Listen and read along as hosts David Bezar, Karen Bezar, and Bret Elam talk with Joe Krause.
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Announcer 00:00
This program is paid for by Jacob Media Partners. All opinions or statements expressed on this program are solely those of Jacob media or its guests and did not reflect the views of WP HT or Audacy Today’s program is pre-recorded. Welcome to Roadmap to Retirement, the Radio Show with David Bezar, Karen Bezar and Bret Elam from Thrive Financial Services who have been featured on Fox, ABC, NBC, the Wall Street Journal and more. Saving for retirement is a great start. But it’s what you do with this money that really matters. What’s your strategy to reduce taxes, generate income in retirement, reduce your risk and get even more from Social Security? This is where you can count on straightforward and objective advice about how you can make your money go a lot further in retirement. Roadmap to Retirement, the radio show now here are your hosts, David, Karen and Bret along with Joe Krause.
Joe Krause 00:52
On this Memorial Day weekend, we welcome everyone to another edition of Roadmap to Thrive, the Radio Show. Thanks, everybody for tuning in, we do pause for a moment to remember all of the men and women who died while serving our great country. And we hope that on this Memorial Day, you’ll find an opportunity to perhaps attend a veteran’s ceremony. And David, I remember a few weeks ago, in conversation, you were talking about a website that educated people on when to raise the flag and all of that. So just for the benefit of those who may be unsure about Monday, raise the or put the flag at half staff on Monday from sunrise to noon. And then at noon time is when the flag goes to full height. So with that, I welcome you in and turn it back over to you, sir.
David Bezar 01:52
Yeah, good morning. It’s exciting. Good weekend. And I’m glad that you cover that, Joe, I think it’s always important. Some you know, it seems that society is somewhat kind of lost its way a little bit and kind of remembering what these important holidays are all about. And they become more festivities and celebrations and parties versus you know what the true meaning is of it. And I know you got military in your family, and we got military family here at Thrive. And yeah, it’s just important to remember that. So thanks for that great reminder. So we got a big show today, and lots of information. Let’s jump in real quick and just get a good description of what we’re going to cover in the show. So people stay tuned in and, you know, get that education, get that awareness. And, you know, we try to deliver that on a weekly basis. So Karen, what are you going to be covering today?
Karen Bezar 02:43
I’m going to be covering is it worth paying a financial advisor to prepare for retirement? Just recent things that I’ve been dealing with personally, and certain situations that have happened with clients here and there. I think there’s a reason we’ve discussed it before. But there’s a little twist at the end that I don’t think we’ve ever talked about.
David Bezar 03:04
So it’ll be a great topic. And I look forward to that. Yeah, I mean, a lot of times people question, you know, does it make sense, and I think Karen will cover is, but I think in the traditional sense, if all you’re really looking for, and I think again, this is what most people think working with a financial advisor is all about, if you’re just looking for investment advice, you know, truthfully, it could be something that you go alone, if you have the time, if you’ve got the energy, if you’ve got the know how if you’re willing to do the homework? Yeah, I mean, you can kind of manage money yourself, if that’s all you’re looking for. But when it comes to retirement planning, there’s so many other elements that really have to be considered that, in our opinion, I think we prove that out on a weekly basis. It takes a professional to know what all those moving puzzle pieces are. And then more importantly, how do they actually fit together for a successful retirement?
Joe Krause 03:57
I don’t know if this is accurate to say, but I almost feel as though it’s impossible for an individual to be able to understand every dynamic of retirement, even if you’re the smartest guy in the room, or the smartest person in the room. Very, very difficult to understand everything that you go into.
David Bezar 04:22
Yeah, and trivial Joe, I think that’s for everybody. I don’t even think that excludes financial professionals, right? I mean, there’s so much data, there’s so many strategies, there are so many different things. And that if you think about it is really what causes me to say it’s difficult for let me just say I’ll use the word civilian, right, for a second. Because you don’t have the 40-50-60 hours a week that it takes to log in and find out really, you know, find that data, find the information, define everything, make your analysis, put your recommendation together and then deploy. You know, if you’re a civilian meaning, you know, the financial profession isn’t your day to day work, I think it’s tough. You know, it’s tough enough as a financial planner today with everything that’s going on. So, again, I think there’s a good case, if you’re looking for that leadership aspect, right awareness, education, but then you need the leadership aspect of it. Hiring the right fiduciary financial professional, who has a well rounded, complete understanding of all the puzzle pieces, could be a great investment. And there’s been many, many studies and reports done by some of the biggest companies, companies like Vanguard and Fidelity, you know, have done the research and done those surveys, that you actually improve by a scientific percentage, your chances for success by using the right financial professional. So I’m looking forward to hearing what Karen’s got to say on that topic. Bret, what are you going to be covering today?
