#196 – Importance of Holistic Planning

Announcer  00:00

This program is paid for by Jacob’s media partners. All opinions or statements expressed on this program are solely those of Jacob media or its guests and do not reflect the views of WPHT or Audacy. Today’s program is prerecorded. Welcome to Roadmap to Retirement, the Radio Show with David Bezar, Karen Bezar and Bret Elam from Thrive Financial Services who have been featured on Fox, ABC, NBC, the Wall Street Journal, and more. Saving for retirement is a great start. But it’s what you do with this money that really matters. What’s your strategy to reduce taxes, generate income in retirement, reduce your risk, and get even more from Social Security? This is where you can count on straightforward and objective advice about how you can make your money go a lot further in retirement. Roadmap to Retirement, The Radio Show now here are your hosts David, Karen, and Bret along with Joe Krause.


Joe Krause  00:52

And welcome everyone to another edition of Roadmap to Retirement, the Radio Show with David Bezar, Karen Bezar, and Bret Elam as we broadcast to you on this Father’s Day weekend. David Bezar and Karen Bezar are off this weekend. Bret Elam and Erik Schuster are with us. Promise to deliver a great show as we always do. Bret Elam welcome in my friend. Nice to have you here on this Father’s Day weekend.


Bret Elam  01:17

Glad to be here as well my friend, no ifs ands or buts. A little r&r for our friends who are visiting. I guess the Dominican Republic, out of the country, so excited to when we get a rejuvenated David and Karen, just wait for next week’s show on the radio.


Joe Krause  01:34

Well, listening to this week’s show and the Audacy app listening online as many people do. And I’ll use that key up to remind people if you miss any of the broadcast today, or you want to go back and re-listen to the podcast, just go to thrivefinancialservices.com. It’ll be there on Monday morning. And a lot of people take advantage of that. Bret, they download the show and they listen to the great content that we provide. You provide not me not we not me.


Bret Elam  02:02

And we are so proud that we’ve gotten ourselves up to now worldwide, the 25th highest-rated podcast in the financial services industry. I mean, that isn’t that doesn’t happen by accident, oh, it is known. It’s content. It’s not product propaganda. And today is not going to be another product propaganda show. The important thing you know, as we were doing a little bit of huddling up with our team and talking about the importance of a team. We’re now just over the 30 team mark. The Thrive army here means people that David and Karen and I have graciously employed, and they’re superstars with us, we’re now up over 30 of us. And so, what the most important thing is as we continue to grow, is the stories and the collaboration. Because what we’ve learned is that we all don’t need to know everything. But so long as we have a team of people that know everything, it allows for all of us to excel in so many different arenas. So Erik and I had an opportunity to sit in a session with some of our other colleagues and just kind of hear in some of the I call them war stories, or myths, that may be clients and or some of the other advisors out there may have and I think I think Erik and I decided that the topic of today’s show is going to be Mis and the importance of holistic planning. So we’re gonna go through some things related to that. But you said most importantly, on the top of the hour as Father stays here approaching my kids and I was talking about that. And Joe, why should you take an extra pair of socks when you go golfing? In case you get a hole-in-one?


Joe Krause  03:33

And did I start the show today by saying it was Father’s Day weekend..


Bret Elam  03:39

Or hey, I get excited about it where it’s a week-long range.


Joe Krause  03:43

So if I get that excuse, it’s a week, it’s a week away..


Bret Elam  03:46

It’s my favorite one. Like I’m always excited to be alive. So, I consider every day like my birthday joke, by the way. But the kids were already talking about that. I had to throw that dad joke out there. I love it. I’ll take it. And how about it? And did you see Martha Stewart? Sports Illustrated 81-year-old woman on the cover of Sports Illustrated and people are blown away with an 81-year-old woman but did you see Vogue magazine, a 106-year-old indigenous tattoo artist is on the cover of Vogue from April magazine? It’s nuts, like what’s going on out there and you want to talk about longevity, how long people are living. It’s out there. It’s another important fact of everything that we’re talking about there. So God blessed a young lady, 106-year-old indigenous tattoo artists, and congrats to Martha Stewart for being an 81-year-old.


Joe Krause  04:37

I will say this in all seriousness there is this movement of or this desire now to eat better, to eat healthier, with the intention of fueling term longevity. It’s out there. Elimination of seed oils from food and all of those different things It’s all about trying to live here longer, which by the way, makes the information that you provide and make arrive. More required. In someone’s retirement.


