8.11.23: Audio automatically transcribed by Sonix

8.11.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
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 predict 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 advisor who always places your needs first. The experienced team at Take 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. So glad you're with us today. Welcome to the show. My name is Erick Arnett. I am the lead advisor and owner of Take Point Wealth Management. I think we have a great show for you today. Lots of information. Probably too much information. Don't even know if we're going to get through it all. But we've got some great guys with us on this. Guys also with us on the show today, we've got Mister Randy Woodruff from Suncoast CPA Group. He is a CPA here in the Nature Coast area and has been practicing tax for quite a while, somewhere maybe close to 30 years, I believe.

Randy Woodruff:
Not one year shy, 230 years.

Erick Arnett:
I don't want to I don't want to date you, Randy.

Randy Woodruff:
But please don't.

Erick Arnett:
You have a hat on? So I can't see all that gray hair? There's a lot. No. So we got a special guest today, Randy Woodruff Suncoast, CPA Group. We're going to talk about some, you know, some taxes and tax situations and how that impacts your retirement. We just want to say thank you to all our listeners up and down the nature coast and all the way down the Gulf Coast really point to Gorda, Sarasota, Tampa. We're so glad you're listening and make us the number one financial talk show in the Gulf Coast Nature Coast area. We greatly appreciate all our listeners. If you missed today's show or you got to jump up and do something, you can always catch our podcast on Take Point on Retirement Radio. That's our podcast website. You can also just go to any one of your favorite podcast apps, whether it be iTunes or Spotify or whatever app you use. We're also on there. You can just type in Take Point on Retirement and you can get all our past episodes. We also broadcast on our own YouTube channel. If you go to YouTube and type in Take Point on Retirement and take point wealth, we'll be up there. You can catch past shows there, but don't hesitate to call us if something you know concerns you today or something doesn't make sense or you have some questions. That's why we have this show and we love love hearing from our listeners. So take some notes, get your pen and paper out today. Hopefully we got some good information for you and we're really working hard to educate our retirement warriors.

Erick Arnett:
If you're in that retirement red zone, that 55 to 70 age category, this show is for you. And we've you know, we've got plenty to talk about today. We were talking prior to the show and we were we were kind of getting bummed out. So we had to stop because we were going through all kinds of information that we need to share with our listeners. A lot of concerning stuff out there about the future of the economy, the future of, you know, retirees, health in general and their financial health. You know, we've got, you know, some big concerns there, but we don't want it to be a total show, just about doom and gloom. We've got some solutions for you. And we do have a team here waiting to help you to navigate that course. Today's today's show and mantra is really going to be about it's really not too late. Whether you're going to be able to retire or not retire, are you going to work to your 70 or 75 or 50 or 65, whatever it may be? It's never too late to get a plan going. And that's why we're here today. And if you call in off the show, we're going to give you a complete free retirement and financial plan that's free for you over $1,300 value by being a listener and a radio show caller. And with that being said, I just want to say good morning, Mr. Randy Woodruff. And Sam, I think you're on the line as well.

Randy Woodruff:
Happy to be here, guys. We've got a great show planned. Erick, I see behind you because we do this show on YouTube as well. So we've got video see behind you, you've got a new whiteboard, you've got some things that you're currently thinking about when you're meeting with clients and when you're working in your practice, says State Plan. Roth Conversion, Medicare and active Investing. Those are some great topics. We're going to get into some of those today. And happy to have a tax expert like Randy Woodruff on the show. Anybody who can do taxes for 30 years must be pretty passionate about it, must know what they're doing. Absolutely crazy. Well, I'm.

Randy Woodruff:
Not sure which one it is, but I wonder sometimes, all kidding aside, thank you for that. And yeah, we've been our firm has been around since 1974. My my parents started the firm back then. So almost 50 years and I came came back from college at 94 and been doing it ever since and really enjoyed doing taxes. It's, you know, one thing that, you know, it's taxes are always changing and and keeping up with everything makes it a, I want to say a challenging profession in a bad way. It makes it fun because things are always changing. You have to keep learning new things and stay on top of things. So it's never, never stagnant. But that's that's why I enjoy it.

Erick Arnett:
Well, Randy, one of the you know, the things that we've talked about on the show all the time and, you know, some of one of our concerns are and then, of course, Sam, you just pointed out, you know, the board behind me, I put those things up on the board behind me for a constant reminder to my clients as well as to to me in my for me and my team, what we need to focus on what is truly impactful for retirees and those, you know, planning for retirement. And one of the things that we talk about, Randy, all the time is, you know. Rising health care costs. Rising taxes, potentially rising risk. You know, these are the silent killers that really eat alive at those retirement dollars, in that in that cash flow. You know, and some you know, inflation over the last couple of years has been out of control. And therefore, you know, our government hasn't come right out and just started raising taxes because it's probably not the best time to do it. However, with a, you know, $35 trillion debt, probably fastly approaching $40 trillion, which is a debt that I'm assuming that this number would never, ever going to be able to pay off. And there's some reports now also that we actually this year be the first time in 80 some odd years we won't even be able to make our obligations. Moody's or Moody's just downgraded the US from triple-A to Double-A. And so it seems to me that a lot of this stuff is starting to finally, you know, kind of show its ugly head.