Bret Elam 06:05
I’m going to be talking about your awareness piece that is no better than the Ed Slott that just came out with some information this week saying the conversations that need to be had related to social security and IRA. So I’m going to dig into that awareness piece of conversations that need to be had that you didn’t know that had to be had, I asked him a series of questions that you didn’t even know that needed to be asked. So I’m looking forward to sharing that with the audience here.
David Bezar 06:26
Good stuff.
Joe Krause 06:28
Real quick, I saw I was looking on the website. And I saw a picture of Ed Slott from the event that was held last year in King of Prussia. And it prompted me to go back in time a little bit, man, that was a really dynamite event. And really, it was a packed house. But I’ve got to believe everybody left that night in King of Prussia fully engaged in the topic.
David Bezar 06:54
Yeah, no question about it. And, you know, as the smartest guy in the room that night, you know, so I think we had over 300 people in attendance. And, you know, a lot of people walked out of there with a lot of good information. It’s funny, you bring that up, Joe, because one of the things that Ed Slott said that particular night that I use in my weekly presentations, is he said, and I tell people this, I said, “Look, if we never meet again, the one thing that I want you to remember, is that an IRA, an individual retirement account, right? An IRA is an IOU to the IRS.” Right? So we bought into this whole idea about putting money away in tax deferred accounts, deferring that money for as long as we possibly can, and thinking that by the time we’re going to need it, we’re going to be in a lower tax bracket. And I think people are coming to the conclusion. That’s not the case. Which brings me to my last point of this opening segment. And I don’t ever get confrontational. Well, maybe that’s not completely honest..
Karen Bezar 08:04
I’ve known you since high school. So..
Bret Elam 08:07
I… I’ve known you for 15 years.
David Bezar 08:11
Yeah, I think in my own mind, passion. So you know, I said last week on the radio show, you know, if you’ve got comments, you’ve got questions, whatever it may be, feel free to, you know, email us, call us, whatever. Our phone number is 215-798-9088 Our websites Thrivefinancialservices.com. And our email is [email protected]. So I got an email from somebody, and I’m not going to get into it too detailed, but it was an email saying stop telling everybody that taxes are going up. So my segment today is going to talk about the actual current proposal from the Biden administration. And there’s not a political statement. This is just our current administration, their current proposal that is on the Senate floor right now, and what the tax increases look like if they get passed. So we don’t try to tell people taxes are increasing for a scare tactic. We’re giving you current event type situations, if you decide not to heed our warnings on that situation, and you get clobbered with taxes in the future. We know we did all we could do to make sure that the consumer is aware of what the reality actually is Joe.
Joe Krause 09:26
Well stated Roadmap to Thrive – back in a moment. Welcome back, everyone to this edition of Roadmap to Thrive or Roadmap to Retirement, depending on what your preference is. But this is our radio show this Memorial Day weekend. Bret you’re up on deck, my friend, always look forward to your conversation because I think that one thing that you do differently from David and differently from Karen is you provide for the listening audience a topic and then a lot of different resources that are part of your research every week. And I like that. So I’ll toss it to you with that lead.
Bret Elam 10:11
I get some emails occasionally as well as kind of saying that as well. So it’s good to hear and appreciate that feedback before I dig into talking about Mr. Ed Slott. You know, it’s that time of year where we’re transitioning from cooler to warmer weather and what we found ourselves doing over this past week, we just went through our coat closets and turned over the winter coats for the summer, lighter gear, if you will. And we’re saying do we need this many coats? So I know we talk about it a lot in the wintertime. But I want to encourage our listening audience. Again, Krause’s Coast Drive, it will start taking supply right now. So again, I just want to remind our listening audience again, as you’re starting to flip over here, maybe winter to spring to summer apparel. Hey, we’re looking for some gently worn coats as against supporting the veterans.
Joe Krause 10:55
I got 18 boxes. On Tuesday of this week. That’s awesome. 18 boxes out of the blue phone call just like huge inspiration, hey, I’ve got this. Do you want them now? Or do you want them in September, I’m like, when I’ve got the reading together. I’ll drive up and I’ll pick them up. Because you know what? I
Bret Elam 11:11
Because you know what I know?, six months from now it’s gonna be cold. It’s gonna be cool. Yeah, so.
