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Enjoy it, share it, but most of all, thank you for listening and choosing the Truth Podcast Network. Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now, let's get started with Finishing Well. Well, welcome to Finishing Well, a certified financial planner, Hans Scheil, and today's show may sound like a bummer, but it's not. You know, all things work together for good, you know, is what we understand from the Book of Romans, you know, 828, but anyway, there is 2026 tax increase that is coming, and so, you know, we're going to talk about that, but we're going to talk about a window of time that we have to do some good planning, to do some sound stewardship in order to finish well, and I think about that there's a window of time that we have to do something as far as our salvation is concerned, and that salvation is based on faith.
Like, who do you have your trust in? Is it in Jesus Christ and him dying for your sins, or do you think you've done something to earn your way into heaven, and there is only a window of time for you to get that right, and so the Bible says that we're not going to get anything done on our own merit. Apart from you, we've done nothing, and so we definitely need that fire of our own faith that we believe that Jesus did what we needed to have done in order to have our salvation. Well, similarly, you know, if you have faith that taxes are going to go up substantially in 2026, then you have a window of time in order to make some changes, and there should be a fire, you know, kind of burning for you to do something, and that's what we want to talk about today, is possibly to change your understanding of what is coming in 2026, right, Hans? That's exactly what we're talking about, and we've talked about this before, but I want to turn the heat up a little bit, because January 1st, 2026 is not that far away right now, and we've got the rest of this year and all of next year to capitalize on this, or another way to put it is you could say that taxes are on sale for the next 18, 19, 20 months, and so, and people will, of course, debate with me, and they're going to say, oh, well, you know, that may or may not happen, and you can listen to the political rhetoric from both sides as you hear the Democrats saying, oh, well, we're going to extend these tax cuts for some period of time for people below a certain amount of income, and then we're going to raise taxes for all the people that are over this amount of income, and then you can hear the Republicans saying, oh, well, we're going to extend these tax cuts for everyone, and we're going to do, we're going to make these things permanent instead of sunsetting at the end of 2025, and I just want to point out something to you. Whichever side wins, and I certainly have my own bias that I'll keep to myself of who I'd like to win, but whichever side wins, when the president does not have as much power as they're saying, the president can't just go in and raise taxes or lower taxes. It's going to take an act of Congress to make this go away, okay, this tax increase.
I mean, do you understand that fully, Robbie? I do, I do, and I think it's completely, you know, you're talking about there's a bill has to make it out of the committee to begin with, and then it's got to get passed by the House, and then it's got to be taken to the Senate, and then the president has to sign into power, and tax bills are hard because there's just a whole lot of stuff going on on all sides of that, so it literally, like you say, it is an act of Congress, and we're not here today to talk about in any way, you know, what we think Congress should do or what the president should do. What we're talking about is here, you know, whatever hand gets dealt to us, then we need to be good stewards and allow God to show us ways to take advantage of the best way to handle our money under either circumstance, and that's what we're talking about today, so that we can see that one thing we know for sure that we can count on right now is we have a window of opportunity right here and now in 2024. We do, and let's stay on this for a minute, because back in 2017, the Tax Cuts and Jobs Act was passed, and it took a lot to get that through both houses, both halls of Congress, and then to get the president to sign it and all the negotiation because they can't spend money, well, I guess they can spend money they don't have, but when it comes to tax policy, they have to prove that they can make the budget or whatever, whatever goes on with that, so what they negotiated in 2017, they say, well, let's just make this last for eight years, so all we got to count for that is 2018, 19, 20, so on through 2025, and so it's only going to last for eight years, which just conveniently would have been the eight years that Trump would have been president if he would have won a second term, but so they negotiated to have the Tax Cut just last eight years because eight years seemed like a long time a long time back then, and everybody's for it, we've all had the Tax Cut, we've enjoyed that, the economy's taken off, but now it's time to pay the piper because the law of the land has the Tax Cut from the sunset, or in other words, we're going to revert back to tax rates and tax brackets as they were in 2017. Now, there's an inflation adjustment in there, so nobody knows exactly what they'll be, but I just want to make that point to people, so I'm not talking about something that might happen, or that they're going to change the law, too, I'm talking about the law of the land, and it will take an act of Congress, literally, to change this or to stop this from happening. Exactly.
