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Taxes: Sign of the Times

Finishing Well / Hans Scheil
The Truth Network Radio
July 13, 2019 8:30 am

Taxes: Sign of the Times

Finishing Well / Hans Scheil

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July 13, 2019 8:30 am

In Mathew 16, Jesus confronted the Pharisees and Sadducees when they tried to test Him, saying that they knew how to interpret a red sky but couldn't interpret the signs of the times. This week, Hans and Robby talk about the fear and confusion of retirement taxes. People tend to worry when their tax return is smaller than expected, while in reality, this is no cause for fear because the tax rates holistically have gone down. It's important to know the difference between retirement policy and politics so you can plan financially and live well.
Hans recently participated in a webinar with IRA expert Ed Slott and discussed the S.E.C.U.R.E. Act that recently passed in the House of Representatives. Hans says it's crucial for financial planners to pay attention to new tax rates and plan ahead for their clients' best interests.

A single person can have an income up to $40,000 and a couple can file jointly with an income up to $78,950 to qualify for a 12% income tax. The next bracket allows a joint income up to $168,400 and a single income up to $84,200 for a 22% income tax. Robby talks about how a lot of families will find themselves in those brackets, and, instead of being afraid, should save and think about the future.

You can generate more income by converting traditional IRAs or 401ks to a Roth IRA. This will allow you to pay taxes on the money going into the Roth in the spring and take advantage of the 12%, 22%, and 24% brackets. Robby says it wasn't that long ago when the tax rate was 30% or 34%, and right now, with the low rates, there's an opportunity to save and manage your money shrewdly.  

 Most people had a pension and savings to prepare for retirement 30 years ago. Now pensions are less common and 401ks, tax deferred savings plans, and IRAs are popular. These accounts give the impression of big balances, but that money hasn't been taxed yet. Because of this, there's not as much money in those accounts as people assume. Converting this money to a Roth over several years will minimize your taxes at a lower rate. Even though you are increasing your current taxes,  you'll be saving money down the line and creating a stable retirement income.

Up next, Hans and Robby talk about the S.E.C.U.R.E. Act currently being processed in the Senate. The S.E.C.U.R.E. Act stands for Setting Every Community Up for Retirement Enhancement Act 2019. The bill is intended to help people better prepare for retirement by getting them to use their IRAs.  

Because of this, the S.E.C.U.R.E. Act has changed the policy concerning beneficiaries. If a spouse is named beneficiary, they'll inherit the money in an IRA with no change. But if children are named beneficiaries, they can only stretch IRA taxes over ten years instead of their life span. Hans says if the goal is to leave as much money as possible to your heir, you should meet with a retirement advisor to help minimize potential taxes. It could be that life insurance is a better alternative to an IRA. The point is, tax bracket management is the key to secure retirement planning.

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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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 with finishing well. So today I'm finishing well certified on style, the concept of signs of the time is the tax sky read our meeting read you like is it a sense it coming anyway.

You might remember in Matthew 16 Jesus was and had an opportunity to speak with the Pharisees and the Sadducees, and they came to testimony asking for a sign from heaven and answer them in a when it's evening you still be fair weather, for the sky is red. There seem a pretty sunset in the morning it will be stormy today for the sky is red and threatening.

You know how to interpret the appearance of the sky, but you can interpret the signs of the times and even on the evil and adulterous generation seeks first sign but no sign will be given it, except for the sign of Jonah.

And so you know that the sad news for the facts are Pharisees and the Sadducees is. They are literally have an opportunity to talk to God. I mean this is God and and he's in a position to save them and and oh my goodness they can interpret the signs of the time because they're not really seeing which way you know things are going at and so are we taking a hard look at the signs of the times in the course today.

I'm finishing well were talking about taxes and unfortunately you may have a lot of people are freaking out because the wind is coming from a completely different direction than it used to be and so you could work out of fear and say oh my goodness, my tax return, you know, this year I didn't get near the refund.

I got in and all of a sudden work out of fear that but is it time to reset your sales because what you see is not necessarily what you're not getting his outlets exactly as so you know you what were really talking about today is that a year ago, two years ago, just depending on when you edit up tax rates, income tax rates came way down significantly down and there's some deductions that went away and some changes but the rates, especially in these lower brackets has has just been lowered and I really haven't taken as good of a look at it.

I mean, I looked at it and I know it, but it took you I was sitting on a webinar getting trained by it slaughters my IRA expert and he's sound and all the signals and calling all us together and sit in front of our TVs talking about the secure act that just past the house and he's talking about. Okay, so it is not law yet, but we as planners we we we we need to pay attention you need to pay attention talking about me and so we go here in that the I got this presentation in front of me and I can see here with the tax rates and just look at some of these brackets so a married couple can have five married filing jointly, their adjusted gross income can be as high as $78,950 in their owing of a 12% federal income tax diocese from Homeland and you just as it think of how many families are falling into that category only paying 12% tax.