Erick Arnett:
It's been the cans have been kicked down the road. And, you know, the politicians, our leaders up in Washington have done nothing to help us but spend. And so. You know, this is obviously a big concern for our retirees. I know that the cost of their living is going up. I see it every day in my practice. I see people telling me that, hey, you know, I'm probably gonna have to go back to work. I've seen that for the first time. I've seen for the first time, people just tell me flat out that retirement isn't attainable for them anymore and they're going to work until they die. So there's been quite a change, you know, in the last few years and people's attitudes and people's concerns and projections. But we're here to tell you folks, it's it's not too late. I don't care how old you are. It's but it's about getting involved and getting active and getting a plan. And let's, you know, whether you're going to be able to retire or not. We can still put you in a better position for your future. And it's about, you know, getting a team to surround you that does this day in and day out and has true strategies and ideas to help implement, to optimize things and just make things better for you. So but with that being said, that's why we partner and we have Randy on the show today. You know, we've been talking this for about this for a long time with this type of deficit and with the out-of-control spending up on Washington, the the bidenomics, they call it, uh, you know, they're going to have to do one one of two things.

Erick Arnett:
They're going to either have to cut spending, which they're truly shown that they're not going to do. And that's probably something that is just laughable or they're going to have to increase taxes. And so, of course, of course, that's probably, you know, going to be the number one choice is going to have to increase taxes. And, you know, our baby boomers, those folks that are retiring, the folks that actually did save if you're a baby boomer out there, congratulations. Most of you actually did save and and put some money away in your 401 seconds and your IRAs. And I congratulate you on that. However, the government is licking their chops, knowing that all that savings that you put into your 401. K, that they're going to get, you know, 20, 30, maybe 40% of it. So you do have a partner. And when you start taking that money out, it's going to get taxed and potentially at some very high tax rates in the future. We know that the Trump tax cuts do sunset here and I believe 2026. So, you know, we've got a couple of years there. And so we go back to the old tax rates that we had prior to Trump, during the Obama years. And, you know, the current administration and I know there's you know, you've got typically when the Democrats are in control, they want to raise taxes.

Erick Arnett:
When Republicans are in control, they try to lower taxes. But so for sure, if we have. A majority that leans Democrat Democratic. You know, the tone up there and the rhetoric up there has been increased taxes. So I think that it's inevitable. And for sure, you know, that's going to be have a major impact later on in the show. We want to talk about health care and those rising costs and how astronomical those things are. I don't see that slowing down at all. So even if you're going to retire or not retire, you've got to start putting some strategies in place to help save for all these increases in and expenses and all these increases in taxes. So it's going to be more more costly to live in the future, much more costly than it even is now. I know that's probably hard to fathom and understand, but with the inflation, which, you know, the rising interest rates, I don't see that coming to an end anytime soon. But Randy, you know, what are some of the things that you could offer us or or some of the things that, you know, you see in your practice and some of the challenges that you see with your clients and your and your retirees with the tax increases and the potential tax rates that are coming and some strategies, maybe some things that you see that could help help folks out, maybe cut some costs or get a little bit more tax efficient.

Randy Woodruff:
Absolutely. Before I answer, that's what I want to. You mentioned inflation. And, you know, what are the things that I think I've been talking to my clients about is, you know, inflation typically, I'm not saying it has never reversed, you know, but typically, once prices go up, they have a hard time coming down and they typically never go down as much as they went up. So as much as we're all feeling the pinch in our budgets, you know, there may be some things that go up or go down. But overall, you know, because we're printing so much money, you know, the level of inflation we've experienced the last couple of years, you know, quite a bit of that's probably here to stay. You know, it's probably not going to go away. You may see home prices come down a little bit. Car prices may drop back a little bit. But, you know, gas may come down if we just started pumping more oil. But I won't get into that. But but, you know, overall, I think we're going to see a significant, you know, a matter of that Inflation is here to stay. And as we know, inflation pretty much goes up every year. You know, the Fed's target inflation rate is 2% a year. And, you know, they may or may not hit that every year, but that's so they're planning on things to go up every year. So just keep that in mind that as you're as you're as you're planning your budget for the future, that you're probably not going to have that much relief from inflation going forward.

Randy Woodruff:
But back to taxes, you know, one of the things that in your right ear we talked on this show many, many times, that when we think tax rates are on sale, whether they be capital gains rates or taxes on ordinary income, definitely feels like it's on sale based on the rates compared to to historical numbers, especially long term capital gains. So it's important that that, you know, one of the things that we're talking with our clients about is. How much money you need to spend in retirement, but it's also needed to know how much money you're actually what your net worth is so you can plan. And one of the things that I constantly see people forgetting about is taxes. Yeah. So they may have a net worth of, let's say $5 million rather than $5 million. How much of it has a lot of, I'll say, built up gains or untaxed gates? So if you got $5 million in cash, that's a lot different than saying you got $5 million worth of Microsoft stock that you bought back in 1988, you know, you've had a huge increase in your Microsoft stock and pay tax on. So if you got $5 million in cash today, you got $5 million in cash. If you got $5 million at Amazon stock that you bought, you know, 35 years ago, you don't have $5 million.

Randy Woodruff:
You got $5 million less than taxes on that. That's how so many people are forgetting as they evaluate their net worth, evaluate the amount of money they have to invest and actually ultimately spend in retirement. So it's important to keep that in mind, too, that as we've talked about, tax rates we think are going to go up when they're going to go up, we don't know exactly when. We mentioned earlier in the show that the Trump tax cut sunset in 2025. So we know unless Congress acts to keep those tax cuts in place, there will be a tax increase for all AmErickans. You know, back in 2018, when that tax cut were in place, every single AmErickan doesn't matter whether you're making $10,000 a year or $10 million a year, every single AmErickan, every single tax bracket got a cut. So, again, if those those those tax rates don't get don't get put back in place or extended, we will all see a tax increase going forward. But, you know, back to your question, Erick, what are some things that people can do to to minimize their taxes? And, you know, we talked about Roth conversions on this show many, many times. And we think that our clients should look into that. You know, what are the things we want to make sure of is that every client, you know, may not be a Roth candidate to a Roth conversion candidate today.

