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The First Rule of Taxes

Finishing Well / Hans Scheil
The Truth Network Radio
November 7, 2020 8:30 am

The First Rule of Taxes

Finishing Well / Hans Scheil

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November 7, 2020 8:30 am

Hans goes over state taxes, social security taxes, pension taxes, estate taxes, and IRA distribution taxes and how they can differ between the state you choose to retire in. 


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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This is Darren Kuhn with the masculine journey podcast research the ancient paths to find ways that God brings light to the door and help set me free from the struggles that we all face on a day-to-day basis.

Your chosen Truth Network podcast is starting just a few seconds. Enjoy sharing most of all, thank you for listening and for choosing The Truth Podcast Network. This is the Truth Network welcome to finishing well brought to you by Cardinal guy, certified financial planner long shy best-selling author and financial plan of 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. So welcome to finishing well certified financial planner Hongqiao. I'm actually very excited about this got a different title is called the first rule of tax. Have fun with the acts where I think you can be surprised. I really actually love this topic because I know that you're gonna have fun and learning some ways that you can keep more money in order to get that in a minute but is I've been living life.

I realized Galatians 5 in order to give you the fruits of the spirit that in order to have fruit. It takes two to tango. She got I got to have Jesus with you and that even though one of those in self-control. You have Jesus to little bit because it takes two to make fruit, but joy is a big one other person and apparently I had taught my granddaughter at some point in time that there were rules deficient, but I'd forgotten the rules that I taught her to fishing because I was on a target fish that we have an opportunity to go to Colorado when she was eight years old to go fishing and as you might imagine she was struggling, leaving her bathed in the water long enough it was really exciting fishing trip and every time the sheep fillable from the river I got when I got on and she would really end before she would JI holes in the tangled and it was just it was an adventure and my daughter was getting tangled and I was getting more and more angry and frustrated this inner two days of this note is called efficiencies and I got when I got on every 20 seconds and I'm doing all this work.

So finally I just fairly graphically say to her.

Lila, you have got to leave your bait in the water long enough to catch a fish say very nicely as I was frustrated and she goes, Poppa, you have violated the first rule of fishing and I want I will see said yes and I was like well I guess I talked to the first truth. What's the first rule of fishing and she does have fun so we prayed right there is either arrested. That was pray that you'll forgive Poppa and have I'll have more patience with you.

You have more patience with the fish and true story. She, Kate fish right after that and we did have a lot of fun as we are catching fish.

But more and I learned a lesson about having fun. I really have applied all of life like from doing radio elements a month for doing the show ponds we have fun and and and so if you got a face this idea of tax, which apparently is part of life, you name eyes will have fun and I I dearly love what you teach about the whole concept that the tax it in order to have fun with tax, it's you don't have fun when it's a history lesson. Now you don't know me and then let's most people's experience with income tax. Specifically, I go do my taxes once you're gonna hire somebody to do my taxes and were just look at how much that I/O much of my getting get back in what we do in our business is. We look forward and when you're in retirement. You're in control of your income now has some qualifiers you got have some savings and some retirement savings to be in control of your income, but for most people that have that in the come to us there wanting to know how my going live in retirement how much money am I can receive every month.

We inevitably have to get to the fact that much income taxes, I got Pam and what gets left out of the discussion frequently is the state income tax which were talking about today and what is fun about this to me is increasing the amount of money that people get to keep. I'm not that excited about saving on taxes. I'm much more excited about having people have an increase check every month as we distribute money were there receiving tax-free money, which is very possible even here in North Carolina where we got a state income tax.

So that's really funny is is really doing the planning of the distributing of the money in a very tax efficient for a low tax or a no tax environment died in his ear explained that to me is so I got a little over 5% North Carolina but Virginia, South Carolina, where he might be listening to this broadcast your your podcast you you got other states have resources at their Cardinal diaper you can click on those links and see what those different things are. There's a lot of applications to this five something % we are talking about before the show so you're gonna take a lump sum distribution for some emergency that you got out of your IRA and you want to net $50,000 to help bail out something or do something that you gonna do now all the sudden I would take out 90 grand, depending upon your tax rates and all I can think that part of the take out 90 to net 50 because you can have to pay about $40,000 in taxes which it even that 5% of the sound like a much but your science. It's $4500 B 4500 would be on the whole 90 and we need to plan for that or it also might be smart to build up through IRA distributions a little bit every year so that you get a savings account with 50 grand of after-tax money to do this 90 grand distribution over a number of years anticipating that you're going to have something or you might have something that comes that you'd have to withdraw 50 grand.

