Category: Alliant Webinars

Hey, welcome everybody. We still have a couple more minutes before the top of the hour and uh we’ll wait until then to make sure that uh we don’t start too early and people can’t uh it didn’t so that people didn’t miss the beginning of it. But I appreciate everybody being on time here. I know it’s a uh something that I try and do is to be on time, but we’ve still got another minute left. Uh, I will tell everybody, and I’ll probably re-emphasize this, uh, I’ve got a pretty good thunderstorm rolling in here. I usually don’t have any issues with power outages or internet or anything like that when a thundtor thunderstorm comes in. But, um, you just never know. It’s supposed to be a pretty big one. Um, which would be good cuz, uh, we desperately need some of the rain here. But anyway, we’ll go ahead and get started here in just a little bit. Uh it is Wednesday. It’s actually I will be out of the office the rest of this week. Um normally I’m in, but it just happens to be that I am out for the rest of this week. So um I will uh talk about that a little bit later on. Um so see Lang, you’re hearing it echo. So, if if anybody has any any questions or or comments or anything like that, go ahead and put it in the either the chat, the webinar chat or the uh Q&A. And I see that uh somebody says that they’re hearing an echo. Is anybody else hear an echo?

Um let me see here.

I don’t have anybody else that’s hearing an echo. Uh, yep. No echo. No echo. Yeah, I’ I’ve Yeah, so far everybody else has got no echo. So, I um Sorry about that. Uh, and maybe you could try to resign in or something if you’re hearing an echo, but nobody else seems to hear it. You know, I do I get that quite often where one person will have an issue and nobody else does. So, I don’t know how that is. So, it seemed like everybody else is okay with it. So, all right, we’re at the top of the hour here. Let’s go ahead and get started here. Uh again, thank you everybody for joining me uh today on this webinar here. Um this is about Roth conversions. Uh before we get into that, let me uh just talk a little bit of um uh housekeeping. So again, as I just mentioned, if you have any questions as we go along through this webinar, if you have any questions, please put the questions down in the chat or the Q&A and at the end of this uh webinar here, I will answer all the questions. I will I I encourage everybody to stay to those questions because maybe somebody else has got something that might uh pertain to you that maybe you hadn’t thought of. Um but we’ll get into we’ll get into those here in a little bit. So with that being said, let me share my screen here with you. There we go. Whoop. Share there. Okay, perfect. So we’re talking about Roth conversions. This is something that is a really big topic. I I I talked to many people and they and many people have heard about them uh but they are not sure exactly how the best way to go about it is how much you should do in a Roth conversion or anything. So let me get into that here. The first slide here um it talks about the different uh websites that we have here at Alliant Credit Union. Uh the webinars, we got so many different topics and they’re all complimentary which is really awesome. and you can go to that website and take a look at all the different topics and and click on the ones that pertain to you that might help you out. I’ll be honest with you, we have our invests podcast. It’s we haven’t put out any recent uh podcast recent uh recently. Um and so the information there is still pretty important, but uh but it’s not been a a big topic for us to do. But then we also always have the Aerys website and the blog uh that talks about my division here. So Aerys stands for Alliant Retirement and Investment Services. That’s the division that I work for uh here at Alliant. I’ve been with Alliant now for almost 13 years. I love it. Um I hear quite often how much uh people appreciate our our credit union and I’ll be honest with you, working for the credit union is just as good if not uh if not better. So, and then just a little uh sidekicking. Unfortunately, this is very proprietary and we just ask that you don’t record any of the information on here. Uh we would have to get compliance all involved in everything and and we try and keep compliance out as much as we possibly can. So future the problem is is with our uh current situation with taxes and and our debt is the future of the tax environment is going to be. This slide here is quite uh quite a few months old. The last time that I look at our national debt, we were up to $39 trillion and it just continues to grow and grow and grow and it doesn’t seem like it’s ever going to uh that it ever reduces down. Uh so you know what’s going to be the future uh tax consequences on this uh we don’t know but by doing a Roth conversion it doesn’t matter because we know what the taxes are now. Our current tax code is now good until the end of 2028. The one big beautiful bill uh put it in until 2028 and then after that we’ll just wait and see what Congress does if they extend it come out with something different or if they just let it lapse and it’ll go back to whatever it was. But um our current uh national debt is at uh 36 excuse me $39 trillion last time I looked and that’s been a little while. So we could be up to 40 41 at this point in time. I’m just not sure. But you know our deficit obviously has been rising quite a bit and it just seems like it continues to grow. So over the last 10 years, um it’s just uh it’s just been out of control and and uh uh and I don’t I don’t see it changing anytime soon, unfortunately. Because if we take a look at our entitlements, you know, your Medicare, your Medicaid, uh Social Security, those are entitlement programs. At some point in time in the near future, just our entitlement programs alone are going to be 100% of what our revenue brings in from taxes. Uh and you know, and the national defense isn’t part of the entitlement program. So then where do we cut back? What do we need to do with that? Um, again, the really the only way that I can foresee us getting out of the debt that we have is by raising taxes. Now, we’re in a very low tax environment um period of time right now. We’ve had bunch higher taxes in the past and many times it’s been after World War I and World War II where they raise the taxes to pay off the debt. Uh, we just hopefully are finishing this war with Iran. Um, but I I don’t see them raising the taxes to help pay for that. They’ll just put it on the bill and and make our kids and grandkids pay for it down the future. So, the question is is how do you get out of paying the taxes so much? There’s three different ways you can diversify taxes. either either you can get taxed now um by investing in mutual funds, index funds, mutual funds, e uh EFT, uh ETFs, sorry, uh individual stocks, CDs, savings accounts are taxed now. Uh so whenever you earn interest or dividends, you’re taxed on those. Tax later is your 401k. A pre-tax 401k or your traditional IRA, meaning that as the money grows, you don’t pay any taxes on it until you take it out of that. Annuities are the same way. As the money grows over the years, you don’t pay any taxes on those, but you do when it comes out. And the tax never, those are the ones that I love. Uh the Roth IRA and MUN bonds, not a big fan of MUN bonds. Their bonds since they don’t pay a whole heck of a lot. Uh and HSA’s accounts are are taxed never, but let me put in a caution in there. The Roth IAS are never taxed as long as you meet certain require requirements. And we’ll get into those uh two requirements coming up here in a little bit. And same thing with HSAs. Now, as we move uh forward in the future, you know, a Roth conversion is something that might really benefit you, excuse me, and could really save you on taxes over the rest of your life. And we’ll get into those uh coming up here in a little bit. So, here’s our agenda. We’re going to talk about all four of these different topics here. I’m not going to read them. So, we’ll just get into the top uh the number one, and that’s uh the basics. So, what is a Roth IRA? So, with a Roth IRA, any contributions that you put into the Roth IRA are not deducted from your income for that year. Now your contributions can be taken out at any point in time without acrewing any penalties or or taxes. But any of the earnings that you uh do gain from those contributions, they have to be taken out after 59 12 and after 5 years. Now the five-year rule starts on January 1st of the first uh amount that you put in. So, hypothetically, let’s say you add you open up a Roth IRA today and add money to it. The 5-year rule started January 1st of this year. So, you basically have 6 months already under your belt. So, you really only have to hold it in for five and or 4 and 1/2 more years. Again, as long as you’re 59 and a half after those 4 and 1/2 years. So, with a Roth IRA contribution, now I just want to I want to clarify this here. There’s a difference between a contribution and a conversion. So, a contribution is money that’s not in an IRA, not in a retirement account, and being added to a Roth IRA. It’d be like money coming out of your savings account. Okay? So, there are limits on how much you can do as a contribution for the year. If you’re under 50, if you’re under 50, 49 or younger, the maximum contribution you can do into a Roth IRA is uh $7,500 this year. And if you’re 50 or older, it’s $8,600 is the maximum contribution. Now, that’s for all your IAS combined together. So, if you have a Roth IRA out there and a traditional IRA, if you put 5,000 into the Roth, the maximum you can put into the traditional is 2500 if you’re under 50 or 20 or 3600 if you’re over 50. So, again, it’s a it’s a total com combination into IRA contributions. Now, with a Roth IRA contribution, there is there are income limits. So, for example, I’m married. I’m going to look at that one. If I earn $242,000 or less, I can do the full $8,600. 80. If I earn anywhere from 242 up to $252,000, I can’t do the full $8,600, but I can do some depending on the income there. And if I earn more than $252,000 in a year, I cannot do any contribution directly into a Roth IRA. you can get around it and we’ll talk about that but in a direct contribution you cannot do that because of an income uh the income limits with a traditional IRA there are no income limits but also with a contribution you have to have an income getting a W2 at the end of the year if you’re not working you don’t have any income the government kind of frowns and says how are you doing a contribution if you don’t have an income coming in now let’s say I’m working part-time time. I’m semi-retired. I’m part-time and I only make say $5,000 a year helping out a buddy of mine. Then the maximum contribution you can do that year is $5,000. So it’s whatever your income is up to a limit of8600 or 75 if you’re under 50. Now my wife doesn’t work but because of my income we can still do a contribution for her. Okay? So even though she doesn’t have an income coming in uh W2 or anything like that, we can do a contribution based upon my income. So if uh with that being said, I I’d have to make 17,000 uh 86 $17,600 uh a year in order to do a maximum contribution into both of those. Okay, now let me jump uh slides a little bit or topics a little bit. This is a Roth conversion. So, a Roth conversion is money that is already in a traditional IRA or a pre-tax 401k. Okay? So, it’s not adding to your retirement plan overall. It’s just moving it out of a traditional IRA over into a Roth IRA. So, with that, you can do it at any point in time. There’s no income limits. There’s no uh age limits. There’s nothing like that. Now, when you do the Roth IRA, excuse me, the Roth conversion, it has to happen or you get taxed on it that year. So, whenever you do a conversion, you are going to be taxed. You got to claim that as income and pay taxes on that. I’ll give you an example coming up here where it wasn’t um the best thing for them. You don’t have to do the entire traditional IRA. You can do partial uh to fill up to a different tax bracket and we’ll get into that here. Um but uh there’s again there’s no age limit, there’s no income limit and there’s no limit as to how much you can do as a conversion. So oop I went wrong way. All right. So, as I said, any of your distributions, so any if you add money to it as a contribution, you can take that contribution out at any point in time. If you do it as a conversion, you’re still going to be taxed on that conversion amount. Even though you might think, okay, well, if I convert $100,000 over from a traditional IRA and you want to take out $5,000 later on, if you haven’t met the two requirements, the 59 12 or the 5-year rule, you’re going to be taxed on that 5,000 that you take out. So, a conversion is different than a contribution. Okay? Just want to make sure. So, who can do a conversion? Anybody can as long as you have a traditional IRA to do that. Again, there’s no age limit, there’s no income limits, high or low, and there’s no requirement that you have to be working to do a conversion. So, often times people do that in their retirement. You know, again, social security does not count towards an income limit or or or being classified as having an income. Uh so if you’re on social security uh then you can’t and that’s it. You can’t do a contribution but you can do a conversion because there’s no limits there. Now as I was talking about earlier um I’ll give you an example of how it can kind of anyway let me give you an example. Years ago prior to working at Alliance here I work for a big nationwide bank. I had some people come in to me all in a panic. The the uh the wife had lost her job and the husband thought he was doing the right thing and rolled it over into a Roth IRA. They were fairly new. They came out in the late 1990s. Roth Roths did. So, uh he thought he was doing the right thing. Well, when he went to do his taxes, his accountant said, “Congratulations, you owe the government $40,000 because of that conversion.” So, at that particular time, they that’s when they came into me all in a panic. I was able to work with the uh old 401k company. We got the money moved back to the 401k company and then they transferred into a traditional IRA with me and we and and by sewing do doing so they didn’t have any uh any tax consequences but the tax cuts and job act the TCJA stopped being able to take it out of the Roth conversion. So if you do that after 2018, you’re stuck with it. You cannot move it back and roll it into something else. If you do a conversion, it’s going to stay in the conversion into the Roth. Okay. Now again, the cool thing about Roths also since it all comes out tax-free, there’s no RMDs, there’s no min uh required minimum distributions. And also in retirement, when you take money out of the Roth uh the Roth account, it doesn’t count towards your Irma. And Irma is if you earn enough money in retirement, you will have to pay extra on Medicare Part B and Medicare Part D. And we’ll get into that coming up here in a little bit. But Roths don’t count towards taxes. They don’t count towards Irma. And they don’t have any required minimum distributions. So, the RMDs for traditional IRAs, if you were born uh um 1959 or earlier, if you’re not taking out RMDs right now, then you’re then your RMD age is at 73. If you’re born in 1960 or later, they increased your RMD age to 75. So, either at 73 or 75, you’re going to have to start taking money out of a traditional IRA, whether you want to or not. it’s just the requirement. But with a Roth IRA, there’s no requirement to take out because there’s no they’re not going to get their taxes. So they they allow you just to leave it in there and let it go. So again, as going back to our national debt that we have, we just don’t don’t know what the future taxes hold. So by, you know, being in a very low uh tax environment right now, it might be better to do a Roth conversion now versus later on when you have to do your RMDs and who knows what the taxes are going to be at that particular time. Now uh so traditional IAS 100% of that counts towards your income when you have to do RMDs or just taking it out in general. It also adds to your provisional income and again it could be uh held against you in your Medicare pricing depending on your modified adjusted gross uh income for that year. So that’s a traditional IRA. in a Roth IRA, none of that applies, which is kind of nice. So, let’s take a look and see, is it beneficial for you to do that? So, let’s say you’re in a pretty low tax environment right now and you’re paying 12% taxes and you’ve got a $100,000 in a in a traditional IRA and then you decide that you want to do a Roth conversion here and you get a in both the traditional and in the Roth, you get a 5% return. So, if you’re in a 12% tax bracket and you convert over uh um uh $10,000, and if you take the taxes out of that $10,000, you start um uh investing at $8,800 cuz that other $1,200 went towards taxes. Now, later on, let’s say that you have to start doing your RMDs and because of your RMDs, you’re at a higher tax bracket at 24%. So, if you don’t do a conversion, your $10,000 will jump up to 16,289. But if you’re paying a 24% tax bracket, then your after tax value is only $12,380 versus if you do the Roth conversion now and you start out with a little bit lower of amount at at $8,800. Again, it’s assuming the same 5% annual return. your b your uh amount value in 10 years will be at 14,334. So it would save you almost $2,000 which would give you 15.8% more in your after tax value. So again depending on where you’re at in your tax brackets it might be really beneficial for you to do that. So again, our future tax uh situation, we don’t know what the taxes are going to be after 2028 and but today we do. So you can take it in and convert it and as I mentioned earlier, you convert it up to a certain tax bracket or tax bucket here, excuse me. So when I do that, I talk to uh people to see what their current tax bracket is. And let’s say you’re at the 22% tax bracket. And so you can do some Roth conversions up to stay within that tax bracket and not affect any of your taxes. Now, if you slip over a little bit into the 24% tax bracket, you’re only charged on the amount that’s within that uh 24%. You’re not It’s not like your entire income is being taxed at 24%. it’s only for the amount that’s within that particular tax uh bracket uh and everything. So, as I mentioned earlier, you could be paying more if you have high enough income coming in in retirement. So, I’m going to again I’m going to talk about myself uh married filing jointly. If our income of everything combined is at $218,000 or less, then I don’t pay anything extra for uh Medicare Part B and part D. If I have from uh uh 218,000 up to 274, then I’m both me and my wife are going to pay extra for Medicare Part B and Medicare Part D. it’d be $28084 extra versus um uh and and then also 37.5% extra for um uh for Medicare Part D. You know what I like to say here is congratulation for being successful. The government wants more of your money. And again, if you have the income coming in in retirement, then you’re going to pay extra and Medicare Part B and Part D. Part A is free. That’s just pure hospitalization. So, it doesn’t uh it doesn’t hurt you at all. So, when you’re doing a Roth conversion, you’d kind of like to look for maybe a low income year. you know, when you if you’re a business owner and you have a little bit unusually low in sales or whatever, or if you have some high expenses that you can write off on taxes, or even if you’re not a business owner and you do have some tax deductions that you can take and drop down into a a lower tax bracket, that might be a really good idea to decide to do a a Roth conversion at that point in time. Now, let’s talk about the original IRA owner. So again, with a traditional IRA, you have to do RMDs because whenever you added money to the traditional IRA or the pre-tax 401k, the government gave you a discount on your on your income that year based upon the amount that you contributed to those. So you have to start doing RMDs at 73 or 75. I talked about that. And that has to come out. And so for, you know, the fail failure to take out your RMDs, it could result in a 25% uh penalty uh when you, you know, the next year when you do taxes. Now, the RMDs aren’t a huge amount. So, it starts out at a fairly low amount at 3.78% if you’re at 73 years old, or if you’re at 75, it’s just a little bit over 4%. So, it’s not a max uh a a a mass amount, but it’s still it’s money that you have to take out whether you want to or not. And you can see here that every single year it’s the the amount the percentage that you have to take out slowly increases. Okay, year-over-year. Okay, so item number three is the surviving spouse here. So, let’s take a look at this here, Adam and Jane. And let’s say that overall with social security and IRA and pensions and everything, let’s say that they both uh have a total combined income after taxes of $110,000. Well, that puts them in the 12% tax bracket. But one thing that a lot of people don’t understand and realize is that when one of you passes away, we’ll say statistically men pass away at first. It didn’t happen in my case. my mom passed away first and then my dad later on. But let’s say that Anne wants to maintain that $110,000. So obviously they’re going to lose one of the the lesser of the two social securities and uh but then an is going to have to start taking more money out to maintain that $110,000. She’s still going to have to do her RMDs if she’s at the age of doing an RMD, which is pretty much going to be about the same, very close if you’re close enough in age and everything. But because she’s now filing as a single filer and has an income of $110,000, instead of being at the 12% tax bracket, she’s at the 24% tax bracket. So, by maintaining the same amount, it’s going to increase her taxes and give her less overall to be able to spend on on whatever she spends it on. Now, let’s talk about beneficiaries. The rules changed. Excuse me. Sorry about that.

The rules changed in in um in 2020. So, it used to be that if you inherited money prior to 2020 from somebody who was not a spouse, so for example, mostly like a parent or whatever, the old rule is that you could stretch that out for the rest of your life. Okay? So, let’s say that you earn that you inherited a million and but you did have to take out a minimum amount every single year. And so in Carrie’s situation, she’s taking out $25,000 a year. That was the old rule in which she could do that now. But under the new rule, all traditional and Roth IRA have to be taken out within 10 years. And again, not a spouse. So a spouse, you can assume it as your own, but if you’re a non-spouse, then you have to take it out over uh everything out over 10 years. So, if she’s getting an average of a 5% return prior to taking the money out, she was at a a lower end of the 22% tax bracket. If it gives a 5% return and she wants to deplete it completely over the next 10 years, each and every year, she’d have to take out $123,000. That’s going to bump her up into a higher tax bracket. Okay? So, she’s going to pay more taxes on on each each tax bracket that she’s in because she inherited a traditional IRA from somebody who wasn’t her spouse, typically a parents. But after taxes on that million, well, she’s going to pay taxes on that million of roughly $310,000. So, that million she’s really only going to get about uh 700,000, a little bit less, 690,000. Now, Roth IRA conversions, things to consider. Again, there’s no limits uh income limits on it. So, you can do as much as you want. Doesn’t matter. And if you do a contribution, let me jump back to the contributions. If you do a contribution, you can do it for a prior year up until when taxes are due, up until April 15th, typically. Okay? Now, but if you do a Roth conversion, you can’t do it for a previous year. You’re going to be taxed on it the year that you take it out. Okay? There’s no pre-aged 59 12% tax uh penalty. So, if you take money out of a a retirement account, IRA account, and you’re under 59 a.5, you have to pay an additional 10% towards your taxes. Okay? But, you know, it it could have an unintended consequence by doing a large amount uh as a Roth conversion. Again, you’ll have to claim that as income and pay taxes on it. And again, if you do it in retirement, uh you could you could end up paying more for Medicare uh premiums because of the Irma, the IRMA, IRMA. So there’s a few limitations, potential limitations and risks of doing a Roth conversion. So there’s no guarantee that the Roth will do the same as the uh as a traditional IRA. If you invest in the same things, then yes, the accounts will grow the exact same. Um but we don’t know uh if any rules, the Roth rules are going to change down the road. So right now, and this is the way they have always been, but they’re not written in stone that there’s no taxes on the Roth as they come out. I can’t imagine that the government would ever change that, but there’s a lot of things the government does that I can’t imagine and they go ahead and do anyway. Okay. So, with a Roth conversion, it you do have to claim that as income and it can can uh you have to pay taxes on that and everything. So, the cool thing about this is, you know, as I mentioned, there’s a lot of people that do it a little bit here, a little bit there. We have a complimentary program here that we can run each each individual their particular situation to see if a Roth uh conversion is the right thing for you and for how much you should do in a Roth conversion. And I’ve ran many many many of these, hundreds of these and it it it never ceases to amaze me the difference from one person to the next. So, this is the an example of the report that we can run by doing a Roth conversion and and helping you determine to see if a Roth conversion is the right thing to do. And it does a lot more than just Roth conversions. Basically, it’s going to tell you, do you have enough money uh to last you through the rest of your life through retirement and everything like that. So, part of this report that we run here, it gives us our our uh uh our our income. So in this particular situation here, the dark blue is social security, the light blue is a pension plan that they had. And in this situation here, the orange is the uh the the uh RMDs out of a traditional IRA. The red line there is their expenses. And you can see the expenses jump up quite a bit once they do their RMDs because your taxes are going to increase because of the RMD that you have to take out. So, it’ll give you a lifetime portfolio asset that that you will be able to pass on to beneficiaries, but then it also gives you a cumulative tax on how much you will pay taxes for the rest of your life. And then when we do run the report, it can tell us how much you would save in taxes, if there’s any savings, or how much it’ll cost you extra in taxes based upon your situation to see if it’s the right thing to do or not. And it will also tell you the portfolio assets left to beneficiaries. Uh if it is a positive amount, meaning it’s higher than this 4.2 million here, or if it’s a lesser amount because you’re paying taxes at a higher tax bracket. It’s really cool how it all breaks down. Now, we can do a Roth conversions here by doing it over a set number of years. So, for example, in this one here, they want to do $60,000 a year for the next eight years. and it will spit us out a report to tell us what that will do. So in this particular situation, it would reduce their taxes over the [ __ ] accumulatively over their lifetime. It would reduce their taxes by $140,000 and it would then increase their assets to let to leave behind to their beneficiaries by $828,000. So that’s the kind of report that it will tell us. Is it the right thing to do? Was it not the right thing to do? And what I like to do here, and again, this is example. If we do say 60,000 over the next 8 years, I I think it’s more I I usually do it filling it up to a different tax bracket and filling up to the different levels of of taxes that you have. Again, this report will tell us where your expenses are and if you will need to take any extra money out of your assets or when your RMDs kick in. Do you have enough or whatever. It’s a really cool report and everything. And again, it will tell you what it will be, you know, based upon your assets, what it will be throughout the rest of your life and kind of how much you can kind of expect to to pass on to beneficiaries. Obviously, if there’s any deviation for the plan that we put in here, that’s going to affect everything. Could be worse, could be better. We just never know. But then, as I said, we can also fill it up to a set tax bracket here. So, in this example here, we want to fill it up to the 22% tax bracket, and it will kick in and tell us what the report is. So, instead of doing $60,000 for the next 8 years, we can do it up to the 22% tax bracket. So, based upon the base information of not doing any Roth conversions, this would give us by doing it up to the 22% tax bracket, it would give us uh it would save us $116,000 in taxes over our lifetime. And then it would add an additional $250,000 um to your bene to your base when you pass on to beneficiaries.

And one of the reports that isn’t on here that I really like to take a look at is what type of an account will your beneficiaries then receive. Again, beneficiaries not including a spouse. So, for example, I’ve got three kids. It will tell me at the different tax brackets and everything, how much they would be able to receive in both Roth IRA money or traditional IRA money. And, you know, then we can kind of, you know, take a look and see what the expectation is. is how if there’s any traditional IRA money left over, how much uh they will then have to pay taxes on it and everything. So again, if we do it up to the 12% tax bracket, it it would show us the different ages. And one thing that also on another report here gives us our break even age also. So up until a certain age, it may or may not be beneficial to do a Roth conversion. um you know up until like uh say ‘ 86 it would be better if you left your money in the traditional IRA for you not for your beneficiaries but for you but then let’s say 86 is a break even point and from 86 there on after it’d be more beneficial to do a Roth conversion so in conclusion here we don’t know what our future taxes are going to be so while we do know what the taxes are now it might be a really good idea to do a Roth conversion. Um because again with our national deficit going up, the debt is just skyrocketing, who knows what future taxes are going to be. Okay? And we have a very effective tool here to determine to see which is the best way to do a Roth conversion for you. if it is the best way. Uh the the longer of a time frame you can do uh the Roth conversion and leave it in the Roth, the more beneficial it is for you and for your beneficiaries, which is kind of nice. Okay, we can also take a look and see which is the most taxefficient way to do a Roth at which tax bracket. You know, I did a plan a couple of about a month or so ago and for that gentleman, it was better if he did it all at one time. Now, the unfortunate thing is if he decided to do that, he was going to pay $1.5 billion towards taxes for that year, but it would stop his Irmas that he’s currently paying and leave all that money as Roth beneficiaries to uh all that the Roth money to beneficiaries so that they didn’t have to pay taxes on it and everything. So, we’re here to help. There’s so many different ways that we can help. It’s not just the the Roth IAS. We have so many different options that are available to you. You know, how can we help is we do estate planning here. Part of this wealth vision report. That’s the uh that’s the report that I run here with a Roth conversion. It’s just part of it. It’s a wealth vision. We do estate planning here. We look at all different types of financial uh planning and and investments and everything. But you know, why Aerys? Why Aerys over say somebody down the street or whatever. So what we like to get here as Aerys is we like to get to know you and design a plan specifically for your needs and what you’re looking for. And then we use a team approach to take a look at your situation and make sure that it’s the right thing to do. And then we like to build a lasting strategy and for a rel excuse me for a relationship for the rest of your life. The cool thing here with Alliance is you would be working with me or any one of our other financial uh consultants and any question you have, you call us directly. I you’re not calling a toll-free number and hoping hoping that you don’t get somebody just fresh out of training. But we all have many many years of of experience here. As I mentioned, I’ve got 13 years of experience here at Alliance and prior to the big bank, I was there for about 10 years. So, I’ve got uh almost a quarter of a century of experience of investing and I’d love to help you out here. So, with that being said, let me uh get to some of these questions here. Um,

hold on a second.

