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Alright, gang. It is that time of the

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week. It is the favorite Tuesday I've had

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all weekend. It is time for the True

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Wealth Radio Show. I am your host Dave

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Littlejohn in studio today with me. Matt Dixon.

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And our special guest,

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nobody but us. Yep. Yep. So glad that

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we've got each other. So thanks for hanging

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out, Matt. I'm ready to go. Yeah. We

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have got

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an interesting question to pose today. Yeah. Right?

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And here's the question, Matt,

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at what point

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have you put too much money

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into

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pre tax

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or otherwise known as qualified

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retirement plans?

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I don't know that there's a necessary like

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a actual number that we can slap on

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there because it can kinda vary. Right? But

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there surely is a number out there where

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it's, like, maybe you've put too much in,

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so I kinda wanna unpack that today. Right.

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I I was waiting for him to say

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it's $4. Good show. Let's that's a wrap.

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Right? But no, we're not going to do

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it. We're going to actually answer the question.

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If you've if you're wondering,

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how could you possibly think that you've got

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too much money in a retirement plan? So

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there's there's a funny

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funny element at play here. Mhmm. Okay? So,

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I mean, help our listeners for a second.

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What is the what is the concern

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that we as advisors have about really big

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retirement plans. Maybe I'll try and oversimplify it,

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right? Yes.

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Say you're in a 20% tax bracket today

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because you're deferring some of your income into

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a retirement account.

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Alright? Pretty simple.

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What if

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you

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defer enough over a long enough period of

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time, you grow that retirement account substantially,

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and when you go to retire,

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you have to take out

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so much money that you have jumped into

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a higher tax bracket.

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So,

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here's what, there's there's this critical

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piece some people do not know

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and that is

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that retirement plans,

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particularly these a qualified pre tax plan Like

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a traditional

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Traditional IRAs, 401ks,

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403bs

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and so forth.

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The

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IRS will only let you defer money for

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so long before they start looking for you

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to pay taxes. Right. And that age has

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been changed

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but it's now currently

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73. 73. Mhmm. And then you start to

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have what's known as a required

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minimum distribution.

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Right. So you have to take some portion

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of that money out of the retirement account.

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They force you to. Yeah. It's compulsory in

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nature. And how do they force you to?

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Well, if you don't do it, they tax

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tax you at 50% of what you should

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have taken out. It's a lot. Which is

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So, just take the money out. It's Yeah.

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And and so that is higher than the

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highest marginal tax bracket.

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So, essentially they're saying, We will make you

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pay the highest tax we have if you

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refuse to take money out of your retirement

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plan. Right. So now you have to think

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to yourself, wait a minute.

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What happens if I make more money in

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our current tax system?

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Well, we have what's known as a progressive

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tax system, which means very simply, the more

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you make, the higher your tax rate goes.

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Right. And it tops out around what? 30

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37%

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federally. Federally. Yeah. And, you know, that changes

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from time to time depending on administration. Mhmm.

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Right? So depending from time to time depending

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on administration.

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Mhmm. Right? So, depending on the makeup of

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Congress and the White House, those tax rules

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can change and they have.

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I certainly have throughout my

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few decades working around this, I guess, more

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than 2 decades. A few weeks it sound

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like more than 3. I haven't been doing

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this for 30 years. I'm in year 25

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so it's been a while. And I've seen

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a lot of tax changes.

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Mhmm.

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So

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here's the here's the rub. Right?

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If

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you in retirement

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have a really big

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retirement plan, then you're going to have a

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really big

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required

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distribution.

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Which will drive your tax bracket

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higher

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in

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because it's a larger distribution.

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Right. And here's another thing to think about.

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You just mentioned it. Right? Policies

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change with different administrations. Yes. What has been

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a recent change

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that we've seen

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since Biden took office?

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The Secure Act. Right? Right. And that's a

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big deal because we're talking about, like, these

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IRAs growing to a, you know, a sizable

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amount

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and then you end up in a higher

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tax bracket, but we also got to think

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about what are the implications

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to the errors

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of those retirement accounts. Can can I just

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for a sec, can I just hit pause

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on this one? Yeah. Because what I'd really

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like to do for for everybody listening, let

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me let me paint the the the scene

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for a minute here.

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The IRS has kind of an interesting approach

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here.

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They typically do not tax something twice.

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There are a few scenarios where that kind

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of happens in theory because,

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for example, dividends. 1st a corporation pays a

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tax and then distributes the dividend which is

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then taxable again. Some would argue that's a

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double taxation. Views it as we tax the

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money once. Okay?

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Views and says, we tax the money once.

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Okay?

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And and so now if the money gets

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paid to somebody else, they get to pay

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taxes on it. So it's not like the

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money's not taxed over and over again in

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the system. It is. Right. But I'm saying

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if you earn an income, you you pay

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taxes at the point that you

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earn it. If you defer the tax,

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then you're going to pay taxes when the

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money gets undeferred.

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Right. Okay. And that's a funny way of

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saying when you take it out of that

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that tax deferral.

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Well,

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if we think about the so I like

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to think of it this way. The IRS

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kind of gets you on the way in

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or they get you on the way out.

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Okay?

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And

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retirement plans are usually a they they get

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you on the way out deal. Right. Now,

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the magic of this, and we're not going

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to talk a ton about this today, it

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will hint about it, but would be Roth

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IRAs

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Because there, you pay into a Roth IRA

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with money that's already been taxed. Mhmm. And

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this is a unique situation where that account

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is allowed to grow over time and if

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it's qualified and there are just few things

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and we're not going to go into great

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detail here, but essentially it's been longer than

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5 years that the route has been open

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and you're over age 59a half, then

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those monies should be qualified, meaning they're going

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to be able to be removed from the

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Roth IRA

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and no tax is going to be owed.

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But wait, Dave. Didn't you say

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that they get you on the way in

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or they get you on their way out?

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Well, the money that you've already been taxed

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on, that makes sense that you wouldn't have

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to pay taxes again because they already taxed

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it. What about all the gains?

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Mhmm. Right? If you've grown that asset a

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whole lot, did you have to pay taxes

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on the profits?

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No.

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That's the unique thing about a Roth IRA.

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And here what's another really unique feature? And

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this is why I asked you to hit

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pause, Matt. Okay.

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Heirs do not That's why you wanted me

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to hit pause. Yes. Yes. That is a

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big deal. Because

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heirs

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basically inherit the same tax status.

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Okay? And so, when it comes to retirement

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plans, a Roth IRA heirs inherit tax Roth

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they inherit the Roth tax free.

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They still have to take the money out

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of the Roth

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but the current rules are within 10 years.

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Right? Yeah. But They don't pay taxes on

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it. I ran into this issue not with

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a Roth but with the traditional,

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I I was talking to someone and they're

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like, yeah, I've got, you know,

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it was I think over $2,000,000

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in an IRA

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and

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their children

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were both really well off making, like, 200

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+1000

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a year. Mhmm. And they're like, so,

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what when I pass

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and this money goes into a beneficiary

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IRA from my kids,

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now they're gonna have to take the money

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out and pay taxes on it, but they're

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already making 200,000 a year and it started

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to make them sweat.

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They're like, oh, it gets better. It's going

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to come up in this show even more.

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Okay. Okay?

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But when we talk about taxes and errors,

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the first point to remember is if you're

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going to inherit the same tax issue, right,

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then an IRA,

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traditional IRA that you've not paid any taxes

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on, you're you hit age 73, you start

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having required distributions. Uh-huh. If you die and

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there's money in that IRA,

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your heirs like, if it goes to your

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spouse,

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they get it without owing taxes for receiving

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it but they're going to have to make

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decisions about how old are they and when

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will their required distribution start.

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If it's a non spouse,

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then a 10 year clock starts ticking and

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they have 10 years to get that money

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out. Right. Think about this for a second.

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If you inherit

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an IRA

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worth

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$5,000,000

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Okay. First of all, high five. Nobody's going

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to feel sorry for you for inheriting

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$5,000,000 Okay? High five.

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But

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you have 10 years to take this out.

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If that account didn't earn a penny more.

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Right. You just completely uninvested. You just

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just put it in a savings account with

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0 interest. Mhmm.

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You'd have to take if you did equal

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distributions, a half a $1,000,000 a year for

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10 years

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to get that money out of the account.

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Yeah. A half a $1,000,000

275
00:09:42,045 --> 00:09:43,184
added to your earnings

276
00:09:43,565 --> 00:09:45,325
is very likely to put you in the

277
00:09:45,325 --> 00:09:48,445
highest tax bracket possible, which is currently close

278
00:09:48,605 --> 00:09:50,899
so 39%, but you'll be well over 30

279
00:09:51,379 --> 00:09:53,220
percent at at the federal level. In the

280
00:09:53,220 --> 00:09:54,980
state of Oregon, you'll be tacking on another

281
00:09:54,980 --> 00:09:55,480
9%.

282
00:09:55,940 --> 00:09:56,680
So imagine

283
00:09:57,059 --> 00:09:57,559
39%

284
00:09:58,019 --> 00:09:58,519
federal

285
00:09:58,855 --> 00:10:01,254
and 9% state in Oregon, so you've got

286
00:10:01,254 --> 00:10:01,754
48%

287
00:10:02,294 --> 00:10:02,794
tax.

288
00:10:03,254 --> 00:10:05,014
Right. And so And if you're watching this

289
00:10:05,014 --> 00:10:06,294
show by the way and you're not in

290
00:10:06,294 --> 00:10:09,089
Oregon, then apply your own state tax circumstance.

291
00:10:09,389 --> 00:10:11,069
Right. But but you're saying a bunch of

292
00:10:11,069 --> 00:10:13,949
taxes. You did so good. You crammed all

293
00:10:13,949 --> 00:10:15,649
that money into that IRA.

294
00:10:16,014 --> 00:10:17,855
Right. And then you're like, alright. I'm gonna

295
00:10:17,855 --> 00:10:20,095
give this big gift and then poof. Almost

296
00:10:20,095 --> 00:10:22,014
half of it's gone. Right. And so And

297
00:10:22,014 --> 00:10:23,649
you never thought about it. Half of it

298
00:10:23,649 --> 00:10:25,330
goes to taxes. And you, well, what was

299
00:10:25,330 --> 00:10:26,230
the point of that?

300
00:10:26,610 --> 00:10:28,790
If I was in a 30% tax bracket

301
00:10:29,009 --> 00:10:31,090
Right. And I was deferring Take the income.

302
00:10:31,169 --> 00:10:33,305
And turn it into a 50% tax bracket

303
00:10:33,305 --> 00:10:35,625
in retirement. Like, oh, yeah. You kinda broke

304
00:10:35,625 --> 00:10:37,465
it. You did. You could've just took the

305
00:10:37,465 --> 00:10:39,865
money as income and you would've It would've

306
00:10:40,210 --> 00:10:43,009
it literally been cheaper. Yeah. Because believe it

307
00:10:43,009 --> 00:10:44,870
or not the math works out pretty straightforward.

308
00:10:45,169 --> 00:10:46,929
It's you know you save the money on

309
00:10:46,929 --> 00:10:47,970
the way in or you save the money

310
00:10:47,970 --> 00:10:48,929
on the way out but that's kind of

311
00:10:48,929 --> 00:10:50,315
how the tax brackets work.

312
00:10:51,175 --> 00:10:52,615
So, we got to unpack this a little

313
00:10:52,615 --> 00:10:53,995
bit for everybody. There are some

314
00:10:55,014 --> 00:10:55,995
financial planning

315
00:10:56,934 --> 00:10:57,434
approaches

316
00:10:58,299 --> 00:10:59,200
to how to navigate

317
00:10:59,580 --> 00:11:01,899
how much should I be saving. Right. And

318
00:11:01,899 --> 00:11:03,580
here's the here's the good news. If you're

319
00:11:03,580 --> 00:11:05,100
like trying to, you know, anywhere close to

320
00:11:05,100 --> 00:11:07,235
that, okay? Then you don't necessarily have to

321
00:11:07,235 --> 00:11:09,714
worry about it now. Let's create that problem

322
00:11:09,714 --> 00:11:11,315
so we can worry about it. Okay. Let's

323
00:11:11,315 --> 00:11:13,019
do that. Good problems to create too, but

324
00:11:13,100 --> 00:11:14,700
But some of you out there, this is

325
00:11:14,700 --> 00:11:17,019
a real concern. And so and and it

326
00:11:17,019 --> 00:11:18,540
may be a concern because you are the

327
00:11:18,540 --> 00:11:20,620
person that owns this IRA. It may be

328
00:11:20,620 --> 00:11:22,720
a concern because you could be inheriting

329
00:11:23,085 --> 00:11:24,544
something like this from your folks.

330
00:11:25,164 --> 00:11:26,205
Because, you know, we got a lot of

331
00:11:26,205 --> 00:11:27,804
folks that are now in their eighties nineties

332
00:11:27,804 --> 00:11:29,804
and they've been deferring taxes for a long

333
00:11:29,804 --> 00:11:31,570
time and there's been a lot of stock

334
00:11:31,570 --> 00:11:33,429
market growth over the last few decades.

335
00:11:33,970 --> 00:11:36,049
So what does this mean? Well, I wanna

336
00:11:36,049 --> 00:11:39,054
know. Yeah. As do I. But first, we

337
00:11:39,054 --> 00:11:41,215
have to take an obscene profit. Okay. Let's

338
00:11:41,215 --> 00:11:43,134
do it. We're gonna do that. Stick around

339
00:11:43,134 --> 00:11:44,434
and when we come back,

340
00:11:44,815 --> 00:11:46,360
we will unpack this a little bit more.