Randy Woodruff:
You know, you may be 59, you may be still working. You may be at your higher income years. You know, if you if you pile on a $100,000 Roth conversion, you're making $300,000 a year at $100,000. Roth Conversion goes right on top of your 300. You're up in the 24, maybe higher tax bracket at that point. So you have to come out of pocket, you know, for the value of that conversion. So we think Roth conversions, everybody should be looking at them. Doesn't mean you should do them this tax year, next tax year. We should have a plan which we always advocate for a plan and and make sure that you do the Roth conversion that time instead of one. Save you that much money in taxes at the time of the conversion would also be at a time when there also may be some limitations based on your age when you start taking that money out also. So keep both those things in mind. Um, you know, a required minimum distributions. You know, when you reach a certain age, you start taking money out of your, out of your out of your retirement accounts that you've saved, saved for. And one of the things we see clients getting on, we use the word trapped, but surprised is okay. They've got, you know, let's say $1 million sitting in an IRA account or some kind of tax deferred account.

Randy Woodruff:
Now they start pulling money out because they reach a certain age. Well, they may not have been paying tax on their capital gains. You know, they may have some money in mutual funds or they've got a portfolio that's that's being traded and they've got some gains every year, some some short, long term capital gains that because of their income being so low, they've been able to avoid paying capital gains on that. If you're if you're married filing joint and your taxable income is less than around $84,000, there's no tax on your on your capital gains. Once your taxable income goes over around $84,000, you begin to pay tax on your capital gains. So you're getting those required. Minimum distributions could cause you to have to start paying tax on your capital gains that you haven't had to pay on in the past. Also, depending upon the amount of capital gain income that you have in your your portfolio, you know, those RMDs could cause you to start paying tax on your Social Security. Or it could also cause cause the government to start charging you more money for your Medicare. So it's important that you that you plan ahead and you you would know of your net worth. How much of your net worth is actually that you already paid tax on and think you I've had some clients over the years that have been you know I'm worth this amount of money and I'm going to be okay retirement Once we do the tax calculation, they're still going to be okay, but they're not as enthusiastic about, you know, being okay or not.

Randy Woodruff:
They're as confident because, oh, wow, I just lost, you know, 20% of my net worth to taxes that didn't really hadn't really thought about. So it's very important that you make that calculation and and and, you know, use a realistic be conservative. You want to shoot high that way you I'd rather recommend that clients overestimate what they're going to have to pay in taxes that way they're not overconfident in while we're all fearful for is running out of money. So you want to make sure you're conservative and you make that calculation as to what you're going to be left with after taxes. Um. And, you know, just real quick on taxes. You know, we I've had clients that. You know, I still get asked this question, you know, that, you know, don't want to pay capital gains tax or they're worried about the capital gains taxes. You know, the capital gains taxes right now are the maximum capital gains rate is 20% for long term capital gains. The maximum ordinary income tax rate is 37%. So, you know, I still get people that that, you know, are that, you know, just think capital gains rates are super, super high. And back at one time they were they were up in the 70s and 80s probably back in the 60s and 70s.

Randy Woodruff:
You know, the capital gains tax has been around since like 1940, 1941. So it's got about a 80 year history. And right now we are at the second lowest point in history of long term capital gains in terms of taxation rate. So now may be a time to think about taking some you know, you've had some you've had some gains that you've been sitting on for a long time. You bought some good positions and some will say some good growth stocks or other kinds of stocks that are appreciated. Well, um, you may now want to talk to Erick and I about is it now time to start taking some of those, you know, cashing on some of those positions while the tax rates are so favorable? Because as we've talked on this show many, many times, we feel like and a lot of other our colleagues around the country feel the same way, that tax rates are going to have to go up. And you've heard the expression, you can't get blood out of a turnip. You know, if if somebody's making $40,000 with two kids, they don't have any excess money to pay taxes. If you have somebody retiree making $100,000 and no bills, they can definitely raise the tax on long term capital gains or other other sources of income to squeeze that money out of folks that have it. So.

Erick Arnett:
You know, I see this all the time. Folks, I think, believe that. They're set up for retirement more than they really are, and they feel like their wealth is is much larger than it really is. And I know, you know, like I've got certain people that I know and clients. And even when I talk to folks that call in on the radio show, there's a lack of understanding that, yes, you have. You know, you have a couple million dollars in property. But what did you pay for it way back when? Is that it? You know. So what's the gains tax going to be? Is it producing income? You know, like you're going to need you know, you know, it's concerning to me if you're if you're land rich but cash poor while you're going into retirement, especially all these huge costs that are facing you, you health care costs, I can't even get into. It's astonishing the costs that are going to be facing you in health with health care. Huge tax costs are coming. You know, so it's you're really probably not as wealthy as you think you might be. And that's why we always talk about planning here and planning for income, you know, and putting a plan together that's going to produce income. You know, having that high net, that net worth number going up looks cool and all. And it might be great for our egos, but it's not really doing us a lot of good when it comes to practicality and reality and living in retirement when it's going to cost you 100 to $200,000 a year just to just to make it and not be on beanies and weenies in the future. So accumulating property, you know, that's been kind of the hype lately here in Florida because we, you know, we had a good real estate market. I see people just trying to accumulate more and more and more and more property that's going to create headaches, too, if you get too out of balance in the future. There.