They're actually getting way more in their paychecks every month than what they used to be getting, but because their refund got smaller. This year they think it's time to go into fear, but actually it's time to set your sales for wow you need to be saving and and thinking about the future and 11 well and in so is so single person is 39 and essentially $40,000 that you can earn so it's it's less but you still can pay if you're more than that, more than you still gonna pay 12% tax on the amount of money that was in that bracket.

But let's look at the next bracket snake out a maximum of 168,400 for a married couple and the tax rate is 22% still very low, comparatively modern times, and for a single that top number of the 22% tax bracket is 84,200 and so the point that slot was making is to retirees or anticipating retirement is every year that passes that you don't realize income or you know that you don't allow yourself to get up to this amount is you know that's gonna me when in 2019 finishes and you're a married couple and you just finish the year at $80,000 or something. I'm sure you only pay 12% tax on that money, but you've missed an opportunity to pay 22% tax on a whole lot of income, the Civil War my get together income and what it was, as well. If you look if you just say that your income is not within your control.

Then you you could say yeah I mean the sense of this is news you're telling me this, but only to make more income on the tell you exactly where you can get more income is you can convert your traditional IRA or 401(k). If it's in there in your and they offer a Roth option, you're going to converted to a Roth.

So you're effectively gonna pay the tax this year or you'll pay it in the spring. That is, it just this year you to pay the tax to take advantage of this 22% or 12%, or even if you go above that.

It just goes to 24%.

So these are very low tax rates right. I mean who could forget my long ago they were 30, 34%.

So here if this opportunity. The wind is blowing with a lower tax rate in the ideas we talked about IRAs and so many times that a Roth IRA you won't it won't count as income against your Social Security when you get older just that nobody you just I can pay tax on. So if you created income on this. You just can be enjoying tax free of me and we are just going over the example of me. I'm I'm doing this in the process of doing yet and I've been for years that my intention is to have my whole IRA converted to a Roth. By the time I'm 70 K and I'm to get few years before 70 and then to begin drawing income from it tax free from 70 on the end it tax free income for me and my spouse and then furthermore it's tax-free income is guaranteed by an insurance company because I practice what I preach. As I have bought an annuity several annuities actually have got it spread around to where Anna drawn income that is not an end until both Ron and I are gone so that sounds a little complicated. A little far-fetched, but weekly. We were just talking is as it were not 20 years from now, I'm still alive and I'm 81 and I'm drawn this check and Rhonda you know and are drawn it and then tax rates are potentially much higher, which I just looking at the things historically in the budget problems and just I think that that that that would be my guess is there can be much higher. Simon be getting that check tax-free and in addition I'm not could be a pain, any taxes on my Social Security check that I waited till 70 to start some scan of this tax-free income coming in in minutes can be pretty happy, and how and the idea is the winds have changed and they've changed either recently within the last year and 1/2 and so today show is on taxes right. One of the seven worries there. The seven worst habit. Cardinal, which by the way, is what brings you finishing well and so if you go to Cardinal you click on the seven worries tab they'll you will find you know the taxes thing and you can download the PDF of Hans's book the complete Cardinal guide to planning for living in retirement. They are, or course, you can just email Hans and asked for the book you got some just this week, you poke asking for O yeah gladly send out because that's the idea is to get the information out there to where people can finish well. We yeah and by the way, if you want to copy my book and get it on Amazon is very inexpensive, but you also can just you. He said you can download the chapters for free, but if you do send me a message and that is what you're referring to.

I had a nice man from California that the download in our podcast. It's flattering, and he wrote he asked for some information about some insurance products but he also asked me if I'd send him a book and and and a copy as well to his parents who are 80 years old so I if any of you want to do that you send us a message in will will be glad to send the book out now when it comes to Roth conversions. I've always been, you know, in favor of them but a kind of on the fence and I'm not still just recommending everybody out there that's listening that you just immediately start converting your Roth.

I mean we we really got a look at your whole situation but generally speaking, I've moved and have been moving my position on this that I think that now is the time to really start looking at this seriously and this is a hard sale with clients because what I'm what I'm really telling you is that to increase the taxes that you're paying now. Okay, that's just it's just hard to convince a client and then when I convince the clients to do it and they go ahead and do it then I got a re-convincing next year at tax time is eagerly panel these taxes and what I'm saying here is just with the tax rates the way they are now and with some changes that are coming in the law that we think are becoming soon, but if they don't come soon.

