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Low Tax Rates

Finishing Well / Hans Scheil
The Truth Network Radio
April 25, 2020 8:30 am

Low Tax Rates

Finishing Well / Hans Scheil

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April 25, 2020 8:30 am

With the recently passed tax law, the government created a 5 year window of the lowest taxes in over 40 years. So how do you make the most of this window? Hans and Robby go over some strategies to maximize your money and lose less to taxes! 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
Rob West and Steve Moore
Rob West and Steve Moore
Rob West and Steve Moore

You're listening to the network and welcome to finishing well brought you by Cardinal Certified financial planner belonged to Schild, best-selling author and financial planner helping families finish well 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. Finishing well how funds a day on finishing well. We are very very intriguing topic.

I'm intrigued. So I'm hoping you will be to guide is why did God choose tax collectors and never really considered that much. I mean, yeah, we understand that the idea I think when it came to Matthew that he has been forgiven much right loves much there something there about some that what I been talking with Tom Schauer, certified financial planner and actually this was that this was a question he brought was actually the first time, as were preparing the show that I actually move you from one verse in the Bible clearly away to a different place in the Bible and then we gone live at this it's actually very enlightening and really I asked. It just connects a lot of dots for me both in the Bible and also with what your subject matter is today which is taxes. But of all things, but this other idea that one thing you could say about a tax collector is they would have to be true absolute.

I mean this guy's job in life is to try to sell you on the idea of paying taxes and anything and I do that, but then collect them from even if he doesn't sell. You collect them from a zoo.

Maybe they would have again maybe it would help me understand why God chose a car dealer visit that clearly you know if you're going to sell people on the idea that you're trustworthy in your cardio area. This could take some some shrewdness, but more than that, it's gonna take some values and and what you talked about just a minute ago Hans was that it was one thing to develop shrewdness but it's another thing to develop value when the two have to go hand-in-hand, especially in my business and what you're looking for and you know I bring on and have run on thousands of people into the business and have a cadre of people over the years that are just very successful. Very good planners in my current group that I've really been developing over the last 10 years when you need somebody who is extremely shrewd to be successful in her business. You want somebody who shrewd to be advising you in handling your money, but at the same time you don't want somebody who shrewd who has got some honesty difficulties okay and so what I was telling you earlier I'd much rather start with the honesty and teach shrewdness than I ever would start with the shrewd interest teach honesty. Okay, I'm very blessed with the crowd that I have now that that were working with and teaching, but if he gets back to our topic is why did God choose the tax collectors and why Jesus asked the guys that kiss was a chief tax collector, which meant it was actually the car dealer. He wasn't just a salesman at the end and then you have a course at Matthew Pepin you know I was.

I was thinking about is after you brought up like oh yeah, Matthew is the first book of the New Testament and and a lot of people say it's it's the book that was written for the Jewish people themselves and so here's a guy that really dealt down in the dirt. Most of his life with raw human nature. I think you you you answered it for yourself is he. He understands human behavior and human tendencies.

What people want what people do and how to sell the good news insincerity to and of the of what Jesus really did bring from a standpoint of the law because it is he understands on Romans. He understands the Pharisees he's got the whole right he's he's sliding between all the different powers to be at the time, but along those lines, we actually have something that's really pretty profound. We can talk about today from from a standpoint of your shrewdness of of what you've observed. Now in the tax laws that we could take advantage of to leverage for the kingdom. I mean I through email. I gave Robbie a lesson in tax rate or marginal tax rate history and it just in getting ready for the show is just most folks are not aware. I don't know if you the listener are of exactly what your tax rates are but I I went back several years in just picked 40 years ago. 20 years ago. What are they now and where they can be in the future and I took a single person making 50 grand a year. I said what's their marginal tax rate and what what are they paying on their last dollars a month to that of the getting the federal government and taxes, and in 1980 person making $50,000 a year. Their marginal tax bracket was looking at 55%. They paid $0.55 on the dollar and a married person married couple married filing jointly.

