5 Tax Planning Strategies Used by the Ultra-Wealthy…

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Speaker 1:
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 straight forward 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:
From the Thrive Financial studios right here in Ft. Washington, welcome to Roadmap to Retirement, the Radio Show. According to a recent article from CNBC, \”The wealthy are prepping for tax increases now.\” And it\’s because government spending is soaring at the both the state and federal levels while revenues are dropping like a rock from this crazy COVID-19 crisis. This could only mean one thing for you, monumental tax increases could be just around the corner and that could be financially devastating for anyone, David, planning on retiring soon.

David Bezar:
Today\’s going to be an awesome show. Again, i know we talk a lot about taxation, but with everything that you just said, Joe, I really hope, folks, you guys are listening to us on this because this is not a debatable situation. Taxes are definitely going up and the wealthy understand just how deadly taxes can actually be and that\’s why, today, they are doing everything in their power to minimize these taxes. We\’re seeing more people, even with COVID, than we\’ve ever seen because people are recognizing this. But what most Americans don\’t really realize is many of the strategies the wealthy use to save fortunes in taxes are also available to you. It\’s just that you don\’t know they exist or they are simply not taking advantage of them.

David Bezar:
Coming up on today\’s show, we\’re going to share five tax planning strategies used by the ultra wealthy. These could help you save a fortune in retirement, so it\’s going to be things like the most important key to saving money on taxes that most Americans actually just ignore, an expiring tax loophole that could be a windfall of savings in retirement plus an overlooked stealth tax that could rob you of your hard earned savings. We\’ve got a number of topics that we want. The first one we\’re going to cover, Karen\’s going to pick it up from here is that the wealthy use tax planning, P-L-A-N-N-I-N-G, planning to help them save a small fortune in taxes.

Karen Bezar:
Most people we see when they come in for the first time, is they simply prepare and file their taxes every year with their accountant or their CPA, but when you do that, you\’re just reporting history, what already happened. If you want to save a lot of money in taxes and retirement, you need to look forward and not backwards and this is what we\’re talking about. This is what is called, tax planning. And this is how we help our clients keep their hard earned money in their pocket.

Karen Bezar:
According to Investipedia, tax planning, here\’s the definition, is the analysis of finances from a tax perspective with purpose of insuring maximum tax efficiency. And recently I saw somebody who came in and she took out money from her IRA, a little bit more because she needed it and either she was doing this on her own or her advisor wasn\’t aware of this, but also she said, \”I got killed in taxes.\”, but also she got a nice friendly letter from Medicare a year later and incurred a surcharge on her Medicare and she was shocked. She didn\’t even know this was a possibility.

David Bezar:
That\’s always a big surprise for people.

Karen Bezar:
Exactly.

Bret Elam:
And you see it all the time with boomers and again, conventional wisdom says, let\’s put all that money away, put all that money away. Tax deferred, tax deferred, tax deferred, but they necessarily didn\’t think about what was coming and again, that\’s why we talk about the impact of, it\’s what David and Karen just said, tax planning. You\’ve got to have that plan to put all those different puzzle pieces together. Again, you can create that bomb for people that are inheriting your money, you create that bomb for yourself, inevitably what can come. And here\’s what\’s staggering, we talk about this all the time, is that how many, over two thirds of people who had over $150,000, this is from Think Advisor. This article just came out a month ago, said they wished they had better prepared for paying taxes in retirement. And the reason being, is everything that\’s going on right now, is it\’s going to yield to higher taxation inevitably into the future.

David Bezar:
I guess the easy way to sum it up so people really understand, because there is so many times that people do come in and say, I did this last year and I did not realize what the consequences were going to be of that decision. My advisor didn\’t give me any advise. I had to put a down payment on my vacation home or I had to buy a new car and the randomness of where that money got pulled for this particular person, she ended up saying, I guess my IRA is the best place to take it. Two things, she wasn\’t even 59 and a half yet, so she got hit with an early withdrawal penalty of 10% and then it counts as income. So she\’s earning money, you have to add this on top of that so it\’s really … The best way to say it is, today\’s retirement savings may be making taxes worse for you tomorrow.

