Your IRA

You're listening to the Truth Network and TruthNetwork.com. Welcome to finishing well brought to you by Cardinal guy� Certified financial planner belonged to Schild, best-selling author and financial planner helping families finish well 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 with finishing well welcome to finishing well works I have with this. I'm a certified financial planner on trial in today show an interesting title your IRAs three God questions so you may know the story that Adam was there in Genesis chapter 3 in they'd managed to do the one thing they weren't supposed to do when they found themselves in trouble and God came to call and he asked very three wonderful questions that I think we can all examine a lot of areas of our life with these questions and so when I mentioned these questions I've been really a lot bigger than what return brightest IRAs and even be thinking about them in all areas of your life.

But the first question he asked his where are you Adam, the second question we ask is who told you you were naked buddies you know essentially who told you, and in the third question is, what have you done son and he said that I'm sure in a very loving way, but what have you done at an and so all those are great examining questions and so as we look at our I IRAs were the first question Hans is you know where are you in and at what stage of your IRA area. Yet it's stage of life I mean something that came to me from really from Ed slot, who I go to the seminars twice a year and a month constantly reading his material part of this group and he talked at the last session about the penalty free zone and I just thought this kind of thing it's 59 1/2 to 70 1/2, which is a whole lot of our listeners. And if you're not in this zone from 59 1/2 to 70 1/2 in your listener, you're probably headed there.

You're thinking about their because, otherwise, why would you be listed as the shell you could have a parent that's you know you share in her 40s. And sure, but still that that's a significant thing so before I'm 59 1/2.

If I touch my RM up a huge penalty 10% of every dollar coming out of the pound and another that Iran if I'm over 70 1/2 that I've got to do minimum distributions. Yeah, I mean you're you're exposed to a 50% penalty 10% penalty of 50% of the whole IRA but it's of the amount you should've distributed and you did so in a say I've got $300,000 IRA. It seems like a lot of people have them and I'm 70 1/2. This year I needed to take $3000 per probably would be more like $12,000. That's why we have has a financial dinner, not me little short of 12,000 yeah okay so I should've taken $12,000 but I did my own taxes. I did know about minimum distributions and so wow, when I went turn 73 now I've done this three years in a row.

I was supposed to take three $12,000 minimum distributions and I didn't and so now I've got a pay so there's a whole process in a form that we used to get somebody up diseases go to the IRS and we can appeal it. If there's some kind extenuating services.

Those appeals don't go very well but I mean we can we can at least started but so you got $12,000 that you should've taken for three years. That equals $36,000 or we would calculate the minimum using my head math but actually with the table and chart come up. The dollar amount and then that means you should've taken out $36,000 and you didn't then your penalty would be 50% of the amount you should have taken her to be 18,000 that boom your send an $18,000 to the IRS. You don't get a Avenue pay taxes right and so then on top of that, you still gotta take out 36,000 know now I believe you can you can take that out of the other eight of the other 18 and you can have pay taxes on the other 18. We pay taxes on the whole, 36, no does not do that was a double taxation but basically you're going to send most of this $36,000 to the IRS so that you serve from understanding and left it in a math genius at all, but so if I would've taken my $12,000 distribution.

It was like I was given that many of the RSI was taken that money and I could use it is dependent put in the bank's savings account it should have to pay tax on it is income you are likely taxes on his income. But if you're in a lower bracket that could be 20%, 15% estate tax. If you're in a really low bracket we just live in off your Social Security and this is where it's real shame with the 50% penalty is is that when we discover these and people later is is that you maybe could pay no taxes on if it was just a small amount of money and it was you don't have a lot of other sources of income other than Social Security so once your 70 1/2.

Your you're definitely out of the penalty free zone. You mean you gone into the penalty zone and before 59 1/2 you eat a pretty substantial penalty when you put that together with tax of any money run up a lot of their because the government really doesn't want you accessing this money because they want you to have it for retirement right but there is a huge benefit if you asked the question, where are you and you are in the penalty free zone.