So if we went to $100,000 a year for a couple their marginal bracket bracket was 59% chose 4% more that they were paying on their last dollars that they are. Some folks just call that the marriage tax, and if you come all the way into the present. In 2020. Looking at the tax rates. This person making this ignores inflation.

I'm just trying to show you just a simplified version of what a low marginal percentage that you're paying its 22% for that $50,000 your single person and for the married filing jointly.

It's also as well 22%. It's almost mind-boggling to me. Tom that all those years ago and it really gives us the historical significance of Ronald Reagan and and and what he did to change America, but no doubt now based on this information, like oh my goodness, look how low the tax rate is compared to what I've done for most of my life and what does that mean now from a shrewd land and in those go 1 More Pl. and some of that is is Donald Trump and the current with the tax cuts and jobs act took this down pretty substantially raise the brackets and in that law. Again, I don't know how much that the tax brackets that we have now sunset at the end of 2025 so they don't change the law, which is pretty hard to change the law. I'm your new big movement in 2026.

This person is paying 22% now is going to pay 28% means going up 6% or 30% or however you want to talk about this a lot to go from 2228 minus a number of deductions so the taxpayer rates that were just done in the tax cuts and jobs act are scheduled to go away. At the end of 2025. So what that is created is a window of about five years where were paying the lowest marginal tax rates really in history. You know, we can leverage these low tax rates to invest money in the things that will become tax-free while the getting is good. Well, how many of you ever heard this before is is that while you're working. Put as much money in your 401(k) or into an IRA.

As you can because you're paying high taxes where you're working and then went you know you defer taxes and then when you're retired, you can pull it out and you can be in a much lower tax bracket.

When we look at actual people that have applied this you know you to come to put meat on these bones. Yeah, I mean you know in my own situation. I've converted most of my savings that I have either over to the Roth IRA or into cash value life insurance saliva done coming out.

I have a plan that when I'm older than 70. I'm in a wait till then to take my Social Security that I'm going to pay zero taxes, or perhaps I'll be earning some sort of a royalty off of this business. If I retire then so maybe I'll pay taxes on that. My plan is to be able to have a tax-free income and to avoid taxes on my Social Security. Is your Social Security is taxed at a rate driven by your other taxable income. So if you have zero taxable income you pay zero taxes on your Social Security and for those of us forming him as fast as you are to get in this summit shrewdness of what you just described that I would not of been able to get anybody.

This affected by your side. For these many months but are actually over a year, but let's say that Hans didn't convert, and what had traditional money in an IRA right at and so he was going to and in now we turn 70 1/2 or San Jose's Denny's getting a Social Security and here comes this income here, but in order to continue to live with the lifestyle that he lives.

He goes okay what I need to take out $40,000. My IRA this year to help make my other payments and that's it. Since that more money is coming out of the IRA. Now it's never been taxed so I don't have to take 60 or 70 to net 40 right just to pay the taxes. Right now I've got other income of 60 or 70 that's going to drive my taxes up grandma pay 3040% taxes on muscle security right in there and there you see the strategy of why leveraging these lower tax rates because you are in fact paying more taxes now in order to convert my yeah awesome that's that's the whole point. That's the bad news here and that's where I'm back like Matthew the tax collector is on proposing to you that you can pay your taxes and selling you on the thing that Jack is now 22% rates possessing them be around forever right so you know thinking about it. From the way most of us think that it 22%. In other words, I'm get to keep $0.78 of my dollar that sit in that account right versus if I wait for five years. I'm obviously only gonna get to keep 79's will and looks. I didn't do this all in one year the whole elephant ones alive and we went through this first segment. So here you have here for why God did choose 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 care and long-term care.

