Share This Episode
Planning Matters Radio  Peter Richon Logo

2021 EP0410 PLANNING MATTERS RADIO - TAX PLANNING

Planning Matters Radio / Peter Richon
The Truth Network Radio
April 11, 2021 9:00 pm

2021 EP0410 PLANNING MATTERS RADIO - TAX PLANNING

Planning Matters Radio / Peter Richon

On-Demand Podcasts NEW!

This broadcaster has 37 podcast archives available on-demand.

Broadcaster's Links

Keep up-to-date with this broadcaster on social media and their website.


April 11, 2021 9:00 pm

ROTH CONVERSION OPPORTUNITIES – If tax laws reverse over time and start climbing higher, it will likely affect those with larger retirement accounts and income disproportionately. Tune in to learn more as Peter Richon discusses tax-deferral & it’s consequences, tax-free income, & Roth IRA’s.

YOU MIGHT ALSO LIKE
MoneyWise
Rob West and Steve Moore
Finishing Well
Hans Scheil
MoneyWise
Rob West and Steve Moore
Finishing Well
Hans Scheil
MoneyWise
Rob West and Steve Moore
MoneyWise
Rob West and Steve Moore

Plan planning matters radio program on planning matters radio by planning to visit us online on.com got any questions. If you like advantage of the optimize retirement plan. Like to download or have access to any of the resources that we will talk about on today's program. They often be found there@thatwebsiterichonplanning.com it is my last name looks like it's spelled Rich on planning.com where you can follow us online on your favorite social media platform at Rochon planning is our handle on most all the social media platforms that are out there so confined is easy online. A number of different ways. And again if you like and optimize retirement plan will will talk about exactly what that consist of on the program today. If you would like any of the resources that we will discuss.

You can find us online. You can go to our website Rich on planning.com, including if you would like a copy of my book understanding your investment options. Now this book breaks down just about all of the different options that you may be presented or that are widely discussed when it comes to how to use your money how to save your money, how to grow your money how to preserve your money how to create income for your money. There's a number of different goals that we all have with each and every dollar, and there are a lot of different options out there. We got a know which option is best suited to achieve which goal in order to make an informed decision, and so will talk a little bit more about that on today's program. We will also talk about some questions that we did not get to last week on our report of are you ready to retire, and these are 12 questions that you really need to have answers to in order to know if you are prepared for retirement and we will be talking about some broth opportunities. These are opportunities to better control your ultimate lifetime tax liability. And right now opportunity is knocking.

We are not 1985, folks, we are not in 1995.

It is 2021, and we need a different way to think about taxes. Talk about why that is how you may be able to take advantage of some real efficient tax planning opportunities to leverage your money to be more efficient with taxation to get to keep more of your money throughout the course. The program, but get anytime you have questions. If you like to take advantage of anything that we talk about were off on the program are also always welcome to be in touch by calling 919-300-5886 919-300-5886 and we are willing to help anyone who is looking for financial direction. If you are looking for specific answers to specific questions if you're looking for guidance. If you're looking for a partner to help walk with you and give recommendations on how to handle your financial progress. We are a resource here for you and look forward to speaking with you. 91930058860. Again, over the course of this program discussing controlling and minimizing your tax liability over your lifetime. Specifically, through retirement because the way that we've been taught to save for our financial future is by deferring and delaying paying that tax bill is not really the best way do we need to rethink that paradigm. Back in 1984 when the majority of today's retirees. Those that are making that transition work perhaps already retired, began their savings progress. The 401(k) was a relatively new vehicle. It was not intercepted until 1974 under the ERISA laws and it wasn't really being widely utilized until about a decade later. That's when companies began to go away from their pensions and instep more of the 401(k) structure for their employees, offering them a way to save for retirement, effectively shifting the burden of planning and preparing for retirement onto our own individual shoulders rather than have the company offer us the plan to support us through retirement company's figured out that this was a deal that they they could not quantify the liability they were having trouble figuring out how much they were going to have to need to dedicate to retired employees lifestyle and an income in support and so they began to make the shift to 401(k)s and the way this was sold to us is save now in these retirement accounts because you will be paying lower taxes into the future in retirement will flash forward 10 years, 20 years 30 years 1919 94, 2004 2014 an hour in 2021. This is 37 years later, is the paradigm is the way of thinking that we will be paying lower taxes in retirement still relevant. Think about this for a moment back in 1984 stated in order to be in the upper 30% tax bracket.