Randy Woodruff:
We have a great point about real estate, and I wanted to end I wanted to just bring up something that that we get this question a lot. And for people that are in real estate, you may have heard the term tax free exchange 1031 exchange, tax free sale or whatever. And um, we we at here take point in Suncoast Group think that clients should explore those opportunities to do a tax free exchange or a 1031 exchange. But keep in mind, as I've said earlier, long term capital gains rates are the second lowest point they've been in history. So when you do a 1031 exchange, you avoid paying tax on that, on that gain on that piece of real estate today and you're kicking the can down the road. But when you kick the can down the road, it may be a lot more expensive than in the future. So sometimes it's best just to pay the tax today. Start with a fresh, clean basis on a new piece of property that you want to buy and lock in. Those tax rates also lock in those gains at today's tax rates when they're more favorable compared to what they could be in the future.

Randy Woodruff:
So I'm a big advocate of looking into 1031. We've done some 1030 ones for clients and but it depends on the situation. And take a look at the net worth of the client, what they need. This property for, all those kinds of things to determine if it's best for them. And then we do a ten. It's just not just a tax decision. There's also what your overall net worth, what do you need for the future to live on? And because there is some benefit to holding on the property until you retire or assets to retire, you get a step up in basis. So for certain clients that have a lot of net worth that won't need to liquidate a piece of raw land to to have cash to live on, I might recommend doing a 1031 holding it until their death and that way they get that step up in basis when they pass on to the kids. So there's all different things to consider other than just taxes. And today, in today's environment, there's the future. That's why planning is so important.

Erick Arnett:
Folks, we've got to go to a break. This is Take Point on Retirement radio. We're going to be back with some more with Randy Woodruff, our CPA. And also we're going to talk about Generation X facing a harsh retirement reality. Millions have little to nothing, save for their golden years. We'll be right back with Take Point on Retirement radio.

Producer:
You're listening to Take Point on Retirement. To schedule your free no obligation consultation visit. TakePointOnRetirement.com.

Announcer:
I'm here with Erick Arnett of Take Point Wealth Management. Erick, these last few years have been a time of change for a lot of people. Some have left their old jobs and started new ones. What if they still have a 401 K or other retirement plan from their old employer?

Erick Arnett:
That's a great question. If that's you, you've got options. A lot of work based retirement plans come with high fees. We can show you options that are a lot more affordable. And don't eat away at your retirement savings and investments.

Announcer:
What about if I'm getting close to retirement? Do I still have options? Yes.

Erick Arnett:
And this goes for anybody with an employer based retirement plan. You have more options than you think. Did you know you can roll over some of those funds into an IRA with more favorable investment options and lower fees?

Announcer:
Did not know that.

Erick Arnett:
Now you do. We can help you navigate it all. Just go to TakePointWealth.com and schedule a free no obligation consultation with me today.

Announcer:
That's right. You heard him folks head on over to TakePointWealth.com today.

Producer:
Sound familiar? I'm Jim with the Retirement.Radio Network powered by AmeriLife. Millions upon millions of credit card transactions are processed across the US every day. Creditcards.com senior analyst Ted Rossman told CBS News recently. More than a third of US adults are carrying credit card debt right now.

Ted Rossman:
Credit card balances are at records. We're seeing more people carrying debt and we're seeing interest rates at record highs. So I think this just calls to importance the need to pay it off.

Producer:
Furthermore, a recent report from Lendingtree.com says that AmErickans have put themselves in a $986 billion hole of credit card debt. And while AmErickans don't shy away from trying to score reward based incentives and take advantage of the perceived positives in a credit card based system, it does beg the question is cash still king? Paying for items in cash presents opportunities to reap specific benefits. Instead of paying credit cash payments. Take away the worry of having to pay credit card fees or interest and may be the most significant reason you own what you purchase rather than owe While paying in cash offers a different and safer way to manage your money. There's a growing trend in society of various businesses going cashless, however, paying in cash at various restaurants and coffee shops or even the doctor's office could prove financially beneficial for your household balance sheet using cash instead of credit. Part of our 23 cost cutters for 2023 for the Retirement.Radio Network Powered by Amara Life. I'm Jim Tarabukin.

Announcer:
I'm speaking with Erick Arnett of Take Point Wealth Management. Erick, this topic isn't always the easiest for people to talk about, but it's important. Estate and legacy planning.

Erick Arnett:
And it's hugely important. Here's the big question Is your legacy important to you?

Announcer:
Well, absolutely.

Erick Arnett:
Then the next question should be what kind of legacy do you want to leave behind? I bet it's not one where your spouse or your kids are going to be shouldering a huge tax burden.

Announcer:
Are there strategies to help with that?

Erick Arnett:
100%. A Roth IRA is one example, and we can help you make that part of your plan. Also, if you want your wishes carried out like you want and not like the state wants, give me a call or go to TakePointWealth.com.

Announcer:
Erick Arnett with Take Point Wealth Management. Thanks so much.

Erick Arnett:
Thank you.

Announcer:
You heard him folks head on over to TakePointWealth.com today.

Producer:
Any bonuses mentioned may be subject to additional restrictions and regulations based on the offering annuity company. You may not receive the bonus if the contract is fully surrendered or if traditional annuitization payments are taken and if the policy is partially surrendered, it could result in a partial loss of bonuses because these are bonus annuities. They may include higher surrender charges, longer surrender charge periods, lower caps, higher spreads, and other restrictions that are not included in similar annuities that don't offer a bonus feature.

Producer:
Welcome back to Take Point on Retirement. Schedule your free financial consultation now at TakePointOnRetirement.com.