David Bezar:
Too often people here the word tax deductible and tax deferred side of the story and assume that means tax free. There\’s a misinterpretation of it. It\’s not so. Unfortunately, that\’s what happens. People don\’t realize. They are like, I got confused, I thought this, I thought. I ask people sometimes, tell me about your qualified money. That means your money that has not yet been taxed. And I said, what about your non-qualified? What\’s the difference? When you\’re 59 and a half, there better be a good understanding between qualified money, not qualified and what the consequence is.

David Bezar:
Recently a new client shared that she made this withdrawal, I just told you about it, and she ended up owing a big tax bill. And the problem for her was, she didn\’t have money set aside to pay those taxes.

Karen Bezar:
Right. And that\’s where she incurred the Medicare surcharge. Recently I met with somebody and they did not realize that their 401k was qualified money and then that would affect them in their retirement, that they were, actually she thought she already paid taxes on it. So that\’s where the difference is. If you think you\’re doing a great job by yourself and you may be, but there is so much out there, or your advisor\’s not doing a great job for you. You\’ve seen that, Bret.

David Bezar:
Absolutely. And when you start putting these puzzle pieces together, it\’s what Joe just started the show with. Government spending is soaring at both the state and federal levels and at the same time, revenues are dropping like a rock with everything we\’ve been going through the last couple of months.

Bret Elam:
Which can only yield to one thing, higher taxes in the future. We\’ve been talking about this on recent weeks shows and this is a great example. This is somebody we just sat with this week. Literally the conversation was, I\’m getting out of the city. We\’re hearing a lot of that today. People are scared from a COVID standpoint. We\’re going to move to the burbs down in Delaware. They were moving to. Bret, I need to go buy that house and I really don\’t want to mortgage, I want to pay cash for it. I said, I need you to think about this. She goes, what do you mean. I go, all of your money is in 401ks and IRAs. They didn\’t do the necessary planning.

Bret Elam:
Her intention was to go out there, go out there and take money from the IRA and just pay cash for the house. This is what happened. If she went out and did that, it was going to create a $65,000 tax bomb because it was going to be all at once, it was going to push her into a gigantic tax bracket, but it made no sense. This was the strategy we came up with. We said, I want you to get a mortgage. Bret, I don\’t want to get a mortgage. I understand that, but we\’re going to pay off that house in 17 months. She said, how are we going to do that? We\’re in right now 2020, 2021 is in January and 2022 is the following January. If we pull that money out of the IRA over three years, all of a sudden she saved herself, just in spreading out that mortgage over 18 months, the payment on the house, $18,000 by having a plan.

Bret Elam:
Why does that plan become so important? This is what people don\’t realize. Taxes are lower now than they have ever been and especially over the last 40 years. Many tax experts, CPAs, economists, agree that taxes must go up. And this could happen, it\’s going to happen just as the baby boomers are retiring. Take a gigantic chunk out of the IRA, the 401k, social security benefits, investment income. But here\’s the good news, there is simple tax planning strategies that can reduce and eliminate a lot of those taxes in retirement. Whether you\’re looking to buy a house like I just spoke about. Maybe you have that Roth conversion on your mind.

Bret Elam:
We\’re going to be talking about some of the tax changes that are proposed depending upon who gets elected in November. Things like cost basis elimination. Things like estate tax changes. Talking about capital gains tax going away and it just being normal brackets. There\’s a lot to juggle at one time and it can become overwhelming. And here\’s our encouragement, pick up the phone and call us now at 215-987-2430 to schedule that 15 minute discovery call. And here\’s what David, Karen, and I hear so often. I wish I had called sooner. Because they said I wish I had planned sooner. And a lot of times we\’re able to answer all those questions on an initial call and sometimes they say, you know what, I need to go a little bit deeper to look at all my puzzle pieces. So if any of those topics we\’ve just spoken about, if you thought of them now because we just brought them up or you previously have thought about them before, again, reach out to us at 215-987-2430. Once again, that\’s 215-987-2430.