Bret Elam  05:14

It’s almost like the wealth and health series that we’re going through here we’re taking some of our clientele, who graciously are always trying to find ways to introduce their friends and family to us. And we’re just exposing them to so many of those just health and wealth topics that are so much on people’s minds, but they don’t know how to take action on it. So we’re just assisting them with and again, this life is more than just about investment management at the end of the day. I mean, if you’re a regular listener of the show, you’ve kind of heard David’s health improved just over the years, and we’re gonna have the doctor on the show here in the not-too-distant future and talking about just some of those lifestyle changes, because 106-year-old indigenous tattoo artists? God bless. If I can make it to, I like to think I just went over the 45 range. Now I’m 46. And people are like, what’s it like for life to be half over? I was like, I’m going with a third over, like people like when it comes to 135. ago, why not? Why not? So I know it’s a lifestyle change that we need to make as well. So, you know it this week in history going back, because I’m going to be making a drive down to the shore a little bit later today. Guess what happened? Almost 90 years ago, this week, the very first gasoline tax came into effect. Why am I talking about that? Because when I drive down to Delaware, that’s when I go fuel up the tank because there’s a lot of gasoline tax here in the state of Pennsylvania. And we talk about the topic of taxation, and we’re never really talking about tax, or never really talking about taxation on gasoline, it’s realizing that when tax from the tax system first came out and how it’s ever so evolved, like over the years, for example, you had the first estate tax happened in 1979. To fund the United States Navy, there were no estate taxes before 1979. The IRS was formed when the Civil War led to the country’s first income tax. Again, people always want the services, and they want better roads and all those things. And he was talking about better roads the other day. It is just kind of a price that comes with it. Um, inevitably, at the end of the day, the first gift tax. I talked about the state of Delaware, the first sales tax was enacted almost 102 years ago. And there are actually still five states today, Alaska, Montana, and Oregon. But closer to us, Delaware and New Hampshire have no taxes whatsoever. Here’s one for you. 80 years ago, this all happened this week. 80 years ago, new laws were changed. We’re now employers were required to withhold federal taxes from every paycheck. Going way back when you just paid a lump sum at the end of the year. I think they figured out that people are like, we’re not good savers. We don’t have that money that’s due. So now they’re taking it step by step by step. So just talking a little bit about what’s going on out there. Here’s a couple and for you cross-eyed remember these words tear down this wall. This week, this week 1987. The famous words by who? President Reagan to Mikhail Gorbachev talking about the Berlin Wall and those Cold War speeches. Here’s one for you.



Bret Elam  08:23

This week, also 1944. What was this week big for? President Dwight Eisenhower gave us the go-ahead for operation overload otherwise known as D-Day. I’m seeing we’ve seen so many movies that are out there just illustrating what the day is all about. And just understanding it just coming out on Memorial Day, realizing a million Allied troops landed on the beaches of Normandy in northern France when all that was going on in World War II. So just understand that evolution. I’m just having flashbacks of what’s going on. So, Erik and I are excited to share a lot of myths. And just the importance of holistic planning hope, just given, had a little bit of fun in that opening segment. But we’re excited to turn the page and just talk about the importance of understanding how to pull all these different puzzle pieces together. So excited to take us into the first break. And on the other side. We got an action-packed three more segments with Erik and I going to be kind of toggling back and forth just talking about some stories.


Joe Krause  09:18

Good stuff, we’ll get Erik Schuster into the conversation. As Bret said, when we come back on the other side of the break as we go into the commercial break, you’ll hear messaging on some of the upcoming workshops. Get registered, get educated, and go to thrivefinancial services.com. And back here on Roadmap to Retirement, the Radio Show –  we thank everybody for tuning in and being a part of another weekly edition of Roadmap to Retirement. Again, if you want to get registered for one of those upcoming workshops, they’re always at capacity, go to thrivefinancialservices.com Or you can call the team at Thrive at 215-798-9088. Bret, back to you, sir.


Bret Elam  10:04

All right, I promise no more dad jokes for the rest of today’s show.



Bret Elam  10:11

It’s all good. It’s all good. There’s no better time than to continue to celebrate that to moms too. Every day is Father’s Day and Mother’s Day. But as we dig into things, I’m going to turn the baton over to Erik and just start going through some of the stories of myths and the importance of holistic planning where you can’t just take things at the surface. But you have to peel back the layers of the onion to get deep. And again, we always talk about the importance of you can’t plan here on people on TV, giving you advice for 300 million people, but the importance of actually digging down that customized, most importantly, holistic plan for somebody. So Mr. Schuster, great to have you today.


