As we begin the broadcast this morning, just Bret in the big chair, and myself, bringing you an hour full of great information about our program, Roadmap to Retirement. Bret, I’m going to speak on behalf of David and Karen, I’ll let you, in your own words, thank the listening audience. The July numbers, July ratings are out for our program. The July numbers are incredible. This show is a tribute to the members of the Thrive army. They are coming to the show, they are returning weekly, they are signing up to come to the complementary workshop, and most important, they are getting themselves educated. It’s been an incredible ride. I am thrilled to share that news with you, and with all of our listeners. I wish David and Karen were here this week to be able to hear it. But we’ll talk with them about it next week.
We echo that same sentiment, Krause.
I mean, it’s what our mission has been ever since we started this. People ask us the same question, “Hey, it’s the summer, are you guys going to quit doing workshops? It’s easy to do radio, are you guys going to quit workshops?” We actually had record attendance at our workshops at the same time, Krause. I think the information is more relevant than ever. This market’s been crazy with the United States and China. So it’s almost like you’ve got to take everything fundamental and throw it out, and now you’ve got to deal with politics, and listen to the trade wars, and all of that other stuff that’s going on out there. Again, it’s what our job is to try and make this good radio.
Again, it’s not an infomercial to talk about what’s the latest, greatest product that can help me get nowhere at the end of the day. It’s about if we can be anymore in fact about just having a plan, having a plan, having a plan, where we had so many phone calls this past week of just, with market performance out there, it’s like, gang, we’ve already done what we were supposed to do. As long as we start making, the most important word, rational decisions, not emotional decisions, we’re going to be okay. So it’s sometimes just reminding people what we did and what we came up.
Again, a lot of people describe coming in here, sometimes, like a massage, where it always feels great when they’re here, and then when they leave, they’re like, man, I’m achy again. Maybe it’s time to come back in and get my retirement roadmap review looked at one more time. It’s a great pleasure, it’s a great honor, to have this … We always say the easiest thing to lose is the hardest thing to gain, and it’s called momentum. So my partners and I, it’s something that we’re going to strive for, for the years to come, to just bring great listening radio, great content, educational workshops. Again, we talked about our workshop we got coming up here even at the end of September, which is going to be another one.
That’s exactly where I was going to go. I was going to use your statement to transition into giving you an opportunity to talk about that September workshop, because that workshop is going to be at one location, the seating is going to be 300?
Yeah, we’re somewhere in that two to 300. That’s crazy, just how many people we’ve had RSVP just over these last couple of weeks. I was actually, while we were in studio last week, just listening to the show, and again, we’re going to be in Plymouth Meeting on September 25th, and we have a special guest that night. Again, we’re actually going to have him on the radio. He’s going to actually be with us Labor Day weekend. That weekend, he’s going to be coming in the studio here from Kentucky, and we’re going to be hearing from him a little bit, just a little bit of a preview of what to expect here in late September. But we’re excited. Again, part of the Thrive army is already calling here to the office and saying, “Hey, do me a favor, just save me a seat. I want to make sure that I hear something, just because of the content that you guys have been able to deliver thus far on the radio, thus far at the workshops.” They just don’t want to miss the information.We always echo the same sentiment, that's what our mission is Click To Tweet
Just for clarity, again, that date for the event coming up, and you’ll start to hear a lot about it, because you’ll start to hear radio commercials, you’ll start to hear some promotional announcements for the event coming up in September. There is no charge for the event, but a ticket is required. The reason a ticket is required is to provide some structure and some organizational flow to make sure that we don’t exceed the allotted number in the room.
Sometimes it’s like, ah, it’s a workshop, I can go to the next one when they come back in another three, four, five, six months, something like that. But with this, this is one and done, gang. Again, we get the opportunity, sometimes it takes us a year plus to try and get some special guests in the area. While David and I, and Karen, feel like we believe we deliver pretty good content, sometimes it’s great to hear it straight from the horse’s mouth. So it just brings another level of sophistication.
