Tax Planning to Avoid The IRS


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Transcript

Mike:

Trying to push your required distributions back as far as possible is the exact opposite of what you should be doing. Right? Smart tax planning is all about saying, Hey, wait a minute. How do I best manage my 401ks and IRAs? How do I bet? How do I determine when the timing, when should I pull this money out? So I pay the least amount of tax it’s possible.

Zach:

Welcome back to retirement today. I’m your cohost Zach Holcomb. And alongside me, we have the Michael Reese. He’s the founder of the prosperity planning system, certified financial planner and president and CEO of Centennial Advisors right here in Austin, Texas on today’s program, we’ve been talking all about potential tax changes coming from our government and how it affects you.

Mike:

Yeah, that’s right. Every time you say that government, you know, government such a nice word when they’re really just what’s my word of the day for them, the weasels, the weasels in DC, yes I politicians are anyway. So here we go. We’ve talked about step up of basis at death, right? And just a quick recap. That means that right now, when your parents pass away, they leave you a house. They leave, you stock, whatever it is you get, what’s called a step up a basis, which means that you received that asset at the value that it was w- for whatever it was worth at the day you received it, right? So when you sell it, you really don’t know a lot of taxes. If you sell it right away, that step up of basis, I want to get rid of that, which is that’ll affect pretty much anybody who inherits money.

Mike:

We talked about 1031 exchanges, right? 1031 is where if you invest in real estate, you can sell real estate. And as long as you invest in new real estate, you get a tax benefits for that. Now, by the way, whether or not that’s, you know, the, the way I look at it’s like, I want personally, I just want a simplified tax code. I think we should be able to fill out our tax return on a postcard. You know, I think we should have just one flat rate for everything, and it should be a lower rate, not a higher rate, you know, but you know, silly me. If that, if I were a politician, that would be a horrible idea because then I don’t get to feed my special interest groups who give me money to get elected. And that’s all I care about.

Mike:

But anyway, we don’t, if you’re a politician, you don’t care about what’s right for the country. You only care about what’s right. To get you reelected with all that being said, lots of ways of talking about changing the tax code. But what I want to do in this last segment is I want to talk about, again, the average person, think about if you’re an average person what’s going on, you’ve probably been working for a number of years. You’ve probably been saving money in your 401k, 403B, IRA. You know, that kind of thing.

Zach:

It’s what we’re told to do.

Mike:

That’s what we’re told to do, right? That money has been growing. And your hope is that someday you’ll be able to have enough money in those accounts to make work optional, right? Prosperity planning is all about helping you not just make work optional, but helping you to make smart choices with your money, whether it’s from an investment perspective and income perspective, a tax perspective, but let’s make those smart choices so that your money supports the life that you want.

Mike:

That’s what prosperity planning’s all about. And it shouldn’t matter what the stock market does, good or bad. Your money should be there to support you either way. Right? It’s pretty hard to do that when the IRS wants to come along and take a big chunk of it. Yep. So when you are putting your money in things like 401ks and 403BS, et cetera, for a lot of people, what’s happening. If you’re like most people you’re building up these accounts, next thing you know, you’re getting ready to retire. And you’ve got a boatload of money in these accounts that have never been taxed.

Zach:

That’s a problem.

Mike:

And you’re thinking that’d be okay though, because Zach, Zach, it’s going to be fine because I’m going to be lower tax bracket

Zach:

Mmm, misconception.

Mike:

In retirement, I’m going to be in a lower tax bracket, but are you, I mean, think about it. If you want work to be optional, it means that you probably want to maintain the same standard of living. You just don’t want to work to do it.

Zach:

Yeah. You got to have the same income,

Mike:

Which means it needs same income and your kids are grown. So you don’t have those tax deductions anymore. Those little tax deductions run around the house and no grandchildren don’t count. Your mortgage might be paid off. In fact, heck you know, with the standard deduction rates I mean, probably not right enough a bunch anyway. So guess what need the same level of income? Your taxes are going to be probably pretty close, but it gets worse than that. Because on top of all of that, you have with IRAs and 401ks, you have something that no other account has. No other account has this. I’ve heard different publications like Forbes and Kiplinger. They call this the weapons of tax destruction. You know what I’m talking about?

Zach:

It’s a roth.

Mike:

No,

Zach:

Not a Roth?

Mike:

Required minimum distributions. The way it goes right now is when you’re 72, you’ve got required distributions. Right? And so many times it doesn’t matter if you know, people are in a position where they don’t, they’re forced to pull out more money than they want to. And maybe you don’t need to when you’re 72, but by the time you’re 75 or in your eighties, holy cow, especially when your eighties, the percentage you got to take out is so high. That it’s very, very common that you’re forced to pull money out. You don’t want to pull out. It’s like, I don’t, I want to pull out 30,000 for income. And they say tough. You’ve got to pull out 70,000 for your required distribution. Right. And you got to pay tax on how much, 70,000. Right. And so what they’re doing here, here’s part of what they’re talking about, right.

