We are back for another great Roadmap to Retirement discussion this week. David, it has been a busy month for Thrive, to put it lightly.
Yeah, busy, busy, busy. We just finished a fantastic week, another week in the books, and really turned out fantastic. We had a lot of great appointments and one workshop I think we got done, so we rested up a little bit this week, Joe, for the anticipation of what’s to come in the next couple of weeks.
We keep doing it because the demand is there. People love the conversation related to taxes, and that always leads into a further conversation about retirement in the whole. You know, as well as our listening audience, that we do it a little bit different. We’re all about education and advocacy. The common response we get from people, the common input that we get from them, “This is a conversation I haven’t had before,” so we’re going to keep at it. We love doing it and, hopefully, we’re delivering great value.
Yeah, and we remind the audience, if you happen to be driving along the Pennsylvania turnpike from Valley Forge through up to the Philadelphia exit, you’ll see the brand-new billboard up there, On the Road to Retirement, You Have A Choice: Certainty or Uncertainty. That really does ring true.
Completely. Look, we work hard at making sure that the work that we do delivers tremendous value. I try just to convey that message that what’s the investment? What’s the cost, right? If we take one hour, it’s complementary, and you end up with certainty versus that uncertainty, it was incredibly worth it. If you find, even further, that we now maybe fill a void that’s been missing from a retirement planning perspective and you want to do business, then we can really kind of put into place real certainty. Rather than kind of a do-it-yourselfer type program, we can give you the guidance. We can hold your hand. We can act as that advocate along the way.
I want to get you to repeat one or reference one bullet point that you delivered to the listening audience last week. I’m pretty sure it was last week. There was a client who had come out to the workshop who she had attended many, many financial workshops. The comment that she made to you at the very end, which rings so true to me when I listen to this show, I think it’s worth the audience hearing that little story again.
Yeah, and I say it from a humble perspective.
Yeah, not with arrogance, absolutely.
Yeah. She just said, after she came up right after the workshop was done, “This is the first workshop, and I’ve been to many, where I didn’t feel as smart as the presenters.” This is a very educated person. She has taken the time to go out there and accumulate the education. We were able to introduce concepts to her that she had never heard before, wasn’t aware of. It’s just not the common conversation.
Getting to retirement should be fairly easy for people. You get a job, and you make money and, hopefully, your expenses are less than what you make, and you take that difference and you put it into some type of a retirement plan whether it’s with your employer or on your own. You’ll pick some mutual funds, some different types of investments, and you let the money sit there for 30 or 40 years, and you accumulate a nest egg. Pretty simple plan, not a lot of pages to that book. Now that we’ve got to distribute that money and we have to consider Medicare and Social Security, taxation, longevity, sequence of returns, you start kind of adding the table of contents of all the things that you got to do to retirement, the book kind of gets thick at that particular point.
Yeah. Well done. Well said. I’m going to allow you to stay humble because I believe in being humble, but Brett, I’m also going to say, with an emphatic, emphatic tone in my voice, for the listening audience to truly, truly absorb what is being said on this show. You guys are as real as the day is long, and I think that’s so significant.
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Yeah. We’re not preaching from what’s theory. Again, what we have the opportunity to do and see is a couple thousand plans on an annual basis. Again, as we hear things, as we see things, and as we see them over and over, the same thing happening, it’s like, “You know what? I bet you the listening audience has a lot of the same similarities of the people that we’re sitting in front of.” Again, it’s just sharing those experiences and stories of people so that they can just make the best decisions for themselves and, again, just be conscious of everything that we need to think about as we enter that next phase of life.
When we come back out of the break, we’ll start with you. We normally do that. What’s on your agenda for a topic of conversation today?
Yeah. We’ve been talking about some of the potential changes out there that the government’s proposed with this thing called the SECURE Act, so just want to kind of continue along with that about kind of the why’s and behind it. Again, I’m going to be talking about retiring retirement. Are we ever purely going to retire? It’s an interesting story that we’re going to share.
Good. You can see I brought in a paper clip of a lot of notes from the SECURE Act of 2019 just to start to get educated. It’s all about getting educated, Karen. There is so much to know. There’s so much to learn. It literally changes from what we learned, sometimes, yesterday.
Right. We keep up with the changes.
You really do.