Again, people in our industry do a very good job of making things that are simply sophisticated overly sophisticated. So again, it’s just taking our time and talking about things, about rational issues that are really out there. Try not to be emotional with them. Then how do we just take it straight at it and just go attack it? So it’s things we take great pride, great pleasure. We’re actually getting ready … This is a good one, Krause. We’re actually getting ready to be able to start doing some continuing education for some of our accountant friends here in the area, where we’re going to be offering some continuing education. As you can tell, we have a heart for taxes.
So just about how, just, again, empowering the community. How many accountants can we work with and talk to in the greater Delaware Valley. Coming out to some special CPA workshops, where it’s going to be specialized, so that they can then deliver that much more greater service to their people as well.
Yeah, that’s great stuff. The one thing that I will say is that you will leave that event on the 25th of September with a lot of valuable information. Go to Thrivefinancialservices.com and get yourself registered for that event. Again, the event is no charge, but the event is 100% going to sell out, meaning all of the tickets that you have are going to be given out for that night, 100% guarantee.
Yeah, you know what’s crazy, Krause, is we do a lot of marketing for a lot of our different events out there, and we haven’t done anything except mention it a couple of times here on the radio, and the number of tickets that have already been taken, it’s crazy. So, it’s why we’re talking about it now, so that we have the appropriate number of seats. Again, maybe it’s something that we’ll try and do again, maybe sometime, heading into 2020. But again, with this content, the information that we’re going to be sharing at this workshop, I promise you, the content hasn’t been shared previously before, because this gentleman hasn’t been up here before, Mr. Ruby.
I want to give you, as we go into the commercial break, we’re under a minute now until we get to the commercial break. I’m going to read the three lines, the opening three lines of an article that I tagged from Barrens over the weekend. Then I’ll let you process that. We’ll come back out of the break, I don’t want to get you sidetracked from what your intentions were with the program today.
But I do want you to comment on that. Opening three lines of the article in Barrens, “The vast majority of working Americans are at least somewhat anxious that their savings will run out during retirement. Most do not believe their savings and sources of income will last throughout their retirement.”
Absolutely, great job, great spot to go. Moving it around allows more people from the Thrive army to get into those workshops. As we went into the break, I talked about, or read verbatim, three lines off of the Barrens’ article. The bullet point is that Americans are anxious, Bret, that their savings are going to run out, their sources of income are not going to be there. They’re going to come up short and not make it through retirement. I think that’s a very, very credible statement, and one that most of us believe.
It’s in the back of your mind.
It’s in the back of our minds, absolutely.
David always talks about, during the workshop crowds, of two overarching questions. Do I have enough? Will it last? I mean, it’s almost one and same, to be quite honest with you, which is exactly what that article just said as well. Again, we have the opportunity here to do a couple thousand plans on an annual basis, and there is nothing more that we have the heart for. There is so many people that things, they feel like they’re too well off. Sometimes we have to humble them a little bit, where things don’t always seem as good as they are. But I’ll share with a lot of the people that are listening here today, too, sometimes things aren’t as bad as they seem either. But it always gets back to, and I just said it a little bit ago, is no one ever plans to fail, rather they fail to plan.
So, it’s funny, we just did a sales, our semi-annual meeting with our sales team here on Wednesday, David, Karen, and I had the opportunity to sit down with them. Number one, to congratulate how many families that we’ve given peace of mind, a roadmap to, of what it’s going to look like moving forward. But the other part of it is, again, as our Thrive army continues to grow, something that we take great pride and passion in, is that everybody that has a deliverable, that comes out of Thrive, is the same thing over, and over, and over. We don’t want some people building cheeseburgers over here, and somebody putting mustard and relish over … We want it to be the same thing each and every time. But personalized, given your situation.
So it’s why we have a heart, and really talking about taxes here today. Again, most people never plan to fail, but rather, fail to plan. It’s just going deep. That’s what we call the Thrive Retirement Roadmap Review is, again, it gave me appreciation because there is words that I always say over and over and over again, when people start echoing back to me, I was like, oh my gosh, it actually started making an impact.
So many times you listen to a lot of our colleagues, people in our industry that have showtimes here on the weekend, on the same channel. You’re going to hear about this product, that product, this product, that product so many times, or it’s superficial, there is not a whole heck of a lot of substance, or they’re talking to you live from Boston and Philadelphia. I want you to realize, we are Philadelphia, we are not talking about workshops in Providence, Rhode Island, or Boston, Massachusetts, we’re talking about Cherry Hill, and Chester County, and Bucks County, and Delaware County, and Chester County. We’re here for the greater Philadelphia area, that’s where our heart is. This is home. It’s why we talk about the Eagles. In fact, can’t wait for that season to start.
