Good afternoon everyone.
All right, just disconnected the auto on my phone so we don’t get the the feedback going back and forth. Um we are going to start uh on time uh at 2:00 sort of about 8 minutes or so but uh for anyone who is here early and wants to say hello I’ll open up the lines. Hello hottie. Hello who you know R you’re on you’re on all the time and um I hope you have a you know this is uh informative to you. What is your name? So at least I know what your name is. if you could just unmute if you want to say hello. Just uh at the bottom of your screen is a microphone. Um just click on the microphone and it’ll allow you to speak
or you can put it in the chat. But at some point, let me know what your let me know what your name is cuz I see you on every every every week, but it’s just as an R and I was just I was just curious.
Welcome, Steve. Welcome Nancy.
Welcome William. Welcome Selena.
You guys want to say hello or ask a quick question before we get started? We got about We got about six minutes before we get started. Why don’t just say hi? Hi, William. Thanks for thanks for joining us. Awesome.
Welcome, Rick.
Welcome, Mark.
Hello.
Good to see you. You, too.
It looks like we’re waiting for a few more people or No, it’s going to be um I’m going to start. Yeah, we’re going to We have a pretty good amount of registries today. Uh, we should have we have should have quite a few people on. So, I’m going to start on time at uh at two o’clock, but I just figured uh I like to just figure if we’re all going to be here, if you want to say hello, we can or you got a quick question before we start, ask away. But, uh, but I’m going to mute everybody when it comes time to and and I’m going to start right on time at two o’clock. So, we’re four minutes away. All right.
Welcome, Tina.
Welcome Bradens.
Welcome James.
How are you doing? Great. Doing great. We’re I’m just I’m just welcome to everybody as they come aboard. But uh we’re going to start right on time in about four minutes. Gotcha. We got We should have a pretty packed house today. So, but if you got a quick question before we started, ask away. Gotcha. All right. Welcome Karen.
Welcome, Kim.
Welcome, Nick.
Welcome, Lori.
Welcome, Christopher. Welcome, Vanessa. We got a good crowd today. All right.
Welcome, Barbara.
Welcome Ruby. Welcome Kirk,
Dario. Good to see you.
Welcome, Dennis.
Welcome Julie.
Robin, welcome. Thanks for joining us. All right, we got a good crowd here today. So, um again, uh I’m going to start right on time because I have a packed uh a packed presentation today. So, I’m going to try and honor your time and we’re going to start pretty much at 2:00. So, uh, with that, um, I’m going to
welcome Brooke.
Oh, welcome Terry. Welcome Mark. Welcome Diana. Welcome an
Welcome, Terry. Okay, now it’s two o’clock. I see there’s a bunch of people still uh still logging on here. So, uh but I’m going to get started because I want to I want to honor the uh 52 people who are currently on. So, and I want to honor their time. So, with that, um my name is Bill Russo. Welcome uh to today’s uh I guess late lunch and learn uh about savvy tax planning. Uh what we’re going to talk about today is how tax planning changes through the four changes uh for the four through the four stages of your retirement. Um and what I’m going to do is um I’m going to first start off with a few ground rules on how how these because I see there’s a lot of new people on here. So, what I’ll do is I’ll just start um I’m out of uh San Francisco. I’m a financial adviser out of San Francisco, California. I cover mostly Northern California, but I have clients all over the United States. I’ve from I have a client in Hawaii. I have clients in Florida and New York. So all over. I have clients all over the place, but most of my clients are in the Pacific Northwest, the ba, north, northern California, Nevada, Oregon, and Washington. Um, but uh before uh I get started with any of this, uh a new disclaimer I have to put in here is that with AI and all these recording devices, I have to put this in here. We are in a super regulated industry. That’s why I don’t um I don’t record these. We do have recorded sessions that you can go on. We have a library of them. But what I ask you to do is not to record today. So any listening devices or anything like that that note takingaking devices, please do not record this. Um because again we are in a very regulated industry and we have to go through approval for all of these different things and it’s proprietary uh it’s proprietary information. So I’m happy to go through it with you individually if you ever want to make an appointment but uh please do not uh please do not record this. All right. And before we get to the main attraction, get to the coming attractions here in 2 weeks on Wednesday, June 3rd, uh at 6:00. Usually what I’m going to do is I I alternate this every every other Wednesday from uh I’ll do it at 6:00 and then I’ll do it at 2:00. So today’s 2:00, next one’s going to be at 6:00. Um, in that one we’re gonna tackle annuities, the good, the bad, and the ugly. So, that’s I I do something that I know is probably a little hard to comprehend, but I’m going to take annuities and I’m going to try and make it fun. I do a whole western theme to it. So, uh, but it’s not just, um, anyone who’s anyone who’s new to this will, well, anyone who’s not new to my webinars here, I do not I’m not selling anything except for maybe making an appointment and doing a plan, which, by the way, spoiler alert, it doesn’t cost you anything to do except a couple hours of your time. um with uh as it’s a it’s a benefit of being an alliant member. Um so I’m not here to sell you an annuity or anything else. What I am going to do on that webinar is I’m going to tell you annuities, how they work. There’s a lot of misconceptions about annuities. I’m going to tell you how to look uh how to how they work for the most part and I’m also going to tell you things you need to watch out for because the devil are in the details. There are there aren’t annuities themselves aren’t bad, but there are certainly bad annuities and there are things you have to be aware of. So, that’s coming up on June 3rd. And then on uh two weeks from then on June 17th back at this same time uh we’re going to do IRA planning strategies which is we’re going to talk about the different types of IAS and ways to really take advantage of them while you’re working and throughout retirement as well. So um and you know there are if you don’t like my jokes or you know my or this time doesn’t work for you check out our website which has all of our different uh webinars. It’ll tell you all what the webinars are for the next coming two weeks. There’s all sorts of times with we have 12 different advisors here that all have different presentation styles and whatnot and different areas that we focus on. So go to uh aris a r i s.allantiientalantcreditun.com
um/events for the webinars. But if just go to arisalliancreditun.com and that’ll get you everything ARIS uh which is Alliant Retirement Investment Services. So okay. So now that I got that out of the way, welcome everybody. I’m glad to see you here. Uh, what I’m going to start off with is a little little tax brain teaser. So, after this is this is Bill here who is retired and he has a taxable income of uh a little over $58,000. So, he’s in a 22% tax bracket. This includes uh $45,000 of retirement income and 38 37,500 of social security benefits. So, he wants to go on a road trip to the Sphere in Las Vegas to uh to see the Eagles, which well, maybe you may need a little bit more than $1,000 to do that, but uh but anyway, so what he wants to do is he’s going to take that $1,000 out of his IRA. So, you figure, okay, well, how much in tax is this going to cost him? Well, you figure, okay, this is pretty simple question, right? You have all right, you have here it is. He’s in a 22% tax bracket right there. So, all right, he takes out 100 thou uh another $1,000. Okay, he should be paying 22%. Right, you figure 22%. So, it should cost him $220. Well, in actuality, no. It will not. It will cost him $47 in tax or a 40% tax rate. Now, what the hell just happened? Stay tuned. I’m going to answer all those questions, this question and others in just a moment. So, I will I will answer it though how it came to that. And that is really getting back to the how tax planning changes through the four stages of retirement. As I said before, my name is Bill Rito. I see we have a lot of people who just joined us. So, um, my name is Bill Rito. I’m a financial adviser for Alliant Retirement Investment Services. We are the division of Alliant that takes care of long-term money. long-term money and financial planning. What is long-term money? It’s anything beyond 18 months. Why? Because if anything prior to 18 months, well, Alliance got some great solutions for you. They have, you know, we have great very competitive savings accounts, CDs, all that good stuff. But once you go beyond 18 months, you’re starting to compete with the long-term effects of money. Inflation. Inflation is the rate at which prices go up. gas, food, housing, it all goes up over time. We’ve gotten a crash course on it lately on what inflation can do to the spending power of your money. So, with that, anything beyond 18 months, you really need to put your money in something other than savings or CD accounts cuz otherwise what you’re doing is you’re very safely losing value over time. And that’s kind of what we do here is help plan for the major events in