Retire Smart Austin | Episode 220

Leah Woodford  00:22

Hi, and welcome to Retire Smart Austin. I’m Leah Woodford, your host. And with me today is Phil Capriotti Sr and John Solyman CRPC, and they are with Empower Wealth & Tax. Welcome to the show, gentlemen, you guys are looking sharp.

 

John Solyman  00:47

Thank you for having us.

 

Leah Woodford  00:49

We’re talking-

 

Philip Capriotti  00:50

John, I like- it looks like it looks like we bought the suit at the same manufacturer.

 

John Solyman  00:55

My wife picked the pocket square for me.

 

Philip Capriotti  01:00

I really feel the pink. Very, very nice. Go ahead, John, we have a heck of a well, I’ll start off. We have a great topic, one that you’ve never heard before, never what we did was we decided to kind of switch, switch gears a little bit. We came up with 50 reasons why retirees, or soon to be retirees, should have a tax efficient retirement income plan. So, what we’re going to do is we’re going to pitch you 30 of them, wow, the top 30. And I’m going to let John go ahead and run a show, because you folks are probably tired of listening to me. I have had the benefit of working with John since September. And what I- what really stands out to me is the fact that he’s a doctor, and all the planning he puts into each and every one of his appointments. I mean, he’ll literally, I watched him put an hour worth of planning for initial consultation, and it was one of the things I was most impressed with. And so, with that being said, I’m going to hand it off to you, John. Let’s go ahead and start with…

 

John Solyman  02:12

Well, I will say thank you, I think any advisor or a planner out there should take the time, okay, learning about their clients, or who are they sitting with investing that just genuine time, okay, getting to know them. Because I believe, at Empower, we believe that the financial arena out there is very complex. There’s a lot of products, there are lot of strategies, there are uncertainties, tax laws are changing, and everything right, and we’re confident, as we have the resources that we currently have, and we understand the whole year of the financial playing field and how things are working. And by getting to know our client, we can confidently say that we can help them protect their worth, their assets, what they work really hard for, grow it and make sure it lasts for a lifetime. So, this is something we take pride of. I take it personal. Okay? As Phil said, a client at some point in my life, they trust me, patients, with their health, okay? And this is something very personal, very honorable. And when they come and sit with me personally, I think that everybody in power, I’m confident they do the same thing. We take it personal, okay? People, money, and saving, and hard earned money is very, very personal, and they’re very careful with it. And I think any advisor or planner should take it at the same level of honorable relationship, if I may. That being said, okay, this is something our clients that when they come to our office, the planning process, we get to know them first, we spend our time. They’re actually in it for three meetings when they say, Well, three meetings before complimentary. Wow, complimentary. I want to make sure that when through the process, I give them the value so they can make a decision that either they can work with us or take the information that we provided for them, and they can apply it on their own. Okay? And I think this is a mission that Mr. Capriotti, he started from the front. He actually- he lead with that. He’s very community driven. I’m honored to work with him and to be part of the team that being said, Okay, a lot of the advisors, or the planner that would there, they chase returns. They only talk about returns, what we’ve done, what we will do for you, okay, but they ignore the tax part of things so important, yeah, I’m not excited for getting a client. We give them double digit returns. Okay, this is not a big problem, but if I’m growing your account and helping you grow your net worth or your nest egg to a certain point, but you still liable for 30, 40% of all what you save to pay taxes. Okay, I’m doing you a service. Okay, so that’s the main thing. So, I’m gonna kick it off with few strategies. I know we’ve got you guys hear everybody talk about Roth all the time, right? So, Roth IRAs, okay? Is something that I Think as early as you can, as early as you have earned income, start with the Roth. Ira, okay. Now, few folks out there, a lot of folks out there, they make higher income, and they believe they don’t qualify to contribute to a Roth. And this- when an advisor that know what he’s doing can start implementing our Backdoor Roth for you.

 

Leah Woodford  05:20

Okay, can we talk about what the Backdoor Roth is? I’ve never heard that term before.

 

John Solyman  05:25

Good, so, it’s a strategy that for higher, a little bit of higher income, okay, that, the, are beyond the phase out, that they can make a non-deductible contribution into an IRA. Okay, so, they put the money in the IRA, post-tax money, okay? And by putting the money in the non-deductible IRA, there is a way of moving this money tax efficiently, because if you’re doing wrong, you’re still subject to taxes. We do that day in and day out. Okay, so you put the money in the non-deductible IRA, and you do what we call a bag door Roth conversion into a Roth in, as in a specific time frame.

