are coming. Well I mean we could start with like your Social Security check all retirement planning starts with added and then with that, but it starts with that is the first thing we had to do with any client coming in is a are you on Social Security yes or no and is your spouse on Social Security. Yet yes or no in case of its yes then were going to deal with what we got is you've Artie filed your taxes and refiled your Social Security in your receiving a check and we could possibly look at on doing that, but for the most part it's done what's done is done and then it may be that both spouses are in the same place in enough same age may be one of the skin. The check the other ones not so the pain is going to be the very first thing we might suggest to you is to delay taking your Social Security know whether we suggest that or not but if you thought you were gonna start getting $2000 a month next month or three months from now or whatever and then were a sitdown after we've done the planning and so you know, it might make more sense to wait until your 70 or wait until you're 68 or so. There's yours there is your short-term pain is is that $2000 a month that you were planning on by your choice, you're going to not receive Vincent's really like a lot.

Most of the time people that we recommend delaying the Social Security they got other money like in a retirement account so what are some of the short-term pains with a retirement account well it might be just making withdrawals to live off of. So you can watch that balance start is found.

As you can live off that taste are taken Social Security. I met I could give you a list of him we might sitdown and we might start looking at. You may still be working planning retirement and so were going to lay Social Security but we may delay Social Security even further than you thought and push it out to 70 there something there some loss then secondly we may start talking about a Roth IRA are a Roth 401(k) conversion so we may talk about paying the taxes now that you been postponing all your life so that we can enjoy tax-free income later in retirement. There is a loss for you and some pain and some tears began to shed some light oranges or the Lotta cases, their beneficiaries would receive the tax-free benefits of a Roth IRA casino when the kids get the money it it's it's a difficult situation with the oh yeah, I mean a lot of people to do these Roth conversions.

They end up not taken the money is not needed as an author Social Security check in their other savings or whatever other income and so just sits there and then it's a wonderful inheritance for spouse with her children and grandchildren because it's not an ounce can be a tax-free inheritance. So to hear it. We go to see how quickly we want to move over the gains. I mean, I think he only want talk about the benefits of doing financial planning and your initial questions and Milos talk about the pain here and I thought I I think that's a good a good topic to get on because it's the pain of doing the whole process that takes time, but takes time but it also takes a big person to willingly take on some pain because what we most of the time when people do is we avoid pain and we just we put it off to another day. We don't even think about and so what what I want to be talking to the listeners about to you about.

If you're out there listening is doing financial planning is painful in and of itself it just mean you got it you get a sitdown. You get to say we need to do this, you get to gather all bunch of records you need to come in and see us or we need to do this over the phone that were in get to know each other and you're basically gonna let your whole financial life. Bear in front of us because we can't really make recommendations to see where you are with your tax situation isn't just everything on your invested what you got prepared for the future, and will lay out your next 2030 years, 15 years and then for you and your spouse with a plan that out and so that that is painful foot for most people, especially you going to need to bear your sentence in front of us to move most people come in the door, they say, algia. II withdrew money out of my IRA because when I was 62. I got downsized and I went in the real estate business and I spent all my money that I had on that and then to now, I'm now I'm you know in my late 60s and 70s, and I have a lot less savings every people just need to you help my son out my helping daughter out my first husband passed away and I received these settlements and then you know we got remarried when I got remarried to my current husband. They brought on things that he had done and just.

We spent money on this, though. The other thing to me just that's the stuff that's painful even not just to tell us because were in effect strangers is that you're getting to know, but just for you to look at yourself and talk about amongst each other. It's the whole financial planning process is painful. You know, for most people, even just thinking about doing it and then what I will tell you is when people come in and they're finally doing it. I can just sense that they feel great.

It's like when you get sin confessed right you bring it out into the light where obviously you can you can begin the morning met situation in Jesus and coming temperature but if you're not on more that you don't get the comfort unite is usually not as bad as you think it is a mean just since I have people given me this man and then look so was this what we got this look fine to me.