Here we go. Okay. So, let me get to some of these questions. Let me do this here for if anybody would like to have a um contact me directly. This is my phone number here. Um and if for if there’s anybody on the uh on this webinar here on the telephone, let me give you my direct phone number here. Uh my phone number here is 773 462 861 uh 8 8 73 462 8612. Sorry about that. Um, I will tell you, as I mentioned very early on, maybe before some of you uh joined on, I uh this is my last day in the office this week. I will be out the next two days. Uh so if you call me uh and leave me a voicemail, my voicemail said will say that I’m out of the office here. Um then um I will be back in the office next week. Um and that’s my direct email address. Uh bbaker.lplantcreditun.com. lplatantcreditun.com

and let me get to the questions here. Uh we’ve got many of them here. So first question is a retirees pension considered enabling income uh for a no it is not for a contribution a pension 401k does not count as income for you to be able to do a contribution. You can again there’s no income requirements at all for a conversion but a contribution it does not count towards that. Uh haven’t inherited traditional IRA from when my father passed. The trust has me take out RMDs. Okay. For the last 20 years. Yep. I I won’t be 73 for 6 years. So I am confused. Are they already taking out RMDs? Should they not be doing that? No, that is correct. they should be taking out RMDs. So since your father passed away prior to uh 2020, you do you you have needed to take out RMDs every single year. Again, roughly about 4%. Um but again, the government then realized that they probably won’t see all that money for a very long time and that’s why they changed the rules. So since he passed away 20 years ago, taking it out every single year was the correct and appropriate thing to do. Uh I have some small 401k accounts less than 8,000 per account. Uh I understand taking any of them out and converting to a Roth will be a tax event. I have to declare as income the year converted. Yes. Can I convert partial amounts out of the 401ks to a Roth? Yes, you can. So, you don’t have to do the entire amounts. If you’ve got a a an $8,000 account, one of your many that has an $8,000 account, you could do any partial amount of that and leave the rest of it in the 401k. Uh, so you’re not taxed on it. Do you have a table showing age, income, tax brackets, and where there would be a cut off point where the conversion is no longer worth doing? Um uh if you just want to Google uh 2026 tax income brackets, you can find that again based upon whether you’re married or single. Um and the report uh that I the complimentary report that we have here um would tell us whether it’s good or not to do that. In fact, let me launch this out here. Let me send this out here. If you would like to have a one-on-one conversation with me, or if you would like to have that Wealth Vision report that talks about whether you should do a Roth conversion or not, uh please hit yes to this here. I will not be able to reach out to you until next week, but I promise I will reach out next week and uh then we can schedule a time to do to talk about the the Roth conversion or any other questions that you have with that. Uh let’s see here. I have an inherited traditional IRA from Oh, answer that. You did it in both. Uh, I have a small for Okay. Uh, Katherine, you did it in both. Okay, good. Uh, can you explain how a backdoor Roth IRA would work? A backdoor Roth IRA and a Roth conversion is the exact same thing. So, a backdoor Roth IRA, so again, if you have an income limit, well, I’ll give you an example. Back when I was at the big nationwide bank, I had a client of mine who was a an anesthesiologist for two hospitals in Chicago, made buku money, way over his income limit that he could do as a contribution. So, a backdoor Roth IRA is basically the same thing as a uh Roth conversion. He would come in every single year, add money to his traditional IRA because there’s no there’s no income limits on on when he would not be able to add to it and then we would convert that traditional IRA over into a Roth. And by doing that, you can still get money into a traditional IRA or excuse me, into a Roth IRA. You just have to do it through the back door or a Roth conversion. It’s the exact same thing. Um and with that that is all the questions that I have. So again thank you everybody for joining me today. Um again if you have any questions please feel free to give me a call. For those who answered yes on the questionnaire I will reach out to you next week and I will give you a call first and if I don’t get a hold of you I’ll leave you a message and I will also shoot you an email. And in my emails, you will have access to my calendar and uh you could schedule a time so we’re not playing phone tag back and forth. But I hope uh this was helpful uh to everybody and I hope you have a great uh rest of your week and have a great weekend. Take care. Bye.

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.

Okay, good afternoon everybody.

We got a couple minutes to before we start, but I just wanted to check on a couple of things. Uh, welcome Andrew and Ida and James and Sarah and Sheila. Susie, welcome. Hey, can you guys do me a favor because I I didn’t have my um normally I set this up where I can see it on my phone to make sure everybody if you guys can just somebody raise their hand if uh if you can hear me. Okay. And you can see the uh long-term care. Perfect. Thank you, Andrew. Thank you, Ida. We’re good. Um, that being said, if uh we got a we got a few minutes if people uh if you want to if you want to say hello. I’m going to take everybody off of uh allow everybody to talk. If you want to say hello or ask a quick question in advance. Hello Sarah. Hello Kelly and Amy and Julie. We got a good crowd today. Hello an

good to see you. Yeah, good to be here.

All right,

I’m free of porn. And I apologize if I uh if I completely butchered your name.

Welcome Steve. Welcome MK Mary.

Welcome Malcolm.

Welcome Braden. Welcome Nick.

All right.

Welcome, David.

I see you scheduled something, David, for Friday. Look forward to speaking to you then. Oh, hi, Bill. Good to see you. Yeah, I look forward to meeting with you.

All right, welcome Conrad. Welcome Mary. Welcome Pam. Welcome Pam.

Hello. Hello. All right, we’re going to get started in just another minute or so. Looks like we got a pretty big crowd. So, I’m going to

I’m going to take everybody when we get started. I’ll

I’ll take everybody off uh so that uh I’ll allow everybody to talk at the end as well, but All right.

Welcome, Colleen. Welcome, Conrad.

All right, looks like we got a pretty good crowd. I see a bunch more coming on still. Uh, but it is now 2 o’clock and I’m going to honor everybody who’s here on time. So, I want to honor your time. So, with that, uh, my name is Bill Rito. Welcome to today’s webinar. All the things you needed to know or didn’t know you needed to know about long-term care protection strategies.

Hold on. It looks like somebody Hold on. Okay. All right. I think uh All right. I think I got rid of the echo. Okay. Um so, as I said, my name is Bill Russo. I am the financial advisor for Northern California in uh for Alliant Retirement Investment Services. Um we have advisors all over the nation. Uh, I kind of want I’m I’m out of San Francisco uh just north of SFO, but um I cover well I have clients all over the nation as well. But for the most part, most of my clients are in the Bay Area, Nevada, Oregon, up through uh up through Washington, but I have I have clients everywhere as well. uh a lot in Arizona and Florida, which seems to be uh where everybody moves to in retirement. So anyway, all right. So, um for anyone, I see a lot of old faces here. I also see a few new faces here as well. So, with that, I’m going to give you a little uh insight in how I run our webinars here. Um I’m just going to go through before I get started. I’m going to go through just a few logistics. I apologize in advance if I sniffle and sneeze a little bit. I got a little bit of a cold that I’m not not killing me, but I’m I’m a little uh a little slower than I normally am. So, if I’m not as witty and quick as I normally am, well, that’s that’s probably why. So, um we appreciate I I appreciate any and all questions here. Uh when you have a question, though, there’s a there’s a way to do it. Um, you’re going to notice at the bottom of your screen is a um is a menu of a little control panel. You’re going to notice a Q&A and you’re going to c uh you’re going to notice a chat button. Either one of them, I have them up on my screen. So, when you get a question, as soon as it pops into your mind, type it in there. But be patient because what I’m going to do is I’m going to go through the whole presentation first. I promise you at the end I will answer any and all questions. So, as soon as a question pops into your head, ask put it down. The only question that’s a stupid question is a question that you didn’t ask because you thought it was stupid. And I guarantee that if you have a question, there’s two other people on the same webinar that have the same question that didn’t ask it because they thought it was a stupid question. So, ask away. So that’s kind of how this runs as far as um my disclosures go. Um I just have a today’s session is for educational purposes only and includes proprietary material. So protect both the content and everybody’s privacy. We ask that everybody here does not um pre-record capture the presentation whether by video, audio or screen sharing or AI tools without prior consent. Um I appreciate your understanding and uh I’m glad you’re here. So now that I got that uh disclaimer out of the way, I can take off my disclaimer hat. Okay. And the coming attractions are I do this every other week typically. So, every other Wednesday, um, and I’ll switch off between 2:00, which is now, and 6:00. So, the next one I have, I’ll be talking about estate matters, uh, principles of pres preserving your wealth. Um, that will be on Wednesday, July 29th at 6 PM where I’m going to talk about, yes, trust, but everything everything you need to know about protecting your assets at the end of life and uh whether it be IAS, um, you know, different uh different strategies on maximizing what goes to your heirs and not go to your uncle Sam. So, that comes up on Wednesday at 6:00 p.m. Stay tuned for that. And then, um, two weeks from then, at this same time, August 12th, I’m going to be talking about retirement, the fragile decade, which is essentially the the five years prior and 5 years after your retirement date. A lot can happen during that time and I’m gonna tell you specific actionable items that you need to be aware of before and after that time during that you know pretty pretty momentous decade of your life. So, that’s going to be happening on Wednesday, August 12th at 2:00 p.m. And if Wednesdays don’t work for you or they don’t always work for you or you don’t like the sound of my voice or the the my jokes or whatever, the good news is is that we have plenty of other advisors at plenty of other times that can help you with that. So, if you want a list of all of our webinars for the next two weeks, go to uh our website at aris.aliancreditun.com/events.

That’ll give you all the all the upcoming webinars for the next two weeks. If none of those times work for you or you happen to be up at 3:00 in the morning with insomnia, well, why not check out one of our podcasts that at least if it won’t put you to sleep, at least it’ll get you to learn something. So, that’s also on our website. Uh, it’s just the same website/mpodcast. And if you go to alliancreditun.com/ um slash our blog, there’s a link to our website at ARIS. ARIS is Alliant Retirement Investment Services. Um, we handle everything long-term. So, what’s long-term? Anything beyond 18 months. Uh, the reason why that is is because if you need the money earlier than 18 months, Alliance’s got some great resources with very competitive CDs and savings accounts and all that good stuff. But once you go beyond 18 months, you’re starting to compete with the long-term effects of money. Inflation. Inflation is the rate at which prices go up. Gas, food, housing, all that stuff. We’ve gotten a crash course on what inflation can do to the earning power of your money uh quite a bit over the last few years. So, what we do here is we help you plan and manage risk or plan for the major, you know, the major events in your life like retirement or college savings or whatever. Um, and we help you also manage risk. And we do that by planning. We do everything through planning. So with that, when we do a plan for you, we first take all of your goals, we prioritize them, we quantify them, and then prioritize them. And then we’ll take a look at everything you have to fund those goals. Whether it be uh your 401k, your pensions, social security, and we’ll take a look at everything, whether it be how often do you buy a car, do you like to go on vacation, we take a look at everything and just make sure that you’re on track to doing everything you want, and we’ll come up with strategies on when’s the best time to take your social security. Does it make sense for you to um you know convert your 401k to a Roth or and create a plan to do so? If it does, there’s a myriad of things. So, we do not charge for our services. The only thing it’s going to cost you is a couple hours of your time to do a plan. Um the reason why that is is because we are a nonprofit. Now, Alliant Retirement Investment Services is a nonprofit. It does not mean we’re a charity. What a nonprofit means is that any profits we do make, instead of paying off shareholders or lining the golden parachutes of our corporate executives, it goes back into our serving our members. So, with that, I’ve gotten all my pitches out of the uh out of the way now. So, let’s get on to today’s subject matter is long-term care. I know it’s everybody’s favorite subject matter. Um, but it’s really important. Now, one thing I telling you right up front, my job here is not to sell you long-term care insurance. You’re never going to hear a pitch from me to sell longterm care insurance on this webinar. Um, now that being said, um, long-term care is, even though, you know, yes, long-term care insurance, I can sell long-term care insurance, but that’s not the purpose of that’s not the purpose of today’s webinar. Today’s webinar is to get you to plan for it. And why is it so important to plan for it? Well, because you know many members of the baby boomer generation are now reaching retirement age. In fact, approximately 10,000 baby boomers turn 65 every day. A trend that is expected to continue through the rest of the decade. That works out to be one person every about 11 seconds. How fast is that? Well, in 2020, there was about three and a half working age Americans for every individual in retirement age. By fast forward 40 years, by 2060, there will only be two and a half working age Americans for every individual in retirement age. The median age of the US population is expected to grow from 38, which is what it is today, to 43 by60. So again, we’re all we’re an aging population is that’s a that’s a really, you know, long- winded way of saying we’re aging. So with that aging, it means that over 70% or about 70% are expected to need long-term care services at some point in your life. And now it’s difficult to predict, you know, the type of care one person might need or how long he or she will need it. Um, but statistics reveal that the average person needing long-term care will need it for about 3 years. Women are averaging a little longer at about 3.7 years to men’s 2.2 years. Probably because women live longer than men. So, stands to reason that that’s why women are in, you know, needing long-term care longer than men. uh and 20% of us will need care for more than 5 years. So, just a couple of I don’t say this to scare you. I say it to prepare you. So, here are the things we’re going to talk about today. Understanding long-term care. I’m going to talk about what it is exactly, how much does it cost, and what are your options. So, you know, since so many people are over the age of 65 and are expected to eventually need some level of long-term care, you know, let’s go into understanding about long-term care, how it works, and consider, you know, what you need to do to prepare for it financially. Okay, first question is, what is long-term care? Long-term care is a bunch of different things. Long-term care includes skilled nursing care such as rehabilitative care needed as after a long, you know, extended hospital stay, but it’s just one of the many types of care available. Long-term care also includes assisted living facilities, which is what most people think of long-term care. These are environments for individuals who can no longer function independently but don’t need daily care. These facilities offer occasional help um is what referred to as the activities of daily living. These include bathing, dressing, eating, transferring, getting in and out of bed or a wheelchair, and walking. So, typically, just to let you know how most long-term care providers work is if you need long-term care, you need to qualify for two of those six. So, if you need to, you know, if you need one of those, you know, hurricanes, you know, to help walk, you know, that uh if you need one of those or you you see those bedroom, those bathrooms with the bathtubs with the door on it, because any of those are typically covered, you need two of those six to be covered for the long-term care, the long-term care insuranceances that are out there. Um now in addition long-term care also includes home health care that is associated with occasional help that you know activities you know the activities of daily living that I just mentioned um as well as help with meals, budgeting, house cleaning, uh medication management, even transportation. Um, in this case, however, the help is offered by hired assistants who come to your home uh on a regular basis. So, give you give you a heads up that like uh just an example, my mom is 89 years old now. Um, so it’s kind of taken care of by, you know, her care. She’s she lives on her own, but she’s on um she’s she’s a couple blocks away from my my sister who kind of is on the front lines of making sure my mom’s okay because she’s at 89. She doesn’t really she’s forgetting some things here and there. She’s fallen a couple times and she forgets to eat sometimes. So, my my sister’s kind of on the um on the front lines of making sure that, you know, she takes care of the house, has someone come in uh well, we pay for someone to come in and clean and and do all that. My my sister kind of takes care of mostly everything, but we have someone come in and take So, that is all considered part of long-term care. And speaking of my sister, it also includes respit care, which respit care is the occasional break for family members who provide long-term care services. So, in my case, my sister’s case, you know, there is my my mom has a long-term care policy that provides respit for my sister periodically so that she can kind of take a break and we can hire someone to kind of help mom so that, you know, my sister can, you know, my sister recently just took a vacation out to see one of my I got five sisters. I got a lot of sisters. So, she went out to go see visit one of my other sisters. Well, we provided some this the care policy provided some help with my, you know, with my mom while my sister was away. So, there’s all sorts of things that are included in long-term care. It’s not just nursing home.

Okay. So, how much does long-term care cost? Well, that $64,000 question is a lot of times more than $64,000 and it really depends on where you live. So, the national average for assisted living centers uh single occupancy is around $50,000 a year. Um the average cost of skilled nursing facilities is much higher though at about at about $100,000 a year. Uh now obviously if you want to go, you know, if you want to go on the cheaper side of that, move to Utah or Missouri. Um where, you know, the costs are somewhat less than the sub than the national average. Unfortunately, New York and California are quite a quite a bit higher. Um, as you can see on here, I mean, New York is almost $150,000 a year for a long for a skilled nursing facility. So, whereas here in California, it’s going to it’s going to typically cost you around $10,000 a month on average.

So, and again, I don’t say this to scare you. I say this to help prepare you that this is an expense that most of us are going to need at some point. So, I’m not saying you need to buy long-term care insurance. I’m saying what you need to do is prepare for it and and allocate for it.

So, okay, what are your options for long-term care? Uh there are many. However,

your primary choice is typically between two options. Self insurance or purchasing a long-term care insurance policy. Now, I’m going to go through each.

Now, self insurance involves depending on your personal savings and investments to fund any long-term care needs. This would give you complete flexibility, but it requires that you are prepared to handle that potential expense. Now, remember that the national average for assisted living centers is about $50,000 a year. The average cost of skilled nursing is about $100,000 a year. Um, however, in California, which most people on this webinar are, it, you know, again, it’s higher than that. Now, excuse me. Um, self- insurance is a choice that many people make usually by default simply because they haven’t planned for long-term care expenses at all. So, if you if you don’t plan, well, you are planning this is your plan. You’re taking care of this for yourself. And as you see, self- insurance, self-insuring, you know, well, especially if you don’t plan for it, can have consequences.

Now, I’ll give an example of self-insuring for someone who did not really plan effectively. This chart shows a million-doll retirement for portfolio generating hypothetically about a 5% rate of return, which is usually what f you know us financial planners kind of divvy out as you know that’s how much you can that’s how much you can withdraw from your retirement without without affecting the principal for the most part. So with that, okay, if this is generating five 5% rate of return, it assumes that the six a 65year-old couple will be withdrawing $50,000 a year adjusted upward of 3% per year to account for inflation. Okay. If all goes well as planned, the retirement portfolio has a potential to provide income until the couple reaches 92 years old. Okay, great. However, if one of those spouses spends five years of his or her retirement in a nursing home, well, now the portfolio’s income potential changes dramatically. The hypothetical example assumes that the couple will spend $117,000 a year adjusted upward of 3% for inflation during the 5 years cuz you know we’re in California or I’m in California. So as you can see if they don’t make any changes their funds are going to be exhausted by the time they reach 83 years old. Now again I’m not saying this to scare you. I’m saying this to prepare you that you just need to there are ways to prepare for this. Um, stay tuned. I’ll get to that before we end. Okay. Now, the first question I usually get is, well, wait a second. What about Medicare? Medicare does cover some some long-term care, but it’s only a partial solution to the longterm care problem. Medicare actually does cover some skilled nursing home care under very tight restrictions. You have to have stayed in the hospital for 3 days first and then be discharged directly to the skilled nursing facility. However, Medicare doesn’t pay for custodial care. And under these conditions, Medicare will cover the first 20 days completely. So for the first 20 days, okay, you’re good. The next 80 days, it will cover all but a deductible. And after 100 days, it doesn’t cover anything. So you’re covered for a little over 3 months somewhat. This assumes, of course, that you find a skilled nursing facility that accepts Medicare and you meet the other conditions that Medicare imposes as well. So, it’s a little bit of a limited choice as well.

Okay. Now, long-term care insurance. Now, there’s a bunch of different ways to get to have long-term care insurance. Um, what long-term care insurance is is it’s it’s a way to transfer the financial risk of long-term care to an insurance company through either long-term care insurance. There are also some annuities now that offer long-term care benefits as well. So, if you don’t qualify for um traditional long-term care insurance, um you know, there are other options for you. Uh a long-term care care policy can cover all levels of care from from skilled care to custodial care to inhome assistance. Uh many find it to be an appropriate way to protect themselves and your loved ones from, you know, obviously the potentially devastating costs of of long-term care.

Why is it going to the next page? Okay. So, now there are a number of pros and cons to long-term care policies. On the pro side of ledger, um, long-term care insurance policy can obviously protect your assets. You won’t need to dip into your retirement funds to cover the cost of care. Great. Um, and under certain circumstances, your premium may be partially or completely deductible. Um, that being said, there are different types of policies out there. Some of them you can pay up some of them because that’s that’s a problem with a lot of long-term care. Um well, hold on. I’ll stay tuned. I I’ll get to that at the end of this. Let me get through this first. Um long-term care insurance also offers other advantages as well in in the event of long-term care illness. Um you know, it’ll enable you to obviously preserve your dignity. you can maintain your standard of living as for as long as possible and primarily your independence. Um, you can also preserve your choice. You can keep from, you know, becoming the burden on your family if if that’s important to you. Um, some people figure, hey, you know what? You were burden on me for how long. Now it’s your turn for me to be a burden on you. U, my sister would say, my mom’s not being a burden at all. We don’t think that. But um it is certainly it is certainly something that all of us as a family, as I said, I got five sisters. We’re all helping out, not just, you know, not just with um you know, my sister’s kind of on the front lines, but we have people coming in and helping her out as well. Um, that being said, on the cons side of the ledger, um, you need to be comfortable with the cost of premiums or at least have a set amount set aside to take care of the cost of doing so. Um, now there are some sorts of policies because here’s the problem. Here’s what I was going to get to earlier. Um, there are the big problem with a lot of long-term care policies out there is it’s not it’s not exactly a sexy investment. It’s something that you really hope you never have to use um you’re paying for it. if you know and if you pay for it um and never use it a lot of times at least the traditional long-term care insurance you’re paying for it can be fairly expensive and you know if you never use it it’s just an expense that’s gone you now there are other types of policies out there that there are a number of different things you can do there are annuity policies that you have the instead of having an income writer, you can have a long-term care rider. So that what’ll happen is the long-term care needs come out and it’s tax it is, you know, it’s tax-free um to take care of those. There are other um that come in a life insurance policy that basically will you pay it up in advance. So, let’s say you have $200,000 sitting in checking in savings or CDs that are, you know, I’m probably not going to need this. It’ll probably go to the kids, the grandkids, but I got it there just in case. And if that just in case is I need it for a long-term care event, which is usually the just in case that most people come up with, well, that two or that 200,000 that you have in that account for that just in case, well, you can put it into an account which will give you leverage on that. So if you need it, you can pull it out usually after four or 5 years or so. Um you know, you can pull it out. However, um if you need the money, take it out. It’s available to you. However, it’s the last money you want to touch. Why? Because if you leave it in there, that 200,000 can become 3400,000 of tax-free uh tax-free uh long-term care coverage. So, and if you don’t ever use it, well, then what happens is is that it will um the 200 will typically go tax-free to your heirs. Now, you’re not making a ton of interest on it because essentially the interest is essentially paying the long the cost of long-term care, but you’ll get like it depends on your age and and whatnot, but you’ll typically get the 200 will provide like between 230 and 250 that will go to your heirs if you never need it. So, that being said, this and and again, I’m not trying to sell you a long-term care policy. I’m just trying to show you that there are many solutions out there to help you get to get to your end goal, which is covering your long-term care needs. Um, so that’s the one cost. Uh, the cost of premiums is obviously a con. The other thing is is that there’s a wide range of benefits and premiums available on a lot of these policies and you got to be an informed consumer because you don’t want to be paying for something that you’re very unlikely to use. Um, and there are you want to you want to have someone who’s going to shop for you because different insurance co companies judge different ailments differently. So there you go. So, with that, that kind of covers the pros and cons of long-term care policies. Um, now, when you’re choosing a long-term care policy, you need to bear in mind a few things. Number one, you need to make sure you understand the limitations and the features of the policy that you’re considering. Uh, in most cases, policy holders cannot collect their benefits until their disability reaches certain levels. Remember I talked about two out of the six uh functions of life. Usually that’s the certain level that that qualifies. You got to you got to qualify for two of the six daily functions of life. Um and most most policies will specify how much they will pay for either each day of care and for how long. So, you want to make sure that you know how long you’re covered for and your total amount. Um, second, take a close look at the type of care covered. Long-term care policies can cover everything from skilled nursing care in a nursing home to periodic uh custodial care in your own home. You need to understand exactly what’s covered and what is not covered. Third, you want to look at the total benefit. uh you don’t want a policy that’s going to run out of benefit just when you need it most. Um you also don’t want to pay for coverage that you’re unlikely to need as well. So, you know, again, it’s it’s really all about planning. Um you definitely uh oh, look at the waiting period for benefits and uh when they’re scheduled. They’re usually going to have a a a period of usually it’s 90 days where you got to wait 90 days to get in. Typically because especially in California, it’s because that’s when Medicare kind of covers that first 90 days. So the first 90 days is a waiting period for them. You’re not going to be able to collect until Medicare kind of takes care of their portion. Um, you also may want to consider um inflation protection because the cost of health care has been rising a lot more, especially in recent years than the rate of inflation. Um, and you also want to consider a um a policy that has a waiver of premium. This means that your premiums are discontinued once you start drawing benefits. You don’t have to pay into the policy anymore. now you’re collecting it. So, all things to consider. Um, an important thing, one more other thing about long-term care policies is that, um, uh, is that, sorry, I just got a question that I kind of threw me off track here for a second. Um, the other thing about long-term care policies is, you know, ultimately, here’s who it’s not for. Long-term care policies are for people who have a lot of money or no money. Why? Because if you have no money, well, then, well, the government will take care of you. Now, you may not like the way the government takes care of you, but they will take care of you. um you know, they will they have facilities that are set aside for but the problem is is that you can’t have any assets to get in them. You got you can’t have more than $2,000 a a month income to get into those facilities. Now, on the other end, if you have a ton of money, you do not need long-term care insurance because hopefully you’ll have like in in the case, you know, in in a case of my mom specifically, she’s got some coverage, but she doesn’t have a ton of coverage because and it’s really to cover a few of the she’s got a small policy that covers the cost of inhome care and things like that. The reason why that is is because for the most part, she’s got enough assets where they’re generating if she really needs to go into a long-term care facility. Well, at that point, her assets are going to cover that portion of it. She’s got enough assets to generate enough income to pay for that. Um, so if you have a lot of money, you don’t need long-term care insurance. You still need to plan for it, but you don’t necessarily need long-term care insurance. It’s for the people in the middle that really long-term care insurance is for. If you know, if if a long-term if you’re all set and everything’s good to go and you know what, we’re we’re pretty good with retirement. But if one, especially if you’re part of a couple and one of you gets sick and it’s going to really dwindle the retirement savings for the other one, that’s when you need to plan. You really need to plan for how you’re going to take care of long-term care insurance. So, like anything, it’s not really um you know, planning is you can do anything as long as you plan for it. So, with that, um, you know, there are a number of long-term care planning strategies. Um, I can go through them with you. Um, but it’s really to cover everyone from couples to, you know, families to your your loved, you know, the the your younger loved one or we live in a sandwich generation where, you know, we’re taking care of elderly parents and raising kids at the same time. So, um, all of these I can help you with all of these different strategies. Um, now that being said, if you do want to do a plan with me, um, not necessarily a will and trust plan, but, um, if you want to do a plan, um, feel free. We’re here to help. Whether it be, you know, take a look at, um, you know, with with this, this is, um, Will and Trust is is a provider that we work with, um, that can kind of help you kind of get your estate and things like that in order. This is really a plan for excuse me. Um, you know, it’s someone we work with. We’re not I’m not promoting it. I’m just saying that we can help kind of walk you through if you want to do estate planning or anything like that as well along with if you want to set up a financial plan or do some long-term care strategies. you know, it doesn’t cost anything to sit down and talk with us um or to talk with me. So, with that, if you would like to talk, uh hold on a second. Um I’m here. Uh you can there’s a couple ways to do it. You can either and I promise you I will answer all questions. Um I see we do have a quite a few questions up here. Um, but if you want to sit down with me before I answer the questions, um, there’s a couple ways to do it. You can either scan this QR code that’ll take you directly to my calendar where pick a pick pick a time that works for you either via Zoom or phone um, and you’ll reserve that right on my calendar. Or what you could do is you could um uh just click on whether or not you would like an appointment with me and I’ll contact you. If you do that, do me a favor. Put in the uh chat or Q&A. Just put down either email or phone. It lets me know how you best want to be contacted. So with that, okay, um let’s get to the questions. Uh Julie, you are very welcome. She says, “I just want to say thank you and tell you how much I appreciate Alliance webinars.” Well, we’re here to help. Okay. Um she also mentioned, “Yes, San Francisco is averaging $14,000 a month for skilled nursing facilities.” Um, it can be especially if you’re in a um especially if you’re in a uh Oh jeez, I was going to mention it, but I forgot it. An Alzheimer’s um uh an Alzheimer’s facility, they can really be really expensive. Um that being said, okay, so next question. Um

