Author: davenkross2026

What’s up? Two minutes after the hour. Let’s go ahead and begin. So again, good evening everyone and my name is Baptist Bruner and I’m a Texas-based financial consultant with Alliant and just a part of a team of financial professionals with the Lion Retirement Investment Services who give regular educational webinars. Again, like to start by thanking everyone for taking the time out of your evening uh join us today. Get a better understanding of Roth conversions, which can be an effective retirement tax strategy, but it can also be a great legacy planning strategy. We’ll get into that too. Uh this presentation will be about 4550 minutes long. Might be able to do it a little bit quicker. Might skip a few slides. And as always, we will have time at the end to ask any questions that you may have. When that time comes, uh, just go in the question and answer the chat section. Go ahead and take the time to identify both of those. Now, there’s two areas where you can ask questions. Q&A or the webinar chat. We’ll get to it when that time comes. Go ahead and ask away and I’ll be sure to get to them.

All right. Uh, we’ve had some problems with this as of recent. Few people have been throwing their AI notetaker in. Please don’t do that. Um, proprietary information, I don’t know. But if you want to take a photo of the slide, I can’t stop you from doing that. So, if you find some good beneficial information in this presentation, I cannot stop you from taking photos of it. But let’s just keep the AI notetakers out of here for the time being. All right. some of the upcoming webinars that I will be presenting. Uh two weeks July 9th, designing your retirement income blueprint, coming up with a strategy to maybe fill in your income, utilizing your social security, maybe you have a pension or an annuity, what are the best ways to draw your retirement income? What might be a better tax efficient strategy? What might be a better way just doing it to where you are able to grow your estate and your wealth best? bunch of different things in here. Great webinar. And then after that one, we’ll have another one that’s another evening one similar to this later in July on how to get rollover ready with IRA planning. Great webinar here as well. Maybe trying to transform your 401k into an IRA where you will have much better and a much larger um investment selection available to you. So consider that as well. And of course, our team at Alliant Retirement Investment Services. We are focused on helping you, our members, understand the ins and outs of investing, saving for retirement, and of course, much, much more. Go ahead and take a photo of this one. Nobody will get mad at you for that. But take a look at our website, aerys a r i s.alliancreditun.com, uh/events will bring you to our webinars page. Uh, we have a podcast on there. hasn’t been updated in a while, but I think Christian’s going to do another episode on there soon. Now, really great resource. And then, speaking of resources, we also have a resource center. So, slashresource center-c center. Lot of calculators in there, tips, tricks, everything. Go ahead and take a look on there just to see our podcasts, uh, our webinars, and our resource center. It’s a free tool available to you as a member.

And I’m on the investment side of things with Alliant. You know how we can help. We do complimentary foundational financial planning, investment management, management, advanced planning, you know, showing you a comprehensive range of investment choices. But a new thing that we’re offering is more and more help on estate planning. So, you probably joined us for a couple of our webinars on estate planning if you’ve been on a few of these before. Heck, I think I just did one two weeks ago. But a new thing that we have um is an estate planning tool available to our clients, those who are investing with us. Uh we have a subscription at trustinandwill.com that’s at no cost to our clients where you are able basically use the digital platform for estate planning to create your will, a trust if necessary, and they have attorneys readily available to you to can ask them questions if you do get stumped along the way or if you just need some more help. But it’s a really great digital tool for state planning. So consider that.

All right. So now we’re going to start talking about taxes and the actual subject why everyone’s here today. But let’s just start with the future tax environment and how budget deficits and titlements and taxation can affect Roth IAS. So, here’s a scary number, and that is our current debt. Over $36 trillion, over $16,000 for every single person in America. That’s including recently born babies all the way to those who are 110. And as we look at budget deficits, for example, over the last 10 years, what you’re going to find is they’re on average about a trillion dollars most years, more or less. And I’m really talking about the 2014 to current days. And when you get into 2020 20, you know what happened? Co hit and all of a sudden we go from a trillion and those types of deficits to to three trillion pretty much overnight. So you have that in both 2020 and 2021 and the deficit spiked up and so far has not come back down. And that’s caused a pretty sharp increase in the overall debt which is about 36 trillion. And maintaining that debt when interest rates are low is one thing, but with interest rates rising, the carrying cost of that debt, it’s going to become very honorous. Let’s look at how that’s affecting entitlements. So, Social Security, Medicare, Medicaid, as well as the interest payments on those debts consumes all the tax revenue that you have coming in. And according to the Congressional Budget Office, that’s actually going to happen in 2035. So, consider the impact of that in another 12 to 13 years. It leaves nothing for everything else like human health and human services, highways, defense, all those other things that becomes pretty problematic as you can see. So if you’re the government, there are really only two things you can do to counteract that problem. Number one, you can cut spending, which yeah, do we really see that happening? or what we’re more likely to see is taxes being raised probably starting with the highest earners, but at some point it will trickle down a bit to the lower earners. And then the middle and the middle high income people eventually will feel the impact and they’ll probably be the ones that get hit the hardest. And one of the troubling aspects of IRA planning is that the tax rate on your future distribution is just unknown. Even if you can project your income with relative confidence, there’s no guarantee that tax rates will remain the same. And while it’s hard to find someone who doesn’t think they pay too much in taxes now, I hope everyone on the call thinks feels that way. But the reality is that the top tax rates today are pretty low in a historical context. So just take a look at this chart. See what I mean? When the income tax was first introduced in 1913, the top rate was only 7%. But within just a few years, top rate had already skyrocketed to over 70%. And after dropping back down to as low as 25% after World War I, top rate jumped to 63% in 1932. And from there, it wasn’t until more than 50 years had passed when in 1987, the top tax rate finally dropped back below 50%, letting those in the top bracket keep more of their income than they were forced to give over to Uncle Sam. Now, of course, not everyone pays that that top rate. In fact, it’s only a very very small percentage of Americans that do.

I’m sorry, but that said, our national debt is at an all-time high. We have a budget that hasn’t been balanced in years and fiscal troubles left and right for many of our entitlement programs like Social Security and Medicare as well. And it’s possible that rates could go up across the board. And that makes coming up with the right plan just even more important. So how can you are how are we preparing our clients to guard them against that? You know, we talk about diversification of investments and that’s important, but we also need to look at diversification from a taxation standpoint. And that brings us to three areas. Tax now, tax later, and tax never. So let’s look at tax now vehicles. That’s going to be your non-qualified assets like your brokerage accounts that are in managed money mutual funds, stocks, bonds, CDs, etc. Then you t your tax later options include those tax deferred vehicles like your IRA, your pre-tax IRA or a 401k, maybe an annuity. Um, and then there’s also tax never. That’s going to be things that have a big tax advantage. And we’re going to be talking mostly about Roth IAS today in addition to that, but there’s also something like a municipal bond or an HSA would have a tax-free feature. Um, life insurance can also be another one of those as well.

So, if approached correctly, a Roth IRA conversion can be an effective strategy and effort to keep as much after tax tax-free money as possible. And today, we’re going to look at a few important issues that must be considered if you want to consider a Roth IRA conversion. So, one, we got to go through the basics behind a Roth IRA conversion. We also need to go over the considerations for the original owner of that Roth IRA. some other considerations for the surviving spouse of that Roth IRA owner should it be owned by your husband or your wife and then you inherit it and then the considerations for the beneficiaries of the Roth IRA afterwards. So spousal IRA, you know, more than likely if it is, you know, a husband, a wife is the beneficiary of it, that’s section three. Section four mainly referring to your kids, your nephews, your nieces, whoever’s getting your assets after you that’s not a spouse. So, let’s just start with the basics. And many of you probably know that there’s another type of IRA. Mentioned it a few times already, but it’s called a Roth IRA. And Roth IAS are similar to traditional IAS in many ways, but there are also some key differences. And one of those differences is that you don’t get a tax deduction when you make a Roth IRA contribution. So once your money is in a Roth IRA, it grows tax deferred like it does in a traditional. But the big benefit of the Roth though, and another key difference between it and the pre-tax IRA is that Roth IRA distributions can be tax-free in retirement. And so if you’ve had any Roth IRA for more than 5 years and you’re over 59 and a half, then all withdrawals from any of your Roth IAS will be tax and penaltyree. Again, tax and penalty free as part of what’s known as a qualified distribution. Even if you need to take a withdrawal sooner, you can always take out your Roth IRA contributions tax and penaltyree. And some of the same contribution rules that apply to a traditional pre-tax IRA contributions, they also apply to Roth IRA contributions. So for instance, that same, it used to be 7500, I think it’s 8,000 now for for, you know, the same $7,500 contribution limit applies. There’s also that same kind of catchup once you hit 50 and older. Um, and then, you know, I think it’s $1,100 more. So no, it’s $7,500. If you’re underneath uh under 50, you get an additional $1,100 and catch up to $8,600 once you hit 50 and over. And Roth IRA contributions are also subject to the same compensation rules as traditional IAS as well. So, if you have sufficient compensation, then the only thing that could prevent you from making a Roth IRA contribution is just having too much income. And there are ways around that, too, called a back door. We’re not getting into it today, but there are backdoor Roths as well. But you can see the income limits up here on the screen. And just note that if you’re a single filer, as long as your income is under 153,000, you can make a full Roth IRA contribution. Now, similarly, if you’re married and file a joint return, then as long as your income is under 242K, you too can make a full Roth IRA contribution. You know, while some baby boomer couples retire at the same time, more often than you’d think, one spouse retires before the other. In such cases, you may be able to take advantage of spousal IRA and or Roth IRA contributions. And these are special contributions that allow a spouse with compensation to make a contribution to the traditional IRA or the Roth IRA of the non-working spouse. In other words, the non-working spouse can use the working spouse’s compensation as their own, which allows them to make those contributions. So, the spouse for whom the contribution is being made, however, they still have to meet all the other contribution rules applicable to that type of IRA.

Now, a Roth IRA’s conversion is the name given to a special type of transaction where you move money from your pre-tax retirement account like the pre-tax IRA, the 401k, 403b, etc. to a Roth IRA. But when you make a Roth conversion, the amount of money you convert, it’s just added to your tax return for the year and it’s taxable whatever your income tax bracket, you know, whatever one you happen to be in for that year. So, in this example, let’s meet Jill here. And let’s say Jill has $100,000 in a traditional IRA, and she wants to convert into a Roth IRA. We’ll talk more about why she might want to do that in a moment, or why she might want to do it differently than this example, but we’re still in section one of the basics. So, if Jill moves forward with her $100,000 Roth IRA conversion, she’ll have to add $100,000 of income to her tax return for the year, which will be taxable at whatever rate Jill happens to be in. But because this is a big decision and can have a significant impact in your taxes, it’s always best to discuss this option with your tax and financial advisors beforehand. Now, in my opinion, $100,000 might be a little bit too much to convert just in one year, but you don’t have to do this in just one year. you can spread it out and stay in your lower tax bracket. We can help you figure that out, too. But why would you voluntarily choose to make one of these Roth IRA conversions and pay taxes before you even have to? Well, there’s a lot of reasons, but perhaps the most common reason is one we’ve already discussed. It’s to pay off Uncle Sam now so that you own your retirement account free and clear for life. Just remember with a Roth IRA, you have the potential for future tax-free withdrawals of everything in your account. So if you’re over 59 and a half and you’ve had any Roth IRA for more than 5 years, then all withdrawals from any of your Roth IAS will be tax and penalty-free for life. Keep in mind, like we mentioned earlier, taxes are probably going to go up in the future. Taxes are at a low right now. You know, you have a low rate right now. You could convert it now. and never have to worry about taxes again. Whereas, if you could convert at 12% now rather than if they increase the rates later to 20, it’s getting rid of some of the unknowns of our future.

But something else to keep in mind is that unlike Roth IRA contributions, there are no restrictions on who can make Roth IRA conversions. You can’t be too old. You can’t be too young. You can be working or you can be retired. There’s no minimum amount of income you need or a maximum amount of income you can have. I I think you see what I mean here. But if you want to convert your IRA to a Roth IRA, there’s nothing in the tax rules that will stop you from doing so.

So the Tax Cuts and Jobs Act, that was the first one that was passed back in 2018. It eliminates the recarerization option for car uh conversions made in 2018 and later. But if you convert your Roth IRA now or in the future, you are stuck with that decision. If you go forward with it, again, speak with the tax advisor, speak with the financial adviser to make sure. But if you’re making the conversion, more than likely, you won’t be upset with the decision.

Another big benefit of the Roth IRA and one that many retirees do in fact find attractive is that Roth IAS have no required minimum distributions during your lifetime or RMDs is how you may have heard them. So remember all those RMD calculations and potential mistakes. We talked about those earlier. You know, whenever you turn 73 or 75, depending on the year you were born, you have to start taking money out of your pre-tax accounts, you avoid that with your Roth funds. So, they’re not an issue if you have a Roth IRA. So, during your lifetime, you can take as much or as little as you want, and you’re not forced to take anything out at 72, 73, 75 if you don’t want to. So now, not only is a Roth conversion a great tax strategy, but it means doing a Roth IRA conversion can also be a great legacy planning strategy because now your Roth IRA can continue to grow and compound tax-free for your heirs, which also makes it just again a very very intriguing vehicle for estate planning. Your wife or your husband can take over your Roth IRA, no problems. That’s a spousal right. or your pre-tax, right? In this case, your pre-tax accounts, they get to take it on. There’s no um automatic 10-year that uh distribution period. With a Roth, when you give it to your children, they get to just keep it. They don’t want to touch it. They can just let it sit there and grow forever and give it to your grandkids if you’d like. It can be used to make generational wealth. And it’s not that hard to do in some cases. Just depends on your situation. But again, be happy to show you that. But the potential tax-free nature of the Roth IRA may also provide you with additional benefits such as a hedge against tax rates that more than likely will rise in the future. And when it comes to your retirement, there are just a lot of unknowns. What will the market do? What will inflation be like? What will your tax rate be? And so on and so forth. But that last one, taxes. It’s a major concern for many retirees and one we’ve already talked about a bit, but a Roth IRA conversion can just help you manage that risk by paying taxes at today’s known rates. And if tax rates rise in the future, then those tax-free distributions from your Roth IRA will be even more valuable. Of course, if you think your tax rate will be lower in retirement, then that would be an indication that maybe this strategy isn’t the best for you. It might still be again something we can help you figure out, but since Roth IRA distributions in retirement are tax-free, they typically don’t impact the other things tied to your income that we discussed earlier.

All right, we talked about the benefits of a Roth for estate planning purposes, but it also has anciliary benefits. Let me get up this other one, you know, including the impact on social benefits. And by social benefits, we’re talking about social security and Medicare. So, think about an IRA income in a pre-tax IRA. So, think about a pre-tax IRA. That income is 100% taxable. And it’s included, all withdrawals that you take out of it are included as provisional income for social security purposes and it’s adjusted uh it’s included in your modified adjusted gross income for Medicare purposes. So, if you have to pull out a good chunk from your pre-tax accounts, now you might be getting taxed more. on social security and you might have to pay a higher premium in Medicare. Whereas if you had a bunch of Roth funds, that’s not reportable anymore. You already paid taxes on it and the same incoming the same income coming out of a Roth again not taxable. It’s not included in that MAGI, your modified adjusted gross income. So, when it comes to pricing, how much your benefits, how much of your benefits are taxed, and how much your client’s um how much your government benefits might cost, the Roth is really now starting to show some serious value.

So, Roth IRA conversions can be able to they’re able to help you keep more money after all the taxes have been paid. Let’s just look at a hypothetical example of someone over the age of 59 and a half considering a Roth IRA. Um, in this case, it’s a Roth IRA conversion of $10,000. So, we’re going to assume that the marginal tax rate now is 12%, but the tax rate later when it is taken out will be at 24%. Now, if this individual doesn’t complete a Roth IRA conversion and just continue to let that pre-tax money grow, grow, and grow for another 10 years, and we’re assuming a 5% rate of return for both sides of this, they would have $16,289.

Then, if they take the money out and pay the income tax 24%, they would have $12,380 left over. However, if they chose to complete a Roth IRA conversion, they would have to pay 12% of the money in taxes and would have only $8,800 in the Roth IRA. But assuming annual growth of 5% per year for 10 years, they’d have 14,334 they can access income tax and penalty-free. since that Roth IRA owner in this case they hit the 59 and a half fiveyear rule. But that’s potentially almost $2,000 more or 15.8% more if they complete the Roth IRA conversion and pay the income tax now instead of keeping the pre-tax money in the retirement plan or in the pre-tax IRA and pay the income tax later when they withdraw the money. It’s a basic example. You’d be shocked to know how many clients of mine and how many members I’ve done these plans for. And it just shows how much more money you can save in taxes and in fact grow your account by. We’re talking about 15.8% on just $10,000. Apply that same number to your entire account. And now look at that higher number, but also look at it from being a tax-free number rather than a future Uncle Sam’s putting his pocket hand in your pocket in a few years. Think of those two different values.

And this chart can help you understand how a Roth IRA conversion might help given various tax brackets both now and later. You know, as you can see, moving across the top is where you will find the current marginal tax bracket. Let’s just say it’s 12%. Now, if we move down from there, you can see how much of a Roth IRA conversion, how much a Roth IRA conversion might help. But if later this money would be taxable at 24%, a Roth IRA conversion could help you end up with 15.8% more money than after income taxes.

There you go. You know what, folks? I’m going to just go ahead and say it. Take a photo of this slide. This is a good one. It could show you, hey, maybe it makes sense to go ahead and see if this might be a good tool for me.

And not only do we give these general educational webinars, if you’ve been on these before, you already know this, but we also have the planning tools available for you to take advantage of that can help determine your specific effective tax rates at times down the road. It’s just help we can offer to you. Again, it’s your decision. But here at Alliant, you have a lot more available to you than just banking and great CD rates. We can help you figure out what your future is going to look like financially and if we can hit your goals or if you can do a full conversion, etc. We have fantastic planning tools to help you uh decide if maybe a conversion is great for you. But whenever a Roth IRA conversion is considered, you must consider two tax scenarios. One, how the future tax situation might play out without, you know, without a conversion, but two, how the conversion will impact today’s situation. So, we don’t just need to look at the federal income tax bracket. That’s just one of three or four different things that you need to look into whenever doing a conversion. income taxes here. That’s important. But you also want to make sure that you’re not going to start jumping Medicare brackets. Those get kind of steep, especially after once you start getting into the third and fourth bracket. Medicare gets very pricey. Want to make sure that you don’t cross into that threshold. And then next, there’s also the 3.8% net investment income tax that was introduced back in 2013. It’s 200,000 for singles, 250,000 for joint. and they haven’t increased those thresholds since 2013. And obviously money is not worth as much as it used to be then 12 13 years ago. We have to keep all of these in mind whenever we’re talking about a conversion. And again, we can help you with that. We’re here to assist.