341
00:11:46,600 --> 00:11:48,440
I'm Dave Littlejohn. And Matt Dixon. And you

342
00:11:48,440 --> 00:11:50,860
got True Wealth on News Radio 939 FM

343
00:11:50,919 --> 00:11:51,579
and 12:40.

344
00:12:10,290 --> 00:12:10,790
So

345
00:12:11,195 --> 00:12:12,495
the moral of the story

346
00:12:13,034 --> 00:12:13,534
is

347
00:12:14,554 --> 00:12:17,355
when we went to figure out how to

348
00:12:17,355 --> 00:12:19,759
do this show today, this is based on

349
00:12:19,840 --> 00:12:21,220
a Dave Ramsey scenario.

350
00:12:21,840 --> 00:12:22,600
And and,

351
00:12:23,040 --> 00:12:24,820
I was sort of jammed up with clients.

352
00:12:25,040 --> 00:12:26,399
Jammed just makes it sound bad, but, I

353
00:12:26,399 --> 00:12:27,440
mean, I was I was doing a lot

354
00:12:27,440 --> 00:12:29,134
of face to face time with clients. So

355
00:12:29,134 --> 00:12:30,575
Matt was doing show for everybody. He comes

356
00:12:30,575 --> 00:12:31,875
up. We gotta talk about this.

357
00:12:32,414 --> 00:12:34,975
And it started with Dave Ramsey was struggling

358
00:12:34,975 --> 00:12:36,759
with this one because this guy did. He

359
00:12:36,759 --> 00:12:39,399
had his example. He's 66 years old, and

360
00:12:39,399 --> 00:12:40,379
he has, like,

361
00:12:40,759 --> 00:12:41,259
$7,000,000

362
00:12:42,039 --> 00:12:45,175
in different tax deferred accounts. And the question

363
00:12:45,175 --> 00:12:46,774
is, what do you do? And and they

364
00:12:46,774 --> 00:12:47,915
said, do you just

365
00:12:48,455 --> 00:12:49,654
and we're gonna talk about this on the

366
00:12:49,654 --> 00:12:51,274
rest of the show. Do we just

367
00:12:51,610 --> 00:12:53,629
convert everything to Roth, pay taxes,

368
00:12:54,250 --> 00:12:55,690
and be done with it, kinda rip the

369
00:12:55,690 --> 00:12:56,669
Band Aid off?

370
00:12:57,210 --> 00:12:57,950
Do you,

371
00:12:58,570 --> 00:13:00,384
he didn't really talk about the idea of

372
00:13:00,384 --> 00:13:03,585
staggering conversions and spreading the, tax paying out

373
00:13:03,585 --> 00:13:04,865
a little bit, but there there are some

374
00:13:04,865 --> 00:13:07,079
decisions around that. And then they didn't talk

375
00:13:07,079 --> 00:13:08,839
a whole lot about estate planning other than

376
00:13:08,839 --> 00:13:10,679
to say, the longer you defer this, the

377
00:13:10,679 --> 00:13:12,360
more it keeps growing, the more the tax

378
00:13:12,360 --> 00:13:13,740
obligation grows too.

379
00:13:14,120 --> 00:13:14,620
So

380
00:13:15,320 --> 00:13:15,566
I think what we're gonna try to unpack

381
00:13:15,566 --> 00:13:16,139
today and the rest of the show

382
00:13:16,440 --> 00:13:18,105
is, unpack today and the rest of the

383
00:13:18,105 --> 00:13:18,605
show

384
00:13:19,785 --> 00:13:20,285
is

385
00:13:21,384 --> 00:13:23,384
how do you recognize that this is a

386
00:13:23,384 --> 00:13:24,445
potential problem

387
00:13:25,065 --> 00:13:27,340
as an investor? Because I think that's really

388
00:13:27,340 --> 00:13:29,600
the key here is if you've got

389
00:13:30,059 --> 00:13:32,139
retirement plans, then they're great. They exist for

390
00:13:32,139 --> 00:13:34,139
for reasons. It's a it's a good way

391
00:13:34,139 --> 00:13:34,800
to save,

392
00:13:35,340 --> 00:13:36,595
but at the same time

393
00:13:37,134 --> 00:13:38,815
you reach this threshold of like it may

394
00:13:38,815 --> 00:13:40,735
be diminishing marginal return and it's time to

395
00:13:40,735 --> 00:13:42,414
start looking at other areas of the balance

396
00:13:42,414 --> 00:13:45,210
sheet that may be more tax advantageous. Right?

397
00:13:45,269 --> 00:13:46,870
And we'll see how far we get on

398
00:13:46,870 --> 00:13:47,690
the show. Right?

399
00:13:48,070 --> 00:13:50,570
We're gonna have to recap the first part.

400
00:13:51,269 --> 00:13:54,004
I've got a client listening and they want

401
00:13:54,004 --> 00:13:55,845
they want a They want a recap? A

402
00:13:55,845 --> 00:13:58,085
slight recap because this one can be interesting

403
00:13:58,085 --> 00:13:59,784
for them. Yeah. Yeah.

404
00:14:00,325 --> 00:14:02,164
We we have a client And we have

405
00:14:02,164 --> 00:14:04,009
somebody who also said how much money?

406
00:14:04,389 --> 00:14:05,990
$42. That's how much if if you have

407
00:14:05,990 --> 00:14:08,070
$42 in a retirement account Okay. You're you're

408
00:14:08,070 --> 00:14:10,089
in trouble. That's Yeah. Classic.

409
00:14:10,389 --> 00:14:12,470
A brief recap to catch everyone up to

410
00:14:12,470 --> 00:14:13,825
speed that missed the first part of the

411
00:14:13,825 --> 00:14:16,225
show. Hey. You're in charge. No. Oh, come

412
00:14:16,225 --> 00:14:18,485
on. You're you're mister speed. I'm giving you

413
00:14:19,424 --> 00:14:21,184
turn this on and I'll I'll enter it.

414
00:14:21,184 --> 00:14:22,990
Right. Hey, gang. Welcome back to the True

415
00:14:22,990 --> 00:14:24,350
Wealth Radio Show. I'm your host Dave Little

416
00:14:24,350 --> 00:14:25,629
Johnny. It's a new one with me today.

417
00:14:25,629 --> 00:14:28,829
Matt Dixon. Dave, catch up the listeners who

418
00:14:28,829 --> 00:14:30,750
are just tuning in. What are we talking

419
00:14:30,750 --> 00:14:32,615
about today? And by the way, you can

420
00:14:32,615 --> 00:14:34,134
get the whole show by going to the

421
00:14:34,134 --> 00:14:36,554
podcast. It'll be available tomorrow. Go to littlejohnfs.com

422
00:14:37,174 --> 00:14:38,860
and you can grab that. Be sure to

423
00:14:38,860 --> 00:14:39,360
subscribe

424
00:14:39,740 --> 00:14:41,179
and then, at some point, we get these

425
00:14:41,179 --> 00:14:43,500
up on YouTube as well. News flash as

426
00:14:43,500 --> 00:14:45,179
well. We are planning on adding a live

427
00:14:45,179 --> 00:14:46,875
stream soon. So, we're working through that but

428
00:14:46,875 --> 00:14:48,954
that that'll be fun. For those of you

429
00:14:48,954 --> 00:14:50,314
just joining, here's the key.

430
00:14:51,355 --> 00:14:53,809
The question of the day, At what point

431
00:14:53,809 --> 00:14:56,610
have you put too much money into retirement

432
00:14:56,610 --> 00:14:59,089
plans? Okay? And it's a it's a funny

433
00:14:59,089 --> 00:15:00,610
thing like, wait, I can put too much

434
00:15:00,610 --> 00:15:02,565
in. It's not that you put too much

435
00:15:02,565 --> 00:15:03,924
in. The question is like at what point

436
00:15:03,924 --> 00:15:05,605
is it diminishing marginal term? Or at what

437
00:15:05,605 --> 00:15:07,924
point is it actually harming your financial picture?

438
00:15:07,924 --> 00:15:09,365
Well, at what point does it generate more

439
00:15:09,365 --> 00:15:11,620
tax than saves? That's really the better way

440
00:15:11,620 --> 00:15:12,659
to save it. That's a better way to

441
00:15:12,659 --> 00:15:14,580
save it. Yeah. Because if you if you

442
00:15:14,580 --> 00:15:16,500
find yourself saying, hey, I am in a

443
00:15:16,500 --> 00:15:19,424
lower tax bracket today, but I'm saving myself

444
00:15:19,424 --> 00:15:21,024
into a retirement that puts me in a

445
00:15:21,024 --> 00:15:23,584
higher tax bracket than today, then you're making

446
00:15:23,584 --> 00:15:26,279
it less efficient, not more. Might be act

447
00:15:26,519 --> 00:15:27,179
like, actually

448
00:15:28,440 --> 00:15:30,039
easier to do than you think. It might

449
00:15:30,039 --> 00:15:31,720
not be as much money as you think

450
00:15:31,720 --> 00:15:33,804
either. Yeah. So we

451
00:15:34,345 --> 00:15:34,845
did

452
00:15:35,225 --> 00:15:37,465
we did do a little bit of swag

453
00:15:37,465 --> 00:15:39,245
math. It was swag math.

454
00:15:40,665 --> 00:15:41,165
So

455
00:15:41,545 --> 00:15:42,620
do we just give them the number and

456
00:15:42,620 --> 00:15:43,899
then tell them why or do we tell

457
00:15:43,899 --> 00:15:45,980
them what we did? Tell them start with

458
00:15:45,980 --> 00:15:47,740
kind of like how we even got to

459
00:15:47,740 --> 00:15:49,455
this point. Like, what brought it up? How

460
00:15:49,535 --> 00:15:51,054
did we start running the numbers and where

461
00:15:51,054 --> 00:15:53,134
did we end up? Yeah. It started with,

462
00:15:53,295 --> 00:15:55,054
we saw a clip from Dave Ramsey. We

463
00:15:55,054 --> 00:15:57,330
did. And so this this guy is calling

464
00:15:57,330 --> 00:15:59,250
in and he says, hey, I've got kind

465
00:15:59,250 --> 00:16:00,850
of a weird problem. I have all of

466
00:16:00,850 --> 00:16:03,330
these retirement plans that are tax deferred and

467
00:16:03,330 --> 00:16:04,470
I've got over $7,000,000

468
00:16:05,009 --> 00:16:06,070
in retirement plans.

469
00:16:06,504 --> 00:16:08,904
I'm 66 years old and I see the

470
00:16:08,904 --> 00:16:10,904
writing on the wall. I'm gonna head toward

471
00:16:10,904 --> 00:16:11,644
age 73,

472
00:16:12,184 --> 00:16:15,050
have required distributions and the required distributions are

473
00:16:15,050 --> 00:16:16,970
gonna be so large that it's gonna put

474
00:16:16,970 --> 00:16:18,570
me in the highest tax bracket and it's

475
00:16:18,570 --> 00:16:20,250
gonna sort of blow stuff up. Yeah. And

476
00:16:20,250 --> 00:16:21,529
then he's like, what do I do? I've

477
00:16:21,529 --> 00:16:24,095
got some time, right? And Right. Dave's over

478
00:16:24,095 --> 00:16:26,254
there like, maybe not as much time as

479
00:16:26,254 --> 00:16:27,455
you actually need to take this time. And

480
00:16:27,455 --> 00:16:29,235
and and it was it was

481
00:16:29,855 --> 00:16:31,375
kind of fun to watch because there's a

482
00:16:31,375 --> 00:16:33,090
little bit of tap dancing. There was. They

483
00:16:33,090 --> 00:16:34,610
did like, well, here's some of the math.

484
00:16:34,610 --> 00:16:36,290
I'm like, well, it's a problem. And then

485
00:16:36,290 --> 00:16:37,590
it was this head scratcher.

486
00:16:38,210 --> 00:16:39,809
I'll tell you how we would sort of

487
00:16:39,809 --> 00:16:42,365
approach solving the problem Mhmm. And then I'm

488
00:16:42,365 --> 00:16:44,045
gonna talk a little bit about how you

489
00:16:44,045 --> 00:16:46,285
guys can reverse engineer this number so you

490
00:16:46,285 --> 00:16:47,884
get a sense of am I on course

491
00:16:47,884 --> 00:16:49,809
to run into that problem or not? Okay.

492
00:16:50,210 --> 00:16:50,710
Perfect.

493
00:16:51,649 --> 00:16:54,149
So, you know, first thing first is

494
00:16:54,610 --> 00:16:56,230
are you going to run into the problem?

495
00:16:56,370 --> 00:16:57,110
Okay. Well,

496
00:16:57,649 --> 00:16:59,409
the the number as we we looked at

497
00:16:59,409 --> 00:17:01,154
this is like, well, what's future tax rate

498
00:17:01,154 --> 00:17:03,394
versus present tax rate? Mhmm. And we actually

499
00:17:03,394 --> 00:17:05,575
looked at the the tax table and said,

500
00:17:05,794 --> 00:17:07,315
you know, at what point are you jumping

501
00:17:07,315 --> 00:17:09,500
up into that higher echelon in the thirties?

502
00:17:09,500 --> 00:17:11,740
Yeah. And so we started with, if you're

503
00:17:11,740 --> 00:17:14,220
married right now and you have more than

504
00:17:14,220 --> 00:17:14,970
a 191

505
00:17:15,394 --> 00:17:15,894
$1,950

506
00:17:16,914 --> 00:17:18,054
in tax year 2024,

507
00:17:18,515 --> 00:17:21,075
right? Of taxable income. Taxable income. Yeah. And

508
00:17:21,075 --> 00:17:23,554
keep in mind that's adjusted gross income. So

509
00:17:23,554 --> 00:17:25,460
that's after other deductions and so forth. But

510
00:17:25,460 --> 00:17:28,179
if you have that much income, then every

511
00:17:28,179 --> 00:17:30,500
dollar above that threshold is going to be

512
00:17:30,500 --> 00:17:31,960
taxed federally at 32%.