Ann asks, “What do you consider a lot of money?” Well, that depends on you. Um you know, it depends on everybody. A lot of money is, you know, so when I say a lot of money, it really depends on what your needs are. If what I do is I cover when I do a plan, I’ll cover what your normal living expenses are. And then what I’ll do is I’ll do the whatifs. What if we have another 2008? What if you have a long-term care event? What if we have um you know what whatever it may be, right? So what I’ll do is I’ll first run the scenario with with just if everything goes right do your does your income meet your expense needs. Okay, once we get that and say, “Okay, hey, you have a 85% success rate of living the rest of your life and never needing any money any great. You’re right in the bullseye. Fantastic.” All now 85% cuz a lot of people ask me, “Well, wouldn’t I rather be at 100%.” No, 85% is the number you want to be at. The reason is it doesn’t mean that you’re going to get 85% of the way to your goals and then run out of money. It means that there’s an 85% chance you’re going to live well into your 90s, do all the things you want to do in life, and still have money left over. So, if you’re at 90 or above, what it’s telling us is one of two things. Either one guys, you can relax a little bit, fly first class, you know, buy that buy that luxury car if you want, or if you come back and say, you know what, Bill, I’m living my best life. I don’t need anymore. Great. then we can get to the same place with less risk. Okay. Um but then what I’ll do is once I make sure that you’re okay to live for the rest of your life without worrying about, you know, running out of money, well then we take a look at the whatifs. Well, what if we have another 2008 in this case? What if you have a long-term care event? Okay, what is that going to do? Remember the couple that we had where they were all set? They were going to live until 92 years old without running out of money. And then one of them got sick for five years. And now all of a sudden they’re eating ramen for the last 10 years of their life or one of their lives cuz the other ones, you know, no longer eating anything. But you see my point. So that’s one of the things I do with how much. It depends. It depends on what your needs are and where you live and how much you’re going to need for long-term care. It’s just scenario planning. So that’s one of the things. So when I say a lot of money, it that’s what I mean by a lot of it just depends. Okay. So hopefully I answered your question and all right. David asks, um, okay, he said, I went to an alliant workshop. I went to an Alliant workshop a couple years ago and they mentioned an annuity or something where you could put in $100,000 and have $300,000 for long-term care if you need it. Can you tell us more about that? Yeah, it’s um it’s essentially an Well, there are a couple of ways to do it. You can do it in a life insurance chassis, which is what I mentioned earlier. Um, you can also do it. There are certain types of annuities that do that as well, which will give you a certain amount of essentially what you’re doing is you’re getting a you’re getting an additional rider on it. So, it’s typically like an income writer or something like that. In this case, it will it will grow tax deferred like an annuity, but if you need it for long-term care pol long-term care purposes, Yeah. then you get leverage on that. Now, you’re essentially buying that leverage, but there are ways to do it. So, yeah, I mean, it depends. There are many different things out there. Um, when we talk on uh I’ll tell you a little bit more about it on Friday when we talk, David, cuz I know you have an appointment scheduled for me. But hopefully I I gave you enough information for everyone else that, you know, at least you can know what to look into. Um, all right. Next question is from Wayne. Uh, and and if I didn’t answer your question, feel free to follow up in the in the chat. Um, all right. Next question is from Wayne. Is a joint policy preferred to an individual policy? Should I pay with cash or qualified money? And finally, should I pay with cash or Oh, hold on. Uh, okay. I think he repeated the should I pay with cash or qualified money? Um, I appreciate your comments. Okay. Um, it depends. The joint policy is a joint policy preferred to an individual policy. It really depends on the differences and ages of the two people on the joint policy. So, what I would do is I’d run scenarios on both to see what’s best for because if one of you’s, you know, if you’re a couple, one of you is 20 years older than the other one, well then, yeah, you shouldn’t do a joint policy on both of you because, you know, well, well, it depends. You’re going to be paying for the older person’s you’re going to be paying for the older person’s uh premiums. So it again it would depend on your scenario. So make an appointment with me. I’m happy to I’m happy to sit down with you individually and see uh Wayne, you know what’s right for you. Uh that being said, would you should you pay for it with cash or qualified money? And again, it depends on your it depends on your tax situation. Uh most of the time I would say you don’t want to pay with qualified money. Uh you don’t want to pay premiums with qualified money unless you’re doing it through an RMD or something like that. Um but then again, I’m putting on my disclaimer hat again. I’m not qualified to give tax or legal advice. For tax or legal advice, please talk to your qualified tax or legal professional. Um, but I’m happy to go through that with you individually, Wayne, and uh kind of look at your plan and see what works best for you. So, with that, um, I I don’t see any more questions, but I’m going to stick it on for a few more minutes if any new questions come aboard. Um, with that, I usually try and keep these down to an hour, so um, I’m going to be on for another 13 minutes or so at least. Uh, I’ll open it up if people have, you know, if people just want to say hello or have other questions in there. Um, but with that, um, I thank you all for your time. I hope that you got some information that you can take some, uh, you know, you can take action on. So, with that, feel free to give me a call if you want to do a if you want to do a plan or just have a question in general. Doesn’t doesn’t cost anything to set an appointment and ask me with that. Take care everybody. Have a good afternoon. Oh, okay. A couple more questions just came in. Um, okay. Isn’t it super expensive? Deb asks, uh, “Isn’t it super expensive to buy long-term care insurance if I’m 64?” It depends. It depends how much coverage you need. It depend It depends on your health. don’t take my, you know, I just have a cold. It’s nothing contagious, but um usually most people, most long-term care policies are issued be between the ages of 60 and 75. So, you’re actually right in the wheelhouse of when most are, you know, when most uh at 64, you’re in the wheelhouse of when most policies are issued. That being said, it depends. Um, what I would say is, Deb, you know, sit down, we’ll make a plan to one, see if you even need it because you may not need a long-term care policy. Um, and there are ways to do it where it won’t necessarily cost you anything except possibly the interest that you’re earning on that checking or savings account. And it gives you leverage because let’s say that you have $200,000 or $100,000, you know, for what if money, right? And it’s sitting in a checking account or a savings account earning 2 or 3%. Okay. Well, you take that and you get, you know, that you turn that 100 100,000 into, I don’t know, 1752 250 somewhere around there of tax-free money. How long would it take your $100,000 to double and turn it into $200,000 tax after taxes? So, there are a number of ways to do it. Um, again, I’m not saying that long-term care insurance is the way to go. I’m just saying you want to plan for it. And that’s that’s what I’m here for, to help you create a plan. And whether or not long-term care insurance is the right way to go or not, there are many things you can do to fund it. But, um, it’s important to create a plan. So, there you go. So, with that, uh, okay, you’re welcome, Ann. You’re welcome, Chris Charles. You’re welcome, Chris. And I look forward to seeing you on Friday, David. All right. So, with that, um, again, I’ll be sticking around for a little bit longer. Um, if there are any as as just came in, if there are any straggler questions coming in, I’m here to here to help.

and I’ll open up uh I’ll open up the lines in case people have other questions. If you want to talk to me, just hit your mute uh the microphone and talk away.

Deb asks, do I do any face-toface inpersons meeting? I love to face toface in-person meetings, Deb. Unfortunately, nobody ever wants to anymore. But yes, you can come see me. My office is in uh my office is um in Oyster Point in South San Francisco, just north of uh the airport. Um I I do have clients that I do make house calls for. Um, so you know, make an appointment with me and we’ll uh, you know, give me a call and we’ll Yeah, I’d love to see you in person as well. I do I do see certain clients in person, but uh, about 90 90 95% of them want to do it on Zoom nowadays. But, uh, yes, I’m here and I’m happy to do it in person. Uh, probably not this week because I don’t want to give you I don’t want to get you sick, but anytime next week going forward. Absolutely. Love to meet you in person. De

Oh, thank you, Deb.

We’re we’re lucky to have my mom. So, thank thanks for the uh she’s she’s definitely she’s definitely put up with us for long enough, so it’s the least we can do.

And there’s thankfully there’s only one, you know, we we have five, you know, we’re not in it. My sister isn’t in it all by herself. So we have there’s six of us all together. So,

but I look forward to talking to you soon, Deb.

Hello and good afternoon. I’m going to get started in just another minute or so. I just want to make sure people have a chance to get logged in. I will be right back with you. Thank you. Well, hello and good afternoon everybody. Thank you so much for joining me for planning for long-term care. Uh one of the many webinars that I do. I do these presentations every two weeks or so. uh unless there’s a vacation or a holiday. But uh so yeah, about every two weeks I do these on many different topics. Uh today we’re going to be touching on long-term care planning. My name is Joe Gaspari. I am one of the financial consultants here at Alliant uh with the Alliant Retirement and Investment Services team. I do offer uh full financial services from stocks, bonds, mutual funds, ETFs to whether it’s income planning, full retirement planning. That’s one of the biggest things that I do when someone says, “Here’s what I have. Here’s what I want. Am I on the right path? Am I doing the right things? Should I be saving more? Uh spending less, working longer, working shorter, all these different uh factors that might affect your retirement or whatever uh financial goal you’re you’re saving for. But uh again, one of the biggest things that I do is that retirement or financial plan. At the end of this presentation, I will be putting up a survey. I hope you will select yes on there. Uh especially if I haven’t met you already, that we could have a one-on-one conversation. Maybe it’s going to be specifically about long-term care. Maybe it’s about just future planning in general. Uh and we can work up a very comprehensive plan specifically for you. Uh but uh but today let’s just talk about some long-term care planning and learn a little bit about the strategies on what can this cost overtime and who needs long-term care, how many, you know, what percentage of people. So, we’re going to touch on a lot of things. If you do have any questions throughout the presentation, type in the Q&A box or the chat box, either one, and they will hold till the end of the presentation. That’s when I’ll be taking those questions. So if you think of a question, type away at any time. Those will save until the end. So I do want to let everyone know that we are not able to that’s one of the most common questions that we get every presentation is will there be a uh a video or anything like that available after. We are not able to record these for compliance uh purposes and we are not able to have these recorded by any listeners of these presentations. So they cannot be recorded or distributed. So uh thank you for in uh for your uh participation in that. But we cannot record these. Excuse me.

Sometimes you just got to sneeze in an unopportune time. So but again thank you for uh not recording these pres and distributing these presentations. I do have some upcoming presentations um is uh at uh for estate planning the important documents like powers of attorney uh for healthcare power of attorney for financial wills trust the difference between these what’s important for you to have many times just at least naming beneficiaries on your accounts um is certainly sufficient but uh but we can certainly uh you know learn a little bit about what does this all mean for estate planning as you’re looking to spend money in your retirement years. But what if stuff is left over? Hopefully, there’s stuff left over. Uh where does it go? How does it pass? What are the best strategies to get this to whoever your beneficiaries are, whether it’s spouse, whether it’s children, friends, relatives, anyone, charitable organizations, whoever that may be to make sure these pass seamlessly. After that, I do have on Wednesday the 29th, I have IRA planning, uh different types of IAS, whether things are pre-tax like traditional IAS or 401ks, things that are post tax like Roth IAS that grow tax-free uh for retirement. Uh taxable accounts each year like a brokerage or a savings, those things that you get 1099s on every year that you have to claim on your taxes. and what are the best ways to uh strategize on where money should be in the future to hopefully as you go through the different stages of taxes when you’re maybe working making more income than if you were not working whether that’s higher income or modest income what how do we manage your tax brackets going forward you do have access to to see what other webinars are coming up whether it’s from myself or one of my other 10 or 11 team members that do these presentations. We have people in LA, Denver, San Francisco, Houston, Utah, and here in Chicago. We are scattered around the country doing these presentations at different times, different days. We probably have anywhere from three to five presentations a week going on with at least one of us. myself. Again, I do these every two weeks, whether it’s a Tuesday or a Wednesday, maybe it’s a daytime, maybe it’s an evening. You also have access to the podcast. You can listen to our Aerys Alliant Retirement and Investment Services. That’s what Aerys stands for. We have our website and blog. You can check us out to see what who we are, what products and services we offer. I’ll be putting that up at the end of this presentation as well. So, our commitment is provide sound financial information, help you identify what’s important to you. Uh whether it’s uh you know, things like long-term care like this or just saving in general, investing, where what about the volatility in the markets at periods of time, where should you be putting things? This is all these are all the things that we would love to help you with. Uh we do offer which I will be saying again at the end of the presentation our complimentary no obligation consultation and in this consultation we can work up again here’s what you have here’s what you want are you on the right path and again that full financial plan that we do not charge for assessing the risk into getting into long-term care. uh people are turning 65 today have a nearly 70% chance of needing some type of care long-term care. Now this is very as we go through this this is very different. We are not talking about your uhiitei, you know, United Healthcare or Blue Cross Blue Shield or those types of things just for your normal health care uh whether it’s you’re on Medicare or whether you are working and have you know u some type of uh plan through work. This is very different. We are not talking about just going to the doctor periodically or maybe even a hospital visit for whatever reason. These are things of long-term that you need someone assisting in many of these different uh things that we’re going to talk about today. 20% of 65 year olds will need support uh for more than 5 years. Again, that’s one out of five, but that’s still a significant number. 8% of people ages 40 to 50 might have some type of disability or requirement for long-term care as well. What is long-term care? again, ongoing services and support needed because of a chronic health condition, disability, prolonged injury, illness, or cognitive impairment, uh, such as Alzheimer’s.

Levels of care. So, we’re going to discuss three levels. Skilled care is that round the clock you might be bedridden for whatever reason and you need health care, you need uh skilled uh skilled nursing or even potential doctors. Uh but again that you need long-term care with skilled labor. Uh intermediate care uh nursing or supportive care by professionals and or or uh custodial care which is basically maybe you need someone to help cook, clean, uh help transfer you from a bed to a chair, chair to a bed, uh bathroom, things like that. If you need any of the things listed here, that would be listed as custodial care or personal care. Where can you receive care? This comes up a lot with long-term care, uh even long-term care insurance situations of where can I get care? Uh do I have to be in a nursing home? Do I have to be in some type of assisted living? Can I get this care in my home? And many times the answer is yes. that you will still be able to have some type of an insurance and get someone maybe someone coming to you that you can be in the comfort of your own home and still get care. Uh adult daycare is certainly one of those other options where maybe you’re dropped off if you have family members that are working still and maybe that you’re dropped off during the day, picked up in the early evening uh just for an adult daycare. Common misconceptions. I’ll never need long-term care. It won’t be that expensive, which it is. Uh Medicare and Medicaid will cover the costs. Uh Medicare will cover for a very short period of time. Uh statistically, and Medicaid will, but we’ll talk about what the restrictions for Medicaid. Uh my family will take care of me. Some many times people will say, “Oh, I got adult children. They will they will take care of me.” Uh many times easier said than done. Maybe that is the case for some families, but I just can’t count on that for every family that someone can stop working to care for someone needing long-term care. Caregiving challenges. 41 million people provide unpaid care for a family member. 61% of caregivers are women and one-third 34% are a are in either in retirement or of retirement age 65 or over. Unpaid care uh caregivers spend an average almost a full-time job well close to 35 hours a week caring for someone in addition to their own jobs. Uh four in 10 caregivers consider their caregiving situation to be highly stressful. I am working with several people right now that could be maybe in uh with, you know, obtaining some type of long-term care insurance or that are caring for family members right now. And this is kind of hot and heavy. Uh very hard, you know, on on on their hearts right now of I should start be thinking for my own future as well. Um that being a caregiver for someone else and now I’m thinking is there someone going to be there for me? If not, how do we pay for this? Why is it important to have long-term care strategy? So, protecting your assets, uh it could be an asset depletter that if you let’s say you did need skilled nursing care uh for a period of time for a year or two or three or even up to 5 years, are there enough assets? Because that type of care can be very expensive. And how much assets are you willing to earmark for that? Or do you have enough assets to uh you know to even be paying other bills in addition to your own personal care? Uh maintain independence. uh preserve freedom to choose where your care is provided when you have that uh some type of coverage or that uh that peace of mind knowing that whatever it this is going to throw at you. Uh could you be in the comfort of your own home uh or wherever you uh would prefer to be not where you have to be? Avoid becoming a burden on someone else. Today’s focus we’re going to touch on these three things. The first one, potential costs of care in different settings. So, here’s one we’re going to look at. National median costs. These last numbers were updated in 2021, uh, updated every few years. So, hopefully we’ll get some updated numbers here soon, but still in 2021, just homemaker services. This might be, you could see at the very bottom, uh, it’s got the star there based on 44 hours per week. homemaker services. You need someone to help cook and clean and do things around the house for you. Again, maybe getting you out of a chair into a bed, a bed into a chair, something like that. Uh, but that is close to 5,000 a month or close to 60,000 a year just for that. Um, and that could be someone that is I’ll use the term unskilled labor for this and which could just be a family, a friend, a family member or a friend or someone that’s just assisting around the house. Home health aid, a little over 5,000 a month. Adult daycare, about this is the least expensive of these because it’s the least amount of time. And again, you’re dropping someone off at a a adult daycare and picking up typically in the evening. Uh private room and in assisted living, 4,500 per month. Now, we’re talking a little bit more expensive with the semi-private. in a nursing home almost 8,000 a month and over 9,000 a month if you need a private room in a nursing home. A little over 800,000 a year for something like that. So, someone says, “Hey, I have a $500,000 that I can earmark and I’ll just selffund my uh long-term care.” That is $500,000 that could go out if that was in a f for a five-year term of someone in some type of facility that either do you have enough assets to pay for that or that is 500,000 less that is going to your heirs uh because all the assets are being used up. annual cost of a nursing home care. Uh the national medium cost for a private room in a nursing home, 94,900 again in 2021. If we’re going to do this at a 4% annual increases uh over 20-year period of time, that’s over double 211,000 uh a year uh for uh for this type of care and a private room in a nursing home. So, we can just see escalating over time. Uh, typically health care costs and even long-term care costs are exceed inflation. Even if inflation were, let’s say, at a 3% average uh rate, we’re looking at much higher for health care. I’m going to just again throw a reminder. If you do have any questions, uh, go ahead. I know there’s some already, but type away in the Q&A box or the chat box and we’ll get to those questions at the end of the presentation. Uh costs vary depending where you live. This is pretty astounding when I look at Texas versus uh it’s the highest California on just the different costs just depending what state you live in. Uh so we’re seeing Texas is the lowest and again this is a private room in an assisted living. uh you know we’re so average cost uh for that 48,000 almost up to 63,000 when we look at for a semi-private room in a nursing home now now we’re talking New York 153,000 versus uh Texas at about 61,000 so will someone need to move to a different state to get the care that they need because it’s just not affordable in some other states

look to what uh for for um at a nursing home or other senior living facility. People ask uh ask people you trust and do you know anyone in this type of situation where where are they staying? Are they getting home care? Are they in a good facility? There are some sources medicare.gov gov through there where you can get some uh some resources on what trustworthy places that you can look at uh comparing different facilities and talk to the residents, talk to people that are going there if you’re allowed to. I know there’s privacy things that uh they don’t want people just walking into a facility and just start asking uh people questions, but uh um but again, you know, questions asked, you only get the answers if you ask the questions. So uh certainly you know reach out to some people to see where you know where what are the best places in certain areas. Uh focus number two is meth methods to pay for long-term care. Uh so lack of confidence and ability. So when we look at people working on the left side of this page versus retirees on the right side. Uh when we look at very confident to somewhat confident, if we add those up, we’re looking at about uh let’s say about 54% are somewhat confident plus uh that they’re going to have enough assets to fund their own long-term care. Uh but again, that’s a little under 50%, little under half are not feeling very confident on that. Uh same thing with retirees. The numbers are very similar. So people working and then retired. Uh, how many people are are are you comfortable with what assets you have? Can you be self-funded? And are you willing to use your own assets for this type of thing? Then looking at how expensive this potentially could be. How will you pay for the potential cost? Pay out of pocket. That’s number one. So, someone again might be self-funding their long-term care just from savings, investment accounts, retirement accounts, wherever those funds come from, but things that you’ve saved over time. You can rely on government programs such as Medicare or Medicaid. Um, again, Medicare is very short-term. We’re going to talk on about that in a couple of slides here on what does Medicare cover. Medicare is not long-term care. Medicare is a there’s a very short-term care, but it is not long-term care. Medicaid, we’ll talk about the restrictions of Medicaid because you cannot have assets if you go onto Medicaid. Uh purchasing long-term care insurance, we’re going to touch on as well. Add a long-term care rider to a life insurance or annuity. Uh that’s one of the most popular things that we do right now is more of a hybrid uh you know policy which is an annuity with long-term care rider or life insurance/l long-term care where whether you’re in a care situation and you can use some of that policy to pay for your care or if you what if you never even needed that care it’ll pay an enhanced death benefit. So someone is getting something out of those. uh this presentation doesn’t get too much into the individual policies. That’s what our conversation will be about. But I can tell you the the old school tw over 20 years ago when I when I would talk to long-term care, I was with a different firm back in the early 2000s and talking about long-term care. um long-term care policies at the time like GE or Genworth at the time was a very big player uh doing long-term care policies. John Hancock was the other really big one. And those were are the ones that you make a monthly premium or annual premium. And you’re paying, you’re paying, you’re paying. And I can tell you many times because the world has changed since the early 2000s. We’ve gone through many crisis times. We’ve gone through higher interest rates. We’ve gone through very low interest rates. And we’ve seen those types of policies where the premium goes up and the benefits go down or the benefits go down or a combination of both of those where I’m paying more for less benefits over to then what you signed up for 20 plus years ago. Uh those policies are still there, but they’re not very popular because they are still very expensive uh when you just pay that monthly premium. The hybrid policies are much more common now. uh and much more reasonable for because if you never go if you never go into a long-term care situation that these policies that you’ve been paying for 20 plus years, many of them many of them do not have a death benefit. Uh which means that if you never went into a long-term care situation of a policy that you’ve been paying 20 25 year years in and you passed away, it’s gone. It’s done. It’s over. No, nothing goes to anybody. So all the premiums you paid are just gone. So now as people want to make sure that if I’m paying for something, I need this to go to someone, whether it’s me for the long-term care purpose or if I pass away, maybe using none or some of the uh the long-term care uh claim, if not any of it, death benefit will go to someone taxfree. And by the way, it uh also with your if you are if you have a long-term care policy and you put money into this, whether it’s a lump sum or making premium payments and you go into a claim, which means you can’t do two of the six daily living activities, feed yourself, dress yourself, bathe yourself, and you’re getting payments now from this long-term care policy. Those are tax-free as well. Those are tax-free withdrawals. As long as it’s used for long-term care, you do not have to pay tax. So, if you’re putting a chunk in and you’re getting a big much bigger benefit now coming out, it’s taxfree. Same thing with the death benefit. Paying out of pocket or self-funding, you do have freedom. Uh you can choose your who where you are. If you’re paying for it, you can have someone come to you if you need to go to a facility. may be ideal if you can afford to pay for it, but you must be willing to liquidate your assets, may impact the ability to pass um assets to family or beneficiaries. If you run out of money, relying on family members or the government may be your only options using a reverse mortgage. This is kind of a controversial thing that you know it’s when people say, “Oh, it’s well worth it to do a reverse mortgage or never do a reverse mortgage.” some people might say, but basically it’s if you have a lot of equity in your home or maybe even no mortgage, you can do a reverse mortgage where instead of you making payments to pay back a loan, you get payments from that. So, you’re not you’re not paying anything upfront. Uh you’re well, besides fees and costs, but you’re getting money from this company who’s doing a lean on your home. This does need to be paid back, but it’s basically how do you get income from an asset like your home, and you’re able to do that through a reverse mortgage. You can borrow against your equity. You can uh use the proceeds to hire caregivers. There’s no mortgage payments. Again, loan must be repaid when you vacate your home. Whether you move, sell, if you pass away, the loan has to be paid back. Your beneficiaries or your heirs will need to pay this back. A reverse mortgage takes part of the equity in your home and converts it into payments made to you. You can use the payments you receive to pay for long-term care services you need so you can continue living in your home. Drawbacks uh may not be suitable if you remain in the home just for a short period of time. You’re not getting enough benefit out of it. Uh then uh loan must be repaid when you move out, sell or die. amount can be borrowed. It’s typically much less than than the actual value. If you have a $300,000 home, let’s say it’s even paid off, you will not get 300,000 worth of, you know, payments out of here. They will might do two or two maybe up to 250. They will do a percentage of that. They you cannot get the full value. Uh amount can be borrowed as uh involves substantial fees. there are a lot of fees and costs associated with doing a uh a reverse mortgage. Uh the the company doing this reverse mortgage uh they are looking they’re trying to make a profit and they’re not just you know being nice. Uh they’re absolutely a business making a profit. Uh interest is added to your balance and adds up over time. So, it’s kind of a big question mark and it might be a last resort for some people relying on government programs. Uh Medicare will cover your health care expenses in retirement. Uh again, Medicare for uh for your traditional doctor visits or maybe hospital visits. Medicare will, but Medicare will not cover your long-term care. And Medicare Medicaid will cover care in a nursing home potentially. We’ll talk about some amounts and what the availability is on for Medicaid. Uh Medicare is your your health insurance for 65 and over. Uh different parts you have Medicare part A which is your hospital coverage. So your hospital visits are through Medicare A. You do not have to pay for Medicare A if you are not on uh Medicare yet. Uh part B is your doctor visits, your doctor insurance, medical insurance, and that’s what you have to pay for. It’s 22 uh.90. $22.90 uh a month is what you are paying for Medicare Part B. If you opt for the Advantage plan, Medicare Part C, that’s uh you have to go through private insurance. you have to go through either Blue Cross, Blue Shield, United Healthcare, Etna, those types of comp uh companies to get a uh Medicare Part C. I would kind of say it’s similar to more of like an HMO plan uh where it could be a little bit less cost than A and B and but uh um it’s less there’s more restrictions on doctors and they have to be within the network and things like that. Medicare Part D is your prescription drug coverage. Medicare does not pay for personal care or custodial care. Home health uh benefits are limited. Uh Medicare for skilled nursing facility, we can see your first 20 days. This is the short-term care. Um and this is for skilled nursing. Uh this is not just for uh someone to come help cook and clean. This is for skilled nursing that Medicare will pay 100% for the first 20 days. They will pay partial for days 21 through 100. So those remaining 80 days. Um and you are on the hook for $200 a day. $200 a day times 80 days is $16,000 out of pocket. Um, and because and now if your care is much more than that, but they will pay partial partial and you are on the hook for $200 a day. Over a 100 days, Medicare does not pay anything. It’s all on you. That’s where whether it’s out of your assets or some type of insurance that you might have. Medicaid. Um, so this is a federal/state program. It could vary in every state on how much uh um you know benefits that you have through Medicaid. Um it’s meansbased uh which means if you have no assets, there is a restriction on how much assets you could have. I believe it’s on the next page here. uh but uh Medicaid is the biggest payer right now of uh long-term care, but you cannot have you can have very limited assets if you have a spousal situation. We’ll talk about that a little bit on the next slide. Uh each state establishes establishes its own eligibility rules. A few state Medicaid programs may uh programs may allow applicants to self-direct their own care. uh there’s some website sources uh for something like that. But again, Medicaid is if you don’t have assets, if you cannot afford to pay, that’s what Medicaid is all about. You will still get some type of care, but where, when, how, that’s up to uh facilities on what spaces they have available for Medicaid uh recipients. eligibility. In most states, an individual’s income must be less than the cost of care. Uh like social security typically or maybe there’s a pension. Uh the income gap uh applies in some states. Assets 2,000. You can have $2,000 in uh assets basically excluding some of these things on the bottom. Um but if you are married your healthy spouse can have assets but in your own name uh you cannot have assets. Um as you know when people ask questions about Medicaid many times this is uh you need to have a conversation with an elder attorney or some type of estate planning attorney on how to get qualified for uh Medicaid uh and legally start to give away assets or spend down your assets. But uh things that are not counted in that your home if your spouse is still living. If you are a single person, you cannot own the home. Only if your spouse is still living. You can have one car. Uh household and personal belongings. Term life insurance is acceptable to own. Medicaid compliant annuity if it’s something that you you’re getting guaranteed lifetime income from. Uh burial plots and funeral expenses. Uh strategies may include using assets that count, savings to purchase assets that don’t count, maybe using some uh savings to buy an insurance policy, a term insurance policy, transferring assets in an irrevocable trust. There is a big difference between a revocable trust, which is the standard trust that most people might have. Uh if it’s a family trust or a living trust, those are termed as a revocable trust. An irrevocable trust, you do not control your own assets. Someone else has to be the trustee of those assets. So, they are technically outside of your estate. Uh, and start to give away assets, start to gift to, um, family, friends, or whoever start to give, you know, uh, give money away. Distributing or protecting your assets in advance may help you qualify for Medicaid. So benefits are qualify for Medicaid as soon as possible, protect a healthy spouse, preserve assets for loved ones. The drawbacks ethically problematic for some. Some some people are saying that they don’t feel like they should uh need to somehow like hide their assets in some ways. For some people uh may require to give up the rights of your assets and Medicaid laws are pretty complex and again they vary per state. Another reminder that if you do have some questions, please type away in the chat box or the Q&A uh box and I will get to those at the end of the presentation.

