Answering the Most-Asked Questions from Pre-Retirees TPOR 011522: Audio automatically transcribed by Sonix
Answering the Most-Asked Questions from Pre-Retirees TPOR 011522: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Producer Sam Davis:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges, as described in the annuity contract guarantees are backed by the financial strength and claims paying ability of the issuer. Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to project the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
Producer:
Welcome to take point on retirement with your host Erick Arnett. Erick is a fiduciary and licensed financial adviser who always places your needs first. The experienced team at Tech Point Wealth Management takes pride in knowing they've helped so many pursue the financial future of their dreams, and they can help you too. And now let's start the show. Here's Erick Arnett.
Erick Arnett:
Welcome everybody to take point on retirement radio. It's so great to be here with you on this lovely Saturday, I got my good friend and confidante and partner with me and CPA and tax guru Mr. Randy Woodruff, Mr Woodruff said. Good morning to our listeners.
Randy Woodruff:
Welcome everyone. Happy New Year.
Erick Arnett:
We've got Sam with us today, of course. And I think Sam, we talked about, you know, what is important to our retirees and kind of what's going on in the current environment. I thought it would be a great way to kind of set up the show this week is just jump right into some of those questions that you've been fielding from our retirees and pre-retirees so we can really get direct to our listeners and get those questions answered. So get your pen and paper out there. These are some legit questions and questions coming from our listeners. And with that being said, Sam, how are you today?
Producer Sam Davis:
I'm doing well, guys. Thanks for being with me. And as always, if our listeners have questions, just head over to take PointonRetirement.com You can get in touch with Eric, Randy and the rest of the team there. Ask your questions, and I'm sure they'd be happy to help you and provide that free, no obligation retirement consultation as they always do. But what do you guys say? Let's get into the questions.
Erick Arnett:
Let's do it. Let's do
Producer Sam Davis:
It. So the first question comes from a listener down there in the Sunshine State and they're asking what percentage of my final working earnings will I need in retirement income? So I think what this listener is getting at is I make this certain amount of money in my working years. But in retirement, how much of that should I expect to need
Erick Arnett:
A very common question in planning? And you know, you've heard a lot of different percentages out there and one of them, you know, that comes to mind as a rule of thumb, as most of your financial planners and retirement planners will say, a good rule of thumb is planned to have at least 80 percent of your earnings in retirement. But for me, one thing that we kind of pride ourselves on here at take point is we don't just put blanket statements out there for, you know, everybody's different and everybody's going to have a different plan, a different need. Some people are going to be making more in retirement, believe it or not, some people less. What is it that you're actually doing in retirement? You know, what's your wish list? Are you traveling? You're playing golf or you're going out to eat more? Or are you spending money on the grandkids? What are you doing in retirement? So it gets back to what we've talked about in past shows is budgeting and really, truly sitting down and taking the time to get a grasp on what you'll be spending in retirement and what your income goals are. So and it's not a good idea just to kind of make an estimate. You know, I think most people don't spend the time to truly do the proper planning and they just say, Well, you know, I'm probably going to need five thousand dollars a month in retirement.
Erick Arnett:
And, you know, we're pretty passionate about diving a lot deeper than that. And you know, I guess a good rule of thumb is we typically tell people because a lot of times, you know, Randy and I will have our clients in and or our potential clients and our pre-retirees and retirees in and for an appointment. And they'll they'll sit there and we'll kind of say, Well, what's your budget? And they look at each other and think, Well, you know, we don't really have a budget. It's important if you're out there listening right now to kind of get with your spouse or your partner or whoever it may be and and sit down tonight and kind of write this out, you know, take the time. It's really important because it's not what you make, it's really what you spend, right? My grandfather told me that when I was a little whippersnapper and yeah, he did. He call me a little whippersnapper. And, you know, he he always told me, it's like, Hey, you know, you could be a truck driver or you could be an auto mechanic, you could be a doctor or a lawyer. Whatever it is, it doesn't matter what you make, it's really what you. Spend. And so, you know, really assess your lifestyle and what you're doing in retirement. And so for you, it might be you only need 50 percent of your current income or your working income to retire on comfortably.
Erick Arnett:
Some people might need one hundred percent. So that's why it's important to get in and to click that button on the upper right hand corner of our website. I mean, you can just if you're driving down the road right now or you're listening, you can pull over and take your smartphone and Google take point. Wealth management, our website will come up and on that top right hand corner, you can just click that button and set an appointment that's going to be about a 15 minute chat session with Randy or myself just to kind of get to know you and and see if we're a good fit and if we can help you out. And you know, at that point in time, it's a, you know, we'll talk about your your retirement and what your retirement looks like to you and and we'll dove in and build a plan for you. It's, you know, it's all about planning and seeing how, and you may have a number in mind. So let's take it. Let's test it. Let's take into account all your assets, your your retirement income and your Social Security, and we'll build out a plan for you and see what that magic number is for you. So I know that was kind of a long winded answer to a maybe a simple question, but I guess I guess I do tend to ramble on sometimes don't answer good.
