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This program is a prerecorded paid commercial announcement produced and paid for by Jacob Media Partners. No statements made during the Thrive Retirement Roadmap 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 are not guaranteed. Be sure to first consult with a qualified financial advisor and or tax professional before implementing any strategy discussed. David Bezar, Bret Elam and Karen Bezar of Thrive Financial Services and Thrive Capital Management are licensed to offer investment advisory services through Thrive Capital Management LLC, a Pennsylvania state registered investment advisor. Office headquarters located in Fort Washington and offices of convenience used exclusively for client meetings at Exton Yardley and Cherry Hill.
Joe Krause:
And a good Saturday and welcome in everyone to Roadmap To Retirement, the radio show as we come to you on Talk Radio 1210 WPHT. As we move along in the month of April, it becomes more and more apparent for all of us, David Bezar, Karen Bezar, and Bret Elam to deliver information that you can use and create opportunity for you to react to that information and certainly understand some of the information that we\’re talking about here on the radio show. Karen we\’re going to switch things up and we\’re going to begin with you today. I\’m not going to talk a lot today. I\’m going to listen like the audience, but I\’m going to start with you and jump in with you as there\’s critical information to deliver to the listening audience.
Karen Bezar:
Well, hello there Joe.
Joe Krause:
Good morning.
Karen Bezar:
So as I\’m watching everything going on, every day it\’s becoming clearer and clearer to myself and other people that we have been doing appointments with that taxation is definitely going to go up. And that is a big concern for people now and people heading into retirement. And what we have been doing, we have been doing the virtual seminars and meeting with people virtually. And I have a couple case studies here of people, few couples that are near retirement going into retirement and they have been, some people will do their own planning and they think they\’re doing okay. But after they sit with us and then we show them this information, they go, \”Wow.\” So RMDs, big deal when you\’re retired. And just a reminder, RMDs are waived this year because of the whole Coronavirus situation that we\’re in.
Karen Bezar:
So RMDs, we call them RMDs, required minimum distributions is money that you have to take once you become the age of now 72 and it comes out of traditional IRAs, a rollover IRA, inherited IRA, set by IRAs, simple IRAs, 401k, 403(b), 457(b). All of the plans that when you were working, you were told, \”Put your money away, put your money away, save for retirement. Taxes will be lower once you\’re retired.\” So it\’s a good deal. The government\’s like, \”You don\’t have to pay tax now, you have to pay them later.\” So we met with some couples and I\’m going to … what we do when you meet with us, one of the reports we do is we do a tax clarity report, which pushes you out to age 72 if you\’re married, you and your partner both out to age 72 to give you an idea what your qualified assets will … what type of tax implication it\’s going to have in retirement.
Karen Bezar:
And then we also do what some people think about doing now, especially relevant to these times, Roth conversions. So here\’s an example of a couple, normal couple, did what they were supposed to do, saved their money in their retirement accounts. So now they\’re looking at retirement, not there yet, but almost there. So they had about 1.7 million saved at this point for retirement. So we projected them out to 72 and with their social security and sometimes people have pensions, we showed them that there … now these are projected out tax rates. We don\’t know what they\’re going to be after is it five and a half years, David?
David Bezar:
2025.
Karen Bezar:
Yup. 2025 tax rate\’s going up. That\’s my unofficial opinion.
Joe Krause:
Well, based on everything that\’s just passed-
David Bezar:
It\’s a lot of stimulus money Krause.
Joe Krause:
There\’s a lot of stimulus money. No doubt.
Karen Bezar:
Yep. So this couple of 1.7 million saved. So once they retired, they were shocked by a couple things. Once they\’re retired, their income\’s going to be 144,000 a year. That is with their required minimum distributions and their social security and some pension money. And depending on what state you live in, I know for Pennsylvania your pension is not state taxed and your RMDs aren\’t state taxed. But depending on the state, you could also have to pay state taxes. What I\’m talking about now is federal taxes. So their tax, what they\’re going to owe Uncle Sam is $15,861 that year. Remember Joe, required minimum distributions, the amount you need to take goes up every year. And another just thing to remember, if you don\’t do the right withdrawal amount, you\’re going to get a 50% penalty on the amount that you did not take out. So that\’s really important to remember.
