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Income Tax: 2025 Sunset

Finishing Well / Hans Scheil
The Truth Network Radio
May 22, 2021 8:30 am

Income Tax: 2025 Sunset

Finishing Well / Hans Scheil

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May 22, 2021 8:30 am

Hans and Robby talk about current tax brackets and retirement planning under these parameters.


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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Sit back and enjoy it, share it, but most of all, thank you for listening and choosing The Truth Podcast Network. This is the Truth Network welcome to finishing well brought to you by Cardinal guy, certified financial planner longs child, best-selling author and financial planner helping families finish well for over 40 years on 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 this will be an interesting show for you today on finishing well. I can assure you we have something really unique.

You know, when Jesus was trying to describe what the kingdom of heaven wise in Matthew 13 he was trying to give his disciples a little taste of something for nothing mentality and so the name of the show today is tax-free. Does cost you something. In 2021 well. Jesus is trying to explain to his followers.

In Matthew 13 that the kingdom of heaven does cost you something in the way that he put it, was the kingdom of heaven is like a treasure hidden in a field and this man, he found it and you know he did. He hit it again and then his joy he went and sold all he had so he could buy that field. What he's talking about is when we realize that oh my goodness the kingdom of heaven is is worth all that.

The beautiful thing about it is that Jesus paid all he had, so that we could give up what we have in our life and give it to him. It's an amazing thing, but it relates completely to this concept of finishing well in so many different ways and sell today show really started with kind of a video that you guys did. I'm with my certified plant financial planner Hans sure I own welcome palms and said to us about your video, so we we shoot a video every week or really a few weeks before we do the radio show we shoot like three of them at once on the upcoming topics before we do the video you go to prepare a whiteboard and just really works his notes on the topic and we we began several episodes ago about a year ago using those videos is prepped for the shower and then I send them to you each week by week before the show we record and then you are able to view those and you can can get the content of really to the nuts and bolts are shorter than the show they'll go into a lot of detail that people find them very useful to really just learning the material and so I get a lot of clients that just only listen to the show and then they're always asking why you come up with every week show that kind it is. It applies to a lot of different areas so we fix this video and then then we do the show and then have to redo the show we send an email out to our whole email list of about 20,000 people that follow us by email and then there's a link in there to that short video and the radio show recorded a few weeks prior, and then we also put up on our website Cardinal so all this stuff is interconnected really just getting the message out in the word out in the education so and I just want to make people aware of that and then what happened of late is we've used you to really a few years is just a hosting site. We never really spent a lot of time or money on you two.

Because it's really hard to control your sending your message to on YouTube and on their side just inside my head and got into and all of a sudden select videos took off took on a life of their own and so you can go on YouTube you can just search for Cardinal advisors and that ORS click on that that into the search thing and outcomes. Probably 150 videos done by me with a whiteboard behind me and there.

Most of them were prep for the show as a whole lot of ways to find the stuff in the gift learning insert you want more, or perhaps after you listen to gaze show you'd really move were thrown a few numbers around and you really like to see those numbers up on a screen.

You do not find them on YouTube website that help that something at some Cardinal advisors just like the show spotted by Cardinal you know it's if that's really helpful, but today's show so tax-free is gonna cost you nothing or it's gonna cost you something. In 2021 tax-free value and cost you something, and what it cost you. Sounds a little bit like an so the way I get tax-free savings account for a tax-free savings with tax-free income later is by paying the taxes now that one of the themes of the show them you asked me for a story in preparing for this and what story I was well. So don't really have any exciting stories because when somebody becomes convinced when a client becomes convinced to sacrifice the taxes now that they could put off till later this really a sacrifice.

It's hard to get people excited about this and doing that you talk about the crime to do in no Matthew was in Matthew 13 right now so so I'm in people in a sacrifice with the understanding that the possibly to get something that's been the opposite of the second person that's really the deal here within taxes and nobody really liked that and nobody enjoys it, especially paying taxes now when you could delay admin with an IRA or 401(k) you delayed him for several years and you really benefit and so this is real counterintuitive. What were talking about today. We talked about this on several shows for and specifically in today's message where were actually getting the tax bracket back out single people or single filers and then married filing joint and were looking at the tax rates that you pay no either 10% 12% 22% 24% and then no one up higher than that which are really the rates right now corresponding with the brackets are really a historical low and what what I think a lot of people don't realize is, these rates are going to go back out in 2026, which is five years from now, or less than five years. By law, so when they passed a law to lower taxes or years ago and it started three years ago. It peeked into that law was a and our sunset so another words you through 2025 world and enjoy these lower tax bracket.

So what today shows about is just taken a look at those as tax bracket getting you take a look. After the show, like where you fall in the tax bracket and then considering perhaps some Roth conversions or some recognition of income where you can actually voluntarily pay the tax through distribution which can be left now is better than more like absolutely the cool thing is that Wesley Florence for the show in the past.