Erick Arnett:
Hey everybody welcome back to Take Point on Retirement radio. So glad you're with us today. This this is actually the second half of the show Can't believe we're already blitzed through the first half we got Randy Woodruff. Our guest today is with Suncoast CPA Group. So glad to have him here and his insight. We were talking earlier about some of the challenges that face our retirees, even pre-retirees. Our Gen Xers are baby boomers. What you know, what are you and you were you were giving some great advice. And we're talking about capital gains taxes. And we feel as though, you know, now is the time to actually get in and see us. You know, if you have any questions at all, you have any significant assets that might have potentially low cost basis. There's a lot of different things we can do. We have property. Randy is also an expert in realtor when it comes to property sales and commercial property, and he's been a property investor for for a long time and he knows all the strategies behind that. But, you know, we we you know, unfortunately, we don't have enough time on the show, but there's so much to get into. There are actual strategies, folks, that we can put in place, but we need time to plan for this. Right. It's not you know, it's hard when people come to us. Right. With a problem that's been developing over the last five, ten years and they expect an answer, you know, today, now, today, now, like, how can you help this? No, that's that's not the that's not the case.

Erick Arnett:
We probably can't help you. So that's why we want you to get in. Now, if you're 5055, if you're listening to this show right now, 60, 65, you've got you have properties, um, you know, you have low cost basis stock, whatever it may be. I know it's painful to pay taxes and you know, we've been I know Randy and I for the last couple of years, we've been trying to take advantage of these tax cuts, the tax breaks that are currently in place with our clients. And they and they they don't like us when we hit them with capital gains. But, you know, we remind them like, look, you know, this is going to be a much bigger problem in the future if we don't start working on it now. And that's one of my big concerns for our listeners out there right now. I'm sure there's somebody listening out there right now and might be, you know, facing these same concerns and same issues and problems that they're going to face in the future. And, you know, so there's different things that we can do to help you combat that tax currently and in the future. Roth Conversions, we talk about that all the time.

Erick Arnett:
You may or may not be a candidate for that hybrid hybrid life insurance policies. The the life insurance retirement plan. There's really only two ways you can save for retirement tax free, and that's with a Roth account or a life insurance. And so when you hear the word life insurance, don't just turn it off in your brain like don't want to pay that insurance company premiums and things like that don't need life insurance. No, we can use life insurance as a tax free retirement tool. And you owe it to yourself to get educated on that. And we're happy to. If you call us, we will educate you. We'll bring you in, we'll get on a Zoom call, whatever it may be, and we'll start talking through this so you can start understanding how these work. But I would love to have somebody out there call me and we work through a plan with them. And by the time they're 72, they have no required minimum distributions. They're not forced to take money out of their IRA. They might have a really good life insurance plan in place that they can start drawing money off tax free. It's also an asset protection tool. It protects your assets. So a lot of great strategies out there. But, you know, Randy, other than, you know, managing the capital gains taxes and, you know, potentially using Ross, you know, what are you seeing in your practice and what are some of the things and ideas that you might have for folks when it comes to managing this potential problem, even with properties? You know, and there's a thing, you know, as an example like estate planning is huge.

Erick Arnett:
We also do estate planning here. Now at Take Point Wealth, we'll do a complete estate plan for you all in house at a very reduced cost, a fraction of what you would pay an attorney. And we've been doing it for 30 some odd years. So, you know, we've got some good experience in that. So we feel super excited about it. But we need you to pick up the phone and call us so we can help you out. It's and one of the things that we see a lot of times, you know, is people making the mistake of putting their kids on the deeds too early and they they don't get that step up in cost basis. So what are some other things like other than Ross? Because we know that not everybody qualifies for the Roth. What are some other things that you're doing inside your practice with some of your retirees and higher net worth clients when they call you and say, Man, I'm paying too much in taxes? Randy, what do you got for me?

Randy Woodruff:
Yeah, great question. I want to pivot back real quick. It's something when you mentioned that we do estate planning and want to just highlight that for a minute. And you know, we've been doing estate planning with clients for years and years, but not until just now can we actually prepare the documents. So, you know, when Erick says we do estate planning, we don't mean just come in and we'll give We talk about something and you leave and go figure out how to do it. We'll meet with you, talk to you, put a plan together, and then we memorialize that plan. And the estate planning documents to include a trust wills, pour over wills, all the health care documents, all that we can now do in house. And so it's a it's so you know you know, so whether it be in my tax practice, in the investment practice, you know, so often people come in, have a great meeting, have a plan, and then they walk out of the office and don't execute the plan. They don't know what to do next. They don't call back and ask for help because they're embarrassed or don't want to. So, you know, part of having a good plan well, it's great to have a good plan. But if you don't know how to execute or don't execute really as though it, what was the point of that? So that's why we we partnered up with with a company that can help us literally, you know, they help us execute the plan and make sure that our clients get the service that they want deserve.

Randy Woodruff:
Um, you know, there's, you know, talking to clients in terms of ways to save taxes, you know, it's. What are the. You know, basically the way we save taxes is to get your income down, you know, And so that means you're spending money, you know, so if I'm talking to a business client, you know, we have this discussion. If it's a if it's a business client has a growing business and they need more income, they need to spend the money to buy equipment, to grow their business, to expand, to invest in, in staffing, marketing, whatever it is that's going to get a good return, then I'm all I'm in favor of spending that money to grow the business and make them more, more successful. But there comes a point in time where if your business is mature and it's you're just not in an environment or a geographically graphical area to grow anymore, then it becomes a point in time to where you just start looking at retirement plans. I know that we're not that we talk about Roth conversions, you know, and and I think we should be talking about Roth conversions and clients should consider them.

