*A Roth conversion may not be suitable for your situation. The primary goal in converting retirement assets into a Roth IRA is to reduce the future tax liability on the distributions you take in retirement, or on the distributions of your beneficiaries. The information provided is to help you determine whether or not a Roth IRA conversion may be appropriate for your particular circumstances. Please review your retirement savings, tax, and legacy planning strategies with your legal/tax advisor to be sure a Roth IRA conversion fits into your planning strategies. All rights reserved.
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Video Transcript
Rebecca Powers 00:23
Brian, welcome to this week’s edition of On the Money with Secure Money, and it is brought to us by Brian Quaranta he created the amazing team at Secure Money Advisors for 25 years now have helped 1000s of families make Their plan for retirement. You cannot have a great destination without a great plan. I’m Rebecca Powers. I was a news anchor for many, many years, an investigative reporter, and so glad to be with you every week, Brian.
Brian Quaranta 00:52
And I am so glad to be with you, and we’ve got so much to talk about today. Yes, we do, which is another exciting topic called taxes.
Rebecca Powers 01:02
Yeah, well, you know, it’s one of those words. And people say two things you have to do in life, right? Die and pay taxes, right? Yeah, but there’s a much more painless way, and you can help people pay less taxes.
Brian Quaranta 01:14
Yes, absolutely in the long run, yes, absolutely you can, yes. There’s tons of things that we can do. I mean, you know, and sometimes people have to kind of learn the hard way.
Rebecca Powers 01:24
Exactly, when it’s too late. yeah, So, we’re going to do taxes again this week. We talked about it last week. What do you think? And I know you’ve said this many times, that taxes are actually the number one threat to your retirement, yeah, even more than not having enough income.
Brian Quaranta 01:41
Yeah, yeah. Because taxes reduce your purchasing power. So, you know, depending on where your income is coming from, is going to depend on how much it decreases your purchasing power. And the problem that most retirees have today is that the majority of people retiring today were not exposed to some of the better types of accounts that we have now, like the Roth or even the Roth 401(k), the Roth 401(k), just, you know, came onto the scene, you know, in the past probably five years, okay, and some people still don’t even still don’t even know that it exists within an employer plan because employers haven’t announced it, or they did announce and they just didn’t pay attention, or the employee didn’t go in and actually make the change of where the money was going. They’re still putting it on the traditional 401(k)’s side.
Rebecca Powers 02:35
Which is more taxable?
Brian Quaranta 02:37
Well, yeah, because you’re getting a tax deduction, but all your growth is taxable, and all of your income that you have to take out is taxable. So, when you’re taking income out in retirement, you have to pay taxes on it, it’s reducing the amount of net money that you’re getting. We all know that, right? Yeah, because if you look at your gross amount that you get on your paycheck versus the net, it’s a lot different, and it’s going to be the same way in retirement, unless you move forward with tax planning. And there’s lots of different things that you can do, and Roth conversions are some of the easiest. But in retirement, I mean, look, retirement is more than just about the money. It’s about the purpose of what you’re going to be doing, too. You know, I’ve got a client that, you know, his hobby has been woodworking, and he has a little Etsy store now called Dusty Dave.
Rebecca Powers 03:27
Oh, all right. Dusty Dave, free shout out for you!
Brian Quaranta 03:31
Free shout out for Dusty Dave, that’s right. And, you know, he makes these beautiful wooden bowls and utensils and all kinds of different things, and he’s and he’s busy, but here’s a great thing, because he has a business, he has a lot of deductions. You can write off a lot against his income coming in. And I think everybody that has a hobby in retirement should try to turn that into a business, just for the tax benefits alone.
Rebecca Powers 03:55
I love that. It’s so easy to LLC, you just go on your Secretary of State’s office website. You get your little $50 fee. You get your LLC and Dusty Dave. You can even write off, well, we’re not CPAs, so we won’t go there.
Brian Quaranta 04:09
No, I want to hear it though, tell me!
