Hello once again, Texas, this is retire smart Austin with Phil Capriotti senior, the founder of Empower Wealth and tax every single week we try to help you with retirement planning strategies. I’m your host, Mike spangle. Phil, how you doing this week?
But top of the morning to you, Spike, I’m doing great.
We- you know what we’re laughing already, because we’ve got a fantastic show. We do a lot on taxes. We talk about sometimes high-level instruments, sometimes even hard for me to follow where Phil is going. But this is a fun show the income building strategies for retirement, how do we maximize that the steps that we get there, this is the how to stuff that you want to share with folks so they can build the retirement of their dreams. And you’re going to give out the information. All of it right here today.
Yeah, that’s exactly right. And you know, last week, folks, I want to apologize, we didn’t mention about taking the first five callers. We had 13 people call and book appointments, and my staff wanted about to hang me. And we want to help as many people as possible, we truly do. But each week, because we have the TV show to two days a week, and then we have the radio show three days a week. So, we have to save it to the first five callers. Again, all of your all of the retirement income planning your Morningstar planning your Roth conversion planning, all of this is complementary. Many times, we’ll visit with a potential client, three different interviews, before we’re finished with the planning, but it is all complimentary. But we have to keep it to the first five callers. So, get ahead of the crowd, so to speak, dial 888-818-6557 Call for your written retirement income plan and comprehensive Morningstar review.
Right, and also tell us because I see it down there. If they use that QR code, they can open up their smartphone to the camera function pointed down at that little box down there, click on it. And you can go and schedule your own appointment right now. For the first five people who do so, either beat them to the phone lines or do it with your own phone inside the QR code right now. Let’s get on with it. So, maximizing wealth strategies, maximizing how we get there? Where does it start for you? Is it just in the savings bucket?
No, it’s really an all the above approach. First of all, in order to maximize your retirement savings, understand this, whether you’re young or old, whether you’re getting ready to retire in the next five to 10 years or already retired, especially if you have children get their ear. It’s extremely important to put as much as you can into your retirement savings plan as soon as you can. I’ve had folks question: Well, I only contribute up to what the employer gives me through their (indistinct)
I hear that all the time, Phil, I’m starting a new job. Hey, though, this employer, they match up to 6%. So, I’m gonna put that in. I’m always hearing that you just put into the match?
Well, what I tell them, spike, is if your employer is willing to match you 3, 4, 5, 6%, is that all you and they’re willing to match that for your retirement? Are you willing to not contribute more to your own retirement? It doesn’t make sense. So, you should contribute as much as you can. Number two, start right out of the gate right out of the gate with the Roth 401 K. Now they do not if you’re working, contribute talk call your administrator and tell them you know, I was talking with Mr. Capriotti or any advisor, it doesn’t matter. And they said that there’s a Roth 401 K option. They don’t advertise this, Spike. And I don’t know why they don’t advertise it. I think it’s probably maybe because they’re not used to it.
Because it’s all self-directed. I mean, it depends on the size of the company, but you go there, and you have to pick the funds yourself. You have to pick what you’re going to put it into. You’re not getting advice to say Oh, well, what’s your age? What’s your possible tax bracket? Have you considered this, you don’t (indistinct)
Well, the earliest time to start the Roth savings for your retirement is as soon as you get a job. I mean, we started for our son Parker while he worked on the ranch, but the fact of the matter is, you really want to contribute, and I don’t really it doesn’t really matter how much you’re making. Always pay the tax upfront now. And why do I tell you that because taxes are going to increase precipitously in the future because we simply cannot stop spending and giving and printing money. Taxes are going to go up, so take advantage of that Roth contribution while you can.
Do that and kind of a redirect. So, let’s say that we’re in our late 50s. We’re in our 60s, we’ve been contributing to 401K’s regular 401K’s are tax deferred, because of what you’re saying the taxes are going to be going up. This is why I continue to contribute to my tax deferred account. Should somebody in their late 50s or 60s though, also start contributing to the Roth 401? K?