But it’s important for clients to watch for an opportunity to reduce the taxes paid on retirement plan money. You know, we encourage you to see your tax advisors for your own situation, but reducing the amount of tax paid may mean more money for retirement expenses or for passing along to beneficiaries. And here we see how much ordinary income a married couple both over the age of 65 can absorb in the various tax brackets. you know before moving to the 12% bracket it’s 5750 130150 before moving to the 22% bracket 2399 before moving into that 24% bracket and so on. Now there’s a couple different ways to approach a conversion. You might want to go just a fixed amount, whatever you’re comfortable with, but here’s a real savvy conversion strategy that might be helpful for you called filling up the bracket strategy or filling up the bucket. So, remember those tax brackets that we just looked at earlier? Well, sometimes you can find yourself in the middle of one of them or maybe even on the lower side of one of them with a lot of room to add before more income before you’re pushing yourself into one of the higher tax brackets. So, maybe you’re in the 12% bracket. You can convert $30,000 before jumping into the 22. You know, in 2021, that 22% tax bracket for married couples filing a joint return goes from about 81 to about 172. You might have a lot of space, pardon me. But suppose then that you file a joint return, your taxable income is 100 grand. That means that you could add another $72,000 of income without going into that next bracket. Making a Roth IRA conversion to that remaining amount could make sense for you. And a lot of times whenever I’m speaking with folks, I’m worried about this jump from 12% here to 22%. Or from 24% to 32 because obviously, you know, yes, 24 is larger than 22, but it’s not a 10 or an 8% jump. It’s a two. Sometimes it makes sense to do a little bit more than the 24. Again, everybody’s different. Nobody there’s no cookie cutter way of doing it. It’s just getting to know you and figure out what your goals are. But if you plan to convert a sizable portion of your IRA, this approach is often more tax efficient than converting the full amount at one time and instead you can make smaller Roth IRA conversions over a number of years, filling up your bracket each time. And this can help reduce the average tax rate you’ll pay on your converted money and also spreads that tax bill out over a very long period of time, making it a cheaper strategy for you. Now, higher income Medicare beneficiaries are not held harmless and have been paying more for their Medicare parts B and D coverage for several years in the form of income related monthly adjustment amounts, also known as IRA. So, the Medicare Access and CHIP Reauthorization Act back from 2015, otherwise known as DOC fix law, it enacted this new modified adjusted gross income brackets that went to effect starting with the 2018 Medicare premiums. So the 2024 tax return is used to set the 2026 income related monthly adjustments, those IMA brackets. So whenever you’re you want to know what you’re going to pay for Medicare, you’re going to know what bracket you’re going to be in already for two years out. Whatever bracket you are going to lie in for 2028 is going to be based off of your 2026 earnings. What you’re paying this year in 2026 is based off of your 2024 earnings. You have to prepare for these things years out. This is where a conversion can come into play. At least we know the numbers ahead of time, but it all comes down to just good planning. Now, Roth IRA conversions can be especially useful if you had a low income year. You know, for example, you might be a business owner with unusually low sales or you’re paying high non-recurring medical bills. Maybe you’re retired but not yet receive social security benefits, etc. These are questions to ask to see if a Roth conversion is a good move for you. You could do a oneoff year, take some years off from doing a conversion, get right back into it. Who knows? Everyone’s different. Again, now moving on to point number two, the original IRA owner. Once you reach a certain age, the law requires that you begin to take, again, we discussed these, we’re going to get into them now. The law requires you to take what are known as required minimum distributions or RMDs for short from your traditional IRA or your traditional 401k. And those same rules apply to just about all pre-tax accounts. But RMDs are simply the bare minimum that Uncle Sam is going to require you to take from your retirement account each year to satisfy the tax code rules. Uncle Sam says, “Hey, I let you put all this money away 50 years ago, tax deferred. you haven’t paid me on it yet. Now, I’m forcing you to start taking it out because I want to get paid. That’s how it works right now. And the specific age when you must begin taking RMDs, it depends on when you were born. So, if you were 72 or older as of the end of essentially, I’m not going to go through that. If you were born in 1959 or earlier, 73 more than likely might be 72. If it was 72, you’re already taking them, but it’s 73. If you were born in 1959, 58,55. If you were born after in 1960 or later, it’s 75 right now. Just depends on the age. They changed the rules for the Tax Cuts and Jobs Act. So, yes, you will have to take them out at 75 if you were born in 1960 or later. Final thought though before we move on, just remember that you can always take out more, but if you fail to at least take the minimum amount out that Uncle Sam requires you to take out, IRS can actually hit you with a 25% penalty. 25% penalty for any amount that you should have taken but didn’t. So, if you don’t take out 50 grand, you know, here comes a tax bill for $12,500 or a penalty of $12,500.

And you have to take them out by December 31st of the year. Don’t have to tax season to do it. December 31st. Of course, just most people don’t think about things in terms of factors or life expecties. So, here’s a chart I think you’ll find helpful. It shows the approximate percentage you need to take out of your IRA or your pre-tax accounts from 73 to 90 in order to steer clear from that penalty. So if you look, you’ll see that each year the percentage you need to take out increases. Doesn’t necessarily mean you need to take out more money each year than the last though is that also depends on how much your IRA gains or loses from year to year. But these are the more this is the mortality table right here. Oh no, this is just the percentage. You can find the mortality table on the IRS’s website. All you do is take your December 31st final statement from 2025, divide it by that number that’s next to your age. That’s your RMD for the year. Again, make sure you take it out before December 31st of the year. But if you do a Roth conversion, your Roth funds avoid all this and you can just keep your money and let it grow. Now, since the R&D age has increased from 72 to 73 and now it’s 75%, it may be tempting to simply delay all IRA with draws until then. Well, not everyone will be able to do this. Those that can should be aware of rapidly growing distributions that might move them into that higher tax bracket. So, you can see the different ones here. We’re assuming that the initial IRA balance uh at age 65, it earns 5% per year. You can see that by pushing it off and the larger growth now forces you to take out more money and you might go from a 24 to a 35% tax bracket. See it all the time again. Next webinar is going to be about your retirement income blueprint. We can find out ways to solve that too.

Now this graph illustrates the increase in RMD amounts when compared to inflation. It assumes that the initial IRA balance is a million at age 73 and earns 5% per year and an inflation rate of 2 and a.5% which is about the 30-year average. Now, this assumes the RMD is taken at the end of the year. And if we assume that tax brackets and deductions are adjusted at the rate of inflation, if the RMD amount is increasing faster than inflation, it could push the taxpayer into a higher bracket. And if this seems likely, Roth conversions and other strategies should be examined as part of a draw down strategy. Again, a financial professional and tax professional should always be consulted before taking actions to manage this too. So therefore, appropriate Roth IRA conversions before the RMD, before those distributions build too high, could be a viable strategy to help you keep more of your money after income tax has been paid off.

And so in fact, this is a snapshot from our tool. That’s just an example of a married couple that’s retired and living on their social security. And the dark blue, that light blue small amount in the middle is their pension. And that darker red, darker orange color, that represents their RMD. And that red line that’s going across is what they want to spend each year. But you can see that Uncle Sam’s forcing them to take out more money than they need to. This is one of the things that we look at whenever we’re doing financial planning is how to get rid of your RMD problem. We want to try to keep you in that 22% bracket or that 12% bracket, depends on where you are, but you can try to at least mitigate your RMDs to where you’re not forced to take out more money than you need if you don’t want to. Giving you more control over your money rather than letting Uncle Sam tell you what to do with it. And based on that info, you can see that their tax liability is going to increase based on those RMDs. This is just the cumulative amount of taxes. Um, whenever we’re doing financial planning, we’re just going to go through this real quick, but this is essentially what we can show you in the plan, but by doing the Roth conversion, you can see that red is just additional taxes paid earlier on before their RMDs come in. And then we can show you the gray, which represents less taxes they paid later on. in fact showing you how much less you’re spending in t or your how much less you’re paying in taxes and how much you can grow your portfolio by. Why is that? How do you grow your portfolio by doing a Roth conversion? I’m paying more money. I’m made my account value up smaller. If you have a $100,000 Roth and $100,000 traditional, which one’s worth more? Obviously, the Roth because it’s truly hundred grand. $100,000 traditional is Uncle Sam’s waiting to take his bite out. So, it might be worth more like 80 or 75. Same thing. Both are growing at 8%. Which one’s actually growing at 8%. Again, the Roth. Because part of those earnings that you have in this pre-tax account every year are eventually going to be Uncle Sam’s. So, by having Roth funds, by doing a Roth conversion, not only can you save money in taxes, use it as a legacy planning tool, can increase your portfolio because of tax-free growth.

All right. So, moving on to the surviving spouse spouse. In this hypothetical case, we see Adam and Ann’s income and assume they have $58,840 of ordinary income from IAS and or pensions and $60,000 retirement income. In their married filing joint tax status, they’d pay8 $8,841 in federal income tax. Now, if we look at this example with Ann filing as a single taxpayer, she would lose a social security check and need to withdraw $98,000, $99,000 in order to pay the increased taxes of $18,9345 and keep the after tax income the same. So, here the IRA withdrawal would increase 68% and the taxes would increase $ 114%. But while Adam was alive, they were in the 12% marginal tax bracket. And with Adam gone, Ann’s now in the 24% bracket. And we call this the widow’s penalty. You’re enjoying these file married filing jointly rates or basically just double of the single amount as far as the modified adjusted gross income goes. But when one of you goes, Uncle Sam doesn’t really give you any sympathy there. You’re now filing single and now you have RMDs on top of it, which they might have thrown you into the 22% bracket when you’re married, but now they threw you into the 32% tax bracket. We see it all the time.

But appropriate conversations before that first death could be a viable strategy to reduce, you know, for the surviving spouse and give him or her access income tax-free.

And this slide is demonstrating what it looks like when comparing tax brackets between married filing joint versus single. As you can see, the single filers tax brackets are compressed when compared to some married filing joint. One reason this is just very important is because after the first death, the surviving spouse often retains all the assets and the increasing RMDs as mentioned, but they’ll also be at a much higher tax rate compared to when they were married. And as a result, some of you may want to think about accelerating those IRA distributions or doing a Roth IRA conversion or maybe just taking more funds out of your tax-free account while you’re married and why you can take advantage of lower tax rates. And we’ll look at that a little closer in the surviving spouse section next to come as well.

Now, moving on to beneficiaries to finish this discussion. Let’s look at just a hypothetical example of Carrie here. She’s 45 years old. Assume she’s inherited a million dollars in form of a traditional IRA. We mentioned this earlier. This is a great example. She assume she inherited a traditional IRA from her mom who recently passed. She doesn’t need the money now and doesn’t want to increase her taxable income. Now, under the old rules, she could have stretched the withdrawals and would only need to take out a small R&D at 25K in the first year. But under the new rules, if she were to withdraw evenly over 10 years, she’d have to take $123,328 out each year. So, the old rule was preferable. You got to stretch it out over a longer period of time. In fact, many of you might have experienced these. Now, you have to get rid of it in 10 years. You have to distribute all the funds. More than likely, whenever you go, statistically speaking, I hope everyone on here lives be 120 plus, your children are probably going to be in their early in their peak earning years. So, as opposed to you converting funds at 12% 22%, your children might be make already in that 22 to 24% bracket, now their inheritance is taxed at 32% and 35%. Uncle Sam’s not spending your money wisely. I don’t care what side of the political spectrum you’re on. you know, they’re not spending your money wisely. Shouldn’t feel good that they’re your children are going to be spending 35% 32% on your hard-earned money.

So, in this hypothetical example, let’s look at the taxes on this inherited IRA, assuming that Carrie is single and she has taxable income of $90,000 a year. Without the inherited IRA distributions, she’s in that 22% bracket. But when she adds that $123,000 to her taxable income, she’s now up in the 24% tax bracket, as well as adding income in the 32% tax bracket, too. So, this is a simplistic example, but Carrie would pay over $310,000 in the inherited IRA over the 10 years on that distribution.

And one final hypothetical example to help illustrate things. Let’s assume mom and dad have an IRA that will most likely go to their son as a beneficiary and they’re thinking about converting 50k for the next 5 years or 50k a year over the next five years because they’re in the 12% bracket. Their son’s in that 24% bracket now and he’s likely going to stay there.

So in this example, we see that without the conversion, mom and dad will have access to more money than their beneficiaries because their tax bracket’s lower. If however, mom and dad do the conversions at their 12% tax bracket, their access remains the same, but the beneficiary values increase because that tax is paid in a lower bracket. And then after 10 years, the converted values for the beneficiary are about $56,000 more than the unconverted values. And then after 20 years, this increases to about 10 $110,000. But just two things to note. First, in this case, doing Roth IRA conversions did not reduce liquidity for the parents as indicated by the dotted red line and the conversion gold line. Second though, beneficiary received more because the taxes were paid at a lower tax bracket as indicated by that dotted orange line and the blue line.

So, two things to note. I’m sorry, but no, appropriate Roth IRA conversions before the owner’s death. They can be a viable strategy to help reduce the income taxes that the beneficiary must pay. Now, considerations of Roth IRA conversions. Again, no income limitations. Taxable at your ordinary income tax rate for that year. The deadline to do this too is also December 31st of the year. So many of you might conver uh contribute to your IRA come April the next year during tax season. Can’t do that here. Here you have to do it in the year that you convert. So if you make a conversion in April, it applies to that year. you want to make one for 2026, you have to do it by December 31st of this year. Again, there’s no pre-age 59 and a half additional taxes. And as we’ve mentioned previously, be be aware of unintended consequences of Roth IRA conversion. You know, increasing taxes, uh you could increase your social security taxes, you could increase your Medicare bracket. These are things to seek out help from a professional and see if this is actually worth your time in doing. And of course, these strategies aren’t for everybody. Now, as you can see here, and there’s no guarantee that a Roth conversion will achieve those intended results, but we can help you plan to see if it might be something up your alley.

Really, just a couple of slides to illustrate what our tool shows, how our tool can show you, hey, this was all orange ahead of time. There’s RMDs. We do a conversion. Boom. Now, you’re not being forced to take out more than you need in any given year. You can see how your assets would just continue to grow, etc., etc. so on and so forth.

All right, folks. In conclusion, we don’t know what our future tax rates will be. We know what they are today. We know that they are at a absolute low.

If this is something that you think would be worth it to you, again, we offer the help and the advice to do this. I just showed you our financial planning tool, some slides from it. We’re happy to run you through this to see if this is an appropriate strategy for you, if this is something that can assist you, if it’s a good legacy planning tool, if it’s a way for you to save taxes, if it’s a way for you to grow your assets, if you want to avoid RMDs, if you don’t need RMDs, we’re here to help with this. So, at no cost, at no obligation, it doesn’t cost anything. I still I get asked that even after saying it, but I’m going to repeat it again. We’re here to help you. So, if you’d like for us to do a financial plan, if you’d like to see if a Roth conversion is a good strategy for you, please click yes on this poll right here. We’ll schedule a meeting. Be happy to show you how we can help. We’re just grateful to have you as members. We’re here to assist our members. That’s why credit unions are better than banks. You are the owner of the credit union, not stockholders like it is for banks. you are the owner of this credit union. We’re here to assist. So, please click yes in the poll. You’re not going to offend me if you say no or not at this time. I would appreciate if everybody does answer the poll. That way, it shows that I kept your attention and that is one way that my boss measures me. I am currently in first place with the best retention rate or attention rate in the company. Um, so please help me look good. Click yes. No, not at this time. Doesn’t hurt my feelings. All right. And with that, we’ll start getting into some questions here. Go ahead and ask them. Chat, Q&A section. We have a couple of questions here already.

Let me start reading these to myself so I know what I’m actually talking about. But yeah, still have about 50 people who need to answer the poll. If you don’t mind answering, I would really appreciate that.

Okay. I have a concern about the Okay, I think this is something that we covered already, but I’ll just reiterate it and you probably don’t need me to answer this anymore, but have a concern about the increase adjusted gross income due to the IRA distribution. I assume you mean conversion. Won’t this increase my Medicare premium? It can. That’s why we need to do proper planning. We need to ask you all the questions. We need to understand what your income is going to be for that year. I love working in conjunction with your CPAs, too, because this helps me figure out the right number to convert. But that’s really what you do. It can throw you into another bracket. Sometimes it makes sense to go from bracket one to bracket two because of how much you can save. Generally speaking, not so often, but it it does make sense for about five of my clients were doing that where they’re going to jump brackets for about three years from ear because of how much more money they’ll save in taxes down the road.

Okay. How can I figure out myself if this conversion will be beneficial for me? Schedule a meeting with me or click yes right here and we will find that out together.

Isn’t it possible that the huge tax I may pay now in the conversion may not be much different than the smaller tax distribution with RMDs? But depends on your situation. Hey, how much money do you need right now? Are you being forced to take out more than you need? It also depends on your timetable. If you’re in your early 60s, it might make more sense than to do it whenever you’re already taking your RMDs. But again, that’s something that we can cover. Schedule a meeting with me. Don’t see poll, not in the app. Um, if it’s to schedule a yes poll with me, then please Oh, wait. Here.

Okay. If you would like to, if you don’t see the poll, that’s a problem we’ve had a few times. Schedule an appointment with me here. I’ll be sure to add you my numbers that way. If you don’t want to schedule one, you can just say it in the Q&A right there, but can’t see the poll. Didn’t want to schedule. I’ll let them know. Thank you. I appreciate that, too, folks. I really do.

Do you have to have earned income to make the conversion over to a Roth? No. To make a contribution to an IRA, you need to have income. To make a conversion, no income.

How are the funds insured? I don’t know what you mean by that, but if you’re talking about the funds that you have with the credit union, NCUA.

Okay. For those who said yes and you just didn’t get the poll, please schedule a meeting with me in that QR code. If I don’t hear from you, I’ll reach out to you via email.