And so to come back talking about after the break is working to little more specific about tax planning so so what is it that were gonna plan and how is this can be beneficial so to spend the second part of the show, talking about what can you gain from this understanding that that maybe isn't going to draw you to it is really dealing with the pain that's going to drive you to the process is not painful to go to cargo on facility does click on the go right there and there you can find Constance book complete cargo guide to planning for living in retirement, which we get to the PDF that segment will talk about today on taxes. All sorts information. There is a right much more on tax planning. No pain.

Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. Here's a chance for you to advance the kingdom through financial resources and leveraging Hahn's expertise and qualified charitable contributions veterans aid and attendance IRA Social Security care and long-term care. Just go to cargo and contact to schedule a live recording of finishing well at your church Christian or civic group. Contact time to cargo that's Cardinal welcome back to finishing well, a certified financial planner Hans Shaw how today show tax planning. No pain, no gain in Lee Bentley been grimacing Rick the first admit that skin like Michelle you gotta go through the pain enough to enjoy the game and were not quite done with all the pain right because it is no thing on taken advantage low tax rate will yeah and so what were talking about today is tax planning so and is part of financial planning for us and with us that were to sit down in order to try to make decisions were going to make decisions now that are going to reduce your tax bill or another way to put it is increase your spendable income it throughout your retirement and there is a way to me. My personal plan is to pay zero taxes when I'm in my 70s or if I'm not here anymore for my wife to pay zero taxes in her 70s okay and the way I'm gonna do that out and have a very large Social Security check, and she is as well and then normally somebody like me would pay half my Social Security check, and taxes are 40% of the just because Social Security is taxed in its tax by your other income.

So if I have a large other income in retirement that I plan on and I've saved for, but the difference with me is that's all been that's all coming from rough IRA income and life insurance loans on money that I've been saving for years and I haven't paid taxes on the life insurance but I never I've Artie paid tax on the contributions but I haven't paid taxes on the gains and the Roth IRAs the same way I pay taxes on the contributions, writing, data conversion, the point being, have a big Social Security check and then a big other check human big is relative, and if I die then my wife's going to have a big Social Security check is a survivor and she's now make withdrawals from the same Roth IRAs and she's actually going to get the life insurance so that'll be tax free and so you can have this to and doesn't necessarily need to be large numbers like I've spoken of. I don't want to sound egotistical and bragging the same token, you endure the pain of paying the tax on the income in order to show that put that money in a Roth IRA versus a traditional IRA, which we meditated tax on so you're balancing to Roth IRAs are not as high as people. It didn't she's a Roth IRA. However, clearly, in a for anybody.

If the if they had that situation there was some short-term loss of some kind, and in making the conversion and you even went through that with a recent client. I had to clients, husband and wife but they live in different towns and there on the way in his clients and we had a meeting over in our Durham office to have another meeting the second meeting inches just think they were really just how man we got this from him than this.

We have done this and just, you know, we did this and just you cannot get the whole thing and so I don't take paper notes.

Well I'm meeting with people as I'm really focused on listening and then we got time over here taking all the notes he's taking notes extensively and just probably 45 minutes an hour into it. I've just tell on you know you folks can do anything you want because I just I was making mental notes of the Social Security pension really those two things and both of them have Social Security and pension. By the time I added up those four things immediately.

It was it was quite a bit of money and so I just gave that back to him and I could see them to sit back I said we can't do anything about those other than maybe delay Social Security so but that was fine for them to's are both still working and they're both in their early 60s so but we don't have control over your pension and that's going to come in every month and is gonna come in as long as you're alive and then I went over the survivor benefits just just quickly not given him financial planning but I'm just given them a sense to really make him feel a little bit better when he talked about your savings you and then we get over the savings and they've got no X amount in IRAs that are taxable and I said this is where it gets tricky is you can have that pension income coming in and then you can be making withdrawals from the IRA or not. You may not withdraw from the IRA because you really won't need it because you got all this income, and in doing so security in your pension so you probably wait until your 72 when the minimum distributions hit then you'll start taken money in your 10 years older than you are now and that thing is compounded and then you're gonna be making big withdrawals at 72 and that's just you probably won't need him as you got this other income but you can be panel of taxes and I really is kind of explained and I were gonna put all that numbers when we do a financial plan form, but I was just given them a little preview of the planning we can do and I said so what seems pretty obvious to me is is that Roth conversions now is to take the money that's in your IRA or it's actually a 401(k) where the money is for both of them and to take that and make a withdrawal. As you can probably do an in-service withdrawal. I had them checking that between now and the next meeting and we could move that into an IRA not pay the taxes yet. And then we could start our broth conversion plan where slowly were gonna turn a little piece of that IRA or that 401(k) in the Roth so that when retirement when we want to supplement our income.