513
00:17:32,500 --> 00:17:34,994
Mhmm. Okay? So, if you make more money

514
00:17:34,994 --> 00:17:35,974
than that, well,

515
00:17:36,355 --> 00:17:37,634
do some math here.

516
00:17:38,434 --> 00:17:39,014
The the

517
00:17:40,194 --> 00:17:42,029
way that the IRS looks at this is

518
00:17:42,029 --> 00:17:43,710
they have what they would call their uniform

519
00:17:43,710 --> 00:17:45,329
distribution table. Okay?

520
00:17:46,750 --> 00:17:48,990
It's published It's a fancy word of saying

521
00:17:48,990 --> 00:17:50,924
at what rate are they going to require

522
00:17:50,924 --> 00:17:52,945
you to take RMDs. Yeah. Essentially,

523
00:17:53,644 --> 00:17:54,545
when you're 73,

524
00:17:55,164 --> 00:17:56,684
what they're gonna tell you to do is,

525
00:17:56,684 --> 00:17:58,980
hey, take the account value at the end

526
00:17:58,980 --> 00:18:00,359
of the last tax year

527
00:18:00,660 --> 00:18:02,099
and then you're going to you're going to

528
00:18:02,099 --> 00:18:03,400
divide it by a factor.

529
00:18:04,099 --> 00:18:05,940
Okay? And so, like the factor at age

530
00:18:05,940 --> 00:18:07,515
73 is presently

531
00:18:07,815 --> 00:18:08,315
26.5.

532
00:18:08,695 --> 00:18:10,455
Right? So that's so let's say I have

533
00:18:10,455 --> 00:18:11,994
$1,000,000 divide $1,000,000

534
00:18:12,295 --> 00:18:12,795
by

535
00:18:13,255 --> 00:18:13,755
26.5

536
00:18:14,919 --> 00:18:16,460
and the number that results

537
00:18:16,839 --> 00:18:18,679
is the required amount that you have to

538
00:18:18,679 --> 00:18:20,440
pull out of your retirement plan for the

539
00:18:20,440 --> 00:18:22,774
year. For the year. Yep. Okay? And you

540
00:18:22,774 --> 00:18:24,294
can take it out over, you know, spread

541
00:18:24,294 --> 00:18:25,815
it out over a little bit each month.

542
00:18:25,815 --> 00:18:27,015
You can take it all at once, whatever

543
00:18:27,015 --> 00:18:28,855
you want but but that's the money that's

544
00:18:28,855 --> 00:18:30,829
going to be required to come out. Mhmm.

545
00:18:30,829 --> 00:18:32,609
Okay? And then the following year,

546
00:18:32,990 --> 00:18:33,490
that

547
00:18:34,109 --> 00:18:37,549
distribution number isn't gonna be 26.5. It's gonna

548
00:18:37,549 --> 00:18:39,625
be slightly smaller. Yeah. It drops

549
00:18:40,005 --> 00:18:42,404
but what happens is you're dividing by a

550
00:18:42,404 --> 00:18:44,424
smaller number which means the

551
00:18:45,000 --> 00:18:46,460
distribution gets bigger.

552
00:18:46,920 --> 00:18:48,220
I think it's 25.5

553
00:18:48,920 --> 00:18:51,000
in the next year and and but these

554
00:18:51,000 --> 00:18:52,200
are all tables that you can look up

555
00:18:52,200 --> 00:18:55,335
and these tables occasionally change. Right. Depending on,

556
00:18:55,335 --> 00:18:57,275
like we said earlier in the show, legislative

557
00:18:57,414 --> 00:18:59,035
change. Yep. Right. So

558
00:19:00,055 --> 00:19:02,535
what you can see is every year, you're

559
00:19:02,535 --> 00:19:04,720
going to be required to take a larger

560
00:19:04,720 --> 00:19:07,139
portion of the account balance out.

561
00:19:07,519 --> 00:19:08,659
Right. And free.

562
00:19:08,960 --> 00:19:10,339
To sit say it easy,

563
00:19:10,720 --> 00:19:12,164
if you have a bunch of money in

564
00:19:12,164 --> 00:19:14,644
that retirement account and they keep telling you

565
00:19:14,644 --> 00:19:15,705
take more out,

566
00:19:16,565 --> 00:19:18,965
you could end up in a really, really

567
00:19:18,965 --> 00:19:21,330
high tax bracket. Yeah. So the the Dave

568
00:19:21,330 --> 00:19:22,930
Ramsey guy. Right? I mean, if we say,

569
00:19:22,930 --> 00:19:24,309
well, hey, you have $7,000,000.

570
00:19:25,170 --> 00:19:25,670
Right.

571
00:19:26,049 --> 00:19:28,230
And his factor was about

572
00:19:29,125 --> 00:19:29,625
3%,

573
00:19:30,644 --> 00:19:32,105
right? Well, that's $60,000

574
00:19:33,524 --> 00:19:36,424
per million and he has $7,000,000 right?

575
00:19:36,804 --> 00:19:37,899
So, that's

576
00:19:39,159 --> 00:19:40,220
$420,000 distribution.

577
00:19:41,240 --> 00:19:43,799
Right. Okay? Remember, if you have more than

578
00:19:43,799 --> 00:19:44,299
191,900

579
00:19:45,634 --> 00:19:48,275
and $50 and you're married, then you're in

580
00:19:48,275 --> 00:19:49,015
the 32%

581
00:19:49,394 --> 00:19:51,255
federal tax bracket and climbing.

582
00:19:51,794 --> 00:19:53,474
Well, at that income level and if he

583
00:19:53,474 --> 00:19:55,759
had any social security or pension income which

584
00:19:55,759 --> 00:19:58,559
he did. Right. Right? Then, you're pushed even

585
00:19:58,559 --> 00:20:00,559
higher. So, he's in somewhere like 37 to

586
00:20:00,559 --> 00:20:03,434
39% tax bracket. He maxed it out. Yes.

587
00:20:03,674 --> 00:20:05,755
Mhmm. And well, or or at least close

588
00:20:05,755 --> 00:20:06,875
to I mean, the number is pretty high.

589
00:20:06,875 --> 00:20:08,174
You can make up to over

590
00:20:08,555 --> 00:20:10,795
$600,000 before you actually hit the the top

591
00:20:10,795 --> 00:20:12,309
tax bracket right now, which

592
00:20:13,190 --> 00:20:14,809
is very high. Right. Right?

593
00:20:15,670 --> 00:20:16,730
But but nevertheless,

594
00:20:17,269 --> 00:20:20,744
he saved his way into a tax conundrum.

595
00:20:21,365 --> 00:20:23,945
And there wasn't an easy way to reduce

596
00:20:24,244 --> 00:20:26,744
his tax load. Right. Because

597
00:20:27,045 --> 00:20:29,400
the the taxes are going to be paid.

598
00:20:29,720 --> 00:20:32,359
Okay? There there's kind of 2 pathways that

599
00:20:32,359 --> 00:20:35,019
you tend to solve this. It is either

600
00:20:35,320 --> 00:20:36,599
just sort of suck it up and pay

601
00:20:36,599 --> 00:20:37,980
when it finally gets here

602
00:20:38,279 --> 00:20:38,779
or

603
00:20:39,224 --> 00:20:40,605
try to convert

604
00:20:40,984 --> 00:20:42,605
some of the traditional

605
00:20:42,984 --> 00:20:46,609
IRA money into Roth IRA money. Right. That

606
00:20:46,609 --> 00:20:48,289
comes with a whole another host of issues.

607
00:20:48,289 --> 00:20:49,990
We talked about it on the show before,

608
00:20:50,210 --> 00:20:51,910
but when you do a conversion,

609
00:20:52,529 --> 00:20:53,829
remember, one of the qualifying

610
00:20:54,529 --> 00:20:56,365
features of a Roth IRA is it has

611
00:20:56,365 --> 00:20:58,845
to live for 5 years. Right. And a

612
00:20:58,845 --> 00:20:59,345
conversion

613
00:21:00,444 --> 00:21:03,789
is treated like a standalone Roth. Mhmm. So

614
00:21:03,869 --> 00:21:05,549
even though you may already have another Roth

615
00:21:05,549 --> 00:21:07,869
IRA Every every time you convert. Every time

616
00:21:07,869 --> 00:21:09,950
you convert, that money gets a new 5

617
00:21:09,950 --> 00:21:12,664
year clock separate from your other Roth IRAs

618
00:21:12,724 --> 00:21:14,424
if you have And then you're paying income

619
00:21:14,805 --> 00:21:17,365
on the conversion. That's correct. The it is

620
00:21:17,365 --> 00:21:19,144
a taxable event to convert.

621
00:21:19,700 --> 00:21:22,019
The benefit may be and and here's where

622
00:21:22,019 --> 00:21:24,019
we differ from Dave Ramsey a little bit.

623
00:21:24,019 --> 00:21:26,099
His suggestion was, you know, just maybe bite

624
00:21:26,099 --> 00:21:27,779
the bullet and just pay the taxes all

625
00:21:27,779 --> 00:21:30,255
right now, one and done, and then move

626
00:21:30,255 --> 00:21:30,755
forward.

627
00:21:31,295 --> 00:21:33,934
We think there's some actuarial risk, right? If

628
00:21:33,934 --> 00:21:36,255
you're 66, while you're likely to live into

629
00:21:36,255 --> 00:21:39,009
your 80s, if something were to happen immediately

630
00:21:39,009 --> 00:21:41,109
after that, you would have overpaid on taxes

631
00:21:41,890 --> 00:21:43,970
relative to the time span that your heirs

632
00:21:43,970 --> 00:21:46,575
would have had. So Mhmm. So that was

633
00:21:46,575 --> 00:21:48,355
not necessarily a great idea.

634
00:21:48,815 --> 00:21:50,835
Plus you would have the 5 year clock,

635
00:21:51,375 --> 00:21:53,454
for everything all at once. Right. So then

636
00:21:53,454 --> 00:21:56,160
we started thinking we may be more inclined

637
00:21:56,160 --> 00:21:59,200
to spread it out over several years and

638
00:21:59,200 --> 00:22:01,299
just try to maintain a lower

639
00:22:01,600 --> 00:22:04,695
average tax bracket and get money out

640
00:22:05,394 --> 00:22:08,455
of traditional IRAs to lower that required distribution.

641
00:22:08,835 --> 00:22:11,319
And so this is a process that advisors

642
00:22:11,319 --> 00:22:13,640
would we would mostly call it like Roth

643
00:22:13,640 --> 00:22:14,700
Conversion Optimization.

644
00:22:15,000 --> 00:22:16,859
Yeah. K? And

645
00:22:17,924 --> 00:22:19,545
it's not a super sexy

646
00:22:19,924 --> 00:22:20,424
topic.

647
00:22:20,805 --> 00:22:22,325
No. Right? It's like, wait, you mean to

648
00:22:22,325 --> 00:22:23,765
tell me I have to pay taxes to

649
00:22:23,765 --> 00:22:25,799
not pay as many taxes? The unfortunate

650
00:22:26,179 --> 00:22:28,660
part for that guy though was if he

651
00:22:28,660 --> 00:22:29,400
had been

652
00:22:30,019 --> 00:22:32,119
doing a little bit more planning or getting

653
00:22:32,224 --> 00:22:33,825
some help along the way, he might have

654
00:22:33,825 --> 00:22:36,785
been able to have avoided putting it all

655
00:22:36,785 --> 00:22:38,565
in one basket. Right? Like,

656
00:22:38,945 --> 00:22:41,170
he might have been like, well, I have

657
00:22:49,730 --> 00:22:50,230
Right.

658
00:22:50,765 --> 00:22:51,265
And

659
00:22:51,724 --> 00:22:53,345
so this is something that

660
00:22:53,884 --> 00:22:56,445
we do sort of struggle with in the

661
00:22:56,445 --> 00:22:57,644
advisory world that,

662
00:22:58,605 --> 00:23:00,285
you don't know what the future tax rates

663
00:23:00,285 --> 00:23:01,630
are going to be. Right. We have to

664
00:23:01,630 --> 00:23:03,630
make reasonable assumptions or even assume that they're

665
00:23:03,630 --> 00:23:04,609
not going to change.

666
00:23:05,309 --> 00:23:07,710
Right? Like, it's it's actually possible, I know

667
00:23:07,710 --> 00:23:09,974
this is gonna sound crazy, right? It's possible

668
00:23:10,194 --> 00:23:13,174
based on sort of the the political trendings

669
00:23:13,234 --> 00:23:15,174
right now, Donald Trump gets elected

670
00:23:15,954 --> 00:23:16,694
and reinstitutes

671
00:23:17,539 --> 00:23:19,779
different tax policy that's lower at least at

672
00:23:19,779 --> 00:23:22,600
a corporate rate. Right? And so, there are

673
00:23:23,380 --> 00:23:25,000
possible changes on the horizon.

674
00:23:25,335 --> 00:23:27,414
There's always possible changes on the horizon. And

675
00:23:27,414 --> 00:23:29,174
I don't know if it's even or how

676
00:23:29,174 --> 00:23:31,174
possible it is but if the Secure Act

677
00:23:31,174 --> 00:23:32,794
did go away and then

678
00:23:33,099 --> 00:23:35,259
beneficiaries didn't have to take that money out

679
00:23:35,259 --> 00:23:36,079
in 10 years.

680
00:23:36,619 --> 00:23:38,859
Yeah, that would be a significant change too.

