Retirement Tax Savings

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This is the Truth Network welcome to finishing well brought to you by Cardinal guy, certified financial planner Lonza Schild, best-selling author and financial planner helping families finish well for over 40 years of finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes. Now let's get started. Finishing well, finishing certified show is retirement savings and I know a man I can hardly wait for this to actually think about some with me is sort of a parallel concept.

You might remember when you went to church early for me when I went to church as a kid, you know, nine, 10, 11 years old at this point in time I would much rather been out playing with my buddies and being dragged to church and it seemed to me just like an endless cycle of having to step up and step down and you know having to listen to what I thought was a boring kind of thing and then you know a little later on as I got to you know have a relationship with Christ. All the sudden you know I was interested in was read the Bible myself. So when the pastor was talking about things that I had Artie been studying and then all my goodness it became trip tremendously interesting. Some of you know the whole thing. As I began to get the Bible in context became phenomenally more important to me and became fun to learn. It became something I wanted to do, which was go to church while taxes in the in its own way for you ponds right once you train them they take on a whole different light well and well as you begin, you studied it now for how many years. 40 years now, 40 years and so it's become fine when you can save somebody a bunch of money right absolutely and also becomes interesting, maybe not fun when I first learned about tax when I was studying this stuff. I first learned about it in CLU courses, chartered life underwriter courses and I was really looking at my own taxes that I was paying and it was interesting down so all of a sudden you know your viewpoint. Changes like the Bible does, the more you learn right, the more you can read a passage, the third or fourth time you're tell me is you're going through the Bible you read Matthew Mark Luke John now you're up into what are you and Peter past Peter and John epistle of John and you've seen things right, but you've never really just doing it in order just whole bodies of knowledge the word of God becomes revealed to be just things that I kinda knew they were there, but not really there just kind of there certainly wasn't knowledgeable about them and aware of them and just going through the thing and not missing the section unit section by section, book by book day by day. It's just been reviewing and I drew that parallel about taxes for a lot of people are, where you were when you were a little boy going to church just it's kind of doing. We have to talk about that.

I get that completely. Yeah.

So as we got some new stuff will yeah I mean so, so every year from its slot and company I get several charts that are sent to me. I print them out and I put them up on my wall right where I work so I can refer to them all the time and the one were talking about today are the tax rates in the tax brackets the same way that sounds really interesting and therefore ordinary income tax rates and then therefore long-term capital gains and dividends tax rates and then it has a place on their for the standard deduction and so I thought for today shows will talk about taxes is what were not really talking about of the rates were talking about how do we apply this stuff and how do we apply it to the benefit of our retiree clients. That's that that's what were really talking about today and when you really get through this. It's simple for me and I'm thinking that the people on the other side of the table are the listeners. They're not hearing many times the same thing I'm putting out there thinking taxes. Well, I know somewhat. I did those last year and I did in the year before and I certainly want to do financial planning for you. I want to look at two years tax returns because that's going to reveal everything that I want to know but I can't do anything about those. I mean, maybe we could if we found a mistake or something we could go back to your accountant and we could file a amended return or something that's not really what I'm looking I'm thinking right now about your 2021 tax return and then I'm thinking about 20, 22, 20, 23, 20, 24, and then 20, 25, especially because that's the sunset here for the current tax brackets. Did you know that only consent on the shelf. It only taxes before but had bit so tax rates historically are at an all-time low. These tax brackets and the rate that you pay like that 10% and the 12% and the 20% in the 22% in the 24%.

You know I start throwing all these numbers of people in the levels of income that you can earn and still pay at those rates there historically at an all-time low. And that's do the tax cuts that we had about three years before years ago and within that tax cut.

They have a sunset provision that says that 2025, unless they change the law. They're going to revert back to the old rates in the old brackets so you sit and you wonder why did they do that. Why did they just make him forever.