David Bezar:
Joe, your face is priceless right now. I wish everybody could see it. It\’s like the Sword of Damocles is hanging over your head.

Joe Krause:
Just the example that Bret used about the mortgage and the decision to purchase. I could see people making that mistake. I can see people going into a decision like that. Hey, I don\’t want to deal with a monthly payment. It cost them money.

David Bezar:
Sometimes it\’s enduring a little bit of pain early on to have huge gain down the road. And it\’s interesting, the name of the show, Roadmap to Retirement. Go navigate with a roadmap instead of doing it blindly.

Joe Krause:
No doubt about that. As we go to our first commercial break, a question for you. Do you have an IRA or a 401k, you want to think of this as being your own money, but it\’s really not. It\’s a joint account between you and the IRS. We\’ll tell you why when we come back.

Speaker 1:
How do they do it? How do the uber wealthy get away with paying fewer taxes than everyone else? How do they consistently keep more money in their pocket while you\’re shelling out thousands and thousands of dollars to Uncle Sam year after year.

Speaker 1:
Welcome back, everyone, to Roadmap to Retirement, the Radio Show. Don\’t touch the dial, we\’re talking about five tax planning strategies used by the ultra wealthy that can help you save a small fortune in your retirement.

David Bezar:
Folks, coming up in this segment we\’re going to talk about how you could dramatically reduce or even avoid paying taxes with your IRA, 401k, other tax deferred retirement accounts. I hope that we have it clear now and we certainly don\’t want to approach this from a disrespectful, we just want to make sure everybody has a good understanding between what\’s qualified money, taxes have not yet been paid, and non-qualified money. We want to make sure about that. One thing I want to tell you as Bret comes onboard with us here that the wealthy people do not withdraw money from their IRAs or their 401ks without a plan. It\’s a big deal.

Bret Elam:
That\’s such a big word. Plan, plan, plan. And again, realizing that you have a silent partner in these qualified plans, your IRA, 401k, and it\’s the government. Every time they meet, there is a chance that their share of what they keep goes up. How? They change the tax code. They change the tax rates. And again, when we say, how much money do you have for retirement, they will tell us in two seconds. But when we say how much will you pay on taxes on that money, people do not have a clue. Again, conventional wisdom, stuff all that money away. Defer the taxes. Defer the taxes. But people forget, second lowest tax climate in United States history. Again, we sat with a couple last week. I\’m going to call them Jim and Sue.

Bret Elam:
Sue Sample, $4 millions. I\’m on the other end of the spectrum this time. We shared with them, if conventional wisdom, wait to 72, the Secure Act, to start pulling your required minimum distributions. You will have paid $2.1, just under $2.1 million in taxes over the next 25 years and here\’s the big assumption. Assuming today\’s tax rates, no increases in the future. What we shared with them, what we\’re passionate about, having a plan. Have a plan pulling money out of the IRA, 401k, with a plan because what they were going to leave as well, was a $5 million tax bomb that their children was going to have to pay taxes on at who knows what rate, when they eventually pass away.

Bret Elam:
What we had shared with them with the strategy is having that plan ready over 25 years, they were now down to $1., still a lot of money in taxes, $1.2 million, but that was a $900,000 savings while they were alive. And here\’s the most important thing. The tax bomb got eliminated because during that process we moved the money from the IRA over to the Roth IRA. So instead of the tax bomb for the kids where they may have been paying $2 to $3 million in taxes, now all of a sudden, they saved, Jim and Sue saved $900,000 themselves while they were alive and now the kids paid zero in taxes. You\’ve got to have a plan.