 

Philip Capriotti  06:01

Okay, let me kind of expand on that, just to kind of simplify it back to a Roth is very simple. I want to overfund my IRA. All right, so let’s assume for a moment, I want to put $8,000 this year in 2026 it’s 8500 and let’s say I over fund it. I could put that money in the IRA now they were going to outlaw it. They were going to take it off the table with secure act 2.0 but they didn’t. It survived. So, let’s say I put 17,000 in instead of 8,500, the 8,500 is tax deductible, but the other 8,500 over and above the initial is taxable. So, this is what we mean, non-deductible. I can put it in the IRA and let it grow tax deferred, but I got to pay taxes on the distribution. Now, because I paid taxes on that extra money, I’ve already paid those taxes the Backdoor Roth, it allows us to do Roth conversions with all of that post tax money that’s sitting in a pretax account. There’s a formula we use if it’s done wrong, it’s a serious tax issue. So that’s one of them, the Roth IRA, I’m going to say Roth contributions into a 401(k). Now one of the benefits here, if you’re working, you have limited income, you can’t make more than about 340,000 and change and still qualify for a Roth if you’re married, filing joint. But with a 401(k), you can do a Roth 401(k) contribution regardless of your income, you can also do it regardless of your age. I have clients that are 73, 74, 75 they’re still working. And so, we have them actually contributing to their Roth 401(k), at age 74, 75, they didn’t know they could do it. Well, hey just changed the tax law last year. So, I would say for most of you, start your number one. Start your children early. But start yourselves. If you are contributing to your 401(k) for this year, 2026, call up your administrator, regardless whether it’s Vanguard Fidelity, Schwab, whoever, and tell them you want to switch your contributions to post tax, 401(k), or the Roth 401(k). You’ll pay the taxes going in, but you’ll start the five-year clock, and you’ll start to actually accumulate tax free growth, which when you retire, we can convert over to a Roth IRA later- at a later date. So, that would be one- that would be one strategy. Another strategy is that mega backdoor. I’ll let you go ahead and expand on that, if you like.

 

John Solyman  08:58

All right. So, for the Mega Backdoor Roth, this is actually not only waiting on or maxing your contribution for the year, which is, I believe, 30,000 for the year,

 

Philip Capriotti  09:08

32,500

 

John Solyman  09:09

32,500 now, yeah, so you can actually contribute into your employer 401(k), okay, and I believe we’re going to need to go for a quick break. I’m going to keep that one for later, okay.

 

Leah Woodford  09:22

We’re going to cut to a quick break, but we’ll be right back and we’ll get this taken care of.

 

Philip Capriotti  09:31

Folks, are you interested in growing and protecting your wealth but not sure where to start? You know, managing wealth isn’t just about having an investment portfolio. It’s about understanding your dreams, your goals and your challenges at Empower Wealth & Tax. Our professional private wealth management services are designed to simplify your financial journey. We create a personalized strategy for. Help you build, protect and enjoy your wealth. So 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. You Phil, Hello, folks. My name is Phil Capriotti Sr. You know we have been helping folks like you create a tax-free retirement income plan for over two decades. I’m a firm believer that if you worked and paid taxes for the last 50 years, the one thing you shouldn’t be burdened with is excessive taxation and retirement at Empower Wealth & Tax we specialize in helping you reach your desired retirement lifestyle with a tax free and tax efficient retirement income plan with the probability of taxes going up significantly in the future, let’s plan your retirement right call us today and start empowering your retirement right now.

 

Leah Woodford  11:08

Welcome back, Austin. We are talking about Roth and after-tax strategies. Welcome back to the show guys.

 

John Solyman  11:15

Thank you. Thank you. Thank you. I know we’re talking about the mega backdoor Roth before the break, so I’m going to start with that. So, there is a strategy that only few have access to, and only few advisors talk about it. Okay? It’s called the Mega Backdoor Roth, and this is when you have an opportunity with your employer. Okay, you can ask the plan, okay, and have a plan, a planner on your side, only ask them, Am I allowed to put non-deductible contribution into my 401(k), you can put up to like, $70,000 Okay, now only the maximum limit for your contribution from your payroll, you can actually put money out of your bank account, okay, into your 401(k), it’s called the non-deductible part outside the payroll. It’s called the mega bag door off. And when you do that, you put the money into your bucket in there, which is a non-deductible post tax money. And when you do that, you actually have an option in there to convert it into the Roth pocket of the 401(k). Why we like that? A lot of rules about that, the taxability of the conversion of the Backdoor Roth and backdoor. Mega backdoor Roth pro rata rules, meaning is a lot of your own, all your accounts, balances, all your pretax money, can play a role mega backdoor Roth that doesn’t apply there. You can put all the Macs in there and have a Roth account that’s growing now. You can always roll this one out. It’s your money, you can roll it out from your Roth plan into an IRA, a Roth IRA that you have on your own. You can take this money out, put in a self-directed but it’s an, I think it’s a strategy that people think it’s only for the ultra-high net worth or the wealthy folks and stuff like that, but you can implement it tomorrow, okay, into your own employer plan. And if your advisor are not talking to you about it, if you never heard about it, give me a call. You know what? Call me personally. Okay, our office. Ask for John. Tell me I heard you talking about the Mega Backdoor Roth, and I want to talk to you, and I’ll make sure if that’s something available to you, to help you implement it.

 

Leah Woodford  13:19

Well, your phone is going to be ringing all right.