681
00:23:38,859 --> 00:23:41,434
Even just extending it to 15 or 20

682
00:23:41,835 --> 00:23:44,795
years would really impact planning. It would. People.

683
00:23:44,795 --> 00:23:47,674
Yeah. Because my my concern would be, you

684
00:23:47,674 --> 00:23:49,674
know, if you inherit a big IRA and

685
00:23:49,674 --> 00:23:50,955
you only have 10 years to get it

686
00:23:50,955 --> 00:23:53,470
out, you're going to be forcing people into

687
00:23:53,470 --> 00:23:56,509
higher tax brackets. And that's what's happening. It

688
00:23:56,509 --> 00:23:58,884
it does make sense from the IRS perspective.

689
00:23:58,884 --> 00:24:01,045
Mhmm. Right? They're like, we're hungry. Give us

690
00:24:01,045 --> 00:24:04,744
more. Right? It's just frustrating from planning perspective

691
00:24:04,805 --> 00:24:05,305
because

692
00:24:05,924 --> 00:24:07,700
my position is that we already,

693
00:24:09,600 --> 00:24:11,920
pay we well, you know, I would say

694
00:24:11,920 --> 00:24:13,920
I'm thankful we don't get all the government

695
00:24:13,920 --> 00:24:15,355
we pay for, but man do we pay

696
00:24:15,355 --> 00:24:16,894
a lot for a government.

697
00:24:17,674 --> 00:24:19,115
Yep. Right? I mean there's just a lot

698
00:24:19,115 --> 00:24:21,214
of money that goes into the kitty and,

699
00:24:21,994 --> 00:24:22,654
you know,

700
00:24:23,275 --> 00:24:24,849
I'm not trying to pick on the people

701
00:24:24,849 --> 00:24:25,970
that work in that room. I think there

702
00:24:25,970 --> 00:24:27,329
are a lot of people that are genuine,

703
00:24:27,329 --> 00:24:28,930
like, they're really trying hard to make it

704
00:24:28,930 --> 00:24:29,430
right.

705
00:24:29,970 --> 00:24:32,369
I just think the system is it's hard

706
00:24:32,369 --> 00:24:34,065
to make a really big system not be

707
00:24:34,065 --> 00:24:36,965
bureaucratic and bloaty and slow and cost inefficient

708
00:24:37,025 --> 00:24:39,525
over time and and there's not really incentives

709
00:24:39,585 --> 00:24:40,805
to lean government.

710
00:24:41,265 --> 00:24:43,539
Right. There's no internal incentives for government to

711
00:24:43,539 --> 00:24:44,900
prune itself. So why would it? Mhmm. And

712
00:24:44,900 --> 00:24:46,580
that's kind of tricky. Right? I mean, the

713
00:24:46,580 --> 00:24:48,340
private sector has lots of incentive. You know,

714
00:24:48,340 --> 00:24:48,840
margins

715
00:24:51,355 --> 00:24:52,174
are profit.

716
00:24:52,634 --> 00:24:54,554
So it it it looks to prune when

717
00:24:54,554 --> 00:24:55,134
it can,

718
00:24:55,515 --> 00:24:57,994
but government doesn't have to think the same

719
00:24:57,994 --> 00:24:59,859
way a lot of the time. David, let

720
00:24:59,859 --> 00:25:01,460
me ask you a question. So going back

721
00:25:01,460 --> 00:25:04,119
to what we were talking about Mhmm. We

722
00:25:04,179 --> 00:25:05,940
kind of started to mention what are some

723
00:25:05,940 --> 00:25:07,619
of the other things that this guy could

724
00:25:07,619 --> 00:25:09,845
have done in order to have,

725
00:25:10,224 --> 00:25:12,384
you know, if it's not gonna be that

726
00:25:12,384 --> 00:25:15,285
IRA, where else could he have gone? Right?

727
00:25:15,505 --> 00:25:16,325
And so,

728
00:25:17,349 --> 00:25:19,109
do we wanna talk about that at all?

729
00:25:19,109 --> 00:25:20,950
Like, what are some of the other options

730
00:25:20,950 --> 00:25:22,410
that this guy could have

731
00:25:22,789 --> 00:25:24,970
taken advantage of? I know. I was smiling

732
00:25:25,029 --> 00:25:26,634
and laughing, when she,

733
00:25:27,654 --> 00:25:29,894
mostly smiling. Our listeners don't get to see

734
00:25:29,894 --> 00:25:30,715
that as much.

735
00:25:32,375 --> 00:25:34,470
I know what you're doing, Matt. What am

736
00:25:34,470 --> 00:25:36,730
I doing, David? Go ahead and just expose

737
00:25:36,789 --> 00:25:38,569
it. No. He's so

738
00:25:39,029 --> 00:25:41,244
when we're prepping for the show, I look

739
00:25:41,244 --> 00:25:43,005
at him and go, you know, there's kind

740
00:25:43,005 --> 00:25:44,684
of an exotic way that you can sort

741
00:25:44,684 --> 00:25:47,505
of reposition things and, you know, shift your

742
00:25:47,565 --> 00:25:49,724
investment focus elsewhere and and sort of change

743
00:25:49,724 --> 00:25:51,490
the characteristic of your taxes and it would

744
00:25:51,490 --> 00:25:53,329
be way more efficient. And he looks at

745
00:25:53,329 --> 00:25:56,210
me and goes, go on. Because I also

746
00:25:56,210 --> 00:25:58,214
want to know that part. I think everyone

747
00:25:58,214 --> 00:25:59,115
does. Right? Like

748
00:26:00,214 --> 00:26:00,714
okay.

749
00:26:01,015 --> 00:26:03,015
So I mean, you know as well as

750
00:26:03,015 --> 00:26:04,855
I I'm not a huge fan of life

751
00:26:04,855 --> 00:26:06,529
insurance as a whole, right?

752
00:26:07,069 --> 00:26:07,970
Like, term policies,

753
00:26:08,269 --> 00:26:09,329
sure, I get it.

754
00:26:10,829 --> 00:26:12,484
Those have a time and place for sure,

755
00:26:12,484 --> 00:26:14,585
but could this guy have used life insurance?

756
00:26:14,964 --> 00:26:16,184
Could he have, like,

757
00:26:16,964 --> 00:26:18,805
gone into real estate? I just kinda wanna

758
00:26:18,805 --> 00:26:20,565
pick your brain on where could he have

759
00:26:20,565 --> 00:26:23,190
gone, how could he have done it, and

760
00:26:23,890 --> 00:26:25,590
Alright. Yeah. I'll do this.

761
00:26:26,930 --> 00:26:27,330
I

762
00:26:28,210 --> 00:26:29,970
I'll let you drive some of this. I

763
00:26:29,970 --> 00:26:32,414
know you've got some ideas and questions

764
00:26:32,875 --> 00:26:35,434
that we want that for our admin. You

765
00:26:35,434 --> 00:26:37,194
know, Matt's Matt knows a lot of this

766
00:26:37,194 --> 00:26:39,349
stuff. Just don't don't let him fool you.

767
00:26:39,349 --> 00:26:39,829
He is,

768
00:26:40,710 --> 00:26:43,349
he's doing this on purpose. It's like, no.

769
00:26:43,349 --> 00:26:45,109
No. I just wanna interview you. And so

770
00:26:45,109 --> 00:26:46,549
he's sort of setting you up and that's

771
00:26:46,549 --> 00:26:48,368
why I'm chuckling about this because I'm like,

772
00:26:48,368 --> 00:26:50,247
you're gonna do this, aren't you? And he's

773
00:26:50,247 --> 00:26:52,361
like, oh, it's happening. Turning it back around

774
00:26:52,361 --> 00:26:54,240
on me? No. I'm not gonna do that.

775
00:26:54,240 --> 00:26:56,059
I am gonna say, I'm just I'm looking

776
00:26:56,059 --> 00:26:57,500
at the clock. Why don't we do this?

777
00:26:57,500 --> 00:26:59,580
We're running long already. We'll we'll grab we'll

778
00:26:59,580 --> 00:27:01,820
grab our next break. Okay. When we come

779
00:27:01,820 --> 00:27:02,320
back,

780
00:27:03,325 --> 00:27:05,724
this again, if if you're trying to figure

781
00:27:05,724 --> 00:27:07,325
out, hey, if I'm starting to reach the

782
00:27:07,325 --> 00:27:10,065
threshold where maybe it's enough in retirement,

783
00:27:10,845 --> 00:27:13,599
what else? Yeah. And so we'll unpack some

784
00:27:13,599 --> 00:27:16,640
ideas. It's not advice but some concepts and

785
00:27:16,640 --> 00:27:18,080
it'll be enough that at least will stoke

786
00:27:18,080 --> 00:27:19,704
the fires of interest for you. So stick

787
00:27:19,704 --> 00:27:21,544
around. We'll be right back. I'm Dave Littlejohn.

788
00:27:21,544 --> 00:27:23,464
And Matt Dixon. Get True Wealth on Newsradio

789
00:27:23,464 --> 00:27:25,964
9029 FM and 12:40 KQED.

790
00:27:27,390 --> 00:27:27,890
Bingo.

791
00:27:29,950 --> 00:27:31,089
We've got a problem.

792
00:27:31,630 --> 00:27:32,609
We need a solution.

793
00:27:33,069 --> 00:27:36,984
Yes. Yeah. So alcohol is a solution. Drink.

794
00:27:37,125 --> 00:27:37,625
Drink.

795
00:27:38,005 --> 00:27:39,924
Drink your tax problems away. Oh, we were

796
00:27:39,924 --> 00:27:41,365
talking about different things, you know.

797
00:27:42,164 --> 00:27:43,509
Water is a solution also.

798
00:27:44,150 --> 00:27:44,650
So,

799
00:27:45,589 --> 00:27:47,609
hydro cleaner or whatever it's called yourself.

800
00:27:48,230 --> 00:27:48,509
So

801
00:27:49,069 --> 00:27:51,289
the electric vehicle maker I guess

802
00:27:51,670 --> 00:27:52,410
I am

803
00:27:54,125 --> 00:27:55,184
I'm I'm I'm

804
00:27:55,644 --> 00:27:57,664
making sure that I'm reading the

805
00:27:58,205 --> 00:27:59,744
your your cues here.

806
00:28:00,450 --> 00:28:01,649
You wanna talk a little bit about,

807
00:28:03,970 --> 00:28:04,710
real estate

808
00:28:05,009 --> 00:28:05,990
and then how

809
00:28:07,329 --> 00:28:08,149
and then

810
00:28:11,384 --> 00:28:14,025
the life insurance thing has come up somewhere.

811
00:28:14,025 --> 00:28:16,025
What's driving the life insurance question? It's on

812
00:28:16,025 --> 00:28:16,605
the list.

813
00:28:19,420 --> 00:28:22,000
I was like, because it has Roth conversions,

814
00:28:22,140 --> 00:28:24,230
setting up a trust, using life insurance. I'm

815
00:28:24,230 --> 00:28:26,335
like, could he have used a whole life

816
00:28:26,335 --> 00:28:28,654
policy even though we don't love whole life

817
00:28:28,654 --> 00:28:29,154
policies?

818
00:28:30,255 --> 00:28:32,815
Well, could he now? Probably not as easily,

819
00:28:32,815 --> 00:28:35,150
but could he have? That's what I'm saying.

820
00:28:35,150 --> 00:28:36,450
And the Yeah.

821
00:28:37,150 --> 00:28:37,650
Yeah.

822
00:28:38,190 --> 00:28:40,349
He could. And And I hate even mentioning

823
00:28:40,349 --> 00:28:42,029
it because I don't like whole life policies,

824
00:28:42,029 --> 00:28:44,184
but I'm like, if we're on the topic

825
00:28:44,444 --> 00:28:46,204
So we can talk a little bit about

826
00:28:46,204 --> 00:28:47,265
some specialty

827
00:28:48,365 --> 00:28:50,605
life insurance concepts and then it's what's gonna

828
00:28:50,605 --> 00:28:52,960
happen is it's gonna be, okay. So you

829
00:28:52,960 --> 00:28:55,279
either have to see us after class. Yeah.

830
00:28:55,279 --> 00:28:57,279
Right? Let's go that route. Or you have

831
00:28:57,279 --> 00:28:57,779
to

832
00:28:58,240 --> 00:29:00,325
find somebody who's qualified to help you navigate

833
00:29:00,325 --> 00:29:02,484
this because we're gonna get into advanced market

834
00:29:02,484 --> 00:29:02,984
concepts.

835
00:29:03,525 --> 00:29:04,025
But,

836
00:29:04,724 --> 00:29:06,744
honestly, life insurance is like

837
00:29:07,410 --> 00:29:10,210
the last hope against the IRS. Mhmm. Life

838
00:29:10,210 --> 00:29:10,609
insurance

839
00:29:11,009 --> 00:29:13,589
I would basically gets to walk and talk

840
00:29:14,450 --> 00:29:17,115
like retirement plans. Wouldn't you rather just

841
00:29:19,275 --> 00:29:20,954
take it as income and just put it

842
00:29:20,954 --> 00:29:22,174
in a brokerage account?

843
00:29:23,515 --> 00:29:24,335
It depends

844
00:29:24,690 --> 00:29:26,630
on how you take it.

845
00:29:27,410 --> 00:29:28,309
That's what

846
00:29:30,369 --> 00:29:32,849
oh, gosh. Someone put a filter on me.

847
00:29:32,849 --> 00:29:34,230
I'm about to get canceled.

848
00:29:34,724 --> 00:29:35,224
Yeah.

849
00:29:35,605 --> 00:29:37,144
Can't say that on the radio.