Yeah, I’m sure.
See those power rankings going on. I was watching a little bit of that pre-season. I don’t care, we saw enough to be excited yet again.
So amen, way to be a Philadelphia fan. But getting back to that, is again, we invite people in, whether it’s coming to a workshop, coming to this tax summit, Whether it’s listening on the radio, just get that second opinion. Just get the second opinion. It’s not a process to try to get you in to come sell you some annuity, or to become our client, to start doing your tax return It’s about just getting an assessment, and not the minute before you’re ready to retire, a couple of years out.
For example, Krause, here is one. Young lady, she had a ton of money in retirement. But she’s working with an advisor where she’s pretty much already locked in. Like, she can’t even move her money around. There is not a whole heck of a lot of assets there. She’ll get a Social Security check in retirement, and our listening audience and people who have come to our workshops, and even our staff. I was using some of our tax planning tools this weekend, and doing a little bit of training. I said, “You know, when we see somebody like that, they’re not going to be paying any taxes whatsoever in retirement with just that Social Security check.”
So this young lady had $150,000 in IRAs. Okay? Not a ton of money, but it’s all relative, because it all has to do with your expenses. David talks about that all of the time. Somebody who may have a million and a half, instead of needing 2,000, 3,000 to live, they might need seven, eight, $10,000 to live. A whole different set of circumstances. So everything is relative at the end of the day. It’s why we customize and personalize everything that we do. But when we met this young lady, she thought there was never a road to retirement. Like, I’m never going to be able to hang it, I’m going to have to pay taxes, I’m going to have to pay Medicare. How am I ever going to pay for this?
So we take our time, we breathe. Because again, we can’t solve world peace for everybody at every point in time.
But again, if, we call it garbage in, garbage out. So if you share information with us … This is a second opinion Krause. Somebody who did not become a client. She priced, gave us a testimonial tomorrow, even though we don’t do that here on the air. But this is what happened. Her advisor, she was making about $35,000 a year, young lady, by herself. So she was still paying some taxes because she was working. Her advisor told her to start putting money away into Roth IRA, so that the money that she has there, and after it’s been there for five years, she can pull it out and it would be tax free. She said, “Misses Doe, you know, you’re in a decently low tax bracket, but let’s put that money away, after tax money, so we can let it grow tax free.” Okay?
So, we sat down, as we were assessing, there wasn’t going to be much that we were going to be able to help her out on. I said, “Hey, you know for a great use of your time, I don’t want you to have to travel another 45 minutes to come in here and take a day off, I know this is important to you, and you saw the value, that’s why you’re here today, to take some time off of work, because you cared about this process.” I go, “Here is what I’m here to share with you. Unfortunately, your advisor you’re working with isn’t telling you the right information, because what he means, because I hear everything about a Roth IRA, I think your advisor was reading CNN Money Magazine too. But she didn’t apply that scenario to you.”
She’s like, “What do you mean?” I go, “This is what it looks like in retirement. You’re not going to pay any taxes. Here is your Social Security check.” “Yeah, but Bret, he said I’m going to have to take these required non distributions, and I should start putting them in a Roth IRA, so I’d never be subject to it.” So we shared her, lots with her, live, here in the office, interactively, that I showed that on top of her Social Security check, of her $150,000 in her IRA, she was going to be able to pull out approximately about $10 to $13,000 a year, from her IRA. Ready for this? So she put money in her IRA while she was working, she got a tax write-off on it. So she didn’t pay taxes on that contribution. But between $10 and $13,000 a year, again, there will be some inflation that should help out with that number, going to be able to pull out of her IRA, ready for this? Tax free. While she was working.
Think about it, Krause, you’re working, I put money in my 401K. I get a write-off. Instead of me paying, say, 20% in taxes, I’m going to write it off and I’m not going to pay 20% in taxes.