So, let me give a couple examples, okay? So, the very top of the 24% bracket for a married couple, married filing jointly, is $383,900. Well, most people listening don't make $383,900, okay? But that's the most you could make of taxable income and pay taxes at the federal rate of 24%. Now, for a single, a single, the top of the 24% bracket is $191,950 of taxable income. So, I just wanted to point that out, and that's the top of the 24% bracket. Now, if we go back to the 2017 table, the tax rate at a similar bracket is 28%. So, you could say, well, that's only 4% more. No, that's not 4% more. That's like 15, 16, 17% more, 28 over 24. It's 17, 18, 19% more. And the top of that for a couple is $233,000, and the top of it for a single is still the $191,000. So, you look at that and say, what am I going to do with all this information and numbers? Well, if you've got money sitting in an IRA or a 401k that's pretaxed, and your maybe minimum distributions are a few years away, maybe they're not, maybe you're in a position where you're having to take minimum distributions, you can do a Roth conversion up to those amounts, and that's a pretty substantial amount of money if you made $100,000 a year, and you'd otherwise pay tax on that, you'd have $283,000 worth of IRA money that you could convert, pay the taxes on. So, I'm not recommending anybody run out and do this. I'm just trying to make a point that if you're going to do some Roth conversions, and you want to protect yourself and insulate yourself a bit from these future tax increases, then doing a Roth conversion at these lower tax rates may make a lot of sense.
Oh, I would certainly think so. Again, it's a little confusing when you talk about pretax, but a traditional IRA, I know, is you have not paid the tax on that money, and so you have a partner in that deal, and that is the government, and they're waiting to get their part, and as we've talked about with this tax increase, that if we allow them to take their part sooner rather than later, rather than them getting a larger percentage, they get a smaller one. It would increase your tax over that year, as we've talked about, that you take it, but if it saves you a great deal in the long run, then the beauty of that, from my standpoint, the really amazing thing, as I begin to look at my own Roth IRAs that you suggested I start to take out, is that not only is the money that you put in going to go to your heirs tax-free, but then it also, the money that it is making is tax-free as well from now on, even for them for the 10 years after you pass away, right?
It is, and that's the part people miss. If you're in your 60s, and your spouse is in your 60s, or even in your 70s, you know, one of you is probably going to live another 20 years, 30 years, so when you take IRA money that's pre-tax, and you just leave it sitting in there, and it's growing quite nicely, that is going to be a larger amount down the road, and the government's share is growing too, by the same amount, because somebody's going to pay the tax on that inflated amount sooner or later, I mean whether it's you or your heirs, and you can leave this money to your spouse, and they can further postpone the taxation if you die first, but ultimately somebody's going to pay the tax, so the government is just fine with you leaving the money there, and letting it grow and grow and grow, and then when you add tax rates going up, and it's my presumption that, you know, our deficit problem is so big that sooner or later they're going to raise taxes even higher, so my thinking is if you've ever considered them, the best time to do that, as we can see it, is in 2024 and 2025. All right, well we got to go to a break, but before we do that, we want to remind you that this show is brought to you by cardinalguide.com, and at cardinalguide.com there you're going to find the Seven of Worries tab, and obviously we're talking about taxes today, one of those worries, but hopefully we're going to help you with that, and if you go to that tax tab under the Seven of Worries, you're going to find a show of the 2026 tax increase, it's got all the show notes on it, as well as a wonderful video there that's also at Cardinal Advisors on the YouTube channel, but if you go to cardinalguide.com, you can also find the contact information on how to get up with Hans, talk over your individual situation, because he doesn't like to cookie-cutter anything, and of course Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement, so we got a whole lot more coming up, and what an opportunity we have, what a window of time, both for our salvation, but also to maximize, you know, our stewardship of before these 2026 tax increases, we'll be right back. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.
Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Hans Scheil. On today's show, we're talking about the 2026 tax increase in this window of time we have in 2024-2025 to make sure that we take full advantage of the time that we have, the window of opportunity, and so Hans, take it from there. Yeah, so, you know, we're talking about if you have a significant amount of money still in a 401k or that you've rolled over to an IRA, but you haven't paid the tax on it yet, and that might be why a lot of people are sitting back looking at these things and they're just saying, I never expected to have this much money. And then when we sit down with them, we figure out and then we have a lot of folks, they have more than they actually need.
And they prove that by just the way they're living. So they'll come into us talking about Roth conversions, you know, and I'll go to the other side, I'll say, well, why do you want to do a Roth conversion? Well, I want to pay less in taxes. Okay, why do you want to pay less in taxes? Well, everybody wants to pay less in taxes, but, and so what I'm getting at is a lot of people don't really have this money apportioned to anything. And that's, they live off of their social security and their other savings.
And, you know, I'm going to really hit with people and what's this money for? And what it's supposed to be for, the reason the government gave you a tax break is for you to set up an income in retirement. These things, these 401ks actually replaced pensions. So instead of having a monthly check coming in for the rest of your life, what you have now is a big bulk of money that you've been successful growing.
And now you've got to create your own pension. And so pensions are taxable. And so when you pull out large globs of money, you're going to have to pay taxes on it. And so a lot of people, this is their savings account. And we'll point that out to them that if you pulled $100,000 out of there, or you needed $100,000 for something, we're going to have to pull out 170, 180, 160 just to pay the taxes so that you're going to net $100,000. And that income is going to go on top of your other income for that year. So it's not a good place to store emergency savings is in a pre tax IRA or 401k. Now, that being said, you never pay tax on this account, and to take $1 out, you got to pay taxes. And so when you look to the future, and you get the minimum distributions, you're going to be pulling money out.
And you're going to be paying tax on every penny of it. And if that's done methodically, strategically, that's all fine and good. But if it's shooting more money at you, then you really need to spend that gets people in a real, in a real sort of just trouble spot.
And they, we have a lot of people just don't want to deal with it. They just like looking at that big balance, they just shove it aside. And I'm suggesting to you that a Roth conversion can make sense at any time. But it's got some extra timing thing a window of opportunity for the rest of 24 and the 25 for you to make two maybe larger than you would have planned on Roth conversions to take care of the to take advantage of the lower tax rates and higher bracket amounts, then you're going to be dealing with in 2026 and beyond.
Right. And again, the advantages of that Roth IRA, you know, as you reach, you know, the ability to begin to use it, however works is as that money goes into that Roth IRA, then all of a sudden, something changed is huge, which is the income in that Roth IRA is never going to be taxable. And so that money that now you've switched over here is growing, just like the money grew in the other IRA.
But now it's growing, and it's your money, all of it 100%. And it will be for your heirs for 10 years. And so those conversions, that low painful a little bit at the beginning, you know, it really makes them tax free. So whatever happens with the taxes in 28 or 29, or whatever, you know, it won't matter because you've you've planned for it in major adjustments. It's hard to put a price on having a tax free savings account, sitting there, that's growing tax free, that's available to you to pull out, this is going to be the last money you spend. And then what's left in your taxable account, or the pre tax account, we're going to strategically put that out to you, the government is going to require minimum distributions, if you put it off forever, but we're going to strategically pull out a certain amount of money out of there for you to live on.
And we're going to try to plan that so you pay low ish taxes on that. Because we're just depends on the size of your IRA. But the whole time, if we need more money, then we could pull out a social security, the pre tax account. And then we needed some more money, but we didn't want to pay taxes on it. That Roth account just sits there, we can pull as much as we want out of that in any year and not pay taxes on it.
We can even set that up. So in an annuity, that'll send you payments for life, that'll be tax free payments. I mean, there's all kinds of options. And most people just let it sit there. And then they pass it on to their kids, their kids have no tax liability on inheriting a on inheriting a Roth. And then the kids can let it sit there for an additional 10 years, and let it grow tax free. And then at the end of the 10th year, they got to pull the whole thing out.