Joe Krause:
Now the example, just real quick in the example you\’re giving, the couple is on the doorstep of retirement. They\’re not actually in retirement.
Karen Bezar:
Right. Few years out from retirement. So we also did what we call a Roth conversion analysis, and I won\’t go into deep detail, but if you\’re interested, go ahead and make an appointment with us. You can give us a call at (215) 987-2430 and we will do these analyses for you. Not sure if that was the right plural and pronunciation there. So this couple with their 1.7 million, if they don\’t do any Roth conversions they will end up owing, let\’s see, $413,000. They will … I\’m sorry, let me repeat that. They will make a potential mistake and they will lose $413,841 if they don\’t do a Roth conversion. So that would be, they will end up paying approximately $413,000 more in taxes. And you know Joe, every $413,000 in retirement helps.
Joe Krause:
Is it realistic to think that that mistake would be made?
Karen Bezar:
100%. 100%. People, it\’s something that they-
Joe Krause:
I\’m not being smart with the question-
Karen Bezar:
No it\’s something that they think about, but they\’re kind of scared to do it.
David Bezar:
There\’s a lot of confusion about Roth conversions, Roth contributions and the rules behind that. So we\’re going over the next couple of weeks, make sure we\’re getting people … I mean, what basically Karen just said there very quickly was, if you don\’t consider a Roth conversion, 400 plus thousand dollars is going to end up in the hands of the government in the form of taxes as compared to staying into your accounts as the form of investment.
Karen Bezar:
Right. So for example, this couple, the one partner, if they keep their qualified accounts, the tax implication will be 159,000 overall on her qualified account. If we do the Roth, the tax implications will be 74,000. So that\’s a big difference. And then the other person, if they don\’t do any Roth conversion, their taxes will be 640,000. And this is from age 72 to 90. Again, we go into more detail if you want to make an appointment with us, you\’ll understand this a little better. So again, 640,000 is what he will have to pay from 72 to 90. If you do a Roth conversion, it will drop it down to 310,000 which still sounds like a lot. And again, these are based on today\’s tax taxation. So I know I kind of went through that quickly, but give us a call (215) 987-2430. We would love to help you out with this and give you your own analysis on doing a Roth conversion and also checking out what your taxation is going to be.
Joe Krause:
And just for clarity for the listening audience, those appointments are virtual, so you don\’t need to come into the office. As Karen referenced, you can call to get scheduled at (215) 987-2430 is the number you can get scheduled at your convenience and do a virtual reality on Roth conversion or RMD and you can begin with Karen. Good stuff. Thank you so much Karen for kicking us off on Roadmap To Retirement, the radio show as we come to you on Talk Radio 1210 WPHT. We\’re delivering relevant and very important information. We\’ll continue on with the program right after the break.
Speaker 1:
David, Karen and Brett will return after the break. And remember, if you want to connect or have a question, send a text to (267) 870-8210.
Joe Krause:
And back here on Roadmap To Retirement, the radio show. Don\’t forget about the upcoming webinars. You can go to thrivefinancialservices.tyl16lnm-liquidwebsites.com. And we thank all of our listeners and all members of the thrive army for tuning in here on this Saturday, David.
David Bezar:
Joe we\’re going to take a little bit of a shift and I don\’t know, maybe this we could consider kind of like a public service announcement. I guess it was Thursday, our team was very, very fortunate to be invited to a conference call with one of the world\’s top economists. There was only 20 people on this call. And I\’m not at liberty to share who had actually was, but you probably have seen this person if you watch CNBC or Fox Business News. You definitely have seen this person quoted extensively in the Wall Street Journal. Guy is, very, extremely good at what he does and very well respected. It was a little, to be honest with you, it was a little disheartening because the view of the future and I hate to be the bearer of bad news, but it\’s looking pretty bleak.