This is this is the time to make a because you know it's like springtime of your well yeah and what would you want to do is you want to think about Roth conversion, and I don't necessarily say you want to wait till your 59 have to think about Roth conversion Roth conversion makes sense anytime, so do we need to talk a little bit where my talking about here with divergence yet as of something baby. Let's not know what Roth means what a Roth IRA or Roth 401(k), it's tax free. Instead of tax-deferred regular traditional IRA is tax-deferred, meaning that you don't pay taxes on it now on the earnings of the contributions but you gonna pay taxes. Later somebody is after your death writing patient penalties. If you don't take proper distributions after 70 so tax-deferred is what most people think with IRA as a minute do this to save on taxes, but it just means that later there going get you with a raw it's tax-free, but you get no tax deduction now so in others. If you convert traditional IRA money to Roth IRA, you gotta pay the taxes and immediately people answer why would I want to do that mount CPA said that's nuts. Why would you want to do that when I'm doing it. I said well you know I I don't see a lot of future and calling your clients not okay this is but it's okay but I just want them over when I did it because I you know I just said that. Now I've got this money in an account that I can just leave there until I die. And then my kids are going here at this tax-free money which is chemical or if I need money when I'm old or I need to create an income or I need to avoid taxes on my Social Security just for whatever reason, I can just pull that money out no taxes due. How cool is that right it's and I can leave it there and I can invested in whatever you want to invest as long as is IRA suitable and the growth on that. That's tax-free as well so here we are defined in the tax-free zone right is that I penalty free so excuse me, the penalty free zone and you get that right yeah the penalty free zone and right taken advantage of the low tax rates that we have right now.

It's a great time to do Roth conversion.

Boy there is that in that eight frame of where are you son I'm yeah I'm 63 years old and I got up no irate you might want to spread it out over a few years, but might not mean we and we can now always preferable if you got the money on the sideline somewhere else, is to convert the whole thing. The whole amount in your IRA or into pay the taxes out of other money. If you have I want to sell and something to do that but if you get other money sitting there in a CD or brokerage account or you just got money you inherited it. You earned it.

You saved whatever and it's sitting there in a savings account use that money to pay the taxes and then take the whole amount of the IRA, the traditional and move it into the Roth. Now that's the best way to do it, but there's a lot of people that don't have that money sitting over there on the sidelines or if they do have it, they can't part with it or they won't part with it.

So what I'm supposing to you here with his low tax rates, it makes sense to do a conversion email right now at 6061 62 6360 really make sense. It 75 images but but to do a conversion and actually pay the taxes due out of the IRA money okay because you can have less money in your IRA but is can be untainted by future taxes so rhyming I'm not recommending this just blindly to everybody where we need to look at your situation.

I just want you to consider at this test the question, where are you and and what options are available to you. That's what we talked about today on certified, excuse me, I'm finishing well and certified financial planner Hans Schild today show is on IRA IRAs, which you'll find that is one of the seven worried tabs there@cardinalguide.com which you can get a free PDF of Hans's book the complete cargo guide to planning for living retirement.

That whole section is free there at the seven were stabbed as a PDF for you to store the book on Amazon for real, expensive, or you can just email Hans and get to the book, send me an email or message on the website would be glad to send so you got several clients that really are in this zone right now and if you got a story that comes to mind of somebody that that your work well yeah I mean one gentleman that I'm thinking is, he's just now turning 65 in we sent them a letter and we talked about a lot of things more than just Medicare that the turning 65 letter came in to see if he's a CPA and this gentleman is very wealthy and he had no idea what a big problem. This hermit was going to be for him on Medicare so he's been doing Roth conversions, but a little bit a year and he's just discovered that between his wife and him there to be paying $1000 a month extra for their Medicare this thing called term and Irma is based upon your taxable income so he could heat he notices so your money that you pay taxes on every year for a married couple. If you're over certain thresholds you have to pay extra for Medicare. So if your name is Irma don't take any of this personally, but I wish I was asked what big get more in the Irma and Mark is really at one of the three questions I we got to where I haven't even heard about that and or what Hans and I would love to take our show on the road to your church, 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 aid and attendance IRA Social Security care and long-term care. Just go to cargo guide.com and contact Tom to schedule a live recording of finishing well at your church Christian or civic group contact Tom Cardinal guide.com that's Cardinal guide.com welcome back to finishing well, a certified financial planner Hans Schild which is brought you by Cardinal guide.com she put in Cardinal you got@theguidecardinalguy.com you can find all sorts information there as well. But today show or talk about IRA specifically three God questions those questions being where are you son. You know who told you that silent and what have you done and so along those lines you know are still with you know where yet son we been talk about these Irma's in this particular man's case didn't realize that wow I'm making these conversions a bit faster Roth yet.