Medicaid planning example. So, here’s an example of giving away assets. So, you transfer ownership of your house to your son. Uh the value of this home is 400,000. The average cost of a nursing home in in your area is 8,000 a month. So 400,000 value of the asset divided by 8,000 a month for this care. Uh Medicaid is saying you are not eligible for Medicaid for 50 months. 50 that maybe you should have sold the house and use those assets for care. Uh this so there are different ways or something like that. if you spoke to an attorney, how do I start to give away assets and qualify for Medicaid as soon as possible? I am uh working with a um very good client of mine actually uh out in New York and her sh her her husband is on Medicaid and now she has restructuring some of her assets working with an attorney so she can herself go on Medicaid and we’re going through some steps on all this and it’s been probably a little over a year that she’s been planning this for herself now. Um so in this case the ineligible uh ineligibility for Medicaid is a little over 4 years. So benefits of long-term care insurance. So different types of policies for long-term care. What are most people doing these days? So in exchange for a premium or a lumpsum that you might deposit into some policy. Uh there’s a contractual daily or monthly benefit that you will receive if you are in a claim for a long-term care. Especially valuable uh for middle inome Americans who want to preserve their financial independence and quality of life. Preserves freedom to choose where and when you receive this care. Uh helps protect accumulated assets. avoids the need to spend down your assets, especially if you already have um different types of policies. One of the things when I talk to people about planning, do you have other insurance policies, whether it’s life insurance or do you already have a long-term care policy? Is this still the best policy? Insurance reviews are a big part of this process as well. And are you in the right type of policy for whatever you’re trying to protect? Maybe you have family members, maybe a higher death benefit is most important to you. Maybe you don’t have uh maybe you’re unmarried or don’t have children and maybe the death benefit is not the mo most important thing. Can things be reallocated to put you in an appropriate policy? Uh so preserves the freedom to choose where you receive the care, helps protect the accumulated assets, and avoids the need to spend down your assets by having some type of insurance policy. How does long-term care insurance work? You must be in reasonably good health to get it. So when people say, “When do I get long-term care?” Basically, when you don’t need it. Um so if you are in a health situation right now whether it’s heart or lung or cognitive uh uh disabilities or something like that or some cancers or things that uh make make you not qualify, you need to get this insurance while you qualify. Uh so sooner than later to at least start investigating this. Maybe it’s something that you can afford to do. Maybe you feel you can’t afford to get some type of policy, but let’s certainly have the conversation to see if this is something that you should be planning for. Premium is based on again these are if you’re making monthly or annual premiums are based on your age and the features and benefits you choose. The younger you are, the more benefits you will get in this type of a policy. benefit is typically triggered when you become chronically ill or cognitively impaired or can’t do two of the six daily living. Feed yourself, dress yourself, bathe yourself, those types of things that if you are not able to do those, then you could be in a claim for your long-term sharing care insurance and get payments from that policy. Once the elimination period or the waiting period, typically it could be a 30-day, a 60-day, or even a 90day elimination period, which means if you are in a claim, doctor says you can’t do two or more of the six daily living things. If you are in a claim, the insurance company says, “All right, you were approved that you can start to get payments, but you have to wait this 30 days or 60 or 90 days.” So, you’ll always want to know, is there an elimination period for this? Five key features in long-term care insurance. The benefit, so the benefit is the amount that you will receive every month uh or annually to help pay for care if you are in claim. The benefit period is how long is that going to last? Is it 1 year? Is it 2 years, 3 years, 5 years? or even typically a lot of times it’s 6 years that you get this coverage for the elimination period is the waiting period to start getting the benefit 30 60 or 90 days. Uh location of care. Does this policy that you have allow you to get home care? Can you be in the comfort of your own home and have someone come to you? Maybe it’s family or friends that you’re able to pay. And maybe it’s uh someone like a company like Visiting Angels or something that will send someone to you. Uh professional um companies like that that will also uh do home care or do you need to be in a nursing home? Inflation protected? Is there increases? So, for example, if you’re buying a policy today and you’re young enough and healthy enough and you get this and let’s say your benefit is 4,000 a month, uh if you’re young enough, let’s say in 20 years, is 4,000 a month going to make a dent into that, how much is uh is care going to be in 20 years from now? So, are there some type of cost of living increases on this benefit? managing the cost of long-term care insurance. Uh the younger you are when you buy long-term care policy, the less expensive the premium. Make sure you can afford this uh premium now and in the future. Buy from a reputable company. There are many companies that we are able to use for this type of insurance. And of course, every company that we are able to even talk about are highly rated uh insurance companies. Make sure you can afford the premium now and in the future. Buy from a reputable company. Choose features and benefits wisely. Take advantage of tax incentives. So, typically if you’re making monthly premiums or annual premiums into these, many times it’s there’s some type of tax deduction. I do not have details of what is the specific situation. How much can I deduct? Talk to your qualified tax advisor if it comes to something like that. But there is a chart here based on your age on uh they it is age-based that uh on how much you can uh deduct and there are potentially some state deductions as well. Again, talk to your qualified tax advisor about how this can affect your taxes. Partnership policies that help you qualify for Medicaid. Uh key features to consider. What’s the benefit amount? The benefit period. Uh again, the amount, how much do you get every month? Uh as a benefit, how long do you have to uh how long does that last? 1 year, 2 years, up to 6 years. Benefit triggers, the two of the six daily. Many times that is the factor. If you can’t do two of those six daily living things, many times you’re in claim, and many times that’s a doctor note or something from your medical uh provider. Uh elimination period, how long do you have to wait to start getting the benefits? uh types of facilities included. Could it be home care? Could it be an assisted living? Does it need to be a nursing home? What type of uh location is this? Inflation protected. Will these premium uh the benefits increase over time? And the waiver premium. If you are making monthly premium payments into this policy and you’re in claim, many times that you don’t have to make those premium payments anymore. As long as you are in claim, you do not have to make payments. Sometimes that’s not the case. Sometimes there are you do have to continue making your payments but many times it is a waiver of premium and guaranteed renewable. Other insurance options there’s hybrid life insurance. So a combination that I said earlier a combination of life insurance and long-term care or a deferred annuity with a long-term care rider. And we’ll touch on both of these. So, a hybrid life insurance uh linked benefit long-term care rider uh chronic illness or critical illness acceleration rider. Here’s what all this uh means. There’s positives and negatives uh of of course, but uh if you are looking to get an insurance to cover two different events, a death benefit and a long-term care benefit, if you had one policy for a death benefit alone, and you had one policy for a long-term care benefit, that death benefit would be higher on that single policy and the long-term care benefit would be higher on that single policy. But if you have a hybrid, you’ll be covered on both, but it could be a little bit lower for uh for the benefits of both of those. But you are getting two uh cover coverages in there. And that something is going to someone. If you need it for long-term care, it’s available to you. If you never needed it for long-term care and you passed away, that benefit is going to someone for a tax-free lump sum death benefit. So the positives, the premium is guaranteed and won’t increase over time. Flexible premium uh payment options. Many times we do a lot of lumpsum things. Uh that they’re very common these days, especially if someone can afford if someone cannot afford that. Uh there are some monthly options, but again, typically I’m going to be looking at more hybrid options uh than your standard long-term care uh because they’re just more affordable and it make have a lot more benefits attached to those. Um maybe easier to qualify um for coverage than a traditional long-term care policy. Might allow for you uh for you to pay family members who cares for you. There’s a big difference on many different policies where it might be indemnity payments or reimbursement payments. Here’s the difference on that. Uh some policies offer indemnity payments. So let’s say hypothetically you’re getting 5,000 a month benefit that’s coming to you if you’re in claim. An indemnity payment means that you get 5,000 a month direct deposit tax-free if it’s for long-term care and you use it as you choose. If you want to have a family, friend, or someone, whoever, just to come to the home and help care for you, you can pay for them out of this 5,000 uh or if you for whatever purpose, maybe you need to get a wheelchair accessible vehicle and you’re going to make a monthly payment. Yeah, you can use this uh premium for something like that as well. You can use it for whatever you need. If it is a reimbursement payment, that means you pay let’s say the 5,000 a month that you’re that you need to pay for some care and you get reimbursed. You have to submit receipts and that means it cannot be family or friends. It has to be a reputable company uh that uh that does this and like you’re visiting angels or something like that or whether you’re in a nursing home but you are getting build you’re paying it you submit that receipt and you get reimbursed. So there’s a big difference whether it’s indemnity payments or reimbursement payments deferred long-term care annuity. So, there are uh you can kind of look down this list here, but basically what a long-term care annuity is. It’s a fixed annuity which earns a gu uh an interest rate uh for a period of time for as long as you own it. It’s just earning interest uh tax deferred interest and it’s growing growing growing over time and you have a long-term care writer. An example of one of the policies that I’m able to offer in this type of an annuity is it’s a lump sum deposit. In this specific case, let’s say a h 100,000 goes into this policy. It is immediately available if you qualify for 300,000 of long-term care coverage. So day one, you put a 100 in and it’s worth 300,000 of long-term care insurance. And year two, year three, let’s say it’s just growing over time. Let’s say some years down the road, let’s say your 100,000 has earned interest. Let’s say it’s worth 125,000 um in value. So, it’s because it’s been earning interest. Now, your long-term care benefit is still three times that, which would be 375,000 of long-term care coverage. And then that payment back to you is divided by 72 months, which is 6 years of coverage. And that would be how much you could receive in a monthly benefit from this policy. So you put money in, it earns an interest rate. Now, how how does this pay out? What if you don’t need it? So it pays out this uh I’ll even do a very quick calculation. Just if I said 375,000 divided by 72 payments is $5,28 a month. That’s what you would get from the insurance company. If you use that for six years, that’s what the coverage is for in this specific example. Um, you would have gotten 375,000 for long-term care coverage out of that for 6 years. What if you never needed that policy and you passed away? Uh, that let’s say that example of the balance was 125,000. If you passed away, someone’s getting the 125,000, whoever you name as the beneficiaries. So, um, but there is certainly money going to someone. Uh, but that’s basically what a, um, an annuity with a long-term care rider. I do those as well. Um, and I do the hybrid life insurance/long-TM care, many of those as well. Uh, tax-free HSA distributions. You’re able to use um, HSA health savings accounts for potential long-term care needs. uh withdrawals for long-term care. So, if you are if you have this money, if you have an HSA account available, maybe you have a high deductible health care plan, typically that’s why you would have an an health savings account is with a high deductible savings or a high deductible uh uh health care plan like we do here at Alliant. That’s what our company offers. It’s a high deductible, so I’m able to contribute to an HSA account. And if there are funds in my retirement down the road and I want to use those uh for some long-term care, uh I can certainly do that. And those are tax-free withdrawals. Begin planning today, whether you’re healthy uh while you’re healthy enough to take advantage of all the options. And again, if you and I do get together and have a discussion, we could certainly talk about your future plan. Maybe it’s for retirement, but what if uh what if you passed away? What’s the death benefit of all of your assets? And who are those going to? Is it going to be a spouse? Is it other children, family, friends, whoever those are? I want to make sure that whether you are here, you have enough assets to live on in retirement. If you’re not here, where does all that go? And how does it go? What are the best tax advantages for all of these things for beneficiaries? and what if you have health care needs like long-term care or not. And we’ll look at all of these different scenarios for this comp complimentary plan that I will offer you uh while you have enough time to plan for Medicaid and accumulate funds in your health savings account and to relieve your family of the burden of making these decisions. So, long-term care planning checklist, you can see here uh just again everything that we talked about here. I would love to have this one-on-one conversation. uh work with us, use us, we are a free source to you on doing financial planning. uh it is not an obligation uh as we get t you know if we do talk about what do we do that’s what this page has on here I am a full financial services uh advisor here with the credit union whether it’s looking at how do I invest where should I be should I be more aggressive should I be more conservative um and there’s many different types of uh investment options that we can select from uh every anything that is available I can offer full financial services, including all of this planning for whatever your life may uh throw at you. Uh I do life insurance, I do long-term care insurance, I do all of the protection things like that. Um and it’s all available to you. So hopefully you will say yes at the end of this presentation and have a one-on-one conversation. With that, I’m going to take some questions. I know I have a um a good number of them here right now. I’ll try to get hopefully to all of these uh before our time is up. But uh as I’m going through the questions, you have you can see on the screen there the QR code. If you have your phone handy and you want to hold that up to your camera up to that, just tap on the little yellow tab that comes up there and you will have access to my calendar and you can schedule a time and you can even do that right now if you so choose. I will be putting up the survey otherwise and just basically saying would you like to set up an appointment and with that uh um you know so if you say yes on there well of course I’ll reach out to you and we’ll get something on the calendar. Uh so I’m going to launch the poll here.

So hopefully you see that up on your screen right now. So select yes if you would like to have that conversation. Um and then uh while you’re doing that I will go through the questions that I have. Do the costs you are um presenting include meals? So, uh, possibly some, uh, have like it’s all-incclusive, which means your room and all the meals are, um, I can’t say that every service will include meals, but many of them, especially if you are in like a nursing home and you’re paying an 8 or 9,000 a month for some of these, yes, that would include the meals. I can’t say that for every facility, but many times, yes. Uh, who had the information to review insurance options? Um, not sure. I have your name on here. What what you’re asking here. Who had the information to review insurance options? I’m not sure what what that means. So, I have your information. I would I can certainly get some more clarification on that from you. Uh, please repeat the link for nursing home comparison. Uh if you don’t mind any everybody, I’m going to might make you a little dizzy here, but I’m going to go back to the screen uh with the the link. Let’s see if I can get to it. Sorry for the busy screen here.

soon as I get back to the Medicaid.

If you have your camera ready while I’m about to bring this up, you can take a screen a picture of the screen as soon as I get to it. And hopefully it’ll be here within the next page or two here. If it doesn’t pop up here, this might this is might be the one that you’re looking for. Uh so if you have your camera ready or I’ll just leave this up while I’m going through some questions here. So that is for the uh for comparisons.

Uh let’s see. At what age should one obtain long-term care insurance? Uh some will argue that if you’re in your you know even early 50s because it’s very inexpensive. It’s much less expensive the earlier you do it. Someone might say, “Well, I haven’t accumulated enough assets yet to do something like this.” And maybe, you know, the average is probably in the early 60s, sometimes a little higher. I could say that if you are 70 or older, you can still get this many times up to age 75, but insurance companies will start to dig a little deeper. uh if you are 70 or over they will do a cognitive call many times where someone will call you and do and check you out a little bit. They’ll ask you a bunch of questions like for example they will say um they will give you a list of 10 items and can you repeat the 10 items? Not necessarily that you have to remember all 10 of them. It’s did they even did you understand the questions that they were asking? So some they will do a cognitive call. So it is a little harder to get approved on some of these especially um if there’s a beginning of any any cognitive uh um areas there. But uh uh but you know as far as what ages typically in the early 60s might be the most common. Uh I’ve done many in the 50s as well and especially with people with assets. Um, the most common type of long-term care policies that we do, even though we do some with some type of monthly or annual payments, uh, we do a lot of lumpsum options, which means people might have enough assets to say, “All right, I have enough assets. I think I might be able to self-fund, but what if I earmarked a h 100,000 toward this long-term care policy? Still doing something, still working for you. Uh, but it might be earmarked for an enhanced benefit for long-term care or a life insurance. Uh, so we do a lot of those types of policies. Uh, what are the reasonings for having an elimination period? It could be because maybe you just had a short-term uh, issue. Maybe it was uh for example, sometimes people will go into a claim on a let’s say a hip replacement where they need some care. So let’s say that let you know if you did a hip replacement but it was let’s say magically better within a 60-day elimination period. 2 months later you’re okay. It will not pay out. Um, but if you had an issue where maybe it’s 6 months to a year or longer that you’re you need care, you can go on claim. You have to wait that 30 or 60 days, that elimination period, and then you get payments and if you suddenly are better, maybe that HIP is now improved or you’re able to do things on your own, you go off of claim and then funds are available to potentially go back on claim. So, you can go on claim getting money from the policy, go off claim because you’re better, and then potentially go back on claim if that happens. But the elimination period is to avoid any shortterm things that might have happened uh that the insurance company will have that period of time where okay, we know you’re in claim, but just in case you’re better in the next month or two. Typically, if it’s a long-term care situation, you’re probably not going to get better, but that’s the purpose of the elimination period. Uh, can I buy while living in one state? But what happens if I move? Yes, you can. Uh same thing with you know life insurance things are state um you know uh you know stateaterun especially when um uh you know if so someone buys life insurance I’m in Illinois if I’m doing a policy for someone that lives in Illinois I go by Illinois rules of buying a life insurance policy for someone um but if you move to another state absolutely it would still pay out a death benefit would still pay out for long-term care. Yes, you can move.

Oh, sorry that uh changed the screen there. Uh can I buy uh what happens if you move? Uh can you update uh the stats uh in your desk? For example, the 2026 uh HSA contributions have. Okay. All right. So, uh, yeah, I’ll have to look at the HSA contributions on there and see if we could have our our admin person change, uh, some of those numbers. So, I apologize on that. Uh, what’s on the screen is Medicaid, not the nursing home evaluation link. Uh, we’ll see if I could find that. I think I just have I’ll still try to do that. Let me see. I had a long question here. Uh when you say qualify for Medicaid as soon as possible, what do you mean by that? My grandfather is 80 years old and he wants to pass uh in his home pass in his home with care uh to in his home does uh he does does own his own home and from what you described he will have to give away the assets in order to qualify for Medicaid. uh since the spouse is disease his main asset is the home fully paid. I am his caretaker and he is still uh able to do a lot on his on this the right is this the right time to start planning for Medicaid. So there could be the reason I say as soon as possible is there could be a five-year look back for Medicaid. Uh so if you’re applying if all of a sudden uh someone applies and says I have no money, I have nothing. Um but uh you just gave everything away a month ago or 2 months ago. Um maybe that was legally maybe some people will do some things to hide assets. Uh so everything does have to be done correctly and but there could be a 5-year look back on these. as an example, if he assigned the home over to someone else. Remember when it said that 400,000 home because if care is average of 8,000 a month, that was 50 months that you would not qualify for Medicaid. So, that’s one of those you need to start planning that. And I would highly recommend an elder attorney or an estate attorney to figure out um how and when and where to uh where assets can be. Um I will have to get back to I’m going to make a lot of people dizzy as soon as I uh if I can get the nursing home evaluation link. I’m still looking for that one. Um but if not I can please reach out to me if I don’t have your information and I will get that information for you. Um other than that I think that is all. Uh can you go over the HSA process again? Uh so I cannot share the slides. Someone just asked if I can share slides. I am not able to. Um I’m looking for the nursing home comparison. I will try to find that. I have your information here. I will get back to you with the I can do a screenshot of a link and I can get that to you so you’re not waiting for me to find that page. Uh the HSA process is if you have a health savings account and you have funds in this that maybe it’s even invested or just earning an interest rate, you’re able to accumulate assets in an HSA account. And basically, for example, myself, I have an HSA account that I put this money in pre-tax. So, it comes out of my paycheck. And our company actually provides some of that, too. So, it’s all pre-tax going in as long as money is used for health care and long-term care is acceptable for this that you’re able to use assets from your HSA account and uh um and put money and use it for long-term care. Let’s see if there was anything else. Uh what’s on? It’s the Medicaid, not the nursing home. So again, I will get to you that information. Uh okay. So we’re just past 3 o’clock. I appreciate your time so much. Thank you. And I hope that we’re going to be having a one-on-one conversation soon. We’ll talk to you all soon. Have a great rest of the day.

Well, hi everybody. We’re going to go ahead and get started. Uh, my name is Kim Kennedy and with me today is Malcolm Horn and we are financial consultants with Alliant Credit Union. We get the question often, do we really work for the credit union and we absolutely do. We work in the Alliant Retirement and Investment Services division of Alliant. Both Malcolm and I are based in Denver. We have offices in the Denver Tech Center and also on the west side of town in Lakewood. Clearly, if you’re joining from another state, we can do virtual appointments or even within Colorado, we have a lot more people wanting to do Zooms instead of face to face. So, we get that. Um Malcolm is going to be walking you through the webinar today. So, thanks for spending some time to learn about taxes. At the end of the webinar, we’re going to answer all of your questions. So throughout, feel free to put your questions in the the chat or Q&A box at the bottom of your screen. You will get a follow-up contact from Malcolm or I after the webinar, usually within a week or two, just following up, making sure your questions got answered and seeing if you need any help with your retirement planning or tax planning. We have a couple webinars coming up and the first one is Thursday, July 16th. That’s going to be on Roth IRA conversions. This has been a really popular topic just like taxes. Everybody’s concerned about that going down the road. Uh not that a Roth conversion is appropriate for everybody, but we’ll walk you through the different scenarios and um let you let you see what you think. And then the next one is Thursday, July 23rd, and that one is IRA planning. Just the different types of IAS. How do you utilize those in retirement? And if you’re interested in either one of those, feel free to watch for those emails coming through and sign up for either of those. We also have some resources available to you.

Malcolm and I aren’t the only consultants doing webinars. Our colleagues across the country are also doing the same thing we are. So, if you go to our website, uh, aerys.alliancreditun.com alliancreditun.com and click on the events page. You can see all of the webinars that are occurring and you’re free to attend any of those. So, if there’s some topic you want to get smart on and you see an upcoming webinar, feel free to sign up. Same thing with our podcast. If you’re looking for a piece of information, we produce a podcast inhouse and we store all those historical ones on our podcast page. So, again, take a look there. And then lastly, both our website and blog contain just a barrage of information about various financial topics. So again, if you’re looking for a little more information or confirming what you thought on a specific talk topic, either any of these places are a great place to go. So with that, I’m going to turn you over to Malcolm and he’s going to walk you through taxes and thanks for spending part of your day with us.

Thank you. Thank you, Kim. All right. Well, let’s get started. And again, thanks for attending today’s webinar on taxes. And before we jump into taxes, I like to start with a a little bit of a brain teaser. So, you have Bill. He’s retired, 64, and he has taxable income of around 50 58,000, which puts him in a 22% tax bracket. that includes 45,000 that is taken from his IRA, 37,500 that is getting from social security. And he decides, hey, look, I’m retired. One of my favorite bands is playing and I’m going to take $1,000 out of my IRA to cover whatever expenses, the tickets, the gas, the food, whatever. And so he says, “Well, I’m in the 22% tax bracket, so I’m going to withhold 22% from that $1,000 that I take out of my IRA.” And so you would think, “Yeah, right. 20 You’re at 22% 22% of $1,000 is $220. That’s the amount of taxes that you would think you would pay on that.” Well, is that really true? And the reality of it, it’s wrong. He’s actually going to owe 40.7% tax rate on that $1,000 that he takes out of his IRA to go see a concert. We will discuss this later in today’s presentation and show you why it was 40%. So, whenever you’re dealing with taxes and you’re dealing with something very very specific regarding taxes, we always say please seek professional advice. And especially when you’re dealing with traditional IAS, money that’s in traditional IAS, whenever you take money out, you’re going to be paying taxes on it. Roth IAS, as long as you’ve had it for 5 years, you’re over 59 and a half, all interested and earnings is going to come out taxree. This presentation is going to be focused on federal taxes only. Some of you may have to pay state taxes, but just be aware of that. This presentation is purely federal. And so you might be, well, why are you doing a a tax presentation? Well, we do not do taxes, but we need to know the tax code to help people plan for the future, plan for retirement, plan for Roth conversions, plan for those capital gains that you might be faced with. And so today’s webinar is going to be purely educational and focus on things that we think are very important when it comes to your situation. And also in while you’re working, you’re in the we call it the accumulation phase. You’re working, you’re saving, but once you hit retirement, you’re in this distribution phase, which is a completely different tax code. Well, that tax code is the same, but you’re going to be faced with different kinds of taxes that you weren’t subject to while you worked. For example, in retirement, your children have probably moved out of the house. They’re independent. You don’t get to write them off anymore. Maybe you’ve paid off the house and you no longer get to deduct the mortgage interest. You no longer get to contribute to the 401k because you’re no longer working. So, that’s another way that reduces your taxable income. But in retirement, now you’re going to be faced with how’s my social security test? Oh, wait a minute. I’m going to be required to start taking money out of my retirement accounts and be subject to required minimum distributions. How do I pay for long-term care? Or what about health care expenses in retirement? So, you’re walking into this new complex world of taxes that you weren’t previously faced with while you’re working. So the problem that we run into is people often pay more taxes in retirement than expected because the system is confusing. There’s various types of income that you might be receiving, but then there’s also these hidden taxes and penalties that you need to be aware of in retirement. And so people just don’t understand these hidden taxes and penalties and they pay more taxes than they need to. So, we want to help you develop a solution. We want to help you kind of show you these these hidden taxes or penalties so you can come in and say, “Hey, we want to avoid paying these additional taxes in retirement.” So, and also there’s when we talk about taxes, we’re going to be talking about four different stages of retirement. First one is pre-retirement. you know, people between the age of 50 and 60, you’re still working, you’re still saving, but you’re on the brink of retirement. Early retirement, ages 60 to 70, it’s kind of your go- go years. You’ve retired, you’re active, you’re traveling more, doing more things. Middle retirement, 70, 80. It’s kind of the go slow years. You’re still travel, you’re still playing golf, but maybe not as active as you once were. And then late retirement is 80 plus. You you’ve done all your traveling. you may not be playing golf or pickle ball anymore. It’s kind of this late retirement. So, these four stages of retirement. And then also I also want to make sure that you’re aware of you could have the best retirement plan put in place, but there’s always going to be surprises along the way. For example, inflation. Cost of goods are going to increase and there’s nothing we can do about it. You know, longevity. You might live longer than you expect. My grand my wife’s grandfather lived to 99 and 9 months. His expectation was like, “Ha, I I I don’t expect to live till 70.” He lived to 99 and 9 months. Expenses, you might have high expenses in the first 5 10 years of retirement and then hopefully maybe they decrease, but there’s always going to be unexpected expenses that pop up. And then healthcare, you know, my wife’s wife’s dad worked till 70 and their plan was to travel the world and then a healthc care arose that the next two years all it was was doctor visits. So there’s always going to be surprises along the way when it comes to retirement. Okay. So what’s the first thing you need to understand about retirement and taxes? You have to know what your after tax retirement savings picture looks like before retiring. Well, what does that mean? Well, you save in the 401k. You put money into the 401k. And let’s say hypothetically you retire. You have 500,000 in the 40k. You’re like, “Awesome. I have $500,000.” But the reality of it is don’t forget you’ve been putting money in pre-t all these years. You’ve been putting money in pre-tax. When you start take that money out, you have to say, Uncle Sam says, “Hey, I’ve been giving that benefit to you. I want a piece of it.” And if you came in and took all that money out at once, you could be subject to a 35% tax or 37% tax rate. That just means that’s the highest tax rate that you could be possible up to. So be aware is that when you take money out, you’re going to pay taxes. Depending on what your taxable income is, depends on the taxes you pay. So maybe it’s saying, “Okay, I have $500,000, but I’m going to spread it out over 30 years. And maybe you’re able to spread it out and be in a 12% tax bracket or 22% tax bracket.” So just be aware the way you take money out of that that retirement plan determines what well it’s added to your taxable income for the year and depending on what your total taxable income is depends on the taxes you need to withhold from that. Now there was this thought in 2026 the taxes were going to go up um because the the TCGAA was going to expire. Well, they came in and permanently extended that. And permanent just means that, hey, there’s no expiration date on it, but Congress could still come in and decide, hey, in 4 years, 10 years, 15 years, decide to uh change the tax code. So, as of this point, for the next 3 years, we know what the tax code looks like in regards to taxes are not going to increase. We’re on the same tax brackets as we were the last 10 years. They also increased the standard deduction. So in 2026 as a single person your standard deduction is 16,100. As a married it’s 32,200. That just means that this is the amount of taxable income that you can have and none of it’s going to be taxable. So you can have for a single person you could have up to $16,000 $16,100 of taxable income and that standard deduction means that you don’t pay any taxes on that. But any additional income above that you would be paying taxes on it based on your brackets. Okay. Well, at least I still have social security to supplement my income and supplement my income and Medicare to pay my health care costs. And that’s true. But you need to be aware of some social security and Medicare traps, tax traps, and you need to plan for them. And what are they? Let’s first talk about social security. Remember that example where Bill went on that went to concert, he took $1,000 out. Let’s specifically look at that. So before the concert trip, he had $45,000 of taxable income or sorry, he had $45,000 he took out of the IRA. Now he took out 46,000. He took additional $1,000 out. So that’s the the only thing that increased. He he increased withdrawal from his IRA by $1,000. But because he took $1,000 out of his IRA, it caused 85 85 cents more of his social security to be subject to tax. So every dollar he took out actually a $1.85 was now added to his adjusted gross income. So that $1,000 increased his taxable income by $1,850 which that is where we’re getting this 40%. So this additional tax liability because now he’s paying more taxes on social security, we need to take into consideration on that when it comes to his tax liability. And that’s why if you single that $1,000 out where you come up with the 40%, it’s because there’s you have to pay they’re they’re collecting tax on that additional social security income that you’re receiving. So when you look at the tax brackets and if you’re married filing jointly, if your provisional income, which is your addressed gross income plus one half of your social security benefit and any tax exempt interest, if it’s over $44,000, that means that 85% of your social security is subject to taxes. Now, this is not a 50% or 85% tax. It just means that portion of your social security isn’t including your adjusted gross income. And depending on your adjusted gross income determines how much tax liability you pay on social security. The thing that sucks about this bracket is that you’re looking at something that’s over 40 years old that’s never increased. the first bracket of 50%. They started taxing social security in 1984 and then they added a second layer of tax liability in 1993. And this bracket has never increased for inflation. So every year it just catches more and more people because this has never been increased for inflation. Now, in this new tax bill that was signed last year, they did come in and say, “Hey, we’re going to add a bonus deduction for seniors over 65.” They spent it as, “Hey, we’re not going to tax you any of your social security.” Well, your social security is still subject to tax. They just came in and added a bonus deduction to help offset some of the taxable income that you might have. So, if you’re over 65, they’re giving you $6,000 per person. Now, there’s phase out limits. So, if you’re a single person and your income is over $175,000, you don’t receive any of the $6,000 the additional standard deduction. Joint, it’s 250,000 or more. So, if your income is over modified adjusted gross income is over $250,000, then you don’t receive any of this bonus deduction. But if your income as a single person is below 75,000 then you receive it. If you’re joint 150 below you receive 12,000 6,000 per person. This is a temporary bonus deduction. It does expire at the end of 2028.