David Bezar:
As a country, we\’re really always pretty darn optimistic and if we remember back to the 911 situation, we rebounded as a country, right? We pulled together, didn\’t really matter if you were, what race you were, what religion you were, what political affiliation, everybody kind of pulled together. There\’s a lot going on right now with this pandemic and if you watch news channels outside that you kind of see a perspective. Like I was watching CNBC yesterday and the disrespect that we\’re seeing from China, they really are looking at us like fools with this whole thing. And I\’m not going to get into the politics of it, but it was spoken on on this conference call a lot about it. So I wanted to kind of jump in and share some of the 10 key points that he discussed.
David Bezar:
Now keep sharp objects away because it\’s not going to be fun, but the goal of it is to make you aware and then we\’re going to talk further in the show about some of the potential solutions. So the first thing is try to get this economy restarted. The challenge with that is going to be the companies are going to be much less risky and much less productive as a result of what\’s going on through this crisis that we\’re all experiencing right now. You\’re already starting to see it, right? You\’re seeing like Google this week decided to cut its marketing budget by 50%. Google, right? 50%. They\’re the biggest marketing company in the world and they\’re going to cut their budget by 50% and they have a hiring freeze. That\’s unheard of for Google. So companies are going to become much more conservative because earnings are going down significantly, which is going to be tough to have the stock market rebound like everybody\’s hoping and praying it will.
David Bezar:
Number two, consumers are going to have more of a home bias. They\’ll be less likely to travel and venture outside their homes for an extended period of time. Now, whatever you believe, right? Whether you think it\’s, you should be doing that. There\’s obviously two camps to that, but I would say in the majority, most people are going to be much much more cautious about you see it, right? You drive around and there\’s less traffic, there\’s less … I mean, it\’s kind of scary. Number three, there\’s going to be more government control and I would tell you that capitalism is being attacked. I really would … that\’s my commentary there. As we begin to reopen the economy, governments are going to kind of restrict and control our movements and our activities in a greater way than we have ever, ever, ever seen.
David Bezar:
Number four, there will be more government involvement in companies due to the bailouts that are being already as well as federal and state local governments, kind of picking the winners and losers within our own local economies. Right? And there\’s going to be more bailouts in the … We see it, right? Like down in Georgia, the governor\’s making a decision to open up tattoo parlors, gyms and salons. Well, I don\’t know why those versus other things. And then the mayor of a town says, \”Well, I\’m not listening to the governor. I\’m going to do what I want to do.\” All of this delay is going, and I\’m not saying good, better and different, but it\’s going to have a dramatic impact on the recovery the longer we go. And Joe, if our longterm listening audience remembers back, we go back maybe four or five months ago. I wrote a statistic, read a statistic that the longer the bull market goes, the deeper the correction will go and the longer the recovery will go.
David Bezar:
That is now what … This is the one of the top economists in the world. This is not a bounce back. This may not even be a U shape recovery, which means it\’s we go down low, we stay there for a while, we come back up. This may be what\’s very much feared, called a W recovery. Where we go down, we see a bump back up, we come back down and that second traunch down, which is what happened in 2008, much, much more severe than the first time down. Again, I\’m being the bearer of bad news and these are predictions. But again, from somebody with this stored history, this guy knows what he\’s talking about. He\’s been right most of the times. Maybe we wish he\’s not right this time, but the challenges are everything\’s kind of pointing to it. Does that make sense?
Joe Krause:
Yeah, no, it definitely makes sense.
David Bezar:
Yeah. Number six, consumers will be scared and less frivolous with their spending because we\’re all going through, and we\’re a little bit kind of shocked right now. We\’ve never experienced anything like this and we really don\’t know what the immediate future is going to be. So we as people tend to, I mean we\’re communal, but we\’ve been scared into this point of almost a paralysis situation, which is going to affect consumer spending. And we have a society that\’s built, we have a market that\’s built on consumer spending. All of this is going to result in both the supply and demand issues on a very large scale moving forward. So the problem with supply and demand economics is when there\’s a big demand, prices go down and the opposite, right? So like we saw oil, there\’s so much supply that it fell to … it went negative, which they\’ll write a history book on that. It\’s never happened.