Randy Woodruff:
But there's also a point in time in your life when you're a higher income earner that you need to be taking a look at putting money into retirement plans to reduce your income when you're in those high, high, I'll say earning years, you know? So here again, this is part of planning. You know, when you do this, how much to put in, what kind of plan to have. It all comes down to planning, coming into meeting with us. Let, let let us take a look. Look at your income and seeing what's best for you. So. When we talk about putting money into retirement, we want you to put money in retirement when you're in your higher income years. You need to save money when you're in higher tax brackets. And then as you as you get into retirement or you're right before retirement and your income drops or you go to part time, you know, that's when you could be looking at doing the Roth conversions or even when you're in retirement, you can be doing Roth conversions. And I'm not saying you can't do a Roth conversion when you're working. You just want to make sure that you analyze. You know, if I make that Roth conversion while I'm still working, that Roth conversion is going to stack on top of my current income.

Randy Woodruff:
And that Roth conversion income, if you will, to be taxed at a pretty high rate. So here again, it's all part of planning, all coming in. There's no one size fits all to to a plan. It's everybody's got their own unique set of circumstances that they're going that they're going through today. They're going to be going through two, five, ten years from now. So you come in and see us. We can help you plan for all of that. So so back to being in business. You know, if we're talking to business owners, you know, we we do advocate spending money and and at the right time, you know, so sometimes you're having a really good year and you were thinking about making making a purchase and you could do it this year. Next year. Well, next year is not going to be near as good. You want to go ahead and make that purchase this year when you're going to be probably in a higher tax bracket because you'll save you'll save taxes at those higher bracket rates. So that's that's been your timing is everything. We heard that expression so many times in our lives and we want to make sure that you also time your purchases to get to achieve the most money in tax savings as well.

Randy Woodruff:
Um, you know so there comes a point in time to where you're as a business owner, you've maxed out your potential for growth unless you want to expand in other geographical areas or get into other lines of income. So then you get into, you know, really focused on savings. And that's where can I can recommend some really different types of retirement plans. You know, some of them are simple, simple IRAs, you know, and we've got some very aggressive for certain high income earners and very aggressive plans. You can put over $100,000 a year in if you're in that if you're in if you if you have the income to do that. Also, there's a lot of factors that come into play in terms of how employees you got those kind of things. But we've got a lot of different options. We can run some scenarios for you to help you pick the best plan and then. You know, when it comes to retirees. You know, as we've talked before, you know, Erick and I like to have when we get into planning with retirees, we like to have multiple different buckets of income to pull from. You know, we want to pull pull from some taxable income. So there's some there's some income that you, your RMDs, you have to take that money out.

Randy Woodruff:
You know, you may not have to take money out of annuities if you have other income sources coming in. But if we have some, you know, multiple if we have some money sitting in in IRAs, we got some money sitting in Roth IRAs, we got some money sitting in the stock market that that, you know, has some capital gain exposure, but it may not have that much capital exposure, income, income interest, sorry, dividend interest, income, Social Security, giving us, you know, multiple buckets to work with in retirement. You know, we can pull from different buckets throughout the year and and basically manage your tax liability while we're doing that. But you can't give us multiple buckets of income to work from. If you start when you're 65 or 70, you need to start planning the different kinds of buckets we can allocate from long before you get in retirement. That's mean. You can't plan a retirement. It just it just it just makes the the results that we achieve when you're in retirement, you know, we can we got different buckets to pull from have different tax consequences. We can be much more effective with your tax planning ultimately lowering your taxes and giving you more money to spend in retirement.

Erick Arnett:
Yeah, I love it. I love it when we do on occasion we do get a younger client in their 40s, maybe early 50s, and they come to us and say, Hey, you know, I think it's time for me to do some planning. And I would say no matter who's out there listening, I don't care what age you it is you're at, you've got to start planning now. In fact, we just started Randy and I just started planning with a 22 year old. We started we start with a 45 year old guy, calls me a lady, calls me. I get excited about that because we have a nice runway. We've got a long runway. But when someone comes in at 60, 65 or 70, I'm not going to say 70. But in that that runway gets really short and it's hard for us to take off and have a successful takeoff. You know, we could we we don't have a lot of time, you know, so it's it makes it that much more challenging and probably not going to be able to get you to your goals as quickly as as we would like. You know, we can try to help minimize it and optimize the best we can. But getting that plan in place at an early age is super, super important. And Randy, one of the things that I know we have we we have a lot of listeners that I believe are self-employed.

Erick Arnett:
We've got a lot of listeners that own their own businesses, small businesses like myself. I'm a small business owner. You're a small business owner. And years ago you were very helpful with me in planning my business structure. And that's something that Randy is also really great at here at Suncoast CPA Group. You know, if you're out there listening, give us a call. 352 616 0511 Or you can go to TakePointWealth.com. And in the upper right hand corner you can just click on there and get right on my schedule. Let's talk about how you're structured, whether you're self-employed or whether you're a small business owner. Are you an LLC? Are you a C Corp? Are you an S corp? You know, how are you structured? Are you taking W-2 income? Are you are you taking 1099 income? Are you paying yourself wages? Are you paying yourself dividends and bonuses? You know, how are you structured and what is your what is your cash flow and tax strategy? Because one thing I know, Randy, that you taught me a little trick and one of the things that you use with your clients all the time. I'd love for you to explain that here to our listeners today.

