Joe Krause:
What do your IRA, 401k, social security benefits and investment income have in common? They could all get clobbered by taxes when you retire, leaving you with a fraction of your nest egg. Welcoming everyone to Roadmap to Retirement, the Radio Show along with David Bezar, Karen Bezar and Bret Elam, David, over to you, sir.

David Bezar:
Yeah, Joe, big talking points, right? Everything that’s going on right now, especially if you’re close to retirement or you’ve entered retirement, we start bringing up the words, IRA, 401k, social security, investment income, your ears got to completely perk up. Forbes Magazine says, planning for taxes when you retire could be like a hornet’s nest. I got to tell you, here at Thrive, we couldn’t agree with that any more. Because there are countless ways you could trigger higher taxes in retirement, you could trigger them by when you withdraw money from your IRA 401K, when you’re filing for social security, if you don’t do it correctly, when those required minimum distributions, we call those ticking tax bombs, start to have to come out of your IRAs, or just managing stock dividends and other investment income.

David Bezar:
Believe it or not, you can actually, if it done properly, kind of have, and take a lot more control over this than you actually know. If you take advantage of some of … we talk about them a lot on this show, Joe, and I hope it doesn’t become like a broken record and people become tone deaf to us. But if you take advantage of the defensive tax strategies that we are constantly talking about, you could dramatically reduce, or even possibly, eliminate these taxes when you retire. You know what? That means a lot. That means that you get to keep the money in your pocket versus giving it to uncle Sam. In today’s show, it’s going to be a great show. We got four tax planning mistakes that people are making that actually can wreck their retirement, and what you can do right now to protect yourself.

David Bezar:
These topics, Joe, just real quick, the key to having tax free income in retirement, how you avoid getting gouged by taxes during your IRA and 401k distribution phases, and then how to take a contrarian strategy that could help you reduce or eliminate paying taxes on your social security benefits.

Joe Krause:
One thing I was going to say, one thing we’ve learned about the year 2020, including just this past week, as late as Friday, you can never be prepared for what’s coming, so you have to have a plan for retirement. It’s a must.

David Bezar:
Again, I think most people are expecting your taxes … they kind of think, and we’re talking the contrarian again, people think that taxes are going to be lower in retirement because that’s what we’ve been conditioned, but the reality is …

Karen Bezar:
It’s kind of a fairy tale. We have seen it in our own experience when we sit down with people and we say, “What’s retirement going to look like?” And then we really start digging in the weeds, so to speak. Sometimes we’ve actually had people, if they have certain amounts of pension income, their retirement income is actually higher than their current income, and they look at us and they’re like, “Ah, I’m quitting. I’m retiring tomorrow,” which is a good thing. But just remember, we don’t have a crystal ball. We can’t see what’s going to happen in the future. But we have a $2 trillion stimulus package that we’ve gone through, and it’s going to help millions of Americans get through this economic crisis, but it’s going to have some unintended consequences and no one’s really talking about it and there’s going to be collateral damage.

Karen Bezar:
These economic stimulus packages, they’re not free. Someone’s going to have to pay for it, and it’s going to come possibly from higher taxes in the very near future. Unfortunately, if you’re a baby boomer in retirement or heading towards retirement, this is going to effect your IRA and your 401ks. So, you saved a long time and you saved hard and you worked hard and you have a nice nest egg. Now it’s going to decimate, possibly your retirement savings. It’s going to kind of eat away your nest egg. If you had more money saved and you think I’m good, and you have a bigger chunk coming out in taxes, it’s something that you can’t do anything about, so we have to do it ahead of time. You can’t do it in the moment.

David Bezar:
Yeah. As a matter of fact, look, we know there’s probably more stimulus coming, so I’m just going to cover, very quickly, just a couple statistics. They’re not really statistics, it’s just kind of philosophy that’s out there. What we know is that, for many decades in this country, tax rates were actually much, much higher than they are today. Conventional wisdom kind of build up this idea that taxes will be lower when you retire. I think more and more people are starting to recognize that that’s a falsehood. Tax rates are to a hundred year low, and they’re very likely to go higher in the future, especially because of the stimulus. It’s been said that large government debt could rise to 130% to 140% of GDP, so the only way you can balance things out is with higher taxes.