Karen Bezar 11:15
So you can forecast the future. Woo!
Bret Elam 11:18
I think I’m pretty cool. A little bit of Nostradamus. So anyway, let’s jump into today’s topic. And hopefully, our listener that emails David’s not going to take offense to this talking about Ed Slott says we should be having a conversation with clients. And what does that mean is this may only last for the next three years 2023, 2024, 2025. After that tax rates are scheduled to revert back to previous levels. So again, not a political statement, it’s just talking about what’s going to happen at the end of the day, because again, as a reminder, I’m just going to set the scene before I start digging into this is if we are a married filing jointly couple is you can essentially take your income to almost $400,000, this calendar year and probably the next two years as well and not leave the 24% bracket. And if you’re a regular listener of the show, what I’d love to share with people is besides death and divorce, what’s worse than paying taxes? Is paying more taxes at the end of the day. So when we talk about what’s going to happen in 2026, the 25% tax bracket started at $76,000. So again, all the reasons why we want to start being proactive. But again, we talk about kind of week in and week out just some of the pending legislation that’s out there. And I know David’s gonna go deep into the existing tax bill. But we’ve been talking about the SECURE Act, the secure act 1.0 was passed back in December of 2019. And SECURE Act 2.0 was passed in December of 2022. And what we need to remember is Congress is the one who passes the laws when we talk about taxes, and the IRS enforces the laws that they pass. And sometimes we talk about things like unintended consequences, where they allow for public hearing periods of time up saying whoa, we need to change that language, or we really didn’t intend for that to happen. So kind of want to dig into a couple things that were glaring in the, in the, in some of the tax code changes as relates to I’m gonna call it everyday people. So one thing we talked about, and one of the changes that happened, as we said, at the age again, it used to be 70 and a half that moved to age 72. And now at age 73, you have to take what we call those required minimum distributions. Then if you are of age 19, if you were born 1960, or thereafter, that age moves to age 75. And the old rules of how it worked with IRA withdrawals, if you missed pulling money out, they charged a 50% penalty on what would have been pulled out. So we got a little bit more grace with the passage of the SECURE Act, especially 2.0, the one that just passed some five months ago where they took that 50% penalty down to 25%. Which sounds good. However, what’s part of the law that we haven’t really discussed on the radio and gets messed up is additionally the penalty can further be reduced to 10%. If the missed RMD is withdrawn during the correction period. For most people, the correction can be made. By the end of the second year following the year in which the RMD is missed, the RMD would need to be taken and the 10% penalty during the window. And for that there’s an IRS form called 5329 of how you ask for forgiveness from the IRS to avoid those penalties. So here’s the big change: previously the IRS has been very generous and forgoing those penalties and waving them altogether but with the proposal of what has been put in is that 0%. Meaning they give you amnesty if you will have to call it forgiveness of what that penalty would be, is that 0 sounds like it’s gone altogether. And now that permanent 10% is now here. So that’s a big deal. And again, all the reason why we can’t win things, and we need to prepare is simply because what was a penalty before where they are given people amnesty, is they now said, Okay, we’re still going to get people forgiveness, forget 50, we’ll go down to 25. And again, if you pay it within the period of which that forgiveness window is there, 0 is now gone. Now they’re putting in place that permanent 10%, again, all the more reasons why you need to have a plan together and not forgetting things, which leads to Ed’s next comment, which talks about, he was asked a question is how should people be dealing with dementia, and setting up automatic RMDs? Again, it wasn’t as big a deal before. But since now, forgiveness has now gone, gone from the 0% to maybe the lowest of being at 10%. Talk about the importance of why while people are caught with it mentally. You know, exactly what’s going on is the importance and something we talk about here, with our clients at Thrive. We have the importance of talking about things like power of attorneys, trusted contacts, because at some point in time, sometimes we mentally call it start to go backwards. And again, we want to prepare for things while things are fine versus the storm that can ensue, that when things change and become a lot more chaotic, again, all the more reasons why we need to get out in front of these things. Another thing that Ed Slott had shared, and I want to kind of share a little bit of a client story with this is he talked about people having some of those fears related to social security, so much, so much news out there right now about the most current news that’s out there, as they’re trying to put in place, again, maybe eliminating taxation on people collecting Social Security. And again, you got things that are being proposed, far left, far right and all over the place. But the one thing that Ed shares, and I believe we generally agree with it as well, is that if you’re already collecting Social