So I could put it in a Roth, and pay 20%. For her, it was going to be approximately about 15% where her income was. Okay? Don’t pay taxes on it, with the promise that you’re going to pay taxes on it in the future. Well, in her mind, and again, we hear conventional wisdom. So say I put money away because in retirement, your tax rate is always going to be lower than while you were working. In her circumstance, it’s absolutely true. But so many people, when they come in a part of that Thrive Retirement Roadmap Review, their tax rate is actually higher in retirement.
That’s why nobody can listen to the generalizations happening in magazines, on TV, even on this radio show. You need to get everything personalized to your situation. Krause, she goes, “I don’t need the money though. Why would I pull money out of 12 and a half thousand out of my IRA if I didn’t need it?” I said, “There is this thing, remember your advisor, he’s telling you to put money into a Roth IRA? I want you to do a partial Roth conversion.” “Bret, what do you mean?” I go, “That $12 and a half thousand that you don’t need, I’m going to be putting that into your Roth IRA every year. So instead of while you’re working, that your advisor is telling you to take 15%, or don’t pay 15% in taxes, because you’re not going to pay taxes later, well in that scenario, when you make a Roth IRA contribution, you’re paying taxes on that contribution today, with the promise of it being tax free in the future.”
In her circumstances, she was paying taxes today, with no taxes in the future. So it makes zero sense why you would contribute something today that you’re not going to be paying taxes on in the future. I go, “Here is a situation where your advisor talked to you about your investments, your investments, your investments. They did not do what we talk about, a Thrive Retirement Roadmap Review, where they talk about tax efficiency. Income distribution, that written income plan. Then how do we factor it all with healthcare and legacy? Then how does it marry with the investments?“
We gave this young lady a roadmap, I said, “We don’t have any pride, we don’t have any ego. Feel free to go give it to your advisor, and say, do this and here is why. If they have any questions, I’ll help out, because I care about you. You took time out of your schedule to at least come and get a plan. But he should be able to get this.” That’s what drives us nuts, Krause. But it’s what gives us pride, and it’s what gives us passion, and most importantly, is what gives us purpose. There are so many people in our industry that just don’t know. They just don’t know.
It might be the case. I kept, and I’m still thinking, as I listen to you lay out that story, the one thing that you always say to me is your plan is our plan. So that customization of details, in her example, was so tailored to what worked for her, specifically. Really good example. I hope everybody is able to …
If you don’t, you call.
That’s it. You pick up a thing or two, and you’re not going to follow it. It’s like when I get a client who is an engineer, I got no clue what he’s telling me. I got a client who comes in who is a nutritionist. I hope I understand what she’s telling me, but I don’t always do that. It’s the same thing. When I’m hearing things on the radio here, I’m never going to understand it all the way to the level of detail I wish I would. But that’s why we invite people for that complimentary session. That’s what it’s all about, Krause.
I want everyone to react quickly for the event on September 25th, Bret. That is at a neutral location, convenient from the Pennsylvania turnpike, convenient from the Blue Route. It’s where all points come together. It’s going to be a spectacular night. 200 to 300 people in the room, whatever the capacity will be, it will be filled. It will promise to be, and will deliver, and incredible amount of complementary information, and nothing is for sale.
Nothing is for sale.
These sessions, these workshops that we do, is people always say, “I always leave with an additional question than I came from.” Which means we’re delivering good content at the end of the day, and things that actually apply to you. Not just talking about things in thin air that don’t apply to anybody here, in the local Delaware Valley area as well. But-
On our conversation from the last segment. Taxes are always a part of the conversation. The headline of the workshop is Taxes in Retirement.
That’s a big, broad statement, or big, broad three words. Narrow it down for the listening audience, right now, Bret. Give me some examples of what that means, if you can. I know you can, but if it translates well for the audience to do that.
Yeah, we’ll talk about some of the ah-hah moments. I described one, with the young lady I just had a moment ago. I’ll describe some of the others as well. I mean, again, it’s broad, but we go through a ton, and literally, we get the fortunate ability, we get a lot of do-it-yourself-ers that come up to our workshops, because they appreciate the fact that it’s not bait and switch, is what we call it, come out to a steak dinner, and a glass of wine, and see if I can get you a little tipsy, and maybe you’ll schedule an appointment to come talk about stocks, bonds, mutual funds, annuities, or something like that.