Bret Elam:
Yeah, and the way you gotta be proactive with it. We talk about it on the show quite a bit, talking about Roth IRAs. That’s what I think people need to take a serious look at that conversion. How that process, how that affects me, again, pay some taxes today for tax free growth in the future. Again, Forbes said it best, we’re on the heels. We’ve been talking about the largest stimulus package in the United States history, and then basically with our deficit and national debt, again, things are only going to grow from here. At some point in times, we got to pay it back. Again, governments at every single level will need to find more revenue in the form of taxes.

Bret Elam:
It reminds me, we just had someone, and he’s a widower. He was widowed later, earlier [inaudible 00:06:50] his wife had passed away, and he had $1.6 million in his 401k IRA. I know you might be listening to the show like, hey, that’d be great. A single person, 1.6 million. I’m never going to do that. But this is simple as this. If I have a 25 year old who puts $300 a month away, including their match, just $300 a month for 40 years at 70%, or pardon me at 7%, 70 would be phenomenal, but 7%, $300 a month, 40 years, 7%, that’s $800,000. Husband, wife, you don’t need to be a gazillionaire to have $1.6 million every time, but what did they not plan on? Wife passing away? They hadn’t done anything proactive yet with everyone they had spoken to.

Bret Elam:
Now all of a sudden this year being the last year that they’re going to file a joint tax return, we talked about how they have to be so proactive because what I shared with him, if he just simply does the conventional wisdom route on 1.6 million, under today’s tax code, forget future increases, 1.37 million versus a strategy we went through with him a half million on converting to $800,000 in taxes. Again, you got to be proactive with it. Again, we’ve been talking about on the show. People don’t realize it, but taxes are as low as they’ve ever been in 40 years. Again, they kicked in, in 2018. Again, economist tax experts, CPAs, they don’t agree on a lot except for one thing, and it’s the wrong thing, is taxes have to go up. Taxes must go up.

Bret Elam:
What we want to do as part of today’s show, again, a special offer for our listeners today, is we want to show you some of these tax planning strategies that can help you save a small fortune in retirement with that retirement tax analysis. Again, we don’t need your social security number, we don’t need your count numbers, but we need some basic information to figure out which one of these strategies out there are best for your particular situation so that we can show you exactly how much money you can save. Most times, it’s tens of thousands. Actually, it’s actually hundreds of thousands of dollars we’re able to share with people day in and day out savings and taxes. Most importantly, we’re not going to charge you a dime. There’s no obligation. Our loyal listeners know that all the time, but we just want to offer that here today.

Bret Elam:
Again, if you’ve saved, and I see probably like $250,000 is where we start seeing some of these strategies that we can start being strategic. Again, my encouragement is to give us a call at (215) 798-9088. Again, (215) 798-9088. Again, we have a short period of window. We’re here in the last part of the year to take advantage of these tax planning strategies, so do not put this off. You can call, our team is standing by. Again, (215) 798-9088.

Joe Krause:
Yeah. Good stuff. Good way to open up the show here on Roadmap to Retirement, the Radio Show. One programming alert, Bret Elam goes one on one later on this afternoon with Dom Giordano. Should be a conversation. The subject of that conversation, taxes. The Trump tax plan versus the Biden tax plan. All of that coming up later on this afternoon. Uncle Sam, by the way, is licking his chops right now. He can’t wait for you to retire, and I’ll tell you why when we come back. A recent article in Forbes said it’s easy to ignore one vital topic with retirement planning and it’s how much money you will owe on your retirement income. I quote, “It’s a hornet’s nest.” David, I think it’s the biggest surprise that’s waiting out there for anybody that’s consuming or listening to this radio show. If you don’t do something bam, you’re going to get popped.

