Welcome to Retire Smart Austin. My name is Cynthia De Fazio and I’m joined today by Phil Capriatti Sr of Empower Wealth and Tax and to our viewers at home. We’re talking all about taxes, tax planning, and tax-free retirement income strategies. Phil, how are you today?
Good morning, Cynthia. I am doing well. How are you?
I am doing fantastic. I’m always excited to be in the studio with you. Because obviously, you’re so busy. I know that you are seeing a lot of new clients that are coming into the office seeing existing clients. Also doing seminars. You’re just on the go.
Yeah, I actually love it. It seems like the faster I move the younger I become, right.
You are aging in reverse. Yeah. Oh, yeah, we are definitely. We’ve been working together what almost five years now. You look younger.
Yeah. Thank you. I appreciate that. So do you. Well, thank you, you know, without doubt. I like what we’ve been doing lately. throwing me surprised topics, just, just toss the topic out there. Our shows have always been part of me so spontaneous from five years ago when we first started. And now it’s so most I almost say it. I expected get different topics of the last several shows, which completely off our normal mantra. But at any rate, yeah. I love this. Now, it seems like we’re coming back to Senator. Tax Free retirement.
Yes. Well, and I want to talk to you, first of all about the fact that you’ve always been extremely passionate about tax planning. So, if our viewers are watching you for the very first time today, Phil, why is tax planning and tax strategies so important overall, for the retirement years?
Well, number one priority is Washington. When we look at Washington’s reckless spending, and again, no offense to either party, they’re both guilty, all three parties are guilty of it. It’s become ridiculous. We are one of the most successful economies in the history of man. But yet, even though we take in close to $5 trillion, trillion with a tea per year, they still feel obligated to spend an extra 2.22 point 5 trillion that we’re borrowing. What also amazes me is how we borrow money and give it to other countries, countries that may or may not even care for us, we’ll just leave it at that. So, this is reckless spending, we would never be able to do this. Now I understand the mentality, the mentality, maintain and power even I have to buy it. But the fact of the matter is, we’re at 35 trillion plus in debt, the interest on that debt as rapidly as rapidly approaching 1.1 trillion just an interest, it’s going to exceed our national defense budget. Now there’s only not math is still math, there’s only one thing that’s we can expect to happen. And that is taxes are going to go up as we move forward in future in the future, because many of our elected officials simply do not act as a fiduciary to the constituents. And what I mean is, I’m talking about the taxpayer. Sure, sure. So, with that being said, we know that the retirement accounts have literally 10s of trillions of dollars in it. We know that the Comptroller General said once we hit 40 trillion, taxes must go up somewhere in the neighborhood of 10 to 20 to possibly 25%. Over and above the tax rate we’re currently paying. So, with that common sense dictates that we focus on tax planning and retirement, because who has the majority of the wealth? Obviously, the wealthy the wealthy? Well, I would venture to say, who pays the majority of the taxes? Well, that’s easy, the wealthy, the wealthy, and who do we consider wealthy today?
That is the question that is the question different for everyone. Yeah,
it is different for everyone. Well, I would say that they consider you wealthy if you have $500,000 or more. Okay. And I think the more wealth you have, when you get into 1,000,002 million, 3 million, I’m talking about liquid. We can already see the changes in Washington what they’re doing they want to they want to tax unrealized gains in the market. Hmm, I mean, they’re looking at ways to target. Okay, additional taxes. But the biggest is tax deferred accounts that are I consider government retirement accounts 401 Ks four, three B’s IRAs 457. Any time any, any of savings’ accounts that we’ve saved in for retirement that have been tax deferred, we’re going to defer it out later. You know, taxes are going to be lower later. Well, that’s become really a fallacy at fable. Okay, app. So, with that being said, I think it’s extremely important. Faber had all wanted to put these taxes, okay, reduced taxes in retirement will favor the prepared. So being prepared, okay means executing tax free and tax efficient ways to receive income and retirement. I’ve said it before. And I’ll say it again, folks, those of you who have been taxpayers for the last 50 years, okay, that means most of us who are getting ready to retire and have saved like a good taxpaying citizen, I believe that once you reach 75 years old, at, at the max, you should be in a zero exempt tax bracket. Wow, we’ve done our fair share. We’ve paid enough taxes. So how do we do it? They’ve given us the window to move in, in. Back in 2010, they opened up the Roth conversion strategies, all of our all of our elected officials have been using them. So, let’s follow the leader, shall we?
