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August 18, 2018 8:30 am
Ecclesiastes 3 says “There is a time for everything, and a season for every activity under the heavens”. Everyone knows about tax season, but it is important to look at your finances and taxes every season, not just in the spring every year.
This week, Hans and Robby discusses more in-depth topics regarding axes, including QCDs, capital gains taxes, itemization, and more. They even answer a listen question on air!
Taxes affect every aspect in retirement. You have to look at all of this in order to finish well. You don’t want to leave your family a huge tax burden when you pass.
Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on CardinalGuide.com for free!
You can contact Hans and Cardinal by emailing email@example.com or calling 919-535-8261. Learn more at CardinalGuide.com.
Welcome to finishing well brought to you by Cardinal.com certified financial planner on six child 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 today on finishing well.
I almost wish I was bird start off on to everything turn turn turn directly quoting Ecclesiastes 3 hours where Solomon was instructing. Actually, God was instructing through Psalm there's a time for every season and so today show.
We've titled attacks for every season because when we enter into our finishing years between 62 and wherever it is that you finish your it's a different season right Hansson on then on top of that the government is change the season in 2018 and so they moved our cheese. Well, they absolutely have, but I think in a good way yeah the economy is doing well but the tax new tax rules for tax law is it's not necessarily benefiting everybody that you think it's benefiting it's changed and so it's important to look at our own situation. Each one of us and see if were doing things the right way and to do that during the year that's affected instead of waiting till you thoughts tax return to find out these facts yeah and so were talking with Tom Schaal. He's a certified financial planner CFP with Cardinal guy in the shows brought to you by Cardinal guy.com courses book we are to refer to the complete Cardinal guide to planning for and living in retirement and in the idea of tax illicitly year for me with the Jesus labor love I have that nonprofit with a Christian card I show and all of a sudden people donate in cars, and we moved there cheese that the other they don't get the deduction that there's other places where you know planning really is a critical aspect of what's is gonna look like it like you say when you go to fill out that return the end the year, but especially for people that are now on Social Security that have been before went with her to get the benefit of the tax deducted the tax deduction is really not from donating the car.
Their taxes when they fill them out in the spring next year.
There can be less because now there's a $12,000 standard deduction or for a married couple is $24,000 standard deduction which means you won't be itemizing for a lot of people. Okay.
And so do not itemizing you don't get a tax deduction for your charitable deductions. But you got more than you would've given the lack so if your taxes are less than considering your taxes are going to be last because you get a bigger standard deduction and then the rates are less and that's the places that people are aware of this is in their paychecks. Is there tax withholding should be in such a way under the new law that kicked in in February or March. They're getting more money consumers across the country are getting more money by the month and there using that money to spending that money in the economy and that's been good for everybody and 1 Large Pl. that they moved to the cheese phenomena say this is chatter is think UCD is now permanent and we talked about at several times on the shows and some people may not evaluate it, but that's huge. It's absolutely hated UCD is a qualified charitable distribution UCD and so what is that me will you gotta take minimum distributions after age 70 1/2 for many IRAs and 401(k)s qualified money and generally people dislike distributions because they know they gotta pay taxes and we've talked about in the show many times I continued to. Distributions are necessarily bad. Paying the taxes so you've avoided tax or youth postpone tax on this IRA money whole life. The governments can get their money if they don't get it from you while you're alive when this money transfers to your heirs there to get it from them then then they're going to get their money so taking a distribution from your IRA and paying the tax is not necessarily a bad thing like people think it is right in the beauty of this is you can actually when you earmark that money for your church to give to God work in ungodly charity of some kind that then now you can take the other income that you would normally use for tied that and use that to for your benefit. Absolutely.
So if you're over 70 1/2. You can take advantage of this is your basically going to give through your IRA and there is very high limits on this so you can you can be very generous with that and it has no effect on your taxes when you're not uniting going to have to pay the taxes.
I wouldn't suggest just listening to the show and then going doing this on your own and you need to have somebody that's familiar with tax law helping you with this and you're one of those people. Yeah, I absolutely I am in. We've studied this boy to bed and we've actually helped a lot of clients donate money or give it in a very tax efficient way and then he brings up another point were talking about taxes today is just stockpiling money in an IRA and you think you cannot beat in the tax system is not a good estate planning strategy. Okay, it's smarter to systematically withdraw throughout your lifetime in such a way that you can go ahead and pay the tax. Even if you don't spend the money or given away to just take the net money and maybe put it in a taxable account so that you got a savings account that the taxes of Artie been paid out in again.