Erik Schuster  10:45

Yeah, thank you for that, Bret, say I really want to touch on holistic planning today. And the word holistic planning has really become a buzzword and a marketing term in this industry. But very few advisors and very few people are actually staying true to what holistic planning actually is. And I want to provide an example here, of what it really is and how here at Thrive, we can build a true holistic planning firm, where we look at all aspects of the entire financial picture. So what I want to get into was, we recently had a client come in, and he had a significant amount of money in cash, he had recently sold his business and had a piece of real estate associated with that business, and it was sold. So he had cash in the bank. And we needed to figure out a solution for this. Now, given the situation is about to be retired, we didn’t want to get too aggressive with the money. So we had to look at a fixed income solution to provide him some income in retirement and provide them some growth of that money. But what we looked at was, there are really many facets we can look at, and we’re not here to thrive tied down to one solution, right? If you go to a mutual fund company, they’re stuck with a mutual fund or an ETF. If you go to an insurance person, they’re usually stuck with some sort of annuity or life insurance solution. So what we did was we went through all the different options we have, right? So when we look at fixed income, we think about what are the options, we can look at Treasury bills, and how they work. How did treasury bills work? Well, they will pay you interest to pay on the length of them every six months, that interest immediately becomes taxable to you in that year. So now if you’re only earning about five, or five and a quarter percent on a treasury, we’re going to pay tax on that money that year. We look at other solutions out there, there’s municipal bonds, the rates aren’t really where they once were. So now municipal bonds, it doesn’t make as much sense to go into those because you’re much better off actually buying a taxable bond, and not worrying about the tax free income that a municipality can give you. So then we look at what the insurance will offer us. And there is a product out there that allows you to earn interest, but defer that interest tax to later on. So if you just like a CD or a treasury, if you got into a three year type of product, you’ll have the option every single year, do I want to take my interest, or I rather leave it in and keep the interest compounding and defer the tax to the end. So what we do here is we have to look at the entire picture. Because when we looked at the situation, the treasury bill, five and a quarter percent. Insurance option 4.9%, according to Bret right here, which option would most advisors or people choose when he hit five and a quarter percent or 4.9%?


Bret Elam  13:31

Yeah, all things being the same when you just look at it at the surface. Again, the importance of where Erik’s gonna on the holistic people want more five and a quarter.


Erik Schuster  13:40

People who choose five and a quarter all day. So we brought in our team, we were CPAs on staff here at Thrive. So we went to the drawing board. And when we looked at everything that this person was trying to accomplish, given where we are from in a tax situation in this country, we’ve really needed to prioritize Roth conversions for this person, several million dollars tied up in IRA accounts, and we need to free that money up and get it to a Roth. So if we did decide to take that five and a quarter interest rate on the Treasury, that would just jam up their tax return with extra interest this year. And what that does is that limits how much we can now convert to the value of our conversion would go down. And that is their main priority. They have a huge amount of money in these IRA accounts to release and free into the Roth IRA. So when we look at that insurance option, we can now earn 4.9%, a little bit less, but we now have the option every year do we want to pay the interest and pay the tax? What if we keep deferring it up and pushing it to a year might make more sense to take on that tax? Given their priorities here, it made sense to actually take the 4.9% giving them a little bit of interest but the tax savings are so substantial is tenfold and the return you’re gonna get on that.


Joe Krause  14:59

So just for clarity.. You can defer the taxes to..


Bret Elam  15:08

Your control situation, right.


Joe Krause  15:11

And that enables you to do the conversion. In this scenario, I know everyone’s just trying to understand it. And by being able to defer the taxes, you’re in a better position, obviously, you’re in a better position, because you’re not, you’re not writing that check for the taxes, or you’re deferring when you have to pay it. 

Bret Elam  15:34

Think about what Erik said, if 5.5 and a quarter percent, let’s say you had a million dollars and treasures, it’s $52,500. But taxed. But let’s say you get $49,00, 4.9% on the same million dollars, but it’s tax deferred. So yeah, you may have lost $3,500 and quote, unquote, guaranteed gains. But do we care about what you have? Or do you care about what you keep? And most importantly, the scenario that Erik is describing right there, gets in the way of the Roth conversion by almost $50,000 for income they do not need. And it talks about the importance of revisiting people’s plans, and the holistic approach, because a lot of people have the mindset of set it and forget it. And guess what, we were having this exact same conversation 15 months ago, where there was a treasury bill 1% 2%. Now we’re talking about five, Houston, the world has changed. That’s it. And that’s why you gotta have a dynamic plan and work with somebody as what Erik just said, the importance of a holistic planner, a holistic planner, and pulling all those pieces together. But not only looking at holistic planners, but someone who’s actually going to customize and not just give you a one bag trick of goods at the end of the day. 

