Cynthia de Fazio 00:22
Welcome to Retire Smart Austin. My name is Cynthia de Fazio, joined today by Phil Capriotti Sr and Henry Lande, certified financial planner of power, wealth and tax to our viewers at home. Thank you for being with us again today on Retire Smart Austin, we’re once again going to dive into a very important subject, why you should be working with not only a Certified Financial Planner, but that same person being a tax planner as well. They marry together so beautifully, and you’ll see why it’s so important to have that cohesive asset management style. Phil, how are you today?
Philip Capriotti 01:01
I am wonderful, blessed, and it’s good to be back on a set, not only pardon me with you, but with Henry. Yes, I’m excited too. We got a lot of compliments on the past three shows, so we figured heck, let’s keep up the good work and keep it going strong. So, we’re here, and this is a great topic. It’s a topic that a lot of CFPs unfortunately steer away from, or recommend that their clients talk to their CPA. I mean, they throw the CPA out. Now, most CFPs know that not everybody has a CPA. They. Most of these folks have what we would call a tax filer, whether you’re with one of these big box tax groups or not. They’re not actually tax planners. They’re basically recording history. For those of you who have been watching our show for the last, going on six years, now, you understand my passion with taxes. You understand my passion with eliminating or significantly reducing taxes through retirement, and that comes by that that comes through proper tax efficient tax planning, as well as portfolio management. But we want to take a look at the tax planning, so we recruited and actually trained certified financial planners in our office. Henry is number one on the list that actually love the tax side. In fact, they come to work with our firm because we focus on significantly reducing, mitigating, eliminating taxes and retirement so we’re going to dive back into this subject. We brought it up three shows ago, and I think I use it more of as an infomercial to recruit certified financial planners in Lakeway and Dripping Springs and so forth, but, but we’re going to dig into more of the actual meet the data, so to speak.
Cynthia de Fazio 02:54
Well, I’m glad that you did, because I know your phones were ringing off the hook. Obviously, everyone wants to work with you, Phil and Henry, so it made perfect sense. So, it’s so important, Henry, I want to guide this to you. Obviously, proactive tax strategy, not reactive filing. There’s a difference. In case someone in the audience is asking, Well, what does she mean by that? Talk about proactive tax strategy, not reactive filing.
Henry Lande 03:17
Yes. So unfortunately, we run into quite a bit of clients that come to us after December 31 and they end up saying, uh oh, I owe money, or I got refunded. What should I do? Well, it’s a little bit too late, but guess what? I’m a CFP. I want to be here on your corner working for you. Moving forward, let’s plan for the following year based on what we did last year to try and alleviate taxes, maybe do some charitable gifting, maybe do some Roth conversions, up to a certain tax threshold. These are all things that we run into day on, day in and day out with all of our clients. And Phil and I will giggle. We’ll sit there after a client comes in and say, What can we do better? How can we continue helping? What are the tax codes for today, for tomorrow? What’s going to happen at any given timeline, and it really adds a lot of value. If I can help you save money in taxes, that means you can spend more in retirement, you can travel more, you can see the grandkids, all of these great things you can do more exactly. So, I encourage you come in. We may not be able to do everything for you that you’ve seen on our show, but we want to give you that customized advice.
Cynthia de Fazio 04:21
Most definitely. Phil?