It should come up. It might be hidden behind some of the other things in the brow. It might be hidden behind the browser. Thank you very much. I appreciate that. Uh I get hung up on having nondeductible IRA contributions mixed with traditional IRA funds and the pro router rules. If I want to convert to Roth, do I need to work with a CPA or financial consultant to sort this out? Work with both. You know, you’re at this time in life where CPA costs a couple hundred bucks and they can might pay their weight in gold, but doing a non-deductible IRA, that’s a contribution. That’s the backdoor Roth. So, if you are over the contribution limits with income or if you’re over the income limit to make a contribution to a traditional IRA or any IRA, you can do a backdoor one where it’s basically you make a contribution to a traditional account, a pre-tax account. You don’t deduct it. It’s converted to a Roth. It’s called a back door. It’s one way you’re able to get contribute to Roth uh IRA even over the income limit. It’s a simple process, too. But we can go over that again together. I’d be happy to schedule a meeting with me. QR code, email, click yes, whatever. Uh, we have about 15 more people that need to answer the poll. If you’re still with us, I’d appreciate that. If not, I understand. And I just hope everybody keeps joining. So, I appreciate everybody joining us today. It looks like that’s all the questions we have. Please bring bring more bring more questions. Don’t don’t be nervous. I’m here to answer them. I’m not going to charge anybody or send anybody a bill for a dollar for every question you ask. Please, we’re here to answer all of these. We’re kind of trying to differentiate ourselves from other We’re not trying, we are differentiating ourselves from other financial institutions by trying to go above and beyond for the members and offering these webinars and offering the services that we do. Apparently, nobody else does this, so we feel very special about ourselves. But please, any questions, we’re here to help with these. If you want to find out if a Roth conversion is good for you, if you want to find out if it’s not good for you, we can give you that answer. It’s a simple conversation.

No penalty. Even if it’s before the 5 years, there’s not necessarily a penalty. It’s just the Roth funds in there, not the earnings. If you start ear reaching into the earnings portion of it, then that’s where you might be taxed. But you’re more than likely not going to have to worry about that. I I’ve rarely seen that unless there was a serious life event while someone was in the middle of a Roth conversion. Um, you don’t need to worry about the five-year rule necessarily. It’s good to know though, and that’s a great question.

Okay, let me go back here.

Can the converted amount be withdrawn anytime the way contributions can? It’s the same thing 59 and a half fiveyear rule like I just mentioned, but after five years, you’re good. If you’re over 59 and a half, no penalties either. Can I contribute to my Roth IRA on a monthly basis? Of course, you can. You can contribute to it in whatever frequency you’d like. You can do all at the beginning of the year, all at the end of the year. You can put in, let’s see, $8,600 divided by 365 days of the year. You can put in $2356 every day of the year and contribute to your Roth if you’d like.

Are there better types of stock ETFs to do a conversion with? I would say to each their own for that question. That’s a great question, too, because generally speaking, hey, you’re doing a Roth conversion. You want these funds to these funds are taxfree while we’re converting. We’re also trying to draw down the pre-tax funds so there’s less of a pain to deal with later with RMDs. So, you’re more than likely not going to be reaching into your Roth funds after the conversion or really near that time because you still want to wait on that 5-year period. What does that mean? Means you can be a little bit more aggressive with your Roth funds. So, if you’re in retirement and you just want to be pretty conservative, go for a 3 to 5% return, great. But with your Roth funds, you know, 3 to 5% return on a pre-tax account. Remember, Uncle Sam’s getting his cut of those earnings. With the Roth though, you can go a little bit more aggressive. It’s kind of how I illustrate it most of the time, too. I’d like to show people that

if you convert to an existing Roth IR Oh, by the way, how’s it going? Long time. Good question. Okay. Um, if you convert to an existing Roth IRA that’s been open for more than five years, is there a restriction on withdrawal portion? Yeah, it’s the same thing. Just a five-year countdown happens with new funds. So, if you did a conver if you have a $300,000 Roth IRA and it’s been open for 10 years, but you want to convert 50,000 into it, the 50,000’s now on the five-year click on the fiveyear ticker there, fiveyear timer. the other 300,000 is going to be available, but still um you’re good in that case. It’s just you’re going to be reaching into the other funds first.

See, glad to hear.

Does the surviving spouse have to take the other spouse’s RMDs and his her arm? Yep. That’s what we’re referring to as the widow’s penalty. So, you lose the joint status and now you have both RMDs to deal with and you more than likely have the higher social security. So, you are you have money problems. Not not lack of money problems, but you got money problems or you’re going to have to worry about taxes, too. So, you do have to it’s as if it was all already your own IRA the entire time. So, the surviving spouse does have to take the other spouse’s RMDs once they pass.

All right, folks. I believe that is the end of it all right here. I have to get running. I am moving to a new spot down in Houston and I need to go meet with somebody about selling some of my old furniture. Look, if you ever have any questions, if you don’t want to do a consultation, that’s fine. We’re here to help. Like I mentioned, here’s my info. Send me an email with any additional questions if there was something that kept you up at night tonight. Here to assist you guys. Here to assist our members. For those that said yes, I will be in touch soon. I’ll probably send you an email and give you a phone call tomorrow. We’ll schedule a meeting at time convenient for you. Hope everyone has a wonderful day. Thank you very much. Take care. I’m glad it was helpful.

All right, welcome everyone. Thanks for joining us today to our webinar presented by Alliant Retirement and Investment Services in partnership with Alliant Credit Union. We’ll we will have a live Q&A session uh at the end of the presentation. Please submit your questions regarding today’s topic which is social security, Medicare and your retirement or about Alliant Retirement and Investment Services in the chat or the Q&A. The presentation is recorded and a link will be provided later by email for on demand viewing. Our speaker today is Tom Davia of Alliant Retirement and Investment Services. Tom is one of our financial consultants. He’s based in Chicago uh in the Chicago area. He holds the certified financial planner designation and has over 27 years of experience in the financial services industry, including nine years with Alliant. During the Q&A session, we’re going to launch a poll uh asking if you’d like an appointment with Tom. We encourage everyone to answer the poll uh so we can learn what’s helpful to you as members and continue to bring financial education to you. Please be sure to adjust your volume to an appropriate level as settings vary by user. Now, let’s start our presentation. Social Security, Medicare, and Your Retirement.

Hello everyone. Thank you for joining me today. My name is Tom Davia. I’m a financial consultant here at Alliant Retirement and Investment Services. Today, we’re going to be talking about Social Security, Medicare, and your retirement. We’re going to be talking about how Social Security and Medicare programs work. uh discussing some important issues facing both programs and a few effective strategies for supplementing these retirement benefits. If you’ve been concerned about Social Security and Medicare being reduced or eliminated, you’re not alone. Both programs have been in the news quite a bit lately and there’s some talks of insolveny, tax hikes, increased eligibility ages, all that’s uh created a lot of confusion around these programs. So, we’re here today to kind of walk you through that and answer some of your questions.

Some educational resources for you. Our team here at Alliant Retirement and Investment Services is focused on helping you understand the ins and outs of investing and saving for retirement and much more. So take a look at our website if you get a chance. It is a aris.allcreditun.com.

There you can see the list of our weekly webinars, our podcast which I’m the co-host of, and our financial blog and resources available to you as well.

So, how can we help you? We are a full services financial planning organization here at the credit union, a fiduciary firm. We can help you with retirement planning, we can help you with your investments, life events, and generational planning. So whether you have questions about today’s topic, social security, your 401k plans, current investments, if you’d like to do an investment review, or if you had any major life events, it’s a good time to check in on your financial plan and make sure it is structured correctly to meet your goals.

All right, today’s agenda. We’re going to begin today’s seminar with a quick look at the changing face of retirement. We’ll review the structure of both social security benefits and Medicare. We’ll talk a little bit about uh metag gap insurance and health savings account. And finally, we’ll talk about some effective strategies for meeting your financial and medical needs during retirement as well, just so you don’t have to solely rely on Social Security and Medicare.

First of all, we start by talking about the changing face of retirement. Planning for retirement now is more important than ever. Things look different today than they did for previous generations. planning for retirement. We have people living longer uh longevity concerns. We have careers that are less linear than they were in the past. And really the responsibility of funding retirement has shifted towards the individual instead of the company offering the traditional pension plan. So it’s more on the individual at this point. Retirement in the future can cost significantly more. We all hear about inflation in the news. We have inflation concerns as costs continue to rise, health care expenses, longer lifespans. Really, what all that means is you need to plan for your money to last 20 or 30 or even more years. So, help is available, right? That’s why we’re here. We’re doing these meetings to let you know we have a financial planning services of the credit union available to you. So, help is available. We have professional guidance to help you figure all this out. And really when you have these conversations, timing matters. The earlier you start planning, the more options you typically have. And today’s topic, understanding Social Security and Medicare benefits is even more important now as you make your planning efforts. Social Security and Medicare are key pieces of the retirement puzzle, but they’re often misunderstood. and knowing when to claim benefits, how those payments are calculated, and how the Medicare coverage works. This can all have a significant impact on your retirement and your income and your health care costs.

Okay, let’s first start and talk about social security.

Social Security is really a general term that describes a number of related programs. So, Social Security can cover retirement benefits, disability benefits, family and survivor benefit programs as well. It’s really designed to supplement private savings and retirement plans. And in 2024, 68 million Americans received Social Security benefits. But when you look at the numbers, Social Security benefits typically represent about 30% of income of retirees. And that’s according to the Social Security Administration.

So how does Social Security work? Well, it is mandatory funding. So you probably see your contributions coming out of your payubs either as social security taxes or FICA taxes. So it’s mandatory funding that comes out of our paychecks and the tax proceeds they go into a special trust fund that’s established exclusively to pay social security and Medicare benefits and some administrative expenses. Now to receive benefits uh you depend on your full retirement age. So some people full retirement age may be 66 and a few months. Most of us it’s turned into age 67 but you do have the ability to take what they call reduced benefits as early as age 62. So your benefit amount depends on your earnings work history. So it’s based on the highest 35 years of earnings. And you can see that calculation in your social security statement if you haven’t looked that up before. It’s available within your online account at ssa.gov.

Now, if you are receiving if you wait past your full retirement age, you could receive up to an 8% increase per year in benefits if you postponed your benefits.

Now, here are some of the issues that you might be hearing in the news about social security and the payments of the benefits. So, we have the retiring baby boomer generation right now, which is causing a lot more payments out of the system than money is being received. People are living longer than was originally calculated in life expecties. So, more money again is coming out of the system than being paid in. we have fewer workers paying into the system. It’s a pay as you go system. So all the taxes collected in a specific month would be paid out the next month. So fewer workers have less money coming into the system. And you put that all together and it’s estimated by the year 2035, Social Security would exhaust the trust fund and may not be able to meet all of its obligations as promised to all retirees. It’s currently estimated that if nothing changes that there would be a 20% reduction in social security benefits across the board by the year 2035.

Now there are some proposals on the table for improving the situation and not running out of money in 2035. So a few options here on the table raising the retirement age as I mentioned some of us it’s 66 in a few months it’s been raised to 67 there’s some discussion about raising the retirement age to age 70 or starting incrementally to bring it up to age 70 there’s also talk of means testing what that means is cutting benefits for wealthier seniors there’s also the cost of living increase every year so Social Security each year will give you a cost of living adjustment based on inflation. There’s some talks of reducing that a bit not to make it as much of an increase each year. There’s also talk about investing trust fund dollars in the stock market and possibly diverting some of the payroll taxes to private accounts which would then have some stock market exposure to it. Withstanding the market crisis of 2008 2009, stocks historically have performed better better than any other type of investment. Although past performance can be no guarantee of future results.

Next, we’re going to talk about Medicare. All right. Medicare is a federal government program that helps older and some disabled Americans obtain and pay for medical care. It’s administrated by the US Department of Health and Human Services, and it’s the nation’s largest health insurance program, which covered more than 66 million Americans in 2024. Now, Medicare is really broken down into two parts. Part A, hospital insurance. Part B, medical insurance. Part A, hospital insurance, covers most of the costs of a stay in the hospital, as well as some follow-up costs after time in the hospital. Part A pays some other outpatient medical services, including some home health care, but it does not cover the cost of prescription drugs. And under most circumstances, you do not have to pay a premium for part A. Part B, a little different. Part B is medical insurance. This optional coverage is intended to help pay doctor’s bills for treatments in or out of the hospital. It also covers many other medical expenses you incur when you are not in the hospital, such as the costs of medical equipment and tests. If you elect Part B, a monthly premium is automatically deducted from your Social Security check.

You have two options for Medicare coverage. The original Medicare plan and Medicare Advantage, a managed care plan. Each of these programs have their pros and cons. The original Medicare plan, you pay your Part B monthly premium and then you pay additional services as you use them. In 2025, the standard monthly premium was $185. Additionally, Medicare PartB deductible was $257 in 2025. If your modified adjusted gross income uh from 2 years ago is above a certain amount, you may pay more for Part B. Now, Medicare Advantage plans, it’s an optional program through private insurance companies. They provide HMO type coverage. To determine which program is right for you or for your needs, you can call Medicare 1 800 Medicare which is 633-4227 or you can also log on to www.medare.gov.

There are also some other options to consider. Metagap insurance and health savings accounts. We’ll take a look at each one of these health savings accounts. So, we have the creation of tax-free health savings accounts for anyone under age 65 who is enrolled in a high deductible medical plan. That’s defined as one with a deductible of at least $1,650 for an individual or $3,300 for families. And these amounts are adjusted for inflation. The contributions are taxdeductible. The maximum contribution to an HSA plan in 2025 was $4,300 for an individual and $8,550 for a family. There’s also a $1,000 catch-up contribution for individuals between the ages of 55 and 64. So much like a retirement account or an IRA, health savings accounts allow for account holders to select a variety of investments that can suit their time horizon or risk uh tolerance. Also, the account balance can be maintained from one year to the next. Now, distributions for qualified medical costs are tax-free, but non-qualified, right? if they don’t qualify for medical cost. Non-qualified withdrawals are taxed as income and may be subject to a 10% penalty.

Medigap insurance. If you choose the original Medicare plan, you might also be interested in receiving Medicare supplemental insurance or metagap insurance. The term metagap comes from the notion that these insurance policies will cover the gaps in Medicare payments. Metagap doesn’t fill in all the gaps, but it may help. So before you buy a metagap insurance policy, consider not only the services that are covered, but also the amount of benefits and the monthly costs of the policy. Also pay attention to how much premiums may rise in years to come. You may want to also compare Medigap with Medicare Advantage. For more information on Metagap insurance, you can again call 1800 Medicare. That is 1 800633-4227.

Okay. Now, we’re going to shift gears a little bit. We are going to be talking about planning for retirement and preparing for your financial well-being. Now, up to this point, we spent most of our time learning why you shouldn’t count on Social Security and Medicare to cover all of your needs during retirement. Now, let’s talk a little bit about what you can do to ensure a comfortable retirement for yourself. Now, fortunately, today we have more choices than ever, which we’ll discuss in a moment. But with these choices, however, more responsibility. It’s up to you to determine whether you should contribute to a retirement plan, how much to save, and what investment choices to choose. So, regardless of your age, investing for retirement should be among your top financial priorities. However, one of the greatest challenges for most people is realizing the need for a retirement investing program. According to financial experts, you’ll need 70% or more of your final working year’s salary each year during retirement.

Okay. Now, here’s some retirement savings vehicles you might be familiar with, right? Traditional 401ks, 403bs, IRA. So, we’ve established, right, since social security was never meant to be the sole means of support in retirement, you have other options for retirement savings. There’s several tax advantage investment options for retirement savings. Like I mentioned here, 401ks, 403bs, 403bs generally cover nonprofit and healthcare organizations, and IRA are your individual retirement accounts. Now, when you look at these, there’s two types of 401ks and 403bs. You have the traditional and you have the Roth plans. Traditional plans offer tax benefits. Contributions are taken out of your paycheck before income taxes are assessed. That’s kind of pre-tax. You pay taxes on a lower amount. Now, what’s more, earnings on your traditional 401k or 403b, they can potentially grow and compound without losing some of that growth to taxes each year. So, they grow tax deferred. Now, Roth plans are a little bit different. Roth plans feature after tax contributions, so you pay the taxes on it today, but qualified distributions are taxfree. Roth 401ks and 403bs, they’re really available based on the uh discretion of the employer. So, you need to ask your benefits administrator if your company offers this type of savings options. In addition, uh many other employers uh offer a match portion for these plans, which may potentially be the easiest money you’ll ever receive. If your employer matches a portion of your 401k contributions at a rate of 50 cents on the dollar, that’s an automatic 50% return on the part of the money that you’ve been investing. If your employer offers a 401k or similar plan, take advantage of it. Also, try to contribute the maximum to the plan. Remember that early withdrawals before age 59 and a half might be subject to an additional 10% penalty tax as well. Expanding on the IAS or individual retirement accounts. This is another important way to save for retirement through a traditional or a Roth IRA and they offer significant tax benefits as well. Again, with a traditional IRA, your investment is potentially taxdeductible when you make the contribution depending on your income level. And like a traditional 401k plan, earnings can grow and compound tax deferred. A Roth IRA doesn’t allow for deductible contributions. But however, earnings grow tax deferred and the big payoff comes in at the end at retirement when you could tap into Roth assets. you could tap into the earnings without paying federal income taxes provided you’re at least 59 and a half or older and held the account for 5 years. And just like the 401k plans, most early withdrawals from IAS are subject to a tax penalty. So because of the complexities involved with these retirement savings vehicles, you might want to consider using the services of a qualified financial professional to help you make your investment decisions.

Just a few final thoughts for you to keep in mind today. We’ve covered the state of Social Security and Medicare, possibly the two most important issues facing current and future retirees. We also reviewed the importance of planning for retirement and taking advantage of those investment options available to you. The next step, right, next step is yours. Perhaps you make an appointment with one of us here to sort out the wide range of choices available to you. You may also want to contact the Social Security Administration to obtain your estimate of benefits. Make sure they’re tracking your benefits correctly for you as well. Whatever your situation, keep the following in mind. Again, don’t expect Social Security and Medicare to cover all of your retirement costs, and you need to stay up with the Social Security and Medicare benefits and plan wisely. One last point to consider, you could spend more than a third of your lifetime in retirement planning for your retirement so you don’t have to rely solely on uncertain futures. Social Security and Medicare planning is time well spent.

Again, here at Alliance Retirement and Investment Services, we’re here to help you. Again, we can help answer some of the questions you might have on today’s presentation. Social Security, Medicare planning. Uh we can help you make some of the investment choices in those retirement plans, consider retirement income options for you, review investment accounts, discuss life events with you, uh and also help you out with your estate planning, beneficiaries, or generational planning as well. I’d like to thank you for joining me today in discussing these important topics. This is my contact information. Uh my phone number, uh email address, and the QR code will take you right to my calendar link if you’d like to set up a time to talk a little bit more about your specific situation or creating your personal comprehensive financial plan. Thank you for joining me today.