Even when you’re, quote, unquote, retired, how long is that going to be, 30, 40 years for some people that we have? It’s constantly changing, and we’re here along with you for the ride. We’re always constantly checking, every year, how are things going? Then you might have to adjust things, but we always have a plan.
I was going to say people who come out to the workshop, there’s people that come in here that have no retirement plan, and we just open their eyes. They’ve never even thought about it. We start asking them questions, and they were like they were just blown away, but they’re so happy that they came and they sit through this presentation. They’re so happy come meet with us. It’s crazy. Then we have other people that come in that are afraid. I don’t know what they’re afraid of, because David said they must have been to some really horrific seminars, and they’re just so pleased and relaxed by the end of the seminar. They come in, offer them, they answer questions and everything like that.
All right. Good stuff from Karen Bezar. David, I’ll give you closing word before we go to the break. Perhaps they’re afraid of the uncertainty. That would be something that we would embrace, the uncertainty perhaps. I don’t know.
It is. It’s common. People don’t want to know what the reality is sometimes. Sometimes they’d be surprised, to be quite honest with you. Sometimes we’re giving the two thumbs up telling people things are fantastic, it’s not as bad as you thought it was by any stretch, but it’s better to find out sooner versus later. 99.9% of the time, there’s always a solution how to get it done.
Quickly, when we get to your segment in the show, you’re going to talk about what?
We’re going to be talking about taxes today.
We’re going to go into the long term and the short term.
Four workshops next week, on Monday at the Huntingdon Valley Library, which is on Red Lion Road, Tuesday at the West Whiteland Township Building, which is in Exton, and then there are two workshops on Thursday. One is at the Mount Laurel Public Library in Mount Laurel. The other workshop on Thursday is at the Indian Valley Library in Telford, all starting at 7:00. Wow, a full slate.
We’re taking over the greater Philadelphia area, Krausey.
You’re taking over. If you had points up on a map, you’re covering it all.
Yeah. While this is a great means of communication here on the radio, some people like to come out and see us entertain. I hear it’s a great show these days with the cookies and coffee and just everything there.
Go to thrivefinancialservices.com. You can see the full calendar, but perhaps you can make one of the four for next week.
Yeah, that’s it. Not only is it great entertainment, but the education that we hear is even that much better and, again, the things that we’re talking about on this show and just diving a little bit deeper. Over the past couple weeks, we’ve been talking about this thing that government has thrown out there called the SECURE Act where it’s making some potential changes to things like required minimum distributions, again, going from age 70 and a half to age 72 or maybe even 75.
I was actually had an article shared to me from a client. What the topic of the article was, it says Retiring Retirement. What it means is people living longer and longer and longer. One plus one always equals two so, for today, we’re going to talk a little bit about math and just talking about the population growth of just what percentages of what ages of people are going to be living at periods of time and people living longer and longer. I’m just going to read a little bit from this article here today here, Krausey.
Again, it starts off just talking about a couple going in front of a doctor, and the doctor’s asking them, “Hey, what medications are you on?” It’s none. It’s like, “Well, how much you exercise?” It’s like two hours a day. Again, we have so many people come in that may not be healthy. There’s a gigantic segment of the population. I’m going to share some actuarial stats as the show goes on as well that we need to be conscious of making what we say are rational decisions not emotional decisions. We share that a lot during the workshop. I want to talk about that quite a bit here in this segment.
This comes from a young lady who had recently turned 67 years old. Again, just talking about doctors being shocked about how many people are not on any kind of medications and actually living healthy in retirement. Here are some things I just want to go through. I want to make some comments as I go through the article. It says, since 1950, the median age in developed countries has jumped from 28 years old to 40 years old, and it is expected to be 44 by 2050. Again, that’s developed countries. Now listen to this. The percentage of citizens age 65 or older is expanding accordingly from less than 10% in 1950 in the United States, western Europe, and Japan to a respective 20, 30 and, by 2050, 30 years from now, 40% of the population 65 or older. That’s a big deal.