Randy Woodruff:
I want to add something to that. We've seen over the years that we have. We live here in Florida and we have have had, you know, for many, many years, decades, you know, people moving from the Northeast, the North, Midwest, even even the West Coast to Florida. We have a low cost of living here and some in no way recommending that people relax on what they think they may need in retirement. But we've actually seen a lot of people moving here from up north, selling their house, retiring and moving to the Sunshine State and actually having a very good retirement here because they've got good income. They save, they've got pensions, they got Social Security, great cost of living here. And so be thinking about that if you're listening or, you know, someone moving from a northern state, you know, here again, I'm in no way recommending that you don't take savings seriously, but you may want to consider if you're getting to retirement knowing somebody who's getting to retirement, you know, taking a look at other alternative places to live that will will be cheaper in terms of cost of living and will allow you to stretch those retirement dollar, stretch those retirement dollars further.
Producer Sam Davis:
So kind of related to that guy's a listener is asking before I retire. Is there a way for me to project what my retirement income is going to be?
Erick Arnett:
It's really getting I think it's getting with a certified financial planner. You're a certified public accountant, your advisor or an experienced retirement advisor and really sitting down and utilizing the technology that they have available in order to do that planning for you. I know a lot of people will just kind of get on a computer at home and there's a lot of apps and stuff out there and just punch some numbers in. But we we want to make sure that you're doing it the right way and making sure we're factoring in inflation, health care, rising health care costs, when to when, when, when is the appropriate time to take Social Security? So there's multiple, multiple ways to to take Social Security and is it a good time to do that based on what will the taxes be? And so. And where do you? I mean, more important too is like, where do you take the income from? If you have multiple income sources, it's important to make sure you're taking the income from the right source in order to not create maybe a tax situation.
Randy Woodruff:
Yeah. Eric, you bring up a good point. There are lots of apps and programs out there that can do calculations based on a expected rate of return over a certain period of time or a certain continual amount of investment year after year. But what those computer programs and apps can't do is take into the real life experiences that Erick and I have encountered with our clients like Erick mentioned. You know, making sure that you have like for us as players, we like to have multiple, say, buckets or pools of money to pull from. And they mean by that some tax free income to pull from taxable income, from savings to pull from. So as as you begin to get into retirement, we can develop an efficient plan that just investment efficient plan, but a tax efficient plan that will allow you to achieve your financial goals and get a lot of people don't think about taxes as they get into retirement, but they are. They are a real issue. And so there again, the planning earlier in life to have a tax efficient plan in retirement will definitely allow you to have more overall cash flow retirement to spend it enjoying retirement.
Erick Arnett:
And something comes to mind is it's so important if you're close to retirement or if you just just did retire or you're a couple of years into retirement, it's so important in those first five years of retirement to get it right. So that's why we feel it's so critical to get your retirement plan in place. And the reason I say that is, you know, if your portfolio or your retirement plan is not tax efficient, if it's not market efficient, fee efficient, you know, and you suffer maybe a downturn in the market because you're not properly allocated whatever it may be or take too much income. A lot of times we've seen this Randi, where people retire, they roll that 401k over and all of a sudden they see this big pot of money and they start spending money. Maybe, Oh, I'm going to buy the grandkid this or, you know, my my son or my daughter really needs a home or or I'm going to go out and buy a big boat or a big car, I don't know. But making those big expenditures in the right off the bat in retirement can also be somewhat harmful if you haven't done the proper planning. So the first five years of retirement are critical. You know, if you guys get a hold of us, listeners get a hold of us, whether it's email or click that button in the upper right hand corner or just call us (352) 616-0511. We're available for your call. If we're on the phone with somebody else, just leave us a message. We'll get right back to you. But really, really important. And I think there's a Segway into some of the next questions is is making sure that retirement income is planned for and shored up and you have your guaranteed sources of income in place. So there's a lot of things we can do there to help you out with that.
Randy Woodruff:
I know the Great Recession is in the rearview mirror for a lot of folks and it's been, you know, getting into 2022. It's, you know, going to be, you know, well over 13 years since that happened. And so we kind of tend to forget about that. But I know myself and I know you are working with clients, you know, we had clients that we're going to retire around that time did retire around that time. Portfolios dropped in half or more and like you said, they were having to pull from their portfolios. It had it had major impact on people's ability, ability to retire. Not only did they not want to retire, but people are losing their jobs as well. So people, really an event like that can really especially as such at the end of your working life can have a significant impact on what you're. Was your retirement, so it really is good that that again, you can't plan for something like that specifically, but you can have a plan that you can weather a storm like that and not have a significant impact on your ability to retire stress free.
Erick Arnett:
Yeah. So I mean, if if you if our listeners take the time to just get a hold of us, we're happy you don't have to fumble around or try to find the right software to help project this for you. Just get a hold of us and we'll do it for you as a just tell them you're a listener to take point on retirement radio and we're going to knock that out for you. One hundred percent complimentary. So and do it the right way.
Producer Sam Davis:
Answering questions from listeners, both retirees and pre-retirees today and guys, the next few questions sort of pertain to Social Security, so I'll sort of combine them together to save us some time. Listeners are asking, When should I file for Social Security? What will I need when I file? How can I get an estimate of what my benefits will be? And let's say I'm considering retiring before my normal retirement age? Should I file for Social Security early at that reduced rate?