Sorry, my video is not coming back on. There we are. Okay. Thank you so much. Thanks, Tom, for that great presentation. Let’s go ahead and get started with our Q&A session. And if you have any questions for Tom, you can put them in the chat or the Q&A and um we’ll try to get to that. If we’re not able to answer it in the time that we have, we’ll be sure to follow up with you on it. All right. Our first question is, does Social Security estimate the amount increased um that the increases monthly before full retirement age or does it update less often, once in 6 months, uh after you’ve reach reach the full retirement age? Okay. Thank you, Brooke. Uh I hopefully understand this question. And I think I’m going to hopefully answer it correctly for you. Some of these questions are your um your questions, your thoughts maybe need to be answered on an individual basis. We can go into your specific situation. I believe the question is regarding your social security benefits, how it’s calculated over time. And I think that really falls back to your uh statement of benefits that you can access on ssa.gov. What they’re going to do on that statement is they’re going to look at your past earnings history and then they’re going to project into the future thinking you’re along the same path of continuing the same type of earnings. So they’re going to show you estimates of benefits starting at age 62 and every year till you’re 70. So there’s going to be some assumptions in there that you continue to work. There’s going to be inflation assumptions in there as well, but really that’s going to be an annual statement that they’re going to provide to you. So if you look at it on an annual basis, you want to make sure that the numbers are correct. Maybe a few years ago, make sure that the income you earned is actually reflected in there. Again, the highest 35 years of earnings. So you just want to make sure there’s no zeros in there when it should be an earnings year just to make sure those benefits are correct. But yeah, it’s going to do forward projections for you and be available on an annual basis. Great. Great. Question from Candy. I’m turning 66, but I haven’t signed up for Medicare because I’m still covered by my husband’s work plan. When should I sign up? Okay, so Medicare, you have three things you’re watching there. Uh, one is called the initial enrollment period, which Candy you’ve missed. That is going to be initial enrollment period 3 months before your 65th birthday. The month of your 65th birthday, 3 months after your 65th birthday. So, for some of you out there, the initial enrollment period might be important to you, but uh Candy, you’ve gone beyond the initial enrollment period, which is fine because you’re still covered by your husband’s group plan. And then we define a group plan is a uh a plan having company having over uh 20 employees. So, what you’re going to do is you are going to go into the next phase, which would be at some point in time your special enrollment period. And that really means a qualifying event. If your husband leaves his job, that’s a qualifying event. There’s an eight-month window where you could then sign up or you both can sign up for Medicare. No penalties, no problems for that. There is an 8-month kind of window there. But with those eight months, you really want to make sure you coordinate benefits. So, one plan stops, Medicare begins in the next month because if there’s a gap, Medicare is supposed to be covering that. So, you might have a lot of out- of- pocket expenses. So, make sure you coordinate the special enrollment period. If by chance you miss everything, the third category is called the general enrollment period. You’ve missed your initial, you missed your special period. You go into the general. If you go into the general, there’s some problems that might be involved. There might be a penalty if you don’t sign up in a in a timely manner. So, in your situation, you really want to keep an eye on that special enrollment period when your husband stops working. Excellent. Excellent. This next one I’m going to um I’m just going to summarize a little bit. I do not qualify for social security and I must fund my own retirement. Um I I don’t qualify for Medicaid as I have investments. Um and I don’t have enough to live on after this deduction. How can I maximize my spending income?

Okay. So I I just took some notes as you were talking there, Brooke. Um the one focused on there’s a few things going on and this might be one of the situations that’s kind of best addressed on a uh a personal basis. Sure. The one I really kind of took away from is the very last comment I think you said I I don’t have enough to live on. Right. Right. One of the things we do here at the credit union, we are a fullervice financial planning firm. So we do do financial planning. We do take a look at a comprehensive personal situation like this to try to help you navigate through all these bullet points or all these facts that you kind of you gave us today. But we want to find out what the best course of action is for your situation. So when we run a financial plan, we want to make sure that it has the longevity concern that you do have enough to live on that it’s going to last a long period of time for you. So we need to gather some more facts to really help you out personally. But in a situation like that, when I end on that last note, not enough to live on, we have to look at some ways to either maybe keep you working for a longer bit, get you involved in some more retirement savings. Um, look at your budget, maybe look at some areas to reduce some of the spending so everything kind of works out for you, not only today, but 5 years down the road, 10 years down the road, 20 years down the road as well. So, I’d give a little plug for our financial planning services. I think that can help you, but I also think that conversation could be helped a little bit more on a one-to-one basis if you have some time to talk with me. Excellent. Great. Thank you. Is there a deadline for the distribution of the um um of medical costs? Let’s see. For the distribution um for HSA. HSA. Okay, there we go. HSA. Yeah, that’s a good one. Uh HSA is one of my favorite investments. HSA is like a Roth IRA account, which I mentioned in the presentation, not taxed on the front side, not taxed on the back side. Uh, the only thing you need to have it not taxed on the backside is a receipt. You need some out-of- pocket medical expenses. It’s a great question. I bring this up all the time to my clients. If you have a receipt, that receipt never expires. So, there is no deadline. So you can continue saving in your HSA account. You can continue to contribute to it. Most plans will have the option if your balance gets above a certain level, you can have an investment component. So it can really grow tax-free like a Roth account. But then along all those times, along all those years, you can save all your receipts. They do not expire. So in retirement, if medical expenses really kind of spike up, you can go to that file cabinet. You can pick a receipt from 5 years ago, 10 years ago, 15 years ago. You really grab some old receipts, uh uh submit them to the HSA and get that taxfree distribution. Great question. No expiration on HSA. Got it. Got it. I’m just We have a lot of good questions coming in. So I’m taking taking them down and seeing what we can do and how we can talk about it. Um, what does it cost for estate planning?

Great question. Um, like a lot of answers in my profession, I’m going to say it depends. Right. Right. It depends. So, uh, I’m here in Illinois. Um, I’m at the quarter headquarters of the credit union. So, in the Chicago area, Chicago area, I do have some estate planning attorney contacts that we work with. You really do uh kind of take a look at what your needs are. First of all, um general answer to that is a will, a trust, power of attorney, healthc care directives. You get kind of the full estate planning package. Um some clients will debate, you know, back and forth, do I need a trust? Do I need the added expense of doing something like that? So, kind of individual conversation. So, if you go to an estate planning attorney, so I can help with estate planning, but I can’t prepare documents. But if you go to an attorney, you’re going to have some attorneys fees to get all those documents put into place. Um, it could get costly, could be in the neighborhood, depending on your state, your city, could be a few thousand or so to get all that put together. There’s also online resources. There’s some uh lowerc cost options available online to prepare some of those basic documents for you. Um, personal situation, personal budget, how you want to attack everything. Some clients will say, “As long as I’m going through the process of getting this done, I want to make sure this is done absolutely correct, tees are uh crossed, eyes dotted, that kind of thing.” So, if uh anything comes into play down the road, I I know that everything’s taken care of in in good uh good order. So, it’s important to have those documents in place. There’s going to be a cost, maybe less online, maybe more with an attorney, and it’s just kind of determining what documents are appropriate for your situation. Excellent. Good. Good. I just remind everyone that um we put up a poll asking if you want to have an appointment with Tom. Um we would love to have an answer either way. Um just so that we uh it’s how we track engagement so we can let you know uh we can continue doing these pieces um uh and provide this education to you. So, all right. Going back to the HSA conversation, Ken, and I think um maybe we can just expand on this a little bit, but can you talk about HS HSAs being used in retirement and during retirement? Yeah, a couple ways to do that. Um, so again, I’m going to relate it. It is not, but I’m going to relate it to a Roth. So, it’s going to be taxfree for you. So, you make taxfree distributions. Brooke, when you say retirement, to me, I always think of like retirement income, things like that, right? Yeah, I agree. As retirement income, we can also talk about it as uh retirement medical expenses. So, I saw a couple questions. We’re probably going to get to this, but uh there was a couple questions in there about uh under age under 65 medical plans. They’re going to be expensive, but if you’re working on your retirement and your retirement plan is under age 65, you’re not going to have the Medicare coverage that we’ve been talking about. So, you have to go out of pocket. It’s going to get expensive. So, an HSA, as you pay for that, if you built up a nice balance in the HSA, you could offset some of those under 65 healthcare cost with the HSA with those current receipts or past receipts. If you’re in retirement, you’re doing income planning. We talk about diversifying your assets between stocks and bonds and all these different things. But we also talk about in financial planning, diversifying your investments by tax treatment. You have some pre-tax money in a 401k. You have to pay the taxes on it. You have some after tax money either with a Roth or the HSA. Again, if you have old HSA qualified receipts, you could use that as part of the income distribution. just depending on what the balance is in the HSA. You could even put it at the tail end long-term planning in a plan and say I am somewhat worried based on my family history about long-term care planning needs. This can be used as part of that as well. So, a lot of functionality to the HSA just got to curtail it to uh what we what we mean by retirement. Yep. Okay. Got it. Got it. Are some of the services you’ve mentioned free to alliant clients or are some of them fee based? Can you talk a little bit about that? Yeah, I’m going to answer that where it depends. It depends. Um, so it just does everything we do here uh consultations, financial planning, discussions, answering questions, all this no cost, no obligation service of your membership of the credit union. So if we meet with you, if we talk with you, if we go into, you know, if it requires a financial plan, all that is getting us to understand your situation better and make any recommendations to you, no charge, right? We’re going to do that for you if you’re a member of the credit union. But I will say, uh, I’m also a registered investment adviser. So, as we go through that process and that journey together, I may make some recommendations to you investment wise to help you reach those goals. maybe lower volatility in the market, growing and protecting your assets, distributing your income to you. So, there’s a lot we can talk about. So, if we go into an investment relationship, I always say some investments do have a fee, some investments don’t have a fee. Uh we’re completely transparent with a fee structure, but once we get into investments, we’ll have those conversations and let you know exactly what uh what you might be looking at. Okay. question on uh Medicare. Is metagap coverage the same as original Medicare part B? Medigap uh we’re going to be a little bit different. Uh original, right? The original plan, original plan is going to have your part A hospital, part B doctor. Um original is going to allow you to choose your doctors. Uh it’s going to be a little bit more flexible. You don’t need as much referrals. uh predictable costs. Original plans are good. If you also travel state to state, it’s going to have more flexibility because you don’t have as much uh doctor referrals needed for something like that. I believe uh Brookwood advantage if we get into advantage plans, I think that’s really kind of the comparison there. Uh advantage plans going to be just a little bit different. Maybe lower upfront cost, lower monthly premium. Um, but you got to get into the referral system, into the network. So, if you have a network you’re comfortable with, if you don’t travel a lot, um, you know, you might want to look at one of those, uh, advantage plans. Yep. Okay. Um,

all right. Let’s see. Good questions coming in. Uh, question. Is there anything parents can do for their children at birth, when they’re a teenager, college age? What can um what can we do to kind of set our kids up for success? Yes. So, uh my kids, right, they are 26 and 24. And I was always frustrated in school because nobody teaches finance. Nobody teaches investing. Nobody teaches stocks. Nobody teaches the power of compounding which these kids have on their side. Right? Birth. I don’t know. I talked about retirement. So we got 40 years, 50, 60 years. Power of compounding is incredible for children. First thing I’m going to mention just came out Trump accounts. $1,000 from the government to sign up. It’s an index fund. You go in the S&P 500. You can add up to $5,500 per year in the plan. It’s really not accessible until they’re 18. Some ordinary income tax issues when they’re 18 out of those Trump accounts. Could tell you more about that if you have interest in it. That’s the new thing everybody talks about. Separate from that birth. The first thing I think of is 529 college savings programs. It’s a great way to tuck money away. It’s a great way to have friends and family, presents, gifts. goes right into the 529. Not taxable. Not taxable for higher education distributions. If their birth rate, they got 18 years grows over a period of time. But it just seems like, you know, with college planning, which we could talk about as well, it’s just everything’s not enough. The inflation rate on college expending has been so much. So, it’s good to start early, save as much as you can. The problem with the 529 plans is really based on college. Some clients will say to me, I don’t know if my grandkids are going to college. I don’t want to tie them down into that. So, our third category for kids, plain old, separate, just investment account, right? They’re young. They’re not age of majority. They can’t own an investment account, but you could have a custodian on the account, usually a parent or grandparent. You’re in an investment account. You can invest in anything you want. You could have a stock. If they really love Disney World, you could have Disney stock. If they buy that Apple stuff, they could have Apple. It could have mutual funds. They’re uh children, so they’ll have some preferential tax treatment on this along the way. Now, the good thing is with an investment account, it grows, right? But they could take it out whenever they want to. The custodian will uh uh do that for them before they’re the age of majority. You could use it for a car. You can use it for a house. You could use it for retirement. You could use it for college. You could leave it alone and let it grow. But it will have preferential tax treatment down the road if they take the money out. Capital gains rates of 15% which is better than ordinary income rates of going through the marginal tax bracket. So only three ways to uh to help kids out. But help kids out in my view is just have these conversations with them. Get them involved in investing. Let them know the power of compounding over time. I’m answering this question a long one because this one is important to me too. Yeah, if you have kids or grandkids that work, they have any kind of summer employment, anything like that, they are eligible for a Roth IRA. So, you might want to look at it and say, I’m going to gift some money into a Roth IRA for my child or grandchild. Limitations, you can only, you know, put in 7,500 per year if they make that much. But all of a sudden now we’re talking about this retirement account growing for 30 or 40 years. The numbers get astronomical. But that’s a a good way to help them out. I call it again gift gift of a lifetime. That’s great. Great. Good financial opportunities or educational opportunities. Help the children. Yes. Yes. Um real quick, there’s been a couple questions about um a replay of the presentation. So couple options there. We will be sending out an email uh later today that has a link to the presentation so you’re able to view it again. Um Tom’s information will also be in that uh email so you’ll be able to reach out to him directly to ask any questions that you have or get some clarifications. If the couple of you that um have had questions that um uh Tom said he needs to dig in to a little bit more with you, please feel free to reach out. go ahead and you can put yes to an appointment um and we will we’ll prioritize those folks and and uh make sure to reach out to them. So, couple of ways to to get those um to to um view the material again. One, um let’s see, this one I like. Is it true that a person can retire at 67 and turn around and get a full-time job with no limit on income received and still receive by full Social Security benefits? Yes, I think that’s I think a lot of people have that question because I what you know can I can I have both if I how does that work? The uh the big thing there is 67. Mhm. So at 67 you are full retirement age. So you will not have what they call the earnings offset which means if you’re younger than 67 if you’re working they may reduce your benefits because you’re making too much money. So key there is 67. So, if you’re working and you’re receiving social security benefits, it’s fine. But what you have to consider is when you work and you get your paycheck, you’re still going to have that little line item deduction FICA tax. So, you’re still going to be paying into the system. You’re going to be receiving a benefit from the system. And then when you get the benefit payment from the system, that’s going to be taxable to you as well. So, you’re being taxed when you get paid and you’re being taxed when you get paid. So you might have a double taxation going on with something like that. So you just have to watch the uh the taxes. Now it’s based on the highest 35 years of earnings. So in 35 years if you have a couple non- workinging years, zero years, lower years while you’re working, you could still increase your benefits. So that double taxation may work to your benefit, but if you never replace a lower year, you’re paying taxes when you get paid and you’re paying taxes when you get your social security benefits. So, we could kind of uh, you know, walk you through that. Take a look at the ideal times to start your benefits. One thing I would mention is if you wait from 67 to 70, benefits max out at 70. What you’re doing is you’re receiving what they call your deferred credits. Basically, that means it’s guaranteed your payments are guaranteed to grow go up 8% per year every year you wait beyond 67. Not only that, Brooke, wait, there’s more. It goes goes up by inflation as well. So inflation, just call it 2%. So 8% guaranteed, cost of living adjustment 2%. So your payments could be going up 10% per year for every year that you potentially uh defer from 67 to 70. I’m in the investment world. I’ve been in the investment world for 20ome 28 years. I have no investment that will guarantee an 8% return. So, we really want to kind of dig in there a little bit and say, you know, number one, financial need. Do I need it? Number two, can I can I take advantage of those deferred credits? Good. All right. Do you have recommended options for self-employed retirement savings? Is there anything that Alliant offers? Yes. So, um, typically if you’re with a company, you get the 401k. If uh you don’t have a 401k, you have access to an IRA. And an IRA typically if you’re over 50, you get $8,600 that you could put into an IRA. If you’re self-employed, you get the SE IRA. SE IRA is for self-employed individuals. Higher limits, right? You don’t have the 401k, you’re self-employed, but they’re going to give you much higher limits than a typical IRA. So, we have different ways we could take that conversation. And there’s different plans available depending on your situation, your company, your employees, things like that. The easiest answer is a self-employed SE IRA. Way higher uh contribution amounts than a typical IRA. We can help you through that. Um number one, when you get an IRA, whether it’s a traditional IRA, Roth IRA, a SE IRA, any kind of IRA, a lot of people when I ask them, I say, “Well, what’s your IRA invested in?” They’re like, “I don’t know. It’s an IRA. It’s an IRA. So you can have an IRA. You can have an IRA in anything except collectibles. No baseball cards, no wine, no art, things like that. But an IRA can be invested in anything else. Savings account IRA, stock IRA, mutual fund IRA, portfol. So you really want to look at those IAS whether it’s through self-employment, whether it’s a Roth and really kind of maximizing your growth potential. It’s going to be based on your goals, based on your time horizon. Uh, typically we see Roth IAS at the longer end of a financial plan just because they grow taxfree. So, we want to have a little bit more of a lean in that asset class just because it all grows tax-free. So, good question. Many ways to take it, but uh yeah, look at a SE IRA. Okay, good. Good. Um, how do you verify that social security has all your contributions correctly? Go to ssa.gov. Go to uh log in there. I think this system they use now is called my gov. Govt govt ID. Yes. Set up your user ID. Set up your password. Uh first thing you’re doing that for is to make sure no nefarious actors go in there and steal your identification and mess with your social security benefits. So you want to secure the account, number one. Number two, you want to go in there and look at your current statement of benefits, and that’s where you’re going to verify employment income. So, they’re going to show you all your employment income. They’re going to summarize some of the years. They might, if it’s a long time ago, lump them together in 5-year increments. It’s going to look like you made a lot of money 20 years ago, but they’re going to up that for inflation. But, you just want to keep checking on that periodically just to make sure it looks okay. Make sure they didn’t miss any years. You don’t want any zeros there when you’re actually working. If you see anything like that, you want to report it as soon as possible. Contact uh Social Security, let them know, hey, there’s a uh disparity here. We need to get that corrected. That goes through the uh financial planning process, right? So, you don’t want to retire uh on Monday and work on your financial plan and your retirement on Tuesday. If there’s an issue like that, it’s social security. It’s the government. It may take a long time to fix something like that. That’s why I always tell my kids, proper preparation prevents poor performance. We want to do the proper preparation, right? We want to set this up for you ahead of time. We’ll check into that. One of the first questions I ask when we do a financial plan is, do you have your statement of benefits from Social Security so we know what the numbers are? Third part of logging into that account, again, I said it before, it’ll show you your age 62 amount, 63, 64, full retirement age, and projections all the way to uh to age 70 as well. So, a lot of good reasons to get uh logged in. Yep. Speaking of consultation, what is the cost of a consultation with you? No cost, no obligation service. Happy to talk with you. Um, some people I talk to uh they have questions, financial concerns, financial questions, investment questions. Um, some people don’t require a full financial plan, comprehensive meeting that’s available to you if uh if appropriate. But, uh, we’re here to help. We always say a credit union is defined as members helping members. I’m a member. Brook’s a member. you’re a member. So, uh, we’d like to help you out with these topics. That’s why we do these presentations, just to let you know we exist. We have a financial firm here. Um, I always say we’re the best kept secret at the credit union. So, can’t help everybody. Brooke, I think we’re 900,000 members deep in this credit union. Close to a million. We do these meetings just to to get the word out that you have some resources here. So whether it’s a simple question, you need clarification, whether it’s some uh advanced planning, we’re here to help. Excellent. All right, we have time for one more question. Um we have a several questions around HSA. So um I think that’s something that we’ll we’ll we’ll take back and and and Tom have you and Brandon work out um answering some of those questions. But um this last one is what is the best way to take money out from the traditional 401k at retirement age?