The fear is, as Baby Boomers like this young lady are moving towards retirement. Again, the first Baby Boomers started turning 65, 10,000 of them a day for a long time, just started in 2011, that there will be fewer workers to support us, which will curb spending. Curb spending, that’s a big deal. What’s the number one thing that drives this economy? Consumer spending. We need to be conscious of all these things that we’re facing. Straining the healthcare system. More people are getting older. Obviously, we’ve talked about the crisis to things like Social Security and Medicare, again, with that many people out there. We talked about the reform that’s staring at us in the face. Again, everyone gets those statements from Social Security. I’m only going to get 78 cents on the dollar in year 2034 if nothing’s done. Again, it’s talking about some of those changes.
There was a story over the weekend that I saw, Bret, where thousands of Philadelphia area Acme workers are at risk of losing their pensions.
Oh, my gosh.
Out of the blue, that story pops you or smacks you right in the face. So important because, sometimes, you just don’t know what you’re going to find when you wake up tomorrow.
Yeah. That’s another topic. What you just brought up right there, Krausey, is probably a topic for a whole show, but we talk about that during the workshop, this thing called the Kline-Miller Pension Reform Act of 2014 where these employers have the right, if their pensions get underfunded or unfunded by a certain amount, where that you could reduce if not eliminate that pension benefit. Again, in our head, if we felt we were iron-clad heading into retirement because we knew we had this guaranteed bucket of money we were going to be able to rely on, om top of Social Security and, all of a sudden, our employer pulls it back, we need to be conscious of all these different things that could happen to us at the end of the day.
What this article says is more and more people, as they’re hitting their 60’s, they are not yet ready to go out into the pasture. I just shared with you that, every day, 10,000 Americans turn 65 and, every day, more and more of them are still fit, fit physically, where society may view, they still may view able, competent, sound-of-mind seniors as happy curiosities but, in fact, they’re becoming a sizable demographic. Again, thinking about how many people are growing up during those days and, again, going back in time where you had people working and factory workers, and the average age of people going back in to the Great Depression was 59 for men, it was 63 for women, where a lot of people were retiring from factories at 35 and 40 years old, and the pension systems were there to carry them into their 50’s and 60’s.
Life has changed. Again, what has won is economics versus science because it depends on what industry you are in is where you, quote, unquote, can be labeled as old, chronologically mature if you will. If you’re working in a factory, it could be a little bit more grueling than working behind a desk, et cetera, et cetera. That’s where they say science has won versus economics because the government has labeled you being old at the age of 65. You now apply for Medicare and everything else, and you, quote, unquote, can what we call is hang up the cleats. That’s where we start. I learned a new word called ageism, I had never heard of that before, as going through this article.
Some more number here, Krausey. Not only are Americans living longer, but they are also gaining more active years free from debilitating illnesses.
We’ll talk about what work’s doing for people’s health as well. Hear this one. In a recent analysis of Medicare from the University of Illinois found that nearly 30% of citizens over the age of 85 remain in excellent health, and a whopping 50% of them said that their health didn’t stop them from working, 56%, did not stop them from working or doing household chores. This level of well-being is particularly remarkable given the fact that most of them grew up during the Great Depression, 85 or older, when millions of those families were suffering from poverty, nutrition, not doing a whole heck of a lot, where life expectancy was a lot shorter.
Just imagine if these Golden Agers, what they’re called, not Baby Boomers but Golden Agers, the next generation above, imagine if they had come of age as the Baby Boomers did after the post-war ’50s and ’60s, because you think about that generation, the Baby Boomers, what do the Baby Boomers have in their face? All of a sudden, you start seeing the anti-cigarette and tobacco campaigns. People started quitting smoking a little bit earlier. You saw advances in technology and nutrition. How many diets have we heard about over the last 20, 30, 40 years versus how many of them were there 20 or 30 years before them? You got things like the GI Bill helping people get educated. We smoke less. People are exercising more and have better access to nutritionist food and are better educated than previous generations in history, although they will tell you people are getting a little bit heavier, though. Again, people are getting taller, so we say a couple extra pounds is okay with that.
Right. It is true. People are getting heavier, but that’s a different conversation.
But they’re staying healthier at the same time. Sounds like an oxymoron, but it’s actually possible. It goes on to say we’re going to see something that’s never been seen before where people in their 60’s, 70’s, and 80’s functioning at an exceptionally high level who want to continue working and remain connected.
I think about here at Thrive. There’s about 20, 25 of us here in the office. We have people here at Thrive in their 20s, their 30s, their 40s, their 50s, and we actually have three people on staff that are in their 70’s. People are working well into retirement. It sometimes becomes a have to, sometimes it becomes a want to, but again, people are healthier, and they’re functioning, and they’re wanting to keep the mental capacity continuing to go as well.