Rebecca Powers 04:11
Let me write this down. I mean, lunches. You take someone to lunch to talk about new colors or new ideas for your bowls, and you save those receipts and you write on there “Lunch with Brian, ideas for…”
Brian Quaranta 04:23
That’s right, and if he’s got, if he has grandkids, employ them. He could, he could employ them. He could put him on his website, you know, and get a tax deduction for them and for him. And it goes on and on and on and on, yeah. And these are all, you know, Rebecca, let’s- you know, let people know that this is all legal, right? It’s just about understanding the tax code and what you’re able to do. And see, tax accountants are not there to really explain the tax code. They are there for you to give them your W2s, your 1099s. They put it in their little software, and they say, this is how much you owe. But they’re not consulting people on the fact that, hey, you know, you’re retired, now, I know you like flying airplanes. You know. Have you thought about maybe starting, you know, a company where you could do sightseeing and..?
Rebecca Powers 05:20
Or teaching!
Brian Quaranta 05:21
Or teaching, instructing, and have those deductions, and those are all creative ways that we can bring down the tax bill.
Rebecca Powers 05:29
All right, I love case studies. I love giving you real life examples and get your spin on them. Brian, here we go. Here’s the situation. John is 65, Karen is 63, retired with 1.3 million in their 401(k)s combined. She says they have no Roth accounts, no income plan. Don’t feel bad. Most of us didn’t, and they wanted to wait until the RMDs kicked in to touch anything.
Brian Quaranta 05:53
Yeah, so a lot of people that might not need income initially when they retire, okay? Maybe, maybe they have rental property that is paying them an income, and then on top of it, they’ve got their social security, or maybe there’s a pension there. And because of that, they can just let their retirement accounts defer longer and longer and longer and longer, growing bigger, and all you’re doing is compounding and compounding and compounding that tax bill, and people are not realizing that. And all of a sudden you turn 73 when you got to start taking those RMDs out, which is a forced distribution. Let me say this again, a RMD stands for required minimum distribution. It is an IRS rule that you must start taking money out of your retirement accounts at the age of 73 you don’t get to decide how much to take out. They decide for you, and if you don’t take that money out, there’s a big penalty of 25% but when that money comes out, it gets added as income, and now it starts compounding. It creates a chain effect to where now social security becomes taxable up to 85%. IRMA goes up. Your income tax bracket goes up. It gets really, really messy. Now here’s where it gets even more messy. Your spouse dies, and now you go from a joint filer to single, and now your spouse has that income coming in, and now the tax bill skyrockets, and that’s the one thing folks are not thinking about, is that when you lose your spouse, you are going to a single tax filer. And folks, this is why, if you haven’t yet, you have to go to RightTrackMyTaxBill.com. It is a calculator that we have built for you so you can see how much taxes you potentially owe to the IRS. It is a tax lien on your money that you’ve paid into. You have a partner, a silent partner, that you probably never wanted. I know I never wanted them, and you need to get them out of the picture and buy them out of that partnership as quickly as you can.
Rebecca Powers 08:29
And it all starts with a strategy, because there are a lot of different tools that serve different purposes. So, when Brian mentions that black binder, it is imperative, really, to have a plan, whatever your plan may be. Again, on this quick break, go to RightTrackMyTaxBill.com. See what your tax liability will be for the future. And it’s very powerful stuff. And we will be right back.
Speaker 1 08:55
You’ve got quite an extensive resume. Wow, so many years of management. I bet was fun. So, this job requires basic knowledge of the social media and video platforms, content creation, and SEO. How proficient are you in those areas?
Brian Quaranta 09:16
Going back to work after retiring is not ideal. I’m Brian Quaranta with Secure Money Advisors. If you have amassed a nest egg, it’s time for a financial advisor to help you reach your retirement goals. This is one of the greatest tax windows in history. Now is the time to take advantage of this tax discount while you can. We specialize in retirement planning, tax mitigation, estate planning and more. Plan your retirement right Call now for your complimentary portfolio review and tax analysis.
Rebecca Powers 09:48
All right, thanks for being with us. I think the key takeaway from the last segment is waiting kicking the can down the road is not going to help you, and it’s all about what’s going to help you and your family.