What was it? The big question. Oh, is it? Sorry, I don’t I don’t I don’t like to end with a softball. You’re ending on a 20-minute answer. Uh best go. I’m sorry. Could you repeat? Best way to take money out of a 401k at uh best way to take money out from the traditional 401k at retirement age. Okay, retirement age is going to be a question mark there. So, we don’t know exactly. We’re not going to define that. So, here’s the problem with traditional 401k or traditional IRA, right? It’s always taxable. It’s always going to be taxable whenever you take the money out. it’s going to compound over time. It’s going to get bigger and you’re going to have bigger amounts that are all going to be taxable to you. So, we do estate planning, we do tax planning, we do all these wonderful things, but when it comes down to traditional IRA pre-tax, traditional uh 401k pre-tax, all that pre-tax money, there’s not a lot of fancy things that can be done. And what happens is you either have to take the money out and pay the taxes or you have to do a Roth conversion. Roth conversion, you pay the taxes, goes into the Roth, never have to pay the taxes again. A lot of wonderful points about that. There’s also a third category down the road for some people. You can actually, if you’re over age 70, you can do a uh charitable distribution directly from your IRA. So no matter what you do, you have to pay the taxes on this money. So to the question, what’s the best way to take money out at retirement age? So it depends again on your accounts, right? We want to do this in a tax efficient manner because you have to pay taxes on it. So is your best course of action doing some of those Roth conversions before retirement age. Is it best to do the Roth conversions and kind of delay taking money out of the traditional IRA? So there’s going to be a lot of options on the table for you to do that. different totally different way to answer that. I’m going to throw everything I said out the window and I’m going to say at retirement age, right? Things are different. It’s easy when you’re saving money, right? You just save in the 401k. Market goes up, market goes down, you’re adding to everything’s easy on the front side. On the back side, right, we have all those things we talked about today. Medical expenses, longevity, taxation, children, like all these things you have to consider. So when you start withdrawing funds, you have to say where do I withdraw my funds from? A good way to approach this is what we affectionately call the bucket strategy or segmenting some of those traditional 401k assets. What I mean by that is one bucket short-term nothing to do with the market. It’s there. It’s available to you. You can distribute. It doesn’t matter if the market goes down 20%. It’ll eventually catch itself up. But your bucket number one is safe, secure, and distributing to you. Bucket number two, an investment account, a lower volatility investment account. There’s greater growth potential, but if the market goes down, it doesn’t really hurt you in that situation. Long-term bucket, let it grow. Market cycles go up and down, but it’s the best performing asset class in history to have some market exposure. So, over time, what happens is as you’re making withdrawals, if you need to replenish bucket number one, right? Markets are doing great. They’re up. I’m going to take some from three. I’m gonna replenish number one so I can continuously keep this cycle and not have to sell my investments in a down market. So, that’s one way to take a look at it. But again, not a 20-minute answer, but there’s a lot that No, you did. You did great. Put it all in there. And of course, everybody add to that, everybody’s different. Everybody’s putting together their retirement with different with well, different buckets and and things. So, a consultation is always going to going to help get you to the right place. So, yes. Yes. And I always say if you’re somewhat thinking about retirement, approaching retirement age, uh it is worth the journey to explore those Roth conversions I mentioned. And I just say that because so many members of the credit union, they’ll come to me when they’re approaching required distribution age 73, 75. And unfortunately, a lot of people, it gets to be too late. they’ve lost the power of compounding in that Roth conversion story. So again, that’s something that we offer. We can model Roth conversions and see if it can help you. Excellent. Well, thank you, Tom. Thank you so much. This is the end of our Q&A and and our session today. If you have any additional questions, uh or you’d like to schedule some time with Tom, all that information is going to be in the email that you’ll get after um later today along with the link to the presentation. If you’re not currently an Alliant member, visit alliancreditun.com to learn how you can support your family uh with a gift of membership. You can view our savings rates and helocks there, too. Have a great day and thank you everyone. Thanks, everyone. Have a good afternoon.

Hi everyone. Hey, this is Mike. We still have a couple of minutes, but I just wanted to log on. Uh, thank everybody and welcome everybody. Uh, thank you very much for being here. Uh, we still have some folks logging in and it looks like looks like I have two o’clock straight up, but there’s still some folks logging in. So, we’ll give it a minute or so and then we will we’ll get started. I hope everyone’s doing well out there. Um, it seems like this is a rinse and repeat for me to say I hope the weather’s much better because here in Houston the weather has been eventful. So, I was worried for a second we might not have power in our building, but everything worked out. Storm’s passed. Everything’s good. Oh, let’s uh give it one more minute.

It is good to see

a lot of new new names. Uh some regulars, so it’s always nice. All right.

So, if you’re hearing an echo, I don’t know if that’s everyone. That is not on our side, I think. Um, I only have one mic. Let me see.

So, the person who just emailed me that it looks like you’re logged in twice. I can remove.

Yeah, it looks like you’re logged in twice. So, that might be it. So maybe close out one of your uh one of your windows when you joined us. I could close you out, but I don’t know which one. So I didn’t want to do that.

So all right. So let’s go ahead and get started. 2011. Um if you’re joining us for the first time or me for the first time, uh welcome. My name is Michael Marx, certified financial planner and financial consultant with Alliant Retirement Investment Services or AIS for short, A R I S. Uh, as I said earlier, I live in Texas, specifically Houston. Uh, I’ve been doing this for over 30 years. Um, family been tied to Alliant for well longer than I’ve been alive. Uh, for those of you not familiar with Alliance history, uh, Alliant is Continental Airlines or actually United Airlines. all me saying Continental since since I’m here in Houston. Uh United Airlines Credit Union and my folks have been with um with the airlines since like the 1960s. So longer longer than I’ve been around. So um you know I realize that some of you may have found us through different channels, right? So obviously United or Continental or maybe Google or Tesla, CVS, Suzie Orman, however you’re here, welcome. I’m glad you’re here. Just a quick bit of housekeeping. [snorts] Uh so today’s session, let me read this. So today’s session is for educational purposes and includes proprietary material to protect both the content and everyone’s privacy. We ask that attendees please do not record or capture the presentation whether by video, audio, screen sharing or AI tools without prior consent. So, thank you so much for your understanding and again we are glad you’re here and bravo to that other person who’s in Houston too. So, and again I’m not sure if you joined this webinar via the email directly from us or if you signed up via the Alliant Credit Union’s website. So, I just want to take a couple of minutes and talk to you about ARIS. So, we are the wealth management and investment planning division of Alliant. So, people say, “Hey, do you actually work for Alliant?” I’m like, “Yes, we do.” If you go to the website, you’ll see my smiling face on there. Um, our services and our product offers are pretty broad. Everything from fixed rate guaranteed to as aggressive as you want to be out in the market, strategies to hedge against loss, or maybe a multiplier on the upside. Uh, most retail places cannot do that. Most of your self-directed stuff don’t allow you to do those things. But um just some of the different ways we can help right the complimentary financial planning uh I’m a CFP uh advanced planning if it becomes a little more complicated than that you know some of the conversions cash management flow tax strategies things like that uh estate planning today this will be a very high level uh obviously the investment management which is our primary what I would say is our primary job here um and then just broad range of investments so that’s our two minutes on what We do. Uh so if this is your first webinar, we do multiple webinars on various topics throughout the week with different presenters. Uh you can find a list of our upcoming webinars on our website uh which is found right on the Alliancredit Union’s website. So you can either go directly to our website at aerys.alliancreditun.com Alliancreditun.com events. Um, or if you just go to the Alliant Credit Union’s homepage, we’re up in the investment tab or on the investment tab in the upper right hand corner and you can just click that and it’ll take you to the website and schedule and all that good stuff. So, you can find our our podcast, blogs, um, wealth of other resources. I encourage you to take a look if you have not been there already. Uh, each of us host webinars twice a month. I usually do one in the evening and one in the afternoon. So, my next webinar will be in the evening. Uh that is July 28th on Tuesday at 6:00 p.m. Central and 700 p.m. Eastern. We’ll be talking about long-term care planning. Uh so, and really of all the potential challenges, right, potential headwinds and things like that of retirement planning, I would say this is like one of the more financially devastating if it does happen and you’re not prepared for it. Uh, and it’s one of the easier ones to prepare for if you even need it. Um, and just to be clear though, this is not a webinar on on long-term care insurance pitch. It It’s not that, you know, we we’ll talk about the headwinds and the options that are out there. Um, and and frankly, why it should be part of your retirement planning or at least a consideration. It doesn’t necessarily have to be in there, but at least it’s considered on the whatifs. And we’ll talk a little bit about that. um retirement income my one back in the afternoon will be in August. So August 12th on Wednesday and that is 12 central 1 Eastern. So a little bit earlier than today’s and it is titled the fragile decade. And what this does is we look at the 5 years before and the 5 years after retirement and what that looks like. Uh we’ll put some timelines out there how you get ready. Frankly, you should already start getting ready maybe 10 years before you start to retire so you can maybe get some of those tax strategies, income strategies in place. Uh, and it kind of allows you benchmarks as far as where you should be and what that should look like.

Voila. So, I appreciate your patience with the housekeeping. So, let’s jump right in. So, what is the purpose of estate management? So estate management is about preserving your assets that you’ve spent your whole lifetime building. It’s about protecting your spouse, your children, their heirs, and ensuring that your assets are distributed how you want them to be. Um, it’s really about managing the amount of the estate taxes that may be due. Now, I will tell you, um, most of you will probably not have estate taxes, but there are other taxes that go with it. Um, so we’ll look at some of the fundamental estate management principles and how to enable you to manage your financial and personal affairs during your lifetime, right? So you can distribute that wealth after death. So there’s two objectives for estate management. First is managing your financial and personal affairs during your lifetime, right? And second, distributing your wealth after your death in an efficient manner in the way that you want it to do. So if it’s done well, it can make a huge difference, right? And you can you can be able to spell out how your health care wishes are and in ways that you ensure they’re carried out, right? Even if you’re unable to communicate, right? So you haven’t died, but you’re not you’re not where you can communicate these things. All of these things are in the in between. some of the things that we’ll just we’ll touch on today, right? You know, how you choose your heirs, um you know, how you might want to communicate that as far as what your your wishes are, right? So they can have a better idea because it is really difficult because you know, we’ve seen this with other clients where where someone passed away, you know, and and they have no idea. So it it it makes things just a lot easier for those who are frankly left behind.

So we found it helpful to illustrate the various estate management principles and strategies as a pyramid. Right? So the foundation is formed by an understanding of how estate taxes work and as we move up we encounter more critical estate management documents at the top. It’s really specific tactics for for the management of it. So let’s talk a little bit about the foundation and how how they work. So in order to understand how they work, we’re going to take a little look at the history of estate taxes. So the first estate tax was established back in the late 18th century, so 1797. Um, and it was really to fund the undeclared naval war with France. So shortly after the war ended, that tax went away. And then it happened again for the Civil War and the SpanishAmerican War in the 1800s and Congress passed the estate tax to pay for the war. Then it repealed afterward. Now we know, and if everybody’s anybody’s a politician here or has family as politician, this is all tongue and cheek and my apologies for that. But we know how Congress in DC and when they start paying taxes, it’s very hard to give that up. So in 1916, the 16th amendment of the constitution passed in 1913, right? And that one gave Congress a right to lay and collect taxes on incomes from whatever source derived. The Revenue Act of 1916 established a state tax, and it’s been modified over the years, but it’s never been repealed. So, um, there was a sunset provision for some of you who might know that that back in 2010, it eliminated estate tax that year. So, I’m going to jokingly say that was a good year to die uh if you’re worth over a certain amount, but I don’t know if there’s any good year to die on that. But, so in 2012, right, uh, the American Tax Relief Code made the estate plan a permanent part of that tax code. [snorts] Um and in 2017, this will matter, uh the tax cuts in the jobs act doubled the estate tax exemption, right? So it went from about 5 1.5 million, it was 5.49, it went to 11.18 million. And that’s why I say most people the states won’t actually pay estate taxes. There’s other state there’s other taxes, but that that matters. So in 2020 uh cuz it was graduated so it rose to the 11.58 and in 2025 it rose to 13.9 million. That was supposed to um be a sunset provision at the end of last year but the one big beautiful bill act in July eliminated the sunset provision and it increased it to 15 million a person. So you actually have an exemption of 15 million before you actually even have to pay estate taxes. And that’s per person if it’s done right. So if you’re married and you position the assets correctly, it’s a $30 million exemption. So um this is a hypothetical example uh that shows the formula for estimating the estate taxes and and it’s actually quite simple. Uh note that we’re only going to talk about the federal estate tax though, right? because about a quarter of the states in their union have their own additional state estate tax. Uh so it’s actually 12 plus the District of Columbia have a state income tax in addition to the federal estate income tax. So uh if you don’t happen to have a complete set of IRS tables laying around, you can estimate the federal estate tax just by using a quick formula. Right? So this this this slide uses I think it’s 2024 numbers but it’s the same process. So you bring up the gross value of the estate, right? And you you would ex you would subtract that exemption value, right? So it was 15 million, but since it’s 2024 it was 13.6. So you’d have a taxable estate uh of just under 1.4 million. So 1,390,000 and 40,000 is your tax rate on that. So your estate tax that would be due to the federal government would be 556,000. Now there are multiple tiers just like your income tax. There’s multiple tiers um for estate tax as well. How much over that exemption? So that top tier is for a million and over. But the tiers, they start at 18% and they go up to 40%. So after you complete your estimation, right, you’ll find your tax, the yeah the estate tax bill. And so now I will tell you if in your head you’re doing that, you’re like, “Oh, I’m going to owe estate tax or at least my family will,” you probably will benefit from like more complex estate management. But we can talk about that at another time. So again, most people aren’t going to have this problem because the average person is not worth 15 million. The average married couple is not worth 30. So if you do have this problem, there’s statistically a pretty good chance that you already have your affairs in order, but some don’t. Okay, so your most basic, it really starts with a will. So more than half of Americans don’t even have a will. All right. So I would say a greater number of people are are impacted by the lack of basic planning. And this basic planning just begins with a will. So know this, you already have a will. The difference is whether it’s your wishes or if it’s determined by the state that your assets reside. So, if you die without a will or some type of planning document, right, you’ve died in testing, right? And if that happens, state specific laws determine who inherits your assets. Um, so it’s always better for you to decide instead of letting the government decide. At least I believe that to be true. So, there’s a number of critical documents that you’ll need to be part of your estate. And the first one is a will. Uh that’s the most basic estate planning document. There are other ways to set up your current accounts like your bank accounts, investment accounts, and to where it’ll bypass probate. So you don’t need a will. It would bypass the will. Uh but a will basically tells the world exactly where you want your assets distributed when you die. So, everybody should have a will, but according to one study, CNBC, 60% of Americans don’t have one.

And what I would say is these aren’t just for the wealthy, right? Because an in if when an individual dies in testate or without a will, it’s up to the state to decide how those assets will be distributed. So, even if you have a trust, by the way, someone says, “Oh, well, I have a trust. I don’t need a will. [snorts] That will will take care of any of those holdings that are outside of the trust. Like did you put your car in the name of the trust or is it owned as you as an individual? You know, it’s things like that. So, you know, the person who did mine is a board certified estate attorney. He’s like, you know, we always run both because the reality is is that someone inevitably will forget to to title everything they have in the name of the trust. So, it’s easier. It’s a simple one. It’s relatively inexpensive to have one of those. If you don’t, we’ll talk about that at the end that we could probably help you with that. Um, so since a will is kind of the cornerstone of your estate, uh, your will names an executive who oversees the process of distributing those assets. Uh, you can name a guardian, uh, if you have minor children still. Um, [clears throat] and it allows you direct to direct how your propertyy’s distributed, right? So, not just your cash, not just your investments, but like your house, your car, things like that. Um, but really a lot of times the wills aren’t the be all end all, right? So they do have their own shortcomings. The first one is wills can be contested. So in fact that probate court will send out a notice of the will to let anyone who might have grounds to contest it. And frankly, even if they don’t have grounds, it doesn’t prevent them from contesting it. But if someone wants to contest it, there’s potential for a lengthy battle in probate court and it costs money. So sometimes it’s not always so smooth. So there might be more efficient ways to get some of those assets to the ones that you want. So wills are essential um since they’re essentially instructions to that probate court. They pretty much guarantee probate, right? The probate process can be expensive, but not always. Um and it can take many months to more than a year to resolve depending on how large your or complex your estate is or if [snorts] there is anyone who can test it. So probate so when you die right your assets go into something called probate where they’re kind of frozen and during that period of time those assets are made public they pass away that the estate exists. So if you owe money, creditors can lay claims to that. Beneficiaries can say, “Hey, wait a minute. I think I am also I should benefit from some of that.” Um, so that matters. Um, and during that time, that’s when the probate court will, you know, they’ll determine the validity of the will and everything’s good. Then they will say, “Yep.” they give you the blessing and who whoever is the executive the execut will go ahead and start liquidating assets. Um

so if you only use a will, anyone can find out how much you left and frankly to whom. So, we’ll talk a little bit more about how you can avoid some of that probate and distribute your assets um to your heirs privately, but let’s talk about some of the essential documents that most people should consider having in place in addition to that. So,

so part of this right is not just after you pass but while you are alive. So, you know, you want to really take care of your estate. A will isn’t the only document. So, there’s a set of documents that you should have in place. So, among these are called advanced directives. Uh, and this includes a living wall. And basically what that is is that’s, you know, you might have heard them as AMD, advanced medical directives. So, they’re guidance to doctors on medical treatments you would either would like to have or not like to have like a do not resuscitate. A DNR would be an example of one of those or the information that is contained in those. You’re a power of attorney and there are different types of powers of attorney where you give somebody the authority under certain situations uh to handle your affairs but while you’re alive not once you pass because once you pass that power of attorney is no longer valid. Um the durable power of attorney for health care. So they allow you to um that person who’s designated to still work on your behalf uh when you no longer have the mental capacity for example uh to make decisions on your own. [snorts] So you can kind of decide early while you can, right? So there are also financial documents and agreements like joint ownership, that durable power of attorney, living trust.