Karen Bezar:
And the other area that we have the look of shock and surprise or just annoyance is this required minimum distributions. We recently met with somebody and she said, I keep talking to my advisor saying, I know this coming up, I know this is coming up, is there something I can do about it and he really was kind of wishy washy about it. But in her head she knew there has got to be something I can do. I know minimum required distributions are coming up and is there something I can do so that I don\’t have to have that affect my taxes in the future or can I reduce taxation now. Remember, required minimum distributions means it\’s required. The government says when you reach a certain age, you are forced to withdraw your money from an IRA, 401k, other tax deferred retirement accounts. Again, those are any qualified accounts. Because the government has run out of patience, and they want to collect taxes on your money. They force you to sell investments and withdraw this money from your retirement accounts whether the stock market is up or down, they don\’t care. They need your money and it could trigger a series of unforeseen financial consequences on your nest egg. It could decimate your nest egg.

Karen Bezar:
Required minimum distributions are a factor out there that we help plan for in the future. If you can reduce them, that\’s very important. And the other thing that we see sometimes is people, this is so important. If you fail to take your RMD, it gets expensive. You could face one of the steepest penalties the IRS can put on you and it\’s a tax penalty of 50%. Here\’s an example. If your required minimum distribution was $40,000 and you fail to take it, the IRS will levy a penalty of $20,000. That is a lot of money and it\’s very easy for something like that to happen. We recently had the SECURE Act come into play. Required minimum withdraw or RMD age, it changed from 70 and a half to 72. There is still people out there that are unaware of that. That\’s important information.

Karen Bezar:
And Bret, in the example he just said, your RMDs, if you have money in a qualified account and you pass away, you pass that RMD onto your children who are now younger, they are younger than you, but they are making a lot of income so it\’s causing a tax problem for them. That\’s something to remember and that\’s something that we plan for and we see people do not plan for it when they come in and speak with us.

Bret Elam:
You said it there, too, what\’s great about this year is Congress came out and said, no required distribution. But do you know what the ultra wealthy do? They are seeing as an opportunity not to do anything, they are saying, maybe we do the Roth conversion this year. It\’s not, do nothing. Second lowest tax climate in United States history, and we\’re staring at taxes going up in the future, we\’ve got to be proactive. We\’ve got to have that plan today.

Karen Bezar:
Right. And there is a more than $2 trillion tax bill now coming due for baby boomers, and yes, even though I fight with David and argue, I think I\’m the lowest, last one, but I am technically a baby boomer so this affects me. Maybe not you, Bret, but-

Bret Elam:
I\’m not.

Karen Bezar:
Not yet, I know. You can say that, but required minimum distributions, they are banking on us paying that money and not doing Roth conversions. And remember, when you do a Roth conversion, so important to remember, once the money has sat there for five years, that has had growth, you don\’t pay income tax on that money in the future so it can grow income tax-free and you have no required minimum distributions. That\’s something else people don\’t understand. They are like, what\’s the difference between a regular IRA and a Roth? That is so important. If you have an IRA or a 401k, you might want to think of this as being your money. Like Bret said, it\’s really a joint account. It\’s between you and Uncle Sam. Your retirement savings could end up being a fraction of what they are today unless you take advantage of some defensive tax planning strategies right now.

Karen Bezar:
Here\’s some good news. There are some ways you can dramatically reduce or eliminate the taxes on your retirement accounts and we want to show you that these strategies, so we\’re offering a free, customized retirement tax analysis. This free analysis will show you defensive tax planning strategies that could help you save tens of thousands, if not hundreds of thousands of dollars. Again, with your IRA, 401k, anything, even a pension, anything that is tax deferred. So you might expect to pay thousands of dollars for a customized analysis like this, but we\’re going to cover 100% of the cost just for the listeners who call us today. If you\’ve saved at least $250,000, give us a call at 215-987-2430. You want to pay fewer taxes in retirement. This could help you do more for your children, your grandchildren, whatever it takes. So learn how much money in taxes you could save, give us a call. The number is 215-987-2430.

Joe Krause:
What a great segment. Great, great segment. David, quickly, qualified, non-qualified, could I please have the definition of that again.