Joe Krause  16:53

Well also somebody that said that’s that’s in the No, that’s when life changes. 15 months later, you’re already on top. 


Bret Elam  17:01

It’s why we pride ourselves, I call we pride ourselves on being Baskin Robbins versus the Neapolitan factor. Yeah. Again, most people are just talking about vanilla, strawberry and chocolate, but my gosh, we got all the flavors and it’s all about getting in front of people and saying which one is the appropriate for you, not only solutions, but strategies along with it as well. It’s crazy what Erik just said. A survey just came out this week. And talking about the importance of annuities Erik just utilizes them right here ready for this one. People surveyed 100 or 1000 people from the ages of 45 to 65. About 26% of the survey participants had already owned that word annuity. Okay. 86% of survey participants who owned annuities said they were somewhat or very interested in buying more annuities. Roughly 73% of all participants 76% of participants with pension plans. And 67% of participants without annuity said they wanted what? Annuities. What’s interesting with that, right there is when the survey came out, they asked certain groups of people when they did the test, one said, what do you think of the word annuity? The other one said, what do you think about a guaranteed lifetime income product that pays out like a pension by providing periodic payments during retirement? Or they said, What if you could get a guaranteed solution that you can’t lose money that the interest grows tax deferred and your control of when you want to pull it out? When they said one of those last two things? Please understand they described an annuity, but so many people the myth of what the word annuity means has that negative thought in people’s mind. They love how annuities work, but they hate the word. So when you take the time to peel back the layers of the onion from a holistic approach, you understand there are solutions out there even though you may think it’s your grandfather’s annuity. They’re completely different today, because the myth that we have that’s out there, I’ll turn it to Erik, here’s a myth. All annuities have fees. Is that true?


Erik Schuster 19:11

We hear that all the time. Now, when you get into certain annuities, the insurance companies know how to make money. The insurance companies know how to manage risk, they can take in your cash, just like a bank can provide you some sort of savings rate or interest rate and they can still profit without charging you a fee. Now, obviously, over 70% of the annuity market is the word variable. You’ll hear that on annuities. So there are types that do have fees, but it’s really just finding the right ones knowing what in that industry you can utilize. It doesn’t have a fee that can provide you a solution to your problem and allow you to prioritize your financial objectives, which in this case, I explained, Roth conversions were the priority to find the right product. It allows us to maximize their biggest priority.


Bret Elam  20:01

But sometimes it’s that word that gets in the way. Like what Erik just said right there. It’s like they throw the baby out with the bathwater vendors, fixed annuities, there’s variable annuities, like Erik just said, which predominantly makes up the annuity market. And that’s where the negative mindset is because a lot of variable annuities do have 2%, 3%, 4% plus percent, and fees. There’s also buffered annuities, there’s indexed annuities. And when you’re hearing these conversations, these topics, and if you’re not taking that holistic approach, again, we share with you the importance of getting that checkup and that holistic planning, there’s no better time in the present to give us a call at 215-798-9088. And again, this is not an annuity show. But the important thing that they talked about and this article that talked about people wanting to buy more annuities literally just came out this past week that are out there. And the big thing, and we’re seeing articles all over the place saying it may make sense if you had an annuity to even look at new annuities because of the evolution of the space because the space doesn’t sit stagnant. It’s amazing some of the strategies that are out there related to the annuities. But when we talk about taxes, and everybody who’s a regular listener knows we care about taxes, especially when people have significant money, outside of IRAs, as Erik just described, right there plenty of money in cash, the importance of tax deferral, and you control the situation of when that income comes out, is so important. It’s so important when we talk about that holistic approach. So just talking about scratching the surface on just a couple myths that are out there excited to take us through the rest of the show and just dig a little bit deeper, no, a lot more that’s out there that we just want the listening audience to be aware of..


Joe Krause  21:34

Roadmap to Retirement, the Radio Show. Back in a moment.


Announcer  21:38

This program is paid for by Jacob media partners. 


Joe Krause  21:41

And back here on Roadmap to Retirement, The Radio Show with Erik Schuster and Bret Elam today. As Bret mentioned, David and Karen are getting a little bit of r&r this weekend, they’ll return to the program nxt week. Holistic planning was the key word or the hot button word in Erik’s opening segment, which was segment two of the show. Bret transitions over to you but the conversation continues because there’s so much under just that topic. And each scenario makes it so different. Each conversation a lot, a lot to comprehend a lot to understand.