Absolutely. It’s foolish not to. if you have to understand something in order to receive your social security attacks efficiently and hopefully tax free, you must have a tax-free bucket to draw from, as far as I’m concerned, I’ve had people say how much is enough to put into my Roth 401 K. unlimited amount. Okay, as far as I’m concerned, if all of my money is in a Roth, I’m great. Why? Because when I start to take distributions, it doesn’t affect the taxation on my social security. It doesn’t affect my Part B and Part D earner premiums. And not only that, with many of the plans, we put together these tax efficient retirement income plans, don’t you want to maximize your Social Security and not have to give any more of it back to the government. And again, I have nothing against paying taxes I pay. I’ve been paying taxes for over 50 years, and I’ll continue to pay taxes. We live in a wonderful country. But there’s a limit. How long do you want to pay taxes? And don’t you want to enjoy your retirement in a tax free or tax efficient manner? My answer is yes. So, maximize Social Security, understand and consider the factors of how you’re going to be receiving Social Security. How much in taxes, do you want to pay back on that Social Security when you retire? That all is determined by how much you contribute to your Roth.
We want to maximize this income in retirement. So, when we come back from this quick message from yourself, I actually want to ask you how do we maximize the Social Security? We take it early; we’re not necessarily maximizing it. But there’s something else, because I heard you say this last week on the radio, and I just love this. You feel that as folks get into retirement, they shouldn’t have to pay the taxes anymore. Now Phil is not running for office, but I think he could hear. But you’ve said this before and why is that you feel that as we get older, we’ve done our job, we’ve paid our taxes, and we shouldn’t have to pay it in retirement.
Look, here’s my this my simple feeling. Okay, we’ve been all of us been paying taxes. For me, I started working when I was 16. There was not a year that I did not have earned income, which means it was not a year that I did not pay taxes. Once you hit your 60s and 70s, we’ve been paying taxes for the last 30, 40, 50 years, we did not tell our elected officials to spend debt into the trillions of dollars. Okay, we’ve been kind of hoodwinked. Because most of us in a way in a manner of speaking and what the reason I say that is we were told to put money in your 401 K, save it. And then when you retire, you’ll be in a lower tax bracket. And now what we’re starting to see is because the debt, there’s over $45 trillion in these retirement accounts that hadn’t been taxed yet. There’s 35+trillion in debt. We know where they’re coming. I know, I understand why they’re not worried about it. So, we really want to establish those counts. I don’t think anyone once they reached the age of 75-80. If they’ve been paying taxes for 50-60 years, I believe you should have a tax holiday. Okay for the rest of your life. Why? You did your fair share, okay, for the last 50-60 years, just my internal feeling. Now, unfortunately, the IRS doesn’t share this, share my feelings on that. But they have given us the window to do it to create our own tax-free retirement income plan. Why you want to talk to a tax expert like myself, or someone who’s a licensed fiduciary who can help you navigate through the waters and stay away from the get go to stay away from the tax shark.
Right, right. We want to get that tax partner out of your back pocket out of your accounts, call the phone number you see right here the first five callers because we do have to limit it here today to make sure that we’re being as tax efficient as possible. Look, maximizing your income in retirement is just as much about tax efficiency. So, for the first five callers, not only will we do a complimentary review of your portfolio, your investments, but we will also run your tax efficiency report where we feel Capriotti SR and retire smart Austin right after this.
My personal feeling is that no one who has worked in this country and paid taxes for 50 years or 55 years should ever have to pay taxes in retirement if you put a plan together. That is tax efficient, so that when you retire, receiving money from Social Security should be tax free. receiving money from your pension should be tax free receiving Money for maybe life insurance policies are tax free. If you put together the right combination, what you can find is you can structure a tax-free retirement plan for just about anyone to accomplish any retirement income goal. I now currently have clients that want $120,000 a year, 10,000 a month. And I have clients that we’ve worked with for the last 10 years that pay zero taxes on that income.
Welcome back to retire smart Austin with Phil Capriotti, senior He is the founder of Empower Wealth and tax right here in Austin, I’m your host, Mike spangled today is maximizing your strategies for your income in retirement net does include tax analysis, is there much you need to do though, to help people with maximizing Social Security and pension plans aren’t those pretty much set depending on when you turn it on?