No, no, no. If you’re looking for content, if you’re looking to actually get some stuff that you can work upon, whether you already work with somebody, or whether you do it yourself, I promise you, you’re going to come. There has never been once person who has come to one of our workshops saying, “I knew everything going in there.” Not one. I’m talking about doing 100 workshops a year, not one person has come say, “Ah, I wasted my time here tonight. I picked up nothing.” Which again, makes us feel good every night. We’re all about the SWAN theory of investing, the SWAN theory of life, just a SWAN … You know what SWAN stands for, right?
Sleep well at night. So we’re all about the SWANs. Again, just be conservative, just be truthful, be humble, have integrity, generosity, you just give back. If you do good by people, people do good by you. That’s what-
Takes me a bit longer, by the ways. Sleep well at night is something we’ve talked about, but when you condense it down to that.
Well, you know what? This has been a great week, because the turmoil that’s happening in the market with all of the trade wars, and tariffs, and all of that. We’ve talked about it over the past couple of months of the importance of working with an advisor who may charge you a fee. We charge fees too, on some of the solutions that we have. Again, we’re fee based financial planners. But, Vanguard, amongst other companies, have done phenomenal studies about why it’s so important to work with somebody who charges on a fee based standpoint. Why? Because we talk about re-balancing, we talk about taxes, we’re going to talk about taxes in a little bit here today.
But especially with what’s going on this week, it’s talking about making sure people have a rational approach versus an emotional approach. “Bret, oh my gosh, the market is down 3% on Monday, should we get out?” Fundamentally, people are still hitting our earnings reports. Does that have anything to do with the tariffs? Again, everyone’s situation is different. Everyone’s odds at a level is different. But that’s why it’s important that you just don’t, oh, Money Magazine said I should go and invest on my money that way. Was that appropriate to you? “I don’t know.” Sometimes it is, sometimes it isn’t.
But when people come in from the do-it-yourself-ers, and again, there is three ways, how anybody on the phone, how anybody that comes to a workshop, anybody that’s listening here today, how you can grow your bottom line. Three ways. Number one, you make more money. It’s a pretty good way how to grow the bottom line. Now, everyone in our industry, that’s that whole conversation, investments, investments, investments, investments. You get the hockey line, we can give you reduced risk, and increased performance. That’s what everybody says in our business, Krause. We all think we’re great, but here is the promises that we make on the market, David does a great job at describing what our guarantees are related to the market during the workshops.
We talk about, as financial fiduciary, the one thing we can promise you about the market is that it will go up.
We can also promise you that it’s going to go down, and that at some point in time later, we can also promise you it’s going to go up, and then again, we can also promise you it’s going to go down. Pretty much, I just guaranteed you nothing, except the market is going to be volatile. So everyone in our world, and we’ve got some great people here that we partner up with amongst ourselves, that we’ve got some great portfolios, that we help people try to grow the bottom line.We can give you reduced risk, and increased performance Click To Tweet
But there is two other ways how you can help your bottom line. One, you got to be conscious of fees that you’re paying. Do not pay anything more than you need to. Number two is that if you are paying fees, I hope you’re getting value for those fees. Meaning, is there tax as part of the conversation? Is there income distribution as part of the conversation? Are we figuring out how to maximize legacy with trust planning, and is there oil, or gas? Do we need to worry about Medicare? Medicare surcharge. What are you getting for that fee? Okay? If you’re just having that investment conversation, gang, I’m telling you, you’re not really getting anything for that fee. You might as well just go do it yourself-er, invite people to go to that.
Say, if you don’t want work with me, whatever you’re getting elsewhere, do not work with them, because you’re getting zero for value. Might as well save the fee at a bare minimum. But when people, and I love it, because we get very sophisticated people. We get a lot of the do-it-yourself-ers, because they know what’s being disguised at these dinner workshops. They’re like, “All right, maybe I’m going to get a little bit of education. But at least I don’t have to sit through something bad. I can get up and leave.” But typically, we never see, if we get one person a quarter that leaves our workshop early, Krause, I’d be blown away, just because by the time-
That’s the one skeptic that you’ll never be able to reach anyway.