David Bezar:
It’s funny. Karen and I sat down with a really nice couple on Friday, yesterday. That’s kind of the comment that they said. For so many years, we’re savers. We weren’t thinking, we were just, how much could we sock away? How much can we keep putting in our 401ks and our IRAs? We never thought about it. We started talking about the mindset shift that has to happen, the mindset shift, and it was interesting, because this person, without really knowing it took a proactive approach and they stopped contributing into their IRA and shifted their employer contributions and theirs into a Roth IRA. Now, they were able to do that because of their income, but they started getting a sense like it creeped in that it was like, if I keep putting away this money tax deferred, I’m eventually going to have to pay more taxes.

David Bezar:
I said, “You know what? You are spot on.” That was great. Let me tell you about what we do. In this segment, we’re going to talk about why not having a strategy to reduce your taxes with your IRAs and your 401ks, and also any other deferred retirement accounts could actually leave you with a fraction of the savings that you thought that you were going to have.

Bret Elam:
Mistake number two is not having a strategy to reduce taxes on your 401k and IRA. In my last second, I just shared an example of somebody being a widow, widower, and why you need to be proactive with that. Before I jump into that, a special shout out, as my partners here, David and Karen just celebrated 32 years of a wedding anniversary this past week.

Joe Krause:
Wow, that’s awesome.

Bret Elam:
So, why we gotta be proactive while we’re joined, so congratulations, gang.

Karen Bezar:
Yep, 32 years, what a bliss.

Bret Elam:
What a bliss. I saw that text [crosstalk 00:12:21].

Joe Krause:
David. Last word, David.

David Bezar:
My mic’s not working.

Karen Bezar:
It cut out all of a sudden.

Bret Elam:
We know we got a lot of loyal listeners that are getting great information on this show. We got to have a real good strong foundation. We talk about a strategy to reduce those taxes on your 401k and IRA. Actually, we started chatting about it last week and I want to bring it up again, because we got lots of great responses about a guide that we were given out. It was called take charge of your taxes, knowledge you need for proactive planning. My encouragement, again, our number is (215) 798-9088. This is an eight paged document, and it’s giving you the basics. What I find is people miss the basics. You can’t even get to the complex because the IRS code is so thick without even understanding the basics. In this guide, it’s got a layman’s terms approach to again, your brackets, understanding single versus joint.

Bret Elam:
Itemizations, all those drastic changes. My small business owners out there, things like QBI, what the heck’s he even talking about? AMT, estate taxes, retirement plans. What happens with my 401k? My encouragement, reach out to us, again, (215) 798-9088, and please request that Take Charge of Your Taxes Guide.. It’s a great roadmap. It’s a great foundational piece to start building upon again, that we can get that much more creative. Again, mistake number two, not having that strategy to reduce your taxes. Again, conventional wisdom, defer, defer, defer, put all my money away. Don’t pay taxes on it now, but pay taxes on it later. Words of wisdom to my audience as well, please educate yourself.

Bret Elam:
Well, something that’s happening here in the next couple of weeks and some drastic changes to 401ks is that there’s now inklings of being taxed on the 401k contribution that goes in, in addition to the tax coming out. You heard me right, that is double taxation. Now, just like the IRS code, they’re making it more complex to try and figure it out. Nothing like trying to make the code simpler. Please be aware of everything that’s going on out there right now. Again, there’s some credits to offset that. Again, they’re just making it more confusing. This is what it’s all about. That’s why you need that second opinion because what you are creating is a tax bomb by simply deferring it over and over again. Again, remember your 401k and IRA, it’s a joint account with uncle Sam, and every time they meet, there’s a chance that they’re going to have a greater and greater percentage because of higher tax rates.

Bret Elam:
I think Forbes set up best again. You talk about the hornet’s nest is that … and we see this day in and day out when we sit with people’s income taxes end up becoming, we say it, your largest item on the budget when you end up in retirement, and we got to have a plan to make sure that doesn’t happen.

David Bezar:
Yeah. 401ks have complex tax implications. Again, we’ve been trained for a long time just to put money in, get our match, defer, never really thinking about what’s the outcome. Arguably, the most highly touted 401k plan attribute is that it’s a pre tax treatment of the invested monies that go in. That feature is important for a lot of people, because if you have more money to invest upfront, you should have a greater opportunity to enhance your returns down the road. Here’s the big however. However, before accepting the premise that pretax investing is an investment advantage, keep in the back of your mind that when you’re going to withdraw your money from your 401k plan, the entire amount that you will withdraw will be taxed at your personal income tax level.