Yeah, it's absolutely beautiful. And I, I've forgotten your rule of 17 or 12. There's some rule that you have like that money doubles over a number of years, right? Yeah, the rule of 72, which is, if you take the interest rate, and divide it into 72, it'll tell you the number of years it takes your money to double. So an example is if you had $100,000 invested at 6% interest, and we're ignoring taxes here, and you let it accumulate, it's going to take 12 years, you take six into 72 is 12, it's going to take 12 years, it'll turn into $200,000.
Right. And then again, the point is, as we were talking about, let's just say that when you passed away, you had $100,000 that you left to your heirs, and based on the rule of 72, if they got somewhere around 6% interest, that money will almost be at the end of 10 years, you know, almost $200,000. Yeah, they can pull it out at any time tax free.
So big benefit. Now let's talk about another situation is generally when I'm sitting down with a couple in their 60s, early 70s, and they're doing financial planning, one of their biggest concerns is when one of them dies, the other one lives on and making sure the survivor is in good shape. You know, something I'm going to tell you that happens tax wise, is tax rates are significantly more for a single person than they are a married couple. So in planning for that social security checks are smaller for the survivor because one of them goes away or one of them stops. So you've got a survivor that is going to only have one social security check, and then the second thing is they're going to pay more taxes on the money they're pulling out of the pre-tax account. More taxes on that. So wouldn't it be nice to have this other account that's tax free so that they can meet their spending?
So these are great for widows and widowers as well to have as an option to draw out money that's not taxed. Darrell Bock That's the challenge. You don't really think about it much until you get a little older. And Tammy and I were talking about that just today. What are you going to do? And it's things that you really never thought about when you were younger, but that singleness is coming for one of you in most cases. It's something that a lot of us don't want to face, but it's coming.
David Morgan Oh, it is. And I mean, we have to deliver the bad news to the survivor. Not the bad news that their spouse passed away, but you know, we come in and settle things up and help them with beneficiaries. And now we're sitting here, the year the person passes away, one of the two, that's the last year they can file a tax return as a married filing jointly. So they got the rest of the year to do a little Roth conversion if they in fact wanted to do that.
And that's kind of a difficult discussion to have with a widower widower, but we do it because the very next year, they're going to be filing a single tax return, and they're going to have higher tax rates or lower brackets, however you want to state that. So we have to be very practical in helping people. Darrell Bock Yeah, those have got to be some difficult conversations, I would imagine. But you know, it's again, from my standpoint, and I've told Tammy this many times, you know, one of the things that I just delight in on that subject, and she does too, she goes, God, I'm just not going to have any idea where you have the money in this and where you have the money in that.
And I said, well, 1-800-Hans. Because, you know, I just know, you know, that there's somebody there that really understands what I did and why I did it, and why we wanted to make sure that everything would be okay for her. And just to have somebody like that in your corner, it's invaluable. And that's why I can't mention enough times that, you know, to have that, cardinalguide.com, contact Hans, contact Tom, which is also, you know, a good friend and an advisor over a number of years. And so I know that, you know, even if it's 30 years from now, Tom's still going to be around, you know. Tom's going to be around a few of the others. We've got great young people.
I'm not going to be, you know, certainly doing this. You know, I hope to be around. But that's one of the reasons I've brought in so many people. When I brought them in in their 20s, a number of them are in their early 30s now. But they're very well trained up, and they're going to be just hitting middle age or a little bit beyond when many of our clients are in their 80s and 90s. And they're going to be there to help them.
So that's really the plan. For those of you who don't know, this show is brought to you by Cardinal Guide. And at cardinalguide.com, you know, there's a Seven Worries tab or today we're talking about obviously this tax increase that is coming up. And again, the show notes all that information, but I can't say it enough that it's a critical information is how to contact Hans both phone number, email, all that stuff, how they can zoom with you all that stuffs at cardinalguide.com as well as Hans's book, of course, the complete cardinal guide to planning for and living in retirement, which you know, not only it'd be great for you, you might want to send it to your kids, you know, while the getting's good.
So Hans, great show. All right. Well, thank you. And God bless you.
Thank you. The opinions expressed by Hans Shile and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and unless otherwise stated or not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation.
Finishing whale is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.
Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Whale, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Hans' 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, or to get Hans' book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Whale radio show on the website and send us a word. Once again, that's CardinalGuide.com. This is the Truth Network.