Will this talk about the second question for just the second is who told you, and I think that comes in and every one of these radio segments and all the seven worries, but it specifically comes in a lot with IRAs. There are so many misconceptions and I want to ask that so badly to people when they come in all full of what they think is wisdom about IRAs or now they don't really think it's wisdom but it's just these these givens that you know is that this is not that you know the end.

I almost want to ask you who told you that you know you were talking earlier just about the three questions and assist with Adam it was you.

Note who told you that was it me, or was it the devil yeah it's it's a critical question and everybody ate everything you get told it's gonna be told you is either from us on a God of the earth from an ascent of Satan and in the sons of Satan.

Although you know you can say what you want, but that there there usually into self gratification and so they have a motivation for the reason that they don't need when it is that they're telling you, and so that just comes in the play is so many people have these facts in their head that are partly true things is so is just really calls for planning and logic and I can help you with that. The next is what I do for living.

And to think through the subject of this gentleman.

He he's a CPA and is very well-off and has done a lot of planning. He's in the middle of these Roth conversions, but he's all of a sudden learn these Substantial retirement income and Eden Artie knows these going to have to pay substantial taxes on Social Security check. When he gets it, which is can be a few years from now what he just learned about this Irma thing you know, worries band and extra over $500 a month each on both his wife and him but that together. That's $12,000 a year and he's thinking will G do I really wanted keep up with these Roth conversions and running my income up. So I got these high costs for Medicare and the answer to that is maybe we just tested wheat wheat we were still working that out for him and he's working and doing together with him was certainly a consideration is when you do a Roth conversion. You're just greatly increasing your income by the amount of the conversion that particular year. So I think he was doing like a couple hundred thousand dollars a year, and the IRA is up over $1 million and he's already somewhat well into it.

So he's got probably 400,000 over the Roth and now I just showed him how I showed in the queue CDs that when he gets to be 70 1/2 and he's got to do minimum distributions out of the traditional IRA. He will be able to donate that money up $200,000 a year to the church or you know qualified charities and so we just brought a whole lot of factors in there with IRAs for him, but the point I want people to get is I'd like folks to consider a Roth conversion at any age and then specifically if you reach 60 you don't have to pay that 10% penalty. You might even consider a Roth conversion or partial conversion over a series of years where you're actually paying the tax out of the IRA money so I just noticed work consider. I didn't tell you to go out and do that so that's the story at the top and but what about somebody. And while it me about it. Yeah so is lady that I just took it as a client last night.

She's a referral she's down in Charleston, I've helped out her boss substantially on a number of things and in she she was really worried that she just doesn't have enough money saved is 68 years old, returning 68 residents turned 70 and you know I didn't even ask her how much money she had and she didn't just cough it up system is not enough and then you know what I did is I got over to Social Security pretty quick and I just like him. What he got coming in now you know in so she had taken her Social Security at age 66, so she's been getting it for like 2 1/2 years he's been getting it for 2 1/2 years or more.

Nap 3 1/2 for years, but in case she's got to grandma. He's got 1600 a month and then I also found out that she's eligible for a pension of the thousand month if she retires in February so you add all that up.

She's got really, I mean why do all the math and I talked about her on an earlier shows can be about five grand a month that she can get just pretty much tax free and most of that Social Security and she taken have to pay taxes on that Social Security, unless she has a bunch of other income so you can almost in a sick sort of way.