We can do a tax-free and that'll keep the taxes on the Social Security check lower or if they never use need that money than their beneficiaries.

Get it tax-free or you know, including the church or have echoes back to all its wonderful and so you know what the guy said to me was evening I could do that I could just do that all one you're not are not limited by that you know so much a year that I can put into a Roth IRA. I said we've been reading that limit. But that doesn't apply to conversions money that's already in an IRA or 401(k). You can convert as much of that is you want and mean the whole $450,000. You could you could just convert it all at once I set out think you want to do that he saw why not and I said so then Tom got tax rates up on the things that take all your income now that you have and then pile $450,000 on top of that, because that's what should be doing and look which test for simple for us to calculate that he sent thought about. But the what's left would be tax free and I said yeah and tax-free compounding forever so that didn't look too bad. Even though that tax bill was pretty stiff.

Then I said to my civil what if you just spread this out over several men we could straddle year so we could take 450 grand and do half of it in 2020 and the other half in January 3 20, 21, and then entered make it to 25 so be like that and I said we could break in the thirds we could do part this year part next year and then on January 3 of the next year we can do the other third so that start bringing these numbers down she really just got a sense of the kind of stuff that we can do form and what we were doing is tax planning and then working to show the effect of that on socialists on the Social Security and this actually works better for somebody that has hundred and 50,000 and IRA and they got a smaller Social Security check. The reason I say it works better as we can really create a tax-free stream of income for them in retirement much easier than we can for the sky and somebody that Scott you know $1 million in IRA money and they got a 4000 a month Social Security check.

And then they got you a high income now and they've got other assets, it gets a little more tricky but it still the payoff for doing it is even greater for that well-to-do person. This applies at all levels So the concept again this is this this idea of a there's pain involved in just sitting down to do it in the delayed gratification idea of here we go, and so in the idea and NI.

I do love this because it not get a chance to do the show prep with palms and as he sat down with me morning he said you know my my main strategy in this. This is the number one thing that I just hope the outcome will be.

Is that our listeners will make better decisions and I and and you could, I could see his hearts all over that and and while you know that in part of making better decisions often comes with delayed gratification and and so you know, I hope you're hearing his heart and and and that you realize that the number one thing is are you gonna crack open the egg. If you're going to begin to to make an omelette. It really did connect back to the beginning of the show no pain no gain crack that egg my godmother to stop. This is oh again in a cardinal don't forget the guide.

After Cardinal and Hans would love to hear from you. Ideas you might have for show the podcast all are also two previous shows we've done lots of shows on taxes. Lots of shows on RA's all those things are all there a cardinal and just tell Siri on listed finishing well which is the whole idea is to finish well and so you know I get a lot of people emailing me these days that are listed the listeners for a while and they just want to stick their Tysabri people. You tell me who they are, right away and it's great to me just haunts that cardinal is my email and I could people you get that off the website and if you got a question and are usually asked me something you can just do that I could people that text me. You know they they paid, they figure out you 919-714-3397 is my cell number. It's right there on my signature on my email. I get people that some is given that to him and they'll send me a text and they'll say hey I've got this letter. The other thing were a lot of them will say religious in number of things. That's a way to reach out to me and anyway you want to do it. I'm here. I walked with palms now for couple years and let me tell you. You'll be glad you did update it might be it might incur some short-term pain that I can assure you venting from the we hope you enjoyed finishing well brought you by cardinal visit cardinal for free downloads of the show or previous shows on topics such as Social Security, Medicare and IRAs, long-term care and life insurance, investments and taxes as well as constant best-selling book, the complete cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows what you get. Hans book go to cardinal if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word. Once again, that's cardinal cardinal

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