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Income Tax Wisdom

Finishing Well / Hans Scheil
The Truth Network Radio
December 7, 2019 8:30 am

Income Tax Wisdom

Finishing Well / Hans Scheil

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December 7, 2019 8:30 am

Hans and Robbys discuss income tax for people who are retired this week on Finishing Well! Have questions? Please reach out - we would love to answer them on the show!

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

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Welcome to finishing well brought to you by Cardinal guy Certified financial planner belongs agile, 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 with finishing well, finishing well today with certified financial harm silent today show income tax contacts. You may feel like it's attack when you get attacked McQuade's income tax wisdom and you know it's interesting thing. And in Ephesians 5, God tells us to walk in wisdom because you know our days are numbered, so to speak, and they can be evil and so walking in wisdom when it comes to income tax.

Sometimes isn't what people think is no, it's not.

And you know what when people think income tax.

They think CPA they think tax advisor. Think like I just did my 2018 return have done my 2019 X 2019's not done. But I'll do it in April this year when we think income tax or somebody my profession work were thinking a little bit about 2019.

You were thinking about 2020 2021 2025 and were thinking about over the whole of your retirement were wanting to make these taxes as low as possible, finishing well at the age when anemic radio show. What a great idea.

So you had an experience just recently well yeah I had a couple just last night meet with him over my Greensboro office and their referrals and they were all about Medicare supplement. Why him since I was in my main office as me by myself so I had him right around me into my left turn my writing there looking at my computer screen and were going through all the they were.

They were all about buying Medicare supplements from us in getting away from whatever and that's another week show and then you know one of the reasons were in the Medicare supplement business is it brings people into our business and into our fold and what we really were.

We can add the most value for them is in financial planning and tax plan so soon as I started jumping over into that. I felt the walls, okay, and she had worked as an assistant to a CPA or really her whole career where she was the person who sat outside the CPAs office and did all the adding and subtractions were the CPA. She knows a lot about and I asked her a question. I said do you see 7068. Do you know what you need to know about minimum distribution. So yeah, she just did them let refinishing visit did this not think in what is really the answer I was looking for was last most people that question. I have several CPAs that are clients and when I asked them that question about required minimum distributions after 70 1/2.

Most of them say no. I don't know. Tell me more nearly stuffed my book putting out so then we got talking to him and I just kept the conversation going and really just found out that their living off of their Social Security and they don't really need in. They don't need money, so they're going to just postpone it. Postpone taking any money until he's 70 1/2 and when you get there 70 1/2 there to pay the minimum that I gotta take the minimum they Artie got generally will have a written plan to think that that's their general plan and he's thinking he's doing great. This is not pay any taxes. If you only live on Social Security. Pay no taxes on your Social Security and if you don't have other income used to pay no taxes. In the reason I'm talking about these people and the show is this comes up so often we have people in their 60s who are living off their Social Security. Maybe some savings to get everything paid for most everything paid for in their living just fine. And so they said why would I ever take anything out of my IRA I'm good have to pay taxes on that so I want postpone that as long as I can and I want that when I do have to take money. I'm gonna take the least amount I have to take and then I might complain about all I possibly can whoever's help America and I sat night just so that's my summation of, when I got out of them and I said well I said you know we can't do anything about 2018 but if if I got the picture here correctly in 2018. You could've withdrawn about $20,000 out of your IRA while your 68.

Most likely you would've paid no income taxes on the $20,000.

Nor would that drive taxes on your Social Security. If it did it just be a teeny bit and then you could you just redeposited that $20,000 into a savings account that matter.

Now you have a hunk of money sitting there that you can take out and spend any time you want without any taxes or you could just spend Christmas with 2018 is passed, you can't go backwards and do that you can't go backwards and make a withdrawal prior decision. We got about five weeks (2019 and you probably do the same thing this year.

I think we could come up with a better number than that if we do plan and he really can't stop is voidable. Can we do that now, as a know we can't do that. I'm getting ready to drive on to Winston.

I wanted that one of things that I think you commented to him, which I thought was extremely provoking and wonderful was you know if if someone dies with a bunch of money in an IRA you feel like your failures of financial plan. Yeah and go to the extreme failure. But I haven't lightly and I have you failure.