So a little bit of a story. So back in like the late 90s, early 2000s, there was this case of Kerry Shyo. if I don’t know who’s on this or where we’re from so the ages but you know some of them are old enough to remember this but but this really brought that whole advanced directives to the forefront so if you remember or if you don’t so cherry drive was was severely incapacitated right and this was from like 1990 until 2005 so was cardiac arrest and resuscitated but had severe brain damage damage and she was left in a vegetative state. So her family battled for years about what should be done. So Carrie didn’t have a living will. So her wishes could not be known, right? So the husband argued that she wouldn’t want to exist in this state, but her parents disagreed. So they went to court. So this was just a high-profile case. So most Americans at that time still didn’t have healthcare documents, right? So so that’s why it’s important to not only have these documents, but to communicate to your loved ones as far as what level of care you want if you’re incapacitated. A living will provides specific instructions about your medical care if you become incapacitated and unable to communicate. So it goes into effect immediately upon your incapacity and it doesn’t need to go through any legal proceedings or at least additional legal proceedings. So the power of attorney document that’ll authorize someone to handle legal and financial decisions when you become incapacitated but to also give your effect upon your in they also going to effect upon your incapacity right and then they can trigger on an event that you specify. So, like having a living will, a power of attorney doesn’t need to go through any additional legal proceedings, but individual states, just know they have various power of attorney laws. So, consider, you know, just kind of where you’re at as far as when you make that decision on on what you’re going to do. The durable power of attorney is uh it authorizes someone to make decisions for your healthcare on your behalf. So like it’s like a living will and the power of attorney. It doesn’t need to go through additional legal proceedings.

So this is actually interesting. So about 70% of older Americans have advanced medical directives before their death. Now I would hope that number will get higher. I think that is still a surprisingly low number after the Shybo incident. Um, but I will say from a decade ago, uh, that’s up from 30%. So, it was at 30% a decade ago and now we’re at 70%. So, we have come a long way and frankly, I think, uh, we still have a ways to go. So, you know, I mean, when we’re looking at extended life expectancy, there’s so many treatment options that are available. the chance that you or someone close to you will benefit from an advanced directive I would say is probably greater than ever and will continue to increase. So a little bit about financial documents and how we have those set that up. So joint ownership uh right of survivorship is the most common. And basically what that means if uh I would say me and my wife but it doesn’t even have to be your wife. It could be you and a friend have a joint account with right of survivorship. If one of you passes away the other person on that account automatically is takes ownership of the entire account. uh power of attorney. Uh look, you’re in this case, right? You authorize someone to read this. You authorize someone to make legal and financial decisions on your behalf in case of incapacity. Now, I know this goes without saying, but make sure it’s someone you trust and not just from an like from their moral compass side, right? And you want to make sure they’re doing the right thing, but you also want to make sure they have the capacity to make those decisions, right? Like I like them. They’re a nice person. When you look at your kids, and I’m going to jokingly say this, I have I come from a family of five. I you know, I have four other siblings. There are favorites and there are the most responsible. In my case, I just so happen to be both. I won’t tell my other siblings that, but we all know the truth. So there are different types of POAS but in all seriousness right so whenever you name that you are giving them authority to make these decisions so you want to make sure that they’re capable and more importantly they’re willing to right because it is you might have to make some really really heavy decisions so you want to make sure they’re okay with that I wouldn’t I wouldn’t just just name them without having that discussion first so they understand the scope potentially what they might they might need to do. So, um this isn’t mentioned here, but I would say I’d be remiss to not to mention the power of the TOD and POD, which is a transfer on death and payable on death. So, you know, it’s for your simple things like um like your IAS and your 401ks, life insurance things, they already have a named beneficiary, but you know, like your checking and your savings and your CDs, they don’t have a named beneficiary. So you can add what’s called a POD, which is a payable on death. So if you pass away, this doesn’t have to go through the probate process. It’s still added to the estate for estate calculation, but it automatically pays to that that that recipient. Once they show a death certificate for a to uh transfer on death, that’s used in for like brokerage accounts for non-cash. So I have, you know, a brokerage account with XYZ stock in there. Um, I have mine set up as a tod. So, if something were to happen to me, they can automatically liquidate or just take the shares as is. So, those are free to add. And that’s why that is a good thing to have on here. Uh, your accounts, it’s not a bad idea to set them up that way. If it’s simple, you know, if it’s like, hey, I got one or two people that I want to get the assets. If it’s more complicated, that’s where your wills and trusts come in.

Uh, gifting. [snorts] So um so this is for 2024 because the gifting actually increases. So it the amount changes, right? So as of this for 2024, it shows that you can gift up to 18,000 without triggering a gift or an estate tax, right? So if you’re married, you can give twice that. You know, you want to say, “Hey, I’m going to give my son or my daughter or my grandchildren some money.” you can gift up to that per person. Um, so you know, in this case, if you could give away $18,000 and you gave away $19,000, the person technically that extra $1,000, you know, that 19 that you gave away, you get $18,000 as the exemption. You’re supposed to pay gift tax on that thousand. I’m not sure actually does, but you’re supposed to do it. But you can also file that against your um lifetime exclusion, you know, like the 15 million. Um but again, I’m not sure who does that. I’m just saying that’s what the law is. So in 2026, an individual can give away 15 million over his lifetime without owing any federal gift tax. Uh couples can leave twice that amount. So, but also keep in mind, by the way, so also keep in mind that they have their own estate tax regulations at the state level. So, so even though you might have it on the federal tax side, depending on where you live, you might still have to pay something on the state side. So, trusts can be another powerful estate management tool. So, it’s a legal entity that can own property, right? So, a trust when you pass away, basically a trust is an entity that lives on Um, so these can be used to avoid probate, right? So it avoids delays and the expenses that accompany probate. They’re not a matter of public record, which a lot of folks find that very comforting. And they are a so they’re a tool for maintaining your privacy. Um, but they can also provide an effective man management tool and distribution to your heirs. I’ll give you an example. So we have some client client who passed away. Well, they had um more than one child, right? More than one beneficiary. So, so beneficiary. Well, one of their children were not um how do I put this? One not financially responsible. So, they put in, you know, it’s like a spend a spinth a spend threat provision. Basically said, look, they get x amount of dollars when we pass away, they’ll get monthly, and every five years they’ll get a lump sum. etc. And then they put an exception in there. If there’s medical or some type of emergency, they’re allowed to access. Uh it looks like someone just asked a question. Uh unfortunately, there is no they they don’t record this. So So it’s a compliance issue. We had asked about this about being able to put these out there on demand for them to listen to, but unfortunately that’s a no. Um but if you have any questions, you can always just I’ll my information will end. Um so look so even after your death right these can allow you to have some control over how those assets are distributed to children and and other beneficiaries doesn’t have necessarily your children. Um and trusts are a lot more difficult to contest than a will. Uh so using a trust it’s it’s a it’s a more complex set of of rules of tax rules regulations. So before moving forward with the trust, you want to work with a professional who’s familiar with the rules and regulations. I can tell you the person who did mine, he’s a board certified estate attorney. We have some of the basic planning available to our members and certainly to our clients um at AIS. But if you have questions, you know, give us a call.

So how does a trust work? So, [snorts] you know, the first thing is you have to look at like the value of your estate. You make this calculation. You you you include all of your property that you control, right? So, it’s not just it’s not just like your retirement accounts, your stocks, your bonds, brokerage accounts, checking, savings, CDs, etc. Right? You still have to look at like your home, your real estate, uh right? If you own a rental, if you just own some raw land out here, vehicles, uh what could be like a gun collection, a stamp collection, art, things like that, those can all have significant value. Any business interest you might have, life insurance is also included in that estate. Um including those death benefits if you don’t name them correctly. So,

you have to exceed that 15 million for you to be subject to federal state taxes. So, this is one of those reasons why, you know, if if you’re around there, you might either start giving away some things early, spending down your estate. Um, but even if you’re not, frankly, you should consider getting your estate and healthcare documents in order so those wish issues are carried out. And and frankly, I would say yes, nobody wants to pay estate taxes, but more importantly, I would think it it impacts people to be able to make sure their assets go to where they’re supposed to go. Um, the second thing is is really this helps you get your your objectives in order, right? So, you can kind of ask yourself the following questions. And this doesn’t have to be set in stone, right? You you have the right to change this later. um unless you do something like an irrevocable trust, but that’s a little more complex planning. But as a general rule, you can change your mind later. [snorts] So, what you want to know is whom do you want to have inherit those assets, right? How much of that? Who do you want handling your financial affairs if you are ever incapacitated? uh who’s making those medical decisions for you if you’re unable to make them for yourself? Um how do you want to provide support for your spouse if you should die first? Right? Because there’s married couples and there’s children, grandchildren, etc. So, how do those assets go? Right? Like we don’t have children, but we have nieces and nephews and siblings. So, we were having this discussion. Obviously, our assets go to each other, but what if something happens to both of us? Where do we really want that to go? Um, so that, you know, that’s actually a whole separate discussion where a lot of folks may not actually have that discussion. So, you do want to have that. That’s important. And if you have young children, you know, how are they provided for and who is going to provide it, right? Who’s that guardian? Make sure you want to talk to them about it. Make sure they’re okay with it. And frankly, even pets, right? Um, if something happens to me, who gets my dog? Who takes care of my dog? I’ve already arranged arrange I’ve made arrangements for that. I provided money for that. Not I can’t remember who that was. They left like millions of dollars for the care of their cat. Um, someone from New York. But anyway, great story. Great cat story. Um, but but those things matter, right? This is an opportunity to talk about what is important for you. if you are not here. So, so life insurance, right? It can play critical roles in your estate management, right? If you’re using this in conjunction with a trust and frankly even if you’re not using it in conjunction with a trust because you might have a large qualified account, right? Like a um like an IRA. I got a big IRA. If I pass away, my spouse can take it over. So, that’s really easy. But if we both pass away, then my beneficiaries get it. And if a non-spouse gets it, they have to distribute that in 10 years. They change the laws a few years back where before you could take it over your lifetime. Now, nope, 10 years. So, when that goes to those beneficiaries, it’s due federal income taxes do it in their tax bracket. So, this matters and I have this discussion with our with our clients or the members who we manage their money and that when we’re looking at beneficiaries, I ask this question, you know, it’s like, well, you’re retired now. This is your tax bracket. How are your children doing? Are they successful? Yes, they are. They’re in a much higher tax bracket than I am. So, what do we do to prepare for that? And some say, “Yes, I would like to make those preparations. What’s a more taxefficient way to do it?” And others say, “Too bad. I don’t know.” So, they have to pay taxes on it. They’re still getting money. So, there’s no right answer. There’s no wrong answer for that. But, it should certainly be considered. So, you know, when you’re looking at you might have an irrevocable trust, right, which it removes it out of your assets and that funds it. Set up life insurance and we normally do this under really big tax liabilities and it doesn’t have to be a state, but it could be a large income tax um liability. So, they take that insurance policy, move it into that revocable trust, and at the death um those proceeds offset some of those taxes. So there there’s really there’s really a lot of factors that affect the costs, right? The availability of that insurance like your age, health, and like the amount and the type of insurance that you want. Um and they can have expenses, right? So you know what happens if it’s surrendered prematurely? What happens there? So it’s there’s just a lot of things, but those are things to consider. These are things that we talk about with the members um when we’re looking at hey what’s the estrade structure look like? What does that look like for you? So

your two big questions, right? What’s the value of your estate? And what are your objectives for that estate? And you should visit that I want to say every year, but it’s unlikely that that’s something like that, but certainly every few years just to make sure all those things are still aligned or if there’s a major change with those beneficiaries like a marriage, a divorce, um not only just your own personal life, but like your beneficiary, your kids get married, your kids get divorced, they have a baby, now you have a grandchild. Is it something that you’re like, you know what, I would want money funding if something were to happen to pay for their college or care or their first home or whatever that is, right? Their first car. Um, there isn’t a right answer on whatever your objectives might be, but it allows you to get them organized and down on paper or electronically. I’m not sure if it’s on paper anymore, but um, so so here’s here’s a couple of things, right? So let’s just kind of an example of some of those scenarios. So your lower left hand side is Anthony and Selena. They’re a couple with a child. So that they might look at what’s the best way to gift assets to our children and our grandchildren, right? Because because this is a discussion that we have, right? You can wait until you pass away and get that to them or can we spend down some of those assets? Um and and frankly, they need it now, right? they might need it now. Uh and we get to see them enjoy it and benefit from it. So there is something that they benefit as well. Um if you have a blended family, right? So we have a lot of those in the United States now where we’ve come together in a union and each spouse has has children from a prior marriage. So how does that look like? Right? How do we structure for that? Um Dave, Christina, the upper right, they’re retired. So what would they want to know? So is a living trust worth the trouble and expense to set up? Depends. Depends on your assets. What’s the best way to take title of the assets? So Rebecca on the far left, she’s a single parent and business owner. Uh is there an estate value threshold that creating a trust makes sense compared to or not? So we’ll I’ll feel the questions. Oh yeah, I’m sorry. So thank you. So, for the folks who are putting questions in there, or if you’re not and you do have questions, go ahead and put those in the Q&A box and we’ll address those shortly. We’ll leave time at the end. We should have plenty of time at the end. Um, or even in the web chat. Um, so this one is very common, right? It’s very common for single parents and she just happens to be a business owner. So, how does she protect her business interest in the event of her passing? Um, do I have all the critical documents in case of a tragic change or catastrophic change in health? Now, I will tell you this. This is actually something very interesting for business owners. If you’re a business owner and you are attending this webinar, if you have a partner, right? And I’ll give you an example. So, let’s say you’re business partners and you both are married and one passes away. Well, that spouse just owns half your business. And so, now you get to do 100% of the work. and you get to share half of that revenue. So, not exciting. No one’s usually too excited about that. So, there’s there’s documents and structures that you’ll want to put in that force a buyout, right? Whether it’s um whether it’s cross purchase on the insurance, but you know, you value your your value the business. So, let’s say our business is uh worth 10 million and business owns like a $5 million policy and when one passes away, those proceeds are used to buy out the other spouse and they don’t have a say in it, right? That is something that is agreed on while you both are still alive. Um, so Isaac over there in the lower right hand with his laptop, he likes to do research online. So, are the critical healthcare documents I downloaded legally binding? So, depends on where you downloaded them from and how would you make sure to avoid probate and estate taxes. If some of those questions are, you know, give us a call. No problem on that. Um, so this is actually something that we just recently added because a lot of folks will say, hey, you know, do you have someone? And it’s like, well, depending on what you can do, there’s online that you can do. Um but we can help at least with a cost-effective solution on this. So we use a uh trust and will they provide access for legal documents right? So it’s a reduced cost for our members there. It’s actually free to actually clients of erys uh on how they do that and that’s some of the basic you know trust will power attorney etc that living will that we had talked about. If it’s more complicated than that, then we would have a um you’d have like another attorney and and I will tell you, so since we’re all over the country, I it would just kind of depend on where you’re at, but here the the person I use, the board certified estate attorney, he’s the one who actually didn’t mine. So, um so that’s just that’s just something out there. It’s just one of those things we offer. Now, we don’t actually make any money on this. So this is just something that we have so many that that we allow we have this done through a a third party at a a reduced rate. So with that we’ve come to the end. So we’re we’re actually at the Q&A part. So I want to thank everyone for attending. I’m going to put up a one question survey. And what this does is so we’re a full-ervice investment firm, right? Planning investments. We are fiduciaries. Uh, so while we’re going to do the Q&A, I’m going to put the uh quick survey whether you want to schedule some time with me or a call. If you have some questions about your specific situation, go ahead and click yes or just hit that QR code. And while you’re doing that, we’re actually going to go look at some of the questions out there. So,

let’s see. So, uh, is there an estate value threshold that creating a trust makes sense compared to not? Well, the obvious one is if you’re over that 15 million or if you’re married, if it’s over 30 million. But I would tell you if you’re under it, which most people are, trust still makes sense. And kind of the general rule on that is is if your situation is a little more complicated on how your assets are supposed to be uh dissolved and distributed. Like for example, you’re like, well, you know, I got four kids and I want each of them to get 25%. Sell it, done, we’re fine. Um, however, let’s say I live here in Houston, right? So there’s a lot of farms here. Um or saying, “Look, you know, we have a family farm. We have three kids. Two of them really don’t care about it. One of them really does. So I want it done this way. Strike some of those assets to do a buyout. If if that person wants to keep it, if it doesn’t, then just sell the farm, distribute assets accordingly.” So that’s so those types of situations where where a trust is helpful because a trust is an entity that does not die when you die. um it continues on, right? It’ll actually even file the taxes or someone will file taxes on its behalf. So, those are the situations where where you would use a trust. Uh let’s see, we have a few questions here. Awesome.