You would have to do is draw 90 from a after-tax account. You don't have to withdraw 50 so and the state income taxes would just be a little bit of the time so I don't want to get too much into the numbers in the percentages because we lose people in the general plan is when we do a retirement plan for you start your Social Security check in with the project that and that's really going to be next week show world and talk like that, that's really good news for people in North Carolina come Social Security check and and am planning so young. Here's your first fun at your guy have after the paycheck.

Now the good news is if you live in North Carolina. How much is you get tax on your zoster zero because North Carolina tax code excludes income taxes on Social Security check.

So to quote my good friend on child is F REE for EFF.

You don't pay income tax on Social Security North Carolina and I like that all states there are several other states, but it's not all 50 and we could dig out of the article but were missing about 20 that have a state income tax, but then they exclude Social Security income from that state income tax if it took a state like Florida.

They're not in that 20 because they have no income tax on anything that F REE free for everything.

That's why a lot of that's why Tiger Woods lives there. That's why Phil Mickelson was at least live in California and that's a lot of people that are running around in those boats you see up and down in Fort Lauderdale.

There there in there six months a year. They may be in New York part of the year so so Florida is a tax haven for well-to-do retirees because they don't have to stay in contact so it goes without saying that Social Security is excluded or appear North Carolina got state tax of 57% but Social Security income is excluded from that which is part of the end of the punitive discipleship from my standpoint, where you can have fun of learning stuff like wow I mean that these are really good things to know as you begin to plan, as you say you know most people.

One of the first steps in how they're going to live out after you know those last years is actually developing a budget which sounds like no fun, but actually what you're doing. It the Honda away from my standpoint it sounds like fun because you know how I got discomfort.

Yeah, I mean, my goal and me personally is I plan to pay no taxes you know and from 70 years old.

My intended draw large Social Security check. I intend to live in North Carolina. I don't plan to move somewhere and so you could say when you gonna pay federal income tax under Social Security because you have this other income is can be high, and that could happen if I didn't plan well and then you're gonna pay you neck and pay state income tax on your Social Security because they don't have that North Carolina Obama says I'm a pay no tax on my Social Security because my other income is either going to come from a loss Roth IRA schema come out of my savings account of money that I've Artie paid taxes on so that you can have your own money monthly tax-free or it's gonna come from loans against my life insurance policies.

That's right built up most of my savings and HMI need money for many of those other sources. I just take it and there's not a current taxes on either federal or state now a lot of folks that we do planning for were planning for income. A somewhat lower level abutment maybe about what my wife and I need and they've got the Social Security check and then work were just trying to structure their IRA into Ross: part of it into a Roth so that we have non-taxable income and that applies both to the federal and the state's outstanding income taxes. There is no data as no matter in Florida they get you in other ways their property taxes and that sort of thing, but they they don't they do matter, any state that has a state income tax. It needs to be a big part of our planning and income right and as you describe those things, you know, we would probably want to throw in a pitch that we've got this book is called the complete talk about having fun trying to figure out how to finish well. The complete gargle cardinal guide to planning for living in retirement goes into great detail in all these ways that you can begin the plan.

The stuff yourself and it's right there available cargo and you can get into that in one of the other things in the states I found fascinating and some of the material that you sent me is that certain states have benefits like where you don't argue have to pay attention or you do or you don't have to pay on IRA distributions or in those kinds of tests I compose children to get into that, I mean the way I got on this topic of state income tax today is we've had people by my book or book all over the country and then they read the book and they say what can you do this planning for me. Sure, and so were you were licensed everywhere and in the United States and we have a lot of our clients are saying California therein or grandmother's Colorado, Alaska, and so we need to go in and research the state income tax code. Fair, so that we can put their plan properly and so as I'm writing the second edition of my book, that's for all the research came in for today's show is I'm ready because I'm in heaven.