your life. Um be it, you know, social security, long-term care planning, anything like that. We’re the ones that can help you. Retirement, obviously retirement is a huge part of it. Um so with that, my disclosure hat, uh I got to put on my disclosure hat here. Uh disclaimer hat, excuse me. Um, everyone’s tax situation is different. So, you should consult with a qualified tax professional to discuss your specific tax situation. I’m not qualified to give tax or legal advice uh for that. Please talk to your qualified tax or legal professional. Um, that being said, we do I deal with tax issues and help you plan all the time with these type of things. So, a couple things we’re going to talk about today is we’re going to go over traditional IAS, which are tax deferred. Um, basically what happens is you grow, you put your money in, you get the deduction up front, it grows, grows, grows, grows, grows. When you pull it out though, it’s taxes ordinary income. Roth IAS are non-deductible. So, you don’t get the deduction up front, but when you put it in there, it grows, it grows, it grows, grows, grows, but because you’ve already paid the taxes on it, but when you pull it out, it’s tax-free. So, and also, just for the last disclaimer here is um this presentation because I have clients, I I have people on this, I have over 75 people. Um I have uh over 75 people on this uh webinar right now. So uh they’re from all over the United States. A lot of them are in California um and the West Coast, but um because they’re all over the United States, state taxes do apply. So I just stick to uh federal taxes. Obviously, especially in the state of California, you still may face state taxes. So again, that disclaimer hat is on. Please talk to your qualified tax professional regarding any of those. Uh, okay. So my goal here is to help you understand that retirement is the distribution game. Spending your assets in retirement is much different than the accumulation game, which most of you have probably been doing for the last several decades or so. And it’s very very different when you’re, you know, when you’re planning, you know, you’re you’ve been working hard, you’ve been saving your money, and hopefully, you know, your accounts have grown over time. Great. Well, as you prepare to enter retirement, you’re in a very different phase. As I said, the distribution game is now you’re pulling your money out and it’s going to trigger some tax consequences and you also don’t have a lot of the benefits you did when you were in the accumulation phase like your child, you know, your kids are grown so you don’t have child tax credits anymore. Um, most people are, you know, finishing off paying off their mortgages into retirement or at least they’re, you know, so they don’t have that mortgage interest deduction. Uh, and then you have all sorts of other things that you need to do. Um, like you’re going to have to worry about social security, RMDs, paying for Medicare, possibly long-term care, all these different things. So, that’s what we’re going to be talking about today. And we’re really going to help you really limit the amount of taxes you’re paying. Um, because unfortunately, most people pay a lot more taxes in retirement than they would have normally expected because welcome to America. We have a very confusing system that treats various tax income types differently and contains a ton of hidden taxes and penalties. So, I’m going to uncover and shed the light on a bunch of them today.
All right. So, and um obviously, you know, because the tax exposure is going to change throughout the four stages of your retirement, you need a strategy that anticipates both traditional taxes and those pesky taxes you don’t notice like, you know, sir charges and penalties related to social security or Medicare or other income sources. So it means that you need to be informed and have a proactive plan that addresses these before you actually need them. And that’s really what why planning is so important. So here are the four stages of retirement. The first stage is really the decade before you retire. Um, this is where your pre-retirement where you’re okay, you’re you’re finishing up your work and save years, but there are certainly things that you can do to set yourself up now for retirement and and help your taxes in retirement before you even retire. So stay tuned for that. I’ll I’ll get to that. Then you have your big retirement party. Okay. Well, your first part of retirement is your early retirement, which is they call them the go- go years because this is the time that, you know, you’re checking off the, you know, you’re checking off the the bucket list items, you know, traveling, volunteering, maybe starting that uh that hobby that you’ve always wanted to do, you know, maybe working part-time, or spending more time with your family. These are all things you’re going to be a lot more active during these years. In your middle retirement, kind of the second 10 years, you kind of already all right, maybe I’ve seen a bunch of the, you know, most of the the bucket items are checked off at that point. Maybe start to slow down a little bit. Uh well, this is where you’re going to start to come into having to deal with other financial decisions like well case in point uh RMDs are going to be coming up in typically your mid70s. So I’m going to show you ways to really take advantage of that and plan for that to minimize the taxes on that. And then the last part is your late retirement. That’s where okay at some point the travel’s going to be done. I mean, I just got off the phone with my mom where she came out last Thanksgiving. I flew her out first class to make She’s 89 years old, so I flew her out first class to make it as easy as it possibly could for her. And she had a great trip. It was great to see her. And at the end of the trip, she was just like, the last thing she said to me before she got on the plane was, “Bill, it was so good to see you. I’m never coming out again. You want to see me, you’re going to come to me.” Got it, Mom. So that happens to all of us at some point. She made it to 89 before she said that. But uh with that, uh you know, and there’s going to be some things where you really can start to estate, you know, plan your estate to really minimize the taxes going forward.
All right. So retirement’s full of surprises as you can see from this uh couple right here. Uh but the best the best planning can really divert from reality you know at some point you know even if you have a great pl you know even if you have a great plan in place there’s going to be things that happen that we didn’t expect so you know obviously one unknown in the future is inflation as we’ve seen I mean gas prices have just skyrocketed uh you know And that’s the thing, people tend to view their future costs in current dollars and they don’t always anticipate those costs. You know, they grow with inflation. So, you know, I mean, just listen, think back 30 years ago, hell with it. Think back 5 years ago, what what inflation was and what the cost of things were. you know, the price of eggs or a gallon of gas or, you know, whatever. That’s inflation and it goes up over time. You need to plan for that. Um, also, a lot of people end up living a lot longer today, especially today, than they were, you know, our parents did or our grandparents did. So, you really have to start planning for, you know, how long do you think you’re going to live and at least make sure you don’t outlive your your assets. Many people also underestimate the uh, you know, how much money they’re going to need to maintain their pre-retirement, you know, standard of living. And, you know, nobody wants to be eating ramen in retirement. So, you want to estimate those as well. And obviously the big elephant in the room is health care. You know, that’s that’s something that unfortunat I do a whole webinar on just health care and long-term care and retirement and planning for it. And it doesn’t mean getting long-term care insurance. It just means making sure you have assets set aside to take care of that because unfortunately anyone who reaches 65 years of age, you have a 70% chance you’re going to need long-term care at some point in your life. So, you know, I’m not saying long-term care insurance is the solution. I’m just saying you need to plan for it. And even with all that, taxes end up still being if you did your, you know, unfortunately for most people, taxes end up being the biggest expense or a huge expense in retirement that most people don’t even think about, you know. So, we’re going to go through that today. All right. So, let’s get into this because I know I’ve been building this up now for the last 15 minutes or so. All right. Well, the key thing I want you to get from this, and hopefully the last 5, 10 minutes have really pounded this into you is that you got to know what your aftert tax retirement savings picture is going to look like before you actually retire. That’s why the four stages, the first stage is actually the 10 years before you retire.
So, let’s say that you have a half million dollar saved up in a 401k or a traditional IRA. You got to understand that that $500,000 is not really $500,000. It actually could be based on, you know, if you’re in a 22% tax bracket, it could actually be 390,000. or if you’re in a 24% tax bracket, you know, it’s about $10,000 less. In addition, you’re going to have to start taking required minimum distributions in your mid70s, uh, either at 73 or 75, depending on what year you’re born.