Erick Arnett:
You know, that whole impact that the Medicare and Social Security tax has that that 15.3% rate or whatever we talk about all the time. So it's amazing the money that you save people right off the top. And then just by that little strategy that you have, and I'd like you to share that, you know, in other words, that example that you always show me, if you're if you're if you're bringing in $100,000 net income from your small business, are you paying yourself 50% of that in W-2 wages and 50% of that and maybe a dividend or or a bonus or whatever and how impactful that is? I love that structure. And then you also can help people determine, Right, whether they should be an LLC or a sole proprietor or a C Corp or an S corp. And that's super, super important, folks, to get that right from a taxation standpoint. And it's very difficult for us to see. And I just had a lady come in the other day and she's in her 40s. She's been self-employed, had her own business forever, just go and grind and grind and grind and making money. And she's been doing it all wrong for like 20 years. And so it was like it was unfortunate, but I'm glad we can help her for the next 20 years.

Erick Arnett:
But there was a lot of mistakes being made there, so it's super important. Don't think you have to do this on your own folks and don't think it's super expensive to get somebody to help you out and have a third set of eyes. The smartest business owners and the most successful corporations in the world, the tycoons, you know, the the Trumps of the world, the the Warren Buffett's of the world. I mean, you name them. The the the the Elon Musk's of the world. They surround themselves with teams and smart people. They're not just sitting there trying to do it all by themselves. And I know there's a there's sometimes a control issue, a trust factor, whatever it may be. But you owe it to yourself to to get, you know, to to pick up the phone, to call us and to get us on your team so we can start evaluating this stuff for you. (352) 616-0511. And I'll just starts with a quick phone call and a chat session. But Randy, I'd love for you. I think we've got a we've got about ten minutes left in the show because I think if people are listening to this, it can be really impactful because we see this mistake made all the time.

Randy Woodruff:
Yeah, a great point.

Randy Woodruff:
And you're right, we do see this happen happen quite often, especially when someone's, you know, they've been doing their own taxes or they've got a tax advisor that's not a CPA or somebody that doesn't spend time all day, every day doing doing taxes or working with small businesses. So now I give the example and Erick used the number 100,000. I was thinking the exact same number to talk about. So we'll go there. So let's just say you've had a job and you're working, you're making you're making $100,000 a year in salary. Your employer takes out 7.65% in Social Security, Medicare, tax out of your paycheck. And he or she sends that off to the federal government. So when you retire, hopefully there's some money there to give you a Social Security check or retirement and pay for your Medicare expenses. That is your employer. They have to match that. So between you and your employer, you and your employer, you're sending $15,300 into Social Security and Medicare on your behalf. And the younger you are, if you're in your 20s and 30s, you probably if you're not, you should be questioning whether that's a good investment and whether that money is going to be there. In fact, I tell my clients, don't plan on there'll be some level of Social Security there. We hope I'll think it's going to be there in the same level of this and that in terms of the amount, they're probably going to increase retirement age down from 67 up to 60 or 69 or further. We are all living longer.

Randy Woodruff:
But um, so back to the back to the topic. So when we have clients that have a business and they're operating as a sole proprietorship and that, that LLC operating as, as a proprietorship or they're on their own operating under their name as a proprietor, they're netting $100,000. Now you have to pay both portions of that Social Security Medicare tax. So you're paying out of your own pocket $15,300 just in Social Security, Medicare tax. Then you have to pay federal income tax on top of that $100,000 as well. Just like when you when you had a job and you're getting a W-2. So you basically picked up an extra $7,650 tax burden in that situation because you now have to pay the employer portion of Social Security, Medicare. So the question is, well, there's got to be a better option. What can I do? And there is. And we have literally we have hundreds of small business clients in almost every single one of them is taxed as an S corporation. So we have corporations and LLCs taxed as s corporations. And so basically when you have. Entity taxed as an S corporation. The IRS wants to see the people that are working there. It is typically the small business. The owners of the business are the ones that actually are working there. They run the business there. The president, the CEO, whatever else. And so they want to see the owners of the business that are working in the business, taking out reasonable compensation. And they have one court case after court case over the last several decades against folks that were not taken out reasonable compensation.

Randy Woodruff:
I'll give you one that sticks out in my mind. Um, probably back from the 80s there was an attorney netting at least $200,000 a year in his practice, his or her practice, and they were taking out $7,000 a year in salary. So I'm sure, yeah, this laughable. You're right. It's laughable. So I'm sure no one listening to this show right now would work full time for someone for $7,000. And you wouldn't. You can't work you can't work for your own company for $7,000. And the IRS will go after you if you're not take it out reasonable compensation. So you want to make sure you're taking out reasonable compensation and reasonable is based on facts and circumstances. I'll give you a very two very opposite ends of the spectrum examples. Let's just take a realtor and let's say this realtor does not have any any, any paid staff, any assistants or basically working on their own. They're netting $100,000 in income. Yeah, that realtor should be taken out at a minimum $50,000 at half of that. Net income is salary. You only pay the Social Security Medicare tax on the salary. So instead of operating as a proprietor paying $15,300 a Social Security Medicare tax on the full $100,000, you're only paying $7,650 of Social Security, Medicare on the $50,000 salary, the other $50,000 in profits. At that point, you still comes out to you and you still pay tax on it. And you get and you can you can take those profits anytime you want to throughout the year.

Randy Woodruff:
You take it daily, weekly, monthly in any amount you want to, you know, so so at the end of the year, you're still paying tax on $100,000. That hasn't changed. But you're reduced your Social Security and tax bill down by $7,600, which is a big a big deal. Now, one of the things to keep in mind is that if you had worked at that job for, let's say, 40 years, making $100,000 or so, you know, for 40 years, you're paying in Social Security, Medicare tax on $100,000. If you got your own business and you're making $50,000 dollars a year or so in income, you're only paying Social Security, Medicare tax on 50. So when you get to retirement, you're going to have a smaller retirement check on a monthly basis. So we recommend all of our clients take that money that they're saving in Social Security, Medicare, and invest that money. Invest that money into something that you're saving for retirement. It could use you could use it to fund an IRA, help fund the simple IRA. They use that money for retirement because you're you are going to be getting a smaller check in retirement. And most folks forget forget about that. So it's very important that that you keep that in mind. And that's you know, that's one of the the the big things that a small business can do to basically a small business owner can do to really have a significant impact on their taxes. And we we do the structure all the time.