It’s okay. If you’re a cynic, there is nothing we can do.
If you’re a cynic.
People come in with skepticism, we love it.
Because you just let us play it through, we’ll give you the hundreds of names of people that we’ve helped, if you want to talk to them, to find out if we’re fake. It’s all good. But here is another big one. We had a gentleman, three times over the past month. They’re all do-it-yourself-ers. So it meant that I finally need to just speak up about it. Well, a lot of people in retirement, they start understanding that whole potential Roth conversation story, like I was sharing with that young lady. She had no clue, she was working with an advisor who obviously was just having the investment conversation, had nothing beyond that. But we meet some people, and they could be spreadsheet-ers or not, we meet some people who are engineers, and accountants. They just love to throw spreadsheets together.
We saw, during the month of July, a bunch of different scenarios of people saying, “Hey, I’m pulling money out of my IRA, where I just want to pull out and convert enough to go up to the 12% tax bracket. Where I believe if I was to go above the 12%, and reach the 22% bracket, it doesn’t necessarily make sense for me to go do that.” So I’m going to talk about one particular situation, a couple. Even if it spills into the next segment, this is okay, too, because I’m going to go through this. It almost earmarks exactly why we do what we do. Do-it-yourself-er, gentleman was coming in for the last three years, was pulling money out of his IRA, and doing Roth conversions, right up to that 22% bracket. There were two Social Securities in the household, and again, we went through Social Security strategy. There wasn’t much we could do there. We made some recommendations, about Medicare, Medicare surcharges. He understood how to avoid them, and we wanted to stay away from them.
But when he started talking about the tax side of things. I said, “You’re actually not pulling it out to 22%.” He goes, “What do you mean?” He goes, “I have the tax brackets right here.” I go, “Actually, you’re in a 0% tax bracket, where you’re at, before you even started a thing. You’re not even going to the 10, or the 12% bracket.” I go, “Every dollar that you’re going to pull out of your IRA …” He understood it. Every dollar that he was going to pull out of his IRA, he was going to have to … Well, he understood it at the end, I should say that. He was going to be paying somewhere between 18 and 22%.
He’s like, “What are you talking about, Bret?” I said, “Again, we can’t just look at normal tax rates.” At workshops, we talk about effective rates and we talk about marginal rates. I’m going to end this segment, we’ll pick it up on the next segment, is we introduce a concept, and I hope the listening audience has a pen in their hands, of the effective marginal tax rate. So I’m going to throw that out there. Again, we got a couple of workshops coming up this week. When we pick up, I’m going to pick up on that effective marginal rate, and why it’s so important for our listening audience, that my hope is you pick something up big, and this is your big takeaway for August.
You know what most people appreciate, Krause? Is it be like we read the IRS book, and we talk about it, but then we start sharing with people.
We probably go through about six or eight different stories during the workshop of people that can say, that sounds like me. That sounds like me. That sounds like. Where we call them ah-hah moments. So I want to talk about some of those. Rolling back into this topic, as I just concluded the last segment, talking about an effective, marginal tax rate.
So here is the story. Couple in retirement, they already had some of their income on. So we were picking up the pieces of what we already dealt with. So they had about $4,000 a month coming from Social Security. They had, between their pensions and IRA distributions, and some interest income on the tax return, they had approximately $25,000. So, $48,000 coming from Social Security, about $25,000 coming from other sources. Then they had a little bit of long-term capital gains of about $12,000 a year. So their baseline income was approximately $83,000. Their total taxes that they were paying on that would have been a little less than $1,700, talking about Federal income tax, not state tax, but talking about Federal tax, or 2%. Sounds pretty good.
So, he knew that he had quite a bit of room to start putting money away at the 12% bracket. But what we had shared, and I showed it interactively, for those of our listening audience part of the Thrive army that has attended a workshop, they’ve probably seen me or some of my colleagues do this, actually, during the workshop. But what I had shared with him, and I showed him interactively, was that concept of the effective marginal rate. Gang, you’re not going to pick it up. I invite you to Google, come out to a workshop, even come into our office here, and schedule that complementary Thrive Retirement Roadmap Review, where we go through it with you on how it works.
