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IRA Tax Strategy: Triple Crown 

Finishing Well / Hans Scheil
The Truth Network Radio
August 1, 2020 8:30 am

IRA Tax Strategy: Triple Crown 

Finishing Well / Hans Scheil

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August 1, 2020 8:30 am

There are 3 tax benefits you are going to get out of having a Roth IRA in retirement. Hans goes over what these are, as well as what you can do right now, no matter your age, to make sure your IRA and 401k accounts are in a good spot. 


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 

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money religion christian bible finance church retirement planning taxes tax ira Roth IRA
Rob West and Steve Moore
Rob West and Steve Moore
Rob West and Steve Moore
Rob West and Steve Moore

This is Darren Kuhn with the masculine journey podcast research the ancient paths to find ways that God brings light into a dark world and help set men free from the struggles that we all face on a day-to-day basis. Your chosen Truth Network podcast is 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 Network and Welcome to finishing well brought to you by Cardinal guy, certified financial planner longs 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 on style and today show anytime we talk about a Triple Crown you know you immediately think about the big three so today show is tax strategies of Roth IRA are actually a Triple Crown and I think you're to be excited to see how now there's three different things within this one strategy that can really be a huge benefit to us as we enter in this finishing well stage of life right so you know to begin with.

I have to go to the Triple Crown and no consent if you've ever really thought about that. You may think the Kentucky Derby Preakness, but let God view the Triple Crown completely different set of if you really look at the Scriptures and go where it where can I find God the father, God the son God the Holy Spirit clearly identified. At one point in time in the Bible and it's a beautiful thing that lifted that you know every son needs to know that he's the apple of his father's eye and and if we need to know that you can imagine how did Jesus need to know that and so Jesus's baptism is the one place that we can clearly clearly see all three members of the Trinity, the Triple Crown come together for this moment of Jesus's anointing does he go down in the water he comes up this the spirit of God descends on him like a dove, and we hear the father who was his buttons are bursting off his coat. He doesn't talk of the clouds very often. That is like this is my beloved son in whom I am well pleased at and wow you know there you see the Triple Crown itself.

John Owen wrote a book.

He was a Puritan way back. 1400 1500s. It was called communing with the triune God and so throughout my life I've tried to think how can I take full advantage of the Tripura crown up like how can I have a separate relationship, not a separate but Not communing individually with the father versus commune individually with Jesus versus communion individually with the Holy Spirit and so it's really been sort of in a behind-the-scenes I love watching people's lives.

Some people have a phenomenal relationship of Holy Spirit what it what are they doing in order to increase that relationship. Some people have a phenomenal relationship with Jesus and some people like John Eldridge when it comes to being fathered by God they really understand how to you know Jesus makes that possible to to have God as your father not have that orphan spirit so as were talking about this classic Triple Crown today of the Roth IRA tracks check tax strategy you know Hans, I can't help but notice that you can fathered by God. You know it it in the how to set these things up so that you know it's actually brilliant to see how in the seasonal life that this this comes to body Christ Brian so all that from me outlining the three benefits tax benefits and income benefits that you can get out of the Roth IRA is pretty good. Goodbye God that he's got all the heat he invented the whole Triple Crown idea, believe me. So let's let's talk about what are the three benefits okay so if you get to a point in retirement. You drawn your Social Security check.

And you're also living off your other assets in your presumably making withdrawals from your IRA or 401(k). Those are taxable unless there in Iraq. So if we could just envision that most of your IRA has been converted to a Roth know the first benefit number one is that you're going to have tax-free income from the Roth and talk tax-free income is almost twice as valuable as taxable income just in and of itself. So that's the first benefit. Pretty simple. You can enjoy tax-free income. The second benefit of having this tax-free income is that you can avoid taxes or you can pay less taxes on your Social Security that opens up a whole new subject which we'll talk about another show but if I oversimplify when you're drawn Social Security you don't actually pay taxes on your Social Security income in their presumed tax-free and you're only gonna pay taxes on your Social Security income.

If you have substantial other income would like a withdrawal from an IRA which is most people in America.