And you know, according to you know, and I’m just going to show you this is an example of the cumulative after tax value of a half million dollar IRA earning 6% a year, you know, at different tax rates. And as you can see, the lower tax, you know, the lower tax rate you have, the more you keep. Great. That’s simple in theory, but it’s really difficult in practice. And I’m going to go through why that is because there’s all sorts of different penalties and tax situations that really make you pay more taxes than you originally thought. So you want to try and get your money out of well manage your money from a tax standpoint. So and this guy says here he’s saying, “Well, all right. Well, okay. I got these different accounts, but at least, you know, I still have social security to supplement my income and Medicare to pay my health care costs. Well, there’s all sorts of tax traps with Social Security and Medicare as well. So, let’s dive into that first. So, okay. So, Social Security, let’s go back to Bill’s trip here and figure how the heck did this how did he go from a 22% tax bracket to a 40% tax bracket? Well, okay, let’s take a look here. So, before the trip, he had $45,000 of, you know, IRA income. Okay. Plus, he had $37,500 of Social Security benefits. Okay. So his AI his AGI or his adjusted growth income was 74,788.
Okay, which gave him a taxable income of 58,000 and change which his tax amount was 7623. Okay, so what’s the difference in the second one? Well, in the second one, the only difference here, the only difference here is we added another $1,000 here. So, how did that have how did that have your tax bracket jump up that much? Well, it’s because of the AGI, uh, the adjusted gross gross income. It’s because of his social security benefits. Essentially what happens is is that your social security benefits are taxed at uh 85 it’s not tax at 85% but 85% of your taxable uh when you reach a certain level you have you’re going to have not only the money that you owe on your IRA but you also he’s got more of his social security that he’s now going to pay on. So, it’s not just the $1,000 that he had in his IRA income. Well, his social security benefits, he’s also paying 85 cents on a dollar for that as well. So, that’s why or not, sorry, he’s not paying 85 cents on the dollar, but 85 cents of every dollar becomes taxable. So, that’s why it ended up being such a big hit to his income. So again, I’m not saying don’t go on the trip, but what I’m saying is so if you add that up, you know, that 100 that $185 taxable at his 22% rate. Well, now that ends up being a real income tax rate of 40.7% on the $1,000 that we added. So that’s called the social security tax torpedo everybody. Um and it can impact uh single filers and and uh you know married couples even you know even with a modest income. You know this guy’s not making a ton of money here and that was a huge hit. So I’m not saying don’t go on the trip. That’s not what I’m saying. What I’m saying is don’t take it out of your IRA for that, you know, for that situation. Take it out of your cash reserves and maybe postpone that IRA distribution till another year. You know, that’s what I’m saying. So, you know, there’s all sorts of different retirement approaches. Some people retire completely. Some people, you know, retire and bit um and they’ll just, you know, ease into retirement by cutting back on their hours. Uh some people semi-retire and say, “Hey, you know what? I want to do this job I’ve always wanted to do.” Um and other people, you know, volunteer and do, you know, and again, you live, you do you. We’re here to help you plan for whatever you want to do. So, if you plan on working while you’re in retirement and collecting social security, well, I’m going to get the the good, the bad, and the ugly with this. The good is is that well, here’s how social security works. I mean, it’s a whole complicated thing, but I’m going to make on just social security. But what we’re going to end up doing is um how social security essentially works is they have a calculation based on the 35 highest years of earnings, right? And then what’s happens is did I lose you? Okay. uh just saw my connection with a little uh then what happens is is that uh your so if you take your earnings after anytime you can take social security anytime from 62 onward up until 70 is when they max out. So your earnings after 62 can still increase your benefit even if they um and certainly if they replace zero years or low earning years. So, if you’re working in retirement, your social security can still go up as long as you know what you’re making, even though you maybe were making a modest amount, well, it’s not what you were making before you retired, it’s as long as it’s within the top 35 years of your income earning, it will it will increase your social security benefit even as you’re taking it, which is great. Okay. But
well, okay, here’s the ugly. Is that Oh, hold on. Not the ugly, the bad. First, before we get to the ugly, is if you start taking social security, well, okay, just know that if you’re making over essentially uh, you know, $2,000 a month off of it, every dollar of uh every $2 you earn, a dollar is going to be withheld. Uh, now again, don’t worry about that. So, it’s called the earnings test. Don’t worry so much about that because it will as long as it’s in the top 35 years of your uh income. You get that back later
effectively go back in and adjust your your social security at a later that that happens um when you reach full retirement age which is usually it depends on your year you’re born but it’s usually 66 or 67. it will recalculate for you.
So, but here’s the here’s the ugly part of it is that if you are not if you’re not if you’re working just part-time but you know that the amount that you’re making is over $24,000 a year and it’s not in the top 35 years of income. Well, then what’s going to happen is is you’re paying for something you’re not really collecting on. So you it might behoove you to use other benefits because it’s not going to increase your benefit later and you’re paying for something. So you’re getting taxed on it and you’re really not getting the benefit from it. So you may want to take a look at, hey, you know what? In this case, we may want to if I’m still working, I may want to take my social security later. And if I need to supplement my income because I don’t want to work full-time, then take it out of other resources. So, okay. So, Social Security we took care of. Now, let’s take a look at Medicare. Okay. Medicare, we have George and Martha here. Now, they both have Medicare parts B and D. uh they made a great living. So, you know, they have uh they have uh $342,000 of uh monthly adjusted gross income or MAGI. Um and well, what they wanted to do is they wanted to sell $1,000 of stock. Uh sorry, they wanted to sell stock at $1,000 gain. All right. Well, okay. You figure, all right, long-term capital gains rates, okay, they’re going to pay 18.8%. Right, to do that. Well, you figure that’s what it would be, but
nothing’s that easy here. Well, with two A’s, which stands for income related monthly adjustment amount. So, what does that mean? It means that if you go into certain levels, your social security uh sorry, your Medicare premium is going to jump. In this case, it jumped an extraund It jumped an extra uh what? $122 a month times two because it’s two of them. And that didn’t and and your your you know the part D also gets put up as well. So you know whoa that’s an extra $550 a month for a couple over the course of a year just in part D. So obviously what we want to try and do is limit this because you’re looking at this, okay, over a 12-month period, you take those combined together, just that one capital gain of $1,000 ended up costing them almost $3500 over the course of the year. So that was a really expensive. So what I would have said is maybe delay that until another year when they’re not or you know if you want to take the money out take the money out but do it in a way where maybe you can offset the losses with another you know you have another stock that has losses that you’re going to offset that gain on it where it’s not going to it’s going to keep you under that threshold. Now I’m going to talk about a little bit more about Irma. remember Irma because this comes into play a little bit later on down the road. Uh especially when I’m talking about Roth conversions. So hold on a second. Uh all right. So yeah, obviously that’s a huge tax hit. We want to try to avoid that. So all right,
another thing you got. So going to give you an example here of Jim and an Oh, okay. Uh, are you still catching a This is Hey, Dario, are you still catching a huge echo? Cuz I noticed that you put in the comments that you guys are catching a big echo. I turned off my the my phone on my side because it will create an echo. Do you guys still have that? Just give me a heads up if you guys are if if it’s good or do you still have an echo? You still have the echo.
Okay. Uh let’s see.