Philip Capriotti 04:22
Yeah, I would say we do a lot of hand holding with the very first Roth conversion. Okay, so we want to plan for the taxes in the future. And so talking to an individual about looking at their retirement income plan and looking at their RMD distribution, estimated RMD, and we start to take a look at here’s that’s not a problem now that you’re 6566 however, and we because we can still unwind it before that first RMD at either 73 You’re 75 but if you wait, if you procrastinate, I’ll give you a perfect story. I had a Certified Financial Planner talk to a client, well, not a client, she was a potential client. Her husband had passed away. He had left her about 2.2 in an IRA and some other money as well. She was young, 62 years old, and he had worked with her, one of the big box retailers worked with her husband, and two things that he said that I thought were absolutely awful, and I was actually shocked, because the guy is the CFP is that your husband chose me to work with you, because I understand these things, and I’m telling you right now you do not need to do Roth conversions. And he actually put both of those statements in the same sentence. And I’m looking at this and I’m thinking to myself, this lady 62 years old, she has 11 years to slowly move money into a Roth to unwind this huge seven digit- she’s now filing a single return the year after next. And this guy’s a CFP, and he’s telling her, she absolutely- he actually said it’s unsuitable for you to do Roth conversions. Wow. So, I’m going to reach out to all you CFPs and all you financial advisors out there try not to use that type of language. Number one, I looked at it as more of a scare tactic, in a way. But the fact of the matter is that 2.1 if it’s being properly managed, is going to probably grow to somewhere around 4 or $5 million. The RMDs on that money when she hits 73-75 and so on, are going to be astronomical. Now I do not know what the tax code is going to be 10 years from now, but if we keep spending the way we are, and with especially with a lot of these free, or we’ll call them the government subsidized programs with a $37 trillion debt now, in all probability, since the Government owns these accounts with us, these retirement accounts, these RMDs, are going to cause an astronomical tax problem. Wow. And I was actually surprised, and I thought to myself, the very first question I asked was, when did he become a CFP? And I found out it was like 33 years ago. And the second question I asked is, is he keeping up to date with taxes and planning with respect to taxes? And that answer was no. So I came up for the topic of the show, yes, you want to work with a certified financial planner, but you really want to work with a certified financial planner that understands tax comprehensive strategies to reduce taxes, not today, but in the future, especially, this is a number one case study that that I would actually, we’re going to actually write a book, and we’re going to put this in there as this is what, what I would consider a non-suitable advice, most definitely.
Cynthia de Fazio 07:55
And again, one thing that you mentioned that sticks out to me would be the continuing of the education. I know you’re passionate about that, Phil, because you have the Ed Slot designation. Talk a little bit about that. That forces you to stay on top of everything that could be beneficial for your clients, especially with both of you being fiduciaries as well, right?
Philip Capriotti 08:13
So, with the Ed Slot master release certification, we have to recertify our credentials every six months, and this is part of that continuing education. So that means we need to know the new tax laws, how it affects IRAs, how it affects Roth, how it affects everything, charitable giving and so forth. So, when you have to recertify credentials twice a year, you’re- you have no choice but to stay current and to not get complacent. So, I think everyone, every financial advisor, especially if you’re a Certified Financial Planner, should have some sort of continuing education and maybe in a classroom work as well. I don’t care if you work with a Morgan or you work with a Nettie or who it is, I think that these credentials have to stay current, especially with respect to what are current and future taxes going to do with your client’s portfolio?
Cynthia de Fazio 09:09
That’s right, absolutely. Education is power. Phil, thank you so much, Henry, thank you to the viewers at home. This is your opportunity to take action today. We’re talking about the importance of proper tax planning also being a Certified Financial Planner, those two things combined, really is a powerhouse for you to empower your own wealth, to empower your retirement. How do you get ahold of Phil and Henry? Call in today to 888-818-6557, 888-818-6557, if you realize that you need to have help right now, assistance. We’ve made it even simpler. You can grab your smartphone, click on the QR code at the bottom corner of your screen. That’s a fast track to get on the schedule with Empower Wealth & Tax, they are here to serve you, and they understand that you not only have tax questions, you have wealth questions. You have all of those combined, and you don’t know where to go until today. Take Action. 888-818-6557, we’ll be right back momentarily on Retire Smart Austin.
Philip Capriotti 10:07
Hello. My name is Philip Capriotti. If you’ve already filed for Social Security and would like us to fast track you straight to a licensed fiduciary to create your tax efficient retirement income plan, we’ll be happy to accommodate you. You know, one of the most important priorities to ensure that you do not become tax poor in retirement is to number one, structure a tax efficient retirement income plan as well as a comprehensive Morning Star Report. This will ensure that you understand three major variables. Number one, how much risk are you taking? Number two, how much return Are you receiving? And number three, how much are your internal and external fees to fast track your meeting with one of our licensed and experienced team members, just click on the link below, complete the form attached so we can provide you with an accurate and detailed plan. Let’s start empowering your retirement right now.
Cynthia de Fazio 11:13
Welcome back to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriotti, senior and Henry Lande, certified financial planner at Empower Wealth & Tax we’re talking all about the importance of working with a person that is not only a Certified Financial Planner, but also a tax planner that benefits you. Henry, I want to ask you a question about different tax diversification. Can we talk about what that is, please?