David Bezar:
Number seven, all of us are going to really end up with a much heavier debt burden than what we\’ve seen before because if we stay in this protracted recession, people lose their jobs. The first thing they\’re going to do is start putting things on credit cards and borrowing money and then not necessarily have the … Again, this is horrible stuff to be quite honest with you, but it\’s just, we kind of saw it before. There was a rescue package in the last financial crisis. I talked about that last week where the Fed fund rates were, they were at 5%. They\’re now practically at zero. So the Fed can\’t really reduce interest rates to stimulate the economy. That was number seven.
David Bezar:
Number eight, the government, consumers and corporations will be consumed with paying off the debt that they\’re receiving. Some of these loans are supposed to be forgivable. The companies are going to realize it was just kind of putting a bandaid on a whooping, huge gash. It\’s most of these companies are not going to get the forgiveness of the loans and now they\’re going to have on their balance sheets. Same thing with the consumers, right? Number nine, the stock markets are very high still with all things considered. So we see a complete dislocation of the reality between our economy and what the stock market is doing. So there\’s a false hope by many for a very quick recovery. So we don\’t really believe that\’s what\’s in the cards for us and we got to get prepared.
David Bezar:
Number 10, we will eventually emerge from this, Joe, but it\’s going to be a very slow growth and it\’s going to be a very dangerous environment. And I don\’t mean physically, although there may be some physical aspect to it just from a health perspective, but I mean financially. The rules that may have applied may not remain intact because we\’ve never seen something quite like this. Now, when the pandemic flu happened back 100 years ago, we weren\’t as advanced of a society as we are today. And that first quarter of 2020 in the financial markets, we haven\’t seen a situation like that and over 124 years. So our expectations as people, our comfort, our used to having luxury to a degree in our lives is without the proper type of financial planning, without really understanding the conversation of what you need to have. It\’s a game changer right now. And I would say this week was very pivotal for me to understand the impact that we potentially as a company can bring to people.
David Bezar:
It\’s not about doing good. It\’s about doing what\’s necessary now. And I hope our listening audience doesn\’t take what I just shared from the wrong perspective. This is coming from my heart. This is coming from the company\’s heart that we really want to change the course and direction. So the last thing you need when you\’re retired is a financial surprise, which is holy smokes, right? I mean, this is the biggest darn financial surprise we\’ve seen, but it happens all the time. I mean, it consistently has happened as long as you\’re alive Joe, as long as I\’m alive, as long as Bret and Karen, we\’ve seen it happen. It just, it comes out and we get surprised. But we really shouldn\’t. And maybe you overlook a tax issue or you under estimate a major medical expense, and by the time it hits you, the damage is already done.
David Bezar:
So you might be looking at a dramatic change in your lifestyle or worse yet, you may actually be in a situation where you\’re looking for a job right now. We don\’t want that to happen to you, right? We really, we don\’t want that to happen. And that\’s why we\’ve created the thrive retirement checklist. This is a simple three page report that reveals the trapdoors so many people are actually missing, especially when it comes to taxes, social security, income, healthcare, and more. You can even score yourself on this readiness for retirement checklist. So to get your free report, call (215) 987-2430. Simply provide your name and email and we\’ll send it to you in the next business day. And if you plan to retire in the next five years, this report Joe is an absolute must have. It could help you avoid all of those critical mistakes that we just talked about that could actually end up derailing your retirement. And again, importantly, it\’s free. So to get that free report, Joe, call us right now. (215) 987-2430. That\’s (215) 987-2430.
Joe Krause:
We\’ll get to a commercial break back here on Roadmap To Retirement in a moment.
Speaker 1:
So are you a member of the thrive army? If not, it\’s okay. You can still get a sample RMD tax report at no charge. All you have to do is go to thrivefinancialservices.tyl16lnm-liquidwebsites.com.
Joe Krause:
And back here on Roadmap To Retirement, the radio show. Thank you so much for tuning in on this Saturday as we come to you every week on Talk Radio 1210 WPHT. Again, that number that David alluded to going into the break, (215) 987-2430. Bret, all yours sir.
Bret Elam:
Alright Krause, we\’re heading into retirement. We\’ve thought about over the last couple of years, all the sacrifice I\’ve made helping the kids get into college. Sometimes I\’m still helping the kids after college, supporting them and maybe now I\’m helping now the grandkids, putting money away for retirement. Again, sacrificing and then all of a sudden the day comes, I get to retirement and then what just happened four months ago. Again, COVID-19 has made us forget about all the things and the relevant topics that we bring up on the show Krause but what I want to chat about here today is something that\’s called the secure act and what the secure act attacks.