Erick Arnett:
Hugely, hugely impactful. Thank you, Randy, for sharing that example. Folks, if you're listening and you're a small business owner or you're self-employed, your strategies are even, I would say, even more challenging, but require even more expertise to make sure that you're optimizing everything that you're doing to prepare for your retirement. And even, you know, you brought up Social Security several times. You know, we can help you determine a great Social Security strategy, especially if you're married or, you know, there's several different strategies whether you're going to take the spousal benefit and defer. You know, if you start work, if you're still working and you start Social Security prior to your full retirement age, how is that going to impact your Social Security and your Medicare premiums? You know, you've got to be careful there. So if you need a Social Security strategy, you would like a Social Security maximization report. We're going to offer that to you free today. Just give us a call. (352) 616-0511. If you have questions of whether you should be an LLC, an S Corp or C Corp, you know, are you taking enough out in taxes? Are you taking too much out in taxes? Give us a call. (352) 616-0511. We're standing by to talk to you today. There's so many things facing our retirees. We didn't get to them all today. Unfortunately. We've got, you know, lots and lots more to talk about. I hope you join us again next week for this show. We've got tons of topics. And Randy, I'll I'll just let you wrap up and I know you've got something else you want to share real quick and then if you'd like, wrap up the show.

Randy Woodruff:
Yeah, my my next comment I'll be brief is not to scare anybody, but it's informative. We've all been listening on the news and the radio and TV, wherever that the IRS is hiring 87,000 new agents over the next ten years, they're going to be significantly modernizing their technology. So imagine if you if you're retired, you know, and you know, and but you were working. Imagine trying to do your job running on technology from the 1980s when you when you were working or if you have a job or a business. Now, imagine trying to do your job in technology. So that's what the IRS has been working with. And they're going to be they've got billions allocated to modernize their entire system, not just hardware, but a enterprise wide software system. It's going to give them the ability to ability to do a lot more analytics. So my word of advice to everybody I talked to is I'm not trying to scare anybody, but the IRS is is going to be able to do a lot more data analyzing. And I think that we've all been kind of sloppy over the last 15, 20 years. I know our firm, you know, we go years without seeing a client getting audited.

Randy Woodruff:
So that's going to change for all of us. And so we everybody needs to tighten up, you know, make sure that you document everything that you're doing, get receipts, everything that you're doing. And just because you've heard your friends doing something in the past doesn't mean it's right, doesn't mean it's legal. They just get away with it because nobody was watching. You know, I'll admit that on the way here to work, I broke the speed limit probably more than one time. I didn't get caught. Doesn't mean I didn't break the speed limit. So just because you or your family or friends haven't gotten caught on their taxes, maybe doing some things that were somewhat aggressive or not documented. Please, please, please start start to take a look at how you're doing your taxes. Make sure you document everything. Make sure you seek out the advice of professionals. If you are involved in some transactions or have a business that you need some help on because you know they are going to be able to really start drilling down on us as AmErickans and we got to be ready.

Erick Arnett:
What I'm hearing there is it's time to stop winging it and trying to get by with, you know, the old let me see, I, I had one guy tell me one time, well, I just put in a number and see if I can get away with it, you know. So I think those days are over, folks. They are gearing up, the audits are coming. And we're not going to be you're not going to be able to slip that one past the goalie much longer. And, you know, so one of the things that, you know, is facing you is increased costs. Maybe you're going to have to start a little business in retirement to help supplement your retirement. We're here to help you Take Point on Retirement radio. This show is for you. Please give us a call. We're standing by to help you today. You can also go to TakePointWealth.com. You can click in that upper right hand corner and you can get on our calendar today and we can start talking about setting up this plan for you and implementing these strategies for you today. And by the way, if you haven't done your estate planning right here at Take Point Wealth, we're offering a great deal on that. We're going to save you half the cost to get your estate plan done right here. Wills, trusts. Everybody needs a trust. You've heard me say that before. Every single person listening to this show needs a trust. So if you're listening to this show, give me a call. You do need a trust. In fact, I have a free eBook for you today. If you call today, it's a book called Everyone Needs a Living Trust, and I'll Get that out to you free of Charge. Thank you so much for listening to our show today. It's great having you up and down the nature coast all the way to Punta Gorda, Port Charlotte and Tampa. We value our listeners. Give us a call. We're here. We're here to help you. And stay tuned and tune in for us next week on Take Point on Retirement Radio. Thank you, folks.

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 to schedule your free no obligation consultation visit. TakePointOnRetirement.com or pick up the phone and call (352) 616-0511. That's (352) 616-0511. Investment Advisory Services offered through Brookstone Capital Management, LLC, BCM A registered investment advisor. Bcm and take point 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:
Information provided is not intended as tax or legal advice and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional. A Roth conversion may not be suitable for your situation. The primary goal in converting retirement assets into a Roth IRA is to reduce the future tax liability on the distributions you take in retirement or the distributions of your beneficiaries. The information provided is to help you determine whether or not a Roth IRA conversion may be appropriate for your particular circumstances. Please review your retirement savings, tax and legacy planning strategies with your tax or legal advisor. To be sure, a Roth IRA conversion fits into your planning strategy.

Producer:
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