Yes, for the most part they are. But again, in order to receive your Social Security, the way this system is set up, is you basically have to have at least two accounts to draw from, they say three tax deferred accounts, taxable accounts, tax free accounts. As far as I’m concerned, you can take your tax deferred account and move it over into a tax-free account. If you have the resources, financial resources to pay the taxes and allow it to grow tax free. We beat this thing up for a long time, when you actually everybody’s tax strategy is different. Because everyone’s net worth is different their financial resources, they’re different, their retirement income goals different, what they paid into Social Security is different. Some have a pension, some do not. So, every plan that we create with a client is different. It’s designed to be customized to your goals and what your income needs are. So, in order to reach tax efficiency, though, you have to make sure that you maximize your social security. So, I’ll give you an example. For those of us who were born before 1960, okay, your full retirement age is 67. And I’m going to keep this simple. You’ve paid into Social Security, if you paid into it for 35 years, they take the top 35 years you paid into it. And then they either deduct or they add, if you file early, and your full retirement age is 67. If you file at 62, for Social Security, you only get 70% of your Social Security benefit 63, you get 75%, 64? 80%. So, does this make sense to anyone? I paid into Social Security maximize what I paid in Social Security for 35-40 years. Now I’m going to turn it on early and get 70 cents on the dollar. No, it doesn’t and be close half of your Social Security is placed into your provisional income formula. The more you get from Social Security, the more efficient by nature your retirement income plan is.
Okay. And there was also something from it that it was never meant to be taxable. I mean, that was- that was (indistinct)
That was a promise, but we know that, you know, you don’t have to be a licensed fiduciary to be an elected official, unfortunately. But I do understand they’re crafting some sort of a bill that changes that. And I think that we all have to have a certain ethical standard. The fact of the matter is, if you make a promise, okay, like originally, Social Security, you pay into it. It wasn’t designed to be a retirement plan, but it was designed to give you an old age pension that was tax free. You know, and then President Reagan came around with Chip O’Neill, and they changed it made they made half of it, it can be taxable, you know, and then President Clinton came around and 85% Whoever’s running the next president, he’ll be running the country, whoever that may be, it could be 100% of my Social Security is taxable. They don’t really honor the promises of previous generations is the point I’m making.
So, we have to find as many of these tax-free buckets as possible. When I look at the health care one, are you a big fan of using those health savings accounts? Ways that we’re able to save- I know you’re a big fan of the Roth, what about those kinds of accounts.
Yes, and they Health Savings Account are fantastic. And so are those 529 plans with respect to the Roth with respect to the 529 plans and health savings accounts, you can only contribute to a health savings account up to the age of 65 whether you’re continuing to work or not. So, load those plans up. Now you can take distributions for just about anything and considered health care, even dental work and things of that nature, non-prescription and prescription drugs, just about any health and many times beauty A’s. So again, that’s a resource I can draw from, and I don’t have to pay taxes, and it’s allowed to grow tax free. Now I can’t contribute after 65 but I can take from these health savings. housings HSAs as long as you want as long as you want, okay. And as long as you take it out for a qualified good or service, it’s tax free. The 529 plan I want to talk a little bit about, we like to set up 529 plans for all of our clients and their grandchildren. I’m talking about client’s grandchildren, and sometimes children. Why? Well, they say, Well, Phil, they can only use it for college. What if they don’t go to college, if they do not use the 529 plan for college, they just passed a law a couple of years ago, it was part of the secure 2.0 secure act 2.0. It wasn’t really advertised. If you’re watching the show, you know about it. Any unused 529 plan is for a beneficiary of that plan. If it’s unused, they can convert up to 30,000 of it into their own Roth. Okay, wait, I can take money from the 529 plan that my grandparents or parents put in there? And if I don’t use it, I could take up to $30,000 as a lifetime transfer to my own Roth IRA. Correct? The answer is that’s correct. So, there are many more uses for these 529 plans, not just education. But of course, you know, the normal things, educations, books, and so forth.
As you said, As a licensed fiduciary, you have to cover so many different things. This is a rapid-fire program today. There are a lot of different topics in here. But we’re trying to maximize the income in retirement, do we then need to really consider our diversification of the assets, the asset allocation, its wealth and tax, but honestly, I hear a lot of tax in today’s program, what about the assets?