Their common, probably sooner or later your heirs or your children or whoever receives this money that after you die are going to have much less options as far as stretching right the stretch IRA is what's kind on the chopping block. It's in Congress right now is we'll talk about that and a great deal more about interpreting the signs of the times and you know is this guy read is the sunset or is it is sunrise. You know this from some interesting questions to determine a course in what Jesus was teaching was a great deal deeper than that.

That God's right there and in a big part of this cons before we go to break, I think, is are we operating out of fear or are we operating our faith right faith that God's gonna provide a way he might be providing Hans right now is your listening to events a big help you to interpret the times at the scene with Blanche as I can assure you the news is gonna make a big deal out of stuff that's from a purely political standpoint that they're trying to change the way you vote by me. Then, not necessarily tried to show you what's a good way to invest in all that kind of stuff. Their motivations are significantly different and so enabled, interpret the times through the news is not so easy.

I don't well yeah and this is preparation for when you're old. They tell me not to use that description or word, but it's just just is and you're not. You're unable to earn additional income and work or you choose not to worry her in the restful. This is just preparing so you'll live a good life financially and you won't have to worry about your mother and paint and actually finish well back just a minute with the second half of interpreting the signs of the times.

That is the tax guy. 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 Cardinal and contact Tom to schedule a live recording of finishing well at your church Christian or civic group. Contact Tom to Cardinal that's Cardinal welcome back to finishing well today show is interpreting the sign of the times is the tax sky read effects of and and there's some common, possibly likely, which is the secure act and so you may wonder if your that an acronym genie is what that means. Okay, so the secure act has passed the house U.S. House in Congress in its over the Senate and the Senate is working on their version of it or trying to pass this so this isn't law yet the secure act stands for setting every community up for retirement enhancement act of 2019. I was like that with a call. Taxes you know and changed enhancements but there are pieces of this bill and what it's intended to do. It has good intentions, is it's intended to pass the legislation that Lisa looks like there the government is somehow making changes to deal with the fact that in their opinion. Most people are not ready for retirement so there's a whole lot of stuff in here other than the loss of the stretch of the IRAs, but this is what it's lot was saying in that whistle and the whistle blown the whistle on and just saying hey he got us all together on a webinar video of him in PowerPoint and he talked nonstop for an hour and I was just fiercely taken notes in really at the crux of this thing is if this doesn't pass or takes a while to pass. Or maybe he just goes down and get shoot down shut down, that the provisions of this thing, as they affect IRAs and cone wax overdone pass now. The government wants to get their hands on you paying taxes on that IRA money. But I also see his eye. As I read through those details that the government wants people to use the IRAs for what they originally designed them for their not supposed to be a way to transfer wealth to your prosperity.

They're supposed to be a way for you to live well during your retirement years. Leon or me 34 years ago people retiring didn't really have 401(k)s and rollover into IRAs. They had a pension now what they have is 401(k)s tax-deferred savings plans, IRAs, and most people that are getting ready for retirement.

They get big balances in this thing that that's the most of their money and we know we talk about this on several shows that that money has been taxed yet you haven't paid taxes on that money either. The money put in there or if it's in traditional IRA and what were proposing on the show is that you really need to take a serious look at converting some of your traditional IRA. Not all of it.

Some of it to a Roth and you can put together a plan to do this over several years, so you minimize the tax impact but yet your doing this in such a way that you're taking advantage of these low tax rates in one of the things that he highlighted. As I read through the article are the workbook that he sent you was its back onto figure out who your beneficiaries are and that's going to radically the secure act you know is is aimed at certain ones of those types of beneficiaries so it absolutely is is is a set so the secure act is going to reduce the stretch IRA going incisive with the stretcher at for spouses really isn't a lot of change in this act, but for any other beneficiary which is most generally the kids that inheriting this IRA. They before this act would be passed through some advice or somebody like me they can stretch the taxes out in the payments out of this IRA over their whole lifetime.

So you can be others planning things and we recommended that to a lot of people and had slots thing and the alarm bell. He's saying okay, this act is gonna reduce the stretch down to 10 years for everybody. So in other words, if you left this to your granddaughter under the current law and she's 10 years old when you die, and she has a life expectancy of 85.

You could previously have stretch that IRA over 75 years. That's her life.