Now there are different approaches to retirement. Some people might say, “Hey, I’m going to completely retire altogether and not work.” Some people might come in and say, “Hey, I’m going to slowly go into retirement. I’m still going to work part-time, my current job, and then slowly pass out or kind of slowly exit out.” Some people might come in and say, “Hey, I’m just going to retire, but I’m going to do something that I love, that I’m passionate about, and it’s not based on whatever income I’m making.” Or you might just retire and volunteer altogether. So when you think about social security and you think about the good, the bad, and the ugly when it comes to social security and you kind of in these different retirement stages, let’s talk about social security. The good of social security, when it comes to determining your social security benefit, they look at the highest 35 years of earnings. So, if you’ve, you know, maybe you took some time off from working and you have zeros within your working career. If you work within retirement, you might be replacing some of those zeros, which might increase your social security benefit. That’s good. The bad is if you decide, hey, I’m going to work part-time. I’m going to decide I’m going to take social security early at 62. You there is something called an annual earnings test. And in 2026, you can make up to $24,480 before they start withholding some of your Social Security benefits. So for every $2 above that $24,000 amount, they’re going to withhold a dollar of your Social Security benefit, if you’ve taken Social Security early and you still have earned income. Now, they will recalculate your benefit depending on these earnings, and you might see an increase or not, depending on if it replaces any of your lower earning years. But just be aware of this. Now, once you hit full retirement age, this annual earning test goes away. So, again, just something to be aware of when it comes to, hey, if I’m going to take social security early and I’m going to work part-time, you’re going to be subject to this annual earnings test. The ugly to social security is that hey let’s say you’ve paid the max into social security for the last 35 years and you decide hey I’m going to work part-time you’re still going to pay into social security part-time but you’re not going to see any benefit to it because you’ve already paid the maxes to social security. So that earnings that’s being calculated within your benefit does not increase your social security benefit. So that is the ugly to this. So, if you’re self-employed and you’ve kind of paid yourself the max o over all these years, you might consider, hey, I’m self-employed. Why am I paying to social security if I’m not going to see my benefit increase? I know there’s a reasonable income that you have to pay yourself depending on what your position is, but it’s something to kind of talk to you about, talk to to your accountant about if you’re self-employed. All right, let’s talk about Medicare and taxes. So, watch out for something called the Medicare Irma cliff. And what is this? We actually do a full webinar on this app, but let’s use an example. Georgia Martha, they’re on Medicare. They’re they’re part B and part D. And in 2024, they had $342,000 of modified adjusted gross income. In 24, they also sold some stock for $1,000 gain. And capital gains tax is 15% because they were over 250, they were subject to additional 3.8% net investment income tax. So the tax rate on this $1,000 is 18.8%. Right? Well, if you look at the Irma brackets and Irma is based on Irma is tied to your Medicare Part B and Ded premiums based on the amount of income you make, your premium that you pay towards Medicare increases. So in this case, because their modified adjusted gross income went to $343,000, their part B premium increased from 405 to $527. Their Part D increased also. They went from 37.50 to $260 for Part D, which is prescription drugs. So, when you look at this, and remember, you sold $1,000 of stock that caused your your modified adjusted gross income to go into a higher Irma bracket, which caused your part B and D premiums to increase, and it’s per person. So, they saw an additional $3,470 increase on their Medicare Part B and D premiums. So when you add that plus the 18.8% tax, it triggered the real tax rate of 365,000 365% tax liability on that $1,000 that was made on that sale of the stock. So the the 188 plus the new Medicare increase for premium cost $3,658. Now, the hard thing about Irma is that it’s always a 2-year look back. So, right now, if you think about 26, they’re not going to look at your income until 28. So, with them, it was like, “Yeah, we did in 24, but now our premiums went up. Why?” Well, it was because of the stock sale you did in 24. It’s always a 2-year look. Now, I’m not going to get into a lot of this, but biggest thing to point out when it comes to Medicare, make sure you’re enrolling on time. understand when you need to enroll on Medicare because if you do not enroll on Medicare on time and you miss your window, they will come in and penalize you 10% of the base premium for life. So going back to this example of Jim and Nin, if they missed their Medicare enrollment and were like, “Oh my gosh, missed the Medicare enrollment.” they next year they signed up for it, Medicare’s going to come in and say, “Hey, you missed your enrollment period, so we’re going to subject a 10% penalty to the premium.” So, if you look at in 2026, if they miss the premium, that’s an additional $20 times 12 months times two people, that’s an additional $500 that they’re paying each year. That’s going to increase by inflation each year. It could be a lifetime over $10,000 mistake. So, make sure to enroll on Medicare on time. Understand when your windows are to enroll. What are the tax drops? This is a very common question we get a lot. How and when to use your taxable, tax deferred, and taxfree assets to manage your income and tax brackets efficiently. Very common question. Let’s use an example. So pick on Sam and Mary. They both have money in the IRA. They both have money in Roth and they have 300,000 in the savings. The conventional wisdom is, hey, I’m going to spend my cash out first and then spend my IRA and then spend my Roth if I need it. That’s the conventional wisdom. So when we run an analysis that showing them showing them spending their cash down, this is a projection of what their assets look like. And so it shows where the assets are and they’re going to continue to increase because they’re not spending they’re not really spending what they’re making on their assets. But let’s change it up. instead of spending your cash first, let’s actually spend your qualified money first and see if there’s any benefit to that. And there was there’s actually a benefit to them. Their net worth increases by over $200,000. So, there was a benefit to spend IRA down. And what probably one of the reasons is that if they’re spending IRA money first, it’s helping them reduce the future tax liability down the road. There’s been so many studies regarding this type of strategy. Do you do spend your cash first? Do you spend your IAS? So you can Google any of these studies and read this white page on what’s the best way to do this. Another alternative approach would be, hey, let’s spend your taxable money but also do Roth conversions at the same time. And if we do that, then we increase their net worth by almost $700,000. So there’s better strategies that are out there in regards to how to spend your money in retirement. And you say, “Well, wow, that’s 700,000 more. How’s that the case?” When you get into the weeds of this, when for their situation, if they’re spending their cash, they pay really no taxes at all that first like 10 years. But if we do a Roth conversions, yeah, you’re paying taxes up front. But the biggest benefit is when they’re in their 80s and if they just spend their cash first, their tax liability is almost $20,000. But by doing Roth conversions, their tax liability is $10,000. So you’re reducing your tax liability for future years down the road by doing those Roth Roth IAS, Roth IRA conversions, and creating this tax-free bucket. Now, everybody’s situation is completely different in regards to what they want to spend in retirement and what their they want their retirement to look like. So, it’s it’s a matter of what’s your goal when it comes to spending your money. Roth conversions is where taking money out of your IRA, you’re moving it over to a Roth IRA. You’re adding that tax your whatever you moved over is added to your taxable income for the year. So, again, example, Jill converts 100,000 from her IRA to Roth. 100 th000 100,000 is added to her taxable income for the year and she’s paying taxes based on whatever her tax rate is in that year. Another strategy that people talk about is filling up the bracket or filling up the bucket when you come in and say, “Hey, like I’m I’m in a 22% tax bracket, but I actually can convert about $50,000 and still stay within the same tax bracket.” That’s filling up the bracket. And here’s an example modeling what that looks like. So every line you see here represents a different tax bracket. So that yellow is saying this is the amount you can convert and still stay within a 22% or 24% tax bracket. So, we’re able to model that for people and say, “Hey, this is the amount you can convert and still stay within the same tax bracket and show what what is the benefit.” The benefit by doing conversions over the next 5 years. That’s $112,000 $112,000 that you are not giving to the IRS, not giving to the government. Also, you should look for low income years when it comes to Roth conversions. If you’re retired and you’ve decided, hey, I’m going to wait till age 70 to take my social security and my pensions, maybe that you have five years where you really don’t pay you pay very little taxes. Maybe those are good years to do conversions. Or you’re self-employed, you have a kind of a crabby year, low tax liability. Maybe those are good years to do Roth conversions. Or maybe you have high non-recurring medical bills. Let’s talk about that a little bit. you can you can deduct medical expenses above 7.5% of your adjusted gross income. So, let’s use an example. Let’s say your mom’s in the nursing home. She’s 80 years old and her out of pockets out of pocket expense is almost $10,000 a month. Her adjusted gross income right now is $60,000 and she has 500,000 in IRA. She has 500,000 in a non-qualified account or savings, CVs, whatever the case. Without doing a conversion, her income is 60,000. She’s able to deduct anything above 7.5% of that based on the medical expenses she has. So, if that’s the case, then her itemized deduction is $115,000. So, in this year, she pays no taxes. Well, let’s add a tax. Well, let’s do a conversion for her. If we come in and convert $60,000 converting, she still has access to the money. So, you’re not removing the money from her kind of assets to be able to use. So, now her taxable taxable income is of 120,000. She’s able to itemize 113,000 because of her medical expenses. So now her taxable income is $6700. That puts her in a 10% tax liability. So her tax liability is $670. That’s what you would pay taxes on a $60,000 conversion. She still has access to that money to be able to use. But if something happens to your mom, this is money that now gets passed on to you all taxfree. So, it’s another way to use the tax code to help reduce future taxes.

But you have to ask yourself, what’s the most what’s your goal? What’s your goal when it comes to doing Roth conversions? All all of this, everything we talk about, what is your specific goal? If you’re single, have no kids, and this money is going to go to charities anyways, like why do a Roth conversion? If you’re trying to pass on money to the kids as much as possible, maybe it makes sense for you to do a Roth conversion to pay less taxes than what your kids may pay. So, what is your goal when it comes to this money? Some there are some other possible approaches to managing tax brackets. You know, again, if you understand what your tax what your taxable income is and you need more money, maybe take money out of your Roth IAS. For example, if Bill took money out of or the the first example I use with the guy going to the concert, if he would have taken money out of his Roth IRA, he wouldn’t have had any tax liability and he would have saved over $400 in taxes.

selling highly appreciated stock for no capital gains tax. Yeah, I don’t know if you’re aware, but there is a way for you to sell appreciated stock and pay no taxes on it. Now, you have to be below a certain tax bracket. For a single, it’s 49,450 and for a married, it’s 98,900. Now, how this works is this. If you’re a married couple and your taxable income is $40,000, you can have up to $58,900 of capital gains and none of that be subject to capital gains tax. Now, once you go go over that $98,900 number, that’s when you would start paying capital gains tax. So again, going back to my example, if you’re a married couple, you have $40,000 and all of a sudden you sold a house and made $60,000 of gains, that puts you at $100,000. So $1,100 of that would be subject to a capital gains tax. So those are the numbers you need to stay below to have no capital no capital gains subject to taxes. Also, again, look at your tax brackets. And if you’re in a low tax bracket, maybe it makes sense to do a Roth conversion or take money out of your IAS and 401ks and pay less taxes on it than in the future.

If you’re still working and you have a health if you have access to a health savings account, highly encourage you to contribute to it. And the reason I say this is because the money go in the money that goes into a health savings account goes in pre-tax gross tax deferred and when you use that money for medical expenses it comes out tax-free. Huge benefit. Now let’s let’s move on to charitable giving and tax planning. So Albert and Shirley, they’re in a 24% tax bracket. They give $5,000 to charities. they have $15,000 of existing itemized deductions. Well, in 2026 there, for you to itemize, you need 47,500 to do so. So, this $5,000 that they’re giving to charities is not really giving them any benefit. Now, with them being over 70 and a half, there’s something called a qualified charitable distribution. You can give $111,000 out of your IRA directly to a charity counts towards an RMD if you’re RMDH and none of that is added to your taxable income for the year. So what’s the cost of doing a non QCD contribution? So charity gets $5,000. 5,000 is satisfies the RMD. 5,000 is reported as taxable income. And if you’re in a 24% tax bracket, that means you pay $1,200 in taxes. And so really the cost to give to a charity is $6,200 cuz the IRS took their 1,200. But if you come in and say, “Hey, I’m going to give this money directly to a charity.” Then the charity gets $5,000. The $5,000 satisfies RMD. It’s not included in your taxable income. So it’s excluded. So, your tax bill on this 5,000 you’re giving directly to the charity out of the IRA. That’s there’s no tax liability. So, the charity still gets the $5,000, but you just saved yourself $1,200 by doing a qualified charitable donation. So, again, this is another way to help reduce some of the tax liability that might have. Okay. Well, I hope to have assets to pass on to my family. How does retirement tax planning figure into this?

So, if you inherit an IRA, you used to be able to stretch it over your lifetime. That is no longer the case. If you’re a non-spouse beneficiary and you inherit an IRA, you have to take it out over a 10-year period. So, you let’s use an example. Pam, 65, has son 40 years old. Pam dies, leaves her son, 100% of her IRA, it’s $400,000. If we use the 6% average rate of return on this again, if he comes in and says, “Hey, I’m going to take it out annually over a 10-year period,” that means he needs to take about $55,000 out of that IRA each year for that IRA to be completely liquidated. or he comes in and says, “Hey, I’m just going to take the minimum years 1 through 9 and then in my 10th year, I’m going to completely liquidate it.” Well, in the 10th year, it’s going to have to take over $700,000 out, which would automatically put him into the highest tax bracket. So, taking the money out, spreading it out over 10 years, would probably be a more beneficial way than coming in and saying, “Hey, I’m just going to take it all out in the 10th year.

Now, let’s talk about taxes and long-term care. If you have a traditional long-term care premium, uh, sorry, if you have a traditional long-term care policy, the premiums that you pay might be deductible, and any income you receive from those policies are going to come to you taxree. But the traditional loan to care path is more like car insurance. If you don’t use it, well, the insurance kept your money. We’re seeing more and more these hybrid policies. The hybrid policies are more like permanent life insurance. You pay into it. If you never use it, this money goes to a beneficiary all taxree. But let’s use an example of Florence. She qualifies for long-term care. She receives 60,000 a year in inhome care benefits. She has 20,000 from social security. She has 400,000 in IRA. And then she has a life insurance policy that has um 500 thou a $500,000 life insurance policy with long-term care rider that gives her $10,000 a month. So, so scenario one, she comes in and says, “Hey, I’m going to use my IRA to pay for these costs.” And when she passes away, the beneficiaries So, I’m going to sorry, sorry, I’m going to use my long-term care policy to pay for my care. So that means that when she passes away over a 5-year period, her daughter will inherit a tax-free life insurance of $200,000, but then she will also inherit this IRA of 400,000 that’s going to be all taxable to her that she’s going to have to spread out over a 10-year period. A second scenario would be, hey, instead of using a life in the long-term care policy, let’s use your IRA to pay for this care. Because of her cost to care, we’re able to, for the most part, take this money out and pay very little income tax on this distribution. So now when Florence passes away, she will inherit her daughter will inherit a tax-free life insurance policy of 500,000 and she’ll receive $100,000 that’s remaining in her IRA. So again, I don’t know what the kids tax rates are, but when you start thinking about when someone inherits money, do I want to give them something that’s going to be taxable? Maybe they have to pay more taxes than I would or would I rather them pass receive money that’s going to be all tax-free. Now, of course, this money is there for her to use. So, if she lived in a if she was in long-term care much longer, then you’re using this money for all that care. So, if you spent through the IRA and spent through the life insurance, that’s all there for use. But at some point, everyone’s going to die at some point. So when she passes on this money, whatever is remaining, it’s maybe more tax beneficial to the beneficiaries. All right, how do we manage all this? Kind of a review of what we talked about pre-retirement. Know your after tax savings before retirement. Understand what do you think your tax liability is going to be in retirement. Does it make sense to fund Roth IRA or should I be putting more money into pre-tax accounts? early retirement. Understand how social security and Medicare are going to be taxed. Maybe fill tax brackets in low income years. If you are going to come in and delay social security till 70, maybe it’s a way for you to to reduce some of the future tax liability you’re going to have down the road. Middle retirement, understand what your RMDs are going to be, your required minimum distributions, because this is money that you have to take out and it’s going to be added to your taxable income. How does that what kind of impact will that have on in retirement late retirement? Organize your assets for a taxefficient way to pass this money on to the beneficiaries. You might come in and say, “Yeah, this is money I’m never going to use. So, let’s figure out a way for this money to be passed on to kids more tax efficient.

Taxes are going to cons continually changing. The current tax code we know is good to the end of 28. After that point, who knows? I mean, come midterms, we might have a better idea of what could change, but in the next four years, 10 years, taxes are going to definitely change. And so, it’s making sure we understand taxes every single year. And one way that we do that, this is some of the planning that Kim and I do. So, Richard and Richard and Deborah came and saw us. They’re both 62. Richard is going to work till 67. Deborah’s going to retire at 65. Richard had some health issues. So, we using a life expectancy of 85 for him. Deborra’s going to have long life expectancy in 95. They have money in savings. They have money in 401ks. Their house is completely paid off. So, this is just a net worth statement. They have this is their incomes while they’re working. Their social security is 6765 amount. They want to spend $5,000 a month. We’re using $500 a person for health care. They want to travel for the next 10 years once they hit richer hits retirement. And we’re looking at federal and state taxes for their situation. They’re both contributing to the 401k maxing uh maxing that out and contributing 3 receiving a 3% match. So the first thing we do is just put these pieces together and understand what the picture looks like. While they’re working, which is the blue, blue is them working, their income. The red line represents what they’re going to spend. The dark blue represents the social security they’re going to be receiving. The dark orange is the required minimum distribution. Anything above that red line is just excess income that’s coming in that they either they turn around and save. You see a drop off when Richard’s 85. You lose the social security benefit, but even at this point based on the required minimum distributions coming in, you know, Deborah’s good all the way out to age 95 and as you can see her remaining assets. This is what their tax liability looks like. So again, every line represents a different tax bracket. So right now they’re hovering around that that 24% line. Um in retirement they pay very little taxes at all. RMDs kick in. They’re pushed at 12% tax bracket. Richtor passes away. Deborah’s going to be in a 22% tax liability at that point. So we said, “Okay, let’s consider doing Roth conversions when you retire.” We’re able to model that and say, “Hey, let’s stay in a 12% tax bracket.” Is there any benefit to doing that? And when you look at that and model that 12% staying within a 12% tax liability with doing Roth conversions, it comes in and says, “Hey, we’re able to save $145,000 in taxes.” Again, that $145,000 is money that you’re not giving to the IRS, Uncle Sam, the government. this is money you get to keep in your own pocket which is helping increase your net worth. So we’re able to model this and say yeah does make sense or not. So again, retirement when you think about it, think of retirement as kind of climb the mountain. You climb the mountain, climb the mountain, you get to the top, you’re like, “Yes, I did it. I did it.” But sometimes going down the mountain is the most dangerous. And think about retirement. You might hit retirement and now in retirement, you’re going to be subject to different taxes you weren’t aware of. There’s all these different things that you didn’t even think about. sequence of return risk, you know, health care, interest rates, market timing, you name it. These are things that you necessarily don’t think about in retirement. While you’re accumulated, it’s work, save, work, save, work, save. And retirement is a different thing to kind of think about. So, in the end, Kim and I are here to help you. We’re part of the retirement investment services division. We do comprehensive planning to be able to answer a lot of the financial questions you might have. You know, what’s a good withdrawal strategy? Do I use my IRA money, diverse social security? What about Roth conversions? How do I maximize my rate of return but also reduce your risk? You know, help sure help ensure money passes on to the right beneficiaries. So, we’re full full comprehensive. we can do the full comprehensive plan and help you with all these different aspects. So, I know there’s a lot of information in this presentation, this webinar, but we can answer any questions that you might have regarding your situation. So, let’s see what we have here. We got Let’s see. So again, please put your questions in the Q&A or the chat. We’ll answer them from there. I almost I am also going to launch a poll. If you’d like to set up a meeting with one of us and run a plan for your specific situation, we’re happy to do that. There is no cost, no obligation. It’s services that we provide to members of the credit union. Well, somebody asked if we could give the out copies of the slides, and no, we’re not allowed to do that for compliance purposes. They don’t allow that. Uh, let’s see if there’s no open questions. I’m sure you guys have more questions. Yeah, there’s probably some questions. Let’s Let’s just give it a minute. We’ll give it a minute. Yeah, that’s a lot of information that Malcolm presented. All really good and a lot to think about, not only for your retirement, but for your heirs. Um, let’s see. It looks like something popped in. How do trusts change retirement planning? How do trusts change retirement planning? Oh, you know, when it comes to a trust, it’s what are you using the trust for is the biggest question. I don’t think it really changes retirement planning because the trust is a vehicle that you can use to make sure this this money bypasses probate, goes directly to whoever you name as beneficiaries. I mean, some people put up a put a trust in place um to make sure money stays within the bloodline. Maybe they don’t like the the the husband their daughter’s married to and they don’t want that that person to get any money if they get divorced. So, it just depends on what you’re looking what you’re what the trust is doing for you. In a lot of cases, it’s just set up as maybe as a beneficiary or a secondary beneficiary. If it’s a non-retirement account, usually the trust owns it, but for our purposes, that’s that’s what we use it for in terms of differentiating on account types. um to meet for a personal session. Is there really no charge? Yeah, we don’t charge. So, right now, we do not charge a financial planning fee to meet with us. If you want to meet with us, we’re happy to do so. There is no cost. You’re members of the credit union and this is a service that we’re providing. Well, and here’s the other thing I would add on to that. You know, we’re asking people to sit down with us and talk to us about their life savings and hopefully make a decision to work with us in some way, shape, or form. So, we really believe that the planning process is your opportunity to get to know us and see if you really think we know what we’re talking about or you could actually trust us. So, yeah, we do not charge a fee for that. Okay. I may have missed it. Did you mention if someone misses their first required RMD? Yeah. So, when it comes to the first required RMD amount, you actually have So, let’s let’s use an example. Let’s say you turn 73 this year, you you actually have up to April of 2027 to satisfy your RMD for 26. Now, the downside of doing that is that in 27 you have to double up for 26 and 27. So, depending on what that means could put you into a higher tax bracket. But, h excuse me. But if you do come in and miss your RMD, the IRS could penalize you 25% of whatever that amount is. So, if your RMD was $10,000, they could come in and say, “We’re going to assess a $2,500 penalty to do so.” Now, I would suggest if you miss your RMD to talk to your tax accountant and say, “Hey, is there a way to somehow wave this penalty?” Because missing your R&D is a common mistake that we do come across. Yeah. Typically, we just tell people, you know, let’s assume it wasn’t with us, of course, that we’ve discovered they’ve missed an RMD, and that’s usually the case. if you rectify it as soon as you become aware of the situation and then as Malcolm said talk to your accountant and there there’s a waiver of penalty form they can file but the big key is to fix it as soon as you you know reasonably find out about it. Um, another person asks if there’s a fee for services. Malcolm, I mean, yeah, at the at the end of the day, like if you go through our planning process and we determine, hey, this is a fit and you want us to help you with your investments, there might be fees associated with managing money, but then there’s also vehicles that we we put people in that have no fees. So, you know, at the end of the day, like if you if we all decide, hey, this is a good fit for us, we are going to be full, you know, full disclosure of this is what your fee is when it comes to our recommendations for your situation.

My husband turned 65 in October this year, but he’s going to keep working full-time. I understand he should file for social security and Medicare regardless of him working or not. Is this correct?

So when it comes to No, I mean yeah. So yeah. No, if you know if you have credible coverage, no matter how old you are, if you have credible coverage, you do not sign up for Medicare. Now, some people might come in and say, “Well, you turn 65, turn on sign up for part A, so you have this additional hospital coverage, but also at the same time, you necessarily don’t need to. And if you are contributing to an HSA, you definitely don’t want to because once you turn on Medicare Part A, like you are not going to be able to contribute to an HSA anymore.” So, no, it’s yeah, it’s the other thing I think the myth out there is sometimes people marry the two together. They think if they turn on Medicare and Social Security, they have to be done at the same time. And that’s not true at all. And in fact, turning on Social Security at 65 is going to cause your husband’s Social Security to be less. So, handle them separate. If you’re working beyond 65, as Malcolm mentioned, there’s an issue with, you know, part A and a HSA account, we usually tell people to talk to the HR department um and see what they say about it. Seems like the tax liability can be quite convoluted when it comes to RMDs and how that impacts Medicare, Plan B, and D premiums. Was this Congress’s attempt to generate more revenue for the less savvy taxpayer? Absolutely. I mean, at the end of the day, absolutely. I’ll say it. I’ll say it. And if you think about this 10-year rule, it’s another way for the government to uh increase tax liability because you used to be able to inherit an IRA and spread it over your life at time and keep you keep that money, keep the withdrawals at a very minimum amount to pay very little taxes on it. For them to come in and be like, “Okay, now we’re going to change rules and you have to take 10 take that money out over 10 years.” you know, there are going to be a lot of people that say, “Oh, just just give it all to me.” And they’re going to be paying a lot more taxes. So, absolutely. This is a way for the government to come in and people that are not tax heavy have to pay more taxes. So, yeah, absolutely. Definitely requires you to plan. I mean, the tradeoff of that 10 year was an extension on when our MDs start, right? I also think the theory of all this pre-tax deferral was that when we got in retirement, our tax rates were going to be a lot lower, and that hasn’t necessarily turned out to be the case. Uh, what non-t taxable income is included to determine your total taxable income as far as it relates to tax on social security? Yeah. So, they look at provisional income. Provisional income is your adjusted gross income plus half of your social security benefits plus any tax exempt interest that determines the provisional income which determines how much of your social security is subject to tax. So the non-t taxable income is the municipal interest or tax exempt interest mun bots. Yep. Is there a guideline for what percentage of your retirement fund should be in a taxable retirement account and how much should be in a Roth? I’ve heard 50% each. No, there’s no guideline. I mean, it’s all comes down to everybody’s situation is completely different. I mean, so there’s no guideline. I mean, in theory, in theory, if you could get all of your money in a Roth and go into retirement with a big fat Roth IRA and social security, your taxes in retirement would be zero, which sounds great, but it’s not that easy to get it all moved over either. Yeah. Uh followup. Is a Roth distribution counted as income? As of right now, no, it is not counted as income. So, what determines the amount of an RMD, a percentage or what? Yeah. So, when it comes to RMD, they look at the previous year’s balances. So, they look at So, like if again, if you’re 73 this year, they’re looking at the ending balances on December 31st of 2025. And then they use a life expectancy number. The life expectancy number for someone that’s 73 is 26.5. And then they take that those ending values divide it by 26.5 and then that’s going to give you your the amount that you have to take out. The first year it’s about 3.77% and then every year that percentage goes up because your life expectancy number goes down. You get older and so you get older the percentage increases and the balance of your accounts is going to change too, right? Yeah. Uh let’s see. That’s another RMD. I just covered that. If I already have an investment management company, i.e. Fisher Investments, will you be able to work with firms like these? When you say work with them, I’m not sure exactly. Um, you know, ultimately we with people that work with Fiser, we come in and say, “Hey, we’ll help you do the planning aspect of it and then we’ll analyze what Fiser is doing.” What we find with Fiser is they’re taking on a lot of risk for very little return. So then it’s a question of well if that’s the case why wouldn’t you get the same amount of return for less risk. So again we we’re not going to be able to go to a Fiser and be like hey change this model because we don’t manage Fisher’s models. I mean, and yeah, that’s what would come. Well, and I think what usually happens to add on to what Malcolm said is if somebody says, “Well, yeah, I really like the aggressiveness of Fiser and how that’s done, but maybe I don’t want to bet the whole farm on something that aggressive. So maybe a piece of the money comes over to us at Allian and we end up being the conservative piece. I mean, we clearly have aggressive pieces as well. Uh, generally we also have fee than Fiser. I know they’ve worked on their fees somewhat, but I bet we’re still cheaper. Okay, next question. Roth five-year rule. Could you explain the five-year rule on Roth? Does each contribution have its own five-year calendar? And what calendar is the earned interest on? Yeah. So, when it comes to the five-year rule, it’s 5 years or 59 a half. So when it comes to contributions like you so your first contribution starts the clock so it doesn’t so if you think about it let’s see okay we’re in 2026 so let’s say you’re 60 years old in 2021 you were 60 years old you made your first contribution to the Roth come 2026 come 2027 you’re over 59 and a2 half you’re over 5 years from the start of that Roth. So even though you made a contribution in 24, all earnings and interest are still going to come out tax-free for you for that Roth. It’s not it’s not a rolling contribution 5-year clock. It’s your first kind of clock start of the Roth. You want to say it a different way for me. So, as long as you’re 59 and a half and you’ve had a Roth IRA account open for at least 5 years, whether it was contributions, conversions, moved from a Roth 401k to a Roth IRA, that is the initial date that’s stamped for your Roth clock. So, if you’re over 59 and a half and you’ve got 5 years in a Wroth anywhere, you’re good to go. And if you’re not, then let’s say you open a Wroth today and you convert $100,000. Your 5-year clock starts today on the earnings. The money you converted, you’ve already paid tax on. So, you can pull that out anytime you want. So, I always tell people, look, you’re not going to if you converted 100 grand, you’re not going to spend 100 grand in five years. So, by the time you get to that fiveyear clock, then your earnings are able to come out taxree. Also, um let’s see, somebody’s asking, “Will you review what I have invested in already?” Yes, we do that. Yes. I just started receiving social security but still am working and have contributions going into a Roth 401k and pre-tax 401k. Can I still do this? Mhm. Sure. Yep. You still contribute to the Roth. The nice thing about the Roth 401k is there’s no income limit in regards to putting money into the Roth. When it comes to Roth IRA, there is the income limits they look at. So your in earn income plus your social security might push you above the limit for you to be able to contribute to a Roth IRA, right? IRA Roth IRA. But when it comes to a Roth 401k, yeah, you can still do that. But there’s no connection between working contributing to a 401k pre-tax or Roth and taking social security. They’re separate. So you can contribute to either of those accounts as long as you’re working and then social security is a separate decision. All right. I think I got them all. Oh, here’s a few more. Oh, we just talked about the time rule on the Ross. Okay. We have accounts with Alliant and my husband’s 401k and stock through his last employer with another investment firm. Do we need to work with you and then do we need to work with you and then separately manage each account? I’m not exactly sure what the question’s asking, but you know, obviously we’d love to have the whole relationship come over to us, but sometimes that’s not the case. Uh, clearly we can do the planning for you and see where it goes and see what makes sense. If there’s something you’re really dead set on keeping, then we want to build an investment strategy around that. But we clear we have separately managed accounts as well. Not sure if I got the exact essence of your question, Dan. If you want to come back to me if I didn’t. Um, I think that’s it, Malcolm. Awesome. Again, thanks for all the questions. Yeah, great questions. We appreciate that. Again, there’s a lot of information when it comes to taxes. We don’t cover all of it, but um yeah, I think this will be a high level taxes that people should be aware. Okay, thanks everybody and hope you have a nice happy safe 4th of July and we look forward to talking with you all real soon. Thanks. Thanks. Bye.