That makes perfect sense. And I know, Phil, that you are so passionate about the Roth conversions. We’ve talked a lot about that. But before we go into that even further, there’s a difference between the Roth conversion and the Roth contribution. Can we talk about what that is in case someone’s confused?
Yeah, sure. So, the Roth 401 K or the Roth IRA contribution is only valid and only and is an option that you can take advantage of only when you have earned income. So many folks have will say to me, Well, yeah, I have rental income from my properties, I have passive income from my properties. Well, that’s not earned income, earned income is w two income, or net 1099 income if you have an LLC, or if you have, you know, an L Corp, S Corp, or if you’re an employee, then with the 401 K Roth, you can and I’m talking about your 403, B Roth 457. Roth, now, all of these qualified accounts have the Roth option, you should be contributing as much as you possibly can into that contribute only while you’re working. So that’s the contribution and the conversion and happens either when you’re working, or when you retire. Okay, you can do it either time, it doesn’t matter. There’s no age limit. There’s no income limit, and there’s no requirement to be working to do a Roth conversion, you can be working, but you don’t have to be. That’s where we have amassed at the majority of our wealth in these in these trillions of dollars of accounts that hadn’t been taxed yet. So, what our government has said, Look, you can take money from that account, you cannot take possession of it, okay, but you can transfer it into a Roth. And you can now pay the tax once and grow tax free. So let me give you an example. Okay, I have several dozen clients. And over the last 10 years, we have been doing Roth conversions while they were working and when they retire, okay? We don’t even change the investment. Many folks think you have to change the investment. So, let’s assume for a moment, I am investing in a you know, the magnificent now, five, it used to be seven. Okay, basically high-performance chip manufacturing, we’re talking about AI. Okay, let’s assume for a moment, I want to take $50,000 of that AI that’s in my taxable account. And I want to move it over into my Roth account. I’m now going to pay between 12 and 24%. Tax once now all of that growth of that AI that is now growing tax free. Wow. That’s amazing. Okay, so to not so when we want to take, we want to take a look at your portfolio, we want to look at investments that are taxed me later. I trust the government; they won’t raise taxes on me because they said they won’t into take things. Be proactive. Say you know what? This is the lowest tax bracket we’ve seen in the history of our country. We have two more years, depending on who gets elected this this next cycle. Absolutely. We’re figuring two more years. Let’s stop aren’t doing Roth conversions and Roth contributions now. So, I pay the tax on the seed and not on the growth. Also, with a Roth contribution and a Roth conversion, you do not have to take required minimum distributions. Wow. Okay. And the more money you have in the Roth, we can structure a distribution plan from a Roth with your social security, and actually take tax free withdrawals from the Roth and receive our Social Security tax free. None of the advisors that I know are talking about it, except some of the Johnny and Johnny come lately that are probably been watching the show in the last five years and haven’t had become overnight tax advisers. You’ve seen a few of them, but I’m just saying it’s important to look at taxes not just today, but it’s important to, to assume with tax brackets being as high as 70, 80, 90%. In the past, I believe we’re headed towards 40, 50, 60, 70% tax brackets, and in the next five years, 10 years when this does happen, because of the explosion of our debt. Those of you who watched the program and listened and came into work with us will be thankful fact we might even bring some guests in to talk about how they reached the 0% tax bracket arena, that would be great.
Well, Phil, it’s time for our very first commercial break to the viewers at home. 888-818-6557. There’s the number that you see on your screen. What Phil and his team have done this week is to set aside five spots, one per person, this is your opportunity to claim that spot today. What are you being offered Exactly? Do you have a tax plan for your retirement years? Are you prepared for any tax changes that could come your way? If not, don’t miss the opportunity to claim your complimentary consultation today receive your tax plan that?
Okay, Debbie was a CPA, they amassed over $3 million in their 401 Ks and 457 plants combination of the two. That’s all they did all of their savings. Okay, in tax deferred accounts, they didn’t even have a Roth IRA, because their CPA told them to get as much tax deferred money as possible, because he was a surgeon with a high income. She was a CPA with a high income, and that’s what they were concerned with. What’s my lowest tax bracket today? Shame on you CPAs for thinking that way is one dimensional and I And I say that because when folks get into retirement, and they need to start taking distributions from these government taxable accounts, it can create a massive problem, you might want to sign up for my CPA course, on how to execute Roth conversions for your clients. So, what we did was we talked about the new tax law, and it came in 2010. So slowly what we did while taxes were at the lowest rate, we were doing Roth conversions between the 22 and 32% tax bracket, I have the software we do mock tax returns with our clients to help you determine how much you can convert to the Roth in your lowest tax threshold. All right, because we want to put a plan together yearly to move money over absolutely over a nine-year period, we moved the entire two point a close to $3 million into the Roth IRA. We started with their 401 k’s and forfeit the sevens. Now, these folks have retired, we maximize their Social Security, his social security check, he filed at age 70. He retired as 62 He filed at age 70. His social security check is $57,000 a year, her Social Security check is $40,000 a year, they now have retired taking $200,000 a year in income, a combination of their social security and 100% earnings from the Roth. And none of their Social Security is considered taxable income.