You had to be making $68,000 today in order to be in the upper 38% tax bracket. You need to be making in the $600,000 plus range.

So tax rates and tax brackets have really come down significantly. Or another way maybe to look at that is that you can make much more money today and pay less in taxes.

But there's a lot of talk about tax laws changing and when it comes to retirement.

The tax rules are written in pencil, they can change at any time and all of those dollars that we worked so hard to build up in those tax-deferred retirement accounts. They are subject to those changes that the tax rates the tax laws. We know them today, but when we go to use those dollars in retirement. Those are the rules that will apply to those dollars and so is it easier to pay a bill out of our paycheck lower, saving, or maybe is it time. If we've already got a large tax-deferred balance to consider how we can effectively and proactively begin paying that tax bill and I can run a tax report and analysis the social, side-by-side comparison of the cost benefit of considering Roth conversion strategies versus defaulting to the IRS's plan and any times it's pretty astounding difference. It's pretty staggering what that bill will be projected out over the course of an average lifetime or to a specific age in the future if we simply default to the IRS's plan and under current laws. Look at what that tax bill will be versus if were just a little bit proactive.

We do some number crunching. We do some analysis and we begin to proactively implement our own plan for how to pay that bill. I'm reminded of the soul childhood nursery rhyme fairytale that I read it was a Brothers Grimm about the three Billy goats gruff and there was a troll living under the bridge in each each of three brother goats wants to cross over the bridge to get to the greener grass on the other side and one by one they try to cross the bridge. The troll comes up says who's that knocking across my bridge and in each you each goat basically makes the argument don't eat me now, wait till I cross the bridge. I get fat and full and when I come back on fatter eat me then well the IRS is essentially tech troll living under the bridge and we have made argument. They don't eat me now eat me later when I'm fatter that's our 401(k) account.

That's our IRA that's our tax-deferred ballots except we don't have that last Billy goat to knock the troll off the bridge. The IRS is going to be there and they're planning on taking their bite out of that 401(k) account. Sooner or later, and they can make the rules. They are the managing partner determining how much of that account they get to eat and when they get to eat it just for an example of how they can control and set the rules. January 1, 2020. The secure act was put into law. This was a discussion throughout 2019 that wasn't widely publicized, but the law was actually passed the final week of 2019 between Christmas and new year and then it went into effect less than a week later the secure act made a couple actually several changes, but to two pretty big ones that are pertinent to this discussion in an should be considered pretty carefully.

One is that they moved back to the age for required minimum distributions are MDs used to be that the IRS again, managing partner, setting the rules on your account could require you to pull money out of your IRA starting at age 70 1/2. Why can they require. You will because you have a debt to them inside of the balance of your 401(k) or IRA you look at that as a positive number but it actually includes a debt to the IRS.

A yet to be paid bill and if you don't feel like that's the case, wait until R&D age and they start requiring minimum payments just like you would have on a credit card or mortgage or any other bill that you have do you have an obligation to pay that bill, they've allowed you to defer and delay it is like this credit card offers, where you get five years no interest well if you pay it off during that period of time. Maybe that's the case, but if you let the five years go by. Got this big bill waiting for you there. We've all at that time go by and we got this big bill waiting for us in our retirement accounts. They move that back. Anyway, the secure act move that date back from 70 1/2 to 72. So the better for reprieve right. The IRS gave us an extra year and 1/2 will where the government gives you something. On one hand they're usually taken away. On the other hand, and we do have debt and deficit in this country and expenses and obligations and things that need to be paid for. So the guy get that tax money from somewhere on the other side of that year and 1/2 extra bit of time they gave us to defer and delay paying that tax they actually did away with generational tax deferral before the secure act past, you could actually do was hold a stretch IRA. I could pass my IRA tax-deferred to my spouse, my wife no problem and in fact the capacitor. The next generation to my children and they could continue deferring the taxes and they capacitor their children up to three generations could continue stretching and IRA and not pay tax on the full amount only pay tax on a small minimum required withdrawal each year. Well they did away with that.