Henry Lande 11:36
Yeah. So, Phil alluded to it. We were just discussing about a lady that we were helping with her IRA, where she had about $2.2 million. It’s great. Her husband worked hard. He had that saved, and now it’s transferred to her, but she’s stuck in one place with that. When she hits required minimum distribution age, assets will come out of that, and they will go right onto her tax return as taxable income. So, tax diversification or optimization would be having separate buckets to pull from a taxable account, or a brokerage account would be dollars that have already been taxed. They can kick off interest and have capital gains taxes, which tend to be more favorable depending on the environment you’re in. The IRA, again, is going to be ordinary income, but a Roth IRA would be tax free, meaning every dollar she took out would be tax free to her on an income standpoint. The reason that’s important is we don’t know what’s going to happen with taxes that could go up, that could go down with the deficit that we’re in. You know, I lean towards thinking one way as opposed to another. Absolutely regardless of what would happen, she could pull from different ones during different time periods. Taxes go down. Great. Let’s pull it out of the ordinary income or the IRA bucket at a very low rate.
Philip Capriotti 12:54
That’s known as tax diversification. I mean, it’s a very simple concept. And so, with that being said, we want to make sure that all of our clients are diversified. We would like to have, in a perfect world, all of our money and tax free, but there is always a happy medium. We want to create balance. We want tax deferred, yes, you know, for charitable giving and so forth, but we want tax free as well. And then we also want taxable and especially with respect to in these taxable buckets, we like to, we like to structure municipal bonds and things of that nature. So even though it’s taxable, if it’s a municipal bond, it’s tax free when you take it out. So, this is known as tax diversification, which leads us right into our I mean, we’ve been talking about it now for five years, Roth conversions. How to optimize Roth conversions? And I’ll let Henry go ahead and take that away.
Cynthia de Fazio 13:50
Yes, Roth conversion optimization. Talk a little bit about that and why it’s important, Henry.
Henry Lande 13:55
Yeah, depending on what tax bracket you’re in and which year, you know, we had discussed earlier what’s planned for taxes as we move forward? You sit down with us. We do a retirement income plan to figure out what your spending needs are, your living needs. Then we can identify exactly what tax bracket you’re in, and we can optimize those conversions based on that if you want to pay minimal taxes, great. We can do this amount this year. If you have a large income payout. We had a client that came in and they’re selling a property. They made a lot of money this year, but we have a new tax year starting January 1. We can start those conversions with them. So, it’s that forward looking planning process that allows us to optimize these conversions at a designated tax bracket.
Cynthia de Fazio 14:38
Most definitely. Phil, it’s incredible when you think about it, and you’ve been talking about this for years, and Henry as well, the importance of tax planning. It just makes perfect sense when you’re talking about someone’s wealth. It really does empower them. Talk a little bit about capital gains and loss harvesting.
Philip Capriotti 14:54
This is amazing, and it’s really a whole brand-new market. I just got. Out of a meeting yesterday, I was in a two hour meeting, and we were talking about optimizing capital losses out of tax, out of taxable accounts, and using them to either provide with tax free income, but most of all, basically structuring losses and accumulating losses to offset Roth conversions at a, at a, at a neutral, a zero, neutral tax effect. So, can you imagine taking, say, $50,000 worth of losses out of your portfolio? Maybe they’re stocks that just they shouldn’t even be there. And many times, we find they shouldn’t be there, selling them and leaving them as losses and then taking 50,000 from the IRA and moving it into a Roth and using the losses to pay the taxes. Now, again, this is why the Certified Financial Planner needs to be a tax expert as well, absolutely, because a lot of them are not using it. Now, we have cutting edge software that we’re that we’re using. It had been for the past couple of years. It’s getting better and better and better. And so, with that being said, every year you file your tax return and miss an opportunity to do a partial Roth conversion, is a year you made yourself less tax efficient.
Cynthia de Fazio 16:21
That’s incredible. And ages for this. Can anyone do this at any age? The Roth conversion?