But what we had shared was the following. Each and every time, and again, he was very closely approaching the 0% bracket, or pardon me, the 10% bracket on his regular income taxes. Okay? But he thought he was thick into the 12%, because he was paying some taxes whatsoever. Okay? Again, just looking at a chart. But again, our listening audience needs to know that long-term capital gains and qualified dividends, and then pretty much all of your other income runs two different ledger balances on the tax return. So, it’s not linear, meaning you can just calculate it all the same.
There is a little bit of complexities, that’s the Dorne IRS tax code is so darn thick, because they don’t make it easy, gang, is what I’m here to share with you. So what I had shared with him was an interactive tax simulator, how we go about it here, and this is what we tell about forward tax plane, and what are decisions that need to be done in the current tax year to make sure I do things in the most effective way possible, not waiting to see my accountant in March, who can’t tell me to do anything for the previous tax year. But what we had shared with him, and I showed him every dollar that he was pulling out, for every $1,000 that he was pulling out of his IRA and converting it into a Roth, not only was he paying taxes on that distribution, and this is where the concept comes in, effective marginal rates, is that he was actually making $850 of his Social Security income, also taxable.
So not where it was ordinarily tax free. We go through a slide, actually, just one slide during the workshop where we share with people how your Social Security benefits is going to be taxed like no other income you’re ever going to receive for the rest of your life, and why you want to understand that, to start putting the puzzle pieces together. Why? Come up with a plan. Don’t plan to fail, everyone fails to plan. Come up with the plan. How can I stretch out my IRA income, or pardon me, my Social Security income long-term, again, everyone’s circumstances are different, to provide myself tax efficiency for the long-term.
So, we were sitting there interactively, and I was saying, I was like, “Okay, if you’re going to do exactly how you’ve been doing things.” I go, “Let’s just say,” because I showed him, $1,700, and then your 83,000. I go, “Let’s just increase your IRA distribution by, let’s just say, $17,000 in his scenario.” So that’s a $17,000 distribution. His taxes went up. $3,725 by that extra $17,000. Now, conventional wisdom, 10 or 12% of that 17,000 contribution should be approximately 1,700 to maybe, I’m doing my quick math in my head, maybe 1,750 would have been appropriate at that 10 to 12%.
But what we were illustrating to him, interactively, we call it the Gray Chart. The Red Chart is what our real tax rates are. The Gray Chart, which is gray, because it’s not clearly defined, is that effective marginal tax rate where that thousand dollar IRA withdraw was now making, not only that contribution taxable, but also part of my Social Security taxable. Gang, they don’t talk about this normally on the radio. They don’t talk about this on CNN Money Magazine. It’s why we talk about this on the radio, it’s why we talk about this at the workshops, because nobody does.
When you start understanding how to start putting those puzzle pieces together, you just have that much … You don’t have to think about things. It’s deliberate. Make rational decisions. Again, we all think we’re great at helping the top line of growing income. But if we keep the IRS out of our pocket, or keep it as low as possible, along with being conscious of our fees, I hate to call it the American way, but it’s almost like the new winning is not losing, not paying at the end of the day. So let’s make it a double-edged sword, let’s make money, but let’s also save money on the bottom end as well.
Yeah, it really comes down to the example is a perfect bulls-eye, Bret, of coming down and providing a clear example of when you’re educated about a specific detail, you can make a better decision, and be in a better position with your plan. It’s that simple.
That’s what it is. I’m going to speak on behalf of the listener. I don’t know all of the listeners, but I know me. We don’t understand it. I don’t understand it. Until you explained it. Now, I’ve learned enough to know, from the segment that you just did, that I need to learn more. I need to get a better understanding of it, so I can then take that term and apply it to the scenario, so I can understand this.
You know the problem, Krause, the scariest thing? You know who else doesn’t understand it? Accountants. Financial advisors. They’re so used to software, it’s plugging numbers in, that’s it, that’s why. So we just had a client-
That’s a home run.