Still have the echo. All right. What I would say is maybe um
Okay, Dario, I think that’s on your end. Maybe because you’re listening to it on your phone and your email. I saw you logged in twice. Take it off. Hang up your phone. That’ll probably help it on on that side. Okay. Everybody else doesn’t have an echo. So that’s that’s that’s that’s on your end, Dar Dario. But thanks for letting me know. Okay. So So Jim and Ann here are 68 years old. Thanks everybody for letting me know the feedback on that. Uh so Jim and Anne here are 68 years old. Jim retired at 65 and at 66. Now at 65. Okay. Well, they get coverage through Ann’s employer who offers retirey health insurance. Great. So, they figure, all right, well, they’re going to be on her coverage anyway, so nobody really needs to do anything until she retires at 66, right? Well, no. And here’s why. You have a 7-month window. When you reach 65 years old, the most important thing you have to do is sign up for Medicare. Doesn’t matter if you’re still working or not. You have to do it within you have a 7-month window. 6 months prior or excuse me, 3 months prior to your 65th birthday, the month of your 65th birthday, and 3 months after that. So, it’s a seven-month min window. Do not miss it because if you miss that enrollment, the penalty is 10% of the base for of your premium for life. So, you’re looking at in this case, you know, 10% of in 2026, that’s, you know, a little over $200, right? Times two. So that’s 486
$486 almost $487 a year or for life. So you do not want to you know and actually premiums tend to increase every year unfortunately so do the penalty. So that simple thing could translate to a lifetime, you know, $10,000 mistake. And also, you know, a lot of people think, well, wait a second, and that’s just part B. That doesn’t include part D, which also has penalties as well. And even though you got to watch for uh coverage gaps as well, because even though Ann was working, okay, Ann’s working. Well, then I just got I just got one that I’m I’m about to answer that Rick, but I will answer the question. But I just saw come up. You’re you’re you’re two seconds ahead of me. Um, so Rick pointed out, well, wait a second. If you’re working and you’re getting employer health insurance, what’s called qualified, then you don’t have to sign up for Medicare. You just have to give documentation. However, how Medicare works is a lot of times even supplemental insurance and things like that. Well, what happens is is that a lot of times it is um it’s considered uh supplemental. So, what does that mean? It means that Medicare will take care of, you know, they’ll let the insurance pay it first before they come in and take the rest. So with that, you still have to you still have to sign up for it. So just know that.
All right. So, and basically this is if you if you don’t and you it’s kind of like the same thing if you have an RMD. And missing an RMD is not the end all be all of the world. It’s a it’s a huge penalty, but it’s not as big of a deal if you I always say it’s kind of like the same thing with my with my kids. I have, you know, with my teenage daughters. I would always say that making a mistake is not a big deal. However, the penalty will be it’ll always be better on you if I hear about it from you as opposed to me finding about it before you. The consequences will the IRS and Social Security work the same way is if something like that happens, contact them immediately and make sure that you know you can you can get waiverss and documentation and things like that. You can do that, but you have to contact them and make sure the easiest thing is just don’t miss the just don’t miss the window.
All right. So, so are there other tax traps you got to be aware of? Absolutely. Um, you know, you can’t just take a halfaphazard look at, you know, tapping into your tax deferred savings. It’s not it’s not just, you know, what you take your, you know, how you that you take your money out. It’s where you take your money out of. So, you want to make sure that you’re diversified from a tax standpoint. So, what do I mean by that? Okay. Well, let’s take a look at Sam and Mary here. They, you know, want to spend $8,500 a month. They each have, you know, $450,000 in each of their IAS. They each have a $60,000 Roth IRA and then they got a joint bank account of $300,000. Okay. So, they figure, all right, they have all this money. They want to spend just over $100,000 a year. Okay. So, where should they take the money out of first? Well, conventional wisdom says, all right, you spend your spend down your taxable money first, then you spend down your tax deferred money, your IAS, and things like that, and then, you know, spend your tax exempt money la last, which is it’s not a bad plan, but it’s not always the best approach. And here’s why. because yeah, this is fine, but you want to do more than just the basics. And really what I’m going to get to is there’s a different approach here that you can do, especially in the early years of your retirement before you start collecting Medicare is you can spend the taxable money from your bank accounts and things like that first. Great. but also convert some or all of your IAS, your traditional IAS and 401ks and things like that to Roths in low tax years and then sure then spend the tax deferred money until depletion and then last spend the tax exempt money. What is that? What what did you do by that? Well, Roth IRA conversions, it’s probably the biggest thing, the biggest question I get these days is doing Ro, should I convert my IRA to a Roth? And we’re going to take a look at Jim here, who converts, he wants to convert $100,000 or Jill, sorry, not Jim, Jill. Um, she wants to convert $100,000 from her IRA to a Roth IRA. Okay. Now, understand that. Okay. Well, this is going to add $100,000 to her income and that conversion income will be taxed at Jill’s rate. So, you got to be aware of that and you got to plan for it. So, okay. So, figure that. Well, figure that. All right. Well, hold on a second. Here’s I’ll take you through this in a second. Why would she want to do this? Well, if she takes $100,000 out, right? She takes $100,000 out. Let’s say she’s in a 22% tax bracket, right? How much is it going to cost you to do? This isn’t a trick question. It’s $22,000, right? Cuz she’s in a 22% tax bracket. Okay? So, make sure you have that money set aside. Don’t take it out of your IRA if you can help it. Try and take it out of other taxable accounts. You pay that off now. Gee, Bill, thanks a lot. You just increased my tax bill by $22,000. Gee, what do you do for an uncle? Kick my dog? Well, hold on. Here’s here’s the here’s the benefit. Why would she want to do that? Well, because she just paid she locked in her tax bracket, right? She locked in her taxes that she paid at $22,000. Okay. Now, a little something I’m going to show you guys called the the time value of money or the rule of 72. If you want to know how long it’s going to take your money to double, take whatever percentage you’re earning and divide it into 72. That’s going to give you a really close really close estimate of how long your money is going to take to double. So, if you’re making 7 to 10%, well, then your money should double every 7 to 10 years. Why? Well, if you’re making 7%, it’s going to double a little over 10 years. If you’re making 10%, it’s going to double a little over 7 years. If you’re making 5%, well, then it’s going to double every 14 years. If you’re making 1%, it’s going to double every 72 years. So with that you can kind of estimate if you have a stock portfolio and you take this and you’re investing it over time okay well you should earn you know if you’re well diversified you should earn 5 years plus you should earn 7 to 10% over time right okay that means that projecting forward your money that $100,000 that she paid that she paid $22,000 in tax on okay In seven to 10 years, that 100,000 is going to be now 200,000. Right? That 200,000, what’s the uh what’s the taxes you paid on it? It’s the same. $22,000 or in this case 11%. If again, another 7 to 10 years, that money doubles again. now it’s $400,000 or you know she’s looking at a real taxable event of her taxes on that money that she paid on it total is 5.5%. That’s why that’s the advantage of doing Roth conversions. Now one thing you got to be aware of is one thing you got to be aware of is remember Irma you want to do these in earlier years. I’ll I’ll get more into that in a second. in a strategy. What you may want to do in your years while you’re working is start converting it up to fill up whatever tax bracket you’re in. Fill it up. Especially if you’re in a lower tax bracket like 22 or 24% or lower than that, fill it up to the next level. You may even decide that, hey, you know what? I don’t mind paying even 24%, so I’ll fill it up to the 24% tax bracket. That’s great. you can convert as much as you can and you know I’m setting in the taxes at today’s rate. Fantastic. Okay. Well, just know that um just know that uh here are the years where it most makes sense is low-inccome year obviously. So, businesses that have, you know, a year that has unusually low sales or, you know, business owner um has unusually high expenses or yeah, you got hit with a high non-reoccurring medical bills or and as I said a second ago, after retirement but before receiving social security benefits or pension and the one thing I want to say here is is don’t forget about Irma. And Irma is not just 65. They have a two-year look back. So, you got to pay attention to Irma when you’re 63, not 65, because it’s a 2-year look back on what they they they judge that on. So don’t get caught in one of those, you know, gap year where you ended up doing it right before you and then you figure you got a penalty in your first year of, you know, you got a huge penalty. So you save money over here and then you’re getting killed with Irma on the other side. So just try to avoid that. Okay. So it really is important to kind of spell out what your goals are. you know, you want to know, okay, am I really trying to, you know, keep the income below a tax threshold to avoid jumping up or whether you’re trying to increase your income to fill up the bucket, you know, just make sure that you’re, you know, you’re you’re doing this with, you know, you’re you’re doing this with a plan. It’s not just haphazardly.