Now your IRA. If it passes to next-generation beneficiaries must be liquidated within 10 years. There's very few exceptions to this for like special needs beneficiaries, but generally if you pass your IRA to your children if they inherit any amount in those tax-deferred accounts 401(k)s for the three B's IRAs that must be liquidated within 10 years, and that's in addition to the income they are already earning now all taxable to them. So the net effect is that it probably bumped up and accelerated a lot of the payments of these deferred dollars to the IRS. Don't be mistaken, this is in the IRS's favor and there've also been conversations about raising corporate taxes and changing a state law taxes and raising certain income tax brackets, so there's a lot of discussion right now about what changes will be made in the future and we already know that certain tax laws have been changed. Not all of them favorable for us so my question is now the time to plan proactively for taxes into the future and I would say that yes, it is now my assumption is that taxes will probably be higher in the future. However, your plans only as good as your assumptions and you have to question on every assumption.

But what happens if I'm wrong. For instance, a lot of financial plans for retirement. Assume some positive rate of return in the future. Oh, you're an average 8% return an average 9% returns are no promise of Batson assumption. What happens if I don't is a question we all need to ask yourself about every assumption plan assumes 8% would finally get five. Does it still work well in this case we say do not IRA in the assumption is will pay lower taxes in retirement.

What if we don't that's an assumption.

What if taxes are the same or if taxes are higher, even if taxes are the same. If your goal is growth on your account. The IRS has the same goal as you. I'd rather have $200,000, but I rather pay tax on hundred thousand. The IRS would rather me pay tax on 200,000 is the way it works. The higher the balance the more money that you're withdrawing. The more tax dollars.

Ultimately they get Albert Einstein pretty smart guys of the most powerful force on the planet is the power of compounding interest in the IRS I feel was one of the few that were listening and that's why they allowed us to defer and delay paying taxes again your optimized retirement plan includes a tax report and analysis. Looking at those tax-deferred assets looking at the various retirement accounts. How can we be as efficient as possible.

How can we keep as much money as possible.

How can we pay as little and pot as possible in taxes because I feel most people believe they could be making better decisions themselves on how to spend their money than the government. Now I'm all for paying my moral, legal, ethical obligation, but it's a no man's responsibility to pay more than the minimum required tax and so if you'd like to see a tax report and analysis as part of the optimized retirement plan, pick up the phone. Give us a call up Sean planning will run those numbers for you, help you crunch them help you understand him help you identify strategies to be more efficient with your money with your accounts with your planning in the future. 919-300-5886 919-300-5886 and I was actually one of the questions that we did not have the time to get to last week on our discussion of the 12 questions to know if you are ready to retire. It's question number 11 on the list of the are you ready to retire resource. You are welcome to get in touch with that and and request that it's great to go over on your own time.

Just think about your answers to these questions to go over your answers with your spouse. If one of the two of you or both of you are thinking of retiring anytime in the near future. 5 to 10 years if you got family members that are thinking of retiring coworkers give us a call. Download this resource. Get a copy of it in and handed to to them. They will appreciate it. It will be valuable for them to see these questions and think about their answers to them. So if you like that report.

The are you ready to retire report. Give us a call 919-300-5886 or visit Rich on planning.com and you can request a copy of that they are as well as a copy of my book. Understanding your investment options for question number 11 on this report. Do you understand how much you will be paying in taxes in retirement and how much of your retirement account withdrawals.

You will get to keep most people have not really crunched the numbers on this don't understand how all the components of creating income in retirement work together don't understand that withdrawals from your IRAs and 401(k)s can actually cause your Social Security to become taxable. Now that's a taxable stream of income.

You'll get to keep all of it. That means you have to pull even more out of your 401(k)s your IRAs draining them down quicker than you anticipated. You got a plan. These things ahead of time.

You gotta look forward with your approach to retirement is what's planning not reacting.

You do want to be proactive with your planning and this is an essential question to answer.

If you'd like to look that over.

He was a call 919-300-5886 the optimized retirement plan is simple, easy to understand language is not a thousand pages of financial jargon and lingo that won't understand that you read and have no idea what it says it's simple, concise, consolidated is a snapshot of where you are currently and then it addresses investments income taxes healthcare and legacy gives some recommendations on how to improve each one of those areas. It will address the fees that you're paying the risks that you're taking the taxes that you may be liable for, and help you to identify any areas that have been left on addressed in your planning. Again, if you like a copy of your individualized this is a custom thing. This is not generic. This same document doesn't go out to everyone. This is specific for your situation.

If you would like your optimized retirement plan, give us a call now 919-300-5886 919-300-5886.

My name is Peter Rochon I'm a Dave Ramsey smart Mr. Pro I am a fiduciary advisor I'm independent I'm not beholden to any specific financial institution can give you unbiased fiduciary advice, guidance and recommendations that are in your best interest and look for really to help in any one further their financial progress. Does it make sense for everyone to become a client.