850
00:29:37,444 --> 00:29:38,424
I mean, you can,

851
00:29:38,724 --> 00:29:40,105
but people will question.

852
00:29:41,605 --> 00:29:45,259
We get 17 clients tomorrow. We like those

853
00:29:45,259 --> 00:29:45,759
guys.

854
00:29:47,180 --> 00:29:49,259
I was reading off the teleprompter. That's what

855
00:29:49,259 --> 00:29:50,079
we were thinking.

856
00:29:50,859 --> 00:29:51,839
I know. Exactly.

857
00:29:53,454 --> 00:29:55,154
I had a Ron Burgundy moment.

858
00:29:56,174 --> 00:29:57,615
If you put it on there go read

859
00:29:57,615 --> 00:29:58,115
it.

860
00:29:58,734 --> 00:30:00,835
I will, I literally will.

861
00:30:02,630 --> 00:30:04,230
Did Justin ever tell you all the time

862
00:30:04,230 --> 00:30:05,930
him and I are doing a radio show?

863
00:30:06,309 --> 00:30:06,809
And

864
00:30:09,615 --> 00:30:12,275
we were at break, and he's like, okay,

865
00:30:12,414 --> 00:30:14,494
I know where this show is going, there's

866
00:30:14,494 --> 00:30:17,529
one thing we cannot talk about. You cannot

867
00:30:17,589 --> 00:30:19,430
ask me about this, and it was something

868
00:30:19,430 --> 00:30:21,049
to do with, I don't even remember.

869
00:30:21,430 --> 00:30:23,109
I'm like, okay, I got you. And we

870
00:30:23,109 --> 00:30:24,869
opened the radio show, and this was like

871
00:30:24,869 --> 00:30:26,134
when I was newer,

872
00:30:27,015 --> 00:30:28,695
and I got nervous or something, and I'm

873
00:30:28,695 --> 00:30:31,095
like, so just and I just blurted it

874
00:30:31,095 --> 00:30:33,654
out. And he's like, he sits up for

875
00:30:33,654 --> 00:30:35,309
me. He's just kinda mundane. He's like

876
00:30:37,230 --> 00:30:39,390
he just wanted to murder me, like, jump

877
00:30:39,390 --> 00:30:41,009
over the computers and just

878
00:30:41,390 --> 00:30:41,890
knives.

879
00:30:42,750 --> 00:30:44,509
After that segment was over, we cut to

880
00:30:44,509 --> 00:30:46,414
the break, and he's, like, how? It was

881
00:30:46,414 --> 00:30:48,335
the one thing you were supposed to talk

882
00:30:48,335 --> 00:30:49,955
about. You had one shot.

883
00:30:51,134 --> 00:30:53,134
Yeah. Alright. Alright. Welcome back to the Choo

884
00:30:53,134 --> 00:30:53,875
Well Show,

885
00:30:55,220 --> 00:30:56,119
where we're

886
00:30:56,500 --> 00:30:58,420
we're having fun in studio today. Everyone's Dave

887
00:30:58,420 --> 00:31:00,039
Littlejohn with me. Yeah. Okay.

888
00:31:01,220 --> 00:31:03,585
Reminder if you're just joining us, today's topic,

889
00:31:04,205 --> 00:31:05,884
is is there such a thing as putting

890
00:31:05,884 --> 00:31:08,045
too much money into a retirement plan? Yes.

891
00:31:08,045 --> 00:31:10,684
And the our position is that, yeah, there

892
00:31:10,684 --> 00:31:12,144
can be if it

893
00:31:12,750 --> 00:31:14,210
it creates tax inefficiency.

894
00:31:14,669 --> 00:31:16,429
Right? If you drag yourself into a higher

895
00:31:16,429 --> 00:31:18,190
tax bracket in the future than you are

896
00:31:18,190 --> 00:31:20,589
now, then Why? Your retirement plan is not

897
00:31:20,589 --> 00:31:23,075
the right solution. Yep. K? And then you

898
00:31:23,075 --> 00:31:24,214
kind of asked me, Matt,

899
00:31:24,674 --> 00:31:27,955
what else might there be? Yeah. And so

900
00:31:27,955 --> 00:31:29,255
you you've got a couple

901
00:31:29,980 --> 00:31:32,220
set the table for our listeners like what

902
00:31:32,220 --> 00:31:34,380
are some ideas that you've kind of read

903
00:31:34,380 --> 00:31:36,460
about and let's talk about them. Well, we

904
00:31:36,460 --> 00:31:38,139
already talked about the big one. Right? We

905
00:31:38,139 --> 00:31:39,505
talked about the Roth conversion.

906
00:31:39,904 --> 00:31:41,505
K. So that's Just just a reminder to

907
00:31:41,505 --> 00:31:43,904
everybody. You know, Roth's IRAs Yeah.

908
00:31:44,305 --> 00:31:46,144
They are you fund them with after tax

909
00:31:46,144 --> 00:31:47,904
money and then they grow tax free. And

910
00:31:47,904 --> 00:31:50,440
once they're qualified, they the distributions are tax

911
00:31:50,440 --> 00:31:50,940
free.

912
00:31:51,320 --> 00:31:53,340
Also tax free to heirs.

913
00:31:53,720 --> 00:31:54,779
So if you have a traditional

914
00:31:55,080 --> 00:31:55,580
IRA,

915
00:31:55,960 --> 00:31:58,299
you can turn it into a Roth IRA

916
00:31:58,714 --> 00:32:00,575
through a process known as conversion.

917
00:32:00,875 --> 00:32:02,795
But, you have to pay the taxes when

918
00:32:02,795 --> 00:32:03,535
you do it

919
00:32:03,994 --> 00:32:06,170
and you have to the tax is it

920
00:32:06,170 --> 00:32:07,869
becomes income, right? Oh, I have a $100,000

921
00:32:08,089 --> 00:32:09,769
in a Roth account. If I take a

922
00:32:09,769 --> 00:32:11,930
$100,000 and convert it, I have to pay

923
00:32:11,930 --> 00:32:13,230
income tax on $100,000

924
00:32:14,009 --> 00:32:14,910
when I convert.

925
00:32:15,525 --> 00:32:17,384
Okay? So, let's say I'm in a 30%

926
00:32:17,525 --> 00:32:18,345
tax bracket,

927
00:32:18,644 --> 00:32:19,384
then $70,000

928
00:32:20,085 --> 00:32:22,484
is left in my investment account but it's

929
00:32:22,484 --> 00:32:24,569
no longer a traditional IRA, it's a now

930
00:32:24,649 --> 00:32:27,950
Roth IRA and it will grow tax deferred

931
00:32:28,409 --> 00:32:30,730
and once it's qualified after 5 years and

932
00:32:30,730 --> 00:32:32,894
retained age and all that, then you

933
00:32:33,434 --> 00:32:34,955
can take that money tax free or your

934
00:32:34,955 --> 00:32:36,174
heirs get it tax free.

935
00:32:36,715 --> 00:32:39,515
Right? So, that's the conversion thing that we

936
00:32:39,515 --> 00:32:41,950
keep talking about. Right. Okay? But what else?

937
00:32:41,950 --> 00:32:43,470
That's the question. So, if we're talk Yeah.

938
00:32:43,470 --> 00:32:46,049
So, if we're talking about mitigating some inheritance

939
00:32:46,190 --> 00:32:48,509
issues, the other thing I mean, this is

940
00:32:48,509 --> 00:32:51,309
simple, right? But, and I know I've already

941
00:32:51,309 --> 00:32:51,615
mentioned

942
00:32:59,054 --> 00:33:00,069
And So invest outside

943
00:33:00,470 --> 00:33:02,630
and So invest outside of a retirement plan.

944
00:33:02,630 --> 00:33:04,569
Exactly. Because here's why.

945
00:33:04,950 --> 00:33:06,869
If you put that money, say in a

946
00:33:06,869 --> 00:33:10,194
brokerage account, and you invest in x y

947
00:33:10,194 --> 00:33:10,934
z stock,

948
00:33:11,234 --> 00:33:13,154
maybe you hold it for a year or

949
00:33:13,154 --> 00:33:13,654
longer,

950
00:33:14,569 --> 00:33:16,250
What happens when you go to sell it

951
00:33:16,250 --> 00:33:17,309
and there's a gain?

952
00:33:18,089 --> 00:33:20,569
Now we're being taxed at long term capital

953
00:33:20,569 --> 00:33:23,470
gains, which is approximately 10 to 12%

954
00:33:24,055 --> 00:33:26,134
depending on Depends on your total income level.

955
00:33:26,134 --> 00:33:27,414
Right. Those as high as 20%. Sure. That's

956
00:33:27,414 --> 00:33:29,015
still cheap. Like, if you're paying 20%, it's

957
00:33:29,015 --> 00:33:30,715
because your income tax rate's like

958
00:33:32,829 --> 00:33:36,210
39. Mhmm. So wouldn't you rather pay that

959
00:33:36,829 --> 00:33:37,490
than 30

960
00:33:38,029 --> 00:33:41,150
plus percent? I would. Right. Yeah. So it

961
00:33:41,150 --> 00:33:41,984
it does change

962
00:33:42,944 --> 00:33:44,484
things for errors also.

963
00:33:44,785 --> 00:33:48,464
Yeah. Because errors receive a step up in

964
00:33:48,464 --> 00:33:50,559
basis. That's a big one. You wanna talk

965
00:33:50,559 --> 00:33:52,480
about that? Yeah. It's just a really fancy

966
00:33:52,480 --> 00:33:55,119
way of saying heirs receive the thing as

967
00:33:55,119 --> 00:33:56,339
if they bought it

968
00:33:56,694 --> 00:33:59,894
the day that they inherited it. Right. Not

969
00:33:59,894 --> 00:34:01,734
for the price that you paid for it

970
00:34:01,734 --> 00:34:04,134
when you bought it but the value on

971
00:34:04,134 --> 00:34:06,200
the day that they inherit it. That's a

972
00:34:06,200 --> 00:34:07,960
really big deal. And that's why we start

973
00:34:07,960 --> 00:34:10,039
to talk about gifting stuff. People always have

974
00:34:10,039 --> 00:34:11,719
that question. Should I gift it now? And

975
00:34:11,719 --> 00:34:14,094
it's like, well, if they never plan to

976
00:34:14,094 --> 00:34:16,734
sell the thing that you're gifting, maybe. If

977
00:34:16,734 --> 00:34:19,394
it's real estate and it's a family heirloom

978
00:34:19,454 --> 00:34:20,974
of some sort where it's like Yeah. This

979
00:34:20,974 --> 00:34:22,094
is the family farm. I have a real

980
00:34:22,094 --> 00:34:24,289
life example. We have a family farm. Yeah.

981
00:34:24,349 --> 00:34:26,130
The brother is like 7th generation

982
00:34:26,589 --> 00:34:29,230
and so it's something where it's and and

983
00:34:29,230 --> 00:34:30,989
he wants to raise his family there. It's

984
00:34:30,989 --> 00:34:33,585
actually sensible for that farm to be gifted

985
00:34:33,585 --> 00:34:34,324
to him

986
00:34:35,184 --> 00:34:36,784
now because it's probably going to stay in

987
00:34:36,784 --> 00:34:37,985
the family and his kids are going to

988
00:34:37,985 --> 00:34:39,284
take it. Right. So,

989
00:34:39,585 --> 00:34:40,885
if that's the case

990
00:34:41,344 --> 00:34:41,844
then

991
00:34:42,690 --> 00:34:44,710
there's no need to wait for

992
00:34:45,250 --> 00:34:47,569
parents to die for that to happen. They

993
00:34:47,569 --> 00:34:48,789
can gift it now

994
00:34:49,089 --> 00:34:50,230
and it still,

995
00:34:50,769 --> 00:34:52,594
you know, makes sense because because if he's

996
00:34:52,594 --> 00:34:53,954
not going to sell it, it doesn't matter

997
00:34:53,954 --> 00:34:54,695
what his

998
00:34:55,474 --> 00:34:58,275
cost basis is, right? Right. But let's say

999
00:34:58,275 --> 00:35:00,295
that there's no attachment to a home

1000
00:35:00,914 --> 00:35:02,789
and it's just gonna go into the, you

1001
00:35:02,789 --> 00:35:05,030
know, community pot and it's gonna get sold

1002
00:35:05,030 --> 00:35:07,590
someday. Mhmm. Gifting it, but while you're still

1003
00:35:07,590 --> 00:35:09,985
alive, is gifting the price you bought it

1004
00:35:10,065 --> 00:35:12,224
for. Right, and if they bought the family

1005
00:35:12,224 --> 00:35:14,565
farm 7 generations ago for

1006
00:35:15,345 --> 00:35:16,864
Well, whatever the case, let's say it was

1007
00:35:16,864 --> 00:35:19,000
a house in California that was purchased 40

1008
00:35:19,000 --> 00:35:20,360
years ago, right? Oh, yeah. So it's like

1009
00:35:20,360 --> 00:35:21,719
great. You know, we bought a house for

1010
00:35:21,719 --> 00:35:23,980
a $100,000 and today it's worth 2,000,000.

1011
00:35:24,335 --> 00:35:26,034
Mhmm. And okay, well, that's $1,900,000

1012
00:35:26,894 --> 00:35:28,034
of capital gains,

1013
00:35:28,335 --> 00:35:29,634
but if you didn't

1014
00:35:30,414 --> 00:35:33,219
gift it when you die, the heirs receive

1015
00:35:33,219 --> 00:35:34,980
it as if it was fair market value

1016
00:35:34,980 --> 00:35:35,559
of $2,000,000.