Will they gotta pay for this stuff and so you know know in other words, people that were against the tax cut in their organization. Well, you just can create a whole bunch of deficits out of these taxes the government can make less money and the people that were for the tax cut were saying no were actually going to collect more money because were to spur the economy on in such a way that even at lower rates were going to collect more taxes amount is that's all in the negotiations is really mad about all that is just the gotta put an end on this because they gotta pay for every year and their projection. They didn't choose to pay beyond 2025. So no, barring any action that in 2025. Tax rates are going up and that also would've been the end of the second term for our last president.

So that's part of the negotiation as well is is that he covered the tax cut for the whole time he was going to be in office and then little did he know about the 2020 election and then he's not up with the tax rates that we have right now are good for the rest of this year and for four more years, barring any changes there going up in 2026. So what we want talk about on the show. What we do with that information and what we do with the information that you could get if you just went to my website. You can see these tax brackets under the tax code. The same thing I'm looking at Robbie's looking at you can see that and you can also just put tax rates, tax brackets, uses Google that the stuff come right up in a Google search. So if we know what the tax rates are the tax brackets are in with the standard deduction is for this year and then we can estimate for five years into the future and have some reasonable surety that then we can put together a plan where we can make these things workforce instead of against Brian and you have sort of in order to put flesh on all this so that Dana people and see better. You have got a story of how this applies with something dimmer so I got up 69-year-old client who were working until the end of last year's job ended, forced retirement or a termination.

Whatever you want to call it, and he came to us right after that and just talk a little bit what would but we did form tax wise so before he came to us. He'd already started his Social Security check.

He had received a very nice severance so that made his income for last year.

Very high or for you for 2020 because he got this during 2020 and he was really coming to us because he was just worried about paying that tax all that you really want to do some planning. He got a lot more than he bargained for, and the first thing that we went to is how much is your Social Security check. How much is that in his case is about $2300 a month. This is a single guy done have a lot of debt done have a high lifestyle, and where we got to his.

He can pretty much live off of that 2300 bucks so that's kind of a cool place to be and then he's got $250,000 of retirement accounts and he's got about $100,000 in the bank part of which was is this really nice severance that he got and he's worried about spending that because he thinks you know a bunch taxes and invite all obit more than you normally would. Auditors, as opposed to a refund but that's still not worst problem really lies or the solution to his problems over time. It's it's buried in the tax. So I set about an made him aware that if he has no other income in 2021 other than his Social Security and he collects 2200 bucks a month. His taxes are going to be zero. That was news to him. He was like so you not really going to get this off the chart at the website but the tax on Social Security. If you pay any is calculated by the amount of your other income taxable income in a given year, however much extra money you make, or other money you make. That's going to determine whether you pay any tax on your Social Security so for him if that's zero. He pays no tax on his Social Security just collects the checks coming in the 69 stories three years away from minimum distributions. She doesn't have to take any money out of his IRA or 401(k) or any other accounts so he could keep his income at zero and so he was pretty happy with just that thought, wow nice and will wait a minute you gets better what's the women well and I said you'd said that you may go back to work part-time and if you go back to work part-time. Guess what's going to happen. You have other income and then when you have other income. Let's say makes 25 grand a year working part-time for bringing back will now discuss Social Security for 2300 a month and he's got now 25 grand of other income. So when you plug all that in. Now you can pay some taxes on his Social Security and he's gonna pay some taxes on the 25 grant that lot but these taxes you said this was going get better and we got to go to break SL all the time we had to tell you that this ship was brought to you by Cardinal guy.com which, if you go to Cardinal God. You can see there is Hans's book the complete Cardinal died a plan for living in retirement chapters is on taxes that download website by emailing him on we come back to see how Amy taxes better. The way that limits Hans and I would love to take our show on the road to your church and Sunday school Christian or civic group. Here's a chance for you to advance the kingdom through financial resources and leveraging Hans expertise and qualified charitable contributions veterans made in attendance, IRA, Social Security care and long-term care.