Philip Capriotti 16:26
Phil, that’s the beauty. The beauty is you can do a Roth conversion at 30. You can do a Roth conversion at 90. You simply can’t convert an RMD to a Roth you can take the RMD, you can pay the taxes on it and use some of that leftover money, if you’re not spending it as income, and use that to reduce RMDs in future years by doing a Roth conversion. But you can’t take the RMD and move it into a Roth. You have to pay the taxes, or you have to give it to a qualified charity, 501, c3, charity. But again, this is tax planning. This is at its finest. So, I would say to folks out there watching the show today, especially those of you who know, through the grace of God, we’re going to be here for the long run. Okay, has nothing to do with my age or experience. The fact of the matter is, it’s extremely important that your certified financial planner or the advisor that you work with is also your tax advisor, if they’re telling you to talk to your CPA or handing it off to another professional that you have to pay a fee to. Chances are you are working with you’re working with a good advisor, but an advisor that has incomplete knowledge or doesn’t offer enough of the services that you’re going to need to optimize and minimize taxes in retirement. Give us a call.
Cynthia de Fazio 17:44
Phil, thank you. Henry, What about Social Security tax minimization? A lot of people are concerned about that. They know they have to pay taxes on Social Security, but there’s a way to actually minimize those as well with proper tax planning.
Henry Lande 17:58
Yeah. So, the great thing is, you are able to offset Social Security taxes depending on those tax buckets that you pull from. Okay, so we have a great case study. Phil and I have done a ton of these webinars over time that shows, if you were to take Social Security and then take Ira distributions to fund your monthly expenses, you’ll actually pay more in taxes on your social security than you would if you pulled from your tax deferred or tax free bucket or taxable account buckets. It’s all a mathematical equation that funnels down to show, hey, if we want to stay here and pay as little taxes as possible, here’s specifically what we can customize for you to approach your goals, wants and needs.
Philip Capriotti 18:39
Henry, thank you so much. So, in that same example that I stated with that young lady that unfortunately lost her husband at a very young age, as she is forced to pull money from this IRA, now she hasn’t filed for Social Security yet. All right, so with- and she’s actually collecting on her own work record. She’s not taking a survivor benefit, which is smart. Her husband was the high wage earner. But in a situation like this, when she’s forced to take only distributions from these deferred accounts, these IRAs, it’s going to cause up to 85% of her Social Security and also be taxable. Wow. So again, this was a concept, and this was one of the bullet points in the letter that I wrote to this advisor. Did you discuss this with her? So this is this, again, I have to thank Ed Slot and company, because over the last 18 years, I could have very possibly been one of these advisors that did not give proper tax advice, but the fact that I am and we are Ed Slot master, elite Ira advisors, all of these strategies are brought to the forefront so that we can explain them, teach them to clients, whether they work with us or not, helping them understand how to be more tax efficient in retirement.
Cynthia de Fazio 20:00
Phil, thank you so much, Henry, thank you so much to the viewers at home. As you can see, knowledge is power, and we want you to empower your financial future. Well, how do you do that? You call in today to 888-818-6557, 888-818-6557. We realize that you’re in the viewing audience today, perhaps hearing a lot of this information for the very first time, and you realize that you need help as soon as possible. If that’s you, grab your smart phone and click on the QR code at the bottom corner of your screen. That’s going to be a fast track to get you on the client book of Empower Wealth & Tax. The reason we have made that so easy is because we understand that this information is so timely and so critical when it comes to your tax planning again, get on the fast track. Click the QR code. Find yourself at Empower Wealth & Tax we’ll be right back momentarily. Stay tuned.
Philip Capriotti 20:54
Are you interested in growing and protecting your wealth? But not sure where to start managing wealth isn’t just about having an investment portfolio. It’s about understanding your dreams, your goals and challenges. At Empower Wealth & Tax our professional wealth management services are designed to simplify your financial journey. We create personalized strategies to help you build, protect and enjoy your wealth. Don’t leave your financial future to chance. Schedule a complimentary consultation with us today and take control of your wealth. Schedule today, and let’s start building a brighter, tax efficient financial future together.
Cynthia de Fazio 21:42
Welcome back to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriotti senior and Henry Lande of Empower Wealth & Tax we’re talking about the importance of working with a certified financial planner who is also a tax planner so that you can empower your wealth going forward, Henry, we talked a little bit in prior weeks, if you will, about the importance of qualified charitable distribution strategies. Speak a little bit again, about why it’s important to have a strategy in place when it comes to tax planning purposes.