The question is whether society will adapt to make the most of this new labor pool. Employers tend to implicitly favor young, prized speed adaptable and willing to work more hours for less pay while undervaluing the years of accumulated knowledge, and wait until you hear some of this, and wisdom and social skills. It’s understanding that there needs to be that fine line that, as we see it, I hear they have a lot of people coming in there, and they call this phased-in retirement, phased-in retirement. Don’t go from five days a week to zero. You’re starting to see a lot of employers do it at five to four then down to three, where some people are wanting to stay on board, where now you’re able to bring on board these younger employees to pass that knowledge, et cetera.
Again, people in their late 50’s are more likely now to have a college degree than now people in their 20’s and 30’s.
Why? The increasing prices of tuition. You got to think about all those things. You have an interesting generation that may be more educated than the generation before them and the generation after them where there’s a need to now keep them as part of that labor force. Again, between 2000 and 2010, the percentage of American workers aged 55 and older grew from 13 to 20% where, by the end of this decade, next year, projections are one in four workers are going to be greater than the age of 55.
Reason we share that, again, we talk about we have a couple age 65, there’s now a 50% chance that one of them is now living to the age of 95, an interesting stat. People that work one year beyond what is labeled as full retirement, age 65, people who worked at least one year past retirement age had an 11% lower risk of dying. Again, it keeps us engaged. For all those things and understanding on how we’re going to live longer, these are all the things we talk about during that Retirement Roadmap Review is how we make sure that things are going to last for our whole lifetime not the next 5, 10 years.
Well, I get it as we go to the commercial break, really fascinating stuff. I did reference to my wife this weekend, just in general conversation, that it looks like I’m going to be working until about 80 years old before I start to figure out what the next phase of my life is.
To your point, in my 50’s, thinking about and planning to work a much longer time period. Good stuff by Bret Elam today.
Again, want to tell you about four workshops coming up, Karen, next week, Monday the 10th at the Huntingdon Valley Library, Tuesday the 11th at the West Whiteland Township Building, and then Thursday a double shot of workshops, complimentary, at the Mount Laurel Public Library and at the Indian Valley Library. Start time for all four, 7:00 p.m. Go to thrivefinancialservices.com to get yourself registered. It’s complimentary, as Bret referenced. They’re fun but, more importantly than the fun, we’re providing education here, and you’ll leave educated for sure.
You really will. People say that all the time. It is pure education. That’s all we’re there to give you. Please come down is all I can say. Great cookies, Wawa coffee, so come join us. Before I get started on my topic, I would just like to say a big shout out to our baby who is graduating high school this coming Monday.
Shout out to Hatboro-Horsham High School. I don’t know who’s more excited to graduate or get the school year over, my daughter or the teachers, but we are really proud of her
She begins the next phase of her life.
Yes, good stuff.
I’m just going to step into my topic which, again, I’m going to get on my soapbox a little bit about there all you women listening. Retirement planning is different for women, it just is, and here is why. I’m going to go into this topic again because I read this in Kiplinger’s. I can’t talk today. It’s an article saying that, unfortunately, even now in 2019, women tend to take a back seat when it comes to working out the details of their financial future. This is troublesome giving that, on average, women still live longer than men, which we’ve talked about before on the radio show, and therefore have a real stake in how long their retirement income will last.
Nearly every woman will have sole responsibility for her finances at some stage in your life either if you’re out there listening, maybe you never wanted to get married. Divorce comes into the picture. We’re in a high divorce rate right now. Even married women need to consider their income prospects, weighing the facts that, if they’re widowed, they’ll lose one Social Security check and possibly at least one part of a pension check or a whole pension check and will probably have to pay more in taxes when they file as an individual.
Guess what we do here at Thrive? We plan for, if it’s a married couple, we plan for the passing of one spouse. We take all of that into consideration. As this article says, things change with taxation because now you’re filing taxes differently, and things can affect your Medicare, what you’re paying for Medicare premiums. These are all things that we, again, take a look at retirement as a whole. Remember, just give us a call, 800-516-5861, or please take a look at our website. If you’re interested in coming to the seminars that we’re having next week, we’d love to see you. Come on down or come visit us here.