Bret Elam  22:19

Yeah, we had a couple of workshops this week again and listening to the audience again, everybody knows I do that survey question right in the beginning of my workshop. I say RMDs money you have to take from your IRAs and 401k starts at what age? 70 and a half, 72, 73? And I take that poll, each and every workshop. This was the very first week that I’ve done that not one person got it right, I had half the crowd got 70 and a half and the other half guessed 72. And again, your regular listeners. So that’s age 73. And again, we talked about the importance of if you’re a do it yourselfer, as soon as you learn the rules, they change the rules. And that’s what we try to advocate for on the show week in and week out talking about pending legislation, all the different things that are out there, things that we need to be on the tip of our tongue. Yeah, the importance of stocks, bonds, mutual funds, annuities, and you know, we just talked about annuities in that segment. But it’s talking about how each one of those work a little bit differently for that holistic plan at the end of the day. So the next myth I want to go into is to turn it over to Erik, because we hear this one all the time, because we talk about Roth conversions a lot. And we’ve had some listeners over the past couple months say Hey, this is a good segment. And this was actually a question that came in over the past week. It says, Marty , 74 years old, I’m already collecting RMDs. I can’t do a Roth conversion. Why do you say that we continue to do so? That’s one. And we hear all the time. There’s so many more Roth conversions, I call them excuses, because we say everybody can do it. Let me share maybe a story or two that you hear around that or maybe some of the other ones, Erik?


Erik Schuster  23:52

Yeah. So we’re here at a time when people come to us as they’re starting to prepare for retirement, they might come out to see a workshop of ours and decide to come in and visit with us. They always come with us and say, Well, I’m still working, I can’t go into a Roth conversion. I already have too much income. And what we do is we do the analysis, you really need to take a deep dive into your current income, but also project out what is your future income?


Joe Krause  24:16

Is that what the question was from the listener? And the listener?


Bret Elam  24:21

Yeah, the question was, I’m already taking RMDs. I can’t do a Roth conversion anymore. But he shared some other excuses that people have out there. It’s like, breathe. Don’t listen to the 300 million advice show. Let’s get a customized approach for holistic planning.


Erik Schuster  24:35

Yes. When people come in to us we take a look at what is your retirement income and a big night they say some of the most powerful reports that we bring to people is that we fast forward at age 73. And why we choose that age to Bret’s point their RMD start. So now you have an extra income source, whether you need that money or not. At that point, either Social Security for yourself or you and your spouse has to be turned on. If there’s pensions in the house. So they have been turned on at that point in time. So you really need to get a good grasp on what my current income, but also what my future income in retirement is gonna look like. And the reality is, most people that we meet with, it’s typically about the same. Most people will have a very similar income in retirement they do during their working years. But here’s the big difference where tax rates are today. And where tax rates are going in the future. If you have a combined $150,000 of income today, or $150,000 of income later on down the road, today’s tax rates are low. So it’s a good time to still put income in there and get money out of your IRAs, at these low tax rates.