1017
00:35:36,179 --> 00:35:37,960
Right. So it's a big question

1018
00:35:38,260 --> 00:35:39,239
depending on

1019
00:35:39,619 --> 00:35:41,924
what is the heir actually going to do.

1020
00:35:41,924 --> 00:35:42,984
Yeah. And incidentally,

1021
00:35:43,284 --> 00:35:46,264
this falls under the category of estate planning.

1022
00:35:46,405 --> 00:35:48,164
If you've ever wondered, like, what what the

1023
00:35:48,164 --> 00:35:50,680
heck is estate planning? It's the idea of

1024
00:35:50,680 --> 00:35:53,099
well, estate is all the stuff you own

1025
00:35:53,320 --> 00:35:55,640
and it's how do I transfer the stuff

1026
00:35:55,640 --> 00:35:58,025
that I own to the next generation when

1027
00:35:58,025 --> 00:35:58,605
I'm gone

1028
00:35:58,985 --> 00:36:00,844
and do so in a clear,

1029
00:36:01,385 --> 00:36:04,445
clean, and efficient manner. Mhmm. Right? With minimal

1030
00:36:04,664 --> 00:36:07,559
cost for transfer and minimal tax impact. That's

1031
00:36:07,559 --> 00:36:09,980
what estate planning is all about. Sure.

1032
00:36:10,760 --> 00:36:12,359
And I guess we're kind of working our

1033
00:36:12,359 --> 00:36:14,125
way down the totem pole, aren't we? So

1034
00:36:14,125 --> 00:36:16,125
we've talked about some different strategies. Let's see

1035
00:36:16,125 --> 00:36:17,618
some of the Roth conversions. Yeah. And I

1036
00:36:17,618 --> 00:36:20,125
hit Hitting at gifting has really very little

1037
00:36:20,125 --> 00:36:20,944
to do with

1038
00:36:21,404 --> 00:36:23,699
our original question of No. But we did

1039
00:36:23,699 --> 00:36:25,539
talk about the probate account. Yeah. We talked

1040
00:36:25,539 --> 00:36:27,380
about the Roth conversions. We talked about the

1041
00:36:27,380 --> 00:36:28,359
brokerage accounts.

1042
00:36:28,659 --> 00:36:30,235
I guess we got it. That's like just

1043
00:36:30,235 --> 00:36:31,994
don't invest in retirement plans. That's really what

1044
00:36:31,994 --> 00:36:32,655
you're saying.

1045
00:36:33,195 --> 00:36:34,015
Yeah. And then

1046
00:36:34,474 --> 00:36:36,474
even for me lower on the totem pole,

1047
00:36:36,474 --> 00:36:39,119
maybe we talk about life insurance a little

1048
00:36:39,119 --> 00:36:41,739
bit. Yeah. This is what the most dangerous.

1049
00:36:41,960 --> 00:36:43,800
It exists. So I feel like we have

1050
00:36:43,800 --> 00:36:45,880
to mention it. Otherwise, you know, we're not

1051
00:36:45,880 --> 00:36:47,484
kind of covering all the the options here

1052
00:36:47,484 --> 00:36:49,184
for this guy. Yeah. Life insurance

1053
00:36:49,724 --> 00:36:51,505
generally has two purposes.

1054
00:36:52,045 --> 00:36:52,545
Generally.

1055
00:36:52,844 --> 00:36:55,460
Okay? The two purposes that I see are

1056
00:36:55,619 --> 00:36:57,300
Take your money and make the insurance company

1057
00:36:57,300 --> 00:36:57,800
rich.

1058
00:36:58,500 --> 00:36:59,000
No.

1059
00:36:59,699 --> 00:37:01,559
No. No. No. Kinda.

1060
00:37:03,380 --> 00:37:05,384
So, the life insurance

1061
00:37:05,764 --> 00:37:07,944
is supposed to be to replace

1062
00:37:08,244 --> 00:37:08,744
income.

1063
00:37:09,045 --> 00:37:11,224
Yeah. Like somebody was counting on your income

1064
00:37:11,444 --> 00:37:13,989
and it's not there because you're dead. Right.

1065
00:37:13,989 --> 00:37:16,150
So it's to replace what you would have

1066
00:37:16,150 --> 00:37:16,650
earned

1067
00:37:17,030 --> 00:37:19,369
to take care of somebody. That's number 1.

1068
00:37:19,829 --> 00:37:20,730
Number 2

1069
00:37:21,514 --> 00:37:22,974
is estate liquidity.

1070
00:37:23,594 --> 00:37:25,275
Because if you die and you have a

1071
00:37:25,275 --> 00:37:27,514
bunch of property and you don't wanna have

1072
00:37:27,514 --> 00:37:28,170
it sold,

1073
00:37:28,730 --> 00:37:31,150
but you have to pay taxes on it,

1074
00:37:31,609 --> 00:37:33,630
life insurance can pay the tax bill.

1075
00:37:34,089 --> 00:37:36,650
Okay? So it's useful for estate planning in

1076
00:37:36,650 --> 00:37:37,755
that respect. Okay.

1077
00:37:38,214 --> 00:37:41,174
There's a third use for it which is

1078
00:37:41,174 --> 00:37:41,994
sort of a

1079
00:37:42,454 --> 00:37:44,980
getting creative and leveraging whereby

1080
00:37:45,983 --> 00:37:46,483
you

1081
00:37:47,487 --> 00:37:47,987
can

1082
00:37:48,992 --> 00:37:49,492
put

1083
00:37:50,496 --> 00:37:50,996
money

1084
00:37:52,000 --> 00:37:53,655
into an insurance contract,

1085
00:37:54,215 --> 00:37:56,795
whereby you can put money into an insurance

1086
00:37:56,855 --> 00:37:57,355
contract

1087
00:37:57,894 --> 00:37:59,994
and it can grow tax deferred.

1088
00:38:00,855 --> 00:38:03,170
Because it's an insurance product. Because it's an

1089
00:38:03,170 --> 00:38:03,989
insurance product.

1090
00:38:04,369 --> 00:38:07,250
Now, annuities are also insurance products but let's

1091
00:38:07,250 --> 00:38:09,969
talk specifically about life insurance because this is

1092
00:38:09,969 --> 00:38:12,285
something that is possible and I'm gonna be

1093
00:38:12,285 --> 00:38:14,125
very clear when I say this. This is

1094
00:38:14,125 --> 00:38:15,565
not a recommendation. Yeah. This is not a

1095
00:38:15,565 --> 00:38:18,285
recommendation. It's not advice. This is advanced market

1096
00:38:18,285 --> 00:38:19,590
stuff and this is definitely

1097
00:38:27,349 --> 00:38:29,655
Right? Not just a salesperson, Right? Not just

1098
00:38:29,655 --> 00:38:32,295
a salesperson. Someone who has access to piece.

1099
00:38:32,295 --> 00:38:35,175
Yeah. Or the access to, like, advanced markets

1100
00:38:35,175 --> 00:38:37,014
and case design for this kind of stuff.

1101
00:38:37,014 --> 00:38:37,914
Yeah. But

1102
00:38:39,720 --> 00:38:40,539
life insurance

1103
00:38:41,000 --> 00:38:42,300
there's you can get

1104
00:38:42,760 --> 00:38:44,780
life insurance that can be overfunded,

1105
00:38:45,160 --> 00:38:46,684
meaning you're going to buy

1106
00:38:47,144 --> 00:38:47,465
more

1107
00:38:48,025 --> 00:38:49,545
you're going to put more premium in than

1108
00:38:49,545 --> 00:38:51,164
the insurance that you're paying for

1109
00:38:51,785 --> 00:38:54,025
and you can store up cash value in

1110
00:38:54,025 --> 00:38:54,610
the life insurance

1111
00:39:01,625 --> 00:39:04,204
example, husband and wife. So you

1112
00:39:06,184 --> 00:39:07,885
can get a second to die life

1113
00:39:08,719 --> 00:39:10,960
For example, husband and wife. So you can

1114
00:39:10,960 --> 00:39:13,199
get a second to die life insurance policy

1115
00:39:13,199 --> 00:39:16,255
which has lower actuarial cost than an individual.

1116
00:39:16,654 --> 00:39:18,574
Mhmm. And it spreads the risk out. So

1117
00:39:18,574 --> 00:39:20,414
if you happen to have like a less

1118
00:39:20,414 --> 00:39:23,074
desirable insurance profile, you're hard to insure,

1119
00:39:23,454 --> 00:39:25,119
well, you might still be able to get

1120
00:39:25,119 --> 00:39:27,140
insurance with a second to die policy.

1121
00:39:27,840 --> 00:39:28,340
Overfunded,

1122
00:39:28,720 --> 00:39:29,780
it will grow

1123
00:39:30,400 --> 00:39:31,065
a bunch,

1124
00:39:31,625 --> 00:39:32,125
theoretically,

1125
00:39:32,664 --> 00:39:34,525
and that money can be accessed

1126
00:39:34,905 --> 00:39:36,844
in the form of policy loans.

1127
00:39:37,864 --> 00:39:40,179
K? You take the loan out and just

1128
00:39:40,179 --> 00:39:41,780
like if you took an equity loan out

1129
00:39:41,780 --> 00:39:44,359
it's not income. So it's not taxable anywhere

1130
00:39:44,579 --> 00:39:47,000
according to the IRS as we understand it

1131
00:39:47,380 --> 00:39:49,319
and if you then die

1132
00:39:49,925 --> 00:39:51,605
the loan is paid back by the death

1133
00:39:51,605 --> 00:39:52,105
benefit

1134
00:39:52,724 --> 00:39:55,204
and whatever is left if there's additional death

1135
00:39:55,204 --> 00:39:57,929
benefit that exceeds the loan it will still

1136
00:39:57,929 --> 00:40:00,170
go to Ayers tax free. So you're kind

1137
00:40:00,170 --> 00:40:02,349
of giving yourself almost a line of credit

1138
00:40:02,809 --> 00:40:04,909
in a way, yeah? Yeah. Now

1139
00:40:05,289 --> 00:40:06,025
there are

1140
00:40:06,585 --> 00:40:08,284
lots of gotchas in there.

1141
00:40:08,585 --> 00:40:09,864
Yeah. And we don't have time to get

1142
00:40:09,864 --> 00:40:11,464
into this. And that's not the point of

1143
00:40:11,464 --> 00:40:13,784
this. The point is to say there are

1144
00:40:13,784 --> 00:40:16,619
some very clever things that you can do.

1145
00:40:17,000 --> 00:40:19,160
Same story if you have an illiquid estate

1146
00:40:19,160 --> 00:40:20,300
like you can use

1147
00:40:20,840 --> 00:40:21,820
borrowed money

1148
00:40:22,119 --> 00:40:24,440
to buy life insurance. Now you're getting into

1149
00:40:24,440 --> 00:40:27,224
really sophisticated cases. BOLI. Okay? It it

1150
00:40:28,163 --> 00:40:28,663
it's

1151
00:40:31,464 --> 00:40:32,364
it's all

1152
00:40:33,144 --> 00:40:34,359
of the stuff requires, you know, it BOLI.

1153
00:40:34,359 --> 00:40:36,599
K? It it it's it's all of the

1154
00:40:36,599 --> 00:40:37,500
stuff requires

1155
00:40:39,159 --> 00:40:39,659
specific

1156
00:40:40,119 --> 00:40:41,099
legal navigation.

1157
00:40:41,400 --> 00:40:43,715
That's why it's not advice. I'm just telling

1158
00:40:43,715 --> 00:40:44,215
you

1159
00:40:44,994 --> 00:40:46,615
a good financial planner

1160
00:40:47,075 --> 00:40:49,474
and you know good legal counsel can help

1161
00:40:49,474 --> 00:40:51,570
structure something if you are in a high

1162
00:40:51,570 --> 00:40:53,970
net worth and highly illiquid situations. Those things

1163
00:40:53,970 --> 00:40:56,530
kinda work out. Right. Now, back to home

1164
00:40:56,530 --> 00:40:57,030
base.

1165
00:40:58,184 --> 00:40:59,625
There are other things that you could do.

1166
00:40:59,625 --> 00:41:01,385
I'm so dizzy after that, David. I don't

1167
00:41:01,385 --> 00:41:03,864
even remember where home base is. We were

1168
00:41:03,864 --> 00:41:06,079
asking what could you do if you're if

1169
00:41:06,160 --> 00:41:07,840
you're starting to kind of tap at the

1170
00:41:07,840 --> 00:41:08,980
door of maybe

1171
00:41:09,440 --> 00:41:11,760
maxing out the value of your retirement plan.

1172
00:41:11,760 --> 00:41:13,840
There it is. And so we we were

1173
00:41:13,840 --> 00:41:15,465
saying, well, instead of investing

1174
00:41:23,785 --> 00:41:25,050
brokerage. Yep.

1175
00:41:25,670 --> 00:41:27,750
Insurance. The other big one and I'll just

1176
00:41:27,750 --> 00:41:29,030
I'll say what it is and we'll take

1177
00:41:29,030 --> 00:41:30,250
a break in one packet

1178
00:41:31,190 --> 00:41:32,329
is real estate.

1179
00:41:33,364 --> 00:41:34,664
Real estate is a very

1180
00:41:35,925 --> 00:41:38,505
interesting asset because the characteristics

1181
00:41:40,070 --> 00:41:42,070
can they can have both it's basically it's

1182
00:41:42,070 --> 00:41:43,769
like a business, right? It can have income,

1183
00:41:44,469 --> 00:41:45,849
it can have expenses,

1184
00:41:47,190 --> 00:41:48,250
it can have

1185
00:41:49,195 --> 00:41:49,695
depreciation,

1186
00:41:50,155 --> 00:41:52,094
and it can in certain circumstances

1187
00:41:52,555 --> 00:41:53,934
change some types

1188
00:41:54,795 --> 00:41:55,855
of cash flows

1189
00:41:56,579 --> 00:41:59,139
if it has other businesses to partner with

1190
00:41:59,139 --> 00:42:00,199
and you're the owner.