Bret Elam:
These are three things that clients and prospects that we sit down with every day as part of the Thrive Retirement Roadmap, the secure act goes against inheritance, goes against control of retirement accounts and it leads to increased taxation. So let\’s think about that. You have a choice of bigger inheritance, smaller inheritance. Krause I\’m going to throw that one out to you. Bigger inheritance, smaller inheritance. Which one would you prefer?
Joe Krause:
I have to select big.
Bret Elam:
Thank you. More control of how to utilize the assets or less control. Which one would you choose?
Joe Krause:
A again, more control.
Bret Elam:
And then more taxes, lesser taxes. It\’s an easy answer. Rhetorical one right there and that\’s what I\’m here to share with you today is we\’ve been talking about over the last couple months, really over last year, 2019 until the secure act got passed in December of 2019 which created a new normal. A couple of big things came out of the secure act and I want to go through that Krause and then how it relates to a client story that I just met with the last week.
Bret Elam:
Secure act, three things, big things and again the secure act attacks if you have an IRA, Karen talked about this a little bit ago, an IRA, a 401k, 457, 403, anything that has a required minimum distribution called associated with it. That\’s what the secure act is really talking to. So a couple things that came out of it. Number one is that if you are continuing to work and or have earned income beyond required minimum distribution age, which used to be age 70 and a half but now is age 72. And you remember required minimum distributions as Karen just talked about a couple minutes ago, is there way for 2020 but talking about normal years now. Okay, so age 70 and a half is now age 72. So that\’s one big change.
Bret Elam:
The second big change. If you are working, that\’s where I was just going and you have earned income, you have the ability to still make a contribution to an IRA past the age of 72. And I\’m not going to spend too much time on that today because [inaudible 00:26:01] it\’s an accounting nightmare of putting money away, having to take a required minimum distribution. Not going to go there today. But the third thing and this third one is critical because the first two sounds like a good thing. Bret, 70 and a half out of 72. Bret I can now put money away past the age of 72 but what\’s the third one? And as I always say, when the government giveth, the government is also going to taketh.
Bret Elam:
So while I just heard number one and two sounded great, number three, maybe you had received an inheritance from maybe a sibling, maybe a parent. So if you received an inheritance of an IRA, of a 401k, any of these topics we\’re talking about previously to the secure act, what happened was, and for pretty much all intents and purposes, minor exceptions to the rule, and again we go through the details with people related to it here Krause is what happened was you had to pull out a little bit of money stretched out over your lifetime hence the concept was called a stretch IRA.
Bret Elam:
So a lot of times from an estate planning standpoint Krause, sometimes we\’d name our beneficiaries as grandchildren because the number would be even smaller over an extended period of time because someone that\’s 20 has a longer life expectancy obviously than somebody that is 60. So again, some planning went into that thought process. Maybe you had trust documents, IRA beneficiary trust. Again, control as we talked about Krause, control of how those assets are going to be spent after we go to the grave. And I\’m talking about what if you inherited money? I also want you to think about it. Maybe you are planning on giving monies to the next generation. We need to be conscious of the secure act and what it is attacking. Again, those three things, lower inheritances, lower less control, I call it post grave, post-death control of the assets of how it gets spent. And again, number three, increased taxation.
Bret Elam:
Okay, so now post secure act. Now for anybody that passes away after the year of 2019, that means anyone who passes away and we actually already unfortunately have met a couple of people who have dates of death of 1/1/2020 and thereafter and that\’s who I\’m speaking about. So if you inherit money from an IRA, from someone who passes away after 1/1 of 2020, now the secure act comes into play. So let\’s say I pass away, I have $1 million IRA and I give it to my three children, not my wife, because my spouse, the rules stay the same. Remember we\’re talking about somebody other than a spouse. Now what has to happen previously my kids had to pull out a little bit of money over a long period of time. But now let\’s fast forward. Let\’s double my age.