Bret Elam  25:44

I mean, David just shared a story with us last week about a Roth conversion story. There’s another one we’ve talked about Dave and Sarah a lot during our workshops, where their income today is what Erik just said, $150,000, again, when the 2017 tax cuts and Jobs Act before that, they are in the 28% bracket. Today, they’re in the 22% bracket. What happens in 2026, just by the way, legislation sits right now, they go back to the 28% bracket. So again, it’s pulling all those different pieces together. And the important thing of what Erik and I were just talking about right there talking about Roth conversions is that second word, a lot of people hear the word Roth and they forget the word afterwards. We’re not talking about Roth contributions. Okay? There are rules and limitations associated with those, we’re talking about Roth conversions. Again, pretty much you can take the handcuffs off, you’re not too old, you’re not too young. You don’t have to be working. Doesn’t have to be you’re already gotten RMDs. It’s to the point of what Erik just said, right there knowing that in February of 2020, the big news was we scratched over, we just finally went over $20 trillion in debt. Literally fast forward to where we are today, a little more than three years later, getting ready to go over $32 trillion in debt. You just had the debt ceiling passed last week. So now, they’re not going to hear any drama till 2025. Okay, because they gotta get past the elections, because they don’t want to make any hard decisions. 38 to 40 trillion by the You’re probably right by them, because what’s projected to be the national debt, given the path that we’re on right now in 2027, is $44 trillion. Something’s gotta give. And again, I always share during my workshops all the time, and we talked about him on the show. Is that besides death, besides divorce, what’s worse than paying taxes? The simple answer is more taxes. Besides death and divorce, what is worse than paying taxes, it’s more taxes. So what to the point of what Erik just said, looking at where tax rates are at today. And knowing that in 2017, the tax cuts and jobs act again, it took corporate taxes down to 21%. But it also lowered top top tax rates from 39.6 to 37%. And all the other brackets with it as well. You go back to the 70s, as top tax rates were in the 70%, you go back to again, we talked about data here just a moment ago with Dwight Eisenhower. You go back then when good old Ronnie Reagan was an actor back then in the 40s, top tax rates back in the 40s with Ronald Reagan 96%. After Ronald did two movies, he said I’m done. Why? Because when he worked, he only kept four cents out of every dollar that he made. So people don’t like taxes the way they are today. Go back in history, go across the pond to Europe, go across God bless Canada with all these fires happening right now. Go up there, go see what their taxes are right there. Please understand the tax climate that we’re in today is as low as possible. So when you hear all these talking heads, and where we’re at, well, it may not make sense. Again, are you reading an article? That’s it that’s meant to get some ratings that’s really out there for 300 million Americans? Or do you need that holistic plan that’s customized to your situation, that understands what your goals, what your dreams are, what your aspirations are, because that’s the importance of it because everyone’s schematic. If you have 10 people where they had the same exact makeup of this much in their 401k this much in their savings. Their expenses could be different. They may want to leave money to the next generation, they may not want to leave money to the next generation. They may be pathological savers, they may be big spenders, everybody scenarios differently. But what do most advisors do? They take that exact same portfolio. They just simply look at their risk analysis and say let’s just go get you a portfolio of stocks, bonds, mutual funds, and stocks, bonds, mutual funds, annuities, with total disregard to everything that I just spoke about. And if you’re listening, I’m just gonna go have this conversation with my advisor, come on gang. Like you may have been born in the day, but not yesterday. Please understand, if you’re not having this conversation with somebody up to this point and you’re actually paying somebody You have to initiate that conversation, Houston, we have a problem.


Joe Krause  30:04

And it’s one of the reasons I love coming here every week to do this show, because what happens here is so true. And that underlying approach of you’re adapting to the individual to and what the individuals want, because everyone is so different, I think is one of the key ingredients. Yeah, I really do.


Bret Elam  30:29

And if you heard some of the stories that Erik and I have already started sharing today, and you’re like, that sounds like maybe a little bit of my story. Or maybe I’m just tracking my balances and so forth. Again, our process is called your Roadmap to Thrive. And it truly puts you on the right path to thrive. But you need a roadmap to get there. And it needs to be customized. Our hope is you give us a call today, whether you want to come out to one of our workshops that’s coming up here. Over the summer, you can always go to thrivefinancialservices.com and see that lineup of workshops that we’re having, or you could skip that process and come right in and visit with one of our awesome teammates here. You can do that by giving us a call right now at 215-798-9088. Again, 215-798-9088.


Joe Krause  31:13

And then don’t be alarmed, don’t have any fear about attending one of the workshops to get registered. Go to thrivefinancialservices.com. I’ve said this many times as we go to the break, you will be more educated when you leave than when you arrive back in a moment. Go right now to thrivefinancialservices.com and get registered for the upcoming workshop at the Medford Village Country Club on June 15. Starting time is 6 PM. Get educated and get registered. Go to thrivefinancialservices.com. That’s June 15, at the Medford Village Country Club. Thanks again for listening to Roadmap to Retirement, the Radio Show. Erik Schuster and Bret Elam delivering the information for you today we started with a conversation about holistic planning. And that includes a lot as well, right? And Erik, it sure does. We’ve covered a little bit of it today. But it all comes down to you, the listener as an individual, and how you take what Thrive can help you with to be on your road, on your road to retirement.


Bret Elam  32:36

Here’s the next myth that’s out there. And we just experienced it literally this week, you have money in your 401k, it doesn’t matter what assets are in your 401k, stocks, bonds, mutual funds, whatever the case may be, is that they’re all treated the same when you want to move money from your 401k over to your IRA. That’s the myth. And that’s what most people utilize and what most people play by. But there’s this concept that Erik’s going to talk about here momentarily. We’ll just talk about it with a current client that somebody just came on board with and the importance of understanding how this particular transaction works. Something that’s called n you, Mr. Schuster?