Who started working with us, Krause, three years ago. She was working with some other advisors, which we said, we’re not the army. You want to work with us, everything sounds great on the surface. But we’re working with all of these gigantic companies. They’re like, “Bret, you’re right.” Three years later, I’ve gotten zero advice other than the investments. The fact that I should have been dealing with things with my other advisors, that they hadn’t been advising me to do, that you’re advising me on, it’s a game changer. The last one was the advisor that she had left, because her accounts had been reassigned at a big bank, was from an advisor that used to be a Thrive advisor, Krause. I can tell you what happened was it’s what I’m passionate about, as much as you hear me starting to talk fast. I live for Saturday morning, believe it or not. I live for Monday morning. I love this stuff, Krause.
I know you do.
I hate Friday night. I love my kids, and my kids know I love them. I could do this all year long. While David, Karen, and I just did a little bit of R and R so that we’re passionate again, we’re yelling in the radio, gang. Get your plan. Get a review, because I don’t let my advisors, here at Thrive, unless they follow our process, that can actually talk you through exactly what I’m talking here on the radio here. Not, “Oh my gosh, I heard Bret on the radio, I have to go in and see Bret.” No you don’t. You need to come in and see Thrive, because we work with all of our team members here to do the same thing. We have a process. We care about taxes, we care about Social Security. We care about doing things in the right order. We care about more than your investments, investments, investments, investments. I said, “If that’s all you really want to talk about, I have plenty of places that you can work that all they care about are you investments, investments, investments, investments.”
Yeah, it really is an amazing thing. I’ve got to tell you, I mean, it is incredible to me that you, as you sit here this morning, that David and Karen, collectively, as a three, have so much passion for what you do, that it’s the number one priority in your life. That is amazing stuff. Most people don’t get there, Bret. They don’t.
I’ll be honest with you. When we built our business plan, and we’re probably about halfway through into a five year plan. We kicked off radio, it says we started that, Krause. We could have never imagined where we’re at today. Just think of the momentum we’ve built, doing something different, not talking about infomercial and products on the radio. Not doing steak dinner. We go to these national conferences, and we do pretty good here in the Delaware Valley, and people telling us, “Ah, educational events don’t work. They’re all do-it-yourself-ers, and nobody ever wants to do them”
It’s like, why are you doing what you’re doing? Are you doing it to try and make a sale? Or are you doing it to try and help somebody? You hear about our colleagues, nationally, and it’s like, “wait it’s not working.” Because I can already tell in your delivery of you trying to sell me why you don’t do it is why it doesn’t work. But when you actually take a stance … I love Stan Walton. Walmart, whether you like him or hate him, he always had something that we pride ourselves on in here. It’s called swim upstream. Do what everybody else is not doing.
You do what everybody else does, you’re going to get what everyone else gets. So I apologize, we do have dinner with our clients every so often. But we don’t have good steak dinners six days a week. They’re darn good cookies. Okay? The free coffee, it’s normally cold enough that you can still drink coffee in there. But if you’re looking for an education, gang, and you’re looking for something different, not the same darn thing that you hear or get in the mail, come to this workshop or that workshop, I invite you to come out to our workshop.
You’ve got to do it.
Montgomery County, Bucks County, Delaware County, Chester County, we’re now expanding into New Jersey. Again, hitting the counties there. We have a new location, Krause, we’re going to be announcing that new office location here in the next couple of weeks. So we’re excited to announce that. It’s going to allow us to expand our locations. So in our listening audience, just making it easier to get to our offices as well. Again, that’s all I invite you. That complimentary Thrive Retirement Roadmap Review. Come out to a session. You want to call us at 1-800-516-5861. We got two workshops coming up next week, the 12th, again, brand new, Doylestown, excited to go to a brand new area. Then over in Cherry Hill on Tuesday night, the Cherry Hill Library. Again, whether you’re hearing us on the radio, come into a workshop, or tax summit, on September 25th. I promise you, you will always leave with an additional question than you came from.
You don’t need me here in the show today, bro, you covered it all. But I will give the listening audience, as we say, goodbye. One last suggestion, and then you can tune in again next week. Search it out, effective marginal tax rate is something good for you to look into. That’s going to do it for this week’s edition of Roadmap to Retirement, the Radio Show. On behalf of David and Karen, who will return with us next week, and on behalf of Bret Elam, who delivered the goods today with some inspired passion. Well done, sir. I’m Joe Krause, see you next time, everybody.