Hi everyone, this is Mike. Uh just wanted to say thanks for uh logging in and joining me on the web webinar. We still have it looks like about seven or eight minutes. So just letting you know you’re in the right place and I’ll I’ll be back uh in a few minutes. Thank you again. Evening everyone. Uh, looks like we still have a couple of minutes and it looks like we’re still having folks join. Hope everyone’s having a good evening.

I’m not sure what part of the country you’re joining me from, but wherever it is, I’m hoping it’s cooler than it is here in Houston, Texas,

which it feels like it’s about 200° and uh about 10,000% humidity.

Oh, Tampa, I don’t think your weather’s any better in Miami. At least you have a much nicer beast beach than we do here in uh in Houston. Your uh your water color is the correct color.

If anyone’s ever been to Houston or Galveistston since we have still a couple of minutes, so when I first moved here a million years ago, like hey, I’m going to go down to Galveston Bay, which is, you know, about an hour away from where I’m at. I’m like, it’s going to be the Gulf and it’s going to be amazing. My family’s originally from Hawaii and I grew up in Southern California, but I’ve been here a very long time. Everyone goes, it’s not it might not be what you expect when you’re thinking the Gulf. And I’m like, really? So I go down there and if you’ve never been, Galveastston is on the west side of the Mississippi River. So the tides, so the the the tides actually bring the silt of the Mississippi. So, our Gulf Beach is not clear water. It is a silty brown water. Uh, but occasionally we get a storm that comes in and shifts the tide and then for a day or two we have like out of a postcard crystal clear water. But it is a rare sight to see. So, yeah, Miami Beach, you definitely have us beat in about a million ways in that respect. Um, all right. I have six o’clock straight up. Looks like some folks are still joining. I’m going to give it maybe one more minute and then we’re going to start. Um, kind of in the interest of time. We want to leave plenty of time for questions at the end. So, um, I think we’re going to go ahead and start. So officially, welcome to Roth IRA Convergence. Uh I appreciate you joining me this evening. If you’re joining for the first time, uh extra special welcome. I’m Michael Marx, certified financial planner and financial consultant with Alliant Retirement and Investment Services, or Aerys for short, A R I S. I live here, as I said earlier, uh right here in Houston, Texas, and I’ve been doing this for I don’t know over 30 years now. Uh so my family’s been tied to Alliant. I tell this story every time. I’ they’ve been tied to Alliant longer than I’ve been alive. So most of my family has worked for either United or Continental since the 1960s. And if you didn’t know, Alliant was originally United Airlines Credit Union before we changed our name. Um and they’ve been around for over 90 years. So, um, I realize you may have found us through different channels. So, whether you’re joining us from United or Continental or Alphabet/Google or Tesla, CVS, Susie Orman, welcome everyone. I’m glad you’re here.

Before I can get the slide to change, before we dive in, I want to share a quick housekeeping item. Today’s session is for educational purposes and includes proprietary materials. So to protect both the content and everyone’s privacy, we ask that attendees please do not record or capture the presentation whether that be by video, audio, screen sharing, AI tools without any prior consent. Thank you so much for your cooperation and understanding. So with that um again if this is your first webinar or your 10th webinar you would know this but we offer multiple webinars on various topics throughout the week with different presenters. Uh you can find a list of the upcoming webinar uh on our website. So that would be a creditcredit.comvents and we actually have a wealth of information there right. So, I encourage you to take a look. You’ll see our our InvestSavvy podcast. We have our blogs. Uh, and you can find that through our website directly or you can just find this on the Alliant Credit Union homepage, the website there and in the upper right hand corner there is a tab that says retire and invest and that is us.

So, we normally do two a month. We have different presenters. I try to do one in the evening such as this and then one in the afternoon. So, my next webinar will be in the afternoon and that’ll be Wednesday, July 15th. Um, that is 2:00 p.m. Central, 3:00 p.m. Eastern. Uh, and it’s trusts just aren’t for millionaires. Uh, so it’s about some uh higher level estate planning. We’ll go over trusts, wills, the importance of POA documents, etc. It’s some of the fundamental estate management. Um the one after that, I’ll be back in the evening. So, we’ll be planning for long-term care as a family. That is at the end of July. So, it’ll be July 28th on a Tuesday, such as this at 6:00 Central, 700 p.m. Eastern. And and frankly, so I do think long-term care. So, our primary focus and our primary line of business is actually wealth management. We handle investments. the webinars and things are just something that we do as kind of a I don’t know a courtesy, right? Uh it’s a service for our members here. But I will tell you in the world of things that could happen to to derail a retirement plan, it’s really something happening in the realm of, you know, where you would need long-term care and might not have it or something. So, we’ve seen this happen. you know, everyone usually knows somebody, a family member or a friend of a family member or a friend that that their health deteriorated and they they went into that, but it’s it’s a good high level if you haven’t or if you’re not familiar with it. Um, so and I’m not sure if you joined us via web via email directly from us or if you signed up on the credit union’s website. So I just want to take a few minutes and talk about ARIS uh because in addition to the weekly webinars that we host we are a fullervice wealth management division of the credit union um and investment planning. So we’re financial planners, we’re fiduciaries and we have a broad range of the investment options out there from everything from fixed rate guaranteed to as aggressive as you want to be. Uh, as you can see, the estate planning, we’ll talk about that later, that we added some of the things like um like trusts, basic trusts, basic wills, power of attorney, things like that. We’ve had enough people asking about that. Uh, so let’s start. So, with the future of the tax environment and how budget deficits and titlements and taxation can affect Roths and why they might be something that you want to consider. So this our current national debt, right? So that’s 36 trillion with a T.

Hopefully it gets smaller, but we’ll see. Um, so obviously the other thing too is our budget def deficits have been increasing, right? So it dipped a little bit. So So if you look at that big dip, I’m hoping you can see my cursor here. Right here. So this is right around 2020 with COVID, right? So all of a sudden we go from trillion to what you see happen virtually overnight, right? And that’s 2021. So the deficit spikes up and so far it hasn’t really come back down. It’s come back some. Um so maintaining that debt right when interest rates are low are one thing. However, the carrying costs become more of a burden as the new treasuries are issued at higher interest rates and the older debt at lower interest rates are retired or mature. So, we’re going to take this just to kind of give you an idea. We’re going to take this from a perspective on the case that even though we don’t know where taxes are going, there’s probably going to be a good case that down the road taxes will be higher. But to skip to the punch line, I’ll give you a little bit on that is even if they aren’t, there’s still a reason to consider doing conversions as part of your retirement strategy. And and I’ll go over the other reasons why. So let’s let’s take a look at at how this affects entitlements, right? You have social security, you have Medicare, you have Medicaid, as well as the interest payments on those current debts, right? So that consumes all of the tax revenue that you have coming in. So according to the CBO, which is the Congressional Budget Office, this is going to happen in 2035, right? Where where you’re crossing that line, social security, you run out and it’s a concern. So and that leaves kind of nothing else. So like your health and human services, highways, defense, and all those other things. So if you’re the government, there’s really only two ways that you can counteract that problem, right? Number one, you can cut spending. Now, one of the ways to cut spending is just be more to be smarter and a better steward of how we spend, right? There’s there’s so many things and laws and lobbyists and things like that that that we could change that would save the government some money. So and there is a lot of overlap and there is a lot of bloat in the government when you look at it you know from a hundred years ago not the size of it but the percentage of the government versus the size of the economy. You would expect the government to grow but unfortunately the pace at which it had grown kind of lends to some of the bureaucracy at this point. So with that said so you can either cut spending or increase taxes. So, and maybe the answer is somewhere in between, but what we’re more likely to see is taxes being raised. Now, the belief is somewhere and the talk out there on Capitol Hill is that they’re going to target households of 400,000 and up. The reality though is that the expectation is that we’ll probably trickle down to some of the lower income households, right? Not necessarily low income, but lower. One of the things that they can do, and we’ll talk about this a little bit later, is even if they keep the tax brackets the same, they might expand the brackets where if you made a certain level of income, you would normally be in the 12%. But now with that same level of income, you’re in the 22. So they didn’t change the tax bracket, but your tax your taxes could be increased. So we do expect at some point even though if they focus on the higher income earners you know not necessarily the millionaires the billionaires or now the trillionaire um but we really see this kind of impacting some of the middle and middle high income people we expect them to start feeling the income or impact now with that said right so we talk about tax rates throughout history so historically and if you go back you know to the early teens 1913 you’ll see that the t highest tax bracket was high 70 77 78%. Now, what we generally did, right, we raised income taxes. That would be World War I. And then it came down and then it went back up when we look through the depression, right? We had the crash, we had the depression, they needed to raise revenue where they could. Um, and then we didn’t come back down until well after World War II. So you started going into the 70s, we had inflationary periods and then we kind of settled down and stabilized into the early mid 80s. Um, and then we kind of go from there. So based on that chart alone, we say, well, when you’re looking at deficits, and I know they’re talking about people paying taxes, you have one side saying, hey, we want to cut taxes and one side that we need to raise taxes. Again, you have income, you have outflow. We don’t know where it’s going to be for sure, but if we’re betting, we see an increase. So, um, so there’s a couple of ways taxation can be diversified, right? So, it’s a tax now, tax later or tax never. So, the tax now or just like your current brokerage accounts where you have index funds or you hold individual stocks or your savings accounts or CDs where you’re getting that $1099 every year on the interest earned. So, some of the tax later things are tax deferred as we would know them. That would be things like your IAS, um your 401ks, any annuities that you may have. And what that does is it says, “Hey, look, as I’m earning interest on this, nothing. I’m not getting any 1099s, but when I take money out later, I’ll pay taxes off and recognize that on my uh on my income taxes for that year.” And then we have the tax never, right? And those are things like your Roth IAS, which is kind of what we’re talking about as far as Roth conversions, the municipal bonds, and your health savings accounts, your HSAs. So, those are a few different ways that we can do this. So, this is going to be our agenda for today, right? We’re going to talk a little bit about the Roth conversion, what’s behind it, uh consideration for the original owner of the Roth IRA or the surviving spouse, um and then beneficiaries, and we’ll talk a little bit about some of those impacts. So, let’s get started with the basics, right? So, you probably know that there’s another type of IRA called the Roth IRA. So, Roths are similar traditional IAS in many ways, but there’s some key differences. And frankly, it’s one key difference. So, you don’t get the tax deduction when you make a Roth contribution. And there’s many people who make IRA contributions, traditional IRA contributions, that they make too much money that they do not get that deduction anyway. So, but here’s the thing though. Once your money goes into that IRA, a Roth IRA, it grows tax deferred, right? So, there’s no there’s no 1099s, but once you take it out, it’s taxfree. So, that is the biggest difference right there. Um, so now you’ve had to have you’ve had to have an A- Roth, not just a particular Roth, but your your your Roth will have to be either 5 years or 59 and a half, whichever is a greater period of time um to avoid the to have a qualified distribution, which means that the earnings are taxfree. So now with that said though, even if you need to take money prior to that, you can always take out your original contribution and that is tax and penalty-free because it’s your money back. So now you must have compensation right in quotes or earned income. So for 2026, these are your contribution limits. So it’s 7500 a year uh if you’re under age 50, 8,600 if you are over 50. Um and they have a catch-up provision uh of of 1,100. So now there’s no age limit. All right. There are some income limitations as though if you earn a certain amount of money or over you are ineligible to make a Roth contribution. There are some back clauses that allow you to do that. We talk about that. Companies are now offering Roth 401k contributions with higher limits, right? You can do you can do up to 24 5,000 for this year. Then you have a catch up provision of 8,000 if you’re over age 50 to 59 and then over age 64 and that that weird window they have that super catch up for a couple of years where it’s uh instead of the 8,000 you can do 11,250 and that is from um ages 60 to 63. So if you’re in that age this is a temporary thing. Hopefully they make it permanent. But that’s kind of where we’re at right now. Oh, also if you have any questions because we will leave time at the end to answer questions, uh, go ahead and enter that right into the chat or into the Q&A um box and we’ll field those at the end. So look, while some of the baby boomer couples retire at the same time, one spouse usually retires before the other, right? So in in such case you can take advantage of the the spousal IRA which allows a a working spouse to still contribute on behalf of their non-working spouse. So even if one spouse does quit working if they’re retired or they’re a non-working spouse that working spouse still has still has that option. So conversions. So in short, the way the way a conversion works is you would take money from your traditional IRA, right, the one you’ve been converting to, and move sed funds into a Roth IRA. And what happens is, however much money you convert, it’s recognized in the year of the conversion. So, and partial conversions are are are permitted, right? So, let’s say you have half a million dollars, easy math, in an IRA because you rolled it over from another firm. Um, and I want to convert a h 100,000. This would be Jill. So, what she’s going to do is she’s going to have to add she’s going to move that h 100,000 to her Roth and then she’s going to add $100,000 to her income and she’ll pay it at whatever tax bracket she falls in. But from that point on, whatever that $100,000 into a Roth grows to, it will become taxfree when she takes it out. So again, I just mentioned, but this is kind of visually. So the 59 and a half, right? After 59 and a half, as long as you’ve held it for more than five years, any withdrawals on the earnings are taxed and penalty-free.

So who can do a Roth conversion? Anyone. Anyone who’s eligible, there’s no age limits. There’s no income limits. You don’t have to be working to do your conversion. And that’s kind of one of the nice things.

Ah yes. So there was a question on the back door. Uh we will we’ll field that at the end.

So the tax cuts and jobs act right. So that eliminated so a reccharacterization. So so the reason why they say you’re stuck with all your Roth conversions. Prior to 2018, what you could do is you could convert to a Roth, but you had the option to change your mind. You say, “Oh man, I converted too much or something like that, and I want to change my mind.” And bring it back from a Roth to a regular IRA. And that was called reccharacterization. So after 2018, that’s done. It is a one-way street on your con on your conversion. When you convert, it’s there. So kind of make sure you want to do this when you’re doing it.

So, one of the nice things and this is one of the reasons as far as the strategy goes is that your Roth IRA, they have no required minimum distributions. So, no RMDs, right? So, you can decide when to take it. Um, it allows your accounts to grow in uninterrupted for life and when you pass away, your heirs receive that taxfree. So, for those of you who may or may not do, when you um when you pass away with like an old 401k or an IRA or something like that, your beneficiaries, if it’s not your spouse, your beneficiaries have to take the money and distribute it out within 10 years. So, your spouse has the ability just to take that over and when they pass away, then their beneficiaries will have that 10-year clock and start counting. Um, so why does that matter and why is that such a big deal? So

you it allows you to take as much or as little as you want, right? And it becomes a factor for like major purchases like, oh my god, I need a new roof or I want to do this cruise around the world or whatever that might be, right? Because that can change your income for that year if you take it out of a regular IRA because uh easy math. I have to replace my roof and it’s going to cost me $30,000. Well, in order for me to net $30,000, I might have to take $40,000 distribution out of my IRA, have mold out 25%. I get my 30,000, pay for my roof, your total income when you’re retired and you’re on Medicare, right? You have that Irma, which is that income related monthly adjusted amount, the IRMA. We hear about it, they talk about it. So, that might impact you on the penalty because you’ve earned too much and you might have to owe more money on your Social Security or on your Medicare. And we’ll talk a little bit about that later. I think there’s some slides on that. Um, and those are tax cliffs. So, you do want to stay in control of it. The other aspect is that uh I think we’ll talk about this later too is how this goes to beneficiaries, right? And how this goes to your spouse. So being able to control your income that you are forced to take is important, right? So this is a way to reduce the risk of rising tax rates. Do we know tax rates are going to go up? No. No, we don’t. Right. But we do think there’s a pretty good chance because historically we’re in a relatively low tax period even though it doesn’t feel like it. So it does provide you with some additional benefits as a hedge against rising tax rates in the future, right? Most of most of which we just don’t have control over, right? What will that tax rate be? We don’t know. Will it change at all? We don’t know. But we do know that if we have some money that’s tax-free, we can control to where hey, you know, we’re going to take some from taxable um some from our tax deferred accounts and maybe a mix of Roths. You know, I’ I’ve read this and I’ve heard this people ask which order should you take money from? And this general school of thought is you take it from taxable accounts and then tax deferred and then Roth or your tax-free account. And that is true at a very high level. But I would tell you this is something you should probably or like we talked to this um with our with our clients and the members here to say hey you know it depends on what your spending habs are going to be. It might be a mix uh and it might be greater on one than the other. Just depends on what you’re trying to do and maybe those tax impact uh on some of your income. So you’re right at that bottom one your social security benefits which are your Medicare part B. So it matters and your social security benefits to a degree, right? Because there’s three tiers of how much of your social security is taxed. Whether it’s none of it, half of it, or 85% of it is taxed at whatever tax bracket you are. The reality is is most people, if you are on here, you are probably going to have 85% of your social security tax. And yes, for those of you who might be railing against that statement, that is probably close to a double taxation because you’re already paying to it now. So, Social Security and Medicare, right? So, 100% taxable and 100% is included in your provisional income. Um, and it’s included in your Maggie for Medicare pricing, right? And that’s where your Irma comes in. So,

let’s see how that showed up. So where your Roth it’s not taxable at that time of distribution.

So yes an IRA is taxable and a 401k distribution is also taxable at regular at your regular tax rate is taxed as regular income. Um but it is not included in your provisional income. Right? So, if you have a h 100,000, but you take 20,000 out of your Roth, you’re really only showing $100,000 on your income. Though, that 20,000 is not included in for Medicare pricing or for federal income tax. So, there’s some advantages there. So, I’m going to show you this. So, and and and I think this is a really good example, but there’s something that that I would tell you some caveats to this. So, it’s it’s a visual. I think it’s a great visual. So, if you look at this, it shows a $10,000 IRA, right? So, if I don’t convert it and 10 years down the road, assuming we’re earning 5% a year on this, right? So, 10 years down the road, my my $10,000 IRA grows to $16,289.

I’m going to make the assumption that 10 years down the road, I was in a 12% bracket now, but that bracket creeped and now my same income is putting me in a 24% tax bracket. So now my 16,000 after tax is 12,380. Whereas if I converted some of it now, right? So I converted $10,000 and I paid that 12% tax, I got 8,800 bucks. Um so 10 years down the road it’s 14,3334 sorry but it’s taxree when I take it out I owe the government zero on that. So, that’s a little food for thought, right? That because it’s not well, it does matter on how much you make, but it also matters on how much you keep, right? Because this is one of the things that we look at. I have clients call me this all the time like, I don’t want to pay taxes. What can we do to save taxes? And I’m like, well, we can do some things, but you don’t want to be so obsessed with saving taxes, right? What you want to do is what nets you. If I can get a 4% tax-free, but I get a 7% taxable, even if I pay taxes on it, if I’m still netting more money in my pocket and it doesn’t impact me negatively on those other things, you do it. And that’s one of the things that we talk to the clients about. Um, and that is a conversation we have a lot more often than one would think. Um, so, so that extra 1,900 bucks in your pocket, that’s like almost 16% more in your pocket just because you did a conversion 10 years prior, right? So, this is the can the reality of it is this isn’t something that you would really see the benefit from today. As a matter of fact, you’d see you’d experience a little heartburn and a little sadness today because you’d have to recognize it and pay taxes on that income. So here’s a chart that I think visually is a good idea to look at and explain that what that on the on on the left it’s right it’s your tax rate at your withdrawal and the top part is your tax rate at your conversion. So you start at the top and you say well look I’m in a 12% tax bracket and I think taxes will be higher. I think it’ll be 22. And if you follow that down, you’ll see that 12.82. And what that basically says is you’d have 12.82% more money, right? So there’s your 12. Now, if you earn 24, as this example says, you will have made you will have ended up with about 15.79. We’re going to round that to 15.8% more money in your pocket, right? Take home. So the moral of the story without getting too tied up in this chart, the higher bracket you are in later, the bigger your savings are. So a quick strategy from that respect is that anything that you do convert, one of the ways that you can look at this is say, okay, I’m not going to have everything in my Roth, but you know what I can do? If I have to just I’m going to use this example. I’m going to do a 6040 stock tobond portfolio. Do you know where I want to hold more of my stocks? In the Roth side because it gives me a much better chance at growth over those 5, 10, 15 years. So, your growth grows larger quicker, god willing, and the remainder part like that fixed income, your more conservative place, it grows at a slower rate, which starts impacting your RMD, right? So, it’s a lower RMD. So, it’s these type of subtle strategies as part of your allocation can then help you maybe mitigate some of those taxes down the road. So, that’s the savings. So, one of the things when we do on the planning tools when we’re working with our our clients here, excuse me, is that we look about look at like maybe some effective tax rates at specific periods of time, right? So, there’s federal income tax at your green barn, then your other income tax. capital gains, um just some of your gross income and and this is something you want to start doing candidly before you retire, not in a huge amount, right? So depending on how much you’re earning, this is one of the things we look at and how much your income will be at retirement and how much you’re actually going to need on your cash flow, right? So, it’s a great time to maybe utilize some of that lower tax bracket to do some conversion to put yourself in a much better position down the road. So, these are the things that we look at, right? Your future tax situation without that conversion, today’s tax situation with the conversion, right? I’m going to have to pay Uncle Sam right now. And how this affects your income taxes, those Medicare premiums, that Irma, right? And there’s that 3.8 8 net investment income tax. Um, which for households it’s uh if you’re over 250 on your income. Um, and one more thing that’s not on this slide, it’s your single versus married tax rate, right? And I’ll show you an example of that, but if you’re married, unless you’re fortunate enough to die at the same time or at least in the same tax year, one of you will continue on in a single tax bracket, right? you will end up being in a higher tax bracket most likely just because you’re single. And I’ll show you that example. So, how much income before the next tax bracket? So, income, our income brackets aren’t retroactive, right? They’re progressive in that the more you make, the higher tax rate you pay. Now, an example of that, so like standard deduction, this is the 2025 tax brackets, right? So you get your standard deduction. So in at 10% you know that 23,850. You can earn another 50 grand more and still be in the next bracket before you jump into the 22 and you can earn that 109 and so on and so forth. Let me show you the next slide which I think gives you a really cool example of this. Right? So you can earn that much and still be in the 10 in 10% bracket. you can be in that much and still be in the 12. So on and so forth. The neat thing about this, because I’ve heard folks say this, they’re saying, “Oh, you know what? I don’t want to work part-time. I really love it, but I have to watch how much I make because I’m worried about income tax.” Well, I’m going to go back a million years to my my accounting my accounting professor back in college. And he’s like, “Look, if you make 130,150, right, and you make that $1 more into that 22% bracket, you’re only paying the 22% on the extra dollar. It doesn’t go back to dollar one. So, if it’s something you need or something you want to do, um, frankly, do it. Earn it because it’s still putting more money in your pocket.” But I would say this, and to give you an example of this, remember when I talked about, oh, I have to fix my roof, right? If you have to take a vacation and you need that $30,000 because you want to go on a big fancy cruise, at least it’s something you’re enjoying. If it’s something that you have bumped into another tax bracket because you have to fix your roof, that’s just like insult to injury at that point, right? You got to pay taxes. It bumped you into another bracket and you have to fix a roof, which nobody says, “Oh, this is a joy.” or here in Houston, fix your foundation because it cracked. Um, so being able to utilize that conversion, we call it filling the bucket. So, as you can see before your conversion, right, part of that is you filled up the 10% with your income and then that next bucket of income, you’re paying 12%. And then the next bucket of income, you’re paying 22, but you didn’t quite fill that bucket. So, you’re like, you know what? I can convert some of this money now. I’ll do enough to fill that 22% bucket. So, I’ll pay it now and then later hopefully I’ll be able to save something later on some taxfree growth. So, it’s called filling the bucket. I will tell you filling the bucket. There’s some cases on filling the bucket and maybe the next bucket depending on what the next bucket is. Visually, since I have this up, it’s a really easy example. Going from 10 to 12 isn’t that big of a jump. Going from 12 to 22 kind of matters. 22 to 24 isn’t that big of a jump, but going from 24 to 32 is a big jump. So, we always want to be cognizant of how much we’re going to be converting. And really, that I would say is a discussion that you have in the very beginning of the year. So, you say, “Hey, this is what we’re planning on doing. Maybe we got a remodel coming up. Maybe we have a a vacation coming up. Maybe we want to buy some property and we need a down payment.” Whatever that is. But discussing your cash flow with your advisor and maybe bringing that up with your CPA is not a terrible idea. Um, so this is something that I talked about your Medicare, right? Um, and this is the Irma, the IRMMA. So for those of you who are already retired,

uh, so someone asked about the conversion date. So that is um calendar year. So uh December 31st. So this is for Medicare. So if you don’t already know because you’re not retired yet, when you retire or turn 65 because you you should sign up before so you don’t pay the penalty for that. Um even if you’re still working, you’ll pay for Medicare, right? Your part B. Your part A is free, your part B that you have to pay for. And that is $22 at least today. That is $22.90. So, and that’s assuming you make under$ 109,000 if you’re single, 218 if you’re married filing jointly. Right now, if you go over by $1, you are welcome into the next bracket. So, if I make $109,000, I’m fine. I’m at the 20290. If I make $19,01 now my monthly premiums for that year go up $228410.