We manage, you know, we manage and I won’t get into the number we manage a lot of portfolios and 401k is a very large number. And we enjoy doing that. One of the things that a lot of advisors and tax planners do not enter into his tax harvesting. So every single year, folks, if you have a taxable account, if your advisor is not walking through your statements and showing what we would consider are losers and winners and rebalancing by tax harvesting, taking the losses, okay, the clients the investments we no longer want because they’re losers, and offsetting them the winners, we can sell some of the winners sell the losers and tax harvest at a 0% rate. So, if you’re not doing tax harvesting at a minimum once a year should be twice a year, fire your financial advisor and maybe even your tax professional. Because this is something again, we do as a matter of fact, because we’re thinking of it on a regular basis, you should be doing it automatically. And if your current advisory team is not considering that at least once a year, I like to do it twice a year, it’s time to call our 800 number and set up a complimentary consultation.
Right. Calling that 800 number we’re doing it for the first five callers today we’re gonna get the complimentary review and your tax efficient analysis should you be doing a tax loss harvesting are the professionals you’re working with not reaching out to you about you doing the tax loss harvesting, that it’s important for your portfolio that maybe you should be working with someone who will reach out to you who will take care of this with your investments. We’ll do the complimentary investment review and the tax analysis, and you will literally walk away with it. But you need to call the phone number right here and we have to limit it to the first five callers call the phone number more retire smart Austin with Phil Capriotti senior right after this.
Most of the folks that we work with are not going to outlive their money. When an individual comes into our firm that very first question they ask, How do I know you’re going to be here five years from now, your financial advisor and your licensed fiduciary this should be a lifelong commitment. It shouldn’t be a revolving door exercise generational planning. We have an opportunity to not only work together with retirees, but having my children work with their children, my grandchildren working with their grandchildren. So, we’re establishing a relationship that will literally go through several generations. I have three children that are actively in the business. My youngest son Parker, who’s 22 is a junior trader. He works in our home office in Phoenix with foundations. He’s in a three-year mentoring program. My son Phillip is also a licensed fiduciary. He’s 41 years old, he will take over the business and my daughter Lisa, my oldest daughter who’s 42 also has her securities and fiduciary license as well. This company will pass to my children and hopefully someday to my grandchildren, but in the interim, teaching them through my example. That’s our firm.
Welcome back to retire smart Austin with Phil Capriotti, senior of Empower Wealth and tax maximizing income strategies for your retirement is what we’re talking about today. I’m spike spangle. And I enjoy this because I want to know how we can get the most out of every dollar every 10,000 every $100,000 that we have in retirement, and it can be complex. What about let’s move on to the withdrawal strategy? Does it matter if we’re taking from the taxable the non-taxable, so
So many folks come into my office, and they think that it doesn’t matter where they take the money from? And again, they’re not really thinking because they don’t understand the complexities of the tax return. And so, developing a tax efficient retirement income plan includes a retirement withdrawal strategy. What accounts do I take from? And in what level? How much do I take from each account to achieve my lowest as potential tax bracket. So, we, in addition to managing portfolios, managing taxes, tax returns, Roth conversions, we want to manage the retirement withdrawal strategy. So, we’ll actually will part of our review is to will let the client know, okay, you’re going to pull X amount from Social Security, we’re going to pull X amount from the Roth is your How much do you need, you want 150,000, you want 100,000? Based on how much you want to pull out of your retirement accounts for retirement income, we’ll develop a withdrawal strategy to minimize the amount of taxes you pay on, no matter what the level of withdrawal is, many folks do not and especially advisors, they simply do not talk about it. I believe they know it, because you know, when we do our certified financial planning course, it’s covered. It’s covered in there. But again, they cover a lot of things in there. And not everything is actually used. But I think that’s a very, very important issue. And it’s also an important variable to consider in retirement. The next thing is, how about withdrawal strategies for my wife when I’m going or my spouse when I’m gone? Yeah, folks, don’t think about that as well. So, these are the things that we dive into, when you come into our office, and we set up a tax efficient retirement income plan, what we’ll do is we’ll give you nuggets of knowledge to help you understand whether you work with this or not. What does your retirement income strategy withdrawal strategy look like?