What’s the average cost of a simple will or trust? So, you know, online they have they have them as like the basic basic basic. I think I think they’re as little as like a couple hundred bucks, 150, $200 on like the basic basic. [snorts] Um, but again, a lot of those things could be or at least a lot of your assets could be removed too, right? Just by using POD and DoD. But yes, a basic trust will it’s usually for that package. Um, but usually a few hundred hours is use that and it could be a little more. or it would be more expensive depending on how complicated your your assets are. Uh what’s a ladybird deed or house will be paid off soon I want to leave to my children. Ah the ladybird deed. Okay. So a ladybird deed basically is like a it’s like a a tod for your house and and not all states have that by the way. So um I don’t know what state you’re in but Texas we have one. They’re pretty common in Florida. Uh so that’s basically what it is. So you can set up that deed and basically but you still have control of it. You’re still the owner. You are still Yeah. Okay. So you’re in Florida. So that’s probably the most common place that I think the Ladybird deed does. Um but it’s but it’s it’s I know we [snorts] use them here in Texas, too. And and they’re really common in Florida. So basically what it does, it names your beneficiary on your home. So when you pass away, it goes to them. However, while you’re still alive, you still have full control ownership of it. Um they don’t have access to any of the information on that. uh you could still sell your home if you want to move to something else and then you would just put that other home, you know, like if you said, “Look, I’m going to sell this house and move to a condo, like a something that that you would change that that asset and put that in there for your other beneficiaries.” It’s actually a pretty clean way to to do some things. Um we provide this service through trust and wills. Who specifically do we contact? Uh you can you can actually contact me and so we have a gatekeeper on this. So, it isn’t it isn’t someone that you can just click on um that will kind of get an idea. If you haven’t clicked [snorts] yes, just go ahead and click yes on this or or use that QR code and just give me a call um or take my contact information down and and we can get your information as far as what you’re trying to do and then you can say, “Yep, this is what it is.” If you’re not clients of Aerys, just clients of the credit union, um, not part of our division, then it’s a discounted rate for that. If you are clients of ours, um, like I said, we actually don’t make money on this. Actually, it’s a cost to us. So, we we offer that service or at least we’re test offering that service for right now. So, um, let’s see what else. Another question. That’s a good one. Here we go. trust which are created in the US and forcible in other countries. Uh they are not actually. So my husband and French and we have French property and live in the US with property here as well. So let me give you my disclosure. I’m not your state attorney, but generally speaking, no. And and also it gets a little weird too if if it becomes a citizenship thing. So like if you’re um if you’re married right with US assets um and and like my spouse for example your spouse weren’t a US citizen then there’s limits to how much they can actually inherit and the way they inherit that’s taxfree so it does matter. So the short answer is no assets over there they still fall under the jurisdiction of like in that case France. Um, but but I would say this by the way because because states because remember states

I don’t know if I can actually put that survey back up. I’ll tell you what. So, um, just just take my number down or something or I have you I can give you a call here. I’ll just take your information down.

We should have a way to to make that adjustment, right? So, in case you change your mind. So, I will uh I’ll give you a call. I’ll try to do it today, but it might be tomorrow. Um, so with that said though, I and I will tell you though, as far as property goes, this is the other reason. So, this is where it’s kind of matters on trusts and um because it is more complex of a of a um of a situation or or at least your will will will impact this too. So, let’s say I live here in Texas, but I love Florida, so I want to have a condo there somewhere in the Keys or something. I don’t know. Um or in Miami, cuz that’s cool, I guess. But, um it was pretty cool. So, so you know, if I pass away, so Texas has a state laws for Texas, but so does Florida. So, so these things still have to be taken care of under under those jurisdictions. So, that does matter. So depending on where your assets are and this is some of the things that we talk to when we do the planning for our clients but yes that does matter not only within countries thank you for that question but also in states where that property is. It is not uncommon for people to have a vacation home for example somewhere else. Um, let’s see. Let me go through these and make sure I got all of that. Any other questions?

State tax. Oh, this is a good one. Okay, so um, someone asked on taxation for a retirement account. So, remember when I said um most people won’t pay estate taxes, but there are other types of taxes. One of those things is income tax, right? So, let’s say I have a retirement account that my wife’s supposed to get it and if she gets it, she just steps into my shoes, but we both pass away and our children are going to inherit it or grandchildren or whomever. um that is taxable at their tax bracket, right? They have to distribute over 10 years, but they have to pay income tax on that. So, there is still taxes due. Um so, it could be property taxes, things like that. So, the the thing I think that will will get most people is probably the income tax on retirement accounts. So, there’s things that you can do to kind of structure that or start making arrangements for that. Now I think that I think those are it. I think I got all the questions on there. Thank you so much for the participation. This makes this so much easier. Um and I really appreciate the engagement. Uh if there are any questions, please reach out to me. Uh thank you so much. we are going to officially end the uh the webinar, but I’ll still be around for a couple of minutes if anyone has any questions. So, thank you so much for attending everyone. Be safe and have a fantastic rest of your day. Take care. Bye now.

Good evening everybody. Thank you so much for joining me tonight. Uh it’s just a hair after six o’clock so we will get started. I do want to be very respectful of your time. Uh tonight’s topic is estate planning basics. My name is Joe Gaspari. I am one of the financial consultants here on the Alliant Retirement and Investment Services team. Uh what I do here typically every two weeks I do a different presentation. tonight on estate planning. Uh recently the seven things you need to do before retirement, then uh social security, Medicare, all of these various financial topics that might be important to you. So uh tonight we’re going to talk a little bit about uh estate planning where it says estate planning basics. I do want to be uh to let you know this is the basics of this. This is not getting too indepth. Hopefully, this is going to make you think, do I need to speak to someone? And hopefully, I will be putting up a survey at the end of this presentation that you and I can continue this conversation one-on-one with you directly and just to kind of dig into maybe just your future a little bit. And if it’s estate planning that’s uh heavy on your heart, then we can certainly talk about that. Maybe the answer might be I think you need to speak to an attorney um and get some uh you know estate things going especially if it’s complicated if you have multiple properties and or just a complicated uh beneficiary situation. So there’s many different reasons why someone might want a trust or just a will the powers of attorney for health care and uh financial all of these important documents that we’re going to touch on today. So, uh, as we get going with that, I do want to let you know that we cannot record these presentations. That does come up pretty much, uh, uh, quite often, uh, almost every presentation. Someone might ask if we can get a recording of it. We are not able to record and neither are listeners. Um, so we had seen some um, I believe it was competition that uh, uh, other adviserss that were recording our presentations. So it’s something that we cannot do. Uh so these cannot be recorded for compliance reasons. We are not able to also not able to give out the deck or the slides on these as well uh for compliance purposes. So hopefully if you do want to dig in a little bit more, please say yes at the end of the presentation uh and then uh we can certainly uh talk about what’s important to you and to see what steps are going to be next. I do have some other presentations coming up uh which is the IRA planning different you know traditional Roth uh the different tax consequences uh moving forward into retirement of uh many of us that I’ll use the term 401k rich meaning that that’s where a lot of our savings is um that and those are things that if it’s traditional regular 401k it’s all taxable coming out so I do want to uh let you know there’s some other opportun unities and planning that can be in place so every dime is not taxed in retirement. Maybe come up with some strategies for you there. So hopefully we’ll see you on that one. That’s Wednesday the 29th at 2 p.m. Then I have the Medicare presentation August 11th. Another evening presentation. This is a pretty popular topic. Same with Social Security. uh but uh digging into Medicare A B maybe the Medicare C uh the advantage plan Medicare D which is prescription drug coverage all of these different things how much are you expected to pay for this in retirement and we’ll dig into Medicare coming up soon uh educational resources you do also have access to see what other webinars are going to be available uh for you to listen to our uh invest savvy podcast and our Aerys Aerys meaning Alliant Retirement and Investment Services. Uh that is uh our team that I work with. So Aerys website and blog is available as I go through the presentation on estate planning. If you do think of a question, just go ahead and type it in at any time. If you think of that, just type it in. They will hold until the end of the presentation, which is when I will take those. But you can utilize the Q&A box or the chat box. It doesn’t matter which one. Uh but I I’ll have them both up and ready to go to answer any questions that you might have at the end of the presentation. So, let’s dig into what is an estate plan. It’s a map. It’s a road map of here’s what you want. Here’s how to put it in place to make sure things pass without maybe going through probate. Um, we’re going to talk about that. But, uh, you know, if we can avoid probate, if we can make sure that your wishes, maybe it’s, uh, artwork, maybe it’s jewelry that you have. Document, document, document. This is what, uh, basically a will is going to do for you. Documenting who gets what. Um, maybe there’s minor children under your care. Who’s going to take care of these minor children? That would be things that are in a will. So, a map reflects the way you want your personal and financial affairs to be handled in case of incapacity or death. Incapacity mean what if you’re in the hospital? What if you’re in a coma? What if? What if? What if? All of these various things that could certainly happen. And if you’re not able to act uh maybe even paying your bills uh because you’re in the hospital, who’s going to be able to take care of those things for you? So, who needs an estate plan? Chances are you do. uh not just for the wealthy. Without an estate plan, you can’t control what happens to your property if you die or become incapacitated. It makes your wishes clear, helps avoid family disputes. I’ve seen many many many uh times or cases of when someone passes away and maybe it’s just children, maybe it’s cousins, maybe it’s nieces and nephews that are beneficiaries, but family and money sometimes does not mix very well. Uh I’ve seen many cases of that. So, uh it’s certainly something please have things in writing. Uh proper estate planning can preserve assets and provide for loved ones. especially [clears throat] needed if your spouse is uncomfortable uh with financial matters. If you have minor children, who’s going to uh take care of or raise the children legally uh based on your wishes? uh your net if your net worth if you are in this range of over a $15 million net worth then we start to dig into estate taxes not state but estate taxes which is generally a flat 40% on stuff over 20 million or 15 million. So, as an example, 20 million, if someone has a $20 million estate and they pass away, the first 15 million is not subject to the estate tax, but anything above that, so 5 million would be uh subject to that 40% estate tax. If you own property in more than one state, you’ll definitely want to. There’s different state rules uh on especially if someone passes away on how things are passed. Uh financial privacy is a concern because probate is a public record. Uh so if it’s something that is important to you that you don’t want this to be public, then have an estate plan ready to go. And uh sorry for my voice here but uh sorry uh estate planning uh concepts. So planning for incapacity.

So healthcare, property management, planning for death, wills, probate, tax basics, lifetime gifting. We’re going to talk about gifting. How much you can give away while you’re alive legally. uh life insurance and trusts planning for incapacity. Incapacity can strike anyone at any time. Uh there’s been a case, it was a very famous case back in the ‘9s. Uh Terry Shybo, if that name rings a bell at all. I believe she was about 26 years old. Um she went into cardiac arrest and she was in a coma for a very long time. Uh so now her husband this is in the state of Florida her husband after a long period of time and doctors saying she’s not going to come out of this uh said let’s remove the feeding tube her parents got involved then again in the state of Florida and said no we are we should have a say so over the husband the parents should have a say so now we have courts involved where the husband says remove the feeding tube the parents said, “No, don’t do it.” And so then there was court case, court case, court case, and they finally sided with the husband and said, “You could remove it.” It was um eventually overturned and said, “Nope, side with the parents. Don’t do it.” It was about a I believe it was about a a 14-year process uh where this dragged on, dragged on, dragged on, and they ultimately said the Supreme Court got involved and said they could remove the feeding tube and she ended up passing away some days, you know, several days later. But, uh things that are not uh written now, we’re talking about a 26-year-old uh that who would have thought we need to do estate planning at 26 years old. But uh again, it could happen to anyone at any time. Failing to plan means the court would have to appoint a guardian, especially if there’s minor children. Uh lack of planning increases the burden for the guardian and your guardian’s decisions might not be what you want. So if it’s the court appoints someone that is not uh in favor of what your wishes are, they can do what they want to do because the court put them in charge of your estate. healthc care directives. Uh living will number one, having a will. A will is going to be put your instructions in writing. Here’s what I want to have [laughter] happen. So, and I’m going to talk about my parents in a little bit. Uh with my when my dad passed away in 2015, my mother was diagnosed with cancer weeks after my dad passed away. And uh then when she passed away about a year and 3 months after my father did um she updated some things, but she didn’t get to everything we found out. Uh but uh she did update her will. Um but the will opens up probate. So we’re going to talk about even if you have a will, you can still go through probate. So but it does put instructions in writing. So this is where you would put if you have jewelry, if you have artwork, if you have minor children, all your instructions, what you would like to have happen. Sometimes it’s even the emotional things that you could put in there um you know that uh of what your wishes are. Durable power uh power of attorney for healthcare. There are two documents for uh power of attorney. The first one this health care and the second one coming up is going to be for uh property or like accounts to have someone able to pay bills for you. They are separate documents but they are both important documents to have. The first one is the power of attorney for health care. Lets you designate someone to sign for you if you need a surgery to have the say so of um take the feeding tube out or don’t take the feeding tube out. Uh like the Terry Shyo case. So someone needs to be in charge of that and it needs to be in writing. [clears throat] Do not resuscitate. This is an example of actually my mother-in-law uh had a DNR. uh do not resuscitate where when uh she passed away, she uh you know cancer and you know all sorts of things going on with her body and she went into cardiac arrest and they did some measures but it was a do not resuscitate. They can only do so much according to the instructions on there and she did pass away. directs uh that resuscitative uh measures be withheld or withdrawn planning for incapacity for property. Now having joint owners could be very uh important to have but there comes with a little bit I don’t even want to use the word risk but when I explain joint ownership means that someone has access to your property. So, if you are a, let’s say, a single person and you have adult children and you want to put one or all of your adult children as joint owners on your accounts just in case, maybe they’re trustworthy children and you want to just have them joint on your account. So, uh, if you need if you’re in the hospital that someone can act on your behalf, they have power to, you know, sign on checks and things like that. Uh, great. One of the big butts on that is what if something happened with one of those joint people. Let’s say maybe it was an accident or [clears throat] maybe it was their fault, maybe something they got sued for something. Your assets are now in play if there happens to be some type of court case and payment and your assets could be at risk on something like that. So that is certainly it’s a it’s kind of a stretch but it’s certainly something that could happen. Why someone would want joint ownership uh maybe adult children and why someone would not want uh joint ownership. Verbal power of attorney. This is also the document that someone can pay bills for you and have access to your accounts. They’re not joint owners. They can only do things on your behalf. If they ever got sued, it’s not their asset. So there’s no risk on that part, but someone can help you pay your bills and do financial things for you um on your behalf. So they can just sign your name, POA, power of attorney, and then that that person’s name. Living trusts. So we’re going to talk about trust. Maybe it’s a revocable trust or an irrevocable trust. Just so you know, most trusts that people do, most family trusts or living trusts or whatever type of trust are typically revocable, meaning you control it. You might be your own trustee of your own trust and but it is a separate entity that owns your property. It’s out of your um your personal ownership. It is owned by the trust, but you would control the trust. What happens if you die without an estate plan? Some property passes automatically to a joint owner or or designated beneficiary. So all of those accounts that if you have a 401k and you have beneficiaries named, you don’t need to have that in a will, you don’t need to have that in a trust, nothing like that. you have beneficiaries named and if you passed away uh death certificate and the beneficiary has an ID and they can open up an account and inherit those uh funds um or take control of a savings account or just move it to their own savings. So it does pass seamlessly if you name beneficiaries. Same thing if it is a joint owner and you passed away the joint owner already owns the account. All other property generally passes according to state estate and testasy laws. Probate what happens if you die without an estate intestasy. They vary from state to state. So probate rules are very different. My mother and fathers uh which I’m going to talk about here. Uh typical pattern of distribution divides uh property between uh the spouse and the children. So here’s an example of if you don’t have something in writing. Maybe you had an individual account. If you have a spouse and you have children, maybe your wishes were to say, “I’m going to just, yeah, it’s my wife’s. I’m just going to leave this, of course, to my wife first so she can move on.” And uh but some state um laws might be that if you passed away, if a husband passed away in this case, the wife gets half and the kids split the half. Maybe that wasn’t your wishes, but that could happen in certain states. So, here’s an example of even a spousal situation. You definitely want to make sure that you either have a spouse as a beneficiary or joint on that those accounts. Your actual wishes are irre irrelevant. Uh when we talk about um intestasy, it’s up to a judge and there could certainly be uh potential problems there. Wills and probate. So here’s where my mom and dad’s uh situation. Uh my father passed away in 2015. Uh my mother was happened to be diagnosed with cancer 5 weeks after my dad passed away. So 2015 still and she was going through her health issues and kind of settling my you know father’s estate. She was the beneficiary on his retirement account. So that was all smooth uh seamless on that and he was joint on accounts. She took his name off of some of the accounts that we saw and everything was pretty smooth we thought and she went to the attorney to update her will to take you know 50% of hers to her my my father her husband and uh so it was just I’m one of five kids so everything 20% to five kids is what she put in the will. Uh, so she ends up passing away a year later and now we’re going to settle her estate. So we’re at the down in Florida, all five of us are spouses. We do the funeral and now we’re starting to settle things. We see an attorney about her condo um that she owned and then some some accounts she had. We had statements. We had her her IRA account. And so we’re talking to the attorney and the attorney is going through the pile. Oh, there’s no beneficiaries on this one. Uh, we’ll talk about that. Oh, this one has beneficiaries. Go ahead and you can close these out. Anything with beneficiaries, we were able to take care of immediately. There were some accounts that did not have beneficiaries. And same with her condo. So, her condo at the time was valued at about 220,000. And the two accounts or two or three accounts that totaled about 80,000 did not have beneficiaries named. So, we had a $300,000 estate. It doesn’t didn’t count the IRA or anything else that had beneficiaries. The estate for probate purposes are just the things that are still in play, uh, which is the condo and the 80,000 accounts. So, 300,000 estate goes into probate. Now, this is in the state of Florida. And now we’re at the mercy of just waiting. Uh now this is when when people say you know is a you know shouldn’t take too long. I mean it’s pretty smooth. Everything was in the will which she did update but it’s a six sevenmon period in Florida somewhere in that range. And uh what if someone comes forward? A will can be contested. Uh which means if someone says hey she said she was going to leave me some of that you know I I get some. Now, there’s got to be documentation and proof things like that, but it can it certainly delay or add extra costs and things like that. It certainly could. So, uh we ended up going through and it was 6 7 months later we finally uh the judge says, “Yep, everything’s fine. 20% for the 80,000.” Put the condo in the kids’ names, which we ended up selling uh the condo. So, that was all it was all fine after a while, but boy, what a waiting game. And [clears throat] the biggest part of that is the attorney costs us between $9 and $10,000 for that 6 to 7 months. So probate attorney, it’s not a cheap process. So this is one of those when people say if I talk to an attorney, if I have to open up a trust, if I do, it might cost a couple of thousand, but it’s not going to be 9 or 10,000 that it could cost your beneficiaries after the fact. So in the will in our case when you see in the middle one here names an executive u uh my sister as an example was the executive of the estate and the attorney actually looked at all five of us in this room. He’s like just so you know all five of you if you call me I can’t talk to you. I can only talk to the executive. So we all met periodically and so we ended up finally settling the estate um and getting those counts. What a waiting game and what an expensive waiting game that was. Wills and probate the process. Most wills must be probated. And just so you know the term when the do when the doctor when the attorney uh had said u that you know he has this will. It’s updated. We’re going through statements and things. He said the first thing I’m going to do um you know whatever the next day or within the next couple of days is I take this to the court and file it. Now it gets filed. That’s when probate begins. So in just having the will is not enough just to say everything goes to who you say. The will opens up probate. Uh so wills filed uh with the probate court. Executive collects assets. So we had to continue to pay the association. We had to pay the property taxes. We had to pay insurance on the home still and all the different things. We still had to pay all the bills and we had to make sure those funds were available. Typically process lasts several months to a year, which was pretty typical for our case. Again, I’m just going to throw a reminder that if you do have some questions, type away in the chat box or the Q&A, and I will get to those at the end of the presentation. Uh probate uh pros and cons. Uh time and cost could uh typically modest. Uh depends on uh what your attorney fees and things like that are um for uh for probate. Court supervision protects against creditors. If there are, you know, if there was credit card debt or anything or mortgage, thankfully my, you know, the condo was paid off. My mother did not have credit card debt. In fact, I think she bought something for about $200 around before she passed away that we had to pay $200 to the credit card. Uh, but if there are is debt, it is protected until probate ends. uh can be timeconuming for complex estates uh title transfer delays. There’s could be a lot of fees which we had paid and ancillary probate which means if there is let’s say properties in another state you’re not just dealing with probate in the state that you’re in like we were in the state of Florida that’s where my mother lived but let’s say she still owned a property here in Illinois she didn’t but just in case she did there could be ancillary probate in Illinois then so it’s where things could be especially if they’re not in a trust or something like that. Uh it is public record like I said. So um you’re you know it’s so that privacy if it is important get your estate plan wills and probate avoiding probate. Can it be avoided? Absolutely. Yes. Uh this is where we’re going to you know having beneficiaries named is there a trust needed? Uh all those different things. So, joint ownership, uh, complete beneficiary designations on IRA, 401ks, any other retirement plans, life insurance. Make sure you have your beneficiaries up to date on that. Uh, use a trust if you think you might need a trust, and we’re going to talk about that toward the end of the presentation. We’re going to dig a little bit more on that. But, uh, uh, creating a trust is certainly something to consider. uh could be it’s a little more cost than wills uh and wills and power of attorney documents. But there is also and I’m going to share a screen toward the end of this some online do-it-yourself sources for some of these. If you think you’re savvy that you can do this on your own, there are some outlets for that. Uh making lifetime gifts, you can start to give away money uh throughout uh your living years so you don’t have to wait until you pass away to give it. Uh, some people want to see their family enjoy it while they’re still here. Transfer taxes include federal gift tax. So, if you start to give money away, it could be taxed. There’s an exclusion for how much you can give without it being taxed. Estate tax is basically imposed on transfers made upon your death. So, gift tax is while you’re still alive. Giving money away, if you give too much away, it could be taxed. The estate tax is when you pass away is there could be an additional estate tax. Then there’s also an additional if you are separate uh for if you skip generations giving uh you know when you pass away [sighs] uh which is grandchildren, great grandchildren.