1191
00:42:00,579 --> 00:42:01,079
So

1192
00:42:01,699 --> 00:42:04,359
Now it's getting interesting, David. It's getting interesting

1193
00:42:04,579 --> 00:42:05,079
but

1194
00:42:05,434 --> 00:42:07,355
look at the time. We have to take

1195
00:42:07,355 --> 00:42:09,034
our last one. Alright. Let's do it and

1196
00:42:09,034 --> 00:42:10,875
let's get back. Okay. We'll do that when

1197
00:42:10,875 --> 00:42:12,710
we come back. We'll talk about some big

1198
00:42:12,710 --> 00:42:14,550
picture ideas for real estate. I'm gonna tell

1199
00:42:14,550 --> 00:42:15,210
you this,

1200
00:42:15,510 --> 00:42:16,789
we're not gonna be able to make you

1201
00:42:16,789 --> 00:42:19,349
an expert in 10 minutes, but we'll help

1202
00:42:19,349 --> 00:42:21,030
you get dangerous. Stick around. We'll be right

1203
00:42:21,030 --> 00:42:22,755
back. I'm Dave Littlejohn. And Matt Dixon. You

1204
00:42:22,755 --> 00:42:26,054
got TRUEL on Newsradio 9029 FM at 12:40

1205
00:42:26,355 --> 00:42:26,855
KQEN.

1206
00:42:29,235 --> 00:42:30,375
I like it.

1207
00:42:33,739 --> 00:42:34,800
Well, there isn't.

1208
00:42:36,619 --> 00:42:37,840
Tell me something. Your

1209
00:42:38,144 --> 00:42:39,764
weekend Whatever he live.

1210
00:42:40,625 --> 00:42:41,844
How awesome they are.

1211
00:42:43,824 --> 00:42:45,125
Who's texting you?

1212
00:42:45,585 --> 00:42:47,869
That one. Oh, clients have given up. They're

1213
00:42:47,869 --> 00:42:49,569
like, this show is taking way too long.

1214
00:42:50,109 --> 00:42:51,710
You you put Dave off in the weeds

1215
00:42:51,710 --> 00:42:54,109
about their insurance and I don't think we've

1216
00:42:54,109 --> 00:42:55,969
actually gotten in the weeds on this show.

1217
00:42:56,429 --> 00:42:57,994
No. I think we've tried to stay on

1218
00:42:57,994 --> 00:42:59,775
home base, but I think we've got machetes

1219
00:42:59,835 --> 00:43:01,594
in each hand, and we're just fighting our

1220
00:43:01,594 --> 00:43:03,295
way through the jungle. Yeah.

1221
00:43:03,675 --> 00:43:04,494
It's amazing

1222
00:43:05,150 --> 00:43:07,150
how much is in the topic when you

1223
00:43:07,150 --> 00:43:09,469
start to unpack it. Yeah. You know, it's

1224
00:43:09,469 --> 00:43:10,989
like and you think, am I going down

1225
00:43:10,989 --> 00:43:11,889
a rabbit trail?

1226
00:43:12,664 --> 00:43:13,164
Not

1227
00:43:13,465 --> 00:43:16,265
really. I mean, it's relevant. It's just It's

1228
00:43:16,265 --> 00:43:17,144
comp it's complex.

1229
00:43:17,625 --> 00:43:18,684
Layers. Yeah. Yeah.

1230
00:43:19,304 --> 00:43:21,224
You know, it this is the thing. Right?

1231
00:43:21,224 --> 00:43:21,416
In the simplest terms, like, at the end

1232
00:43:21,416 --> 00:43:21,451
of the day, if you were to boil

1233
00:43:21,451 --> 00:43:22,230
the showdown, the question is,

1234
00:43:24,789 --> 00:43:26,250
showdown, the question is,

1235
00:43:26,710 --> 00:43:27,929
you know, at what point

1236
00:43:28,550 --> 00:43:31,425
is trying to defer taxes to do

1237
00:43:33,485 --> 00:43:34,253
something, but it actually makes it worse and

1238
00:43:34,253 --> 00:43:35,025
not better, then stop

1239
00:43:37,930 --> 00:43:39,930
to do something but it actually makes it

1240
00:43:39,930 --> 00:43:42,250
worse and not better, then stop doing that.

1241
00:43:42,250 --> 00:43:43,690
And then the question is, well, where do

1242
00:43:43,690 --> 00:43:45,675
you go from there? So we've talked about

1243
00:43:45,675 --> 00:43:47,594
insurance is kind of a weird avenue. In

1244
00:43:47,594 --> 00:43:50,715
certain circumstances, it works, not always. Right? I

1245
00:43:50,715 --> 00:43:52,635
I don't like the insurance guy that, like,

1246
00:43:52,635 --> 00:43:54,769
the old joke if everything's that if all

1247
00:43:54,769 --> 00:43:56,130
you have is a hammer, everything becomes a

1248
00:43:56,130 --> 00:43:57,730
nail. It's like, I sell insurance, which means

1249
00:43:57,730 --> 00:44:00,849
insurance can solve every problem. Like, I'm not

1250
00:44:00,849 --> 00:44:01,589
that guy.

1251
00:44:02,394 --> 00:44:04,074
Insurance has its place. Like, I'm not gonna

1252
00:44:04,074 --> 00:44:05,695
demonize it. I'm just gonna say

1253
00:44:06,394 --> 00:44:07,534
be aware. Right?

1254
00:44:07,994 --> 00:44:08,494
But

1255
00:44:08,795 --> 00:44:10,014
after tax investing.

1256
00:44:10,369 --> 00:44:11,969
Right? So once you just pay the taxes

1257
00:44:11,969 --> 00:44:13,170
and what's left, you try to be a

1258
00:44:13,170 --> 00:44:14,769
good steward with it. Do good good with

1259
00:44:14,769 --> 00:44:15,269
that.

1260
00:44:15,650 --> 00:44:17,650
And there are pros and cons to it.

1261
00:44:17,650 --> 00:44:19,434
Right? And then and then the last one

1262
00:44:19,434 --> 00:44:20,555
and this is what we're gonna talk about.

1263
00:44:20,555 --> 00:44:21,675
I think a lot of people really wanna

1264
00:44:21,675 --> 00:44:23,675
know this and financial advisors tend not to

1265
00:44:23,675 --> 00:44:24,335
go there

1266
00:44:24,715 --> 00:44:26,880
is the concept of real estate and what

1267
00:44:26,880 --> 00:44:29,440
that means. And I think specifically rental real

1268
00:44:29,440 --> 00:44:29,940
estate,

1269
00:44:31,119 --> 00:44:33,119
although they're, you know, they're people that will

1270
00:44:33,119 --> 00:44:35,355
just buy land, there's people that develop, and

1271
00:44:35,355 --> 00:44:36,494
so forth. So real estate's,

1272
00:44:37,114 --> 00:44:38,795
you know, a huge topic in and of

1273
00:44:38,795 --> 00:44:40,974
itself but we're talking about that now.

1274
00:44:42,155 --> 00:44:43,840
We're gonna have a lot of good content

1275
00:44:44,000 --> 00:44:45,380
out of this show. Right.

1276
00:44:46,000 --> 00:44:47,760
Hey, gang. Welcome back to the home stretch

1277
00:44:47,760 --> 00:44:49,599
of the True Wealth Show. I'm your host

1278
00:44:49,599 --> 00:44:52,355
Dave Littlejohn with me today in studio. Some

1279
00:44:52,355 --> 00:44:54,914
guy that's just spouting stuff off. Thanks, Matt.

1280
00:44:54,914 --> 00:44:55,414
Yep.

1281
00:44:56,594 --> 00:44:57,094
So

1282
00:44:57,554 --> 00:44:58,054
today's

1283
00:44:58,355 --> 00:44:59,894
primary topic is

1284
00:45:00,909 --> 00:45:02,750
what happens if you find yourself in a

1285
00:45:02,750 --> 00:45:04,909
circumstance where you've put so much money in

1286
00:45:04,909 --> 00:45:08,590
retirement plans that the future tax benefit starts

1287
00:45:08,590 --> 00:45:11,285
to diminish or even go backwards. So, like,

1288
00:45:11,285 --> 00:45:13,525
you're you're gonna be in worse shape tax

1289
00:45:13,525 --> 00:45:16,025
wise in the future because your retirement plan

1290
00:45:16,085 --> 00:45:18,769
has grown to a point that your future

1291
00:45:18,769 --> 00:45:21,349
required distributions are going to drive your income

1292
00:45:21,489 --> 00:45:23,489
into a higher tax bracket than it is

1293
00:45:23,489 --> 00:45:23,989
today.

1294
00:45:24,585 --> 00:45:25,085
So,

1295
00:45:25,784 --> 00:45:26,764
you need to pivot.

1296
00:45:27,545 --> 00:45:30,105
Right? And so, if that's the case, where

1297
00:45:30,105 --> 00:45:32,199
do we pivot to? We we kind of

1298
00:45:32,280 --> 00:45:34,839
scratched the surface of insurance. We scratched the

1299
00:45:34,839 --> 00:45:35,339
surface

1300
00:45:35,960 --> 00:45:38,760
of after tax investing in things like brokerage

1301
00:45:38,760 --> 00:45:40,894
accounts using stocks and bonds and, you know,

1302
00:45:40,974 --> 00:45:42,755
fairly mainstream financial instruments.

1303
00:45:43,934 --> 00:45:45,954
But, you know, we haven't talked about yet.

1304
00:45:46,255 --> 00:45:47,155
What is that?

1305
00:45:47,454 --> 00:45:48,275
Real estate.

1306
00:45:49,659 --> 00:45:51,519
Ah. Right. This is one that everyone loves

1307
00:45:51,820 --> 00:45:53,119
because most people

1308
00:45:53,500 --> 00:45:55,579
kind of understand it. Yeah, I mean, we

1309
00:45:55,579 --> 00:45:58,671
we I think generically we all see a

1310
00:45:58,671 --> 00:46:00,803
lot of this. I mean there's there's a

1311
00:46:00,803 --> 00:46:02,935
handful types of real estate, say you know

1312
00:46:02,935 --> 00:46:05,067
you've got residential real estate it's like you

1313
00:46:05,067 --> 00:46:06,640
know if whether it's your home or it's

1314
00:46:06,640 --> 00:46:08,660
a rental property for somebody else to live

1315
00:46:08,960 --> 00:46:10,099
in you've got

1316
00:46:11,200 --> 00:46:12,019
bare land

1317
00:46:12,640 --> 00:46:13,964
and and or

1318
00:46:14,505 --> 00:46:15,964
the opportunity is not developable

1319
00:46:17,144 --> 00:46:17,644
property

1320
00:46:18,184 --> 00:46:18,844
and then,

1321
00:46:19,224 --> 00:46:22,309
commercial property, property, right, and largely they I

1322
00:46:22,309 --> 00:46:24,630
mean they walk and talk similarly in many

1323
00:46:24,630 --> 00:46:26,389
cases but some the strategies could be a

1324
00:46:26,389 --> 00:46:29,344
little different sometimes the regulations are different with

1325
00:46:29,344 --> 00:46:31,184
what you're dealing with, you know, and even

1326
00:46:31,184 --> 00:46:32,864
residential, like, then you get into kind of

1327
00:46:32,864 --> 00:46:35,184
specialty, like, hotel space or the short term

1328
00:46:35,184 --> 00:46:37,585
rental space. You know, that's all kind of

1329
00:46:37,585 --> 00:46:38,039
a

1330
00:46:45,079 --> 00:46:47,465
timber on it or mineral rights or something

1331
00:46:47,465 --> 00:46:49,304
like that. So there's layers to this stuff,

1332
00:46:49,304 --> 00:46:50,125
right? Sure.

1333
00:46:51,065 --> 00:46:51,864
Here's the thing,

1334
00:46:53,784 --> 00:46:54,284
personally,

1335
00:46:54,920 --> 00:46:56,519
well, I'm not advising everybody to do this.

1336
00:46:56,519 --> 00:46:57,880
I think real estate is an,

1337
00:46:58,679 --> 00:47:01,420
an, like, fairly important part of a financial

1338
00:47:01,480 --> 00:47:01,980
strategy

1339
00:47:02,804 --> 00:47:03,304
because

1340
00:47:03,764 --> 00:47:05,684
it tends to be a good diversifier against

1341
00:47:05,684 --> 00:47:08,264
the stock market, right? They're they're not

1342
00:47:08,565 --> 00:47:10,264
super highly correlated especially

1343
00:47:10,869 --> 00:47:13,029
real real estate, like, physical tangible, like, you

1344
00:47:13,029 --> 00:47:15,190
own either dirt or houses or something like

1345
00:47:15,190 --> 00:47:17,269
that. You're not owning a derivative instrument of

1346
00:47:17,269 --> 00:47:17,675
real

1347
00:47:18,635 --> 00:47:19,135
estate.

1348
00:47:19,755 --> 00:47:21,614
Here's stuff that people don't think about.