Security are maybe a year or two away, probably going to be okay. But for younger workers, you better start thinking about what if, and what should I do and Ed describes that at some point in time, younger workers need to find themselves in what we’re there, he’s calling it a yo-yo economy. And I’ve missed the terminology. I love this yo-yo term, yo-yo stands for “you’re on your own”. Again, you’re having a hard time imagining that you’re having all these monies withdrawn from your check. And now all of a sudden, again, that’s earned something you’ve put away to generate that Social Security check. And now all of a sudden, from a younger worker and a really, you got to start considering what the solvency of Social Security, I’m starting to really think, again, as what age should I really be thinking about is that cheque really going to be there and sustainable where I really start, should be putting monies back earlier and earlier and earlier, because like, again, I can rely on nobody other than myself. The last couple things that Ed shared, and again, we talked about the age movements, what came out of the secure act. And we talked about the RMD relief that I just spoke about. Again, there’s still so much confusion when people pass away, because there’s no clarity on what beneficiaries have to do within. Am I within 10 years of the person who died? Am I a spouse? What if they already started collecting RMDs? Again, that’s what we’re here for. David talked about awareness, education and leadership. And that’s what we’re here for. And if you’re like, man, there’s a lot going on with what you just said right there, I invite you to give us a call 215-798-9088. We’ll take you through the conversation of just making sure we have all our ducks in a row. And it’s all about preparation. Don’t just wing it. It’s all about preparation. Ed also spoke about some enhancements of Roth IRAs related to SECURE Act 2.0. They’ve increased contribution limits, because inflation is so high, they have not gotten rid of the backdoor Roth conversion, that’s still a significant piece that we educate people with all the time. If you’re like, What the heck’s backdoor Roth IRA? Right? These are all things that we talk about when we meet with people. So again, you’re so much that’s out there, again, a little bit more clarity is coming out just related to the legislation change. But it took me back to someone I just met this past week. And he had actually seen David at the William Penn Inn a couple of weeks ago. And he’s like, I remember this one slide that David brought up there. And it said, somebody who had about $1.6 million in their IRA, and they said, if they don’t do anything, they just sit idle, assuming tax rates never go up, assuming tax rates never go up of what they would have to take from the age of 73 through the age of 90, is simply $456,000 is how much of the required minimum distribution when they take of how much it would be due on taxation. So cumulatively from age 73 to age 90 equates to $456,000. That’s how much tax is paid cumulatively from 73 to age 90. We meet a lot of people as they take those required minimum distributions. They don’t necessarily need them. What do they do? They start the vicious cycle, they reinvest the money into an after tax account. So then those dividends and capital gains are taxed all over again, another $161,000. And then when the will matures, such a nice way of saying women are no longer with us. Now, the children, the next beneficiaries are all of a sudden, needing to have to pay that tax bill all over again, which equates to another $300,000. So when you look at it, if we do nothing and sit idle $920,000 is due and taxation simply by just taking the conventional wisdom rules. However, it’s why we talk about why we advocate for what Mr. Ed Slott talks about, by forward looking tax planning, forward looking tax planning. And by doing that, $403,000, assuming today’s tax rates is what work given an assumption. But the bottom line is, we’re off a little bit here off a little bit there, I just need you to understand that what I just shared is by proactively looking at tax planning in this example, that I just shared with somebody having $1.6 million in IRA or 401k by just doing the appropriate tax plan. It doesn’t matter what stock bond mutual fund annuity that you may be in, but a $517,000 difference, and just how much is paid in taxation, by being proactive and taking advantage of where we’re at in today’s times. So my ask is, if you hear that, and it’s like, I’m not sure, like the listener that David spoke about, like, don’t say that taxes are going up everywhere. But again, I think we’re in a climate that just has to happen. And my encouragement is to give us a call at 215-798-9088. Again, that’s 215-798-9088 no better time to schedule your Roadmap to Thrive session with us, where we can take you through all these topics.
Joe Krause 21:48
All right, good stuff. Bret, we’ll get to a commercial break on the other side, or in the commercial break, we’ll hear some messaging about getting registered for an upcoming workshop. Back in a moment. This program is paid for by Jacob media partners. And back here on Roadmap to Thrive, the Radio Show we thank everybody for tuning in and being a part of this Memorial Day weekend again on Monday, Memorial Day, we stop and pause for the men and women who died while serving this country. Good show today. Great topic from Bret. Karen, we transition over to you back to your opening tees in the first segment? When we first came on? You indicated that there was? How did you say it?