Mike:

They’re basically saying, oh, we want to push required distributions from 72 to 75. And you’re thinking, well, that sounds like a good thing, right? No, it’s not. It’s actually worse for you because you know what happens is that means you just defer your money longer. So the pot gets bigger. So your required distributions are bigger, which means more money goes to the IRS. I mean, you trying to push your required distributions back as far as possible is the exact opposite of what you should be doing. Right? Smart tax planning is all about saying, Hey, wait a minute. How do I best manage my 401ks and IRAs? How do I, how do I determine when the timing, when should I pull this money out? So I pay the least amount of tax possible, but what do they want to do? Let’s back up. Let’s make it big.

Mike:

Let’s, let’s make it 75 instead of 72. And you might think that’s good. The only way it’s good is it gives you more time to do Roth conversions, but only if you’re paying attention and what it really does, it puts more and more money in these accounts. And don’t forget, after you die, your kids only have 10 years to pull it out. So let’s say you build it up. You’ve got a million and a half dollars in that thing. And then you die. Now, your kids got 10 years to take that out. That’s a million and a half dollars taxable to the IRS. That’s got to come out in 10 years. You know what that is? That is the IRS being one of your biggest beneficiaries. That’s what it is not good. Every time they turn around, they’re trying to tax the little guy more and more and more. They tell you, we’re only taxing who the rich and who are they really taxing?

Zach:

The average Joe.

Mike:

They’re taxing everybody, man, everybody, it’s a bunch of hooey. And you know what? The rich people, the ones that they say, they’re going to tax, guess what? Wealthy people, they all have really super smart advisors, like all day long. I talked to somebody the other day and, and you know, they’ve got like $30 million, right? And here’s the thing. If you got $30 million, you got people lining up to talk to you to help you with your taxes. I was just one of like seven people there talking to. And, but you know what, if you got $30 million, you know, you can also pay someone, you know, 40, $50,000 a year to help you with your tax plan because it’s worth it. Well, what if you don’t have 30 million? What if you have 300,000 or 3 million or somewhere in between? Yep. Who do you talk? Hey, you know what, who do you talk to now?

Mike:

And that’s, I mean, quite frankly, that’s why I’m doing this event. I’m doing this event because I want to help the average person get the same kind of tax planning, help that the $30 million guy yet, because you know what? The $30 million, guy’s not going to pay these increased taxes. You are. So let’s help you get the same help that they get. I want to help you understand what’s happening. What they’re trying to do to you. I want to help you understand how it affects you. And then I want to help you figure out, Hey, here are some strategies you can employ to avoid these taxes. Legally, just like someone with $30 million can. So Zach tomorrow night, I know it’s tomorrow night at six 30, start six 30 sharp. Let’s give everyone the details. I’m telling you. What if you’re worried about taxes that are coming your way, you gotta be there. Fill us in, Zach.

Zach:

I’m excited for this, Mike. So tomorrow night we’re hosting retire tax smart, at the movie house in Northwest Austin. It’s right off six 20 across the street from Concordia university. Again, it’s at the movie house and eatery, starting at 6:30 PM sharp tomorrow. Now to sign up, there’s two different ways. You can do this. You can go to taxfreemovie.com again, that’s taxfreemovie.com. It’s got all the information on that website in a very simple form. You fill out, fill out that information. Boom, we’ll send a confirmation right your way. Now, if you want to call us, you can reach out to our office. Now it is after hours. You give us a call at five one two, two six five, 5,000. Again, it’s 5 1, 2, 2 6, 5, 5,000. You can just leave us a message and say, Hey, my name is Joe. And I want to attend retire tax smart tomorrow night. What do I need to do? And we’ll give you a call back first thing tomorrow morning and get all that information your way. Yeah.

Mike:

And in all fairness, a couple of things I want to say about this. The cool thing is movie house and eatery. It’s super comfortable chairs. You just come and make sure you come early. You want to be there at like six 15, for sure. Get some popcorn. You know, I guess popcorn and drinks are in us. Not like adult beverages, just soda, but anyway, make yourself comfortable. Grab a seat. Now seating is limited. So you got it’s like first come first serve. So sign up right away, call us right away. And Hey, you might be sitting there and you might be saying, oh my goodness, I, this is like, this is for me. I need this information, but you can’t come tomorrow night. Something’s already on your calendar. So Zach, what happens if I’m that person,

Zach:

If you just need help on some of this information that we’ve shared, you can give us a call here at our office. So that number right is shared 5 1 2, 2 6, 5, 5,000. And just leave us a message and say, you know what you need help with. And we’ll connect you with one of the advisors here in our office.

Mike:

So there you go, folks, tax free movie.com or you can sign up there or you just call the office five one two, two six, five, 5,000. Got it. Hey, this is going to be a great event tomorrow night. I hope to see you there. And hopefully I didn’t go too crazy today on talking about Wiesel politicians, but there you go. That’s our message of the week. Folks. I hope you enjoy your week. We’ll talk to you again next week.

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