Bret Elam:
I\’m now in my eighties and my kids are in their fifties, early sixties. They\’re in their peak earning years. Everything that David and Karen just spoke about, we know increased taxations on the future. Again, this isn\’t thrive. We\’re talking about world renowned economists just talking about the climate of the country of where things need to go. But even if I\’m being nice and talking about just today\’s tax climate, but my children now are in those highest earning years, maybe it\’s you, you\’re listening here today. Your children now are in their highest earning years, now have to pull out money. Let\’s say in that example, $300,000 each. Now they can predictably or they can come up with their own schedule of how to pull that money out. But now with increased taxation, not knowing where things are going to be, we lose control. Three things, lower inheritances, higher taxes, and again, the less control of the assets themselves. That\’s what the secure act is attacking.
Bret Elam:
I\’ve got a client of ours, okay. Recently just became a new client of ours. More modest numbers. I hear a lot of people say, \”Hey, I\’ve got big numbers here on there.\” And here\’s someone everyday coming in. Still working. Okay. About two, three years away from retirement, was looking for our help Krause. Had about $600,000 in assets. Okay. All 100%, he was a government worker and the thrift savings plan. Okay. Okay. So a lot of money in that plan. And what we had shared with him, had some debt. We gave them a debt freedom plan. We call it a debt snowball plan to help them get out of debt and then just put your head down for two years and the life\’s going to look a lot different. But the one thing, and Karen just spoke about that report a little bit ago, what I shared with him on the secure act was just kicking the can down the road as a tax procrastinator.
Bret Elam:
Just doing nothing except what conventional wisdom has taught us is that on that approximate $600,000 assuming just the same tax rules as today, which is now very unlikely, would pay almost approximately $360,000 in taxes of just kicking the can down the road, pulling money out of their RMDs from age 72 and beyond. For him, great situation. He wasn\’t going to need that money, so he was going to reinvest those assets. So reinvesting those assets meant they were going to pay taxes on it all over again. And then I shared with them how much his kids, two boys were going to end up paying from a taxation standpoint and that\’s when the jaw hit the ground and that\’s where we started introducing that Roth conversion strategy. It goes against the grain. That is a number one fight against a secure act.
Bret Elam:
And again, I want you to think about that Krause. You\’ve sacrificed, put the kids into college, they only have the Stafford loan. I did my job. I helped them out getting through college, maybe now I\’m helping out the grandkids. That\’s on the horizon. Now all of a sudden COVID-19 hits, the secure act hits. All these things that are out of our control, but conventional wisdom has always taught us I\’m going to be in a lower tax bracket in retirement than while I was working. Well, guess what? That\’s all now changing and we now need to start looking at that analysis. So you look at that, the last thing you need, David said it when you\’re retired or nearing retirement is the big surprise. I\’m ready to retire. I\’m planning for that inheritance. Maybe you\’ve overlooked that tax issue, which the secure act is talking about. And by the time it hits you Krause, it\’s done. That\’s a dramatic change. And with all those things that you\’re facing, that\’s what we talk about. That\’s the report that we offer.
Bret Elam:
So if you\’re hearing our story here today and you\’d love to set an appointment to get that complimentary thrive retirement at review, Brett, how do I maximize social security? Brett, how do I fight that secure act? I want a greater inheritance. I want more control of those assets. I want to pay less in taxes. That\’s what we do here Krause. To schedule that complimentary virtual appointment, please call (215) 987-2430. Again, that\’s (215) 987-2430. Krause, you can\’t wait. Every day is changing. I don\’t know what tomorrow brings. I don\’t know what stimulus package things are coming. This is what I know, the government\’s change and every single day, and now is the time to roll up the sleeves to be proactive. Again that telephone number is (215) 987-2430. Please reach out to us. I encourage you to schedule that complimentary virtual appointment so that we can go through that analysis, go through that thrive retirement checklist David was talking about and making sure we\’re prepared for whatever life throws at us.
Joe Krause:
Good stuff and good segment here on the Roadmap To Retirement, the radio show on Talk Radio 1210 WPHT. We\’ll get to a quick commercial break. On the other side David will come back and tell you about that thrive retirement checklist. We\’ll deal with that and we\’ll deliver the rest of the show following the break. Back in a moment.