Hans is that people you know when you're 45 or whatever taken money out of your IRA as is and pay all sorts of penalties but once in my right once you reach the age of 60. You begin to have other options you can make withdrawals from your IRA after 59 and you have to pay penalties for so and were not proposing just pulling money out of your IRA going and spending his first show. Tax and then once suspended the difference now that it's gone missing retirement savings.

This is something that they are for your tireless retired but the important thing is, once you turn 60 you through the penalties for making withdrawals from your IRA or 401(k).

So were taking it to the next level were saying it may be here down to start to make some withdrawals and paying these really low tax rates is, in fact, that is your tax right, I'm not giving a recommendation on the show and never doing just generally paying a broad brush that you may want to take a look right at some more talk about is possibly one of theirs to three different options that you can hone in on but one of the main ones is still using IRA but rather than a traditional IRA that you haven't paid tax on the income yet you're converting that money. If you're over age 60 into a Roth IRA, which would mean that you would pay tax on the income. However, now you've got a tax-free savings account right now, so we just take an example like we were talking about. So we got a person that had income around $80,000 per married couple retired. Maybe not retired in one of them to him is working but in any case, there are right around $80,000 together and you say another there pretty much in the 12% tax bracket, which is which is actually pretty sweet. And they're not paying 12% taxes on all their 80,000 to get production and people to take the standard deduction now for a married couple 25,000 or even a little more for people over 65 so United directly to pay that 12% less and then the example that we came up with the just save his people had $100,000 IRA or 401(k). The history of that amount in this, they were just sitting on Sri Lanka leaving out of there. I had a great chat not make an $80,000 a year. I can live on that just fine. In fact, I want to add to the hundred thousand so that's for later. So my point is you could first of all, you might want to consider transfer tax and distributing it was just with get to that point because if you're married couple your you can go all the way to 172,750 of taxable income and your rate would still stay 22%.

So the disable 22%.

That's a lot will sure is a lot but when you compare that to the rates of 20 years ago or so.

They were like 40% is tax rates are historical low, so I decided to do it. I just should consider that you might want to take some of your money that's in this hundred thousand dollar account and distributed to yourself and actually pay the taxes now as opposed to having it stay in a tax-deferred thing and paying more tax later makes perfect sense if you know what's on the other end of the rainbow and so in order to get to the other end of the rainbow you can have to stay tank is working at the right back again. Remember, this is finishing well, a certified financial planner Hans Schild today show is tax free costing something in 2021 and so we can have more that NY would you do this plan we come back so state.

Hans and I would love to take our show on the road to your church and 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 care and long-term care. Just go to Cardinal and contact Tom to schedule a live recording of finishing well at your church or civic group. Contact time to Cardinal guy.that's Cardinal welcome back to finishing well in today's show is tax free test cost you something.

In 2021 and when we left our hero that the person that was essentially selling everything they had so they could buy the field because it was gonna be really really good. In this case or disconnect isometric taxes so that we could get the field that when we are right in the middle of that Hans if you want to take back up on so the situation we got a couple of people are about to retire right around 80,000, $90,000 joint income level there at that bracket and they're paying much 12% federal income tax just really really low compared what rates used to be.

All I'm saying is that the not yet used the not were near set to not add so they don't have to take any money out of that IRA and a lot of them. They don't know the Dusan Amana things tax-deferred applicable something allegorically taxes what were saying is let's consider taking some of it out and perhaps converting it to a Roth IRA which is to be transferred know what I'm saying is, is that they took all hundred thousand and converted there and have a tax bill due $22,000 then they also been after North Carolina the estate tax like five cents for the gun out of five.

Possible so it's pretty hefty tax bills.

I would necessarily recommend most people are not that a more or less they have the $27,000 signal from the sideline somewhere 80 years savings counter brokerage account. Some people done that where it's just expense.

They want they want to take the mortgage officer IRA is essentially with the do government unknown part of their IRA anymore. So that would be one option is just pale the tax. Another option would be to do that whole hundred thousand but actually pay the taxes out of the Roth IRA of the district fusion and they're only going to end up with 70,000 in Iraq where they had 100 before in the tradition of the student to be better because there's no mortgage or lien and then another scenario. Another scenario would be to draw out just a plan over five years and so the reason I bring up five years is these tax rate in 2021 going away at the start of 2020 that we have many clients that are coming to us now saying how can I best take advantage of these low tax bracket and the way to do that, depending upon where you fall in the income is to convert pieces of your IRA or 401(k) into a Roth IRA a little bit at a time like case of these people with 100 grand. They could do 20,000 a year for five years than obviously the money on both sides can earn a little bit during the next five years. So but in any case that that's like biting off a little bit of the time, and then the tax bill would be much smaller on an additional $20,000 and perhaps people could stomach that out of their other saving that they could envision over five years getting the whole hundred thousand Moodle of the law navigator tax-free savings for life and we think that yeah I mean it's absolutely beautiful. And when we say tax-free. The rock has this beautiful park to it in a you've already paid the taxes on the money that you put in. But now this money sit in the Roth IRA and you know it's being invested or however it is that your using that money and met new IRA like you did your old 401(k) or whatever but the income now on.