Expect now it's can be 10 years if this thing passes for everybody. So it's it it it it is government never intended IRAs to be in it is estate planning technique in the intended you to use it yourself during retirement to live off and they would get the taxes from the cure and on because ammo is that if that granddaughter when she was 20 had not distributed the money. Then all of a sudden she's can have to pay tax on the whole whammy. I confront what I absolutely and so what he put didn't work when he finish this thing with is that we as planners on part of this no red slot groupies is about 500 of us of attorneys, financial planners, CPAs, the go to with him twice a year, and in so what he's doing in this thing is he saying okay you planners you need to take either this and there's five things that we you know that you can do to lessen the tax load for people so the first one that he put which he always talks about is reevaluate beneficiaries so just want to sing the alarm bell here. I want to encourage everyone out there to find everything that you got your IRAs. All of them have beneficiaries as your 401(k) then have beneficiary is not an IRA and you made a designation at some point on that. I want you to check that. Make sure is what you want but you also have these on life insurance policies and annuities and you get a lot of beneficiaries there. This is a good time to think about. Let's let's get them out. Let's make sure that the what they want and if you do it with an advisor like me then we're gonna take into account the tax law on the potential changes so there's some planning opportunities here they you note. First of all to get the money to whoever you wanted to go to and then to give it in such a way that they pay the least amount tax everything that you do with a TOD transfer on death like you know whatever your checking account is your your savings account you can put two yogis on all that stuff. And if you do it passes out of probate. It goes to whoever you designated it to without it having to get an estate tax audit. Essentially everything that you left in there without a TOD like all his account to go that estate goes into the I hate Erin is going to be not only tied up for whatever period of time, but it also.

That's how they figure your estate tax so TOD is transfer on death and it's a beneficiary designation on a bank account or a stock by cutting that's not an IRA. Okay so this first one. Reevaluate beneficiaries. The second one is Tackett brick tax bracket management that I talked about earlier in the show that a married couple can show income of up to hundred 68,000 and that's after you've taken the standard deduction or whatever your deductions and only pay 22% federal tax and so he's simply saying that we had a look forward and take advantage of that low tax rate in one of the waste do that is his next suggestion is to do Roth conversion. You know, over time, and so we can plan for the next few years because we can reasonably assume that these tax brackets are going to change for at least a few years position to sunset in 2025. We can do Roth conversions up to the end of the tax bracket. The fourth one is life insurance which you want to pass money tax-free to your heirs. If that's really what your IRAs for me.

One way to do that is as we mentioned earlier is to a Roth conversion and then your kids will inherit this money tax-free. But it will be less.

Another way to do it is to start pulling money out of your traditional IRA paying the tax, and using some what's left over all what's left over to buy a life insurance policy to pay for it.

Over the years and if you have a life insurance policy for the amount of the IRA your kids. You can get that tax-free wonderful and then the fifth one that he had on here that were knocking to get into the show is charitable remainder trust or CRTs, but there's a goes away to put your money in trust and to give money, perhaps, of the church work to admissions or to the Jesus labor of love, all go and I am but I don't really want to get into that no one on the show where the idea though is that enough you send it to the charitable foundation. It's a way to not pay the tax on the money and use that part that you would normally do as time showed us to really take advantage or leverage the tax laws when they are currently here and you can get more setting your sales for the signs of the time and setting in a the way the wind is blowing really the three biggest things out of these fibers tax bracket management that we could really sit down with you and look at look at your income halfway through the year in figure out a way to take advantage of these low rates, Roth conversions, which is probably how to take advantage of it and then the fourth one is life insurance which is really planning for the end and it is can. It's the best way to give tax-free money to your beneficiaries paid for with my fridge consuming with IRA money right and so, again interpreting the signs of the times is you know there is a sunset coming apparently on the one law, but you know looking and seeing what you have and in order to finish well. Sometimes means you know paying the taxes on at a time when it's more affordable and you can do it when you're actually not in a got a fixed income later in life. If you're listening to our podcast and you're out in California or you're in North Dakota or you're in Alaska or you're down in Florida or anywhere in the United States. We are license in all 50 states and DC. The only decision that you'll need to make first fall. If you call us and get advice EEE don't you need to pass anything you know for for for the beginning and initial counts. I'll talk to anybody on the phone, but if you decide to hire us.

The only real decision that you're going to need to make is you gonna say I'm gonna forgo effaced face meeting and I'm now gonna do this over the telephone to deal with ounces firm and if you do that which you gonna do is you just cannot open up the whole world of possible solutions because were completely independent.

We represent all these insurance companies, our sister firm has all the investment options in the work were were very independent and I just find it cool people or listen to our podcast all over the country and I'm getting emails and I'm getting phone calls and establishing clients and relationships where we never meet the people face-to-face. But we seem to be serving him well there real happy. All this is along with his book with Hans's book the complete cardinal guide to planning for living in retirement as well as talk about.

You can order they are just like email and Hansson and asking for that the website or the car skidded in a Amazon or any of the local stores but ran out of time before we ran out of stuff to say hot about getting out and will be back this coming. 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 guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows 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.

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