David Bezar:
That’s not something that we have complete and utter clarity on. Could these taxes, these personal tax income levels be higher in the future? If we bought in that we thought they were going to be lower, that could really have a devastating effect. I know what we bring up on the show doesn’t seem conventional, but we’ve shared a million times, what’s popular isn’t always right, and what’s right. Isn’t always popular. It bugs the heck out of me that advisors just spew out this … it’s almost like it’s a franchise type mentality. They spew out the same stuff to the same … no matter what your circumstances are, and it could end up being very disruptive to a retirement. If you just think about this, logically, if you have bought in the taxes are going to be higher in the future, why would you wait? It’s just such a small piece of all the pieces when you’re planning out retirement.

Karen Bezar:
I think one of the things we do here is we’re not cookie cutter, and we take each person or couple individually, and that’s really, really important. It’s not the same for everyone, and we understand that. Again, these required minimum distributions, they can trigger an unexpected tax bill. Just a quick a RMD 101, which is required minimum distributions for the rest of the show, we’re going to say RMDs. They can throw you into a higher tax bracket than maybe you thought when you were working. You’re like, “Oh, I’m just going to keep putting my money away just like David said.” They can, not only cause you to pay higher taxes, it has a ripple effect. Then, now your social security check is going to be taxed at a higher percentage. Possibly, you double your Medicare premiums. If you have so much income, the government says, “Hey, you can afford to pay more for your health insurance,” which is something that is eyeopening to some people when we meet them for the first or second time.

Karen Bezar:
Required minimum distributions, again, they are IRS mandated. You have to take them no matter what, and that starts at age 72. They want you to start withdrawing the money from your retirement accounts. Again, whether you need it or not, another important factor, which people don’t always take into account is it’s not the same percentage each year. As you get older and your nest egg’s still there, the government says, “Hey, take out a little bit more or take out a little bit more, take out a little bit more,” so they can get more in their taxes. If you’re listening out there thinking, well, it’s not going to affect me. One of the reports we do when we do a complimentary consultation and something we use for our current clients is a tax clarity report.

Karen Bezar:
We have a lot of information in here and it’s hard to visualize over the radio. But if we had a client come in, married couple, and sat down with them, they saved a good, nice nest egg, and their IRA distribution first year out was $174,468. Joe, that’s just their IRA distribution. Doesn’t take into account their social security, didn’t take into account if they had pensions. What if you can reduce that IRA distribution to, if it’s 174, can we get it down to zero? It depends on when you start. If you’re out there thinking, oh, what’s a big deal, that IRA distribution? Yeah, it’s a big deal. Remember, they go up, and this is a couple, so they’re going to be taxed at their couple rate, but what happens if … Look, one of you is going to pass away prior to the other.

Karen Bezar:
Those RMDs aren’t going to change. You’re still going to have that money in that bucket, so that’s what happens. This is today’s tax rates. Do you want to pay taxes now or do you want to pay them later? We don’t know, but do you want to be proactive? Come on in. What we offer is a complimentary consultation, and we take a look at what your required minimum distributions are going to be. If you’re out there listening, thinking, geez, I never really thought about … I knew I was going to have to take it, but I want to take a look at what actually might look like. The other factor on that is what will your taxes be in the future? We don’t know. We don’t have a crystal ball, but isn’t it better to start planning now rather than later?

Joe Krause:
Here’s one thing I know, and I’ve learned it from this show. There are no do overs when you get to that point, no do overs.

Karen Bezar:
Right. You be proactive. You might be 55, 60 years old thinking, oh, it’s too early for me. 72 is so far out. Time is flying by. 32 years married, I know to David, it feels like it’s only been one year. His mic cut out again. I don’t know what’s going on. If you’re thinking right, does any of this really pertain to me? Or if you’re thinking, I do want to know what my taxes are going to be in the future, or I do want to know, maybe can I do something to proactively handle this now? If you’re curious, give us a call. Our number is (215) 798-9088. Give us a call. We would have happily set up a phone call for you we call a discovery call, or if you want to come in for the consultation, we would like that as well. I think it will be very informative. The number is (215) 798-9088. Give us a call and we’re standing by.