I’m just going to go through a couple reasons, again, why this is happening to women.
I’ve seen a lot of articles on this lately, and I just can’t believe, in 2019, that it’s still that much of a problem. Number one reason is women still tend to be the primary family care giver. Even if it’s taking care of children when they’re born, the reasons, again, is if you got out of the workforce for 10 years to raise your children or 15 years, you’re losing all of that 401(k) money that you might have been working at a company where they were matching or you’re not putting money away at all.
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Then another area is, once you’re looking at retirement, again, Social Security. You’re probably going to have a smaller benefit amount than your spouse because your spouse has been working longer or has higher income. Just one thing to remember out there is that there’s something called the Social Security Spousal Benefit. That’s something that a lot of people have come in here and don’t even know that’s an option. As a spouse of somebody who’s working, you’re allowed to get equal to approximately 50% of what they would get, your husband or your wife would get, at full retirement age. Or if you didn’t work at all, you’re still allowed to get a spousal benefit on Social Security, which is eye-opening to some people.
Again, in 2019, there’s still that wage gap, which is crazy, but women, on average, earn less than men in nearly every occupation for which they have collected data, the US. In 2017 was the last statistics they took on the actual income. They said that we, as women, earn $0.85 for every dollar than a man earns. Now, I can tell you I’m going to step out of the box here, but financial services, we all get paid the same for the same amount of work, so I’m sure they didn’t include that in there, but that’s a great field that I hope young girls, if you’re listening, go into. Besides that, you can take care of your own retirement and your own self.
Number three, women can expect to pay more in healthcare costs in retirement. We’ve talked about this before. Joe, you might even remember us saying, “Did you plan for your retirement of spending $250,000 in medical costs?” This article actually says that 65-year-old couple retiring in 2018 will need 280,000 to cover healthcare and medical expenses through retirement, but what they say is, because women usually have a longer life expectancy, even though it’s 280, it’s unbalanced, right? For women, they say it’s 147,000 and, for men, it’s 133,000. Even if you’re single, it’s still a lot of money. You still have to prepare to spend that money.
Yeah, I know. My wife and I talk about it all the time. As you know, we had a progressive attack of MS back in 2016, so there’s that uncertainty about what that means down the road. We don’t know what it means, but it’s part of our conversation already. We are very, very nervous about it.
At least you’re talking about it and, instead of sticking your head in the sand, you’re going to plan for that. Then the other part of the healthcare costs is that long-term healthcare. We talk about it all the time, and we plan for that in retirement when we’re doing our plans for clients who don’t have long-term healthcare. They say that annual median cost of care now ranges from $18,720 for adult day care services, and then if you have to go into a facility, they’re saying about $100. We say $100,000, but this says $100,375 for private room in-home nursing care, which it can happen. It can happen at the blink of an eye.
If you don’t have long-term healthcare, guess what? There is hybrid products out there. There’s other ways to plan for that. If you’re interested in learning about that, again, take a look at our website. Come on in, and we will work out a plan for you.
How many people, do you think, listening to the program right now or if there were. I always ask, if there’s 10 people in the room or 100 people in the room, how many people don’t have long-term healthcare? A lot.
A big number.
It’s very expensive, and there’s less long-term healthcare companies out there dealing with it, so that’s a topic for another day, a long topic.
Number four, again, women are typically more conservative investors. They’re just afraid to get out there and take a risk.
Number five, women. This is like a study they did. Women have a hard time discussing their finances even with professionals. How many women are actually working with a financial advisor? They said 47% and, of the 47%, only 50% of those who had an investment advisor actually spoke with their representative. You’re not going to get that from us. We’re going to work on a plan with you, and we’re always here for you. We work on the plan with you. We educate you so you really understand what’s going on.
I’m going to say, real quick, bottom line is, if you’re a woman who’s been avoiding financial planning or if you’ve handed the job over to your spouse, it’s never too late to get involved. Don’t be intimidated by the jargon or your spouse or don’t say you’re too busy. I know you are busy, but just come on in, 800-516-5861. We have female financial advisors here. Talk with me, and we have a couple advisors. We’d love to speak with you and meet with you. Just give us a call. Just start with that or come to a seminar.