Karen Bezar 22:31
Just something we haven’t delved into? And honestly, Bret touched on it a little bit. But I’m gonna jump into this. And the reason again, I’m talking about is it worth the money to pay a financial advisor to plan for retirement. And the reason I’m bringing this up is recent experiences. Personally, we have somebody on our staff that’s dealing with this as well. Just personal stories, just meeting with clients this week, actual clients. And I’m gonna say number one, there’s so many scams out there. I’ve been dealing with David’s parents who are in their 80s. We’ve been moving them, we disconnected their phone for 24 hours. When I reconnected that phone, there were 46 voicemails that people were trying to sell them, you know, the auto and not the auto insurance, the auto warranty on their cars, just so many phone calls. And they’re unfortunately targets. I want to say elderly people, right? I think actually, I’m getting a lot of AARP things. So I think I’m in that market.
Joe Krause 23:42
Here’s the one thing to that point. I think hair above my age, that generation answers all those calls. It makes me crazy. And when they answer them, they become vulnerable.
Karen Bezar 23:57
Yes. So it leads into my topic, is it worth money to pay a financial advisor to plan for retirement? So one of the things that we know is we know a lot about finances, and we know a lot of things about, you know, money and we do understand what scams are out there. And we have a couple clients and one in particular, it’s a single person. So they’re not, they don’t have a partner, they don’t have a spouse. And when you’re a financial advisor, if you’re managing all of her or his money, they’ll call and they’ll say, I need to take out $25,000. Because my friend has this great investment opportunity. As a financial advisor, we give guidance and we can save this person from making a terrible, terrible mistake. And also we had somebody else who you met with this week, and they were getting some advice for, again, be careful who you take your advice from. Also, they were all getting some advice about their health insurance, their Medicare and their supplement. And a friend or neighbor, I think it was their inlaw said, you know, because they’re paying, quote unquote, a lot of money for their insurance, their health insurance, “if you just drop it, and then re-sign up for your health insurance, you’ll get a lower rate.” I don’t know where they got that from. I don’t know if they think it’s like XFINITY or Verizon, like dropping your service and starting as a new health insurance, and especially Medicare supplements don’t work like that. There’s plans out there that they don’t even offer anymore. And this gentleman had one of those plans. If he dropped his insurance, he wouldn’t have had that level of health coverage again. So if you have a financial advisor in your corner, we’re here to answer all of those questions. Thank goodness, they didn’t make that mistake. So there’s some things that you can’t correct once it’s once you’ve made the mistakes. And once you’ve made that decision, like David says, you only get one plan to you know, plan for retirement get one chance.
Joe Krause 26:10
Yeah, back to what we said in the beginning, I think I made the statement. I think it’s impossible for us, me, individuals to know all the answers, right? It’s just impossible to do it no matter how much we think we can self manage that.
Karen Bezar 26:27
And we have it, it’s not just David, myself. And Brett, we have a great team here. We have attorneys, we have CPAs, we have certified financial planners, and we work as a team, because we cannot understand everything that’s out there. And there’s so much misinformation out there. So if you have a financial advisor, yeah, in my opinion, but I’m gonna read an article, it’s actually from Forbes Money, wealth management, right? And again, retirement planning, it’s a crucial part of everyone’s financial journey, it can be a daunting and can be overwhelming task to plan for the future, like we just discussed, especially when it comes to making sure you want to make sure your money is gonna last for retirement, you want to again, you want to make sure that you’re making the right decisions. So what can a financial advisor do? We can help you make smart decisions, and plan for retirement. So financial advisors, right? If you just want someone to advise you on your actual investments and how you’re invested, and just some guidance, and you think you can do it yourself, great. But what I’m saying here at Thrive Financial Services, we do more than just managing your assets, right, we can help you with tax planning, we can help you with tax preparation, there’s, when you make that decision for Social Security, you better make sure you’re making the right choice. We can help with legacy planning and Medicare guidance. So just those few things. That’s all that we offer. So if you’re a do it yourself-er and you’re listening to us now, do I think this is something that I can maybe I want to think about, I would say give us a call 215-798-9088. Just take the first step, it’s just a consultation. It’s not going to cost you anything but your time, and will give you an honest opinion. And maybe just maybe you might change over to the thought, you know, you get tired of worrying about these things, or tired of planning for all these things.