Erick Arnett:
Yeah, so great. Great questions. And of course, this all plans around Social Security, planning and Social Security maximization. How do I maximize my Social Security benefit? And if you're a couple, that's even more important because there's many, many ways that you can take Social Security. There's multiple strategies and they can be really, really impactful. I mean, as an example, ninety five percent of the folks that I talked to are sit down with me as a couple have had no idea about the spousal benefit, you know, so what is the spousal benefit? I'll just give you an example of if one person in the marriage is at full retirement age, the spouse can turn on what's called the spousal benefit. She has to also be 60, but she can turn on that spousal benefit and receive half of it Social Security and still continue to defer hers. So, you know, that's just an example that comes to the top of my mind is what the number one, maybe filing mistake is made. Heck, I have people in the office and the gentleman might be collecting Social Security and the wife isn't. And I said, Did you know that you guys are leaving free money on the table and you're like, Well, what do you mean? It's like, Well, you're younger than your husband.
Erick Arnett:
You can actually turn on the spousal benefit, receive half of his and not even touch hers yet. Keep deferring there. So that's just one little example of, you know, getting with a good planner or a good advisor, a CPA and doing Social Security planning. So part of our financial planning in our retirement planning for folks is what we call our Social Security maximization report. So we'll sit down with you and we'll develop and show you several strategies and what's the best one for you? So, you know, normally you've got to take Social Security or or turn on Social Security or set up Social Security three months prior to you plan on collecting it so you can't start collecting until you're sixty two. And then, of course, your full retirement age, probably for most of our listeners are going to be around sixty seven. And you know, and then you can also defer all the way to age 70 so you can go to SSA.gov. It's pretty simple, straightforward. You can set up an account with them. I don't think the Social Security Administration sends out those statements that we used to get in the mail all the time anymore.
Erick Arnett:
So you just go to SSA gov. Plug in your information there and you can pull off your Social Security report and it's going to show you what your estimates are. And at that point, you know, we need to get together and just figure out based on what you have in retirement income, whether it's a pension or IRAS or whatever it is you may have, you know, may not even make sense to turn on your Social Security yet. So a lot of different avenues to take there. But you know, you definitely going to want to have your Social Security card ready your proof of age tax forms from the previous year, your marriage certificate, divorce documents and death certificate and just call. You can call the Social Security Office with those documents, and they should be able to get you in the right direction. But if you just want to kind of look up, if maybe you're a pre retiree and kind of see what things might look like, you can certainly go to SSA.gov or just give us a call (352) 616-0511 and we'd love to do it for you and walk you through it.
Producer Sam Davis:
And anything for that listener wondering if I decide to retire before my normal retirement age? Should I file for Social Security early at? At reduced rate.
Erick Arnett:
Well, I mean, that's the million dollar question, right? So. And what comes into, you know, what factors in there is just that what we're talking about is, you know, after we do a plan, does it make sense for you to do that? And maybe it does. Maybe it doesn't. You know, a lot of factors. There may be health longevity. I mean, you know, Randy and I get this question on a daily basis, and it's kind of like, Well, hey, you know, how long do you plan on living? You know, no, nobody really knows the answer to that, right? So but. You know, we can still try to put our best foot forward and show you actual dollars and cents what it means to you. If you do take Social Security early, it's going to be a reduced benefit and you don't get your full benefit until you reach your full retirement age. Probably most of our listeners. Sixty seven. And then, of course, you can defer it to age 70 and you're going to get an eight percent increase in your Social Security every year that you defer. So very good rate of return. Yeah. So I mean, most of the time we'll tell folks, I mean, taking it at sixty two, probably not a great idea. That's a little early. But you know, I tell people to.
Erick Arnett:
It's like, Hey, if you retired early for whatever reason and you need the money to supplement your income or you just need the money for income, then you know, go ahead and take it. But if you don't really need it, if you can get by without it, we can show you in our planning, in the plan that we do for you. Our financial plan that you know, hey, it may make sense to just draw money from your retirement account or your savings account until you get the full retirement age. That way, you're going to get the full maximum benefit that's going to carry you throughout your lifetime and then also create a higher benefit for your spouse. So that's really important to think about if you're married and you take that early early benefit, even though it's in, it's a reduced benefit. If something were to happen to you and you were to pass away, your spouse is going to get a much smaller lifetime death benefit. So a lot of things to think about there. So most important thing is, I think is for people not to just kind of jump into making their own conclusions. It doesn't hurt to run run a few questions in scenarios by by your advisor, your planner or CPA, or whatever it may be.
Randy Woodruff:
And what are the things that as we talk to clients, as as we're talking about retirement, when you retire, you know, we recommend our clients, you know, be honest with yourself about the actual money that you're actually going to need in retirement, to be honest with yourself about what things are actually going to cause, be honest with yourself about what you actually want to do in retirement. And same thing with Social Security. Be honest with yourself about what, how you've lived your life from a health health standpoint and what your outlook is. What should you take Social Security? You know, we can run all the numbers for you, but the big factor is, how long are you going to live? That's something that we can't predict, but we can all take a look back at our lifestyle that we've lived and have an idea of how we've lived and how we've eaten. And I'll take a look at our parents. Do they have a long they live long lives and that should factor into your decision. Again, nobody can predict when we're going to pass away, but we can have some good indicators that based upon certain factors, I'm going to live a nice, long, healthy life. Or, you know what? I've used my body and I may not live past 70 or seventy two or seventy five. Basically, I took care of myself, so. And that here you in as uncomfortable as death, is it? You definitely enter into that process or the calculation or the decision.