Yeah. I’m glad you’re taking the lead on it and talking directly to, perhaps, the women that are listening to the show right now. 50% of the audience on Talk Radio 1210 WPHT is female or close to that number, so I encourage them call Karen Bezar or connect with Karen.
Ask for me personally.
Ask for Karen. If you want to know about Karen, go to meetthrivefinancialservices.com. You’ll learn a little bit about Karen as well. As we got to a commercial break, nice job, Karen.
Thank you so much. We do say congrats to Haley and congrats to you as the tuition bill will. but you’ve prepared for it.
We are prepared. We’re not scared.
It’s coming. Good stuff and congrats at a good time of the year. We’ll get into a commercial break here on Roadmap to Retirement The Radio Show. Thrivefinancialservices.com right now to look at the workshops for next week. Back in a moment.
Thank you very much, Karen Bezar for our last segment
Yeah, good stuff.
The topic that we cover at our workshops is primarily tax efficiency in retirement. A couple of them commented that what they see is kind of, after April, they see less and less people attending. We see kind of consistent numbers of people attending our workshops. I think it’s because we convey a message. It’s not just about your upcoming taxes that you have to pay in April. It’s really about the long-term planning, the forward tax planning and keeping up with all the changes.
Again, a lot of people as me, “Why Thrive? What’s the difference between you and my guy or my gal?” and all that. I really do think it’s that we so focus on really how to navigate retirement, all of those different. It’s not just investment planning, right? I mean investment planning, stock, bond, mutual fund, ETF, maybe some alternatives, whatever it is, that only gets you so far, right, because if you don’t handle the money correctly, taxation, longevity, protection, preservation, all of those things, you could end up spending a whole lot more and have that money that you thought was going to last your lifetime not be there. I think that’s why we are very different.
Like Bret talked about with the SECURE Act, I would really challenge most of the people listening to the show today, if they do have a financial advisor, to reach out to their financial advisor and say, “Hey, tell me a little bit about the SECURE Act. Tell me about the propositions that are in place and how they’re going to potentially impact me in retirement.” I mean, Joe, don’t you think that’d be a reasonable question for a financial advisor?
After last week’s show, 100%.
Those types of responses or one that doesn’t seem like it has much clarity, it really should start to show you and indicate to you that there may be a whole another need for professional, a different type of professional to help you kind of get through this. I’ll give you a little insight. I think my hope is that this will really kind of make a picture for people the difference.
Last week, I had nine new appointments, right, nine people that, either through our radio show or through our workshop or whatever, came out and visited with us. Out of the nine people, two of them had less than $500,000 in retirement assets. Three of them had between 500,000 and $1 million in assets. Three of them had between $1 million in assets and $3 million in assets. We had one couple who came in with $11 million. The reason I share that is to show the diversity of the types of people that we visit with, right? There’s no prejudice on our part. We’re not looking to talk to anybody other than people who are genuinely interested in making sure that they’ve got a defined roadmap through retirement. Again, we don’t care if you got 100 grand or you got $11 million.
Now, the interesting thing is that they all had the common questions. You know?
It, again, didn’t matter if you had an extra zero at the end of the net worth or not.
It was really still some of the same questions, “What’s the best way to take Social Security? How do I avoid Medicare surcharge levels? What’s my taxability going to be at the different stages of my life? How do I make sure I have a little bit of money left over for my kids or beneficiaries? How do I make sure I got enough money to pay me consistently, on a monthly basis cover my bills?” I mean that’s kind of what most people say.
We go through those with our Thrive Retirement Roadmap Review. If people go to our website at thrivefinancialservices.com, they’ll see the Thrive Retirement Roadmap Review. It’s actually downloadable. That’s a word. You can go on. You can download an example copy of every single one of those reports that I just talked about. Sometimes when I do the workshop, I get up there, I start the workshops, and I’ll say to the audience, “How many of you have ever been to an educational seminar hosted by a financial service company?” About 99.9% of the people raise their hand. Then my follow-up question is, “Now that you know that we’re a financial service advisory firm, how many of you are skeptical that we’re going to try to sell you something?” Every hand goes up in the room.
I say, “Great. Well, if you’re a cynic, there’s no cure, but if you’re skeptical and I can give you the facts and the figures and the understanding, then maybe you will see that we are telling you the truth. Come in. It’s completely complimentary,” because I really want to bring down that barrier because the information we have is golden. It just makes or breaks. I want to give you a quick example of that. One of the clients who came in, where was he?