Having sat with you and and and thinking through this process on a few shows now I wonder in on my as I think about in the priorities out okay priority number one. The kingdom moving forward given us to a church that when you go out and help people join you in heaven. How cool would that be of use for your money so that is. Think UCD, but the next thing that seems to come in mind for me personally it is. I think that wow, I had that IRA or that 401(k) to use it for long-term care there's a way to get the money out sort of in a way that really is protecting my estate will yeah I mean.
So when you die with the balance in an IRA again. There's planning techniques that we have the plan beyond your death to your heirs and help them spread the tax out so it's not necessarily bad to have money accumulated and then it goes to your children.
The problem with that is that your children many times are not to follow through on those plans. They're gonna need the money and so they can withdraw it. Soon after your death in there and have a big tax bill so you you you may be better off slowly and systematically paying the taxes over your lifetime and then leaving the money that you've accumulated which is tax-free money was income tax-free money that's going to go to your kids so is dictated to plan around this and systematically pay some tax and long-term care is awaited. One of those strategies try. What was sure of me getting long-term care insurance so were mixing up a bunch of subjects here were today is taxes. But it's kind of hard not to salute. Let's move to a point here since of what we talked about is when it comes to an IRA. You can do it. UCD that's unchanged by the current tax law made permanent's energy is made permanent. So that's something. If you're over 70 1/2.
You can do this talk about taxes in the income taxes that you're going to pay on the amount you earn from an investment okay and let's look at that prospectively. So were were thinking about buying an investment were thinking about investing in a certain way and now to look at the taxes that are going to be due either now or later is a smart thing to do and I find that a lot of folks who were retired are still working there, either one way or another they don't look at the taxes at all a lot of investment professionals haven't slept all over their brochures and in their required were not tax people. This is not a tax opinion. Consult your tax advisor. That's not good. Where your investing in something and you're just not even talking about or considering the taxable effects then the other extreme is the person who comes to me that so fixated on taxes there so just taxes are so distasteful that that's the first thing they're looking at as they come to me with some investment there looking at and they're saying you not I get this tax shelter I can invest in what you think in my advices I was done with the taxes blamed you to the underlying investment.
So what we want to do here is we want to be somewhere in the middle so we want to look at taxes as a consideration in how we invest our money, but we don't want to look at it at such an extreme that is the only consideration is the main consideration in speaking to consideration.
If you go to cargo guide.com unifying the seven worries tab there in one of his worries being taxes and and not that it's worry about it, but that it obviously should be part of the planning process and if you click on that you can get a PDF of your whole chapter right can't deny mean of the book, you can construct the whole book in by downloading these PDFs because we have each chapter under each tab or you can just buy the book on Amazon.com. It's very inexpensive and if you'd like a free copy of the book. Just send me a message on Cardinal guy.com to Hans about book offering will will get it right out to you will get a copy of that because the idea of the book is called again the complete cargo guide to planning for living in retirement and there's a book and there's a workbook so the books wonderful of understanding the concept giving story things like that. The workbook gives you numbers and charts and things of that you can really begin to plan with that and and again were hoping that you can finish. Well that's that's kind of where that's going and not have the worries but tabs there are actually further planning purpose and ends in singles, things, taxes are just one consideration their seven content chapters unifying the end unit Medicare and Social Security long-term care, IRAs, investments, life insurance, which we talked about last week, and then taxes so you got seven factors in all his retirement planning leases.
I've defined them in my books and so taxes is just one of them and that's what we're talking about today and organa were going to have some more really stories about we help people coming up in the next segment is so today show is time for our season for every tax or tax for every season. You know they've moved our cheese with Exelon.
Hopefully we got some helpful stuff, stay tuned. A lot more unfinished.
We hope you are enjoying finishing well brought you by Cardinal guy.com visit Cardinal guy.com for free downloads of previous shows, including episodes about Social Security and Medicare, IRAs, long-term care, life insurance, investments and taxes as well as Hans best-selling book, the complete Cardinal do I planning for and living in retirement. Plus the accompanying workbook.