All right? So uh other possible approaches to managing tax brackets is is that you know withdrawing tax-free money uh from a life insurance policy that can also keep um taxes low because income if you have a cash value in a life insurance policy you can borrow against it and actually take out low or in a lot of cases tax-free income off of that. Um, you know, obviously selling highly appreciated stock in low for low or no capital gains. Um, you know, look for years to offset that and, you know, taking distributions from your IAS and and 401ks in obviously a lower tax year. So, be diversified from a tax standpoint. So no matter what your situation in any given year, you have the ability to adjust and say, “Hey, what account does it make most sense for me to pull out of?” Also, you want to take advantage of um health savings accounts. Um use them strategically. Um and also um if you own a business, you can use uh business, you know, qualified business income as well. Um which if you want to know more about that, make an appointment with me. and I’m happy to talk about it with you individually. All right. Um, charitable gifting and tax planning. Okay. Albert and Shirley here are in a 24% tax bracket. They give $5,000 a year to charity. Very nice of them. Um, they have $15,000 of existing itemized deductions. So this year their standard deduction is 32,000 and change. So all right. Well, that $5,000 donation, as lovely as it is, they gave no federal tax benefit. Well, what if I told you they could? Well,
if they are 70 over 70 and 1/2 years old, then you can do that. Even if you don’t qualify for, you know, the the, you know, itemize that deduction, you can still save on that and deduct that $5,000 of income. How do you do it? You take it out of your IRA. Wait, I do that all the time. I still have to pay the taxes on it. You do a qualified taxable distribution. So instead of you taking the money, which happens here, so what most people do is they take the distribution out of their their IRA cuz they have to take out the RMD anyway. So they take that RMD out. They’re taking it out and they put it in their checking account and then they write the check to their favorite charity, right? Okay. Well, in this case, the cost is when you do it that way, the cost is $5,72 because that’s the tax on the $5,000 at a 24% tax rate. Okay. Well, what if you have it go instead of putting it into your checking account and then writing the check, just have it go directly to the charity from your IRA? Simple thing. It’s a form. We do it here all the time. It’s just a distribution that goes directly to the charity. By doing that, well, one, hey, if you’re you’re doing it to satisfy an RMD, it still satisfies the RMD, but it’s not included in your taxable income because it went straight to the tax to the charity and you never collected it. You’re not charged you’re not charged income on that. So, it’s a non um it’s it’s a you know, it’s and hey, I mean, off of a $5,000, you know, $720, that looks a heck of a lot better in your pocket than it does in Uncle Sam’s. So, all right. So, there’s a couple of things here. There’s a couple of ways that you can have um you know when you’re in those later years you want to organize your assets for your family benefits you know and there’s a lot of ways to avoid you know trusts a lot of people you know the only way you could protect your assets was by doing a trust nowaday’s so many ways to protect your assets outside of a trust um to avoid probate um but estate planning still matters and here’s what I mean by that
um now if if you’re not in a community property state, make an appointment with me and I’m going to go over this example with you personally because there’s so many people here that are in California and uh Washington and and some other community property states. I’m not going to take the time to go over it today. Um but if you are not in a community property state, get in touch with me because I can help you. Um, I’ll I’ll share that with you. Okay. In this situation, if you’re inheriting an IRA, we have Pamela here who’s 65 years old. Her son Kyle is 40 years old. Unfortunately, she was not well and she died and she left 100% of her IRA to her son Kyle. Well, that IRA is $400,000. Let’s say it’s earning 6% annual yield. Okay. Well, if he does what he’s supposed to do, well, he’s listed as sole beneficiary. He has 10 years to take out the required minimum distributions and empty that account over time. So, he’s spreading that out over the course of 10 years. So, the annual distribution for Kyle at that amount would be a little over $54,000 a year. You figure out, you know, map it out. Okay, we can we can figure this out. Okay, and you’re spreading out the tax hit over time. So, the annual distribution is only $54,000 a year. Now, we still have to pay tax on that, but we’re minimizing it. Okay. Well, unfortunately, most people do the opposite. They wait until they have to and they, you know, they just lost their mom. They they h I don’t want to think about this now. and they do nothing and they just let it sit there and do nothing through years 1 to nine and then unfortunately if Kyle did this well in year 10 he’s got 10 years to take it out so if he takes this full distribution out in 10 that $400,000 IRA is going to be over $700,000 that’s a huge tax bill that he’s going to have to pay in that and the biggest beneficiary of his mom’s IRA unfortunately or a huge beneficiary is going to be his uncle Sam. So, you want to plan it out and make sure that you take advantage of those type of things. Um, now with when it comes to taxes and long-term care, if you have um I’m not here to sell you long-term care, but just know that premiums of long-term care, you know, they are they have a benefit to them. They can they may be deductible at a federal and state level. Um, and you know the payments because any insurance if you when you take it out the the payments are tax-free. So that’s why a lot of people say hey you know okay well maybe I should have this long-term care policy cuz hey it’ll benefit my heirs. Well and even if you do and that might be great but you want to just be careful about how you take it out. So let’s take a look at Florence here. Florence, she qualifies for long-term care benefits because she’s has income inhome care benefits of $60,000 a year. Okay. She’s got, you know, an inhome care helper. Um she earns 60 thou or sorry, uh $20,000 a year with social security and she has $400,000 in our IRA. Okay. She also has a life insurance policy with a long-term care rider that gives her that gives her children a half million or up to 100 uh up to $10,000 a month for long-term care costs. Well, you think, okay, this is a no-brainer, right? if she uses her long-term care policy to pay for the five years of care. Okay. Well, she has she has deductibles. So, you know, she’s got the deductible. So, she’s going to be able to deduct these deduct. And her long-term care insurance is going to pay $300,000 for her income care, $60,000 a year. So, the kids inherit the life insurance benefit, the leftover of 200,000 um as well as 400,000 of her taxable IAS. Sounds pretty simple. But what if because she’s got the IRA money, what if she says, “Hey, you know what? What if I take the money? I leave the money in the in the policy, the life insurance policy. Why would I want to do that? Well, because she’s not going to pay any income tax on it anyway. Because the $60,000 a year is going to be offset by anything she takes out of her IRA. So, if she pays it with IRA money, she’s still paying $300,000 for her IRA. But what happens is is now she’s got she’s still going to have uh she’s still going to have the money left over for her IRA, but she also has this $500,000 that’s now tax-free. So, it’s the same amount. So, you figure, okay, it’s the same amount. Well, is it? because would you rather have $300,000 of taxable money or $300,000 of tax-free money? So, obviously, you want to be able to you want to be able to take that and take advantage of it as well. So, with that, it it’s not always as simple to say, oh, I got this money that’s used for this, take it out of here. You want to take a look at the whole picture. All right? So, and I guess you know this woman’s all stressed out now. She’s like, “Bill, you’ve gone over it’s been an hour. You’ve gone over all this stuff. My head’s about to explode. All right. Well, how in the hell are you going to manage all this?” Well, I’m going to make it easier here. Okay. So, to review, pre-retirement, you want to take you want to know what your after tax savings are before you actually use it. You want to try and fund your Roth accounts by using those buckets. You know, fill up the year that you’re in. Okay. Also, or in early retirement, you know, start looking to in those low income years, start trying to convert those Roths. You also got to make sure you understand the social security and Medicare taxation which are fees that they get you on the without calling them taxes but they’re the same thing. Um they’re extra money that you’re paying for the government. uh middle retirement, you want to manage your, you know, RMDs and take advantage of the, you know, if you have charitable contributions, things like that. Do it in a do it in a smart way and then organize your assets in a for tax efficiency for estate planning. That being said, you know, I know I went over a ton of stuff today. We’re here to help. If you have any, you know, we’re here to do planning for you. It doesn’t cost anything. It’s one of the best benefits of being an alliance member that frankly not enough people know about. So with that, we’re here to help. Uh and I know there are a ton of questions here. So take advantage if you want to do a uh if you want to do a plan with me or you just want to meet and ask me questions. It doesn’t cost anything to sit down with me, do a plan. It doesn’t cost anything to ask me questions. Just make an appointment. You can either scan, you can either scan this and it’ll get you to a link to my calendar where you can make, you know, schedule a time that works for you or um just let me know um you can either put in uh the Q&A or the chat, just say email or phone and let me know how you want to be contacted and I’ll certainly get back in touch with you. Or sorry, yeah, email or phone and just lets me know how you want to be contacted. That being said, okay, let’s tackle some questions here because there are a few questions here. Okay, the first question from this was earlier in the appointment uh earlier was uh Terry asked, “Isn’t there a webinar tomorrow at 2 p.m. on the good, the bad, and the ugly annuities?” There probably is. Um it’ll probably be by another advisor. We have we have them scheduled all throughout. Uh so we all have different personalities. We all have different uh ways that we do it. So, you know, and we all do it at different times as well because we try and accommodate our members. So, yeah, there’s, you know, look at um aris uh aris.alliancreditun.com/events.