If you make the $137, right? And now I make 137 and $1, my 284 goes to 405. So you can see it’s quite the penalty depending on how much your income is. Now, don’t get me wrong. If you need the income, you need the income. But one of the things on RMDs is that IRA starts getting larger and larger. And I can’t tell you how many clients I’ve said, well, I’ I’ve heard say, “Man, you know what? We need some of this, but we didn’t need as much. We didn’t start converting. Got them later.” So, this isn’t right or wrong. I would say if there’s a glass half full, it is one of the uh problems of having money, right? Um, but you can maybe mitigate some of that and being aware of that is being able to control how much your taxable income is down the road. Um, bigger Roth conversions in years with an unusually low income could be beneficial. So, if you’re a business owner, so this is kind of a smaller niche, right? So, business owners that have really big expenses, uh, some a year where you’re low on sales, uh, we have some losses that you can write off or some high medical bills. That’s kind of a time where you say, “Hey, let’s convert a little bit more because I’m in a lower bracket.” Or, you know, after retirement, but before you receive your social security benefits, right? So, so for example, you might say, look, I’m going to retire at 65 or 66, but I’m not going to take my social security until 67 or 68 or 69 or 70. Um, maybe I’d like to utilize that time to maybe do a little larger con conversion, but these are just some of those scenarios. So, the original owner, right? Moving on to the original owner here. Um, your minimum distributions for IRA are at 73 unless you’re born age 60 or later or I’m sorry, born in 1960 or later, uh, then it’s going to be 75. So, now this is important, right? Because if you don’t take your RMD, you can take a penalty of 25% on that. So, oddly enough, it’s actually lower because it used to be 50% a few years ago, but still a 25% penalty for that is pretty hefty. You’ll still want to do that. Um, and as far as your RMDs go, we’ll give you kind of an idea of what that RMD looks like. So, if you are 73, uh, easy math, and you have a million dollar in that retirement account that you have to take out, that’s about 37,800. So, kind of as a general rule, you’re going to look at like 38 to 38 to 40 or yeah, on a million, 38 to $40,000 on your first year. Obviously, if you have half of that, like a half a million, then it would be half of that. if you have 100,000 etc etc but it’s somewhere around 4% for your first year just to give you an idea and as that keeps growing right if you were fortunate enough to have invested prudently along the way if that outpaces inflation right guess what your RMD is going to continue to go up because it’s a larger percentage as you can see the older you get the larger percentage you have to take and these tax tables go up to like 110 10 115. So you’re not going to outlive the uh RMD tables. So So be careful about your maximum deferral. And I would say I’m not sure about this one, but I mean this isn’t a vacuum, but they’re just saying, “Hey, you know, if you’re going to defer into your IRA or your 401ks, your 401ks and your IAS, you just do that traditional deferral because because I’ve talked to accountants are like, “Hey, you know, it’s going to reduce my taxes now.” I’m like, “Yeah, let’s talk about how this impacts you later.” And they’re like, “Oh, um, so that becomes a problem, right? It becomes a problem down the road. So you kind of want to get ahead of that. Maybe it’s a mix of some traditional 401k, some some Roth 401k if your company offers that. Yes, you’ll pay taxes now, but you remember that growth becomes taxfree later. Um, and this is this is one of the concerns. This is kind of what I talked about, but I think the illustration because a picture’s worth a thousand words. And basically it says this look, you have an IRA balance of a million dollars. I’m going to use a million dollars because that is easy math. Hopefully many of you are there um at age 73 and it it’s going to earn 5% a year but the inflation is 2 and a half percent. So when you look at that RMD that’s taken out, right? Two things. One, your growth is outpacing inflation and that’s how they kind of look at RMDs too, right? So what’s going to happen is you’re going to have that balance start increasing. So your amount that you’re going to have to draw is higher and the percentage that you have to draw is higher. So way again to mitigate that is start doing some conversions earlier, right? And what you can do is that’ll it’ll help minimize pushing you up into that force tax bracket. So R&D amounts, right? So, this graph that I’m going to show you in a little bit, um, it talks about your distributions being too high, right? Which is a great problem to have. I will always say this, and I’m I’m not I’m not going to say this is a negative. Nobody enjoys paying taxes, but you know, candidly, successful people pay taxes, right? So, if you’ve worked your whole life, but maybe there’s a way that we can kind of reduce some of that tax uh burden. So, let’s look at this. So, so illustration wise, right? So, this blue, the dark blue is is Bob and Mary. They’re taking their social security. So, this is a scenario where they have social security and pensions, which I understand pensions are becoming less common. I would almost say they’re at a point where they’re relatively rare now. I would say the vast majority of people do not have pensions with their current employer. So, but bear with me. So, they’re retired. Everything’s going great. It’s rainbows and bunnies. The red line is what their total expenses are. So, they’re chugging along. Their expenses are covered by their social security and then they have their pension. So, it gives employ money and then they have to start taking their RMDs, which they don’t necessarily need. So your expenses go up because now you have to pay taxes on those expenses, right? And as you can see, your expenses continue to go up because that RMD continues to get larger and then it adds to your taxable income. Now this is that example, right? So one of the things they can do is they’re looking at cumulative taxes over that period of their lifetime. Um and this is one of the things, right? We make these assumptions. are like what would taxes probably be or even based on current tax brackets. Now, if you base it on current tax brackets and the tax brackets go up, it’ll be a higher savings. If they go down, the savings will be less. So, that’s why we look at it. For some folks, we’ve looked at it. We’re like, “Hey, look, I don’t think it’s a great idea to um to do any conversions and kind of this is where the reason is. You’re not really looking at the savings.” Um but it depends and it won’t impact your Irma. So, one of the calculations that we run as part of our planning are Roth conversions, right? So, you might say, “Hey, look, you know what? I want to convert 60,000 over the next eight years. Um, and let’s see what that looks like, right? So, in the very beginning, you’re going to be paying taxes on those conversions, right, over the next eight years. Um, but then you and you start looking at your income tax and then you start looking at the reduction in taxes. And what happens there is because that Roth keeps growing. So it reduces what might have been your taxable income on your RMDs. So based on those base facts, right, it reduced your taxes on that same scenario 140,000 almost 141,000 over the course of their lifetime, right? Um, and the assets themselves because of their taxation, the overall assets are about 800,000 more. Now, this is really obviously if they passed away, it’s not really going to benefit them much, but it’ll benefit their beneficiaries. And if you have a choice of do I want to give this to my beneficiaries or do I want to give this to the IRS, more often than not, most people would rather give this to the IRS. I will tell you additionally when you’re talking about beneficiaries, um we’re going to talk about surviving spouse here because this will matter too, but beneficiaries later is that there’s a very good chance that our kids are in a better in a higher tax bracket than we are when we’re retired. But moving on to the spouse. So this is Adam and they file jointly, right? So they’re married and filing jointly. So their total income is they have IRA pension income 58,841. Ann’s getting her social security. She’s getting 30,000 a year. Adam also gets that. So they have to pay taxes a little over 8,800. Now their access after tax income is 110,000 just like magic, right? It worked out really easy for illustration. So that puts them at a 12% tax bracket. So this is where Roth conversions kind of matter. So, Adam passes away. So, and

it’s unlikely that your your expenses are going to cut exactly in half, right? So, we’re going to assume the income needs are about the same or even if they go down a little bit, they’re not going to go down by half. So in this scenario, what we say is, well, Anel gets her social security, but she doesn’t get Adam’s social security. Now, there’s a calculation where she will get some survivors benefit, but this makes it much easier just as an illustration. So, she’s going to have to take more money out of her IRA to make up for that income shortfall, right? So, what happens here is her tax burden went from 8,800 to almost 19,000, right? for that same after tax income. Now, that tax bracket went from 12 to 24 because she’s filing single now. Same income but a whole lot more taxes. So, one of the things that we can do is if you’re married, you start looking at Roth conversions earlier so your tax burden doesn’t pass on to whomever the surviving spouse is. So, when they’re filing single,

this is a really good way of viewing it in that if you look at this top one here, it’s your married filing jointly. This is what tax brackets look like. Single filing jointly. So, I’ll use the blue because it’s kind of easier. If your income is here, you’re 10 to 12, but you’re married right there. All right. And then if you go here to here, so if you’re making about this income, right? And then you have to go here and you’re making pretty similar income, you could be in a little higher bracket. So, you always want to be careful or at least mindful if if you’re married. This is something you definitely want to look at. This is something you definitely definitely want to look at if your spouse is considerably younger. Even if you’re the same age, women traditionally live longer than men. Um, beneficiaries. So, moving on to beneficiaries. And we’re still on time, so we’re okay. We’re going to go through this kind of give you an idea. So, some of the stretch modifications. So, she has taxable income, right? You inherit an IRA, you have to take that out over 10 years. And what does that do to your income? Because the old stretch rules, you can’t do it over your lifetime. You have to do it over 10 years. So, you get to add 123,000 to your income. So, you can’t take it out over your life expectancy. You have 10 years. So, your tax bracket changed dramatically. And you remember this, right? So the beneficiary is assuming your children. Hopefully your children are more successful. That’s what we always wish for our children. So they are making more money than you are. So they are in a higher tax bracket. And with that said, now they get hit for more of a tax bracket. And I have had customers say this. They say whatever. It’s still free money. And I’m like, you’re right. It is free money. But the choice is this. Do you want them to have that money or do you want to give the IRS that money? And there is no right answer, frankly, because it’s a preference. But I have I’m not a huge fan of the IRS. So, if we don’t have to pay taxes or I’d rather see my beneficiaries get that, I’d rather them get it than the IRS. And I would not consider myself unpatriotic because I do a lot for charity and I love this country, but don’t love the IRS. So, one of those things it can do is it can change their bracket and bump them up. And that is one of the concerns, right? So, you always want to be mindful of even if your spouses are the same age, do you have beneficiaries that are not charities, right? Because if it’s charities, that won’t matter. But if your kids, even though they might feel like a charity sometimes, you don’t get the tax deduction on them as adults. So, so the taxes on that $1 million inherited works out to an extra $311,000 in taxes just because of what it did to the tax brackets.

So, one of the things that you can do and one of the things that we do for our clients is we say, “Okay, hey, you’re a lower tax bracket. Let’s talk about your kids. They’re successful. They’re a doctor. They’re an engineer. You know, they’re an oil and gas. I’m here in Houston, so a lot of people are in oil and gas here or on the medical side. um we’re in a lower tax bracket, you know, so let’s do some conversions. Let’s do some conversions out of our traditional IRA. So when they inherit it, they’ll get a smaller amount, but they’ll also get it in the Roth. So I paid those taxes at a 12% bracket or whatever bracket I’m at. So when my child, son, says son here, but my daughter, son, daughter, whomever, when they get it, they’re in a higher tax bracket, but they owe zero because it was a wroth. So, so this kind of gives you like liquidity values on beneficiaries if they converted, right? And then you come over here and you’re like, well, how about if we did some conversions? The further you go out, the moral of the story is the further you go out, the greater the tax savings when it’s passed on to your beneficiaries. So, obviously, it doesn’t reduce liquidity, right? you’re still there, but you know, there’s this break even side. Um, the longer you go out, the bigger the benefit. So, the moral of the story is you have really successful kids, do it earlier. And frankly, if you don’t want to pay the taxes, ask them if they want to help you pay the taxes, right? They can gift you some money to help offset that because that’s going to be their legacy later and they can get that tax free. Um, so again, Roth conversions, this is an area we’re like, hey, you know, let’s do some money at over a certain period of time. And that’s the filling up the bucket. And what does that look like? You’re in this tax bracket, right? Where where you’re in that, oh, what would that be? The 10, 12, like the 22% bracket. So for the first few years, what does that look like? Those are taxes right there. the red, nobody loves that. But if you see down the road, you look at the reduction in taxes down the road. And this actually does not even include the reduction in taxes to whomever your beneficiaries are, right? Because they would actually most likely be paying at a higher tax bracket than you are at that point. So with that said, quick summary. So gives us a few minutes to uh ask any questions or talk about kind of what’s going on out there. What future tax environment, it’s uncertain, right? But it points to higher taxes. But I can tell you spouses, right, go into a single tax bracket. Your children, if you have children, they’re probably in a higher tax bracket than you are. So Roth IAS are certainly the most taxefficient asset you can leave to your heirs and you can become a little more aggressive if you know that’s going to be down the road. Look, we’re here to help. We can answer your important questions. We can help you come up with a withdrawal strategy and we can decide throughout, you know, whether you use your IRA, whether you use social security. This is part of our planning. We are fiduciaries. I’m a certified financial planner. Um, evaluate your employer plan and kind of see where you’re at and maybe we can look at some uh Roth conversions and just kind of help you pass some of that money to your beneficiaries.

So, these are some of the things that we can do, right? We obviously can help through some of those questions that are answered, right? You don’t know what you don’t know. You know, taxes, cash flow, maybe we can ask a question. You’re like, gosh, I never even knew I needed to a ask that. Um, some of the estate planning coordination. We have no fee products out there. Um, we have regular retirement strategies as well. Um, lifetime income strategies, some dividend portfolios. So, we actually have some very lowcost passive portfolios. But I would tell you, you wouldn’t come here just because it’s cheaper, right? Our strategies and we have things that you can do that you normally can’t do in the retail side. I mentioned this if if you need some basic estate planning. If we’re managing uh some of these for our customers here, we have some of the basic planning that we do that without cost. Um even if you’re not, we actually have some that the costs are actually still less expensive than you do this than you doing this through an attorney out there. It’s one of our third parties. Um, so look, I want to thank everybody for attending. So, we’ve come to our Q&A part. We have some questions out there already. So, I’m going to put up a one question survey on whether you actually want to have a call from me to talk about a specific situation um or if you just have a general question or you want to schedule some time to maybe look at some actual well planning if you haven’t done it. We are a vastly underutilized resource here at the credit union. You can access my calendar directly to that um through that QR code. Let me put up the poll and then we’ll get to the Q&A. So, some of the questions out here. So, you rolled over prior a prior 403b to a traditional IRA. You’re over the Roth income limit. Would a traditional IRA prevent me from doing a backdoor Roth? No, it doesn’t. And someone else had a question. Um, and someone else had a question on what that actually looks like. So, essentially a backdoor Roth is you would contribute to an IRA because there’s no income limits on the contribution comport portion of it, right? It’s just the deductibility. So, easy math. I put in $8,000 into my IRA and then I do a conversion immediately into a Roth. So, what’ll happen is I will get a $1099 later that said, “Oh, okay. You did an $8,000 conversion.” But since I didn’t get the deduction on that, I or my CPA will file an 8606. And I’ve had push backs from accountants that did not know this that I just explained it to them and said, “Hey, nope. This is what I do every year. You just file the 8606,” which basically means I had a non-deductible IRA that earned me $0. So, that is how you do the backdoor Roth. uh in short uh but hopefully candidly if you have if you’re still working and you have an employer ask them if there’s a Roth option that’s an easy way to do it because you don’t have income limits on that and you can put away more money so you still pay taxes on it so that part’s kind of a bummer this year but remember you’re actually doing this as a long-term strategy down the road uh let me see let me couple here I am 60 years old and not working I’m currently withdrawing money out of my IRA to live. Does it make financial sense to do a Roth conversion? Maybe. Um, so what we would do is what we would do is we would take a look at your cash flow. So if you are not one of the yeses, go ahead and change that to a yes or take that QR code and just schedule time and we’ll take a look at your specific situation, right? Because again, the importance is how much you need, how much you’re taking and how much you need, right? Um, you still want to be able to live your life because you’ve worked your entire life for that. But by all means, you certainly want to do that. Um, we can we discuss about charitable gifts. Yes, we could, but there’s not enough time. I am sorry about that. But in short, there are some things that you could use for some charitable gifting to reduce your income even in your RMDs. Uh, you can do a direct contribution so it satisfies that RMD without having without having to take a hit on that. Uh, what else do we have?

I think that covers it. You guys had some great questions. Thank you so much for your participation. This always makes this a lot more fun for me. Um, I’ll stick around for a couple of minutes after after we sign this off. So, if you have some questions still in the chat, I’ll still be around for a couple of minutes. But again, thank you so much. I hope everybody has a happy and safe Fourth of July. If you are into World Cup, go USA. Uh, and we will see you on future webs webinars. Take care and be safe. Bye now. Oh, hey, just quickly. So, it looks like I’m sorry, there are a couple of questions. We have some folks still hanging out here. Uh, it look like Judy, it looks like you’re still on. So, there was a question on some emergency savings and you have to do a new roof. Is it better to do a Roth conversion first? No, not if it’s an emergency savings. So, I can tell you I’ll give you an example of what I’ve done. So, I’m going to need a new roof in the next few years. So, I’m probably going to try and pay that before do that before I retire just out of my cash, right? The emergency part. Um, but but the short answer is depends on how much of an emergency savings you have in your cash flow. If you’re not one of the yeses, go ahead and change it and we can look at your specific scenario to say yes, how much is that roof cost? How much you have because you don’t want to take your emergency savings because you might need an you might have an emergency, right? So, we can talk a little bit about that. um

uh a couple 401ks. Again, we can look at your cash flow, right? And what kind of impact your age, what kind of impact that might be have on your tax bracket. Let’s see.

Is he still on here? He is. Oh, he is. So, Gary, um so there’s a question on having money with Schwab. Uh, I would say that look, you can always work with a pro. Look, we would love to earn your business here at at the credit union and Aerys. We’re a division of that. We are the financial division. I’m a fiduciary. The end of the day, I’ve been doing this 30 years. Um, it would be up to you. Whatever you’re you’re more comfortable with. I can tell you that uh they’re not necessarily mutual exclusive. You can go ahead and ask us about it and see what we would look at and then you kind of go from there. But we would love to earn your business, but if you haven’t figured out, we’re pretty low-key about stuff. So, because we’re all members of the same credit union here. So, I think

yes, we do handle couples who are thinking about filing separately. Um.

Ah, yeah. No, that makes sense. Yes, we do handle that. And as a matter of fact, when we do our planning, right, we look at that. So, oddly enough, you would be surprised how common it is, and I think it’s more common now than it used to be, where there is a ours, there’s ours, and individually, right? It’s a mine, yours, and ours. So, we even run plans separately. Uh, so it’s one of those things. I don’t know if it’s cynical. I just say it’s more pragmatic. So that way you don’t have to decide what each person is doing. You’re saying, “Hey, look, this is my goal.” Um, I think it’s a very pragmatic way of looking at it. So yes, actually that’s how my assets are run together. Um, it’s ours, but she has power of attorney and everything else. So with that said, it allows me the flexibility to do whatever I am as far as how I’m structured. And you are retired on that. So yes, we could still take a look at that. Even if you’re retired, we’ll still look at your cash flow and your tax bracket. how much how much room you have in your bucket, right? Whether you’re going in the 12 to the 22 or the 22 to the 24. All right, I’m trying to see if there’s any questions. I love the questions. This makes so much easier so you don’t have to hear me just drone on and on.

Oh, okay. So, this is one. Um, if my spouse retires in January and you exceed the 218, I understand that I have to pay Irma in 2028. That is correct. Caveat, look back. Okay. So, yes. So, there’s a question. So, we didn’t talk about this on the Irma, but as far as your Medicare calculation, they use your income from two years prior. So there is not a guarantee but you can request a recalculation or you can and and um or a concession um in that you’re saying hey look I know this is my income but I am retired would you please use this current income instead so that’s actually an option out there uh and yes that made that made sense that was actually a really good question I should actually add that as a slide for future uh because it’s not necessarily stuck that you are that you have to go from two years ago if if there’s something significant change like you’re not working your job has changed or you retired um you look at that I think all right I think I covered the questions and they were great questions

all right I think I got them All thank you for your patience um and thank you for attending. So everyone have a great night and we’ll see you on future webinars. Take care. Bye now.

Hi everyone. Hope everyone’s doing well. Um, we will start in a minute or two. Looks like folks are still joining us. Uh, as you can see, it is a blue sky here in Houston, Texas, which thank goodness for that because we had a storm that was kind of heading toward us, a little tropical depression. Uh, unfortunately it had taken a turn to the east and it’s heading toward Louisiana. So I’m not sure where everybody is joining me from on this webinar, but if you are in Louisiana, I am hoping everything is going to be okay and you all are going to be safe. Hopefully just a little bit of rain. It looked like quite a bit of rain. So [snorts]

Oh, hey Gary. I’m glad you’re a long way away.

So, you’re missing the fun as far as the storms out here. Uh ah that makes sense. The world is your oyster, right? If you if you retire from the airlines.

So, were you always a United or were you excontinental?

All right, we have ah classic. Nice. My dad worked well my family basically worked for both airlines. So, I’ll talk about that in a little bit. All right, it looks like we are 2 o’clock straight up and we got quite a bit today. So, I think we’ll just get this started and and people will be able to catch up because we’ll we’ll talk about some of the housekeeping stuff for a few minutes before. Um, so officially, welcome everyone. Thank you so much for joining me. Uh, anatomy of a recession, second quarter, and I realize it’s the end of the second quarter, but we’ll talk about what is currently going on as well. If you’re joining us for the first time, an extra special welcome. Uh, I’m Michael Marx. uh certified financial planner and financial consultant with Alliant Retirement and Investment Services or Aerys for short, AR II. I live right here in Houston, Texas, and I’ve been doing this for over 30 years now. Uh and my family has been tied to Alliant for longer than I’ve been alive. So, most of my family has worked for United or Continental since the 1960s. And as you may or may not know, Alliant is the original credit union for United Airlines. And last year they celebrated their 90th anniversary. So I realize that some of you may be joining us through different channels. So whether you’re joining us through United or former Continental, Google, Tesla, CBS, Comcast, wherever, Susie Orman, welcome.

A quick housekeeping. [clears throat]

Uh, 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 not record or capture the presentation. Whether this is by video, audio, screen sharing, or AI tools without prior consent, we appreciate your understanding. We’re glad you’re here.

So, I’m not sure if you’ve joined this webinar via an email directly from us or if you signed up on the credit unions website. So, I’d just like to take a couple of minutes to talk to you about Aerys for those of you who are not familiar with us. Uh, in addition to the weekly webinars that we host, we offer full service wealth management and investment planning. Uh, broad variety of investment options and portfolios from fixed rate guaranteed to as aggressive as you want to be in the market. Um and frankly our portfolio modeling is a little different than what you would have in the traditional retail investment side. So as I said earlier we are primarily a wealth management financial planning department. We host educational webinars as a service to our members. Uh we offer multiple webinars throughout the week with different presenters. So each of us hosts twice a month. Um, our team of fiduciaries at Aerys is focused on helping you understand the ins and outs of investing, saving for retirement, and much more. So, if you haven’t, I encourage you to take a look at the resources on our website, uh, which is aalliancreditun.com. Uh, you can see a list of our weekly webinars, our podcast, Investsavvy, our blog, um, and other financial resources. You can find us directly on the Allian Credit Union website just under uh parent invest tab in the upper right hand corner. So, uh I try to host one webinar in the afternoon and one in the evening. So, my next webinar will be in the evening. That’s Tuesday at 6:00 p.m. Central, 700 p.m. Eastern. That’ll be June 30th. Uh we’ll be talking about Roth conversions as part of your long-term tax strategy. uh we’ll look at some of the tax impact on your RMD, your required minimum distribution, as well as the impact on your Irma, which are Medicare, and maybe some of your legacy planning. So, ideally, getting an early jump on this aspect of your retirement planning is best, but most everyone can benefit from this topic. My next webinar will be back in the afternoon, Wednesday, 2:00 Central time, 3 Eastern, and that will be middle July, July 15th. So, we’ll be talking about estate planning and trusts aren’t just for millionaires. So, we’ll take a look at maybe demystifying some of that estate planning misconceptions out there. Uh, a lot of people find that a pretty interesting topic and also we’ll talk about a little later. But now, but Aerys does actually offer um some of that, you know, traditional will trust services. Um, but I’ll talk I’ll briefly touch on that a little bit later. So, thank you for your patience. Uh, but this is what everybody came for. So, this topic usually runs a little longer than other webinars because there’s a lot of information to cover. Um, we’ll still have time at the end for questions and I’ll hang out a little bit longer if need be to answer some of those questions. So, not to date myself, but there was a movie back in 1977 called Smokeoky and the Bandit, and a song came out of that movie called Eastbound and Down by Jerry Reid. Um, so to quote a line from that song for those who may be old enough to remember it, we got a long way to go and a short time to get there. So, let’s jump right in. So um so the official official arbiter of recessions is a national bureau of economic research the NBER right. So most of us have heard that recessions are two consecutive quarters of mildly negative GDP growth or if in a recess uh depression for example the pullback would be more but that isn’t always the case and as you can see from this chart there are a number of data points to consider as well as the magnitude and the duration of of the impact on on those data points. So I always want to cut to the punchline early on this on this uh this topic, right? So we can focus on the context of things. I think it gives you a better understanding of how the economy works. Um and as you can see here, uh we’re almost all green. Job sentiment still a little weak and it has been for some time now. Uh part of this is AI, the Iran war, some of the impact on the elevated energy costs, some inflationary concerns. the Fed just met and announced today at one o’clock. Um but overall things are looking good until they don’t. Um so contextually, right? Um I’m always a fan of context for those of you who’ve been on webinars before. Uh so the question is something good or bad, right? And really um uh so there was a question on job sentiment. Basically, it’s like the future prospects of jobs and and the job market as a whole. Um, but I’m always a fan of context. So, something good or bad compared to what? Here’s a quick look at how some of those same metrics looked at past recessions. So, here you see a lot of red in those past recessions, right? A lot of red X’s, a few of the little caution, um, and then very little if any expansion in in that given metric. Now, obviously the outlier is 2020, right? There was still quite a bit of green in there and bam, we had a recession. So, for those of you who remember 2020, that was when COVID happened. So, it was a quick sharp decline, but a quick recovery by the end of the year. So, and we’ll talk a little bit about that later, but that’s really what most recessions look like when we’re when we’re talking about tipping points um and the metric. though. Oh, a look at oil. So, it’s a relevant question in today’s economy, right? Today, WTI, I don’t know where it was closing at, but when I was looking earlier today, it was about $76, and that’s West Texas Intermediary. Uh, still oil is about 76 bucks a barrel, and future expectations are heading down if we can truly wind down that Iran conflict. So, fingers crossed, some prayers said for that. Hopefully, that trend continues. um we are still below the line where it’s basically where they look at pricing year-over-year. Um and then that has been in the past an indication of a recession. We don’t really see that. Uh and the best way to describe that is that if energy prices stay elevated for a for an extended period of time, eventually that creeps into everything else, right? Goods and services. We’ll talk a little bit about I think there’s a slide on that somewhere later. Um right because because goods are carried so when you have fuel costs that are expensive right you have it cost it’s airlines are more expensive rail is more expensive truck is more expensive cargo ships are more expensive and just driving around is more expensive so so that does impact it eventually creeps down into the price of into the cost of goods so hopefully we’ll sort that but again it is trending the right direction and hopefully that trend continues Um, so this is what I would also say right so as far as don’t be so energy sensitive versus not today but at least how how it impacted things in the past right so when we look at like how it impacts personal consumption for every dollar like for example I mean this is not just a a business but individuals too right if I am paying oh what’s gas like 335 a gallon here in Houston we’re we’re kind generally less expensive than than the rest of the country. Um but you know when it creeps up to four and and other places five six $7 for every dollar I have to spend putting in the tank that is $1 that I don’t get to spend in other places right it isn’t necessarily a grocery store because that impacts too but hey you know whether I take that trip am I going to take my family to Disney World um or Disneyland or wherever so so extended matters um but this is what’s a little bit different though as far as as far as um vehicles go right so when you look back at 1980 where where that chart is kind of up there as far as a percentage on consumption. The fuel economy back then was like 19 miles per gallon, right? And it was kind of this transition where, you know, we’re starting to go into a little more fuel efficient cars. Um, but you know, you’re looking at hybrids now where our technology has gotten so much better and you’re looking at like 27 miles a gallon. And I’m here in Texas and we love our trucks here in Texas. But even now with the advanced technology, the trucks are still in the low 20s, right? They sh V8 engines shut down half of their their cylinders when they’re on the highway. Um, and even now they’ve gone to V6s and turbocharge them. So technology is better. You’re getting more bang for your buck. So you’re using less fuel for those same miles driven, but it still impacts it, right? So the tax tailwind, um, and I’ll refer to this when we talk about a tailwind versus a headwind. So tailwinds are something that helps, right? Just like a plane, a tailwind will help help the economy, um, help growth or a headwind is something that might

inhibit it, for lack of a better word. Um, so the one big beautiful bill that was signed into law about a year ago, July 4th, 2025. Um, and frankly, we we’re still sorting out the impact of the bill on the economy. The expectation is is a net stimulus to the economy if there have been so many other events in in these last 11 months, right? We had an extended Ukraine war that was supposed to be over, added Iran war, energy tariffs, um tariffs overall. So these can skew the impact, but the expectation is still a net positive to the economy. So this is a big one, right? So there’s a kind of general consensus out there that this year’s market run was if you look at the market S&P Dow etc it was mostly flat up until six 7 weeks ago and then it started moving. Um so we think most of this run is attributed to capex and those unfamiliar with that term is capital expenditures which is basically business spending money to expand the business and in this case it’s AI and the data center buildout right so this that shows up as profit kind of as a general so it shows up as profit as far as companies right the earnings are there um but they’re frontloading their investment um but this growth level you can is not sustainable. [snorts] So the future return on this is still a big unknown, right? So as companies invest in this, as investors own shares of those publicly traded companies, they want a return on that money. So what you’ll see is what we may or may not see is does this truly come to fruition? Um or will the market start making adjustments to the share price? um which could impact the market as a whole. Um but I would say we’re in it now. Stay tuned in the coming years and we will find out. But right now there’s a lot of growth because of that. So um so we talk about and the news talks about the tremendous amount of money that is invested in AI and it is a huge amount but compared to some of those historical investments right um it’s not as large when you look at some of the past tech innovations as far as the relative size to the GDP or the size of our country right our country is just so massive Now so you know auto electric motor tech railroads and we really don’t think about technology as like a railroad and the steam engine and things like that but that is it’s a huge technological advancement you know the the the light bulb I mean what a huge one right and then you know y’all obviously like with the internet and things like that but there there’s really a lot of innovation now I can tell you what one of the differences as far as technology goes is that technology permeates almost all sectors Right? So even if you look at mining, even if you look at um something like oil, right? Being able to frack, being able to directionally drill, that allowed that allowed access to reserves that, you know, 40, 50 years ago didn’t even exist. You just couldn’t get it. So now we have access, which opens up the supply, which could potentially lower our price. Um a new wave. So, so this is about technology, right? And that and that there there’s always these concerns about, hey, is technology going to eliminate jobs? And and candidly to some degree it does, right? It’s it’s it’s referred to as uh creative creative destruction, but but what also happens is it creates other jobs, right? So, if you look at how much more productive we are as as workers, especially when you compare us to the rest of the country, we are incredibly productive. Now, we also don’t take time off and things like that. We’re not exactly known for that. We work really long days and we’re kind of 24/7. Um, but at the end of the day, productivity per worker in the United States versus other places are still like head and shoulders above that. Um, so one of the things that we think is yes, the AI adoption may eliminate some jobs, right? And we’re kind of already seeing that to a smaller degree than probably given credit for. Um, but it also makes people far more productive in how they do their job. So again, stay tuned. We have benefited from each one of those technological uh innovations. And I’m going jokingly say for those who’ve seen Terminator until it doesn’t. So, uh, market outlook.