Additional hiring a traditional IRA and so when you withdraw money from your traditional IRA that creates taxable income which is going to drive taxes on your Social Security check. So this is the second benefit. If you have a Roth IRA or substantial amount of Roth IRA is a substantial percentage with that income is can be tax-free. It's also not an account against your taxation is your Social Security check second benefit than the third benefit is this thing called Irma which we talked about on several shows before presumably when your retirement you can be on Medicare and if your income is above a certain level you can pay this additional tax on your Medicare, which is Irma income related monthly adjustment amount not to get into the details that today would just assume that there's a threshold, if your other income is above a certain amount. Now you got it the third tax or the third benefit of a Roth IRA distribution in retirement is you and I can be paying the Irma tax so there's your three that's plentiful, the Triple Crown now no income tax on the distributions right is not can affect your Social Security income. A tax on your Social Security and no Irma. And so for a lot of our listeners.

This might be the first time you've heard that term. Irma and as Hans was saying essentially your you got Medicare but if you got really large income yet you pay more on Medicare than you would you like me.

So if you're already in retirement. You drawn Social Security and then your other income, whether it's from IRA withdrawals are not you know that you're paying taxes on your Social Security because that's driven by your other income and then if that income is substantial you're paying the Irma penalty or the Irma surcharge you arty know this, and then you may not be aware, and you may think of others.

Nothing like I Marty there. I got this big traditional IRA or this big 401(k) balance. I need to draw from it to live so that drives taxes on my Social Security and it caused me to pay the Irma of security awareness and we could still do some Roth conversions and we we we we we could still do those.

In fact, we might want to consider.

You might be the person that we might want to consider this. I didn't say do this I said, considerate, and you just take the whole bite one year or you spread it over a couple years but if we do this in retirement that's gonna make those other two problems worse for one year, possibly to make him better. Over your lifetime. Who am speaking to allot here are the people that you're not in retirement yet. Are you just at retirement or it's a few years away and are actually from what I know from the rest of the story is somebody can be 30 right now absolutely and they're contributing to a 401(k) or to an IRA and so this is critical information for really anybody that is far as understanding the real implications of the Triple Crown. It absolutely is so user goes is that Roth IRA or Roth 401(k), distributions are tax-free. As long as they happen after 59 have which were making their perception that in of itself is pretty cool, but when we do it from a planning standpoint, you're probably just now learning that your income in retirement is going to drive a lot of other taxes and other areas in the Triple Crown.

It actually week week we can go on and on and on. There some other benefits of M tax-free income retirement, but will just leave it at the Triple Crown for now so where that leads us to is is you.

If you already have a substantial balance in your 401(k) or your IRA and is not any of it or just a small amount of it is in Roth as many of you have a traditional 401(k), but you've taken advantage of Roth contributions.

At some point. So many of you have a Roth balance when I'm gonna propose to you is you know just propose it to you is to consider is a Roth conversion strategy.

If your monies already in an IRA. It's pretty simple and we use a computer to do that is were just going to calculate how much you can convert per year to get to a target amount okay so we generally do these over several years. So is your 60 and you're gonna retire at 66 or 67 is at least in the plan, then we may spread this Roth conversion strategy out over five, six, seven years. It it it actually you know if I can puddle a disclaimer in her Hans. This is one of those don't try it at home strategy that hiring a plumber fire.

The plumber is you know there's a lot of strategy that if you just dump all your money into a Roth them in your wake up to the tax bill or you just pull it out of your IRA and then try to put it in a Roth that will work either.

There's so don't try this at home. You need to get somebody that is a professional like me because the bad news here is. This can increase your tax bill currently possibly even substantially so that's the first thing when I present these Roth conversion strategies to client you know is is is the question of how much influence I can have over the client to look to the future taxes and put out cousins that's obviously there's a Triple Crown the other way coming certainly much that if you wait, you not only can affect what you pay an income tax, but now you're in a pay on your Social Security and are also going to pay Irma so part of the waiting strategies do you get the triple whammy of the government that is pay me now or pay me later and it possibly could be much more later.