1349
00:47:22,795 --> 00:47:24,655
If you're a business owner, for example,

1350
00:47:25,409 --> 00:47:27,269
you can own real estate

1351
00:47:27,730 --> 00:47:29,510
and then have a separate entity

1352
00:47:30,289 --> 00:47:32,210
a separate business. So if you may have

1353
00:47:32,210 --> 00:47:33,765
an entity that owns real estate and you

1354
00:47:33,765 --> 00:47:35,204
may have a business that you run and

1355
00:47:35,204 --> 00:47:37,204
the business can rent the real estate from

1356
00:47:37,204 --> 00:47:37,704
you,

1357
00:47:38,164 --> 00:47:40,325
right? We forget that you can wear both

1358
00:47:40,325 --> 00:47:40,965
hats as,

1359
00:47:41,445 --> 00:47:43,329
you can own 2 different entities and those

1360
00:47:43,329 --> 00:47:45,010
entities are allowed to rent from each other.

1361
00:47:45,489 --> 00:47:46,710
Right? And

1362
00:47:47,170 --> 00:47:48,769
the benefit of that is that it can

1363
00:47:48,769 --> 00:47:50,284
change the cash flow,

1364
00:47:50,585 --> 00:47:53,784
right? A business that pays rent expenses the

1365
00:47:53,784 --> 00:47:54,284
rent

1366
00:47:55,065 --> 00:47:57,144
and then the entity So it can have

1367
00:47:57,144 --> 00:47:57,784
a real estate. Receives rent, but rental income

1368
00:47:57,784 --> 00:47:58,780
is a form of passive income. It's receives

1369
00:47:58,780 --> 00:48:01,420
rent, but rental income is a form of

1370
00:48:01,420 --> 00:48:03,420
passive income instead of active. It has a

1371
00:48:03,420 --> 00:48:05,039
different type of tax treatment,

1372
00:48:05,660 --> 00:48:07,660
and so you you're sort of converting cash

1373
00:48:07,660 --> 00:48:10,425
flow by moving it from one organization to

1374
00:48:10,425 --> 00:48:11,885
another and you own both.

1375
00:48:12,744 --> 00:48:15,804
So clever financial planners and clever CPAs

1376
00:48:16,359 --> 00:48:18,940
can find ways to leverage the tax code

1377
00:48:19,079 --> 00:48:19,900
to help you

1378
00:48:20,199 --> 00:48:23,715
move money efficiently through the ecosystems. It's legal.

1379
00:48:24,094 --> 00:48:26,575
Right? I'm not talking about doing things that

1380
00:48:26,575 --> 00:48:28,815
are shady here. It it if you're doing

1381
00:48:28,815 --> 00:48:31,215
this properly, it's a 100% above board. It's

1382
00:48:31,215 --> 00:48:32,275
a known strategy.

1383
00:48:33,000 --> 00:48:34,140
It's not a loophole,

1384
00:48:34,519 --> 00:48:36,360
you really do have an entity renting from

1385
00:48:36,360 --> 00:48:37,180
another entity

1386
00:48:37,640 --> 00:48:40,039
and paying, you know, fair market rates, but

1387
00:48:40,039 --> 00:48:42,295
it it's a way to manage the way

1388
00:48:42,295 --> 00:48:44,855
cash moves through all of the organizations for

1389
00:48:44,855 --> 00:48:46,074
business owners. And

1390
00:48:47,494 --> 00:48:49,400
if you think about real estate as a

1391
00:48:49,400 --> 00:48:51,400
business, right, like, if you own rental properties

1392
00:48:51,400 --> 00:48:53,179
and you have people living in your properties,

1393
00:48:54,199 --> 00:48:54,940
you're receiving

1394
00:48:55,400 --> 00:48:57,400
income in the form of rent, you have

1395
00:48:57,400 --> 00:48:59,644
expenses in the form of maintenance and potentially

1396
00:48:59,644 --> 00:49:00,144
mortgages,

1397
00:49:02,204 --> 00:49:04,364
and then you have the tax management of

1398
00:49:04,364 --> 00:49:05,579
depreciation and so forth.

1399
00:49:06,619 --> 00:49:08,140
Pair that with if you have a day

1400
00:49:08,140 --> 00:49:09,980
job and w two income or even in

1401
00:49:09,980 --> 00:49:11,119
a separate business and

1402
00:49:11,500 --> 00:49:13,344
these are financial moving parts,

1403
00:49:13,824 --> 00:49:16,085
But when properly coordinated, they can become

1404
00:49:16,545 --> 00:49:19,905
more efficient. Right. I think that's worth mentioning.

1405
00:49:19,905 --> 00:49:22,329
Yeah. That's kind of the the trick

1406
00:49:22,789 --> 00:49:24,329
because I told Matt like

1407
00:49:24,710 --> 00:49:26,309
you know if somebody's clever you rent one

1408
00:49:26,309 --> 00:49:28,070
entity to get started and you start bringing

1409
00:49:28,070 --> 00:49:29,769
in cash flow from tenants and

1410
00:49:30,394 --> 00:49:32,414
you start accelerating depreciation

1411
00:49:32,954 --> 00:49:35,755
in that building in order to offset some

1412
00:49:35,755 --> 00:49:36,655
of the income

1413
00:49:37,099 --> 00:49:37,839
so that you

1414
00:49:38,300 --> 00:49:41,099
can then buy another building to increase the

1415
00:49:41,099 --> 00:49:43,659
total income of your real estate portfolio and

1416
00:49:43,659 --> 00:49:46,364
then get a new package of depreciation assets

1417
00:49:46,364 --> 00:49:48,364
to work with to offset income and then

1418
00:49:48,364 --> 00:49:50,284
buy and you start And buying more way

1419
00:49:50,284 --> 00:49:52,444
us to yeah. Yeah. It's it's more or

1420
00:49:52,444 --> 00:49:55,230
less developing a portfolio of real estate by

1421
00:49:55,230 --> 00:49:57,309
getting real estate to help you buy more

1422
00:49:57,309 --> 00:49:57,889
real estate

1423
00:49:58,349 --> 00:50:01,409
with tax savings accelerating the process. Mhmm.

1424
00:50:01,789 --> 00:50:02,289
K?

1425
00:50:03,045 --> 00:50:04,025
Does it require,

1426
00:50:04,485 --> 00:50:07,465
like, intentional strategy? Yeah. It does.

1427
00:50:07,845 --> 00:50:09,445
It really does. But if you're willing to

1428
00:50:09,445 --> 00:50:12,059
put in the work and get to understand

1429
00:50:12,059 --> 00:50:13,340
it a little bit or you get a

1430
00:50:13,340 --> 00:50:15,119
CPA to help you out along the way.

1431
00:50:15,260 --> 00:50:17,980
Yeah. I think qualified professionals around you and

1432
00:50:17,980 --> 00:50:18,960
then doing this,

1433
00:50:19,420 --> 00:50:19,920
intentionally.

1434
00:50:20,285 --> 00:50:22,285
Mhmm. Right? It's like you develop a business

1435
00:50:22,285 --> 00:50:24,445
plan for it. Okay? And the people that

1436
00:50:24,445 --> 00:50:26,445
are successful in real estate that I know,

1437
00:50:26,445 --> 00:50:28,210
they generally have a plan and they generally

1438
00:50:28,289 --> 00:50:29,670
stick to the things that they

1439
00:50:29,969 --> 00:50:31,329
know. Some people they just buy a lot

1440
00:50:31,329 --> 00:50:34,369
of single family homes and they they own

1441
00:50:34,369 --> 00:50:35,545
lots of homes and they rent them to

1442
00:50:35,545 --> 00:50:36,045
people.

1443
00:50:36,345 --> 00:50:38,425
And you know I I know people like

1444
00:50:38,425 --> 00:50:39,704
their goal is to buy a home every

1445
00:50:39,704 --> 00:50:42,345
year. Mhmm. Right? And just get it rented

1446
00:50:42,345 --> 00:50:43,864
and get it going. Here's the trick. When

1447
00:50:43,864 --> 00:50:45,730
you have one home it's either rented or

1448
00:50:45,730 --> 00:50:47,829
it's not. When you have 2 homes,

1449
00:50:48,450 --> 00:50:50,130
they're not very often that both of them

1450
00:50:50,130 --> 00:50:52,530
aren't rented. If you have a 100 homes,

1451
00:50:52,530 --> 00:50:54,835
the probability that a 100 homes are not

1452
00:50:55,315 --> 00:50:57,815
rented, very low. So it almost gets easier

1453
00:50:57,954 --> 00:50:59,875
the more that you have. Yeah. Well, it

1454
00:50:59,875 --> 00:51:02,755
gets more predictable. Right? That's I guess that's

1455
00:51:02,755 --> 00:51:04,679
a better word. Yeah. You definitely get more

1456
00:51:04,679 --> 00:51:07,400
headaches because you have more moving parts. Mhmm.

1457
00:51:07,400 --> 00:51:09,239
But you also have more revenue and you

1458
00:51:09,239 --> 00:51:10,840
can sort of get people to help you

1459
00:51:10,840 --> 00:51:12,855
because you're really running a business now. Yeah.

1460
00:51:12,934 --> 00:51:13,835
You're running a business

1461
00:51:14,215 --> 00:51:17,494
of rental properties. Mhmm. Okay. But businesses get

1462
00:51:17,494 --> 00:51:19,195
to do different things than,

1463
00:51:19,894 --> 00:51:21,760
being just an employee. Right.

1464
00:51:22,159 --> 00:51:23,760
Right? And look, if you're just really highly

1465
00:51:23,760 --> 00:51:26,239
compensated employee and you can get, you know,

1466
00:51:26,239 --> 00:51:28,659
1,000,000 of dollars into a retirement plan, great.

1467
00:51:29,065 --> 00:51:30,585
But, you know, if you're making 1,000,000 of

1468
00:51:30,585 --> 00:51:32,744
dollars at some point, you're gonna we're probably

1469
00:51:32,744 --> 00:51:34,345
still gonna tell you, you may wanna, you

1470
00:51:34,345 --> 00:51:35,785
know, lay off on the retirement plan and

1471
00:51:35,785 --> 00:51:38,329
look at other assets to invest in because

1472
00:51:38,789 --> 00:51:41,130
it's just not in your best long term

1473
00:51:41,349 --> 00:51:43,750
strategic interest to keep piling money into a

1474
00:51:43,750 --> 00:51:45,025
tax deferred environment.

1475
00:51:45,505 --> 00:51:46,944
Alright. So, David, what I want you to

1476
00:51:46,944 --> 00:51:48,565
do with these last minutes

1477
00:51:48,944 --> 00:51:50,944
that we've got, kinda sum this up and

1478
00:51:50,944 --> 00:51:52,244
give people a takeaway.

1479
00:51:53,585 --> 00:51:55,909
We've we've thrown a lot of numbers around,

1480
00:51:55,909 --> 00:51:56,409
so

1481
00:51:56,949 --> 00:51:58,710
what do you got for them? The big

1482
00:51:58,710 --> 00:51:59,849
takeaway from today.

1483
00:52:01,244 --> 00:52:04,125
For me, it's you actually can put too

1484
00:52:04,125 --> 00:52:05,424
much money in

1485
00:52:06,125 --> 00:52:08,464
a traditional IRA. Yeah. I think

1486
00:52:08,844 --> 00:52:10,789
you can over invest in IRA to the

1487
00:52:10,789 --> 00:52:12,949
point that it you diminish or you water

1488
00:52:12,949 --> 00:52:15,509
down the benefit. Right. And if someone needs

1489
00:52:15,509 --> 00:52:17,829
a second opinion on that, reach out, get

1490
00:52:17,829 --> 00:52:19,835
some qualified help. Or if you feel like

1491
00:52:19,835 --> 00:52:21,594
you're getting too close to that threshold

1492
00:52:22,315 --> 00:52:23,675
Yeah. You can call us and we can

1493
00:52:23,675 --> 00:52:25,514
kind of help you, you know, do some

1494
00:52:25,514 --> 00:52:27,400
of the the math around it and help

1495
00:52:27,400 --> 00:52:28,460
you figure it out.

1496
00:52:29,239 --> 00:52:31,320
Yeah. How do they call us, Matt? Well,

1497
00:52:31,320 --> 00:52:32,619
give us a ring at 541-375-0898,

1498
00:52:35,480 --> 00:52:37,505
or you can just chat us on the

1499
00:52:37,505 --> 00:52:39,525
website. The website is littlejohnfs.com.

1500
00:52:40,625 --> 00:52:42,704
Yeah. And I think that's the key takeaway.

1501
00:52:42,704 --> 00:52:44,940
Sometimes this stuff it gets complicated

1502
00:52:45,639 --> 00:52:47,319
and it you know if you have the

1503
00:52:47,319 --> 00:52:48,380
problem of

1504
00:52:48,920 --> 00:52:51,559
high account balances in your retirement plans then

1505
00:52:51,559 --> 00:52:52,839
you know we're happy to help you how

1506
00:52:52,839 --> 00:52:54,764
we can. Or, you know, reach out to

1507
00:52:54,764 --> 00:52:56,125
your advisor. Make sure that they know what

1508
00:52:56,125 --> 00:52:58,125
the heck that's going on too because they

1509
00:52:58,125 --> 00:52:59,724
should know this stuff. Right? It's part of

1510
00:52:59,724 --> 00:53:00,945
their job. Anyway,

1511
00:53:01,405 --> 00:53:01,900
well, look.

1512
00:53:02,380 --> 00:53:03,659
I'm listening to music. We're out of time,

1513
00:53:03,659 --> 00:53:05,819
so we better run. Until next time. Thanks

1514
00:53:05,819 --> 00:53:07,039
everybody for tuning in.

1515
00:53:07,659 --> 00:53:08,480
Call us 541-375-0898.

1516
00:53:10,059 --> 00:53:12,015
I'm Dave Littlejohn. And Matt Dixon. You got

1517
00:53:12,015 --> 00:53:14,114
TrueWell. Are these ready in 93 9 FM

1518
00:53:14,335 --> 00:53:15,715
and 12 40 KQEN?