Producer Sam Davis:
So if you've been planning or thinking about planning for retirement, give the guys a call. (352) 616-0511 The team at Take Point Wealth Management's ready to help you (352) 616-0511 Or you can just head over to take point on retirement and schedule an appointment there. It's easy, and we've got just a few just a few minutes left in this first segment, so a couple more things to wrap up Social Security. The next question Will my Social Security be taxed?
Erick Arnett:
Well, guess what? I would recommend that you speak to your tax advisor, but we just happen to have one here on the show today. So, Mr. Woodruff, CPA extraordinaire, I'm going to let you go ahead and take that one and I'm going to take a break and just listen to you.
Randy Woodruff:
All right. Well, that's great question. And here again, it depends. It depends how much money you actually make. And you know, part of earlier in the earlier in this program we talked about, it's nice for Erick and I have different buckets of income to pull from in retirement and buy those buckets. I mean, taxable tax deferred tax free. I say cash that's just sitting in an account that that that basically is not going to cause any kind of a tax problem when it comes out. So. But yes, you do pay tax on your Social Security Social Security benefits if your income is over certain thresholds. So and he's actually I've been doing this now for almost 28 years, and these thresholds have not changed in twenty eight years, which is unfair to seniors because, you know, the inflation has gone up, especially this year. But every year the consumer price index has gone up, maybe with the exception of a couple of years during the Great Recession. But the CPI has gone up every year, basically, but this threshold has not gone up. But also, you know, this is a a it's every year it just eats away at your retirement income a little bit at a time. Not much five, 10, 15, 20, 30 dollars, depending upon what your income is. But it eats away at your retirement income because this number does not go up.
Randy Woodruff:
So I'll just read off here. So if you're if you're married and your income is less than thirty two thousand dollars, your benefits are not taxable. And by income, we mean all your other income sources, plus half your Social Security benefits. Between thirty two thousand and forty four thousand up to 50 percent of your benefits could be taxable. And then once you go over forty four thousand eighty five percent of your Social Security benefits are taxable. So when I say they're taxable, it doesn't mean you're paying doesn't mean you're paying eighty five percent tax on your Social Security benefits. It means whatever your Social Security benefits are, you're paying tax on eighty five percent of them at whatever tax bracket you're in. The highest tax bracket right now is thirty seven percent. So potentially if your income is over, it's high enough and you're in that thirty seven percent tax bracket, you're paying thirty seven percent tax on eighty five percent of your benefits. And for single individuals, the numbers are a little bit lower. But the point is it doesn't take a lot of income being up into a point to where your Social Security benefits are taxable. And that's a misconception that a lot of seniors have is that there should be tax free income. And it's not
Erick Arnett:
These brackets and these tables were put in place in like the nineteen sixties. Our government, in its infinite wisdom, has no problem raising taxes and and spending money. But they tell folks that if you're a married couple, the fact this is actually in the Social Security literature, if you're a married couple and you make over forty four thousand a year, you're considered wealthy in America. So I don't know anybody that's making forty four thousand a year that call themselves wealthy, but
Randy Woodruff:
Really using that forty four thousand is nationwide. So. And then think of how different the economics are across our country. You've got really high locations. We'll just say New York and L.A. and Chicago, Miami, then you have really low income areas that are more towards the center part of the country, the flyover states. They call them where just the cost of living is a lot lower. So imagine if you're in a high cost of living area. Forty four thousand dollars might pay your property taxes and your homeowner's insurance no gas and food for the year, not to mention having any fun. So it really is. It really is unfair that they've left this number at this. It had not indexed to that for inflation at all. So here again, this is one way that the government is is force. And here again, it's we use the term on this show, a lot of silent killers for things to talk about. So this here is one of this, in my opinion, one of the silent killers for retirees. And it's slow. You don't really notice it because it's not a lot. It's it's it's not a lot of money, you know, but it is, you know, getting over this forty four thousand, if you're if you're married, you know, hope everybody out there. Listening is making well in excess of forty four thousand dollars in retirement because that's going to give you more dollars to enjoy your retirement. So here again, not much we can do about this without any kind of legislative change. But this is one of the things I think they should highlight in all of this legislation that they're doing for tax is this should be one of the things that they that they changed and make say more fair, and I'll use the word equitable. Since equity is a big, big, big term these days, politically, there should be more fair and equitable for seniors.
Erick Arnett:
Yeah, definitely not fair. And I think that's something that needs to be changed. But if you're out there listening and you're concerned about taxes and you're concerned about taxes in your retirement and you'd like to be as tax efficient as possible, I promise you that after going through our planning process, we'll get you as tax efficient as possible. So. And that's why we have such a great team here at Take Point Wealth Management. We have the CPA staff, the tax staff, the investment management staff. We bring it all together to make sure that your plan is the most efficient, tax efficient and risk efficient portfolio that you can have to set you up for a stress free retirement.
Producer Sam Davis:
Speaking with Erick and Randy, the team over at Take Point Wealth Management is ready to help you give them a call (352) 616-0511 or just head over to take point on retirement and book your free consultation their take point on retirement. We'll be right back.
Producer:
You're listening to take point on retirement to schedule your free no obligation consultation. Visit take point on retirement decomp. At Take Point Wealth Management, we know you've worked hard to earn your money and you've worked even harder to save it when it comes to wealth management and planning for retirement trust. Erick Arnett and his team of experts who have been helping individuals, families and business owners find financial freedom for more than 20 years. Let us help you protect and grow what you've worked so hard for. Schedule your free no obligation consultation now at Take Point Wealth. Welcome back to take point on retirement schedule, your free financial consultation now at take point on retirement.