Just go to Cargill 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 certified financial planner and Matthew the tax collector on style today show is why did God choose tax collectors and when we left our hero Hans. He was on a roll talking about strategies and and and essentially shrewdness when it comes to taxes, but we should tell you know that this is all available houses book the complete Cardinal guide to planning for and living in retirement, which is where you can just email Hans and ask him to send to the book, or you can get the PDF for absolute free F REE can even listen to this radio show broadcast every week right from Cardinal discover the vision well to just tell Syrian your phone a list of the finishing well podcast. It's all there, and you can find out more about how you know why God chose tax collectors to where we were is is that we are talking about a married couple in 2020 files a joint return in their incomes. $100,000 a year. They pay a federal marginal tax rate of 22% and that's the lowest in history we gone back to 1980 and seeing where it was like 59% and we also looked ahead to 2026 and resolve those numbers going to be 28% mostly change the law. Is this is a sunset provision and so I just want to look further into that bracket is this married couple could make up to $171,000 joint income and they still would be at the 22% tax bracket and if they slipped over that they only go to 24 sources two more percent in our 24% bracket in the top end of that is 326,000 so you start looking at that you say will if were below a threshold every year that goes by that I don't do some of his Roth conversion moving my traditional money in an IRA paying the taxes on part of it and then moving it over to the Roth. I just left a window of opportunity of just left left money on the table which is not very shrewd. So what I've done is I've done this conversion over a number years and I still have some years ago when converting all of my IRA money from the traditional IRA to the Roth and I'm doing that on paying the taxes that these low rates, yet still pay state income tax to but that money has now moved from tax deferred meaning gonna pay it later to tax-free which is never going to pay as it's been paid on both the earnings and by the way, Roth IRAs do not have minimum distributions either so you can just leave it there until you need yet so those were listing of never heard our show on Roth IRAs or talked about that subject. Traditional IRAs you put money and you never paid income tax on Roth IRAs allows you to have an interment right investment account where you actually paid the taxes so that when you're getting distributions from that they are in fact is rated tax-free, so they don't even show up on your tax return and furthermore you can collect your Social Security check in not pay tax on that list you got some other incomes so speaking shrewdness right you you pass this along to some of the our radio listeners right there was that there was a gentleman. Oh yeah you in real life the podcast and he was really interested in long-term care insurance, but he also realized that I was a financial planner and CFP Inuit. All that wasn't so as I do with a lot of people were having our first couple conversations. I'm just going to give him advice on just about anything I can and I said you know this Roth IRA is really something that you need to look into and he was he was complaining about the fact that he was over the income limits for Roth IRA contributions. He says I can have one and I said well okay so you're telling me you can have one and limited tell you then maybe you can okay as of the first place. We want to look is we want to look at your existing 401(k) plans because there is both professionals. She works for a big company he works for a small consulting firm. Their software and computer people and he he said oh there's no way ours has because this is a small in all Roth.

I survived unchecking him and then I'm saying is you. She probably does. He had never heard of it. What he went in and check answer between phone calls between the first time we talked, and the second time we talked. He had already changed all his contributions so the new money going in from the Roth Caesar from the traditional to the Roth now most 401(k)s will not let you do the conversion inside the 401(k) there some reasons for that, but he's got it. These people are just in the 50s all their new money is going in the Roth and then I get the tax deduction for that now. So it's granted their paycheck a little bit, but he can see the value of 15 years from now, having all of this in the Roth version okay. The second thing when I just said that a lot of 401(k)s will not allow you to do a conversion from traditional to Roth. You can roll that 401(k) into an IRA. I can help you do this and then once it's in an IRA then you can do a conversion.

So were looking into doing some of that for him now with her to do an in plan rollover to an IRA and then will do a conversion from that. But there's another alternative. The other tax-free thing that we have and he's already bought some of this is cash value life insurance and so were we take a life insurance policy, and we effectively overfunded and so that can create a source of tax-free income for you later in retirement and tax-free benefits of death and talk about shrewd right that the younger you make those choices that, like to change.

I sure sure so so the point I want to make in the show without getting too much into detail as we are enjoying right now if you can imagine enjoying paying taxes.