Joe Krause 28:31
You’ll certainly be more educated. So if you’re listening to the show, perhaps for the very first time, you know, today, you know, no, you will be more educated following that conversation. I’ve said that many, many, many times. And it is so true.
Karen Bezar 28:44
Right. And, again, when you meet with us, you’re gonna get oh, look at your current investment strategy. And we’ll let you know, is it meeting your goals? Are you in the right investments? And we’ll give you an honest answer. Here’s the other options. So there’s things that people don’t know, there’s many charges inside of your management that some people think, Well, I’m managing it myself, I’m not paying any fees. Well…take a deeper look. Yes, you are. And we’ll show you what those fees are. And we can help you if your retirement plan is on track. We have extensive experience and extensive software and a great team, we can tell you, things are looking good things aren’t looking good. Maybe you need to make some changes. But the important thing is, Bret brought it up, when you could get to the point when you have diminished capacity. This is a serious problem. If you’re part of a couple you have a plan in place, but at least if you have a spouse or someone there that can see something’s happening. You put a plan in place. If you’re a single person, who are you gonna turn to if you’re investing your own assets, and then you’re getting these phone calls from these scammers saying, you know, we can offer you this investment or that investment or your Social Security Check, there’s a problem, we need to know what you’re, we need to know your banking information again. So as an advisor, one of the things, it’s a difficult decision, but what we look at is what the legacy planning is like you need to start thinking about, who do you want us to talk to? And who do you want your finances to go to? Who on your family side do you want your financial affairs handled by? Because at some point, this is something that could possibly happen to you. We have somebody personally dealing with it right now in our office, if you have a plan in place, and this is something we know about and we work with, there is a plan in place to take care of this so that you’re not vulnerable to all the scams out there. So again, our numbers 215-798-9088. Just give us a call or come to one of our workshops.
Joe Krause 30:47
I think that’s one of the biggest as we get ready to go to the break. I think that’s one of the biggest areas where people are preyed upon is the social security question is where a lot of that conversation comes from random calls yet, you know, random calls or random numbers, Google search a number you don’t know, you’ll see it. Sometimes it’ll be attributed to a Social Security scam. So good stuff, Karen, thank you so much. Roadmap to Thrive, the Radio Show again, we thank everybody for tuning in, we’ll get to our final commercial break, you’ll hear messaging about some upcoming workshops in the month of June. And then David Bezar will bring us home back in a moment to get registered for the final workshop of the month of May 31. To William Penn Inn, the starting time is 6 PM. Go to thrivefinancialservices.com. Get educated and get registered, this event will sell out and will reach capacity, no charge to be registered, no charge to attend, go to thrivefinancialservices.com. That’s May 31, at William Penn and get registered, get educated thrivefinancialservices.com. And welcome back everyone to this edition of Roadmap to Thrive, the Radio Show. It’s your roadmap to retirement. David Bezar is now joining us, David, you know, as I listened to the show, and I listen to Bret and I listen to Karen and read my mind, I’m playing back some of the things that you referenced in the very beginning. And the question from one of the listeners about taxes, thanks, by the way for the email, appreciate it. You know, it can be very hard to follow. And I think that is one of those and I don’t want to I don’t want to steal any time from you. But I just think that’s one of the things that causes people to make mistakes, so hard to understand what’s right, and what’s wrong. You got to have a team, there’s just it’s just the bottom line.
David Bezar 32:46
Yeah, and you know, we’ve said this before, right, those mistakes can cost you 10s of 1000s. Sometimes even, you know, hundreds of 1000s of dollars, I mean, Bret’s example,
Joe Krause 32:56
That’s what that’s what has me thinking about that..