You could say the fact that you don't have a lot of IRA money saved up could be from a tax standpoint, a good thing because your neck and pay taxes on the Social Security and other income so hers is a little bit historic. It would've been nice if she would've gotten this advice about six years ago. She's got 240,000 in her 401(k) and her husband has about hundred 20 so that's a small chunk of change. I told her that in that whole 360 grand is eligible or it's there that we can create an income in addition to the five grand a month okay so it's a good thing you got this money saved more than you think it is and we can set that up so that you can draw money out of that that you won't run out for the rest your life with a bunch of ways to do that point is that when she takes too much out of that in any given year. It's not only scant pay taxes on that she's going to increase taxes that she's been on her Social Security and her pension right that are both her husband and her so her story is a little bit more historic if I could've gotten with her six years ago or seven years ago, we might not have 240 and 120 in their we might only deal instead of 240. We might only have 180 or something if we had use the money in the in the traditional 401(k) to converted over to overuse the money in there to pay the taxes. We have less money now that I'll be tax-free to be available for our take to get to that last question which I think is it's a tough one but when you if you realize that God is asking it.

You know what have you done at and so how helpful is it, Hans.

When people tell you the whole story versus taking Adam while she did this in this verse but actually say will.

These are the things I did. I know maybe should've take more time to make this decision. Maybe I should've that this is where I'm at right now. This is this is what I really have done is is really helpful in IRA planning really goes back to the first question is where are you going, because the reality is, it doesn't matter at this point who told you that okay and you know what you've done, which done is done for me and so were back at the first question is where are you where are you at work. What situation are you in and that's what I do for people were in a sitdown. That's what I do with this lady last night as we just we sat down and we don't spend too much time now. No crying over spilt milk or whatever it's supposed to just it is what it is and I pointed out several things to her that are just good in her situation and then at the end I asked her how much money she's got these 401(k)s. I was pleasantly surprised. Now we just have the problem of distributing that to her and not upset the apple cart with taxes so when you go through these three questions. I think there wonderful thing to go through when you're trying to get your head right in your heart right about planning out your retirement specifically with IRAs, but I might end up with the really the first question is where are you, and once I find that out and once I get a clear picture of things that I'm in a make a recommendation get most of most can be season were actually preaching out one of the things that I know where you wonder where you are when it comes to IRAs is no figuring out who your beneficiaries are and making sure those are up-to-date, we would be remiss if we didn't mention that right there every meeting with that slot is over that and over and over. It can we go over it. Every time were on the phone with our clients and redoing the review so every IRA in the United States has a beneficiary if it doesn't have beneficiaries, not an IRA or 401(k) 401(k) just got a beneficiary and if you haven't looked at that and while you need to look at and I can help you do that is probably folks that are online with the stuff go online it'll tell you with the beneficiary. There is also a change of beneficiary for now is pretty simple if you married your your beneficiaries, your spouse, but who are you contingent beneficiaries may what if your spouse dies before you do okay. We have a lot of people that their spouses already deceased, and then we finally look at the thing they still got their deceased spouse down as the beneficiary and I got no contingent beneficiaries contingent beneficiaries may times of the children, sometimes not so just reemphasizing that that because again, if you only talk about this many times that your will, won't matter when it comes this it will never is listed as the beneficiary and I went through this with might have life insurance As if he had not updated that beneficiary and forever and it was supposed to be his wife would vastly know three or four years before he did and then the money was going to this trust that had never been opened at because the beneficiary never met up you know and so you know what I went through it. That trust openly you got it. Yeah you got things like your dad which are just like a no-brainer that if if if one person listens the show and checks it out and we discover that we still do some about wonderful thing you got the people to think everything's fine and is who they want, but it doesn't make sense tax wise because there's tax ramifications of who gets what and that might not be aligned and written exactly the way he wanted, and that's where we can also help you tremendously just so again Hans wrote a whole book, and there's lots of information on the subject that we can.

You can get the irate tab at the seven worries that Cardinal died.com. Of course you can order the whole book there the complete cargo guide to planning for living retirement you listen to certified financial planner Hans child fall brought to you by Cardinal guide.com don't forget the guide with the Cardinal and you did right there. Thank you so much for this is we hope you enjoyed finishing well brought you by Cardinal guide.com visit Cardinal.com for free downloads of the show previous shows on topics such as Social Security, Medicare and IRAs, long-term care and 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 what again Hans will go to Cardinal do I.com if you have a question, comment or suggestion for future shows.

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