Erik Schuster  33:15

Yes. So anyway, it stands for net unrealized appreciation. And I do want to throw one more myth out there. Also, if you have a large position in your 401k of company stock, you need to sell it today, because you are undiversified, you’re taking way too much risk. And you need to get out of that position. I can sit here and tell you right now, that is most likely the wrong decision. Because you really did go and look at the holistic planning here and look at the investment side of it, but also the tax side of it. Because if you are fortunate enough to work for a company, and in this area, we see it pretty often with companies like Merck and GSK, and Johnson and John Campbell Soup and DuPont all over the place very good benefit programs, they really do take care of their employees, and a lot of those employees hold that company stock within the 401k. And if you are one of those people, there’s actually a special part of the US tax code that is there to benefit you. And that what it allows you to do is just give an example. Let’s just say you have a million half dollars of Merck stock in your 401k. You’ve worked there for 20-25 years, and you buy the actual purchase price of what you paid for those shares is 500,000. Now normally even 1.5 million our 401k You take a distribution out you’re gonna pay tax on $1.5 million, right? That as ordinary income is ordinary and important, it’s really important, but through NCUA, the IRS will actually allow you to remove your company stock from that 401k and only have to pay ordinary income on the purchase price, or what they call the cost basis of those shares. So in that example I just shared with you, that means when you took out your company stock, the ordinary income would only apply to the $500,000, not to the $1.5 million of stock you just removed from your IRA or from your 401k account. That’s a big deal. That’s a million dollars of ordinary income tax savings, simply by working with somebody who understands not just the investment side of the 401k. But the tax side of the 401k, that you have time – 




Bret Elam  35:41

Yeah, that’s where I was gonna go, just piggyback off what Erik was talking about, where we talked about ordinary income, or long term capital gains, two different ways, two different ledger sheets, it’s happening on the tax returns simultaneously. So in the example that Erik just gave, of that half million dollars, without any kind of offset strategies, and so forth, that’s not what today’s show is all about, is, they would be in that 24%, to maybe 32% tax bracket, okay? Only on the half million dollars, that’s ordinary income. The difference in what Erik just shared right there is that when you go to sell the stock, inevitably, that million dollars and long term capital gains, you heard it right, it’s now considered a long term capital gain. Because if you took that whole million and a half dollars, total disregard of not understanding the terminology that Erik just took you through right there, and you move it to an IRA. Now, every single dollar that’s coming out is going to be taxed as ordinary income, typically 20 to 2432 plus percent under today’s tax brackets, you move out into 2026, that’s where we’re going to be more seeing 28, 32 of the of the new normal of what it’s going to become again. But the difference here, of what Erik just shared is you just figure out a way on $1 million to have that as long term capital gains being taxed at somewhere between zero and 20%. So besides death, or divorce, what’s worse than paying taxes? It’s more taxes. It’s such an important piece of the IRS Code of what Erik just took you through right there. Where if you are working for one of these big companies that you actually have your pure stock in your 401k. And you’re working with somebody and you’re not having that conversation about how anyway would work. Is it suitable for your situation doesn’t make sense, man, and where most people’s money lives in retirement, are inside the big tax bomb buckets. And if you can just understand exploiting one piece of the IRS Code that could have just significant savings, they’re game changers. They’re game changers, when you look at the importance of a holistic plan.


Erik Schuster 37:52

And a very important monitor anyway, there’s a lot of rules around it. Number one, you cannot sell the stock within the 401k, you will lose the opportunity for anyone Horton. Number two, you cannot take a distribution from that 401k before doing it anyway. So the thing here is go seek out the education, find the information or see how this type of strategy could apply to your situation. Because if you make a decision or take action, without getting that knowledge, the whole thing could be over. Give us a call at 215-798-9088. Anyway, the topic is complex. There are many rules. This is advanced tax planning that can bring significant tax deductions. But again, if you take one thing away from this, if you own company stock in your 401k, there are opportunities out there, give us a call 215-798-9088.


Bret Elam  38:52

And I think every time we speak in a public forum, it’s the big three that come out that people look for and what we’re really known for and area leadership. I don’t want to do all this and pull it on their own because I asked everybody who wants to be a part time financial planner in retirement and they all start laughing. I gotta get it. But guess what it’s on you to understand how to put all this together. And then it’s education. A lot of people think education on the stock bond, mutual fund annuity, it’s important. That’s where education begins. It’s all the things that we talk about week in and week out.  

Joe Krause  39:19

 I don’t even want to know what you mean. I just want you to forget to manage it.