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Contact Tom to Cardinal guy.com that's Cardinal guide.com welcome back to finishing well certified financial planner Hans Shaw today show is retirement tax savings which again when we left our hero. He was gonna make additional income and so now it was going affected taxing on his Social Security, but somehow I know this was gonna be better spent the first good news that he got from us was that he's going to be able to live just fine. Office 2300 bucks a month into the foreseeable future Social Security and a lot of that single guy and how high lifestyle cars paid for nice new car very small mortgage on his place, and he's in good shape. The NT was unaware that he's going to owe no taxes on his Social Security unless he messed something up what he could mess up would be making a big withdrawal out of his IRA, or any significant withdrawal in any year not only will you have to pay taxes on the withdrawal, but he also then have to pay taxes on Social Security because his other incomes to so that was right off the bat good news to him. I got 2300 bucks a month free and clear us and will not dissuade men okay so he's talking about part-time job. My thinking is there an inviting back or another school doing the same kind of thing and they need them. I think he wants to go back and I said so if you go back and let's just say make 25 grand a year will now you gonna pay a little bit of taxes on 25 grand or loud Social Security tax almost taxes but then you're also going to pay some taxes under Social Security. Not a lot, but you can pay taxes and you sure don't want to take any money out of your IRA. In that year. It's this year that you do this you don't want to take any tax any money out of your IRA because that'll make the problem even worse. So did three years. He won't have that option because then he's going to face minimum distributions required minimum distributions at 72 and then he's gonna have to take something that he may want to take the minimum or he may want take a lot of something in the law that's can be dependent on whether he still working so this is where tax planning. So he's ready just walk out of my office. They all just live off my Social Security check. And then if I go to work.

Find a little extra money. I don't find us another way meant you no we still have this problem that we get 230 grand in the IRAs that you don't need and then it's just building it's gonna grow and then when you get to be 72.

We just are taken down and then at some point your pass away.

If you have a whole bunch of money in your IRA then your heirs yes Denise, that is quite fond of and that he's gonna leave this to and he she's gonna have a big tax problem.

So how would it be if we waited till October each year. This year, so that's what I month from now eight months from now and then I say October. It is if you want to do some year-end tax planning.

You better get started in October because it takes a couple months to get the stuff done and what were going to do in October. If he doesn't go back to work is we put it through the calculator working to withdraw about $14,000 out of his IRA when I can spend it just going to move it out of the IRA ticket distribution grant deposited over there in the bank. We got 100,914 say why you doing that you gotta pay taxes on money coming out of the IRA. Now going to go to these tax rates were going to go to the tax that the standard deduction. The standard deduction for a single person over 65 is about 14 g so we can take 14 grand out of his IRA and there's no other income your and pay no tax because it's all through the standard deduction and then we can handle 14 grand of other income for the Social Security formula. Still no tax on the Social Security so as far as I've seen it all going to accomplish with this thing is were just going to move $14,000 from a taxable account for future taxable account to an already paid tax. That's it. That's targets better on arming them just thinking based on all you've taught me that if he took some of that $14,000 every year or whatever it is that you got selected October and bought life insurance with with that money is an ongoing basis.

So is there would automatically not have a talk brought tax problem because you know when she gets remaining whatever is in the right sure would, but I'm just trying to write your talk sometimes but I am tight taxes in the thing is with him. This gentleman is not that easy to move through point. He's very very intelligent, okay. Yet he does a lot of research and then he comes to a lot of conclusions that I so it's got one thing at a time, so once we get the 14,000 out of the IRA. Now we do that in October, November, now we can show an income of 14 grand Yen, he's free to go spend it if he wants first.

For now I'm just gonna stick it where he's got his other hundred billion in account but yes it would be smart for him to invest that and something which is tax-free.