Brian Quaranta 09:58
Yeah, and delaying does not equal a strategy. You have to plan intentionally, and that’s the difference between working with an independent financial fiduciary versus, let’s say, a broker. Okay, brokers are not even allowed to talk about taxes. I have friends that have come from the big box firms into the independent world, and they’ll tell you, if the client had a question about taxes, they would say, you need to consult with your tax accountant. They had a question about estate planning, they would say, you have to consult with your estate planner. I mean, think about going in and talking with the person that’s managing your money, your life savings, and they can’t even give you advice around those things. And that’s why, when I built Secure Money Advisors, I wanted essentially a one stop shop, so that when we’re talking about the planning and we want to solve a tax problem, we have the tax account to go to if we have to deal with Medicare, we have the Medicare professional to go to, estate planning professional, and now everybody is cohesively working on your account. One of the great things about Secure Money Advisors and what makes us uniquely different is you don’t just have one person working for you. You have a dedicated team of people, that dedicated team of people, is a lot of brain power to help you get the most out of your situation. And that’s why I want you to go to RightTrackMyTaxBill.com and go through the calculator and learn about what you’re going to owe the IRS. But what I also want you to do is I want you to call the 800 number. I want you to call 1-888-382-1298, because there you can schedule an appointment with the team. Come in. I’ll also send you a copy of my book. If you haven’t read my book yet, Right Track Your Retirement. I talk about all of the things that Rebecca and I talk about all week in this book. It’s a very simple read. I’ve taken the complex, and I’ve made it simple for you. And every time somebody comes in and they say, Brian, I read your book, I don’t know why anybody hasn’t ever shared the information that you’ve shared before in this book.
Rebecca Powers 12:18
All right, we’re going to do a case study, and we love this. These are real life scenarios. Case study. Her name is Susan. She is single, age 68 inherited $400,000 Ira from her sister. That’s sweet. She never got any advice from a tax professional. Just used a CPA every year to do her taxes.
Brian Quaranta 12:36
Yes, yeah. And the problem with that is she’s probably not going to know about the 10-year withdrawal rule when it comes to the inherited IRA. I’ll explain that a little bit typically, when people inherit money from their family members, the tax law used to be that you could stretch that out as a beneficiary IRA over the course of your lifetime. So, let’s suppose that you’re 50 years old, you inherit a large sum of money from your parents, and the IRS used to allow you to take small, little withdrawals out of that account for the rest of your life. And we would take such small withdrawals that they would never be able to catch up, and you would win on the tax game, right? But now what they’re doing is they’re forcing you to either take an immediate lump sum withdrawal, which triggers a huge tax bill right away. And that mistake is made often. Yeah, you’ve seen that. I’ve seen it, and here’s the way that I like to explain this. Do you remember regular cameras with film?
Rebecca Powers 13:49
I do. I’m older than him. Yeah. Do you remember regular- dropping them off at Fox photo, Yeah, taking them in your envelope.
Brian Quaranta 13:58
It was exciting when you pulled up that little photo booth. The first thing you do is pull over and you’re going through them. You’re like, Oh, that one’s not good. I don’t know what that is. Is that a finger or what is that?
Rebecca Powers 14:09
And you had the negatives; you can bring it back and get it enlarged.
Brian Quaranta 14:14
The problem was it, you know? And this actually happened. My grandparents took us on vacation. And growing up in New Jersey, we called it the shore, not the ocean, right? Going to the shore, the shore. And you know, they had that square camera, that long, square camera like this.
Rebecca Powers 14:33
And the little square flash you have to plug in the top.
Brian Quaranta 14:37
So, you know, we’re coming home from vacation. We’re in the backseat of the car, my little brother is playing with the camera, and he pops open the back of the camera. Well, what happens to all of that film?
Rebecca Powers 14:51
You and your sister, Michelle, you ruined all of our film because it was exposed to light.