Wow.
None of it. That is none of it. Awesome. Now, we did and what I did was I did a comparison study with them. I said, Now look, let’s assume for a moment, we still max your social security app, but we didn’t exercise the Roth conversions. And you were taking those same distribution from your traditional 401 K Ira 85% of their Social Security was taxable, and they’re in a 24% tax bracket. Wow. And that’s just as simple as that is. And so, when we look at well, they’re wealthy, they can afford to pay the taxes. Like I said before, if you pay taxes for 50 years, you should deserve to be exempt from tax bank. Now, the government’s give us the opportunity to do it, they pass the law that allows us to do it. The fact is, too many advisers don’t talk about tax planning and retirement exam. I have dozens of folks, this is a prime example of high net worth, folks. But I really like to help the folks that have modest income as well sure, because with a modest income, let’s assume your combined Social Security is $60,000 a year, and you can pull 60 $70,000 of Roth earnings each year. Now we have another situation where you’re getting 120 $130,000 in a 0% tax bracket. Remember, folks, the more you get to keep up your Social Security, the less you have to take from other assets in retirement to accomplish your goal, retirement income.
Well, Phil, I have to ask you a question. Obviously, with these strategies that we’re speaking of, and I know the Roth conversion, specifically, you’re passionate about, why aren’t more advisors talking about it? Do they just not know how to bring it up? Do they just push it aside? Because I know obviously, there’s such a difference between working with someone who specializes in the accumulation phase of life versus the distribution phase? Could that be a reason why?
I think the reason why is education, I think in certain, certain circles, it may even be a little on the selfish side because the adviser realizes we’re going to have to pay the taxes, and it’s going to come out of some of these investment accounts, we have to pay the tax. Okay, I attribute my knowledge to Ed slot. Okay, so I think most advisors are not Ed slot, Ira advisors, I joined ED slot, and I’m now an ad slot mastery, lead Ira advisor. I started in group five, over 15 years ago, so many of these tax saving techniques and strategies were taught to me through ad slot and company, I tell all of my CPA friends that are still active. If you do not go into continuing education with that slot and learn tax free and tax efficient distribution strategies. You’re really not doing a service to your client, not a complete service.
Well, Phil, I know that you’ve set aside a few spots this week to the new viewers that are actually watching for the first time let’s talk about what that will entail. If they are the ones that claim that spot,
folks, dial 888-818-6557. I’d like to invite you into our office to see exactly how tax efficient your retirement plan is. Whether you have a written retirement plan or something that’s etched in your brain. I would like to put it in writing and show you what your estimated RMDs are going to look like based on those returns. And let’s see if you need to build tax efficiency into your retirement income plan. Also, while we’re at it, we’ll also run a Morningstar report on your investment portfolio. Pardon me and your 401k to determine how much risk is in that portfolio. And if it’s according to your suitability, risk tolerance and liking so, click the QR code, or dial 888-818-6557 I’d love to meet you I would love, and our staff would love to help you enter into the 0% tax bracket in retirement.
Phil, thank you so very much to the viewers at home. That number to call is on your screen. 888-818-6557. As you can clearly see from today’s show, there is a difference. If you’re entering the retirement years, you deserve to have a tax strategy, a tax plan in place. Phil and his team have reserved spots set aside I think we had five total when we started the show. This is your chance to claim one you have nothing to lose and everything to gain. If you don’t have a pen. That’s okay. Grab your smartphone, click on that QR code at the bottom corner of your screen that will take you right to Empower Wealth and Tax landing page. We’ll be right back momentarily. We’re talking all about how to build your tax plan, tax free retirement income and so much more. Stay tuned.