This is Matthew the tax collector selling where enjoying the lowest marginal tax rates in the 20s in history and and for those of you that are just leave in money stockpile an IRA and is considered there until you die and then pass on to your beneficiaries there to be hit with some whopping tax rates. So this whole Roth conversion thing or purchasing life insurance or a combination of the two getting cash over there. But let's talk about that a little bit because when you say cash value life insurance. So it doesn't necessarily mean and we talked at great length and all echelons at best beneficiaries, but here were using life insurance as a way to have tax-free income during retirement. Sure we do that by over funding so can you go into little detectives in allotment of smart and not a shrewd. It's a whole lot easier understand when you got a person tied to this that that you know is a certain age, and certain health in then as a certain amount of money that they want shelter. One thing imitate about life insurance is a long-term proposition. So were going to talk about putting a good amount of money in there for several years.

Generally about 7 to 10 years is when working to accelerate the premiums in those years and what were gonna do is were going to pick a given amount of life insurance and what we can do is run overfunded ceramic with the maximum amount of premium in their that the IRS will allow us to have a computer program to figure this or we can do another way we can we can start with an amount of money that you want shelter and amount percent over seven years. We can see how much life insurance do we have to buy at a minimum to justify this whole thing is a life insurance policy needs creates this tax-free savings is not allowing now that out and that well, but now I'm 70 or 71 or whatever and I'm get my Social Security and I need a little extra money in order to pay my bills. Now I can go back to this life insurance policy and how to get money out of through a loan and these are generally not favorable until starting the 11th year.

So in other words, they got one rates they charge you on the loan. During the first 10 years so you'd right off the bat you don't want to get any money out of this thing for 10 years of the first 10 years you want pay in fact.

But after the 10th year. Most of these modern policies have a zero cost loans are you basically borrowing the money for nothing, has no interest little more complicated than that, but your net cost is zero and you just take it out and you borrow it and you borrow at such a rate we can even create a monthly income out of their that is set up that you can never you never want to bankrupt the policies never want pull it all out because if you do that you will could create some taxes.

So it's a strategic thing. It's a very shrewd thing to do right and and again I know that's more complicated than a lot of people may want to to fully digest, but the idea that I just want to say is that oh my goodness, look, here's another way. First, because some people don't have 401(k)s or IRAs and I am to be one of those that that have money sitting around in other areas will hear analysis where you can move in the life insurance and if it structured properly, not blindly saying just go out and do this if it structured properly. Somebody knows what you're doing and you can afford it and you know you can have the money for several years. It can be very shrewd investment and enough the whole idea is to have you know, low taxes or no taxes in retirement and with his life insurance and a lot of people end up doing all this and then they never touch the money and then you just sit there and compounds tax-free and then they didn't planing out and then they die in a much larger amount goes to the beneficiary so insist you know in the same stricture with Roth IRAs.

I'm sure a lot of these Roth that I'm setting up of people paying the taxes now. They're never going pulling money out of because that's is not what people in their 70s and 80s. Do they say they just sits there, but is not creating a tax problem for the next generation right and indicated that life insurance would pay out catching tax rate at as with the IRA out of the Roth my Roth IRA sure for the you know it's the same thing is cash free. We do this all day long for people in and you know I'm just seeing a growing part of the business especially is on my clients are in the minimum distributions they never really have sat down with her IRAs and they haven't really faced paying taxes. They usually come to me to try to avoid the taxes and what they end up with at least in the current era is then append more taxes right now with the idea that there to pay less of time.

Well as you can hear there's a lot of taxes I Matthew it up and submit it okay unit over get cardinal guide to get up with the guide. After where you can get Hans's book the complete cargo guide to planning for living retirement. All this information. Listen, the more podcast all that stuff we would love to have you come in our show or however we can help you.

Just visit Thanks for listening. We hope you enjoyed finishing well with you by cardinal visit 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 when you get Hans will go to Cardinal do if you have a question, comment or suggestion for future shows.

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