That money is now tax-free right and so it is if you had left that same hundred thousand dollars over in your traditional IRA for that period of time. Whatever it was, the income that money is still lively tax tomorrow.

Oh yeah, every dollar coming out of the traditional IRA or 401(k) is to detect whether it was initial deposit earnings inside of their log people have these things, ballooning to large amounts than they take out the minimum when they have to. And then the guy goes to the kid and the kids want to get the money out and they entertain like 40% of it for 45% of it intact only leave a little more than half and then they because I gotta give the money so the taxes the taxes the reason you're paying taxes now considering strategies is to avoid you or your heirs paying a huge tax bill late I'm It's just that simple.

In a Roth conversion are going to a Roth IRA. Just one stretch. Another strategy that a lot of people use is a violation shirt you know that the proceeds of life insurance Co. tax-free to the beneficiaries will in most cases felt so you know it. If we took the same hundred thousand dollars people and they really said you know that money is really. The chart here so we we we just have it over there and if we don't need it that's what we want to go well. What will what you can look at as you can say what would you think it's gonna grow to hundred and 50,000 or 200,000 before you pass away. We could look at the $200,000 life insurance with a very small premium relative to the 200,000 we can pull just enough money out of the IRA.

Every year to pay the premium on the life insurance and that way when you pass away your kids are going to get the 200,000 or whatever the above amount should buy completely tax or use of the month so and actually line insurance comes to them is sweeter than you and get an IRA get together Roth IRA Because other money that wasn't back in other words they use whatever money for the praying aspects.

If the person dies sooner right than they use that the money you have all that money to write closer what yeah the money is still in the rosters of the left raw. A lot of those we come up with a plan to clean the thing out in over 20 years and maybe maybe we don't have to pull it all out realtors and taxes on it and the net amount. Maybe much larger than the premiums that we may just those people may just put that in a taxable savings account but it's not. It was not something that I have tax on again so clearly may spend and we may get together a plan to draw down the hundred million through distributions containing little dizzy taxes over time, but included in their is the premium on a life insurance policy and the payout you maybe just $100,000 policy so they know their son or daughter, their heirs are going to get that amount which was the wishes and you do have a story along those lines that really I mean, although they recently lost her father, but the benefits of their father. Using a strategy were unbelievable yeah to my book and you know really this piece of it is an is as much as the long trip when it in the book, but no PPP just saw this IRA to me was about 80 years old. Client and PT. Could you see that the others IRA money is just a problem.

Minimum distributions taxes. The kids were appliqu that his wife is going live longer than him just all electronically really did need the IRA money.

Sky was a Denniston retired Denniston done real well in. He did spend a lot of money in his wife said the theaters kids federal court and so what we were able to set up as a yeah about 300,000 left in the IRA and we took to actually get about five or 600 and use two or 300 by long-term care insurance with IRA that subordinate another story, but the 300,000 that was remaining. What we did is we put that in an annuity that had a guaranteed income.

He and his wife, $21,000 a year is guaranteed to last as long as you want, live, and she still alive and their -21,000 she's can get the 21,000 from the annuity as long as she lives with you was to hundred just keep coming in hundred five. Even if the annuity is bankrupt, so we we set up a guarantee to pay the premiums of the premiums on the life insurance policy.

They bought $300,000 that that that life insurance policy doesn't pay off until both of them are gone so he died about a year after I sold them all the stuff less than she's 10 years later still alive and doing well but at some point when she dies. This can be 300,000 hundred thousand for each sun and that tax-free. 100 of the life insurance and that thing has a annual premium of about $10,000 a year.

Now that's a lot of money to pay for life insurance but they were like 80 and 76 of so delicate 20 grand coming in from the annuities pay the taxes which I'm sure is not tendering something, then she's got a little something left over herself after she pays the $10,000 annual premium for the life it's all set up and it's just going on behind the scenes we've effectively made the inheritance the boys tax rate within taxable Density power. It's absolutely beautiful and actually knowing a little bit more to this story as we can. Ahead in for a landing here. He also did this kind of thing for his charity and so he was building the kingdom with the strategies of finishing well as well money. He was the Muses is big thing was getting Bibles in the chart and so he started on me about that day I met and so what I did is I I donated a significant part of my commission to that charity gave me the name missions and no there there somewhere off of mainland China and I still get letters from them today. You know in Chinese whatever and then the have it in English but that was his whole gig and then he gave his other IRA. Yet another IRA.

Besides that, the whole thing to this Bible mission of the world intrinsically is terrific and I went in that women's hands-free so the idea of a tax-free cost you something, but oh my goodness like Jesus with the kingdom you know he he paid it and so you can find out all sorts of things about this in Hans's book the complete cardinal guide to planning for living in retirement like he talked about some of the stories are there, you can get that at the website. Cardinal the course. The videos were talked about our at cardinal advisors at you to subject all that stuff out was so grateful.

He listened today and Hans is always so much fun. Thank you. 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 and Medicare and IRAs, long-term care, life insurance, investments and taxes as well as cons 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 will 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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