You brought up something there and leaving it for the spouse and maybe even for the kids. But again, maximizing all of our dollars, can we talk a little bit about the estate planning, because we want to maximize it as we leave it to everyone else as well, which means tax forward thinking so how does this fit into the mix? When you’re putting together the plan?
Well, estate planning is really going to be extreme. It’s always been important, but really important now that we have a sunset of the estate tax code of the old estate tax.
Now, I’ve heard this from regular taxes. What is sunsetting with estate taxes?
Well, you can, if you’re married filing joint, you have a lifetime exclusion of close to 13. It’s like 12 million 8 hundred, 12.9- it’s 12 point some million. Well, that sunsets at the end of 2024. And it reverts back to the original code. That original code is we had to pay upwards of between 45 and 50% on any estates worth over $3 million. I’m talking about federal estate taxes not federal income taxes. Now fortunately, we live in the lovely state of Texas, the land of the home and, and the free and the brave. Also, the land of the tax free income tax, we’re at a 0% income tax. Okay. And hopefully you folks moving in from other states don’t want to change that we like our 0% state income tax in Texas, but the federal estate tax, once this sunsets, it’s up in the air. Okay, they’re juggling the ball. Some are saying it’s going to drop down to 2.5 million. Others are saying no, they don’t have the data, they wouldn’t have the audacity to do that. What are you kidding me? They’ll do whatever they can get whatever their hands on whatever they want. But they look at this as they’re looking at this as a major source of tax revenue to pay down or again, maybe offer more benefits or pay down the debt. So, crafting aid and estate plan is extremely important now, because when these new estate tax limits sunset, we’re going to see is we have inflation has inflated the price of our real estate inflated the price of our businesses, but it hasn’t really inflated the US They tax, it has not increased significantly, along with inflation. So, it’s important to craft an estate plan. Those of you who are watching, if you haven’t updated your will in the last five years, or you’re not even sure what we’re talking about with an estate tax plan, call the number below or snap that QR code. And come on in. If you have a high net worth, it’s extremely important that you protect your spouse and your children and grandchildren from what I refer to as unintended beneficiaries. Who are they, they’re people cashing in on your estate, whether it be the government or other folks. In addition to the people, you want to receive the money, meaning your spouse, children and grandchildren.
One last thing is we’re talking about building our income strategies and maximizing it is, is the inflation protection itself. Inflation was really rampant over the last few months, the last couple of years, we just want to make sure that we’ve got assets that are growing along with the inflation, it’s not just taxes that erode away in our savings, it’s also inflation. What’s protected?
I’d like to address that. So not only should your retirement income plan adjust for inflation, your income plan each year should automatically adjust for inflation. For many of you, your Social Security, you’ll receive a COLA and in 2023, that COLA increase to help accommodate for inflation was 8.7%. On average, your Social Security increases over the last 20 years, they’ve had an average COLA increase of 2.2%. I like to build in an average price index, okay, or increase in your retirement plan of between three and 5% a year. Why? Because we don’t want to see the purchasing power of your retirement income become eroded because of inflation, the secret tax. Inflation.
Right. So, folks, there are many different strategies. There’s a lot of different things that we covered here today and includes making sure you maximize your 401K’s making sure that we’re doing tax forward planning, even the estate planning all of that combined. But you know what, before we wrap up today’s program, I think Phil can say it best. What are the things you want to cover in that complimentary review?
Folks, what we want to do is put your retirement income plan in writing many of you folks have significant assets but no written plan. Or you think you have a written plan. It’s in your mind and it’s not written down. What we want to do is we want to take what is in your mind and if you’re married what’s in your spouse’s mind and put it on paper? We want to structure a tax efficient written retirement income report for you. So, you understand how you cannot outlive your money in retirement.
Phil Capriotti senior thank you so much for talking about maximizing strategies this has been retire smart Austin get your own complimentary review and your tax efficient analysis right here. Call the phone number, come on back next week. Thank you so much for watching.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
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