Think it was Honeywell?
Yeah, Honeywell. Thanks. Bret’s got a much better memory than I do. He was an engineer at Honeywell, and I think she was a scientist at Merck, high earners, and very conservative in their spending. And as engineers, right, and scientists, very focused on data and making sure everything is right. They’ve done a wonderful job. They’ve lived below their means. They’ve accumulated. They’re both in their 70’s now. They got plenty of income coming in, so their big thing was taxation.
We have on boarded a wonderful group of CPA’s, a wonderful group of estate planning attorneys, and a wonderful group of tax attorneys with master’s degree, LLMs. We’ve elevated the resources here at Thrive to really accommodate people that have a very, very… an area of focus on taxation. It’s allowing us to really become that kind of preeminent resource to make sure that we navigate things correctly.
Here’s an example.
They brought in their tax return, and we went through it. What we were able to provide to them, Joe, was a what-if scenario meaning they showed us their 2018 tax return, and we put it to our team of CPA’s and tax attorneys and said, “If you were going to do this return with us back before you actually did it with who you did it with…” Did that make sense, by the way?
You’re talking to the client, yeah.
Yeah, it makes sense.
Then here’s what the difference would have been. Okay? I’m going to read to you the quick side-by-side comparison, Joe. I got this sitting right in front of me. I’m showing it to you right now. This is what I showed the client. Okay? On column A, which is their original tax return, they had $68,824 of taxable interest and dividends. They had $147,000 of capital gains in their mutual fund accounts. They took a $35,000 distribution, required minimum distribution for their IRA, and they had $37,499 of taxable Social Security income for a total of 289,807. Not bad, right? Living a nice lifestyle. Okay? That was their tax return. On that income, Joe, they paid a total of $36,233 in taxation, 24% marginal tax rate, paid 13.17% on an effective rate. Follow?
Okay? After we did our analysis and went to work, what we were able to show them, “If you would have done it with us, this is what we would have done.” Now, I’m going to share a new concept. This concept is called capital storage. It’s just a fancy term for what investment vehicle or tax-deferred vehicle you may be utilizing to prevent taxation on certain bucket of money. There are about 100 different capital storage vehicles that you can use to make sure that that taxable income is now sheltered legally so it doesn’t show up on the tax return, and you end up not having to pay taxes on it currently. All right?
What we were able to do, Joe, in that column taxable interest and dividends, which was $68,824, because we used a tax sheltered, whether it’s a trust, insurance, annuity, there’s 100 different ways to do it, we were able to eliminate that from showing up on the tax return, so $68,824 does not show up on the tax return now.
Okay? Then the capital gains in the mutual funds, because we sheltered a portion, instead of $147,000 of income, we got it down to $58,595. Okay? Because we reduced that income there, it actually allowed us to pull money out of the IRA accounts and go up to that next tax bracket threshold without breaking through it. We were able to take it from $35,872 to $94,749. Took more money out of the IRAs. We’re reducing the principal on it. That means future RMDs are going to be less, less taxation.
Bottom line, Joe, 289 on their tax return for income. On our tax return, $190,856. That put them in the 22% tax bracket. They paid a total of $24,233, so a savings of over $10,000 annually for the rest of their lives just by doing those adjustments. I hope that illustrates the difference between Thrive Financial Services, Thrive Capital Management, what we do here, as compared to an investment advisor kind of out in the public space.
I’ll pause for a minute, and I’ll say that, when you say your information is golden, you are accurate, sir.
Yeah. Joe, it’s the know-how and the focus.
It’s the knowledge.
Yeah. We’re not general practitioners. If you have a specialty item, and most people do… Whether you have $100,000 in assets or you got 11 million in assets, this type of an exercise is applicable.
Yeah, really, really good stuff. Go to Thrive. Great stuff. Go to thrivefinancialservices.com and start with a workshop. I think that’s the best place for you to be or for you to start.
That’s going to do it for the show this week. We thank all members of the Thrive army for tuning in to Roadmap to Retirement The Radio Show. On behalf of David Bezar, on behalf of Karen Bezar, on behalf of Bret Elam, and on behalf of Haley, I’m Joe Krause. See you next time, everybody.