That’ll get you all the all the webinars for next two weeks. All right. Uh,
all right. Then there was Okay. So,
anonymous wrote, uh, Social Security is exempt from tax effective this year, right? with the big beautiful bill. Um, up to a point, I believe. Now, with that, um, I’m putting on my disclaimer hat. I’ll tell you what, I’ll I’ll look that up. I think it’s I think it’s up to a point, but, um, but I’ll look that up and I’ll I’ll I’ll respond to that in an email to everybody, uh, about that. They’re constantly changing laws and things like that. Um, okay. So, it says he Okay, he’s got another question here. Or she, uh, can you explain the pro rattle rule in regards to the, uh, Roth conversions? Um, okay. Um I think what you’re talking about is so when you talk when you do a Roth conversion uh when you talk when you do a Roth conversion you are uh let’s say that you go over a certain level. So just because a lot of people think that you know if I go over that threshold now if you go over the threshold with Irma that’s a threshold and you do not want to cross that cuz that triggers the next that triggers the next uh fee you’re going to pay. So you want to avoid that. But with tax brackets, it’s not necessarily the same way because if you go over, let’s say you go over $1,000 over into the next tax bracket, let’s say you go from a 22% tax bracket to a 24% tax bracket, you’re not you’re not paying t you’re not paying 24% on everything. It’s just the amount that you’re over that amount. So, just know that it’s not it’s not as oh my god, I got to stay a penny below that. I can’t go above that at all. It doesn’t that’s not really such a big deal because you’re only going to pay the higher amount on the amount that you go over it. Now, as I said with Irma, that’s a set level. So, you do not want to that’s a Rubicon. You do not want to cross. So, with that, um,
okay, hold on. Thank you, Rick. Rick is already on the quick on the draw. He already went to uh Google and looked it up and I’ll uh so it says the big beautiful bill did not eliminate taxes on social security. Instead, Congress gave an extra deduction up to a point. Yeah, that’s what I thought. So, you don’t have to itemize to get the that deduction. Um again, that where my disclaimer hack goes, please talk to your qualified tax professional for a qualified. But that being said, we can go through and I can I can help you plan for these things as well from a cuz the taxes the laws are constantly going to change. They’ve changed many times over the course of my career. They’re going to continue to change. You still need to and and that’s kind of the caveat. Even the best planning in the world requires it’s not you plan once. You have to it’s kind of like look at planning as creating a GPS where this is where I want to go. Okay, we’re going to create a path to get there. Well, you know, things don’t always, you know, things change. So, we have to change accordingly to make sure, hey, are we veering away from it or we getting clo, you know, we going one way the other and we can adjust to make sure we’re still staying on track. And that’s really what planning, good planning does on a regular basis. Every one of my clients, the first thing I do every time we meet is I go over the plan we created and say, “Hey, do we need to adjust it, you know, look at your goals? Are there?” And we take a look at everything. We take a look at Social Security. We’ll see what are your break even points. What’s the best time for you to take Social Security for you? Um because it’s a tradeoff. Um you know, we take a look at how often do you buy a car? Do you like to travel? Whatever it is, we customize it. are very it’s a lot more than you’re getting with a cookie cutter at Vanguard or or Fidelity. So, with that, and it’s hey, you can’t beat the price cuz it’s one of the benefits of being an Alliant member because we do not charge for plans because we’re a nonprofit. Um, we’re not a charity, we’re a nonprofit, meaning that the money we make instead of paying off shareholders or lining the golden parachutes of our corporate executives, it goes back into serving our members. So with that, um, you know, we do not charge for that. So take advantage of us. We’re we’re here to help. So, okay. So, let’s see. Any more questions? Um, yeah. Okay. Kirk also mentioned that there is an extra deduction for those 65 or older, but it has nothing to do with social security, just age. Okay. So, there are the big beautiful bill was a huge bill that came in. So, you need to go through that. You need to check with your tax advisor to see how that may affect you. And we can help plan for that as well. But I’m not a tax planner. I’m a I’m an investment planner. I’m a I’m a financial planner. So, I take a look at how taxes take a look at the big picture, but I’m not qualified to give tax advice. So, hopefully I’ve been clear on that. Okay. Uh Mark, you had a question about Okay. You wanted me to go through that first example of how the $1,000 went from 22 to 40. Okay. Did a tax rate jump to a different level because he crossed over some threshold? Essentially, what happened was here, I’m going to go back to it. Uh, let’s see here.
Okay. So what happened was is that his his threshold like the the social security benefits is really what went up because when you go over a certain amount of income. Well, now his social security is now his social security is now instead of being half, it’s now taxed at 85% of his social security is taxable. So what happened for him was you don’t have to add in his you don’t have to add in the just the IRA, but you also have because it took his income tax rate higher. It’s not just the $1,000 because it’s also $1,000 plus 85 cents of this uh right here. 85 cents of a so $850 of that also got added because it’s 85% 85 cents on the dollar is taxable. Doesn’t mean he gets an 85% tax on it. It means that 85 cents on that dollar is taxable income because he’s adding it to his overall taxable income. That’s how it worked. So, I know it’s a little complicated. If you want to go through, I can go through it with you individually and I’m happy to do that. Um, but those are the things where what I would my advice to Bill in this case is don’t take the money for this out of your IRA. take it out of if you have other money to take it out of, take it out of there because it’s going to cost you more by taking it out of your IRA, especially from his situation. That’s why. So, all right. So, with that, any other hopefully that answered your question, Mark. Um,
all right. I know I listen I know I a few people have to drop off because I try and keep these to under an hour and unfortunately we had some questions and this was a lot of information that I want to make sure I got through to everybody. So I think that answers most of the questions we have here. I’m going to stay on um just in case anybody has any other questions they have. If there’s any latecoming questions, I’ll stay on. But other than that, hey, I’m going to give you guys back your afternoon. Have a Thank you guys for being here. Um hopefully you got some uh some information that you can take action on and uh feel free to give me a call anytime. That being said, I will stay on for a few minutes longer if there’s any more questions that pop in. Hey. Hey, Bill. This is Mark. Hey Mark, just asked you that question about the thousands. I get what you’re saying on that. I get it. Um, how do you know when you’re jumping up from 50% to that 85% taxable portion of your social security? Is it a number cut off? Yeah, it’s a number cut off. So, um, there are different levels at which, um, I can Oh, sorry. Uh, hold on a second. Did I Okay. Well, um, so yeah, there’s different levels of so if you’re making like if your income if your income if you’re living in Arkansas living on ramen and you’re making less than I I don’t know the exact numbers, but they’re in the low 20s, you’re it’s tax, you know, it’s tax your social security is taxfree. If you’re above a certain level and up to somewhere in the mid-4s or so, it’s taxed at 50%. Okay. Um, and then and then above above uh 40 some odd thousand it ends up being taxed at uh 85%. Okay. So most people are going to be in that 85% tax. Yeah. But but just know that when you take it out of your IRA, you’re not just taking it out of your IRA. You also got to you also because you’re increasing your income. So, you also got to know that your social security income is going to be taxable as well. That’s that’s what I mean by and and it’s not all of your social security income. It’s 85 cents on a dollar of it is 85% of it is taxable. It’s taxable. It doesn’t Yeah. It doesn’t mean that it’s an 85% tax bracket. It means that it’s taxable income. Okay. That’s what it means. Okay. Great. Thanks, man. You got it.