If you want to follow along with today's topic download free PDF had Cardinal guy.com by going to the seven worries tab of today's show topic, just scroll down to useful documents once again for free resources shows go to get Hans book the complete Cardinal do I planning for and living in retirement or the workload go to Cardinal guy.com you have a question, comment or suggestion for future shows. Click on finishing well radio show and send us a word.
Once again that's Cardinal guy.com Cardinal God.com now finishing well brought by Arnold guide.com him him back to finishing well certified financial planner Hans Schild today show is a tax for every season being idea that the Estes Solomon is instructing is that things change and people move your cheese in with the new tax laws are our cheese then moved some stuff going on, and so you know, how can we look at that from a standpoint of finishing well and and doing some planning and a pretty exciting we got up letter from a listener writing in. Want an answer and so we really want to dress it only do it so the question comes in from Cary, North Carolina the listener and who has a home that she's selling and planning to sell for about $280,000. This is a huge home, but it's worth quite a bit worth quite a bit to her in the over 20 years ago she paid I believe $140,000 for this house, so she's she's a bit concerned about the taxes that she's going to have to pay on the gain on the houses and capital gains is pretty big like hundred 40,000 this $140,000 capital gain. She's moving in with her kids and she's given both of her kids some of her assets and she's just planning to live her married life away looking after the grandkids and he and she's concerned about taxes. So we want to give the answer to that goal for okay you have my complete attention was in South and this didn't change in the new tax law is is that you can sell your principal residence which that was it for her and of the definition of a principal residence is you have to live there in the house for two of the last five years, which she qualifies for that. Most of our listeners would qualify for that and the sale of the home, up to $250,000 is tax-free while yeah and that's been the law for over 20 years and did you know it continues to amaze me that just how little she was a shock teases me. I can do this is no taxes us.
That's the deal.
If you're married couple. The cap is $500,000 so it's $250,000 each and artist Hans my mother-in-law six to sell her primary and she was really worried about the capital gains you know all freaking out about the event that's fascinating that's that's really helpful I bet, to a bunch of listeners you know it. This started about 20 years ago and it was under you know, I guess we were bored we will keep politics out of the show, but this was under Clinton. I remember when my body saying if he's really in the past this. I think I'd vote for him and because my body with the time was about 60 and he even had a fairly valuable home and in Charlotte and he you know this is what it was in the 90s and so it's been around for 20 years and it's it's it's designed and there were people that had to pay capital gains taxes on the growth. A lot of folks would move south and unite retirement so he had a lot of these high-value homes in New York and Pennsylvania. Just will now there high-value homes here, North Carolina Majeed, you have people that needed to access this money thereby much less expensive home to live in for retirement and the staff pay taxes on those gains and really for 20 years up to 1/4 of $1 million for one person, $500,000 for two people is a tax-free sale and this is been a part of the reason licensed really. What a wonderful thing. God is provided to have people that have experience in things like this you know we were an organ to sell that house that we lived in for 20 years once-in-a-lifetime. How would we know such things less you know you check out somebody who has some experience in dealing with estates and and with people that are headed towards finishing well.
Now this two of the last five years living there. Rule a lot of folks are unaware that I mean if a person goes to an assisted living or nursing home and lives there a long time and they've got some means they've got some money there. Paying for this care and in the houses just cannot Because his mom's house.
She may think she's coming back but if those five years pass and then the house is sold after years and two months you're in trouble if it's to the last five you are and so we need to think about these things with people especially if there's a big step of value in the homes was just another piece of the planning, which now after people have this information then you just don't want to put that for Granderson rules around this, but you can you can so you have a lot of builders and I'm a tell you that if you if you know any builders personally. They seem to move every two years coming so you have a lot of builders who are, you know, the custom home business that are going to live in that house. One of the houses they built. Maybe when they can sell they move in there. They lived there for two years and then they sell it two years later after the build. The neighborhood is built up and they can pay no taxes and if there since I'm writing IN their cost basis is real low and you have a lot of builders that remove their whole family every couple three years and they're going to have some really sweet tax-free income so there's an income strategy there for certain people in certain ages, but the season were talking about attacks every season. When we begin to look at Social Security as part of that planning. I'm sure you have stories along those lines where I absolutely do meet me just mean you have the people who live basically off of their Social Security and they live off of their check and maybe some other money and some pension money and then there sitting on a big horde of IRA money and they just taken the minimum distribution and they don't want to pay any taxes and they come to find out that they don't want to take too much money out of their IRA but they can probably take more than the minimum and pay almost no taxes.