Again were tax-deferred or so we can get into what were going to do with the Artie been taxed account of what I want people to get clear on is when you're in retirement in your primary sources of income are Social Security and withdrawals from your savings and then you have the luxury like this man does review have a nice IRA, which hasn't been taxed yet and then you have an account which you've already paid tax on like a savings account. You have the choice of whether you make any withdrawals from either account and you can split it you can so your your effectively in control of your taxable income. Your income other than some noncontrolling social security income that you are in control of whether you pay taxes on resources right and if you're married filing jointly. Am I right that the that the standard deductions like 26 yet you're 65 now you know there you've got a whole lot there you can IRA money that you can move out or arm in a change what you're doing. Based on the same do not have the example is another client they got $40,000 a year and so scared, so that's a couple's two Social Security checks and then they have about $30,000 of other income part of the pension and then he's got some kind of an annuity that's Artie chicken out an income. She's not really in control of the 30. But they just get so they got 70 grand which provides a nice retirement form and there thinking they don't pay taxes on the 70 grand just like they paid on their joining income when they retired and it's not so because the $40,000 in Social Security by itself is not taxable. They didn't have the 30 the whole 40 would come to him tax-free with the 30 is not a huge number they're bringing over the return and there, especially when you got a $26,000 standard deduction.

So they're only going to have about $4000 of taxable income. If you go to the Mary joint is 10% tax year. Taylor Firefox so that when they have much tax because now the soul scourges to be taxed. So then week week different show but you know we could get into the Social Security formula there and have a little bit of tax on their Social Security when you plug in all that other income formula in the Social Security nowhere near what they would pay if they'd had a $70,000 income yet nowhere near and then furthermore, what we can do for them and we are doing for them is were assessing today stand a little more than 30 g.

What would be the implication if they raise their income from 30 to 40 and they can do that by simply making a $10,000 withdrawal of either one of their IRAs. This people are in their 60s that I'll have to do it yet. If they do that now there income joining, go to 40 same standard deduction and then have like 14 grand of income that can pay much tax and 14 grand and then when you take the 40 and you combine it with their 40th Social Security go through the form. Still not much tax on the Social Security so these people might be making a distribution from their IRA into their to themselves and not paying much tax on the distribution even if they just deposited in the other account that you've Artie paid tax so that we can get into what they do with that later. I got some great ideas but it's just I want people during this show to just get the concept that if your sources of income in retirement are number one your Social Security. That's the primary things was to have given you got two Social Security checks not taxable in and of itself, then you're making withdrawals from an IRA or maybe a couple of IRAs work you know and then you also have a savings account or a CD or an investment account of money Artie paid taxes on will and you can make withdrawals from that. And if that's where you're making your other income you're in control of your taxable other income and so that's where the beginning to show where I talked about 20, 21, 20, 22, 23, 24, 2500. Some of these people might want to convert this stuff to a Roth IRA. This guy might want to do that. Besides life insurance or make you do it.

14,000 or $10,000 we can get into all that is what you do with it later. My point is I just want to draw down that taxable� IRA in the taxable account.

I especially want to draw down year-by-year string under these thresholds of either zero tax or low tax until the sunset in 2025. If possible, yeah. And then I want to avoid the year where all of a sudden we have to take 50 grand out of the IRA and then we got take out enough taxes to pay on that 50 grandson never got take out 80 or 90, and then all of a sudden our income in that year is hundred and 50 or hundred and 60. Now we got all kinds of tax sirens going off in the low amount of tax that would have to pay. So if your primary savings account is your IRA that's another tax planning issue in Social Security tax planning issue. So there there's really a lot interest is of this, but the basics is you may want to be taking out more money out of your IRA in your 60s, maybe even your 70s.

Depending on where you fit on the other income category. That's what I want to marry a retirement tax savings today on finishing well again you can find out all this@rickcardinalguide.com's cargo guide.com and there you can again order Hans book the complete cardinal guide to planning for and living in retirement is a lot of fun mesons. Thank you. We hope you enjoyed finishing well with you by cardinal guide.com visit cardinal guide.com for free downloads of the show previous shows on topics such as Social Security, Medicare and IRAs, long-term care, life insurance, investments and taxes as well as ponds best-selling book, the complete cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows to get Hans book go to cardinal guide.com if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word. Once again, that's cardinal guide.com cardinal guide.com this is the Truth Network. One of our generous sponsors here. The Truth Network has come under fire fire from the enemy fire for standing up for family values. Actually one of the biggest supporters of the movie unplanned. The talked about the horrors of abortion. Yes, it's Mike Lindell.

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