Joe Krause:
30 seconds until we go to the break. Bret, I’m looking through this giveaway.

Bret Elam:
Yes, sir.

Joe Krause:
That’s great.

Bret Elam:
Yeah, absolutely.

Joe Krause:
So much information in there. You’ve got to call and get it. You have to do it.

Bret Elam:
It’s funny how many people are still thinking back to 2017, the old ways. Just get the education of what the new normal is, because it’s not going away. Again, where this is now a year, I guess three. In year four, it’s going to be the same thing as well. Get the guide, my encouragement. Again, reach out to us, (215) 798-9088. Again, request, Take Charge of Your Taxes Guide..

Joe Krause:
Yeah, really good guide, really good information. No charge, no cost. Make the phone call. We’ll get to a commercial break. Uncle Sam is looking to sink his teeth into more than just your IRA and 401k. We’ll tell you what it is when we come back.

Joe Krause:
Welcome back here to Roadmap to Retirement, the Radio Show. Again, that phone number to get that free complimentary guide, Take Charge of Your Taxes, (215) 798-9088, or you can go simply to thrivefinancialservices.com.

David Bezar:
Yeah. I hope you’re all seeing that there are countless ways you could end up triggering higher taxes in retirement. The triggers are when you withdraw money from your IRA 401ks, when you file for your social security benefits, we’re going to talk about that a little bit in a second, when you take your required minimum distributions and when you start to get, either stock dividends or other types of investment income. We’re trying to share with you that, if you take advantage of some of the defensive tax planning strategies that we’re talking about today, you actually can dramatically reduce, and even possibly eliminate these taxes. I just want to bring up something really quick.

David Bezar:
One of the things we’re going to talk about in a second is social security benefits. I cannot tell you, folks, how many people visit with us and really have up to the point, minimize the importance of where social security fits in, when they should take it and what the potential tax implications of it are. It’s more complex. A lot of people think age 62, full retirement age or age 70, and there’s so much misinformation about it, that people just randomly … Statistically, from the social security administration, 50% of people take it at the earliest possible time. That for most is going to make people lose most of the benefit that they could get. We’re going to talk a little bit further, not just about the social security, but about the taxation of social security.

Karen Bezar:
Yeah, as a reminder, social security income is taxable, and social security is … you can pay up to 85% of your social security check can be taxed. It depends on your income level. The rules are extraordinary complicated. Statistically, about 40% of people who get social security have to pay income taxes on their benefits, and the higher your income, the more you’re going to pay. As an example, we run that tax clarity report, we also run a social security maximization report. From my last example that I discussed in the prior segment, if this couple had IRA distributions of almost $175,000, and then as a married couple, their total income for social security was $63,648, so what does that mean?

Karen Bezar:
Out of that $63,648, $54,101 is taxable. If you’re thinking, oh, what’s the big deal? 85%. Do you want 85% of your social security check tax checked? I don’t think so. Do you, Bret?

Bret Elam:
Not at all.

Karen Bezar:
We don’t want that.

Bret Elam:
David just said it about people winging it, and we need to treat social security like an asset. We do workshops that are just 100% dedicated towards social security. Again, we’re starting to hear it, because now all of a sudden, tax, tax, tax, that conversation’s coming up all over the place, and we’ve seen it just in the most recent months of people and articles trying to explain how social security is taxed. All I’d say is keep sharp objects out of the way trying to understand how those rules work, but it’s this thing called provisional income. Again, you could have anywhere from zero to 85% of your social security income is subject to taxation. Not getting into the weeds about how hard it is to figure it out.

Bret Elam:
The important thing is to understand, it’s complex and you’ve gotta be proactive. One of my most favorite slides that we talk about and educate people about all the time is understanding there’s a couple of different ways of how you can do things, and people, again, take it that wing it approach. But our encouragement is to always defer social security when we can be, especially with the tax standpoint of it. We show a slide at the workshop. It’s as simple as this. $72,000 of income, 52 coming from your IRA and 20,000 coming from social security because you started to collect it too early. Again, understanding how that provisional income works and so forth. We have a couple, so let’s say age 67 in retirement. 52,000 coming from your IRA, 20,000, coming from social security. A check to uncle Sam for $4,597.