Erick Arnett:
Hey, welcome back everybody to segment to take point on retirement radio with Sam Davis. Randy Woodruff and myself, Erick Arnett. Thank you so much for listening today, and hopefully listening will bring you some great information and help improve your retirement plan. We're going to just keep on drilling in to some more, some more of these questions. I kind of like this show today. We're just kind of have a panel. We're just kind of sitting back and answering some of our listeners questions. So let's get to the next one. Let's drill down to it.
Producer Sam Davis:
Yeah. And as always, if you're looking to book your free no obligation consultation, just visit take point on retirement. You can book an appointment there and the guys will help you lickety split. So next question is, is there a way to reduce the Social Security tax? Before the break, we were talking a lot about Social Security taxation. So is there a way to reduce that tax?
Randy Woodruff:
Great question. And yeah, there is a couple of ways. I mean, you know, if if in retirement, we see a lot of clients that have, you know, not so much anymore, you used to be able to actually make some interest on your savings accounts and CDs at the banks and money markets and those kind of things. But they aren't or bonds, even they're not as popular anymore. So one way to provide asset protection, to provide asset preservation and to also reduce the income showing up on your return on an annual basis. We're talking to our clients about annuities. This allows for the growth of growth, accumulation of income to accrue or grow and not have any tax impact on our clients until you actually pull the money out. So that is is for seniors that are retired, that aren't working anymore. That is probably one of the best, if not the best ways to look at investing to. Eliminate or reduce, hopefully reduce and eliminate your any tax on your Social Security. But for some of our seniors that have done a great job at planning that have great pensions and have great income, they just aren't going to be able to plan their way out of it. There's just no way, no way possible. But but for some that are on the cusp, it's great to come in and talk to us because there are are things that can be done that will reduce or eliminate any tax on your Social Security.
Erick Arnett:
Yeah, that's a great point, Randi. I mean, there's small little tweaks that we can make to the portfolio or the retirement plan in order to make it more tax efficient. So as an example, maybe somebody out there listening, this might make sense to them. But you know, as an example, say you have a portfolio that's kicking off high dividends or high high interest in some type of investment. Well, you may not even need that income. You may not be spending that income. It's just kind of staying inside the account. But that account is going to be kicking out 10 ninety nines of high income, high dividends, which goes to your bottom line, which causes those higher taxes on your Social Security, right? All right. And so just by repositioning the portfolio. Been going more of the capital appreciation route where we're going to be investing to grow your assets and to look for investments that are going to grow and price instead of kicking off what we call taxable income. You know, you can still grow your portfolio. Take. You know, essentially what we call income, but it's not income, it's distributions or withdrawals, you could take withdrawals from the capital appreciation of the portfolio. And that would not sometimes depending on what type of account is if it's an IRA. I'm not necessarily talking about that, but I'm talking about if it's in just a regular investment or savings account, you're not going to trigger the taxes on Social Security. So, you know, this is why it can kind of get, I don't know, in a sense, dangerous on a radio show when we're just kind of putting out these blanket recommendations because I can't stress this enough and we talk about it all the time, every single person that calls in to this show and sits down with us has a completely different situation than the other person.
Erick Arnett:
It's just like genetics, right? Almost. I mean, not every single person, you know, has blond hair, you know? And you know, so if you're taking painkiller aspirin, it might not be right for you. You might be supposed to take a leave. I don't know. I'm just pulling stuff out of there like. But you know, you can't make blanket recommendations. That's one thing I hate in all aspects, in all industries like commercials and marketing, when you hear people just kind of making these blanket recommendations across the board. And that's why we we take great pride here at take point that every family, every individual, every couple has a very specific plan tailored to them, and we'll take the time to do that and develop that for you. So you have that clarity, you have that confidence and once again working together as a team. I've got a CPA of 30 some odd years right beside me building out these tax efficient plans. So might just be a small change in the way you're investing and we can and we can make some really good headway there. So just some food for thought. What do you think?
Producer Sam Davis:
And before we get into the next question, a reminder for all our listeners. Take Point on Retirement is available as a podcast wherever you listen to podcasts. So if you missed part of the show or any week, if you missed part of the show, just listen to take point on retirement wherever you listen to podcasts. Leave us a review and don't forget to visit Take point on retirement to book that free consultation and ask us your questions. Next question, guys. I think this hits on one of our most common retirement misconceptions. The question is, now that I'm going to stop working, won't my taxes be lower?
Randy Woodruff:
Yeah, we do. That is a surprise for some folks. And while certain folks, you know, they they do wind up paying less taxes in retirement, some folks aren't really paying that much less taxes in retirement because they have other income streams they've got to start pulling from, you know? So just here again, Erick said it earlier in the show. You know, we we'd like to talk with our clients and develop specific plans for them. We're not a one size fits all approach and everybody's situation is different. The same thing is true in taxes. But I would. I think that generally speaking, you know, some folks can see most folks will see a somewhat of a reduction in in taxes in retirement. But I think everybody is looking for a much more significant reduction in taxes and they actually wind up with. And I think what actually winds up surprising most folks we talked about that earlier is that their Social Security is going to be taxed. And so depending upon what your earnings history was, you're going to quit working. But now you're going to have between you and your spouse. You can have, you know, 30, 40, $50000 a year coming in and Social Security income that you didn't have before. And that's, you know, a nice replacement for income. Plus, you guys start you start drawing from IRAs that you have accumulated over the years. And so, you know, some folks find that wow, that quite a bit of income coming in. And so their their tax burden, while it may have went down, didn't go down as much as they want it to. So I think. I think we all want our taxes to be lower.