No, absolutely not. But if you are serious about your planning your financial future. We are willing to help and will dedicate some time to helping anyone get answers to their financial questions, addressing issues that are important to you and that just begins with a phone call 919-300-5886 919-300-5886 so getting back to this issues and opportunities relating to taxes.

We really got a look at our opportunities today because tax laws can change in the future.

Doors are open today can close on us and then it takes an awful long way to get back around to the place that we could've gotten to just by taking advantage of that open door and and walking through it. You need to know what a Roth is if you don't understand a Roth and the value of a Roth. Whether it's a Roth IRA or a Roth 401(k), you do need to educate yourself and and understand that the concept of a Roth basically is this when we earn money we pay tax on. If you take that money and qualify it as a retirement dollar inside of a Roth account. That's the only time you will ever pay tax on that dollar when you earn it when you when you get that money is brand-new money and you stick it in your retirement pocket. You pay tax once and then from there all future growth is tax-free. All future income is tax-free when it's passed on as an inheritance. That's tax-free as well now as tax laws stand today. You've got that opportunity available to you and you should consider taking advantage of it. But as tax laws stand today that can change in the future and the Roth has been talked about as being subject to change, so you need understand where Roth is. You need understand the advantages of paying taxes now verse kicking the can down the road.

Letting those accounts grow and paying tax on more dollars in your future and the consequences of that taxable income on your retirement again. Social Security might be a source of tax-free income.

But if you're pulling more money out of tax-deferred accounts. That's additional income. And it goes into the equation can cause your Social Security to become taxable Medicare premiums are now means tested something called Irma income related means assessment now determines your your your Medicare premiums your Medicare premiums might be more because of your tax-deferred retirement account balances. If you are saving in retirement accounts. If you are contributing to them. If you already got a balance if you got a dollar labeled for retirement, then you really owe it to yourself to get this information in education and really understand where you can identify strategies to be more efficient with your money need understand the difference of contributions and conversions.

A lot of people say what limits are very low.

I've already met my contribution limit. Or maybe I'm earning too much money. There's an echelon where if you're earning a certain amount or above you are not allowed to make contributions to these Roth accounts that does not mean that you are eliminated from taking part. You've got to find a different way to do it and conversions don't have the same limitations you could be earning is much as you possibly can in this course. That's always the goal right earn as much as we can and you can still make Roth conversions of pre-existing tax-deferred retirement dollars. Each one of those contributions and conversions there utilized in different places and I got a general order of operations that I typically suggest if there's a match on your 401(k) on your employer-sponsored plan, pretty much nowhere else in the financial world.

Can you guarantee yourself. That kind of immediate return on your investment and it if it's 25% on the dollar fits 50% on the dollar for dollar for dollar should probably be taking advantage of that first and foremost because if I put a dollar in and immediately it's a dollar 25 a dollar 50 or two dollars.

That's a pretty good return on investment.

I hate the terminology free money. It's not free money. It is, there's nothing in life it's free, and especially not money. It is part of your compensation for the work that you do, you're going to do the same amount of work whether you get that match or not. The thing is that if you put some skin in the game. If you make a contribution to your retirement account you get paid more for the same work for the same time for the same effort and so I would highly encourage you that matches their available was on the table strongly encourage you to be taking advantage of that first and foremost from there. Often times there's a pipit I see a lot of people contributing more than the match. Sometimes that may be appropriate.

More often than not it is appropriate to then pipit and take advantage of your IRA opportunities. Specifically, in this case talk about Roth IRA opportunities you have more control you have more flexibility you have more choices and options inside of an IRA.

Your individual retirement account, then you do in your employer-sponsored plan, the 401(k), the 401(k) has a set menu of choices and options.usually about 20 different choices that you can choose to invest in and that's it. You can't go off menu.

In most cases with an IRA you gotten almost unlimited.

The full spectrum of the financial world set of choices and options you can invest in far more things you can begin to be proactive in positioning dollars strategically for retirement purposes. There are a lot of reasons why after you capture the match. You may want to consider pivoting out to a Roth IRA or even an IRA that's going to depend and and in order to know if you want to defer and delay paying taxes or pay taxes. Now that's an analysis of what our current tax situation is and project out what we believe our tax situation will be into the future and comparing the two.