So working at go to break here in the second. You know, and we got we got a mention that we had today's show is taxes. You know, one of the seven worst tabs or you can get the free PDF of that of that whole chapter Hans's book the complete part of guide to planning for living in retirement weakness in refilling their cargo when we come back and put some flesh on this guy is actually given examples might look like the people when they go for the Triple Crown. 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 Hans expertise and qualified charitable contributions veterans aid and attendance IRA Social Security and care and long-term care. Just go to cargo and contact Tom to schedule a live recording of finishing well at your church Christian or civic group contact Tom Cardinal that's Cardinal welcome back to finishing well with our good friends find financial Hans silent. They show were dinette brown as tax strategies for your IRA, 401(k) as well and we could say you know it's not in the title of the show, but it 401(k) is is very much part of the strategy as well so let's get to it. If you got a substantial IRA and it's a substantial Roth or substantial amount of that is in the Roth you can draw income in retirement. This can be tax-free.

That's the first benefit second benefit of the Roth IRA income strategy is even a lesson or avoid taxes on your Social Security, making it tax-free. In the third benefit is if you're above certain thresholds in your face. You know the Medicare tax called Irma you you could Roth IRA income doesn't count against calculating her so there's all kinds of reasons to look to the future and have a substantial portion of your IRA in the Roth so you can enjoy tax-free income in retirement. So the piece we were talking about is you brought up on the earlier segment about the person who is 30 again so is your 30 and your you're only participating in your 401(k) at work.

The first thing that asked you to do is check with your employer and find out they most likely do they may not have advertised this to you that much, but there's a Roth side of your 401(k) you want to ask them can I contribute to a Roth 401(k) wreck. I take part or all of my contribution and put it in a Roth right from the beginning and most employers now have that Kaylee didn't five years ago 10 years ago, but they do now. Okay, so you need to check with them and if they do I have a client that the very first meeting, you know we were talking about all this and I told him I said I need you to check that and he said all they they did, they don't offer that I work for a small employer and if they did I'd know about. I so I still need to check it and then he say my wife probably does and so by the time I met with him the second time he had already learned the answer to that was yes and changed all their contributions over the raw so if you're 30 years old or 40 year you whatever you got a lot of years were you can contribute to the raw side of the things about the time you get to 60 or 65 or 70 year and Artie have built up your money on the raw side of the equation right but there is like you would mention there's another side to this need to be aware of and in person saying we don't have to do that because and you will save in all the taxes is all you have to pay tax on that income and that there again he gets back to taking advantage of low tax rates and and and you know paint. It's essentially saving money in the long term.

Like a lot of savings account. It's it's it's it's the simple thing of delayed gratification. Okay mean do you do you want do you want to pay the taxes now, or you want to pay the taxes later now and we would you know, that is, would you rather pay tax on the seed or would you rather pay tax on the harvest okay and you know you may look at this and I'm just not blanket Lee telling you to do this because you need to be able to afford to do it and I don't want to put in the last in your IRA or your 401(k) just simply to put it in a Roth that you know me, so we really need to sit down, talk about this, but my point is is you can get the money into the Roth side of the thing right from the beginning.

And when your employer does their matching they can't do the matching on the raw side they've got to do it on the traditional side. You also can't do conversions from within a foot 401(k) from so you can take the money you've accumulated already and converted to the Roth inside of the 401(k). There's a bunch tax reasons for this.

You just you can't do it, but we got an answer for that to is if you're one of these people. That's 55, 60, 62, 65, and you gotta bunch of money accumulated in your 401(k). It's obviously on the traditional side and you're interested in the strategy and now I'm telling you you can't do these conversions within a 401(k). There are some alternatives in one of those would be that if your employer allows an interim distribution. Many employers they all have different rules about this, but most American allow this if they allow you gotta be over certain age there and allow you to pull some of your money out of your 401(k) may be a substantial amount of it and just doing an interim distribution.

If you're viewed with the idea that you're approaching retirement will Delco do this on your own Evite. It's up again paying tax on the seed versus harvest back from it to the 30-year-old guy because of sin or processing what you're saying. All anybody in this it in a most people haven't employer match and so you heard pense. I don't want to put in less money in your IRA so if you got an employer match.

No, up to six dollars a month or whatever and by all means continue to put that 600 and there, but what extra you might be putting into your IRA. Put that on the Ross yeah well they're still in a match.