Randy Woodruff:
And so I think that that that people are surprised here again in retirement, that they're not as low as they'd like to be. But I think we're I think whether we whether we are retired or not, we'd all like our taxes to be lower. And every time we get to pay our taxes at the end of the year or during tax season, I think we're all still surprised and maybe dismayed even at how much taxes we're actually paying. So I think that's unfortunately something we all wrestle with and we and should be planning for not just in retirement, but even while you're not in retirement looking for ways to reduce your tax liability. And one of the things that Erik and I talk about on this show repeatedly is that the tax rates are on sale, you know, and so we think and a lot of other analysts and financial advisors think that in the future, tax rates are going to go up, whether it be taxed on your income. You know, there's talk about getting into estate taxes briefly. The estate tax limits are very high right now. There's talk of dropping that back down. There's talk of reducing step up in basis, which is a huge tax saver, especially for families that have held on their assets for decades, where they have a high appreciation that can be a significant source of source of wealth transfer at someone's death. So all these things taxes, whether it be here again, not just in retirement, but in all areas of our life. Pre retirement post retirement all need to be considered and looking for ways to to maximize from a tax perspective. Your portfolio or retirement planning?
Erick Arnett:
Yeah, one hundred percent. I've seen a lot of times where our listeners come to us and we sit down with them and we start building out a plan. And in fact, they are going to be making more income in retirement. You know, so whether you're 50 years old, fifty five, sixty five, I don't care where you're at, what stage you're at, but you really need to get in and talk to somebody. And hopefully it's us because the planning needs to start now because there's a lot of things that we can do to strategize to make sure that we don't get hit with higher taxes, higher income that we don't need to be getting hit with once you retire. So a lot of different strategies and not to get into every single one of those on today's show. But that's why we love for you to call us so we can talk to you about some of them, but a lot of different strategies that you can do in order to really alleviate or reduce that tax, that tax burden. So, you know, Roth conversions come to mind things like that, because if you have all of a sudden to Social Security's, maybe some pensions get turned on, you know, and I and I got to caution people on pensions, too. You know, a lot of times people will just rush to judgment and they'll have an option of turning on a pension at retirement or deferring it or to take a lump sum. And so you've got to be really careful at what you choose as far as your options as well. And that's why it's so important to get with a financial advisor, financial planner, CPA, CFP, whatever it may be, give us a call at take point wealth management. And it's so, so important for us to get in front of that and and head it off at the pass.
Producer Sam Davis:
And I think the next question, guys, is going to allow us to get into some of the specifics here. The question is, is there a way for me to safely and legally reduce my income taxes during retirement? So what are some of those strategies?
Randy Woodruff:
Yeah. What are the things that we see clients have done in the past and and not doing so much anymore as as tax free muni bonds? You know, bonds we talked about on our show over the years has had, you know, interest rates are down. So that mean bonds, your return on bonds is down. One of the things with bonds and I want to get deep in the weeds here is the alternative minimum tax. And this just doesn't affect the fact people who have tax exempt income from muni bonds. The alternative minimum tax has been around for decades, and it's amazing when you take a look back at the history of how many, say, taxpayers that were affected by the Altman tax. When I say the first five or 10 years that it got put into place and how many are impacted today, the number has gone up dramatically. So this year again, we talk about silent killers. And when it comes to portfolios and taxes, this is another one where the thresholds for kicking in the Altman tax haven't increased in years and years. And so more people are having to pay the alternative minimum tax because they have basically alternative minimum tax is like, Hey, if let's just say somebody took all their money and put it in in municipal bonds, if they put a five million dollar portfolio all over into muni bonds, the IRS is going, OK, we allowed you to be allowed for the.
Randy Woodruff:
Taxation and duty bonds to basically be tax exempt. But all of your income is is tax free, so that's great, but we're going to charge you some level of taxation. All your income can't be tax free. So that's kind of a general example of how the alternative minimum tax works as other tax preferential areas in the code. And so the IRS is basically saying you're getting too much of one of these areas and you're going to need to pay some level of taxation. So we've talked on the show about you. Once you are retired, you can't no longer put money into an IRA. You have to actually have to be working, but you can't put money into a Roth IRA. As Erick and I have talked about doing a Roth conversion and that will know it's also good to hear again. Think about doing a Roth conversion before you actually turn on Social Security because depending on what your income is, depending on how much you want to convert, doing a Roth conversion could cause more of your Social Security to be taxed.
Randy Woodruff:
So it's good to start having these plans having these conversations. You know well in advance of retirement. So so we have time to do it more tax efficiently. We're talking with the client now is probably, I want to say, fifty six years old and we're talking about doing Roth conversions at a much younger age. So when he does get into retirement, all of that, all that income is now going to be tax free to him and going to grow tax free. So here again, don't think that the time to do retirement planning to do tax planning is when you're in retirement. It's years and years or decades before we talked about back to tax, tax efficient or tax free alternatives to investing in retirement. We talked about IRAs, Roth IRAs, we talked about annuities here again, how annuities can allow for asset appreciation and the income to grow deferred tax deferred in your account. You actually need the money. So that's another great thing that we use here in our firm to work with clients to one achieve portfolio performance and also give you a good tax strategy for doing that.