All right. Any other questions here? Okay. Oh, hold on. Late breaking. Uh, one came in from Mary Ellen. Okay. Um, if you have $400,000 in a Roth IRA, 500 $5,000 in a traditional IRA, and you convert the $5,000 to a Roth, will the PR rat rule be triggered because there is a mix of pre-tax and post-tax money in all IRA? No. If you have Okay, so I think what they’re talking about is if you have some IRA, so I’m not saying coingle money. That’s not what I’m saying. Like if you have an IRA, you have a 401k. So nowadays, people have 401ks that they have some money in their pre-tax money and some money in a Roth 401k money. Okay. when you roll that over and you could essentially if you max out your contribution if you max out your contribution on a yearly basis um which is uh somewhere in the neighborhood of about 30,000 um depending on your age it’s well 20 it’s low 20s but if you you have step ups and things like that if you’re you know if you’re over the age of 50 which most people on here are um But, you know, you get some benefit. Well, you can you can go up to about just in the neighborhood of about $30,000, a little over $30,000. Well, if you contribute over that, well, you can still contribute to it, but you don’t get the deduction anymore. You don’t get that, you know, you’re capped at it. So, you can essentially, let’s say that you had $5,000 in addition that you put on that. Now, that’s you put it into your pre-tax IRA, but you didn’t get the deduction on that. Well, that $5,000,
the gain on that will be pre-tax, but that $5,000 you didn’t you’ve already paid taxes on that. You didn’t get a deduction on that. So, that that $5,000 you can roll over to a Wroth. You’re not converting it. you can roll that over to a Wroth later. Okay? But the um but it will any money that you have in a Wroth that will separate and you’ll roll that over to a Roth. You cannot you do not want to and you cannot most most financial institutions will not will do that for you. Make sure that you’re not comingling pre-tax money and after and after tax money. you know, we’ll we’ll keep it separate. And typically what’ll happen is you’ll do when you do a 401k roll roll roll rollover, it’s called a it’s a direct rollover where you don’t actually get the check. It goes directly to the other institution. We’ll help you we’ll help you manage that. So hopefully Mary that that answered your question. Uh okay. Well, what she wrote here was, “I read the pro rata rule is the PR rata rule can trigger unexpected taxes on Roth conversions if your IAS contain a mix of pre-tax.” Yeah. You just want to make sure that you don’t Yeah. You want to make sure that you don’t coingle that money. You know, that’s the whole and your advisor should be doing that for you. So, with that, um, yes, Beth, I will contact you. I’ll send you an email to, uh, set up an appointment if you want to. Or what you can do is, hold on, let me get to that. You can also, uh, take that QR code and it’ll just take you directly to my Where is it? I don’t want to go too far.
Where is it?
There we go. You can just click on that QR code and that’ll take you right to my uh right to my calendar if you want to book a time to meet with me.
All right, on that note, hey guys, uh I will again I’ll be on here for a few minutes longer just in case. Um,
and what I’ll do is for anybody left on, if they want to ask a question, uh, you can just unmute your phone. You unmute. There’s a little microphone at the bottom if you want to ask a question. I’ll Or if you just want to say hello.
Hello. Talk to Hello. Hello. Who am I? Is this Beth? Yes, it is. Hey, Beth. Hey. Um, so you had sent the QR code, but the QR code is on my phone, and I need my phone to read the QR code, which is possible. Yeah, don’t worry about it. What I’ll do is I’ll shoot you an email that you can just on my email, every one of my emails, it’ll have a little link to my calendar as well. So, I’m going to shoot out an email to everybody who is on here thanking them. In my every email I have, there’ll be a there’ll be a little link. You can access my calendar. You’ll get that if not by the end of today, by certainly by tomorrow. Awesome. Blossom. Thank you. All right. Look forward to seeing you. Thanks. You got it.
Hi, Bill. Hi, Mary. Hi. I I was the one asking you I was just trying to look up um I was the one asking you about the pro rattle rule you know and I um so right now I am just I’m just working part-time just making a like a teeny bit amount money so I have a lot of money in a Roth IRA and then you know say I earn like $6,000 um but I do earn from like from investments and things I do have um an AGI um above the level I can contribute that $6,000 directly to a Wroth. So I have to do like a backdoor Roth conversion, you know. So, um, and so I just wanted to know if I put that $6,000 into a traditional IRA, um, and then I do that backdoor conversion cuz it it am I is there Oh, that’s different. Yeah, hold on. Because that’s that’s a little different. Um, because with I was I was talking about 401ks. Yeah. Um because 401ks you can contribute above your certain amount. Like if you reach your taxable threshold you can contri That’s why I was talking about with 401ks. I didn’t know you were talking about an IRA. Yeah. Um yeah there are certain now um again I’m putting on my disclaimer hat uh because I’m not qualified to give tax or legal advice. For tax or legal advice, please talk to your qualified tax or legal professional. Okay. All right. Now that I got that out of the way, um, so when it comes, yeah, I was talking specifically about 401ks because you can contribute as you can contribute over your allotted amount now. You don’t get the deduction anymore, but then essentially that’s a backdoor conversion where then you can say, hey, you know what? Um, you know, I I’m going to take that extra amount. Yeah. But that yeah that that’s not sort of my case because I’m I’m not I had that before but now I I’m not working in like a company where I have a 401k but I am making that like I do some consulting work. It’s not bringing not a lot but like I can’t put that money directly into a Roth because again my AGI is too high so from like investment income and things. So am I a problem to have though? Mary pardon. I know. So is it possible for me to put it into the traditional IRA and then convert it to a rock? But like I or will then it look at everything I have like all the IRAs and then I just I heard there’s like you really have to be careful how you do those backdoor conversions. So, I just And you might not be the person to ask about this. I might need to Well, I’ll tell you what. I’ll cuz now you’ve you’ve asked an intriguing question that I’m curious about. So, I’m going to see if I can get the answer, too. Um Okay, cool. Yeah. You know, we can Yeah, we can get that together. Um, I heard like, you know, I don’t know if you know like that fin like Susie Orman like financial consultants really say you have to be careful about that scenario because then if it looks across all your IRAs, you definitely, you know, I have a lot of money actually in a Roth IRA. I definitely don’t want that sweep to go across my total uh IRA situation. Yeah. Yeah. And that’s the thing like if you’re Yeah. typically the raw and I don’t know if the because that was a loophole the uh the backdoor conversion that was a loophole that I don’t know if the I don’t know if the big the big beautiful bill is a is is a bill stack it’s like thousands of pages the bill so and it’s got all this other stuff that has nothing to do with taxes in it but but with that um I don’t know if they took that, you know, I don’t know if that affects that loophole cuz that was a loophole that I I was understanding that, you know, um it you know, they were looking to possibly close that loophole, but I don’t know if they did. Yeah. Like cuz they like if you like on the IRS or or websites that were um explain the IRS, it says the pro rattle rule applies in aggregate across across all traditional SE and simple IRAs. Even if one account holds only after tax contributions like a Roth, the IRS looks at the combined balance, the combined balance to determine how much of a conversion is taxable. And that’s where like advisors say you really have to be careful about that. But you know my goal why I’m asking this question is you know I took another alliant um seminar and I really am trying to get everything over to a wroth but I don’t want to like shoot myself in the foot for this teeny amount of money. Right. That’d be crazy if I if I made the wrong decision and like for $6,000 then it does a sweep across. That would be really a horrible horrible decision. Yeah. So that’s but I really wanted to thank you though for that. That’s interesting like if I did have some leftover in the traditional IRA then you know I it was so interesting about the charity like sending it directly to a charity like that I you know like I could use that money in the future to you know because I do