So, I and and I will say so, um, what they do is they look at like geopolitical events, right? You know, like wars. Uh, it’s usually pretty much wars, right? I think on this one. Yeah, it’s pretty much wars. So, you know, the question is whether you buy on the dip. Now if you’ll notice this this slide with data was as of the end of first quarter. So we have question marks in the 3 months and 6 months. Um but the RN conflict began in February 28th. Right. So that was right right during the Houston barbecue cookoff and right before the rodeo. But but we do know at least part of the answer. Right. So 3 months later the S&P was actually up 9%. So we will see where we are in August to see where we are in six months. So that is also still tracking right right after the conflict 3 months we’re generally up not every time. Um I mean obviously your obvious outlier would probably be the Russian invasion and then the Arab war I believe. Yeah. And then the Gulf War and that’s basically again that’s tied to oil right because oil just permeates everything that we do.

So closing the gap. So for all people who love that the MAG7 and I buy the S&P 500, you know, because it’s really broadly diversified, I would just I would say a note of caution. I mean, we use the index a lot too, but but at least understanding what that is, right? And maybe some of the expectations. So when you look at that right the S&P 500 for those unfamiliar with that index it is the largest 500 companies in the US um and they are weighted right so the bigger the company the bigger impact it has on the index movement whether up or down so it looks at like the earnings growth and the percentage of that right so what you can see is the the teal bars are the magnificent 7 the gray bar is the well the S&P 493 so right it’s the other companies that aren’t those those big seven there um and then you have the S&P 1000 which includes some mid and small cap companies um so what you can see right so what you’re seeing is is we had that peak somewhere around 2024 that mag 7 and we’re starting to see that come down now what’s actually happening on the earnings perspective right is that people put so much money in there we had talked about that a a little earlier that they’re like, “Hey, you know, is this becoming a little expensive for this buy? Maybe I need to look at other things.” And we’re also starting to see other things happen as far as with the other 493. So, kind of the expectation, you know, we’re is is that we’re starting to see those small and mid, the rest of the the 493 starting to catch up on the earnings, so they’re making a bigger play. So, if you’re in the individual stocks, things like that, it just looks at it just basically means there’s other opportunities out there. Um, now, not your father’s S&P 500. And this is an absolutely for sure. So, I would probably say less than 10 years ago. So, back in, you know, the S&P 500 as the largest 500 companies, but they’re weighted, if you recall. So, as these companies get bigger and bigger and bigger like Alphabet and Meta and the trillionaire Elon Musk, right? Um, what it’s starting to do is there’s a lot more technology um found in the S&P 500. Traditionally, it wasn’t that. It was usually a much much smaller position. the the the NASDAQ or if you’re looking at a trading symbol that was triple Q there. Um that was really where you found your technology. But really the S&P 500 is really it’s not as it’s not as different from the from the NASDAQ as it had been in in years past. And frankly, as those tech companies really kind of gain much more popularity, we’re not really sure if that is going to revert back to that mean. it’ll probably stay up there and still be a major part. Not something to necessarily be worried about, but it is something to be aware and how you allocate your portfolio.

So, this is something kind of cool, right? You hear on the news often that the market has hit a new high. And should this be a concern? Well, maybe, but usually not. So, markets don’t pull back just because they hit a new high, right? There’s so many other reasons um why a market will correct. It’s usually around a bubble. There’s not a whole lot of bubbles right now. Um and believe me, I get asked about this all the time by clients. So, with that, there are ways to position your portfolio to still participate in the market while mitigating some of that risk. You know, clients are like, “Hey, you know, maybe I need to be out of the market or I don’t want to go into the market because the market’s high.” And like, well, there’s different strategies on how you do that. So this is a quick summary for this second um second quarter um that it’s really looking at expansion and since we are at the end of second quarter we’re right um that ended up being true but we also expect that to continue on at this point um I would say the big rub as far as what goes on in the Middle East but but even then at this point it looks like it’s pretty

um so so at this point it still looks pretty positive. So, on to the next topic. So, we won’t spend too much time on fixed income or bonds as most people know them. So, few people, frankly, few people like talking about fixed income or bonds, right? Because they are so boring, not exciting. No one says, “Oh my god, you got to see this treasury I just bought. It’s so cool.” Um, but they’re really an important part of your portfolio. So, I wanted to talk about this because the impact on bond prices with interest rate movements. So, as you may or may not know, we have a new Fed chair, Walsh, right, who replaced Powell, who’s just the thorn in Trump’s side. Um, and the Fed met this week, right? So, they just made an announcement around 1:00 central time or like 1:20 somewhere around there. Um, so they did not move rates. anywhere. Uh, which was kind of expected. That was no surprise. And Borch, by the way, is not a fan of guidance where past Fed chairman, this goes all the way back to Greenspan, right? They’re really good on communicating the Fed’s intention or their thoughts. And the intention on that was to kind of smooth the market a little bit. Hey, this is kind of our thought. You know, you guys can kind of make that adjustment out there on Wall Street. Um, and he’s not a fan of dot plots, which is basically a chart that the Fed would put out on where they kind of see interest rates going, whether it’s up or down. In this case, it was kind of on the upside and then and then the down. But, um, I mean, that that going away wasn’t really too big of a surprise because frankly, the Fed was terrible on the dart the dot plot. It was it was usually so far off what Wall Street would forecast and then you would see as those got closer is that you would see them getting a lot closer to the Wall Street forecast. So, I’m not sure if if the world is any worse off without those. Um, but I can say this, right? So, the Fed chose not to hike rates um or cut rates. They did nothing. Um, but the the expectation prior to the Iran conflict was that there would probably be one maybe two rate cuts this year. So inflation’s proving to be a little stickier than expected and and frankly that was exacerbated by the energy costs creeping into some of the pricing goods or price of goods and services right now. Um we’re probably looking at maybe one rate hike toward the tail end of Q3 or the beginning of Q4. But you know again these situations are fluid so I would say stay tuned. Um, I think a lot of that impact is going to be what goes on with with Iran. Um, but you know, you’ll want to consider the impact on the current bond holders, right? If you’re on like a bond holder right now, like in your mutual funds, things like that. Um, and and I’ll explain what this chart is. So, what this says is not not so much I’ll give you the gist of it. The longer a bond is, it’s called convexity, but the longer a bond is, the more sensitive the price of the bond is to an interest rate movement. So whether it’s a hike or whether it’s a cut and the price goes opposite. So if the price if interest rates go up, the price of that bond gets beat up. If interest rates go down, the price of that bond goes up, right? because your bond now and I’m holding a 5% bond and now interest rates are now four because of rate cuts. My bond is more valuable than a new issue bond. So that’s kind of bonds 101 for those of you uh who had to take economics like forever ago. Um and basically what happens the longer your bond is the more sensitive to an interest rate movement is. So if you look at a US Treasury right that’s the most obvious one. So I like pointing that out. So, that 30-year Treasury, if interest rates came down 1%, the price of that bond would go up 22, almost 23%. Um, if interest rates went up by 1%, you would see that it comes down a little over 9%. Now, again, because there’s more of a chance of a rate hike, this is kind of significant, right? Because bonds are starting to finally do well over the last year, year and a half. Um, but if you were in bonds and you’ve held them for a while as part of your asset allocation, that 7030 or that 6040 or whatever that percentage is, like you can say your bond portfolio has gotten absolutely smashed. When you look at a five-year return on there, they’re like flat. Um, but you still you still hold them for a reason. Um, we’ll talk a little bit about that, but but you’re basically holding there to reduce your heartburn. So, um, now the expectation, so, so because interest rates were looking to come down, come down, then we’re like, okay, some of those bond portfolios are actually going to finally maybe recoup some of those some of those losses that I took from 2022. That might not be the case. That might you might have to wait a little bit longer. So, again, another thing that clients comment on, and I will say this all the time, [laughter] will this be our undoing? you know, our debt is so high and and you know, I mean, maybe but probably not today. So, and yes, our debt is high, 39 trillion with a T, but our economy is is also huge, right? We’re a really wealthy country when you look at our assets, both government, corporate, personal. So, so I would say this, right? Because even though 39 trillion is a lot of money and I don’t want to I don’t want you to think I’m dismissing this or being dismissive of that. But if someone owed a million dollars, right, is that a problem? Maybe, right? Context. Um maybe if they’re worth a hundred,000 and they owe a million, that might be a problem, but less so if they’re worth 5 million, right? Their debt ratio. Um with that, we definitely have some work to do as a country. And I’m going to jokingly say this, taxing the millionaires and the billionaires and now trillionaires thanks to Elon. That’s not going to solve the problem, right? Probably a combination of things, right? Maybe increase some taxes, cuts in some areas that overlap. Maybe Washington could be better stewards on how they spend our tax dollars. Um, but I’m sure that debate is going to go on for years and years and years, long after I am gone from this earth. Um, but we do know this, right? US debt treasuries are still very popular globally and that’s why the debt that we have is and it’s it’s at a a relatively low rate, right? Demand is still pretty high for that. And as you can see, you know, we’re still pretty high on the um as far as our debt to GDP ratio, but our rates are still considerably lower than some of the other developed countries out there. So here’s an example of why. Right? Here’s a comparison of the US dollar, the euro, Japanese yen, and the Chinese one. So we are still the preferred currency for reserves and and there’s a reason for that. So there was this debate um oh my god back in 2008. So I’ve been doing like 30 years. So, it’s just one long year for me sometimes. So, back in like 2008, 2009, oil um spiked up to about $147 a barrel and it was there for a bit. Um and there was this question that hey, maybe the dollar shouldn’t be this global trading currency anymore. You know, maybe we should look at other things like the Chinese want like and and and there and the reality is that is probably going to happen someday, right? So, so prior to that, you know, we had the Swiss Frank, we had the British pound, um, that were that were, you know, the global trading currency, but but what happens, what you need the the reality, there’s only like three currencies that could be the global currency. Um, and that’s the US dollar, uh, the euro, and the one. So the reason why those other two probably would not work at this point is that you need a few things, right? You need an economy large enough to be able to handle that scale, which all three of those work, right? The European Union, not one country in particular. Um, but you also need a unified currency that is transparent and that the devil is in the details and that’s what eliminates the other two, right? Um Europe for example so we have a unified monetary and fiscal policy right the EU with the euro although large enough does not have that right they have the unified monetary in the fact that everybody uses the euro but fiscally Greece can do what Greece wants to do Germany can do what Germany wants to do France can do what France wants to do or we fought a civil war for that right so that’s why we have the Fed um and we have Congress so that is an advantage. And as far as transparency goes, China isn’t exactly known for their transparency. So investing in this currency, you’re not really sure. And and yeah, I mean, they used to peg it, but now it’s they they float it, but it’s still a far cry far cry from from Transparent. So the US being

uh being ousted, that’s probably something for much further down the road. So we’re doing okay on time here. So let’s talk a little bit about risks. So [snorts] um some of the headwinds talking about jobs, employment, we see some of those numbers. Now the job numbers actually came out, the last one that came out was actually pretty good. Uh but but I would say as a general rule this time was different right because normally what happens is if you see like an unemployment rate that starts ticking up things like that right usually within a certain time period I think it’s like a year and a half or something like that you’ll see you’ll see recessions follow well this has not been the case so far right so for number reasons right So a lot of this we think is just companies are just becoming a lot more efficient in how they do things and they’re still making money on that. So So it is a different time when we talk about unemployment, when we talk about jobs, it is important but it doesn’t have the same impact like it had before. Uh and profits don’t look recessionary. So companies are still making money, right? And and part of that reason is is basically efficiency. Now, whether it’s AI or not, that that probably remains to be seen as far as how much of that goes. Um, but but they’re still making money and and obviously some of those profits are still under pressure, right? Because cost of energy, cost of tariffs, increase your cost of goods, which cuts into profits. So, we’re going to have to still and wait and see how that plays out. But right now, profits are still there. So I had mentioned this before a little bit of creative destruction um and and and really when you look at this right the these are about the jobs right so that gray is occupations that didn’t exist um versus did exist as of 1940 right so you’re really looking at like World War II at that point um so as you can see there are a lot more jobs that are created since the 1940s that simply didn’t exist prior to that. And frankly, most of that stuff is tech. Um, but as you can see, it permeates all sectors, right? Technology makes our job easier because, I don’t know, 20 years ago, we wouldn’t be hosting these, right? It would be somewhere where we would host for our members and we’d have sandwiches or snacks or something in some rented room or in one of our branches. But now I can talk to you in New York or Florida or Louisiana or Mexico or wherever you might be. So over time it does create it and and really I don’t want to sound flippant or dismissive because I do understand that some people’s jobs are going to be lost as a result of this and we are talking about real people. So yes, we’re talking about data but I have never lost sight of the fact that data is real people and real families. So let’s talk about market concentration, right? We talked a little bit about the S&P 500 with the bigs controlling most of it. So if you look at over time, right? So the last like 35 years since the ‘9s and that was kind of the boom for the technology side, right? You look at the largest 10 companies in the S&P and what percentage, right? As you can see, it started out somewhere around the 20s, somewhere around there, and we are up almost double that now. So as the as the as the tech industry becomes more prominent, you will probably see that number continue up. But we have had a little bit of pullback, right? We’ve had some profit taking on the tech side because people are questioning, hey, is it too expensive and looking at other opportunities. So again, we’ll see how that plays out. So along those same lines, right, trees don’t grow to the sky. So at some point as [snorts] these companies get larger and larger and larger and they represent a larger percentage what you’ll see is they end up reverting back to the mean where they become smaller not non-existent but smaller and smaller. So that just means there’s a lot more opportunity in the other 493 companies in that S&P 500. Or if you’re in that index, what you’ll see is it’ll start pulling back a little bit and as the other companies catch up.

So um what that also means too is that you’ll start seeing some opportunities outside of the US and that has really been the case over the last couple of years, right? We’ve seen some of the international plays if you’re holding international funds u those have actually run like a champ over the last couple of years uh we still see opportunity not as a broadbase but in in certain areas in certain parts of the world and even within countries there’s like you know if you look at Asia or if you look at South America there’s there’s other countries are a little bit here more or there uh that might be a little more favored so non US So obviously there is a home country bias. So we live here, we invest. We invest in what we’re familiar with, right? So when you look at the percentage of the global GDP, right, we’re we’re actually smaller than the rest of of the emerging markets. But when you look at like the the market cap, the the value of our companies, we are a big a big share of that, right? We go from a quarter of the global GDP but our market cap is you know like over 60%. And where our US portfolios 75% US which is pretty common we have better I don’t know we just are more comfortable with those companies and a lot of the innovation frankly has come out of the US and I think that is probably the biggest driver. Now will we stay that market leader? I don’t know. Um, you know, if you go back like to the ’90s, the ’90s was really obvious if if you’re old enough, and I’m assuming people on this are old enough to remember that, um, you know, Japan had this big push, uh, and they just kind of owned and dominated the innovation in a lot of the sectors and technology. But as things started changing, you know, 80s went to the US and then the ‘9s kind of the rise of Japan and then through the 2000s, we saw the rise the US taking back and a lot of that was our our large retail plays, a lot of the technology side. In 2010, you saw a little bit different, right, where you saw some of the oil companies, right? That was kind of your biggest push right there when you brought in the international plays. Um, and now where are we? We’re kind of back again to the US, but China is making quite the run on what they’re doing. So I, you know, the expectation is China will continue to probably grow. Uh, but they are, by the way, our largest economic threat is nothing. I mean, every I would tell you that every economist, this isn’t a political statement, that every economist pretty much knew that since 94. Um, but here we are. So it’s a global economy. we are better for it um in a free market. So here’s your cycles. Nothing huge. Basically what this tells you is that hey some cycles the US outperforms other cycles non US outperforms. Uh right now we’re still in the US. Over the last couple years though a case could be made for adding some international. So US dollar. So, um, so we talk about like cycles, right? It’s usually about 16 years is what they’re saying here. And then, and then we start seeing a little bit of of something getting beat up there. Um, are we there? We’re not really sure. U, right now, I would say the dollar is a little bit weaker, but it’s still strong. Um, so, so today the the dollar index is at 100 because it says a little question mark, but it’s actually a little bit higher than where that is showing. Uh, this was 330. So this is a couple months ago. So the dollar dollar is actually up from there. So this kind of gives you an idea, right? So weaker dollars, it helps the international play. Um and for the obvious reason is the dollar is softer than it was a few years ago, but it’s still very strong. So a weaker dollar helps US exports, right? Because like a stronger foreign currency can buy more US stuff where in the past a strong US dollar bought a lot of foreign stuff and usually it was like Chinese stuff. Um but but the reverse is true. So I mean this is something that frankly Trump wants to see more of, right? More US exports etc. So investor pitfalls. Let’s just talk a little bit about this because this is important. There is always a reason to stay out of the market. Uh you know whether in 2000 it’s the tech bubble burst, right? September 11th, Iraq war, maybe Hurricane Katrina, Ebola in 2014, which we’re having an issue right now. Um, you know, Brexit 2016, COVID in 2020, um, liberation day last year, right, with old tariffs. But but if you look all right what they do is they show your max draw downs during that period but they and then they show you hey you know if you had just held out where would you be today right in that cumulative return so to go back to that tech bubble burst that S&P draw down was 17 and I know it was painful because I was in the business back then but if you had sat tight you know you’re up 360%. So, and that’s as a whole, right? Because I know a lot of those dotcoms, if anybody’s going to say that, uh there is a uh there are a lot of those companies that simply don’t exist anymore. And so, so don’t fall victim to panic attacks. That’s basically what we’re saying here, right? So, don’t overreact. And let let me put a quick and early note uh about the homes category because I can already hear the outrage permeating through this webinar. So before anybody blows me up on the chat or in the Q&A, this is nationally, right? And if you’re looking at costs like not what you just buy and what you sell it for, you actually need to adjust the cost of your annual property tax, school tax, utility tax, insurance, any upkeep like your roof or foundation repair in Texas, you know, um, etc. So, yes, I understand real estate can be very lucrative, but kind of as a whole, it is not. But you need a place to live. So, and if you have rental, it spins off a dividend. So, there is something about that.

Um,

so I love this chart. So it goes back 42 years I think. No, longer than that. Yeah. Yeah. 42 years. And um, so in this so these gray bars, so let me explain this what this is briefly. So the gray bars are when the market is what the market ended December 31st, right? So the year end. So in 1983 the market was up like 20some percent. In 84 it was up I don’t know seven or eight% somewhere around there. And if it’s below that line it was down right. So 2008 the market was down about 39%. So if you look at that there’s 42 years the market was down seven times. So that means it was up 35 times. So that means most of the time you get a win 75 80% of the time. Um, but again the devil is in the details and we’ll give you context. So

we’ll give you some context. What those teal dots are is what the draw down was the decline for that given year. So even your winning 75 80% of the time every year you are having a draw down. So it is rough. It can be a rough path. That’s why we always say, hey, there’s a reason why we allocate. Um, you want to be mindful of that on how you invest because there’s a lot of heartburn along that path. So, can you time the market? Um, maybe in the short term, but historically, not so much in the long term. As you can see, just the buying and holding and then some of the buys and sells, right? You buy after a trough, you sell after a peak, you end up with considerably less money. Now, it’s a very long period of time, but even in the shorter long period, it still matters. So, what we say is don’t miss the best days of trading, right? Um, as you can see, being in the market, not trying to time the market. Um, you want to be in the market, but be mindful. And basically what this chart says, I’ll give you an idea. So, we’ll pick

we’ll pick something that let’s go to 1980 because 1980 is always really interesting or 19 Yeah, 1980. Um, so basically what it said over that decade the market was up the S&P was up 227%. Right. But if you miss the best 10 best trading days, and that’s not the 10 best trading days every year for that decade. That is the 10 best trading days over the entire decade. Your return was more than h less than half. And the reason for that is it’s it’s behavioral science, right? Um and and basically what happens is when the market gets smashed, people are like, “Oh my god, I got to get out of this. I’m going to sell my position and I’ll get back in.” And I’ve heard this many times. Can’t we sell and then get back in when the market gets better? I was like, “Yeah, sure we can.” But the question is, when is the market better, right? Especially when the market trades on future expectations. So, you usually don’t feel better until well after the market’s already recovered. And then you know you you sold low and then you bought high. And I am again don’t confuse this. I’m not saying sit in here throw hell high water. You don’t worry about it. You don’t need to worry about it. You just need to be mindful on how your positions are concentrated etc. But again, don’t try to time the market. It’s time in the market, right? It’s not timing of the market. Um, and I know a lot is made of who’s in the White House and there’s a lot of fingerpointing that goes on through the decades and it probably will continue. But the reality is presidents get they often get a lot of credit, sometimes too much credit for things that go well and when things don’t go well. Um, as you can see from from the earlier data, right, there’s just a lot more moving parts to the economy than the politicians care to admit because well then they might not be as important as as we think they are. Well, so at the end of the day, businesses do business and continue to show profit right throughout the different administrations. Time is on your side, but again, be mindful.

So, how can we help you navigate through some of those times of uncertainty such as this? Um, like I said, we are award planning as allocation modeling um is what we do. So, you know, whether we’re helping you plan some of those questions that are an, you know, that are unanswered, social security, pension, cash flow management, uh, if you haven’t done a financial plan, I encourage you to do that. It’s something we do as part of the service for our members here. Uh we have some estate planning coordination where we can actually coordinate you know some of the basic wills, trusts, uh hibbit uh letters, things like that. Um we have many no free products and retirement strategies. Uh looking at lifetime income, how you how you actually look at your planning there, some dividend portfolios, etc. And we do like the feebased structure, things like that. some of the lowcost passive portfolios as well. Look, I want to thank everybody for attending. Um, and if you have questions, this is the Q&A part. So, I’m going to put up a one question survey. So, it’s a two-part one part. So, type any questions that you have. And we have some questions already there and there’s some other talking points. So, we have, you know, five minutes, maybe seven minutes um as far as answering some of those questions. uh if you’d like to have a call for me also that QR code will take you directly to my calendar so you can go ahead and schedule some time if you want to talk about something on an individual basis on how we can help you. Um but I will also put up a poll uh if you want to be contacted by us. Obviously it’s no pressure but I do think if you haven’t worked with AIS before um you probably be pretty interesting on what we do and how we how we approach things. Uh let’s look at some of those questions while while we’re working on this. So you do to investing? How can my money be used to invest? So that is a great question. Um I would say this um it kind of depends on the individual and basically it really is a function of your goals. Uh that would be one of those things that go ahead and hit yes and we can look at specifically what you’re doing. Get an idea for your risk tolerance. What experience if any have you had in the past and say hey these are some of the the uh options that are available on how you could structure that. uh in the recession dashboard where you showed current versus prior recessions. How go back did you go in those prior recessions? You have to go to see mostly the green result like today. In other words, the 1991 recession. You have to go back to 88 to see all that. No. Um you don’t have to go back that far because those are actually separate. Um they’re actually separate periods of time. So basically when you look at recessions, so um the uh the economic bureau will will go back and and they’ll look at those and they’ll say, “Hey, this is when it started. This is when it ended.” And and they can usually determine that pretty quickly, but they usually determine it after the fact. Hopefully that answered the question. Unfortunately, you missed 15 minutes. Was this webinar recorded? Unfortunately, no, it isn’t. For compliance reasons, we cannot repost these. These are actually just made for like a live webinar, a live Q&A, etc. But I will tell you if you have any questions, one of the things we do on planning, if you have any questions, just go ahead and either hit the QR code, um, you can schedule some time or give me a call. Um, or just say, “Yeah, give me a call and we can kind of figure out how that applies to you.” Uh, let’s see any other questions.

So, a couple of points while we’re having people either ask questions or not because I do get these questions quite a bit. um when people talk about the 1990s right in that.com bust uh they’re like hey you know this AI feel and this tech run you know it kind of feels the same and I would say that yes there are some similarities to it but it’s really really different and basically your biggest difference is there’s money now right when we were doing the com those companies didn’t have any money they weren’t making any money people were just buying because they were buying because they’re do well right now like if you look at their earnings per shares like much much much much better now with those companies. Um and and the PE earnings the price earning those are much much lower too. So you have better earnings the PE is much lower. So it’s a much more stable environment than it was in the 1990s. Um how do we invest in today’s market? Um it’s a good question. It’s a complicated question but it’s a good question. So so what I would say is is one of the things that we do with our clients now is is we look at hedging, right? We look at taking profits because there’s a lot of volatility. So, we can look at kind of protecting some of your downside. And and the reason why we can do this is we we have access to institutional things that you really don’t have in a traditional retail environment, whether you’re in the Fidelity side or or Vanguard or Schwab or whomever. You just don’t cuz some of the things that we do where I came from, you had to be worth 10 million or more to do it. So, the credit union does not have that limit. They allow access. So you can just do things that you couldn’t do before. I guess the wealth I guess wealth, right? Um Oh, a debt question. That’s pretty good. Okay, so the question on on um so our debt because yes 39 trillion is a lot and China’s probably the biggest holder of our debt. So So there said and think it’s just more talking heads out there, right? you know, on on internet and stuff and they’re like, “Ah, China can just call our debt and then we’d be in trouble.” And two things. One, you can’t call that debt. That debt’s out there. What they could do is sell the debt, dump the market, but they would be absolutely crushing themselves if they did that because again, demand, you would have a problem, right? So now you’d have this huge supply, not as much demand. So that price would have to fall. So they’d get absolutely smashed on that. and they’re not really interested in tanking that that holding because it’s vast. Uh maybe one more. All right, good one on this one. So, private credit. So, we don’t talk about this much, but earlier in the year there were some potential defaults in the private credit market, right? where um and they’re like, “Oh, is this is this kind of like 2007 where the credit the credit market just got absolutely hammered and it it caused the stock market to fall and and subsequently cause the failure of Lehman Brothers and Bear Sterns etc. and and not really this is not really even close to the same and and simply because of this um the private credit market is only about 5%. It’s really a small percentage only about 5% of our country’s G GDP, right? But in 2007, those mortgage back securities, right? If we remember those, those mortgage back securities uh were over 30% of the GDP. So they had a really really big share. So they had a really big impact. And there were some problems in the government structure on how they were doing that. And thank God they they corrected. It wasn’t TARP that fixed it. It was basically the markettomarket. they finally changed a lot on how on how how those mortgage back securities were priced and magically we started to see a recovery. So with that I am Hey, we’re 4 minutes till three. Um or at least I think I am. It looks like it. Yes, we are. So it looks like we had all the questions. Thank you so much for the participation today. I really appreciate it. I hope you guys have a wonderful day uh today and be safe and I hope to see you on future webinars. Take care. Bye now.