What's that building will going to look like I can actually show you the math on this. Even if what they have told us is true. Take it with a grain of salt. I will take this at face value that we will be paying lower taxes in retirement. Now I've just spent the first 25 minutes of the program saying I don't believe that to be true, but let's just take it at face value, even if we are paying lower taxes in retirement. Again, if your goal is growth on your money. I can show you can do the math, and show you how the bill will be larger. You will be paying more dollars in taxation. In many cases into and throughout retirement. That's why we need to carefully examine these assumptions do do a little bit of math crunch the numbers and figure out how much do you want to pay in taxes, how much control do you have over that tax bill.

What's the tax situation look like now verse in the future. Often times I find that it's easier to pay a bill out of the paycheck while you're earning an income, then it is to try to calculate and take care of that bill out of your retirement nest egg when you no longer have a paycheck with which to pay it so with be proactive in our thinking.

What's look forward let's make sure that we are planning strategically efficient, effectively, efficiently, to utilize each and every dollar to its fullest potential.

We've worked hard for them they need to work hard for us.

We need to make the most of those opportunities and strategies for how to handle future taxation. Again, conversions contributions, we need to understand taxes on the money we save for the future that the possibility the taxes are currently on sale Israel if you go into a department store. There's two racks in one's full pricing and ones on sale and there's the exact same item on both racks first and wonder Hayes is this a mistake that the cashier assures you know it's not that item is is correctly marked down which one you can about the one that's at full price or the one that's on the sales rack, you might ask why and why is it a difference. But if if if everything else's exactly the same identical we wouldn't choose to buy the once full price. Here's the thing that items that we went to the department store for we probably don't have to buy choosing to buy but we still would choose to buy the one that's on sale. Taxes are a compulsory purchase. We have to buy them at some point time we have to pay that tax bill.

Why not pay it off the discount radical hits on sale.

That's where we are today.

For many people looking at these numbers crunching the that the ultimate impacts of taxation on your retirement account. Looking at the IRS's plan defaulting in an basically doing nothing but delaying deferring and and looking the other way to that tax bill versus being proactive. If your proactive you can create your own discount rack taxes are on sale and we can run a complementary retirement tax analysis to show you those numbers to crunch them and compare them so you can identify what's in your best interest what's right for you and maybe some specific strategies on how to take advantage how to pay the least amount.

Keep the most possible, we know that taxes are what they are today. Tax laws are what they are today. We know that those laws can change in the future we can run a report showing you how to control your tax bill. Contact us for that complement pretax review and analysis.

We can make managing your taxes easy to manage Sean planning our goal is to help savers and investors better determine their outcome. Make the goals that reality specifically. If you like to learn how to retire when you can retire. What will it take to retire. How much do you need what's at retirement number.

We talked last week about how to calculate that retirement number how to pay less in taxes, how to keep more of your money than call. Now click the link around this video requested time to speak with me, Peter Rochon at a retirement review analysis done. Get your optimized retirement plan in your hands, including that tax report and analysis.

It will help you improve your outlook and 20, 21 and beyond.

We certainly appreciate the time tuning in and again made a few different resources available on today's program. If you like a list of the 12 questions to know if you're ready to retire. A great resource to go over on your own time with your spouse with your friends, your family or loved ones hands to a coworker who's thinking about retiring in the near future absolutely will be appreciated will be beneficial for you to know and understand your answers to these work 12 questions work. If there's one that you don't have an answer to made the book understanding your investment options available made the optimized retirement plan available and as part of that or even separate if you like to take a look at your tax situation now and in the future. The tax report analysis is available as well for any of those you can give us a call 919-300-5886 919-300-5886 or you can go online rich on planning.com is what looks like this my last name Peter Rochon were Sean planning.com. We certainly appreciate you tuning into planning matters radio today.

Follow us on social media. Be sure to make this a regular part of your financial routine and always we are here as a resource.

Feel free to contact us with any questions with any concerns with anything you'd like someone to take a look at that to give you some answers.

9193 005-8640 hearing from you soon. Helping this man planning matters radio the content of this radio show is provided for informational is not a solicitation or recommendation of any investment strategy you were encouraging investment tax or legal advice from an independent professional advisor.

Any investment and/or investment strategies mentioned involve risk and possible loss of principal binary services offered through Brookstone capital management, a registered investment advisor. Fiduciary duty extends only to investment advisory advice but does not extend to other activities such as insurance or broker-dealer services advisory clients are charged a quarterly fever as a management voluntary product pay a commission which may result in a conflict of interest regarding


Get The Truth Mobile App and Listen to your Favorite Station Anytime