The book the information so you can just look up on all of these various topics which are state income tax is to be and then some people are picking the place they're going to live. That's a factor, is the state income taxes will then were to make that easy. In the next edition of the book to do that.

So, on the other side of this. We got more on file.

In the meantime at this but you know it is kind of need to see how God has blessed you and God is going to be with you and your gonna be fruitful and being fruitful since fun it is and how it got very first thing that hopefully you be blessed to join us for second have the show right back. 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 Tom to schedule a live recording of finishing well, your church, Sunday school or civic group. Contact time that cardinal that's cardinal welcome back to finishing well plan is also fiduciary should absolutely.

In other words what a fiduciary is sitting over on more times would be in the cycles of learning stuff is somebody that gives recommendations based on your best interest not on their best interest, which yeah is or could be you could add to that is, your interests are above my interests when I'm giving you advice is a fiduciary year interest have to be of the utmost regard any interest or whatever I get out of this transaction I have to disclose that to you as a conflict of interest, right, which is a very difficult thing. Clearly service about self and Jesus said the greatest among you be a servant of you all and let's you know what I see is fiduciary. A really neat word and today show is the first rule of tax which is have fun which ML we have fun in everything we do a cardinal. That's fine and I think that them as I enjoy solving problems for people who very much enjoyed that I really enjoy.

Just hearing people story and meet people and the younger people that work with me, which is most of therein on these interactions and they've come to learn that and enjoy it too. But it first, it's, like houses so interesting you know what I just I find people interesting and it brings me joy to help people rearrange their finances so that they get what they want and I there's some things that we feel like we do uniquely for people and brings us joy and so you know this topic of state income tax. Rethinking OUP how you have fun with that.

Well, yeah.

And then, frankly, I don't get that much fun out of all the research and reading the articles and put it in the block and designing on the web where people can go on our website and they can decide where to live in all that I just inherently I don't find all that interesting, and have a lot of fun with that myself. Where the fun is is is getting people up a bigger check to live on just increasing their checker increase in their take-home pay or whatever whenever you want to call it. That's fun and you know that the point I want to get across on the show is is is that you've got federal tax on all of these things like just your regular income, which states that have a state income tax. They tax your regular income. That's how they make their money and you get tax on Social Security. The federal government taxes, Social Security. If you are above a certain level which a lot of people fall in their sleep and that tax and then the states are either going to tax you on your Social Security like the feds were not like in North Carolina. That's a blessing in our deal is that we we don't add on a state income tax on them. I like your name, no matter what so so but were on were like some states in that factor, but were.

This is different in every state so in North Carolina. Your Social Security free from tax within. Beyond that, this is some states all the federal is going to tax your pension if you get a pension check from somewhere from the government or from your former employer. Bank of tax federal income tax and then some states, you don't have to pay state taxes.

North Carolina you do so. If you live in North Carolina which is where we both live and you get a pension you have pasting text then you got IRA distributions and some states will the federal by the way on IRA distributions of Muster Arras is going to tax them at your federal tax rate and then all the states are different on this. Some states exclude that and IRA distribution. Most states are to have an income tax agreement tax that to get the estate tax, which really is an income tax. The federal has an estate tax, but they raise the thresholds tomorrow. Person dies with less than $10 million, which covers most people you don't pay federal estate tax that isn't a huge deal for most people, but you got some states that have an estate tax will North Carolina has an estate tax because thresholds are adjusted to match the federal so again estate is not can have to pay state income taxes unless your Mr. big box Mrs. big box so if you die in New York as a resident of New York and let's just say you have $2 million unit to be exempt from the federal tax because you didn't have enough to where you had to pay estate tax return. Have a pretty hefty estate tax bill, especially on that second million. Even the first million the tax it at some level. So New York comes in. That's why a lot of the New Yorkers actually are residents of Florida. They just go back to New York part-time because not only do they avoid the income taxes that are high there. Ultimately their errors are going to avoid the estate taxes. Next, this is funny will bring up New York. They're going to get their money on the real estate that you own in New York City stole a home there were a business for something even though you're a resident of Florida New York is going to get there estate taxes over that property someone of a confusing subject and why does this matter to me while it matters I think is were not doing a history lesson occurred in order to sit down with you if you choose to hire us to do financial planning and working a project out so many years and said here's the fun part.