Well, that got his attention. Saw Morrison jumping into the solution here because I asked him I said so if you die when you die out if you die when you die, what's going happen to the money in the races was going to go to Mrs. okay then when she dies who's going to go to all the kids in the civil where the kids can do with.

He said other than a drawdown spend and I said yeah I said you know much taxes there to pay.

They all of a sudden have 1/4 of $1 million increase in income for the year.

The Savoy hate to think about that.

I said probably half of it. So they're given 1/4 of $1 million by you from your IRA. There probably only can be left with about 125 130 1:40 AM that's my point is that is there's other ways to leave money in IRA is not the best way to leave money other than your spouse. It's pretty good, but she could die before you, you could die together or she could die quickly after you so wouldn't it be better to have a strategy. This money is out of the IRA and this means gone.

It could just be somewhere else, but it doesn't have that tax problem with a boy has attention now and I was just showing him the year-by-year how much money he was leaving on the table by not showing some income. In addition to Social Security and when you're in retirement in your primary source of income is pulling money out of your IRA or 401(k) 401(k) which is at your discretion.

You're in your 60s, so there's no penalties just benefits to have calculated amount.

This is a multiple of that amount on the pay no tax or little tax and then I'm gonna pay no tax still on my Social Security. Or maybe a little tax and then I'm in a make a decision whether Irma spent some of that money or not and if it only to spend it, then I'm a redeposited assignment by the way, we can put in a Roth IRA. We can just do a conversion bring your tax return, but now you have untainted money when you leave a Roth IRA to your kids to tax free. As we talked about in the last showing by life and is not really of your get some tax-free income or as we talked that previous shows right now is a good time to consider this because tax rates are low. Oh yeah what what will they are in because that in there there real low. When you when you think about if you get no income now you're married couple. The exemption is $24,000 for married couple in it because there are over 65 of leave is $25,000. So that means that they can earn $25,000 in deduct 25,000 in their income is zero, so that that's can be the tax rate but you could pull out 50 and you're only going to pay taxes on the second 25. They could. The problem with that phone out 50 is Rose a couple problems with the main one is looking to drive some taxes on their Social Security because your Social Security is taxed by the amount of your other income so the moral of the story and really to thinking of the story is just because you're paying no taxes and living on Social Security and hoarding money in your IRA doesn't mean you're making the best possible thrifty decisions. There is an amount of income that you can draw your IRA whether you needed or not and pay either no tax or very little tax and then you you prepared for the future better Put it that you'd mentioned life insurance sure there's all kinds of ways that we can leave money to the next generation or even to your spouse. Life insurance is one of them in a much more tax efficient way than hand an overnight rate. The tax efficiency tax wisdom is what we talked about today on finishing well and for request more information on this.

We have the book's original book, the complete cargo guide to planning for living in retirement strictly triggers give us a bit arms for now I guess it's a there's a workbook that is also called the complete cargo guide to planning for living retirement.

But it's cargo or you can go you can look at the seven worries tab one of those is income taxes at any idea be that you don't worry that that that you you figure out a plan on how to finish well and you can get the free PDF of this chapter either the book or the workbook. There you can as we talk about always email Hans or or you just check out the website because there's phenomenal resources right there on this whole subject.

What you talked about, which was in a minimum distributions and note income to all that stuff right there cargo what is page 120 has Social Security income taxes so this is got all the formula is less than a full page not really that complicated and we can help you with this but just this is the parameters that were to use for this gentleman to try to stay so he still pays no taxes, Social Security, and he pays no tax on the amount that he pulls out but what we've agreed is is going to pull out something this year is once January 1 rolls around 2019 is closed and I excelled minimum distributions, critical people That penalty when they got me looking at that right now.

So these are all things not talk about when we come back on income tax wisdom. 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 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, a certified financial planner on Schild today show is brought to you by Cardinal guide is income tax wisdom and so we were talking about this couple that I met with an evening last night and really in the beginning I said they were all about Medicare walls were up pretty quick when I start talking about their money and Artie got that.