Erick Arnett:
Yeah, I think I've one gentleman comes to mind that started working with a couple of weeks ago, and he called in faithful listener on the radio show and we got together and started working together. And he's sixty six years old, I believe. And we did. All his planning went through everything, several meetings, and he's actually considering or wants to do a full Roth conversion, even though he's sixty six, because he's very concerned about future taxation and understands that taxes are on sale right now. And we can we show him in our planning software that, hey, yeah, you're going to take a tax hit now. But if you have tax free growth for the remaining for the remainder of your life and you also have the control and the flexibility where you're not forced to have to take money out of the Roth now that it's in the Roth, there's no required minimum distribution. That's the biggest. That's the biggest key for me, I think, and and the biggest, I think unknown for people out there is that if you have just a regular traditional IRA or 401K, when you turn seventy to now, Uncle Sam says you have to take money out of your IRA now or your four one K at this rate. And let's just say it's four percent and five percent of your IRA. And if you're in a higher tax bracket, that could be 20 30 for 30, what's the highest one thirty seven that could be as high as thirty seven percent taxation on your hard earned retirement income.
Erick Arnett:
So it's important for us to obviously, the sooner we can get out ahead of that, the better. But more importantly, you know, it's OK for anybody. Heck, we had we had a seventy eight year old. I just came to my I forgot we had a seventy eight year old gentleman who was also a listener of the show that started doing some Roth conversion at age seventy eight. So it's never too late. But obviously it can be a little more impactful the earlier that we can do it for you because of the compounding and and think about the tax efficiency and how your cash flow on your money grows. If you don't have to take the money out and it can stay in there and keep growing right, I mean, it's got a huge, huge impact over the life of your retirement. Please, please, please. I urge you to give us a call (352) 616-0511 or just Google US and take point. Wealth management in upper right hand corner. You can just click that button and set up an appointment to talk with us for 15 minutes on the phone. We can do a Zoom call, whatever it may be, but and just see if this is appropriate for you. Another thing I want to get out there based on this topic right here is we have a great book, a free offer if you're listening and you call in off the show.
Erick Arnett:
Or you request it via email or the appointment Counly account. We're going to send you out a book called The Power of Zero. And it's an awesome book. Everybody that gets the book, I get tremendous feedback from it. It's great learning tool. So we're going to send you if you call in this week, the power of zero absolutely free will mail it right to your home and then you can go through that book and read it, and then we'll talk about it after you're done. But imagine if they do raise taxes to 40 percent. Heck, we've seen tables, randy, where back in the past I think it was under the Roosevelt era or something like that, you know, taxes were as high as 60 70 percent. So, you know, I think people may be missing the boat a bit when, you know, there's definitely potential out there for us in the future to have much, much higher taxation on our retirements. And so if they raise it to 40 percent, 50 percent, 60 percent, whatever it is, 60 percent of zero is zero, right? So if you don't have to take out the money and it's tax free, then you don't have to worry about what they do with taxes in the future. So I think at this point in time, it's never been more critical and it's a huge estate planning tool to because you pass your wealth tax free.
Randy Woodruff:
I was about to mention that, yeah, I mean,
Erick Arnett:
It's so big if you leave it in that IRA and it just keeps growing and growing. If you're lucky to beat taxes and the requirement of distributions, if it's going to another non spouse beneficiary in the future, it's all going to be taxed. So it could. And who knows what their tax rate is, right? Your beneficiary could be in a really high tax bracket. So we're talking about eliminating estate tax and taxation and wealth transfer completely with this one tool.
Randy Woodruff:
And so really, the recipients, if you're passing that, that Roth IRA onto your children, they get to inherit that and that grows tax free for them as well. And they also get that money tax free. So it just does it. This does it escape taxes in your lifetime? Once you convert it to the Roth, it doesn't escape inheritance tax going to your spouse. It doesn't escape inheritance tax going to your kids. It also escapes income tax when they pull it out maybe 10, 20, 30, 40 years down the road as well, or your grandkids. Even so, the Roth IRA is, in my opinion, one of the most powerful tax. I don't want to call it deferral to tax free tools. Tax free ways to pass wealth to future generations.
Erick Arnett:
Yeah, absolutely 100 percent. And unfortunately, one of the most underutilized because of the lack of education. You know, Uncle Sam isn't going to call you and ring the bell and say, Oh, by the way, you know, we got this great tax saving tool so you can avoid paying us taxes. They're not out there giving that information. So please, please give us a shout or get a hold of us so we can share that stuff with you.
Randy Woodruff:
You know, one of the things that Erick and I like to do. You've heard on this show and other shows, but we like the plan. So when you're when you're planning, you have you, you have comfort and you have a peace of mind as opposed to going through it, going through a fire drill where it's chaotic and haphazard. So the the sooner in life that we plan, the better outcome we're going to have. And I'll say the less stress you're going to feel in retirement. And we talked about some of the folks we've helped here in retirement and they've been later on in life. And yes, we've been able to help them. But sometimes it's it's a little hectic. It's not near as efficient as it could be, so cannot stress enough how important it is to plan early and for what's going to be many, many years of hopefully a very happy retirement for you.