David Bezar:
Very simple. Qualified money is money you\’ve not yet paid taxes on, so you\’re going to have a tax bill due as you start pulling that money out. Non-qualified money is like your CDs, saving accounts at the bank, you might have a brokerage account that you have stocks and bonds and mutual funds and you get a 1099 for that every year and it counts as income. There\’s also ways, there are some fantastic ways to actually shelter some of that 1099 money that you\’re getting. I spoke to somebody yesterday, introduced to them some tax planning strategies. They were blown away. Didn\’t know that that was available to them.

Joe Krause:
I\’ve got to believe that the listening audience, me included, there is so much we don\’t know. What an incredible, incredible segment. Thank you all very much. We\’ll get to a commercial break. As we go into the commercial break, what is the retirement stealth tax? We\’ll reveal the answer when we come back.

Joe Krause:
It\’s no secret. Many of America\’s wealthiest individuals get away with paying a lower tax rate than even the middle class, but you might be surprised to learn many of the strategies that help the wealthy save a fortune in taxes are also available to you.

Joe Krause:
Welcome back, everyone, to Roadmap to Retirement, the Radio Show. If you missed any of today\’s show, go to ThriveFinancialServices.com and listen to the podcast. Man, this is a great show, David.

David Bezar:
Coming up in this segment, what we\’re going to talk about is, we call it a stealth tax. It\’s on your social security benefits. There was a time that you never paid taxes back in the past on social security, and a lot of times, this is what we hear. You could pay taxes on up to 85% of your social security benefits and people are like, whoa, what are you talking about? I paid my taxes on this. Nope, nope. That\’s not how it works. Now, there is opportunities based upon how you structure your cash flow in retirement and I\’m going to talk a little bit about that in a second, but how you structure is going to be really important.

David Bezar:
Where you take money from, what bucket you pull out, again, how most people do it is in a very random fashion or they follow conventional wisdom. Conventional wisdom is, I take my social security as early as possible then I take money from my cash accounts, my non-qualified accounts, and then I leave my IRAs, my qualified monies, Joe, right, I leave that alone until I\’m forced to take it in a required minimum distribution.

David Bezar:
Bret\’s going to illustrate in a second that what we teach people, this is a big problem, and this is so simple because, again, people don\’t pay a whole lot of attention to social security. We know, statistically 50% of people start their social security benefits at the earliest possible ages. 62, I start taking that benefit. People go, why would I ever touch my IRA money and delay my social security? Why would I ever do that? Well, if you would rather pay taxes on 85% of your social security benefits, the conventional strategy will afford you that. If you\’re into paying taxes, conventional strategy, take my benefits early, delay my IRAs as long as possible, you\’re probably going to pay up to 85% in taxes.

David Bezar:
There are opportunities where you could actually pay zero taxes, zero taxes on your social security benefit if you structure things correctly.

Bret Elam:
Especially if you look at the uncertainty that\’s out there today. Where is the stock market going to go? What are the interest rates in the bank? Guess what social security gives you? Every year you delay it, eight percent every single year. Again, whether you\’re at zero percent in taxation or 85, if I can continue delaying social security and it grows at eight percent, maybe it makes sense to take some of that IRA money early.

Bret Elam:
Here\’s an example for you. Somebody $72,000 of income. $52,000 of it is coming from an IRA, $20,000 is coming from social security. This was my neighbor saying the government\’s going broke, take your money now. And this is, I\’m taking it as early as possible. As David said, 50% of people at age 62. So under today\’s tax code, $72,000 of income, 52 coming from the qualified money 401k/IRA, $20,000 coming from social security. They end up paying approximately $4600 in federal income tax. And again, that social security is now permanently locked in at a lower amount.

Bret Elam:
Let\’s look at the other side of the equation. Somebody who, what we just said, have a plan. David talked about structure, have a plan. Now let\’s say we delayed social security. The same income of $72,000. $20,000 coming from the IRA now because we\’ve waited for social security. Now social security is now $52,000. That doesn\’t mean work until age 70. It means have a plan of the structure of the income. Hear this. With the exact same income, but just simply flipping the sources of where the income shows on the tax return, the tax bill, instead of $4600, now $30. That\’s $4570 every single year. That\’s $46,000 over 10 years and that\’s assuming today\’s tax rates. And that\’s just a modest income. That adds up over time.