Bret Elam:
Now, if you took the exact same income of 72,000, but now you delayed social security, so 52 comes from social security, so then only long-term 20,000 needs to come from your IRA. Same 72,000, but now we switched, we delayed our social security. The exact same way we calculated it, now all of a sudden, only $30 in taxes. Your social security income is going to be taxed like no other income you’re ever going to receive in retirement.

David Bezar:
Folks, here’s what I know is your challenge. You’re listening to us, and we start going through the numbers and we start talking about these dollar figures and things of that sort, and for a lot of people, especially if you’re like me, I’m a much more visual person. It’s really challenging to grasp, what did he just say? What did she just say? What were those numbers? How does that kind of potentially … Joe, do you feel that way a lot of times?

Joe Krause:
Well, I do. One of the reasons why I love radio so much is it’s theater of the mind, and I often wonder, when we finish and we wrap up a show, is the audience going to be able to visualize some of these details. It can be very hard to do, very difficult to do.

David Bezar:
I am very sympathetic to that. One of the things I’ve prided myself on my 32 years of doing this business is that I have been able to take for people what is perceived to be very complex and make it very simple to understand. I always worry, as we do our shows over, I guess it’s almost two years now, how many people are actually missing the content, they’re missing the experience of how this could be actually applied in their own life. We are so education first based in our business. We are so authentic and committed. I know that’s hard for a lot of people to believe, but if you could just be a fly on the wall and sit and experience one of these Thrive Retirement roadmap consultations, they’re complimentary, they’re casual, and we sit and we go through. The most common remark is … there’s actually a couple, right?

David Bezar:
One is, why didn’t I know more about this? It’s interesting, because of all of our clientele, we serve over a thousand people in the Delaware Valley. That’s in a few short years, and I think that’s a bit of a Testament to what’s happened to our firm because what we’re bringing to the community really resonates, especially with pre retirees and retirees. One very common remark is, why did I never hear about this? Number two, I have a financial advisor, why haven’t I heard about this before? Number three, why isn’t this message out there? Right. I pain myself trying to figure out, how can we impact more people? Because the storm is happening. Social security is confusing. Taxes are really going to be confusing. I really am nervous for the retirement community of what this can mean, especially as people are living longer.

David Bezar:
Come experience it. Sit with us in one of our offices, Yardley, Exton, Cherry Hill, Fort Washington. See, we have these huge smart boards, watch what we’re doing. Let’s get into a conversation together, let’s dial in and really try to understand what’s this going to look like for you. You can get one of those appointments schedule by calling us at (215) 798-9088. (215) 798-9088.

Joe Krause:
When we come back, one of the most overlooked solutions to enjoying a tax free retirement. Back here on Roadmap to Retirement, the Radio Show. Boy, David, I hope that the audience listing today hears your wish for you to be able to reach and educate more people. The information to use a financial term is priceless. You have to get this information.

David Bezar:
It’s adult education. Do you know what I mean?

Joe Krause:
But we don’t do it. We take things for granted or we pick our head up out of the sandwich when it’s too late.

David Bezar:
Yeah. I’ve been a self-improvement junkie for my entire business career since I’m 24 years old. I learned about it. I believe you go backwards if you’re not putting good information into your head on a continuous basis. If you’ve busted your butt for 20, 30 or 40 years of a work life, sometimes I say maybe this is not the most eloquent, but why work like a dog for 40 years to live like a dog in retirement? Come up with that education, make sure you got your Is dotted, your Ts crossed so that you’re doing all the things that are not going to disrupt or derail that retirement plan that you’ve … well, I wanted to say retirement plan, your retirement savings. Now it’s time for the plan. Does that make sense?

Joe Krause:
Yeah, it does make sense. Good point.

David Bezar:
In this segment, we’re going to talk about a strategy of why converting some or all of your IRA, 401k, other tax deferreds into Roth accounts now could really save you a fortune in taxes when you do retire.