David Bezar 33:00
It’s so common, because again, we think about the present, we don’t really project into the future, planning is about the future, it’s not about, you know, the things you do today are going to have an impact in the future, right? So you know, somebody who’s got an IRA account worth $1.6 million, probably would have never in their wildest nightmare dreamt that you would have a tax obligation of close to $900,000. But that, and look, I’m a patriot. That’s Uncle Sam’s gameplan. Right? You’ve been deferring this money all along. And we’re going to be there when you need that money, or you don’t need the money, but you are going to be forced by law that required minimum distributions gotta be taken out. And then on top of that, what I’m going to cover is it may be at higher tax rates than it is today. So you know, a $900,000, that’s from 73 through 90, each year, you take out that IRA money that RMD you gotta pay taxes on it. So that cumulative, then if you don’t need the RMD, because like, that particular example was somebody that was getting Social Security checks, to pension checks. And then on top of it, they had to take RMDs, but between the two social security checks into two pension checks, they were living life fine, like everything’s great budget wise, I don’t need this extra money, but I have to take it, and that’s what ends up pushing them into different tax brackets, and then they gotta pay extra which also affects the Medicare 100%. Yeah, that’s, that’s exactly it. So there’s a lot of cascading type things. So yeah, let’s talk real quick about now, if you’re interested. What I’m going to be reading from is excerpts right out of senate.gov. So this is the Senate’s webpage, talking about all the different legislation that’s out there and proposals that are, you know, on the floor, about, you know, different things, the thing I’m talking about out as taxes today, right. So real quick “..just as President Biden’s budget proposal for fiscal year 2024 includes a wide variety, a wide array of policy changes, new programs, increased spending and higher revenue. The budget is trying. This is the important part. The budget is trying to straddle two conflicting goals, one, increasing spending, which accelerates the unsustainability of the federal budget, while limiting tax increases to narrow segments of high income Americans.” Now, you know, as well as my job, what gets put out in the public press? You know, I kind of always say what the big print giveth, the little print taketh away. Right, because it says even here on their page, that this is kind of gear President Biden had said, he pledged to only raise taxes on people earning more than $400,000 a year. Well, that’s not actually what’s spelled out in the tax hikes. So let me go through a couple quick things. And, you know, unpack this, with the current news this week, that inflation ticked back up, at the same time consumer spending ticked back up. So there’s a lot of things that the Fed is going to definitely continue to increase interest rates, it’s going to continue to keep up we’ve come down on inflation, from its all time hot, not all time high, but it’s high, to a more stabilized new high than that new high is pretty darn substantial. Food costs are still outrageous. Travel is outrageous. You know, fuel and energy costs are still well above the lows that they were a couple of years ago. Things just cost a heck of a lot more. You add on top of that increased taxation, more of your hard earned dollars, whether it’s retirement dollars or earning dollars, are going to go to Uncle Sam, and then have inflation eroding the purchasing power of that money. You can see how that’s like a double whammy, right? I mean, that can really affect whether or not you have a sustainable retirement. Does that make sense Joe?
Joe Krause 37:05
Yeah, no, it does. And it continues to make more sense every passing day that something else changes. It really does.
David Bezar 37:13
And even with that, that’s going to hit us. All right, that’s going to hit the consumer in the pocket. And when the consumer stops spending, companies start to lose earnings. And if you start to lose earnings, the value of your shares go down and we start to see market declines. I mean, there’s a lot of cascading, and look, I feel horrible for sharing all this. But it’s better to be prepared than blindsided. The other impact of it is it makes us less competitive on the world stage. You know, there’s a proposal for this tax that increases an additional $4.7 trillion in tax increases on businesses and individuals, raising U.S. tax rates to some of the highest in the developed world. The budget’s projected revenues rise to 20.1% of GDP by 2033. 2.7 percentage points above the 50 year average. All that tax revenue. All that tax revenue is still not enough to stabilize government debt as a share of the economy. We’ve got unbridled spending. And I heard on CNBC on Friday. It’s just unsustainable. How can you run a business? Let’s just call it a business for a second, where your expenses and your spending far out seeds exceeds the revenues that you bring in? How can you stay in business? How can our government? Well, that’s what they’re fighting for right now, to increase the debt ceiling, right? So that we can spend some more money. And then you wonder, who does a better job spending our government or us? Right? So they want to take more of our money and just do this unbridled spending? It’s just a nightmare. So here’s what I want to share with people real quick, even though the President has made a pledge, that it really won’t impact you. One of the things that Bret said, one of the things I say consistently, is that back in 2017, there was a law that got enacted called “The Tax Cuts and Jobs Act of 2017”. And those tax cuts at that particular time put us in the lowest tax climate that we have seen in