David Bezar:
Sometimes, for those of you listening to us, it may be hard to visualize when Bret or Karen or myself talk about a strategy. When we do our workshops, when we do our webinars, which we\’ll talk about in a second, we\’ve got plenty of PowerPoint slides and it becomes a much better educational tool. It\’s easier to actually visualize and see how the puzzle pieces fit together versus trying to put that into your mind conceptually. What Bret just talked about, if you\’re listening, that was a huge … $4000 plus difference by just knowing-

Bret Elam:
A year.

David Bezar:
A year. Just by knowing when you should start social security, when you start distributions from your IRA, or the blended combination of the two. That takes planning. Again, we kind of try to want to make, we\’re apologizing, is basically what we\’re doing because we express all of this. We hope that you\’re hearing it and you go, you know what, geesh, that is something I really need to learn a lot more about.

Karen Bezar:
Right. If you\’ve made an average or above average income throughout your life and you\’re thinking, do the traditional rules of filing for social security apply to me, maybe they do, maybe they don\’t. Should I delay my benefits as long as possible? Is it going to end up costing me a small fortune? And if you\’re wondering why, it\’s because when you consider the impact of taxes and then Medicare premiums, it\’s because the net could be a lot less money. We want to show you how you could save and get more income from your social security with a customized social security analysis. This analysis will show you how you could get more money income from social security while considering the impact it could have on your taxes, your Medicare premiums, important one, spousal benefits and more.

Karen Bezar:
Some advisors charge hundreds of dollars for a customized analysis, but we\’re going to cover 100% of the cost just for listening for our listeners who call us today. Give us a call at 215-987-2430. If you\’re seriously interested in how you could get more income from social security, don\’t wait. We do receive a lot of calls, so give us a call at 215-987-2430.

David Bezar:
The other thing I want to mention to you all is, we did a tax education webinar. This is probably going back two or three weeks ago. We did it live three times in one day. We did a 10AM segment, we did a 1PM segment, and then we did a 7PM segment. We had over the entire day, 297 people that watched 100%. It was about a 25 minute webinar. It wasn\’t very long, but we had 100% of the attendees watch it from start to finish. As a result of that, two things happened, many people called us and said, \”Hey, you know what, I want to have a call with you guys.\” More than the phone call, many people said, how can I come in and visit with you. Can I do it virtually, are you guys open? We are open. We are very, very careful right now, obviously, with COVID compliance. Our team is very well versed, they are taking care of sanitizing our conference rooms. Everybody is wearing masks, all of the things necessary to keep, not only our staff safe, but obviously our clients as well as people who want to come in and visit us.

David Bezar:
A lot of people came in, a lot of people did it virtually and got a lot of benefit. The result of that is we got tons and tons and tons of requests to go deeper. You guys covered the basics, can we do an advanced class? My encouragement to you is to keep an eye out on our website, thrivefinancialservices.tyl16lnm-liquidwebsites.com, and we will be posting our next date to do a much more advanced tax planning. It\’s an educational workshop. You do it from the convenience of your home. I know you may be Zoomed out, but it will be worth it. It\’s only going to be about 30 minutes long, but we will cover a lot of details. Keep an eye out on our website for that date.

Joe Krause:
I\’ve got to apologize because I\’m supposed to be helping make radio today and I am so focused on the information and the examples that you\’re providing today. Really, really good stuff. As David said, watch for the details on the webinar. We\’ll get to our final commercial break. Why are Americans rushing to convert their traditional IRAs and 401ks to a Roth. We\’ll answer the question when we come back.

Joe Krause:
According to a recent article from CNBC, \”The wealthy are prepping for tax increases right now.\” You might be surprised to learn this, many of the strategies the wealthy use to save a fortune in taxes are also available to you. It\’s just that most people, they don\’t know they exist or they simply don\’t take advantage of what they are.

Joe Krause:
Welcome back, everyone, to Roadmap to Retirement, the Radio Show here on Talk Radio 1210, WPHT.