Producer Sam Davis:
And while we're on the subject of estate planning, what should the listeners know about estate planning? What can take point wealth management do for clients regarding estate planning? What should they know about wills, trusts and really legacy planning? We kind of touched on it a little bit with the Roth there.
Randy Woodruff:
Sure, great question. So we recommend that everybody. We have a lot of people that move here to Florida from other other states. And so we recommend that people get to Florida, that they get their wills trust reviewed by a Florida attorney to see how that's how their current plan is going to say, be governed under Florida law. And we may need to have an attorney here in Florida rewrite their plan in terms of their trust or redo their wills here in Florida. How they recommend doing that. Definitely recommend everybody have at a minimum a will health care surrogate. All of that health care designee and powers put in place durable power of attorney. So someone can make those important health care decisions for you that you know, love and trust the. Upon the assets that you have the size of your estate. A lot of our clients are setting up trusts as a way to avoid probate. Probate can be somewhat of an expensive and prolonged, protracted process. And having having a will, I'm sorry. Having a trust in place will eliminate all of that and allow for the administration of your estate to be a lot more, say, efficient from a financial perspective and from a time perspective. And you still get to do all the designation and appoint all of the appropriate all the money in the way that you want to with a will. It just basically saves you time and money in the administration of the estate. So we have sources that we use through our local attorneys or others that we can put you in contact with that we have used in a very competent. Pretty good of these documents.
Erick Arnett:
Yeah. I'll just mention and put it out there that my background and I grew up in the trust business and the trust industry. So I'm not going to mention any firms but large large banks and manage trust departments. And so a lot of experience and expertize here at take point wealth management on trust and wills, and we'll help you formulate a plan and put it together. And you know, if you're out there listening and you're wondering, do I need a will? Do I need a trust? Do I not need a trust? Do I need, you know, living? Will power of attorney all that stuff? Just give me a shout and I'll walk you through it. A lot of misconceptions out there. Wills. The number one thing I'll just throw out there for our listeners. If you got to write this down, write it down and don't forget it. Wills do not avoid probate. So the number one thing that concerns us that we want folks to avoid is probate. So and if you don't know what probate is, Google it and look it up. It can be somewhat daunting. It can be somewhat expensive, and it's just something that easily easily can be avoided in a very inexpensively. It can be avoided by just putting a proper planning and documents in place, and I'm actually a big proponent that everybody has a trust, no matter what your wealth category is. But that's just me personally. And if you give me a shout or give me a call, get a hold of me, I'll share why I'm so strong. I feel so strongly about that. And so, yeah, so great. Great questions and and we're happy to lead people, you know, take in wealth and reason. We call it take points because we like to take point on that stuff and lead people in the right direction and make sure that they have a trusted advisor by their side when they're trying to make those decisions.
Producer Sam Davis:
And we've got just about a minute left in the show today, guys. So just one last question as we as we put a bow on all these questions that listeners have sent in to us. If a listener gives you guys a call (352) 616-0511 or books that free appointment at take point on retirement just in about a minute or less. What can they expect from the team over at tick point wealth management?
Erick Arnett:
Yeah. So you're going to talk to Randy or myself and and it's really just going to be a 15 minute, just quick chat just to get to know you say hi and kind of get to understand what it is that is your main concern or what's keeping you up at night. And maybe nothing is keeping you up at night. Maybe you feel as though you've got a great handle on things and you probably do, but why not run it by us and let us test out your plan? And so just really all it is is just a quick 15 minute chat, so it's not going to cost you a dime. It's free advice and you know, and we'll go from there. And if there's something that we can do to help make your retirement plan better and optimize it, then that's what we're going to do. And it's a three step process. If if after that phone call, it makes sense for us to move forward and build something out for you, that is also one hundred percent complimentary. We're not going to charge you a thing to build this comprehensive retirement plan for you. We call it advanced planning, and it's not going to cost you a thing other than your time and just getting us the information that we need. And then that's really it, Sam. I mean, it's just a little bit of an investment of time is all we ask.
Producer Sam Davis:
Give the guys a call. (352) 616-0511 The team at Tech Point Wealth Management is ready and happy to serve you. You can also just visit take point on retirement. You've been listening to take point on retirement. Thanks for joining us this week, guys, and we'll be back same time. Same place next
Erick Arnett:
Week. Thank you so much and look forward to it and thank you for listening out there.
Producer:
Thanks for listening to take point on retirement. You deserve to work with a private wealth management firm that will strategically work to protect your hard earned assets. Is schedule your free no obligation consultation, visit take point on retirement or pick up the phone and call (352) 616-0511 that's (352) 616-0511. Investment Advisory Services offered the Brookstone Capital Management LLC. Bcm, a registered investment advisor, BCM and Take Joint Wealth Management are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.
Producer Sam Davis:
Registered investment advisors and investment adviser representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosure of any conflicts of interest, if any exist. Please refer to our firm brochure. The ADV to a Page four for additional information.
Sonix is the world’s most advanced automated transcription, translation, and subtitling platform. Fast, accurate, and affordable.
Automatically convert your mp3 files to text (txt file), Microsoft Word (docx file), and SubRip Subtitle (srt file) in minutes.
Sonix has many features that you'd love including automated translation, enterprise-grade admin tools, secure transcription and file storage, share transcripts, and easily transcribe your Zoom meetings. Try Sonix for free today.