like to give to charity and then um and that I take my RMD out of that traditional IRA and it doesn’t impact. So that was a really cool piece of information. Yeah, there’s so many things and that’s that’s a problem with I guess with today’s webinar that um you know there’s so much I actually cut a lot of it out because there’s so many cool things that I wanted but I I’m trying to cuz once you go over once you get over that like 45 minutes to an hour people start to glaze over and they’re just like you know my brain’s full I can’t like my head’s spinning starting to hurt a little bit I got a meeting at 3 you know and not everybody can stay on for an hour and a half onto a webinar. Yeah. I think it’s really interesting though. I I think you guys do really interesting. So, will will you be doing another uh seminar or Oh, I do it every every other week. Oh, okay. Cool. My next one’s going to be on annuities, but uh Yeah. Okay. Oh, I’m looking at the website because uh let’s see the annuities one on the 20. Oh, okay. That’s probably with someone else. That’s probably someone else uh presenting it. I think there’s one tomorrow or something. Is there? Cuz I have one. I’m doing it on the uh two weeks from today. So, it’ll be on June 2nd. I think second or third. Okay. June 2nd. June 2nd or 3rd. Okay. I’ll sign up for that. Hold on. I’ll tell I’ll tell you where it is. It’s uh because it’s in my It’s in my notes here. Uh cuz it was in the beginning. Uh hold on a second. See, there’s too many. Uh All right. Yeah, it’s June 3rd. June 3rd. Okay, cool. Well, and that’s going to be at 6. So 6 uh is that 6 Pacific or Eastern? That’s Pacific time. PM PST. Oh, okay. Great. Cool. Well, you know what? I’ll I’ll sign up for that. And then if you do happen to see anything for this kind of case um where you are just converting not from a 401k but from like a just a traditional IRA. I would I’d if you happen to find anything because I’ve really been researching on this. It’s kind of Well, I’ll tell you what. Have you ever done a plan before? Um I no I haven’t done Okay. Because one of the advantages of doing an a plan with with Alliant is when we do a plan, essentially what we do is or what I do is I take a look at all your goals. So obviously, you know, retirement is a big goal of most people, but we take a look at everything. We take a look at, you know, do you like to travel? How often do you buy a car? You know, do you have any honeydew lists you want to do? Hey, I want to redo the K. You know, we just redid our kitchen last year. It was like $80,000. you know our estimate was 50 but it of course you know you know the way it goes you know and and all those things. So you know the way you you know we just take those and we plan for them and you know the one thing and then what we do is we take a look at all the things we take a look at all those goals we’ll take a look at all the things you have to go towards your goals. So, we take a look at your 401ks, if you got a pension, if you have a, you know, all those different things, all your accounts, whether they’re here at the line or elsewhere. And then we’ll come up with kind of a financial GPS to see what are the odds of you living your rest of your life, doing all the things you want to do, and still having money left over. And you’re going to get a you’re going to get a number between zero and 100. Zero being I’m married.
Hello. Bill.
Hold on, Mary. Are you there? Oh. Oh, I think it got I I just I just I I think you got I was like, “Oh, I think we lost him.” Yeah. You know what? It it went off for a second there. So, sorry. So, so anyway, so are you uh are you able to see me or Yeah, I can now. I You It froze. I didn’t know like sometimes Zoom edit I see it’s an hour and a half the hour and a half mark and just cut us off. I was like, “Oh, I’ve never this has never happened before.” Oh, yeah. Yeah. Cool. Well, you know, I will, you know, I’m um I’m going I’m going to be traveling um but I and taking care I have to take care of my uncle for a while and then I’m going to the East Coast, but I’ll be back in in late June and I would like to do a kind of deep dive. So, I took your information and I I will try if I if I’m not traveling on that day at June 3rd, I’ll be at my uncle’s. So, June 3rd, I’ll try to catch that one time. Where where’s your uncle at? Uh, he’s in Port I’m in Portland, Oregon, and he’s in Port Towns in Washington, and he is 95, soon to be 96. He’s still sharp as attack, but he has some his do his he lives with his daughter. She’s going away, so he has, you know, some medical frailty. So we I make meals for him and stuff and that’s awesome. So I it’s it’s good and we uh so we talk about you know all this kind of stuff. So I um but I’m real interested in in these topics and I really like I really like Alliance. So thanks for thanks for taking so much time. If you happen to hear anything now because I mentioned backdoor Roth conversion in this way you might hear something about it. Yeah. No, cuz the the typically when I talk about a backdoor Roth conversion, it’s from a it’s from a for you. Excuse me. It’s from a 401k, not an IRA. Yeah. Yeah. You know, I’d have to I’d have to take a look and see if that’s you know, if that’s still Yeah. If that’s a if that triggers something different. Okay, cool. Are you in San Francisco? I am. Where you at? Oh, you’re I’m in Portland, but I lived in Berkeley. I lived in Berkeley for like 20 years, so I know the 650. Nice. Yeah, I have client I have clients all over the states, but yeah, I mean I I do. And actually, because you are Are you married or No, no, no. Oh, not to be not to be the the reason why cuz I was going to do another um I was going to do another example, but it just didn’t have time for It’s not so much where you own. It’s it’s not what you own, it’s where you own it. And different assets can pay differently based on, you know, how you how you treat them from, you know, if you’re taking income, which I’ll I’ll you know what, if we do a plan, I’ll I’ll take a look and I’ll specifically take a look at what you have. And did you know does Alliant also even if it’s like paid service in addition to the financial investment side do you guys have um tax preparers or is that something we go outside of a lion uh like uh I have tax preparers I work with but usually the tax preparers I work with or in the Bay Area. So Okay. Okay. You know I don’t know anybody specific. And you want someone who’s in your area because they got to know the state. They got to know the state tax laws. Yeah. And also like the county cuz Portland, it’s so funny because you know everyone thinks New Jersey and California are the worst taxes, but oddly and I’d have to really do an analysis, but I I think maybe Oregon like living in Portland is worse because well, first of all, we hit the um level of income h faster. California has an ultimately a higher tax rate than Oregon, but I think you hit the levels faster in Oregon. And then we have some terrible like county taxes and even city taxes. So that like I can relate. I listen I live in San Francisco. So I can totally relate. Yeah. Which I believe in. I believe in paying taxes to to help our community. But it does get I’m like, “Oh god, this is getting I I’m in I’m into tax. I’m not into tax evasion. That’s illegal. I do never I will never but I don’t want to and I like I talk to my clients all the time about this where you know a lot of I get a lot of clients who complain about I don’t want to make more money cuz I’m going to have to pay more taxes and I’m like you know the only reason why you’re pay like I would like my response to them is usually you know I would like nothing more than to pay I would love to pay a million dollars in taxes every year and they’re like earning a lot. I’m like, listen, if I’m paying a million dollars in taxes, it means I made at least three. Yeah. You know what? I’ll take that any that that’s my attitude, too. Like, you know, I just don’t want to be making mistakes. Like, that’s why I’m really asking about the prat rule because I I’m paying more taxes cuz I screwed up or, you know, like I don’t want to do things like the Medicare thing, missed the window, because that’s just dumb, right? That’s just throwing money away because it’s a complex system and most people don’t understand it and they make a it’s Yeah, it’s a dumb mistake. Yeah, that is int. That’s an intense mistake. Wow. That totally doesn’t Yeah, that doesn’t have to happen. And it just happens because people don’t know and they don’t think about it and they don’t plan in advance and it happens unfortunately more than people think. So I know that I put I put a big I put a big note in there like sign up for Medicare. Well, um, cool. Thank you, Bill. I I, um, uh, I will be in touch and, uh, and I hope I can catch your, uh, annuity seminar. Thanks so much for Hey, is it Mary Ellen or just Mary? Mary Ellen. Got it. All right. Take care, Mary Ellen. Okay. Take care now. Bye. Bye. Bye. Bye now.