Artie said no were doing and you if you're eager to dance around that, lightly. I always know there's some things I can impart but I have a sense that enough people are just really shut me down. They don't want to go there will and I don't want to go there either because I there to be customers of ours and their referrals. They came in from some of the people, but didn't stop me from really doing my thing in doing some work in. I just needed to take this guy around the block, but I will tell you what really got okay. Is this really was two things is one which we mentioned in the earlier part is where he saw that if he records this money in his IRA, which I think he was on the track in me, and then he ends up going to his kids. It's all going to get enough in taxes.

Okay the second thing that really got to him is in the solution he realized through talking with me that for several years prior, since he retired. He's been living off of Social Security and he just thought he'd been doing a wonderful thing and he had no taxes but what he lost retroactively or in other words, he lost this several years ago, but he's just become aware that he lost this last night was he left at 20 $25,000 tax-free withdrawal from his IRA on the table every year for the last two, three, four years and there's absolutely nothing we can do about that but just the impact that that had on him because I told him I'm not cannot really do the financial stuff to get the Medicare all downward and to do that on Thursday and they were, Michael, can't we do the both of them are now in an immediate they had already just there there ready to play with this and we don't have much time left in the year and so I wanted this message to hit everybody that's listening out there that so if you're younger than this age, I want you to think you're gonna be here before you know it. If you're in your 70s and 80s, and you still have IRA money and you're still just taken the minimum may not be a bad idea to think about taking more and we we need to take a look at what your tax situation is every year and I'm a tell you that you can probably take more than your taking and still not pay much in income tax but something that people that are actually been in their 30s or 40s or 50s could also take the image of it is converting to Roth IRAs.

Now while the getting's good. Absolutely that's going to increase your taxes currently. Well, that's the counterintuitive part were talked about the salt show is that wisdom would be all I need to cut my taxes the lowest bike converting now to Roth IRAs with tax rates were relatively low when Wally got these wonderful deductions that it it it might be a very wise move in the very low turnover you can do this at your 401(k) most of the time you can't believe how many people that are very financially savvy.

They get big balances in their 401(k) and I start talking then there's your plan. Offer a Roth 401(k) down think that's to me.

Just think of myself. That's disappointing. There's this Roth option.

They probably have in their 401(k) and they don't know about. So somebody's not doing her job.

There and so then I'll send them to their most of the time there to come back to me yet. We have and I have several clients that are Artie change their contributions is one of the easy things you can do if you're in your 30s, 40s, 50s and is gonna cost you some money to do a conversion from your traditional Ira 401(k) where you can move money over the Rockies. You have failed. The taxes currently says got cautious and no, but something you can do real easily as you can just simply take your contributions that you're making every year So you're put in a thousand bucks a month and there right now. Right now you can just shift that to the Roth portion and your paychecks going to download because you know I can get the tax deduction benefit of that but you and I now have a Roth IRA that is tax-free. FREE just put a thousand bucks aside an account all the earnings all the principal any withdrawals any anything from the 1000 Bucks Way out into the future tax-free done show up because taxes on your Social Security system, wonderful thing you can do that now you know if you're in your 60s you're already contemplating retirement or your will then you know we go take a look at your whole situation but we can get in a Roth IRA or Roth 401(k) conversion strategy trust minimizes taxes and there's all kinds of things we can do and this is all counterintuitive because this is paying more in taxes now to save on taxes later that just runs counterintuitive to a lot of people but if the numbers are right. It's it's real beneficial value know I'm to sit in my mind.

Thinking enough, he take the people that you spoke to last night right and they want they said that with they want their kids at this money and it's a lot of money. 250,000 while to buy you know that that child of $250,000 life insurance insurance policy on themselves and and and there's that matter taken out $20,000 Ami Nick take it out probably in one lump sum and then here comes $250,000 life insurance actually when that comes it's tax-free. Plus the remainder whatever is in the IRA.

If they were to pass where were yeah this is 500 grand to get to kids that I was using in my example and so you buy a $500,000 life insurance policy on him and 68 and you make the kids the beneficiary report her as the beneficiary and then you put the kids down as a contingent. However, we want to send up and then we pay the premium for this out of the 20,000 SI can be 20 grand, but this can be substantial and we can make it what we want with all a variety of policies we have with move the money into their in this building cash value so that if he wants to get to it will is alive. He can then when he passes away. That's 500 grand or 250 apiece is going to go tax-free and uplifted.