So the federal gift tax, lifetime transfer. So gift tax applies to transfers made during your life. You can give up to $19,000 a year uh individually to anyone or as many people as you would like. If you have five children and you want to gift each of them 19,000, you certainly can. If your five children are all married and have spouses, you can gift your son or daughter-in-law 19,000. So, you can give each family 38,000. And you could do that to every you can give to your grandchildren. You can give to anyone $19,000 a year without it being taxed. All of this totals up that you can give away up to $15 million whether still alive in combination of living and at death without it being taxed. Uh the 15 million exclusion is the largest. So it’s been it crept up over the years. There’s been years, many years where it was lower. Uh and uh of course uh now at 15 million, this is the highest it’s ever been. So the federal estate tax uh applies on transfers made at death. Generally does not apply to transfers made to spouse or a charity. So you can give to your spouse even if you have a healthy estate like this without it being taxed. 15 million uh excluded from all transfers, gifts and estates combined in 2026. All any portion or excuse me any portion of exclusion from uh used for gifts will be unavailable to the estate.

New feature important for married couples. It is portable. So if your estate it could be let’s say 15 million without go being uh through the estate tax but if your spouse has let’s say $15 million you can pass away you can gift $15 million to your spouse and then your spouse can gift 30 million. So your 15 million can kind of move forward to the spouse and when the spouse passes away up to 30 million can go um without being uh taxed on the estate tax. So this is the generation skipping tax where there’s an additional 15 million for this that if you gift directly to uh grandchildren or greatg grandandchildren skipping a generation. So here’s where the taxes are for the estate tax and it’s a flat 40%. Uh so it was 2024 13.6 13.9 now it’s at 15 million. Uh and it is so again if it is a $20 million estate and someone passes away the first 15 million is not taxed but the 5 million after that could be taxed at [clears throat] five uh at 40%. So this is how do we avoid things like that? You start to give away early if you can. Lifetime gifting allows you can do 19,000 uh to as many or as people as you would like. Uh it removes future appreciation of property from your taxable estate and no step up in basis. Here’s what that means. No step up in basis. So I’m going to use a step up example first. though, if someone owns a stock, let’s say they have a brokerage account and they have a stock and I’ve seen something like this. So, I’ll use like an old oil stock as an example. Someone bought an oil stock, you know, 50 years ago and they still have this stock. They bought it for, let’s say, $30,000 and it’s worth $200,000 now. And it’s just grown over the years. Now, there has been no tax on that gain until it’s actually sold. If that living person sold the stock, they would pay capital gains from the 30 up to the 200,000. So there would be hefty capital gains paid on that. Now, if that person passes away and someone inherits that stock, it steps up to the 200,000. Let’s say on day of death, that value was 200,000. If the beneficiary of that sold it immediately for 200,000, there’s no taxes paid, no uh capital gains because there is a step up on that. If you start to gift while you’re still alive, if you have to liquidate any assets, stocks or anything like that to gift, it could be a taxable event to you. Just so you know, there’s no step up on that. Uh step uh that’s only upon death. Lifetime gifting transfer uh transfers excluded from the gift tax. Uh so 19,000 if you are married, you and a spouse can each give 19,000. So a couple could gift each person 38,000. If you are contributing to a 529 college savings plan uh for someone, you can give 95,000 or 190,000 if you are married filing joint uh tax-free. So, you can gift directly to a college savings plan. There’s no gift tax if you pay someone’s tuition, but you have to pay the education uh the college or whatever it is. You have to pay it directly. You can’t gift it to someone to pay tuition. You have to directly pay the uh tuition. And there’s uh so you can do that without it being taxed. And same thing for medical care. If you are paying someone’s medical bills, if you are able to, as long as it is not taxed, if you pay the medical provider directly, again, you cannot gift it to someone to pay the bills. You have to pay the bills directly for them. Trusts. So, let’s dig into trusts a little bit. So versatile estate planning tool can protect against incapacity, avoid probate, minimizes taxes, professional management of assets, provide safeguards for minor children, elderly parents, can protect assets from future creditors, and control over property. Here’s what a trust is. A trust is basically it’s a separate entity. Uh it’s almost like if you had a business and you had a business, you know, uh savings or checking account for the business. Those are away from personally if you had a corporation. Uh if I was Joe and I had Joe’s garage because I’m a mechanic. Um and I have Joe’s personal accounts and I have Joe’s garage uh you know uh accounts separate from myself. I don’t own that. The business owns it, but I control the business. Same thing with a trust. You’re creating a separate entity to own assets. you’re creating this trust and the biggest thing is let’s say for example you create a trust you put the home in the trust and if you pass away you’re going to name what’s called a successor trustee to take over that’s sometimes why they call it a living trust if people die the trust can keep on going someone else just controls it does not go through probate uh this is a a big way how do we things that don’t have a beneficiary maybe when you bought your home there probably was not a beneficiary form. Some states, there’s I think about 11 or 12 states that you can do beneficiary forms. Go to your county, check with your state or county to see if you can do a beneficiary form for your house um to avoid maybe creating a trust or something like that, but that is certainly a possibility. So creating a trust basically takes the assets out of your personal estate and you’re creating this separate entity to own the assets. Uh so parties to a trust there’s a grtor. A grtor is the per is the person who creates this entity creates the trust. Um and you’re going to have a trustee that’s the person who controls it. Now many times the same person is the grtor and the trustee or grtors and co-rustees. So if a husband and wife create a family trust uh and they have assets in there, they put the house in there, they were probably the grtors that created it and they are probably the co-rustees controlling it. So they can be the same person. And then you would name beneficiaries in the trust. So, if you have all of these and if you have some complicated things, some examples of some of those are if you have a special needs person that is in your care. Uh here’s an example of someone that I’ve uh spoken to in the past. I was working with them and they said, “Yeah, we have this trust. We have a special needs person. It’s not our child, but it’s a relative and lives in our home and we actually have it in the trust.” the home was in the trust and it said if we passed away and the special needs person is still alive, the trustee cannot sell this home. This special needs person will always have a home. So those are some of those things that you can put in a trust that are not normally in a will or in your wishes. Another example is uh I’ve had someone said I have three three children. Two of them are very responsible and one is not responsible at all. And if this not responsible child inherits what we have, a third of what we have, it’s going to be gone in, you know, very quickly. So we have it in the trust that the trustee will distribute this p this child assets at a certain age and then when they get to a certain other age, they get more and then another age they get more and it’s spread out. The good is that you can control that from the grave. The bad is this trust has to keep on going and someone has to manage that and there could be fees, cost, expenses and things like that. But some of these things are you are certainly able to do. Uh trusts that are revokable or irrevocable uh comes into play. A revocable is your typical trust like I was just saying is you can change the beneficiaries. You can do whatever you need to do. When you have a an irrevocable trust, you do not control. This is what someone might do if they have extreme wealth and they need to distance themsel from these assets that would be subject to the 40% estate tax. That’s why someone might have an irrevocable trust. it takes it completely out of their estate and it would not be subject to the 40%. So there’s certainly ways talk to your attorney if you are in that uh uh situation you would definitely want to create that type of an estate plan. Life insurance can provide an instant estate. What that means is that even if you have no assets, if you don’t own a home, you don’t have assets, but you have a life insurance policy that you want to leave to someone that is create that’s part of your estate even though you have no other assets. So, a life insurance col uh policy can [clears throat] it can provide an instant estate uh can provide uh needed estate liquidity. Sometimes some people will say, you know, we can pay for the funeral based on life insurance proceeds to come very soon. Uh life insurance proceeds are included in the estate tax. So if you have a million dollar life insurance policy and you have 15 million other dollars that would have not been taxed because that’s at that cap, that million could be taxed at 40%. even life insurance is part of that 15 million estate. Key issue is ownership of the policy. Here’s where we’ll talk a little bit about irrevocable trusts. And this is going to be wrapping up fairly soon here. So again, I’ll just remind if you do have some questions, I will take these at the end. And we’re we’re getting there here soon. Uh life insurance and an irrevocable life insurance trust. Uh basically if you are in the situation where you have extreme wealth and you need to get fund money out of your estate or even have life insurance outside of your estate, you would have an irrevocable uh trust. In this case, a life insurance trust. So you are the insured. You have this irrevocable trust that’s going to hold this insurance policy and your family is your beneficiary. So you create the irrevocable trust and you name someone else as a trustee. You cannot be your own trustee on an irrevocable trust. Someone else has to manage that. Uh and you’re naming the beneficiaries as well. So trustee purchases uh the life insurance policy and it which is owned by the trust. So the trustee that you named uh purchases this policy, you can make cash gifts to the trustee to the trust to pay the premiums for that and beneficiaries technically can withdraw cash gifts. Uh so some of that cash value in that type of a policy might be available. Um but uh the whole purpose is uh trustee uses the cash to pay the premiums for the life insurance. And this again, this irrevocable life insurance trust is outside of your $15 million estate. So this is how some people can avoid paying the 40% is creating entities or trusts outside of your estate. So at death, the insurance company um pays the irrevocable trust which pays the beneficiaries uh and are not subject to the estate tax because again it’s outside of your estate. Proceeds distributed according to the terms of the trust and the beneficiaries receive the full proceeds fee free uh from estate tax and even income tax. So in conclusion, have you implemented a plan for incapacity uh health and property? Do you have a valid will? Are transfer taxes a planning concern for you? Does your overall estate plan reflect your current wishes and circumstances? So here is a there here’s an outside source. Um, now this is not something that we, you know, we’re not I’m not referring, but this is just an example of it’s a website you can go Trust and Will. You can even type in trust and will and you’ll find this website where it’s kind of a do-it-yourself. If you are savvy and you want to at least check this out to see, can I create my own, there’s templates and things and there’s some online sources. It’s not free. you will pay in the I’ll call it the hundreds of dollars instead of the potential thousands of dollars where if you create a will, trust, powers of attorney. Um so it’s a much less cost but there are there are certainly some online sources. Um I had a spec uh an attorney that I used when I lived in Roselle, Illinois. I’m in a suburb of Illinois and at our previous house, we had an attorney who has since retired, but I do have some other attorneys local in this area that I can certainly refer if you would like to speak to an attorney about some of these things about opening up a will, trust, powers of attorney, all of these important documents. But again, this is just a source where you can look and see if this is something that you want to do on your own or you could certainly uh you know, you and I could speak and as I go through the questions here in just a moment, you have a you see a QR code on the screen there if you would like to set up a one-on-one conversation with me just to say, “All right, I just want to see what I should be doing. Can we just look at my stuff and see if do I need a will? Do I need a trust? Do I need the powers of attorney?” and you know those types of things. You and I can have this one-on-one conversation. Uh you can put your camera up to the QR code. You click on the yellow thing that comes up there and you’ll have access to my calendar. You can schedule a time right now if you wanted to or I’m going to put up the survey here in just a moment. It says set an appointment with Joe if you want to say yes. we can you and I will set up a time to speak and whether that’s a phone call or Zoom or if you’re local here uh where I my office is over by O’Hare airport we could even meet face to face. So I’m going to put up the survey here right now. So the survey is there hopefully you see that on your screen and you can just click on that to hopefully respond to that and then I will go through the questions here. So, uh, the first one is, can you recommend an attorney, uh, that can help with the trust and wills? Yes, I certainly can. I have your information here. Uh, I hope you’re one of the yeses on there that we can certainly talk about it and see if, uh, um, you know, what attorney I could certainly recommend for you. Uh, can you have two executives in a will or a trust? You can. Uh, so let’s say a trust. Um, you are what is called the trustee. If you are married, you could be co-rustees. Let’s say you have two children and you want to have one of them control the estate. You can have a successor trustee, one child. Or you could have successor trustees 50/50. They both have to control it. Co-rustees. So co-successor trustees. Same thing with executives. Yes, you can certainly do that. uh for our family when we had five kids when my mom passed away uh one executive sometimes uh I’ll be see especially if you have multiple people and you have two let’s say two of if you have three children and you name two of them as an executive uh that could uh cause a couple of uh issues there but you certainly can uh so if a single person has property how do I ensure that my property gets passed to my heirs will and trust is certainly at least beneficiaries. That’s where I always start is name beneficiaries on your accounts and that’s your savings checking, life insurance, uh IRA, 401k, anything that you can has an account number, you can add beneficiaries. Do that first. Then it’s the other things. What if the car uh you might have a car that could be an estate issue if if it’s just in your name and uh who’s going to get the car you know someone might there might be people fighting over that will maybe you can even put the car in the trust you could put your home in the trust and your wishes are carried out by the successor trustee. So, if you are a single person and you have some property, number one, name beneficiaries on the accounts, things with account numbers. If you’re uh if you know, if I could see what state you’re in, if we do have a conversation, we could see if there’s that beneficiary form for your home. Um, and then anything else would be wills and trusts, especially if you have jewelry, artwork, anything that’s hanging on the wall or wherever it might be, your wishes need to be documented. That would be in the will. Uh, can you recommend an entire already did that one? Is there a way to avoid the 40% tax on money from the sale of the deceased person’s property that goes into the trust at the time of sale. So, if we’re talking of of an estate, the 40% is only above 15 million. Um, if things are not in place, uh, there’s I I used to do a presentation and it talked about James Gandalfini, if you remember James Gandalfini from The Sopranos and other things. He had a sudden heart attack and passed away in his 50s and he had I think they estimated it was about a $70 million estate that he had no estate plan. Uh, so you got to do it while so after someone passes away, if it’s an estate over 15 million, it’s going to be subject to the estate tax. You need to take care of it before someone passes away to the irrevocable life insurance trust or speak to an attorney on getting assets outside of your estate to get under that 15 million to not be subject to the estate tax. So, if if someone has over 15 million and they’ve already passed away, it’s kind of too late. Uh could we see the replay possibly? Unfortunately, I did say at the beginning uh I am not able to uh get the uh recording of this or I’m not able to give the deck out or the slides out um you know for compliance purposes. Uh let’s see, there’s some more here. Uh, will you be able to get the copy of the slides? Unfortunately, no. Are you able to recommend an attorney or lawyer in Texas? I do not have one, but I can certainly help maybe help you find something of a trusted. Maybe I can even check with clients. I have some clients in Texas um in the Dallas um to see if they maybe have an attorney or something. So I always have some sources to go through but I don’t have I just in the Chicago area here where I can certainly recommend someone uh if I have my home uh as an asset of my revocable trust does the value of the capital gains uh purposes reset the day? Yes. Even if it’s in a trust there is a stepped up cost basis on your home even if it’s in a trust. Uh so yes you are protected on that. Yes. Uh even uh hello. Even if the life insurance policy has a beneficiary, it has to be included in the trust. Not necessarily. As if it’s owned by you personally and you have beneficiaries named, it does not need to be in the trust. You can have the trust own it, but you don’t have to do that. You can just have it owned by you. And as long as you name beneficiary, now it’s outside of the trust. If you have different beneficiaries in the trust, I’ve seen this too, that someone might have their children as beneficiaries in their trust, but they have another nephew or niece that’s near and dear to them, and they have this separate account that they have that nephew or niece as the separate beneficiary. It’s outside of the trust. The trust has nothing to do with that account. And so, that account would definitely just go to that individual person. So that’s one of those things. Maybe this life insurance you don’t want in the trust because you want a separate beneficiary. So your life insurance does not need to be in the trust. Uh can a person be a trustee and also be listed as a beneficiary? Yes. Uh I’ll say a successor trustee maybe not necessarily the trustee because if I have my own assets and I’m the trustee of my own trust, I’m not going to be my own beneficiary. But if I name one of my kids as the successor bene uh trustee. So my one of my kids is the successor trustee. I pass away the successor trustee. My daughter let’s say controls the trust but she can also be a beneficiary. She uses the trusted person that I put in there to control to do that. So, um I would say successor trustee can also be the beneficiary, but most likely the trustee is whose assets they are. However, there’s maybe someone else created a trust on my behalf. Um and maybe they’re a beneficiary. So, it’s possible, but there could be a conflict of interest on there. I would say if you have a complicated issue like that, speak to an attorney about that if there’s some certain examples of that. Let’s see if anything else came through. We are I think that is all of the questions that I have. I’ll just wait a minute and see if anything else came through. I think that is it. Thank you all so much for your time and attention tonight. I hope uh you and I are going to have a one-on-one conversation here soon. Thank you. Have a great rest of the evening.