Bret Elam  39:23

And now we know from a couple months ago, you can’t be the ostrich and put your head in the sand. Because we know that doesn’t happen. I promise no more jokes. I’m gonna go into that one right there. But it’s the importance of awareness. Step three. Yeah. What’s awareness? No, Erik nailed it. It’s these conversations that need to be had that you didn’t know that needed to be had. Like going through a series of questions that you didn’t even know to ask. All you needed to hear through that segment of what Erik just shared. If you have company stock in your 401k pause, wait before you make any other decisions and find out how it works in our encouragement. Again, as Erik said, 215-798-9088. Ha. I’m going to wrap up with our last myth today. Mr. Schuster in retirement, we hear this myth all the time, all income is taxed the same. Are there any income sources in retirement that you know that might be taxed differently than maybe some of the others?


Erik Schuster  40:15

One of the builders is building one of the biggest building blocks for most people retirement and social security. So everyone in America is paid into the system, it is not taxed, like anything else you will ever have, it is taxed on what is called the provisional tax system. And to get to the point, either 0% 50% or 85% of your social security will be taxable to you. How do they determine that it all depends on all the other income sources in your life. So if you’re able to take control of the situation, control all of your other income, there’s a potential that only 50% or even 0%, reserve security can actually show up on your tax return.


Bret Elam  40:59

And I took the listening audience through an exercise a couple of weeks ago, a couple have been to Social Security checks, plus polling out somewhere around $30,000 A year and they were paying if our listening audience remembers nothing, zero, and federal income taxes in the state of Pennsylvania, also zero and state income tax. So it was actually back in 1937, when Social Security taxes were starting to be collected as part of the Social Security Act. At that time, when you started collecting your Social Security income. None of it was taxed. President Reagan came in and we talked about him, I think three times in today’s show. And he brought in the 50% bracket, as Erik just spoke about related to social security. And then a couple a little more than a decade later, it was President Clinton that came in that made the law passed that up to 85% of your Social Security benefits are inevitably subject to be taxed. It’s understanding there’s so much that’s out there, especially on the Social Security taxation topic. In addition, we talk the importance of the 2017 tax cuts and Jobs Act that’s going to essentially take taxes back up is that there’s no better time than the present to start talking about it because we said what is the biggest budgetary item that is going to show up on the ledger sheet in retirement, they were like the mortgage going out to eat going on vacation. I think it’s one of two things, healthcare. And more than likely, it’s taxes, taxes, the number one budget item and I bet just about everyone listening has a few areas where they can become a little bit more tax efficient with their retirement money. We day in and day out. We want to help you do a couple things, understand the potential impact taxes can have on your retirement savings. Learn about ways to reduce or possibly eliminate taxes in retirement. And most importantly, we talk about a week in and week out to create an income strategy so that your retirement income lasts as long as it needs to. If you’ve saved realistically, I would say over a half million dollars, call us at 215-798-9088 and we can help you go over your retirement accounts and uncover what your possible tax liability could be in the future. And we’ll talk about some of those strategies that could help reduce your taxes down the road like Erik just said, it could mean 1000s of 1000s of $1,000 back in your pocket, and to spend it the way you want to spend it in retirement. Again, there’s no cost. There’s no obligation, give us a call at 215-798-9088 Call and ask for that tax analysis. Again, that’s 215-798-9088.


Joe Krause  43:50

And that’s going to do it for this edition of Roadmap to Retirement, the Radio Show on behalf of Erik Schuster and Bret Elam and also on behalf of David Bezar and Karen Bezar. I’m Joe Krause. See you next time everybody.


Announcer  44:06

Thanks for listening to Roadmap to Retirement, the Radio Show from Thrive Financial Services. If you’re like most Americans, you have more questions than you do answer about what to do with your retirement savings. If you have a question about your IRA or your 401k pension or other tax deferred accounts, if you have a question about reducing taxes, generating income or filing for Social Security, whatever it is, David, Karen and Bret are here to help and often your questions can be answered in a simple phone call, which is call 215-798-9088. And so you know no statements made during Roadmap to Retirement, the Radio Show shall constitute tax legal or accounting advice you should consult your own legal or tax professional on any such matters. information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investment or investment strategies investments involve risk and unless otherwise stated or not. Guaranteed Be sure to first consult with a qualified financial adviser and or tax professional before implementing any strategy discussed here David Bezar, Bret Elam, and Karen Bezar from Thrive Financial Services and Thrive Capital Management are licensed to offer investment advisory services through Thrive Capital Management LLC and SEC registered investment advisory firm office headquarters located in Fort Washington and offices of convenience used exclusively for client meetings in Exton, Yardley, and Cherry Hill. Roadmap to Retirement, the Radio Show was a paid commercial announcement from Jacob media partners. If you’d like to learn more about the power of the Radio Hour contact Joe Krause at 267-261-3428 Today’s program has been pre recorded

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