David Bezar:
Joe, we\’re going to cover in this segment, why a Roth IRA could be your ticket to tax-free retirement, plus how the wealthy are taking advantage of the different tax strategies that are out there. I want illustrate to you though, for a second, folks, yesterday we were asked, this is really interesting. I think I really need to share this. We\’ve become very well known for helping people in the retirement income planning aspect of their life. Lots of financial advisors can help people get to retirement, but when the questions about social security, Medicare, RMDs, Roth conversions, which bucket should I take first to be effective for taxation as well as longevity. That\’s another big aspect.

David Bezar:
What if, God forbid, I have to go into a nursing care situation, how do I prepare myself because the SECURE Act changed things. How do I protect my kids against taxation. A lot of these questions can\’t get answered either by you, as a do-it-yourselfer, because there\’s not a ton of information and a lot of this is new, or you have an advisor whose just really focused on investment management and not retirement income planning. Yesterday we got asked by a very large company, extremely well-known in the financial service industry for their technology and this is probably the most prominent tool that financial planners use in the financial planning world. It\’s just a very well known company.

David Bezar:
We did a demo, they asked us to do a demo and see if we would adopt their software within our firm and we had our CFPs on, Bret was on, myself and we started asking a lot of questions and the person who was demonstrating the tool for us said, \”Wow, you guys really know your stuff when it comes to taxes because I never get these questions when other financial planning firms demo this with us. Tell me more about your practice.\” We started going through that and every question we asked, he said, \”You know what, we can do that. Let me show you how we could do that, but I never had to illustrate that before.\”

David Bezar:
What I\’m trying to share is, if you want to do it right, if you really want to do it right, you\’ve got to work with somebody who understands it. Number one, knows how to ask the right questions. Number two, knows how to identify the potential challenges. And then obviously, number three is be able to implement the proper solution. You don\’t go get a haircut at your dentist\’s office. That was probably the worst analogy I\’ve ever probably given on radio.

Bret Elam:
And you know what you hear all the time, now, everyone\’s I like it. Everyone is coming out of the woodwork in terms of advisors talking about Roth conversion, Roth conversion as like a marketing gimmick. Here\’s the problem we hear from people we meet with. They are always having to bring the conversation up to their advisor. It\’s never coming the other way and it\’s concerning. The concern is, what we\’ve talked about, where tax rates are going to go. I\’m going to share a couple of things with you. You talked about the CNBC article, talking about, again, it doesn\’t matter. We\’re talking facts. President nominee Biden, in June, late June, said he\’s moving forward, this is the words, this is that CNBC, that he planned to forge ahead with his campaign plan to hike taxes on the wealthy. Now that word wealthy is very generic.

Bret Elam:
And here\’s some of what\’s in that plan. Things like stepped up cost basis gone, things like-

David Bezar:
Whoa, whoa, whoa. Stop for a second. Cover step up cost basis, because I would imagine most people don\’t completely understand it.

Bret Elam:
We\’ll go there.

David Bezar:
Let\’s go where the impact is.

Bret Elam:
Just talk about the stepped up cost. Let\’s say mom bought a stock. $100,000 Boeing 30, 40 years ago. And let\’s say it\’s now worth $1 million and mom passed away. I\’m not talking about in an IRA, we\’re talking about non-qualified money here. If mom died, nobody has to pay the tax from the $100,000 to the million. Hence, at death it\’s called a stepped up cost basis. It could be a shore home, it could be stock. It could be anything that has a cost basis associated with it. The elimination of that becomes mom dies now, somebody\’s got to pay the tax on the $900,000.

Bret Elam:
Gang, the tax bill has to get paid. $6 trillion and counting. Ready for this, a lot of people are talking about recession, depression. What is it in between? Ready for this? Top tax rates in 1922 was 58% and went to 25% in 1925. Let\’s talk about history, went down to 24% in 1929 and then this thing called the Great Depression came in where taxes steadily increased to 63% and eventually moved its way all the way to 94% in 1944. I want you to think about that, where taxes were and where we\’re heading.