Karen Bezar:
As a reminder, we always say, oh, I’ll convert to a Roth. Here’s the down low, as my kids would say. A traditional IRA and a 401k allows tax-free contributions. It helps you reduce your taxes while you’re earning income. But when you finally withdraw that money in retirement, again, you’re going to have to pay taxes. At 72, you’re forced to take those taxable distributions whether you need it or not, and it can have unexpected consequences, which we’ve been talking about. On the other hand, a Roth doesn’t allow for tax-free contributions, but here’s the important part, you pay zero taxes when you withdraw money in retirement, and you don’t have to deal with the government telling you when you need to take that money out, how much you need to take and how much you’re going to pay in taxes. As a reminder, it’s really it’s tax free growth.

Karen Bezar:
So, do you want to pay taxes now or do you want to pay taxes later? It’s a strategy that you need to figure out with yourself, and it’s something that we help our clients with here. Now, we’re talking about, is Roth conversions really could help you in retirement? Don’t just listen to us. I have a conversation article here, and it’s The Four Reasons to Consider a Roth IRA Conversion. Here’s the four reasons. Number one, the recent passage of The Secure Act with its changes to beneficiary distribution. If you convert to a Roth, your beneficiaries are not going to have to worry about paying taxes. There’s a memorable effect there. Number two, the waiver of required minimum distributions for 2020 with The Cares Act, so they say, hey, you don’t have to take your RMD this year, but maybe you should have taken it, do Roth conversions.

Karen Bezar:
Number three, the fact that we’re living with the lowest tax rates in recent history, again, we don’t have a crystal ball where they’re going to be in the future. Let’s be proactive now. Number four, add in the possibility of reduced valuations in your IRA or your 401k accounts due to market losses, and the scene’s kind of set for some significant activity in Roth conversion area now.

Bret Elam:
Yeah, To hear what those four, that Karen just said, number three, we are in the lowest tax brackets in recent history. Again with the tax cuts and jobs act of 2017, Roth rates to where they’re at today, and they’re scheduled to continue until 2025. But again, given everything that we’re going through, stimulus packages, again, proposals on healthcare, all the pandemic, all that stuff. Again, it may go away sooner than that. Again, a lot of experts are now talking 2021, probably more likely 2022, depending upon what happens later this year. With that in mind, you’re in the driver’s seat, you can be proactive. What I try and educate and share with people is there’s a wide disparity, and especially what is facing us as a country of understanding that you have a very wide bracket of income.

Bret Elam:
It’s why we encourage again, Take Charge of Your Taxes Guide. Reach out to us to get that, so you can just get that foundational education. Reminded me of someone who’s just become a client here at Thrive, where we talked about this exact same thing, about not converting versus converting, and the pros and the cons. He’s like, “Yeah, I’ve been thinking about it.” This guy was an engineer. Should I do it? Shouldn’t I do it? Should I do it? Shouldn’t I do it? All we did, we took what was in his head and put it on paper. What we shared with him is that between him and his spouse passing away at the age of 90, now this couples are age 61 and 62, but they have $2.2 million in IRAs. Remember, it’s not that crazy to have that amount. We just went through the math to get that. If they did nothing, except take the conventional wisdom of route, they would still have a $2.4 million tax bomb for their kids at the age of 90.

Bret Elam:
As Karen said, who knows what those rates will be, but those ready for this, during their lifetime, they paid almost $1.35 million in cumulative taxes during that same timeframe. We shared with them option A, option B, option C. They were already doing option zero, which was do nothing. It was all about, we got to be proactive, but how proactive do we get? What we had shared with them was a strategies. Again, what’s the mistake? Not doing anything. When we start sharing strategies with people, we got them to $750,000 in taxes in their lifetime at 600,000 savings to them. Now, all the money is in Roth with almost $7 million because we got the money into the buckets tax-Free quicker. It’s an example that we see every single day about why it’s so important to be proactive, that you gotta be proactive and not be reactive. Again, we talk about the difference between a tax planner and a tax procrastinator all day long as we got to take our head out of the sand and take charge of the situation.