Speaker 1:
We hope you\’re enjoying and learning from this week\’s radio show. And if there\’s an area that\’s important to you that you\’d like covered, send a text to (267) 870-8210 and remember, it\’s always complimentary and there\’s nothing for sale.
Joe Krause:
And back here on Roadmap To Retirement, the radio show as we come to you on Talk Radio 1210 WPHT. I want to thank everybody for tuning in and listening to us every week on the show. Good information by Brett in the last segment. Karen, you kicked us off today with a great start to the show. Every segment I feel that we\’re doing now, every minute of time that we have to deliver the message or to deliver a message is very, very important. And I want to bring the audience back to your segment and give you a chance just to hit on a bullet point or two from the opening segment, just to remind the audience on how we started today.
Karen Bezar:
Thanks Joe. And this really is so important and we\’re so passionate about it and we just, we want to get the information out there. And I touched, one thing I touched on and I want to go back and slowly talk about it again is 50% tax or penalty on our MD distributions if they were not taken correctly. So number one, IRA means individual retirement account. It is not a joint account. So if you and your partner have IRAs, your partner has to take their IRA distribution and you have to take your IRA distribution. You cannot simply say, \”Let\’s look at all of our qualified accounts and let\’s take it all from your account this year.\” You might have two, you might have 10 accounts all across the board. So remember it\’s individual.
Karen Bezar:
So if you for some reason think you can take it all out of your spouse\’s account and that will count for yours as well. That is not true. But believe it or not, that sometimes is a thought process. I\’ve had people come in and they think that IRAs are joint and they truly are not joint and it\’s taxed differently. So very, very important. People also wonder where should … can I take it all out of one account? Can I take it all out across the board? And as we\’ve said before, the answer is yes and no. You really need to know what you\’re doing.
Joe Krause:
Can I merge the accounts into one? The answer to that is no, right?
Karen Bezar:
It depends. It depends.
David Bezar:
Well, it depends. Yeah. Again, there\’s a lot. But the first point that Karen made is the most critical one. Like I wouldn\’t let people veer off of that at the end of this show. They\’re not joint accounts, right? Husband and wife, whatever the partnership is, you can\’t combine them for the … you can\’t take out of just one you got. It\’s individual everybody, or you\’re going to get a 50% penalty. So I think that\’s a big-
Karen Bezar:
And real quick, 50% penalty, right? So if you were supposed to take 10,000, took out five, you can get a 50% penalty on that 5,000 that you didn\’t take. So that\’s a lot of money to make. That\’s a big mistake to make. Even if it\’s $1,000 that you miss taken out 500 extra dollars. Who has that extra money right now? So just real important to forget that in the back of your-
David Bezar:
Yeah, don\’t forget IRA stands for individual retirement account. Individual-
Joe Krause:
I can see the confusion.
David Bezar:
I get it. It\’s easy.
Karen Bezar:
100%.
Joe Krause:
I\’m married 45 years, 50 years. I\’m on the doorstep of retirement. Everything we\’ve done has always been collectively the same.
Karen Bezar:
Right. Joint. It\’s always joint. Yeah.
Joe Krause:
I could see where people would-
David Bezar:
It\’s our money.
Joe Krause:
It\’s our money.
David Bezar:
Our money.
Karen Bezar:
Well you know-
David Bezar:
But not in our case.
Karen Bezar:
Your money is your money and your wife\’s money is her money. Right Joe?
David Bezar:
Not in my house Joe.
Joe Krause:
My money is my wife\’s money. My wife\’s money is her money.
David Bezar:
That\’s where part of that-
Joe Krause:
I\’m just living in the world
David Bezar:
Krause that\’s where some of that Roth conversion conversation that we are just chatting out about Karen\’s topic is you always want to go after the older person\’s monies first because they\’re going to hit required minimum distributions age first. So again, a little bit of some of the strategy of what we look at are Roth conversions. Go after the older person\’s monies first Krause.