From my perspective and actually done some some some 65 is to say Johanson way we live it. That's it for them to take $5000. You know, among them to continue to be not like the boat payment in the but the step that were doing and live it the way that this is what I might need in a moving forward and what is this look like is when we put together our get out to so security checks were not quite get married and so you know, how do we make all this happened and then actually seeing that I'm not going to run out of money when I'm 85 is pretty fun thing to do for the insured's surety is then in doing proper planning now because you may be living off your income Truth Network here for many more years, so that makes your situation unique in the ones expected with a little time to prepare for this time and then were preparing to pay income taxes are not in the future, or at a lower rate. So it's not a history lesson.

It's a projection and it's not always perfect to me just any any any projection is going to be just that things can change, but it still is. Stop us from doing it. And you know like in your case you're gonna reach a point where you're still working but yet you're going to be 70 and you're gonna still draw your Social Security check will be at the maximum amounts will be a nice time out, but you really won't need it so that that's when were going to start building your retirement fund and would have pasting taxes on those years because your other income.

We do this for people all over the country and a lot of them are right here North Carolina just going to sit down and say how you want this to be what resources do you have now what savings do you have now what your Social Security check can be. If you haven't turned it on yet working to tell you what it's going to be and when to take it.

But it's all from a planning oral forward-looking standpoint and it yeah it's it's it's really fun to present the stuffed people because it usually especially taxes.

This could be lower than they thought they were going to bury Test in a run of it. Things happen and I really love the way God guided you in writing your book the complete garden guide to planning and living in retirement was the seven worries, which is a Christian. I didn't like those words very well. My first seven worries literally to be worrying that that the fact is that you know is you begin to reach these ages.

These things come upon you and the idea of educating ourselves in so that we actually don't work. I mean yeah I mean people, people do worry him. Even though it's a sin and you hook they do and they worry about this stuff.

The older they get, and how the assurance of purities savings taxes know their stay, leaving money to their kids and how much in land and long-term care and read people worry about is just kind of a big cannot count, master that's out there and they avoid it they think they're avoiding it but by worrying about you not doing anything about it. And so that the seven worries in retirement there already there before I came and what I'm trying to do is make it all better. Right. Right. In other words, by actually forming a plan eat eat you know you at least have an understanding of how you get to the other side and and then implementing it and intimating it just to simply counting the cost of the same time having faith that God's gonna know bring you through that and there is no need sure to do that and so on taxes. I would not of really thought you know I've started doing the show a couple years ago and out.

I got nothing to worry about as far as taxes going in my and I whenever I get older, but oh my goodness, you know, as I've spent time with you doing this it it it really is a key part of the strategy of of leveraging the income and the savings that you have yeah yeah DE just it is actually fun just got back to the show we we get enjoyment and maybe that's what makes us financial planning nerds but II get enjoyment when over the impact of this is I know what we can do for people.

And I know that peace is when you add in some of the pieces like IRA planning and specifically getting down to Roth conversions and the Medicare expertise that we have the emphasis on long-term care in the long so there's a number of pieces of this that we uniquely doing comprehensive financial plan. I get joy out of just knowing what a difference that's going to make for people down the road. I mean I don't get to see a lot of the difference happening because people this is this is all forward-looking. It really hasn't had a full thing and actually being a client, you know, I can tell you that my personal take home is a lot different today than it was a Yuriko based on the work of Tom and other people that work there Cardinal Drive in looking at Mina my wife's whole situation significantly changed my monthly auto which changes you know a lot of planning which eventually actually does leverage for the church does not currently part of my financial planning is to leverage as much for the kingdom casino. That's where the that's where the treasure is, so I hope you had as much fun listening to days we had doing this, but as always lamenting the show brought to you by Cardinal guide, which is good. No Cardinal in front guide Cardinal and there you can email Hans your question about all means get up with them and have them work this stuff out for you. Have fun. Believe me, you, this is really an opportunity that God is provided in, and I'm so grateful to have palms on the Truth Network to provide this firmest DQ we hope you enjoyed finishing well with you by Cardinal visit Cardinal for free downloads of the show previous shows on topics such as Social Security, Medicare and IRAs, long-term care, life insurance, investments and taxes as well as ponds 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 this is the Truth Network

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