over 40 years. So the low tax rates that we’re experiencing today are from that law that got passed. I’m not commenting on whether it should have gotten passed or shouldn’t have gotten passed or they’re shipping better focused on the long term. It is what it is. But to get that law passed back in 2017, they wrote a caveat into that law that said that those tax rates and Bret talked about this earlier in the show would expire at the end of 2025 and revert back to the pre-2017 tax rates. So I want to give people an idea about that really quickly. Now, in the proposal of the current administration, these are some of the things. One is to increase the top marginal tax rate from its current 37% to 39.6%. That fulfills partly the pledge of the President to increase the taxation of people who make over $400,000. Here, because to get in 37%, you’re the highest income earners in the country. So you’re gonna go from 37% to 39.6%. That’s a 7.02% increase in your taxation. The 35% current tax bracket is proposed to stay the same. So 35% will stay at 35%, that’s a 0% increase. That’s the second group of people who make the most money in the country, they’re getting no tax increase. The 32% current tax bracket is proposed to go to 33%. That’s a 3.12% increase in taxation. The 24% tax bracket is marked to go to 28%. That’s a 16.66% increase in taxation, the 22% tax bracket, projected to go to 25%. That’s a 13.63% increase. The 12% tax bracket is proposed to go to 15%. That’s a 25% increase in taxation. So let’s unpack that for a second. The people who are pledged to get the greatest tax increases, the 37% brackets go on the 39.6. That’s a 7% increase. And the 35% on the 35% is a 0% increase. Right, so that’s only a half a percent of the American population are actually going to see a potential tax increase. The 32% and even the 32% goes to 33%. That’s 3.12% increase, that still kind of represents the highest income earners. But let’s talk about the people that represent 99.5% of the American population. Those people when they do their taxes on an annual basis are going to fall into the following three current tax brackets, the 24%, the 22%, and the 12%. And they’re going to see at the low side, a 13% increase, and on the high side, a 25% increase in their potential taxation. That’s under the current proposals that are happening right now. So you have to prepare and partly, most people follow what is called the “Common Rule”, when they think about how to distribute money out of their IRA and 401k accounts during retirement years. The common rule, which has been used for many, many, many years, has been proven by economists PhDs MBAs to not be the most efficient way to distribute your retirement assets. And we’ve talked about that frequently. So with what I’ve shared with what Bret shared with what Karen has shared, if you’re now getting a sense that it takes a little bit more effort, maybe a lot more effort and a lot more right to really secure and bulletproof your retirement, take us up on our offer. Right schedule, a complimentary consultation, we call it “Your Roadmap to Thrive”, we look at everything, it doesn’t cost you any money. You come in, it’s two appointments. And at the end of those two appointments, you will certainly have the awareness, you will certainly have the education. And then at that point, if you need us, you will determine that you will let us know you will ask us to become your coach, your guide, whatever it is that you want us to be. So give us a call at 215-798-9088 or go to our website register for one of those free consultations.
Joe Krause 44:17
Well, I hate to say it as we in the show today as those pending tax rates for the largest part of the population should encourage you to make the call pretty quickly. That’s gonna do it for this edition of Roadmap to Thrive, the Radio Show we thank everybody for tuning in on this Memorial Day weekend on behalf of David Bezar, Karen Bezar, and Bret Elam we end our show today in a little bit of a non-traditional way kind of a taboo in radio, but we’re going to do it anyway we pause and close the show out in a moment of silence as we head into Memorial Day. We’ll see you next time everybody.
Announcer 45:05
Thanks for listening to Roadmap to Retirement, the Radio Show from Thrive financial services. If you’re like most Americans, you have more questions than you do answer about what to do with your retirement savings. If you have a question about your IRA or your 401k pension or other tax deferred accounts, if you have a question about reducing taxes, generating income or finally for Social Security, whatever it is, David, Karen and Bret are here to help and often your questions can be answered in a simple phone call. Just call 215-798-9088 to 215-798-9088 and so you know no statements made during Roadmap to Retirement, the Radio Show shall constitute tax legal or accounting advice you should consult your own legal or tax professional on any such matters information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific Securities Investment or investment strategies investments involve risk and unless otherwise stated are not guaranteed. Be sure to first consult with a qualified financial adviser and or tax professional before implementing any strategy discussed here David Bezar, Bret Elam, and Karen Bezar of Thrive Financial Services and Thrive Capital Management are licensed to offer investment advisory services through Thrive Capital Management LLC an SEC registered investment advisory firm office headquarters located in Fort Washington and offices of convenience used exclusively for client meetings in Exton, Yardley and Cherry Hill. Roadmap to Retirement the radio show was a paid commercial announcement from Jacob media partners. If you’d like to learn more about the power of the Radio Hour contact Joe Krause at 267-261-3428. Today’s program has been pre-recorded