David Bezar:
Yeah. I just want to remind everybody as well, a couple things, number one, is we here at Thrive are very, very, very inclusive. Today we’ve been throwing around numbers, 1.6 million, 2.4 million, all of these higher net worth type retirement accounts. Folks, we see people that have no money because again, there could be a better decision on social security. They may not have a lot of retirement assets, but they’ve got a pension and social security, so their cashflow is fantastic. There’s a way to help kind of organize that cashflow correctly with whatever savings they may have. I just really want you to understand is don’t prejudge of whether or not a consultation or a phone call with us would be a waste of your time. We get people so many times, “Oh, I don’t know if I should call you.” Give us a call, seriously.

David Bezar:
We’re okay with it. This is what we do for a living. We’re passionate. We love it. We’ll give you information. Hopefully, it’ll benefit you. Hopefully, you’ll get some value. My biggest belief is it will. Don’t put yourself into a category that you don’t think you could benefit by this information. Look, one of the folks I saw last week, they had less than $500,000 in their retirement savings. We do one report where it’s a tax analysis on the required minimum … We do a lot of reports here, by the way.

Karen Bezar:
Yeah, we love our reports.

David Bezar:
We do a lot of reports because again, if you’re not feeling comfortable about your health and you can’t pinpoint what the problem is, you may need a CAT scan, you may need an MRI, you may need an X-ray, you may need an EKG, you may need an ECU blood … lot of reports to come to a conclusion. Am I okay or am I not? We do the same thing with your wealth, with your financial position. So, please don’t prejudge. Come out and see us. This person that had less than a half a million dollars, they had an aha moment when they recognized, as an individual, they had some beneficiaries. Divorced person, they had some children. Between themselves and the taxes they paid on their RMDs, their reinvested RMDs, because they had a big pension, and what the inheritance could have been, they were going to pay almost $300,000 on less than a half a million dollars of savings. That’s not something we make up. We’re fiduciaries. We just run a report that does the math, and that’s the data output that came in.

David Bezar:
The great thing about it is there’s a solution to that. We can come up with a solution. Again, I don’t want people to get off track with that. The other thing that Karen talked about today, I want to make sure people understand, is there’s a lot of misinformation about Roth conversions contributions. It doesn’t really matter what age you are. I had somebody come in and say, “I’m 72 years old. I’m already taking my RMDs this year. Why would I want to do a Roth?” It’s really this simple, like, it’s really this simple. If you sit in the camp that you believe that taxes are going to go up in the future, I mean, it’s really simple, would you rather pay a lot more in taxes on your money in the future or pay the taxes today knowing that you’re in the lowest tax environment that we’ve been in almost a hundred years? Just logically, which makes sense.

David Bezar:
That’s the question you have to ask yourself if you’re listening to us today, which makes sense? Here’s the good thing about considering these defensive tax strategies. See, if we can get you a point, especially if you’re in your early 60s, mid-60s, you’ve got to age 72 to start dealing with those required minimum distributions. Those things are going to come out. They got to come out if you’ve done no tax planning, and they may come out, and they get added to your social security, they get added to, if you’re lucky and have a pension, that may push you into higher tax brackets, so it’s going to blow up retirement for you. If you start to be proactive in the earlier years, you may be able to construct your income distribution plan, meaning your cashflow, by age 72, where none of it’s taxable.

David Bezar:
We talked about that … Now, you may not believe that, but we have people walking out in zeros or single digit effective tax rates. If that’s of interest to you, give us a call at (215) 798-9088, or visit us at thrivefinancialservices.com to get the guide that we talked about and schedule an appointment.

Joe Krause:
Yeah, the guide is impressive. I know we’re running out of time, but it is a fantastic takeaway for you to get started. Again, one programming reminder here on Talk Radio 1210 WPHT, Bret Elam goes one-on-one with Dom Giordano later on today in the Dom Giordano Show. Until next time, on behalf of David Bezar, Karen Bezar and Bret Elam, I’m Joe Krause, see you next time, everybody.

Speaker:
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. Often your questions can be answered in a simple phone call. Just call (215) 987-2430, (215) 987-2430. 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 risks, and unless otherwise stated, are not guaranteed.

 

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