Bret Elam:
There\’s a lot of economists, not David, not Bret, not Karen, economists, the people that are the talking heads, talking about natural disasters and depression is coming.

David Bezar:
Here\’s part of it too. We forget about our history. Sometimes you hear that saying, if you forget history, you tend to repeat it in the future.

Bret Elam:
Amen.

David Bezar:
We were on 6 ABC News a couple of weeks back and we talked about this and we got a phone call from somebody who said, taxes will never go to those rates ever again. Really? I wish I had that crystal ball. With the trillions of dollars of deficit that we have currently, how else does it get paid?

Bret Elam:
You are still waiting for his phone call to figure out how the deficit\’s going to get paid.

David Bezar:
We returned his phone call, we were very pleasant about it. We just wanted to understand what the situation was and why he made that comment. But you do have to prepare. Bret just read off a history, which, it\’s 100 years ago. Whoever thought we would have another pandemic, in their wildest dreams. What was it, the 1918 Flu? Panic, horrible deaths, the whole … It was never on my radar that we would be five months, basically in some type of a quarantine situation because of a health crisis. Blows me away.

Bret Elam:
That\’s why when you talk about things like that, we\’re so passionate. What do the ultra wealthy do and what are we talking to them about, it\’s like talking about Jim and Sue Sample, how I started in that second segment. Roth conversions. We got to get out and get in front of it. Again, do not wait for conventional wisdom and the tax plans rates change in front of us and then it\’s like, I wish I should have. This is all about planning and it\’s what that theme that we hear from people that, when people come in or have that call or that appointment with us, I wish I would have met with you earlier. It\’s all about formulating a plan and eventually just putting a structure to everything that we\’ve just spoken about in today\’s show.

David Bezar:
I hope today really did bring value to you all. We pour our heart and soul into this. We\’re very passionate about what we do because we see people not on the right track when it comes to retirement. Bret said it at the beginning of the show, if we ask somebody how much money do you have saved for your retirement, usually we get a very clear answer, there\’s no hesitation because it\’s a number we like to beat our chest on sometimes. But if you ask the question, how much of that are you actually going to be able to use in retirement, you get a deer in the headlights type view.

Bret Elam:
And that really starts to startle people. So if you\’ve got an IRA or a 401k, you may want to actually think about this. Is this really my money or is only a portion of it my money? And your retirement savings could end up being fractions what you actually thought they were going to be and that\’s a possibility of derailment of retirement. What are the options then? Either I reduce my quality of life or my money runs out before I do. Those are the two biggest fears that we hear from people when they come to visit us.

Bret Elam:
But here\’s the good news, there are ways you could dramatically reduce or even possibly eliminate those taxes on your retirement accounts and what we want to do here at Thrive is show you what these tax savings, these defensive tax planning strategies are by offering you a free customized retirement analysis report. This is going to go through everything that we talked about here today. It\’s going to go through Roths, it\’s going to go through RMDs, it\’s going to go through tax harvesting. It\’s going to go through social security taxation. Anything and everything that\’s related to taxes and your retirement, we\’re going to go through that.

Bret Elam:
We want you to pay less in taxes. So if you\’d like to get that free analysis, give us a call at 215-987-2430. 215-987-2430. And again, please don\’t forget to check out our website for our upcoming tax summit workshop.

Joe Krause:
What a great broadcast that was put together today right here in Fort Washington at the Thrive Financial Services studios. I can say this, I guess, as we end the show, it\’s okay to question conventional thinking. It\’s definitely okay to do that and I think you proved that with our conversation today. That\’s going to do it for Roadmap to Retirement the Radio Show. On behalf of David Bezar, Karen Bezar, and Bret Elam who know more about this than anyone else, at least in my opinion.

Bret Elam:
Thank you.

Karen Bezar:
Thank you.

Joe Krause:
See you next week, everybody.

Speaker 1:
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 answers 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 filing 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 215-987-2430. 215-987-2430.

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