So there's there there there is the people and I have clients like this that are really just like postponing taxes on their IRA when they be better off pulling out more and pay paying little tax just simply because they're in a low tax bracket when they're retired just because Social Security is not taxable unless you have substantial other income. So as we as were going into this season which now 2018 is where tax rates are lower, but you know you got bigger standard deduction. You know that that would allow for more of of distribution and not have to pay tax as much, yeah, or pay little taxes right smart strategy commences for some people and that's where were talking on the air talking in general we really need to sit down with individual peoples are not given any recommendations here just simply saying in general. Under the new tax thing if you live in office Social Security under the new tax law you might be better off drawing out more out of your IRA on an annual basis and then what you want to be careful of the utmost year savings is set in an IRA is that your savings account. You always know you can go there and then all of a sudden you have one. Your children need some money you need some substantial money all of a sudden and so you go withdraw $50,000 your IRA and one given year. That's going to create a horrible tax situation. Your Social Security can become tax or more taxable, and you're gonna pay a high tax rate on that 50 grand or larger that you fold out sick you want to be building a savings account in retirement that you've already paid taxes on right so you could be raising your minimum and about with a little math and some planning raising your minimum distribution to something that makes more sense and need to speak if you don't want to set that inaccuracy dear, you didn't want to buy long-term care you could be funneling and it simply into another savings account. You know that that is tax-free that is tax-free right yeah but getting back to long-term care. I brought up and that you have that's still part of the deal and it that you really you could be taken at IRA money and in funneling it there to yes mean so long-term care.
The payments for it for home healthcare for nursing home care for assisted living. So if you're paying money so your self insured essentially in your paying it. You want to be drawing that money out of the IRA.
But again you need to come to a professional like me because you know if that's just $5000 or something and you drawn out of the IRA.
You may not. You may still be using the standard deduction so you really want to draw out substantial long-term care money like if you're going into an assisted living you want to be drawn out all the expenses for that because those are tax deductible and then you're going to be creating income to deduct that against so it's a you know it's a it is no cookie-cutter here when it comes to taxes, which sounds a little bit dry, but in a way it's rich when you think about it because the money that your savings is could literally be like in the case of the Q CD which was again that's money that's going to your church because you didn't take as much tax on that is that much more of a resource to build the king what it is and if it's money that's accumulated for your retirement were all be stewards of our money MET just and you know my philosophy on that as I want to pay all the taxes I owe, but not really a penny more and I want to be smart about that because this this money is here to take care of me when I'm old and my wife when I'm old and my hands arty think I'm old. Yeah, I may just as it is same here.
I'm already old but you know I really have a plan and hope to get much older than I am right now and we need a pot of savings there to take care of us and then we need to think about long-term care we need to plan for that.
So that doesn't become an added burden to our children and then it becomes an additional who we want. I want to leave something to my kids and me. That's that that's the plan, and leave something to my church right and and the idea there is more talk about the subject. Today is what we don't want to leave them with is a huge tax burden which you know could could literally catch them by surprise if they didn't understand the tax awesome.
Well, yeah, big IRA.
I'm just telling I got them in my book is you know a sister and a brother to kids that 01 of them delayed the distributions.
I just talked to her this weekend.
She's delayed the distributions she done all the right tax things. The brother he drew all the money out and he paid hundreds of thousands of dollars in taxes invested the difference in it's just it's not a pretty thing. So, with many counselors plan six And a time for every tax today on finishing well, a certified financial planner homicidal again Cardinal guy, don't forget the guide to get us a Cardinal and God Cardinal guy.com the complete Cardinal guy to planning for and living in retirement. Those books are free just for the asking. Contact cons there or download any of these PDFs firstname.lastname@example.org Hans another great. Shall we keep learning. Thank you. Thank you. We hope you enjoyed finishing well with you by Cardinal guy.com visit Cardinal do I.com 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 cons 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 to get Hans book go to Cardinal do I.com 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 guy.com Cardinal guy.com