Henry Lande 22:12
Yeah, it’s, it’s a great question, and something that we run into in a day in and day out basis, a lot of people that have worked hard and saved well, tend to also be charitably inclined. They have a master fortune of X amount, and they still want to be tax prepared and look towards their financial future, but maybe donate to a 501(c)(3) organization, which is just a registered tax-exempt organization. It could be a church. It could be your local nonprofit that collects goods and services to give to those in need, but what you can do is utilize your tax deferred assets to lower your taxable income and still get the maximum amount to charity. I believe the current exemption is at $108,000 per year that you can do on your qualified charitable distributions. I’m not saying you need to do all of that, or some of it, but it is an option to help you with your tax planning needs. Okay? And you can start doing it as early as 70 and a half, and RMDs are starting to get pushed back. So, a lot of people thought you could only do it once you were taking your required minimum distribution. But there’s about a two-and-a-half-year gap right now, and that’s going to increase in 2033, to goodness, 75 years old for those required minimum distributions.
Philip Capriotti 23:25
And with Secure Act 3.0 coming up, they’re considering on reducing the life expectancy and uniform life expectancy code to get larger, RMDs. It’s extremely important now to just keep it on the back burner, and let’s make sure that that pot doesn’t boil over. One of the strategies that we use for clients who are charitably inclined, talking about diversification of income buckets, tax free, taxable tax deferred, is I’ve actually put strategies together for clients and they say, well, here’s what I’d like to do. I’d like to give 10,020 $30,000 to this list of charities, and I want to get my Social Security tax free. How can I do that? Yes, okay, perfect question. I absolutely love this. So, you know, you put the old thinking cap on. You say, Okay, this is what we want to do. We’re going to execute Roth conversions. So, we’re going to build up a Roth bucket, and we’re going to leave money in that tax deferred bucket. So, and we’re going to make sure that we estimate that first RMD, if they want to give $20,000, I want to estimate it to be about 20,000 so only do the Roth conversions up to the point where the RMD is estimated to be 20. I’ll give the RMD to the qualified charity. I’ll take the money from the Roth, only the earnings from the Roth, add it to my Social Security, along with some municipal bond income, and voila, I’m in a 0% tax. Bracket, wow. And I’m giving to charities. I’m really having my cake and eating it too. So, this is more I would call this a more advanced. It’s a more experienced option, because we’ve been doing it for the last close to two decades. But again, these are questions that clients come to us with, and these are solutions, answers to these questions that now become solutions with again, generating tax free retirement income.
Cynthia de Fazio 25:29
You make it sound so simple, but I know it’s complicated because you do this every single day, so I’m just always just in awe of all the knowledge that you bring Henry. It’s incredible. I know we don’t have a lot of time, only a couple minutes, but you also specialize in business owner and self-employed planning. Why is that important to know? We can really do a whole show about that, actually?
Henry Lande 25:50
I vote we do because I could spend a lot more.
Cynthia de Fazio 25:56
I was like, should I ask that or not? Because that’s a big one, and a lot of things are very special and unique when you’re an entrepreneur, business owner, self-employed.
Philip Capriotti 26:04
We, Henry will tell you, we ran into a client that owns four hotels and three pharmacies. Business owner, he found us from watching the shows, and he found us online, and he works with the CPA, and the CPA never talked to him about a cash balance plan or a tax or a defined benefit plan, and I’ll let Henry expound on that. So, he’s losing deductions of how much per year.
Henry Lande 26:32
$250,000 a year, tax free, he’s able to put away this is a massively overlooked area, especially for someone who’s working hard. He’s running four different hotels, traveling everywhere. Just needs someone in his corner, on his team, telling him, here’s all my things. What do I do? His CPA wasn’t planning forward, the CFPs will.
Philip Capriotti 26:52
Most definitely and he’s 48 years young now, yeah, and he plans to work until he’s about 65 so for all business owners, I would say it’s so it’s great to have a CPA doing your taxes, but they may not be looking for areas for you to minimize taxes by saving for retirement, like these cash balance plans. I could put it in tax deferred. I could always do Roth conversions later from this and develop he wasn’t contributing at all to this. He was, he was, I think putting $7,000 a year or something like that away, or he had a SEP IRA or something. But at any rate, I know we’re running out of time, so I’ll stop the (indistinct).
Cynthia de Fazio 27:30
Unfortunately, we are Phil, thank you so much, Henry. Thank you so much to our viewers at home. Thank you for spending time with us. This is time for you to empower your wealth. How do you do that, you call in to 888-818-6557, or click the QR code at the bottom corner of your screen. That’s the fast track to get to Empower Wealth & Tax. Be safe, be happy and be blessed. We’ll see you back one week from today. Take care now. See you soon.