You know, going back to work after retiring is not ideal. I’m Philip Capriatti, CEO of Empower Wealth and Tax if you amass the 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 we can we specialize in retirement income planning, tax mitigation, estate planning, and so much more. So, plan your retirement right Call now for your own complimentary portfolio review and tax analysis.
Welcome back to Retire Smart Austin. My name is Cynthia De Fazio joined today by Phil Capriatti Sr of Empower Wealth and Tax and we’re talking about just that empowering you with your wealth and how to be tax free, if at all possible. Phil, this is an amazing show. And obviously I know that you’re so passionate about the different strategies in tax planning. One of the things that I know that you get a lot of questions about would be annuities. Is there a way for annuity income to be structured tax free?
Well, yes, that to answer your question directly. However, most insurance companies do not offer products that as a licensed fiduciary, I would consider selling. And the reason, reason I say that is many of these products are really designed to enrich the insurance companies and, and really throw minor, minor returns 234 percent to the client. My, my ultimate idea is if I won’t own it, I won’t sell it, I won’t recommend it. Now, there are a handful of annuities that we will use. And I’ll explain why. Okay, many times when you own an annuity and I see advisors, they put these folks in annuities put IRA money in an annuity and the insurance company won’t allow them to do Roth conversions. Now you’re stuck in the mind, because now even when you turn that income on, it’s tax-free income, and in many cases, it’s going to cause the Social Security to be taxed. And in even more cases, your Part B and Part D premiums will go up because you’re going to have to pay an ermine penalty as well. Okay, what we like to do and for some of my clients that are very, very conservative, they’ll say, Phil, how I don’t have a pension. My wife doesn’t have a pension, we have social security. We have X amount of dollars in this 401k Let’s say a seven-digit 401k A million dollars in it. How can I make that tax free and efficiently without market volatility? So, we have about a handful of products out of the 2000 products that are offered that allow us to put money into a fixed indexed annuity that allows for double digit gains when the markets doing well. And 0% market volatility when the market is failing. Wow. Okay. Okay. Now one of the things I like to do I like to use one of the reasons I like to use these specific products is because it allows us to do internal Roth conversions without market volatility. Many clients say once I’ve paid a tax, I don’t want the market to drop my account any, any amount of money. So sure, many times what we’ll do is let’s just take an example. We have five years to do a conversion. The client wants to convert say, $500,000 could be 200,100, it doesn’t matter depends on how large the tax-free pension is, how much do you want? How much do you want. So, what we’ll do is over a five-year period, and clients love this, we’ll do internal conversions in that product, we’ll do maybe 100,000 a year, and 80,000 120,000. So, at the end of the three-year period, four-year, five-year period, depending on the timeline to turn on tax free income, we convert the entire annuity into a Roth. Wow, now we’ll turn on a joint life, increasing income tax free income, once we’ve done the conversion. And we’ve done we’ve done dozens and dozens of these and clients to do it, they love it, I’m sure it was. Now since your company didn’t offer you a pension, they offered you just a 401 K, that’s taxable forever, we have to create a tax-free increasing pension. Now, here’s the rub. And this is extremely important. When you’re married and you lose a spouse, one spouse passes, you get to keep the larger social security check. When we set up these tax-free pensions, it has 100% spousal benefit, whether the, the spouse was the IRA owner or 401k, owner or not. But what happens is you go from married filing joint to now filing single. So, what we want to do with these pensions is make our spouse 0% tax efficient, or 0% tax bracket as well. Okay, so they’ll get the larger social security check. They’ll get the large and by now that that tax free pension is 40 5060 $70,000 a year. So, because it’s a Roth tax free pension, it allows your spouse’s Social Security not to be taxed. Oh my gosh. So not only does it, not only does it coordinate with a tax free plan for you and your wife or spouse, but it also helps legacy planning for when you’re gone.
Phil, these are incredible options that people I’m sure are learning about for the very first time today and we are just scratching the surface.
We are and, and the, and the big blocks real retail retailers down the street. You know, there’s one on every corner folks, you know what I’m talking about? They are not allowed to offer these products. Yeah, I don’t get it. I don’t understand it. And this is the reason why you need to work with a licensed fiduciary, a registered investment advisor that has your best interest in heart all the time.
Phil, thank you so much for another amazing episode this week to our viewers at home. Like I mentioned, we have just scratched the surface with tax strategy tax planning. Don’t miss the opportunity to claim your complimentary spot with Phil and his team 888-818-6557 Thank you for spending time with us on Retire Smart Austin. Be safe, be happy and be blessed. We’ll see you next week.
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