Joe Krause:
Let me come to you now Brett and ask you to hit on one of the three points that you referenced in your segment. I guess regarding the secure act, you talked about three categories or three bullet points under that. I mean-
Bret Elam:
Yeah, [inaudible 00:38:37]. Again, listening to audience, these are things, three things that people do not like. Lower inheritances, less control of assets and greater taxation. That is the secure act passed in December of 2019. And again, we\’ve done so many shows on this topic Krause. We will not stop talking about this topic on the shows as well because it attacks people right in the face. And when we ask people to stack rank three places that your money\’s going to go, loved ones, charities and government, you\’ll never guess who\’s number three every time we ask people where do you want your money to go? And of course the answer is always the government. And if you are truly emphatic about making sure that government\’s not going to get the lion\’s share of your retirement accounts, you got to be proactive Krause. That\’s the secure act. It\’s attacking those three things right in the face. And those are things we\’re passionate about educating people on a daily basis.
Joe Krause:
How many people know the secure act?
Bret Elam:
I would tell you-
Joe Krause:
Know the details of the secure act.
Bret Elam:
I mean you\’re lucky if 20% of people have heard of it, and 5% of people know the details.
Karen Bezar:
And we have the stimulus act, we\’ve got the secure act. People are kind of getting confused with everything.
Bret Elam:
People, forget the secure act because of everything that\’s happening. It feels like three years ago it got passed.
David Bezar:
Yeah, Joe. So today, I hope we delivered for our listening audience. There\’s a lot the RMD situation, the secure act, I kind of want to leave people with, listen I\’ll take the weight of the message in saying that things are not that great out there. And it\’s not for any purpose of scare tactics. It\’s not against the government. It\’s not against the financial markets. It\’s not with an agenda. It\’s I just want to try to empower our listening audience to look at reality. And the reality is that taxes are going up, the federal government is going to become a much larger partner in your retirement or your future retirement. And you need to become your own wealth advocate and maybe team up with a wealth advocacy team that can give you guidance to try to mitigate that from happening, right?
David Bezar:
Like I\’m nervous. I\’ll be honest, I\’ve been doing this 31 years and we\’ve been in the lowest tax climate in the history. We all have lived through. Now we may not have experienced, but we lived through where it was 50, 60, 70, even at one point it was at 90% federal income tax level. Now I hope and pray that we don\’t get to that point, but 22, 24, those are going to be bygone eras, right? And now more and more of your money. Unfortunately, some segments of society will say it doesn\’t make sense to be entrepreneurial. It doesn\’t make sense to make a lot of money because you\’re going to be giving. Now understand every time there\’s a tax change, there are very, very, very, very smart people out there who learn how to legally mitigate those tax crisis.
David Bezar:
And we team up with those people to understand how to do that for our clients. So listen again, all that has happened Joe is really a big surprise for us. Like we really didn\’t anticipate it, but these surprises definitely happen all the time. And unfortunately, a lot of times people are overlooking. The big one right now that people are overlooking, they\’re going, \”I think the market will come back,\” but they\’re forgetting completely about taxes. And a lot of time these surprises by the time they actually hit you, that damage is already done. So especially if you\’re a person or know people that have gotten forcibly retired or you\’ve got a dramatic change in your lifestyle that\’s coming about, it\’s really time because we don\’t want that to happen to you. And what we have created for our listening audience is a thing called the thrive retirement checklist.
David Bezar:
It\’s an actual checklist. It\’s a simple three page report that reveals the trap doors so many people are actually missing. And right now Joe, especially when it comes to taxes, social security, income, healthcare, Medicare surcharges. The report actually lets you score yourself on the readiness for retirement. So to get your free report Joe, call (215) 987-2430. Simply provide your name and email. We may have a live person who answers or our voicemail, just leave us your email and we will get that report out to you in the next business day Joe. And if you plan to retire in the next five years, this report is an absolute must have. It could help you avoid making critical mistakes that could derail that retirement that you\’ve worked so hard for. So again, to get your free report, call us right now. (215) 987-2430. That\’s (215) 987-2014
Joe Krause:
That\’s going to do it for this week\’s edition of Roadmap To Retirement the radio show. On behalf of David Bezar, Karen Bezar and Bret Elam, I\’m Joe Krause. See you next time everybody.