Brian Quaranta 14:55
It was exposed to light! Yeah, right, and you can’t get those pictures back, yeah, that’s the thing same thing with your IRA. The minute that money comes out, poof, it’s exposed. You can’t get it back in, done over, you owe taxes and you owe a big tax bill. Okay? So do not make that mistake. Do not make that mistake. So again, go to RightTrackMyTaxBill.com, RightTrackMyTaxBill.com. You can scan the QR code down at the bottom of the screen. You are going to want to go through this tax calculator. It’s going to help you understand what the real problem is. We can’t have solutions that fix the problem unless we know what the problems are and at Secure Money Advisors, we are not sales people. We are problem solvers. We work with you. We are partners in helping you solve the problems that exist within your current plan. And a lot of times, people don’t even know what the problems are because they’re not being asked the right questions. You don’t know what you don’t know. That’s the scariest part about this whole retirement thing, because a lot of people get advice at what I call, you know, they get cocktail advice. They’re at a cocktail party by the water cooler. I’m doing this, I’m doing that, you know. And they pick up information here and there. But the financial industry has done the American public a disservice because, and by the way, Larry Fink from Blackrock was even quoted saying that we have done a disservice to the American public, because the only thing we’ve ever taught them is how to put money into an account and grow it while they were working, but nobody is paying attention to that money. It’s being done automatically. They don’t even know how to diversify it. They don’t even know what accounts to choose and pick. And then all of a sudden, their day of retirement comes, and they’re handed over this big problem, right, right? And now, what are you going to do? You’re going to go to a brokerage firm, and some young kid is going to tell you, yeah, just, we’ll just roll this over. Do you know how many mistakes I see on rollovers? There’s so many people that miss things. I’ll give you things, just simple things that are missed. A guy comes to my office. He says, I retired. He retired at 55, okay? He says, I rolled all my money over to this brokerage firm, and I want to start taking money out, but I can’t, because I’ve got this 10% penalty because I’m under 59 and a half. I said, Well, why did the broker roll the money over? He says, Well, that’s what he told me I need to do. I said, You just missed out on one of the biggest opportunities, called the 55 rule. The 55 rule says that if you leave your money in your 401(k) when you retire, you can actually take the money out of the 401(k) without incurring the 10% penalty. So, in our cases, when we retire people early, we might take a small portion and roll it over, but leave a what we call a bridge account, enough money in the 401 K to take withdrawals early, prior to 59 and a half and eliminate that 10% penalty. These are the little things that are missed. And folks, the little things are the ones that cause the big headaches. RightTrackMyTaxBill.com. Go there right now. Do not kick the can down the road. This is not the time to procrastinate.
Rebecca Powers 18:20
And once you get that complimentary appointment, and that means no cost at all, as soon as you get that appointment, we’re going to mail you this book in a beautiful gold envelope. Brian even pays for the shipping and handling. It’s all about empowering and educating you more with Brian Quaranta right after this.
Speaker 2 18:44
The work never seems to end until the day it finally does. After nearly a lifetime on the job, you should be rewarded for all the time you spent working, whether that’s crossing off items on your bucket list, learning a new passion or rekindling the love of an old one. After all, life isn’t over when you stop working. It’s the start of an all-new chapter, the one where you’re the writer and you get to choose how your story will go. A way to achieve that is by having a clear financial plan to sustain your golden years. The biggest fear most retirees have is if they’ll have enough money to maintain the lifestyle they’ve always enjoyed, having a plan to help protect you against the curveballs life often throws will help to maintain your lifestyle. Call today to get your free written financial plan so you may live every day to the fullest and enjoy the retirement of your dreams.
Rebecca Powers 19:36
All right, we’re going to go over another case study. These are real life kind of events, to give you the scenarios, I should say, to give you ideas of what Brian and Secure Money Advisors would do, all right. This is Mark and Linda, Brian. They’re retired early, both at 60. That’s awesome. With $800,000 in savings rolled on non-qualified brokerage account first and delayed their IRA withdrawals. Yeah,
Brian Quaranta 20:00
Yeah, okay, so, what they’re talking about-
Rebecca Powers 20:01
Is that good or bad?
Brian Quaranta 20:02
What they’re talking about there is, there they’re taking their nonretirement money. So, this is money that they invested outside of their retirement account, right? So, extra money that goes into a non-retirement account. Different when it comes to taxation. We’re talking about taxes at capital gains tax rate, okay?
Rebecca Powers 20:24
Gotcha. You sell a rental house and get a big capital gain, yeah, that was your income.
Brian Quaranta 20:28
Yes, or if I have a stock, you know, and I owned it for $100 a share, and it went to $200 a share, and I sell it, I owe capital gains tax on that profit now capital gains tax rates can range anywhere from ready for this zero, 15 or 20% depending on what your income is, wow. So however, you are not forced to take money out of non-retirement accounts. Okay? No.
Rebecca Powers 21:04
So, no RMDs. No RMDs on non-retirement accounts.
Brian Quaranta 21:08
That’s right. Not only that, but if you lose money in a non-retirement account, you can do what we call tax loss harvesting, where you can sell that position at a loss, and then you capture that loss. And then if you have a future gain, you can write off that gain against the loss. So, if I have a $10,000 loss, but then again, in the future, I’ve got a $10,000 gain, I can wipe out that whole game, because I harvested that loss. And by the way, when I say harvested it means I get to use it forever.
Rebecca Powers 21:49
I was just going to ask you, that was my next question. How long does that last? Forever?