Despite all the IRA money and the other option is I'm sick and thinking unbecoming of a baby on it.

You know they could put some long-term care writers in that life insurance policy and then overdo it and then now I've got not only that life insurance for the kids, but also did not have to worry about me being on the floor in the Medicaid in oh yeah me life insurance policies that are issued now most of them have long-term care options just baked right into chronic care writers and so there's a way we can cover that to me it's a sweet thing in any really requires planning, and it requires an open mind and these folks in the beginning were shut me down it every turn. When I was just trying to walk them through a problem and I took him to look, I don't have to manage your money to give you this advice. You can leave your money right where it is. I'm just giving you tax advice now and if we get too sophisticated about this. I'm in have to charge you. But I still need to manage your money so I'm not in competition with him. I'm just gonna give you some guidance of how you could move the money around right where you are, but he liked that well in the end he started telling me how he feels about him and really the advice that he's been given them so in the end he's gonna move his money probably overdosing but that's not table stakes for me is not mean it just were in the advice giving business. We sell our advice given away for free on the radio and certainly if you give me a phone call and you buy a Medicare supplement from here. Even if you don't I have a lot of stuff I give away. I'm glad to help people answer questions and then is very inexpensive to do a financial plan with us again is leveraging resources for the kingdom. Jesus talked about it in the parable of the talents you've been given. These resources right in the resources for the kingdom for your posterity, but also you know to be leverage for the gospel. However that may work, and so were not trended take anything away from anybody. It's just an opportunity of using the current tax laws, structures, IRAs, Roth IRAs, and in those vehicles, especially life insurance.

In my opinion and long-term care insurance to protect you, your family at ME. This is this is big-time stuff and worth the time of put that in.

In the planning for it by either reading the book or contacting somebody that that will go over that your sentimentality if you yourself are well-to-do then you can ask this question to yourself that if you know somebody this will do. Are you related December 12.

Do you and your friends with and that you can ask this kind of question asked him if they only life. Just ask him. After all, their answer part of a wealthy family and my guess is, is the answer to this is yes okay because he just is and is just that it's so now got a little bit off of income taxes and I'm on the life insurance but purchasing and owning life insurance and transferring money on the generations is tax-free.

That's why and then life insurance has many living benefits and it has access to the cash values of it's all set up properly that you can get it.

The cash value tax-free in your own policy. That's why well-to-do people own life insurance so you don't have to be a well-to-do rich person to own life insurance. We can just get it to something down that fits in your financial plan. These people are rich are probably richer than they think they are because he's got frequent size IRA with the just some common sense advice of getting money out of that IRA is going to change their whole world and their whole outlook on things and protect billing and go up much in the present right and so it's it's that time year tonight. We just have a few weeks to think about minimum distributions right if you got if you're over 70 1/2. I mean that some should be on your radar. But what yeah and what Ami love people wait till December to do it. Many people have done this earlier in the year, but what I'm suggesting is you might want to consider more than the minimum and then you might want to consider just saving that money damages the region when you pull it out pay taxes on don't mean you have to spend you gifted.

We also have the thing called two CDs that we have really talked about now. The problem with the Q CD is that needs when you're going to use it to get out of minimum distributions or it has to be the first money coming out of the IRA. In the years if you've already taken your minimum distribution regarding taking a distribution earlier in the year, then you won't be eligible to do a Q CD for 2019. But then for 2020 we can make a donation to the church if you're over 70 1/2 through the Q CD qualified internal distribution thing on my list is good, I will be glad to help you make that so income tax wisdom again all don't forget the guide after Cargill, seven were stabbed under income taxes.

Download the PDF for free.

Your contact Hans to go about doing that is called vomiting that be pretty easy so Cardinal Thank you for listening. Thank you. We hope you enjoyed finishing well brought 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 and life insurance, investments and taxes as well as constant best-selling book, the complete Cardinal guy 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 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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