They're just going to do it on the traditional side okay see you good okay that'll glass a question that so I could still do my $600 on the raw side but there 600s going over to visit to the traditional additional side. This stuff is tricky and in so we we leave out a lot of details on the show because we don't want to lose our listeners just get the concept. If we got a balance in an IRA or a 401(k) that we have and pay tax on that money yet. It might be beneficial through the use of the Roth to pay the taxes now or pay the taxes on some of it over a number of years to get a portion of this over to the Roth and the reason for doing that is we want to be able to enjoy tax-free income in retirement and the tax-free income is going to go beyond just the income from the IRA could possibly make our Social Security check come tax-free in a public possibly could help us avoid taxes on Unterman are on Medicare, so we wanted to go into a couple examples in used up a lot of our time.

So let's just take somebody for instance that has $300,000 in their IRA okay or it's in their 401(k) and we they're old enough that they can do an interim distribution, we might want to put together a strategy that can a move like $50,000 a year over in a Roth conversion for six years okay and that would get the whole 300,000 over to the Roth but you might not want to go to that extreme my proposal and most of these is that you're going to keep some money on the traditional side and you just want the lion share of it to be on the raw side so and you don't want to do this all in one year because this can create huge tax bill. So we want to do it systematically over a number of years and we don't want to do all of it necessarily and we just want to get. So we got a bucket of money when we get to referral to retirement that we can withdraw from tax-free and compare that to somebody like a lot of folks that are like me you know that they have an $80,000. You know, IRA or 401(k) and they're looking at in a between them. My wife, 15, $1600 a month in Social Security each settled around $3000 and they got a $80,000 IRA. That's all I guess that's it that's that's where their sit in their gonna K-1 take out 600 a month and from our spirit $60,000 you out of my IRA on my minimum distribution 6000 night write-downs are sixth and a year out of my IRA to get my salary back up to the $3500 a month or whatever I was looking at those sent so that person. First of all we want to leave the IRA alone just contribute more to it taken off our taxes were were working if they get 80,000 in their 401(k). We don't want to do a Roth conversion with them okay because is not necessary because they don't have enough money accumulated and they don't anticipate that taxes under Social Security are going to be a problem for them in retirement so I'm not sure that this person was. I got similarity under the threshold.

Anyway, right.

And so what I'm to do this person is just encourage you to build up your balance until retirement as much as you can and then when you get to retirement. Then a lot of those folks they don't take any minimum distribution or any early distribution because they really don't need these little author Social Security and they don't pay tax on the Social Security so they're already there and had sent 1500 a month. Each is 3000 a month 3000 a month tax-free is like five or 6000 a month taxable. So a lot of people live just fine. Author Social Security so when I'm in encourage them to do with their IRA balance is to begin withdrawing some of it every year. Once they're in retirement up to those thresholds they have to pay tax that might be 10,000 a year so that they may be of his gross 200 and they may be over 10 years working to drain that thing and when I can pay tax on that 10,000 because that's the only other income they have. When I can pay tax under Social Security and were sure and I can be pan arm on Medicare now so so with that person. The strategy might be completely the opposite is just to leave it in traditional and then once you get retired.

We're gonna want to be making withdrawals even if we save the withdrawals or by life insurance with and there's all kinds of things we can do now what what I also wanted to talk before through here is was take the person that has 3 million in their IRA. Okay so intake at times 10 and they've got a big income. They don't even know about Irma, yet they don't know about number three but there can be pan some pretty serious money for their Medicare. There definitely can be tempted to taxes on the Social Security and then we got a look at whether they have other assets or not but many of those folks that have substantial money. This can become a no-brainer. It's kind of scary for them and then I can like it at first to turn their $3 million traditional IRA or taxable IRA into a $1.8 million Roth IRA or leave it at a $3 million IRA but converted and pay the taxes out of other assets. If they have them. You start running the numbers on all of that.

There the people that really get the Triple Crown effect of tax-free income, a people or they have a million or million and 1/2 and when you start getting up into these large IRA balances and then you need to live often retirement you can really get the Triple Crown effect were were absent and look at your situation individually. Thank you so much Hans again all is information you find in the complete cardinal guide to planning for and living in retirement. It's available at cardinal guide. Don't forget the guide after cardinal cardinal so much fun yesterday, we will talk to you next week. We hope you enjoyed finishing well brought you by cardinal visit for free downloads of the show 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 shows what to get Hans book go to 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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