Brian Quaranta 21:52
You just bank it right? So, when you have to now have an event where you need to capitalize on money and you’ve made a profit. Now you can say, hey, I’ve got this little chip in my pocket that says I had a loss. And they’ll go, Okay, well, then it washes it out and there’s nothing. Wow. Now what you’ll see a lot of financial advisors do is they will start having people withdraw money from non-retirement accounts. First huge mistake. Here’s why. Number one, you have no RMD on that money. It’s the most tax efficient money you have, because it’s capital gains tax rates versus income tax rates. Delaying taking money out of your retirement account is one of the biggest mistakes you can make, because all you’re doing is compounding that tax bill until you turn 73 and then, boom, you’re hit with this massive amount of money coming out, and now your tax rates go through the roof, your Social Security tax rates go up, your Medicare premium goes up, and it becomes a mess. Yes, it’s a mess. Please do not do this. Whether you work with us or you work with somebody else, go to them and tell them, why are you having me take money out of my nonretirement accounts before my retirement accounts. You see we want if you need income, we should be building it with the accounts that you’re going to be forced to take money out of anyway. That is the best account to generate income from, and that is one of the best accounts to use an income annuity with. People can generate income, guaranteed lifetime income, by taking some of their retirement account dollars and putting it into an income annuity, which, by the way, you can legally do that without triggering any tax bill. So, if you roll money from your 401(k), your IRA, into an income annuity, there is no taxable event going into that annuity, because the annuity becomes a qualified retirement account. Now we get guaranteed income from that retirement account for the rest of your life.
Rebecca Powers 24:12
And if you do the right one for you, fixed indexed annuity is the one that my family has. Yes, the principal is protected. Even if the market goes down, if it goes up, you get most of the gains, but not all. Warren Buffet said it best, you know, be fearful when others are greedy, and be greedy when others are fearful. That’s right. I’m not greedy. I don’t want to lose. So, for me, it was the right thing, and it keeps me out of probate. Yes, never go to probate court. Your beneficiaries, one death certificate, one signature. Boom. So that was right for me.
Brian Quaranta 24:40
And think about this, what is the purpose of your retirement dollars? Yeah, the purpose of the retirement dollars is to eventually use it. Right? That is the best money to turn into a private pension.
Rebecca Powers 24:58
That’s right, it’s a personal pension. I like that!
Brian Quaranta 25:01
It’s a personal pension. If you do not understand how taxes work and how income annuities work, and how you can get guaranteed income for the rest of your life, and if you die, guaranteed income for the rest of your spouse’s life, and even if the account balance of that annuity goes to zero, as long as you or your spouse are living, they are going to continue to pay you the income. That’s why annuities are one of the best ways to ensure your income. And you’re going to hear people say, Well, the reason I didn’t recommend an annuity is because it’s a terrible investment. And anybody that’s recommending an annuity, all they care about is making commissions. Why would anybody hate an account that guaranteed and protected your income for the rest of your life and for your spouse’s life, and if the balance went to zero, you still got the income. Because I can take a very small amount of money. I can take 30% of somebody’s money and generate 100% of their income. Need where people try to do it through the stock market, they usually have to use 100% of their money to generate 100% of their income and have 100% risk, and have 100% risk, and if the balance goes to zero, they’re out of money. This is not the type of planning you want, and this is why I want to encourage you to call the 800 number. Call 1-888-382-1298, my team standing by to take your call and get you scheduled to come to the office, my promise is always is nobody from my office will ever pressure you to do anything. They will never sell anything to you. We are there to be a partner with you. We are there to roll up our sleeves and go into problem solving mode and see if there are ways that we can maximize what you are doing. And if we cannot, we will shake your hand and tell you that you are on the right track. And let me tell you, that is one of our favorite things to do, and it gives you peace of mind, knowing that you are doing the right things, but I promise you, you are probably missing things that could make a big improvement to what you’re currently doing.
Rebecca Powers 27:12
That’s right. And since we were talking so much about tax savings today, don’t forget RightTrackMyTaxBill.com. Make a hot coffee and sit down, put those numbers in, let the math show you math. Numbers don’t lie. Thank you so much for being with us. I’m Rebecca Powers here with Brian Quaranta, and we are so happy. We hope you learned something. We hope you learned a lot today. Any questions, comments, email us. We love your ideas, and we love your questions. Thank you so much Pittsburgh, we’ll see you next time.