 

Philip Capriotti  13:22

Again, dial 888-818-6557, that’s 888-818-6557, say, You know what I heard John Solyman talking about the mega backdoor Roth, and this guy sounds like a very intelligent man. It’s no wonder Phil hired him, because he’s serious, because he is and give him a call and they’ll fast track you write to him. John has been in the business, like I said, for quite some time, and I look forward to a very long and fruitful relationship with him. One of the other second issues that we wanted to talk about with respect to tax free interest is for taxable accounts. So, we have muni bonds. So, one of the one of the benefits of using Blackrock as one of our portfolio managers. So we have proprietary portfolios with BlackRock, and one of them is call our core tax advantage portfolios. And one of the nice things about these muni bonds, BlackRock, a company like BlackRock, if you don’t know BlackRock, they’re the largest financial investment firm in the world. They manage between 15 and set and $16 trillion in assets. So many times, having that association when, when municipalities come out with a floating and they’re going to float a tranche of muni bonds, Blackrock will come in and buy them all. Wow. Okay, so it’s very hard to get a hold of high yielding muni bonds, so we’re very fortunate that benefits from that. But the. Point is, in addition to Roth with your taxable money, we can literally, through tax loss harvesting, convert your portfolio over to these tax-free muni bonds to provide additional tax-free income to go with your Roth distributions and Social Security distributions. So that’s extremely important now for states that have taxable income, like the old state that I came from, Pennsylvania, they have taxes on income. If you get an in-state muni bond, it’s not only federally tax exempt, it’s also state tax exempt, as well. We also offer muni bond ETFs. We also offer laddered, tax-free muni bonds. So, we’ll put that right into a portfolio.

 

Leah Woodford  15:52

Can you explain what a laddered?

 

Philip Capriotti  15:55

Yeah, so it’s real simple. I may have a muni bond that’s due in five years. Let’s say it’s a five-year note, I may want to have a five year, then I want to have a six to 10 year, then I want to have an 11 to 15 year. I want to ladder these things out, so I have continuous tax-free income through my entire tax retirement timeline. So, every person’s different. Every plan is different. It’s not just Roth, Roth, Roth, although I would tell your children, all of your children and your grandchildren, do not contribute to a retirement plan that’s government owned and taxable. Start right out of the gate and contribute. If they’re working and they have a 401(k), tell them to set them wise can make all their contributions into the Roth 401(k), because they won’t have to go through the conversion process. I have worn I have basically implemented this with all of my children, my five children, and as the grandchildren become of age, hopefully it’ll still be available. Let your kids and grandkids retire tax free. We know how quickly the time goes by, but at any rate, so this is another tax efficient retirement income strategy, and I’m going to let, I’m going to do, we have to do a commercial or are we going to John?

 

Leah Woodford  17:22

I was going to ask if we should tell them about the Empower Roth quiz.

 

Philip Capriotti  17:27

I think we should. So, folks, go on to empowerquiz.com, that’s number one. Then go to empowertaxbill.com, then you can also go to empowerrothquiz.com, and if you’re concerned about your legacy, go to empowerlegacyquiz.com. One of the benefits of working with a holistic advisory firm like ours is we do the taxes, we do the tax planning, we do the retirement planning. Managing the portfolio is easy. We structure the social security planning. Most of all, we do wills and trusts as well. Folks like to come to one place and talk to have all of their licensed advisors work in the same building, in the same spot, belong to the same company, and that’s what we spent the last 20 years organizing.

 

Leah Woodford  18:19

Oh, that’s so amazing. So, if you’re not getting this information from your current financial professional, make sure you call Phil and his team at 888-818-6557, again, that’s 888-818-6557, or click the QR code at the bottom of the screen you got. I just don’t know why anybody wouldn’t call you about this. I had no idea.

 

Philip Capriotti  18:46

Obviously, to be honest with you, we get about a dozen or so calls each and every week. In fact, we’re getting more calls now than we did after three years. And I think part of it is more and more people are getting ready to retire. In the next 10 years. It’s going to be the largest group of baby boomers retiring, and they really don’t have plans. Many of them don’t have plans, and they’re starting to realize now, hey, let’s- better start it sooner than later.

 

Leah Woodford  19:11

Well, and that’s a good point to cut to break. We’re going to cut to break, but we’ll be right back with Retire Smart Austin.

 

Philip Capriotti  19:24

Folks, imagine not having to face your retirement with the same old Corporate Solutions as everyone else in these economic times. You deserve a fresh look that includes a personalized income and tax strategy from a retirement planning team who focuses on you. You only retire once, so don’t settle for cookie cutter solutions. You deserve a customized retirement plan, and it all starts with our first meeting to schedule yours. Call the number you see here, or scan the QR code to reserve a spot on our calendar. Thank you very much, and have a blessed day.

 

You know, folks, your family’s financial future is too important to leave the chance. At Empower Wealth & Tax our state wills and trust planning services are here to help you simplify the process. Together, we create a personalized plan to ensure your assets are protected and your legacy is secure. You know our number one priority is peace of mind in knowing your loved ones will be taken care of and your wishes will be honored. Schedule now and let’s secure your legacy together.

 

Leah Woodford  20:49

Welcome back to Retire Smart Austin, and we are talking about Roths, everything Roths today. So, John, would you like to finish your thought from the last segment?

 

John Solyman  20:58

Yes, actually, I was- we’re talking about the Roth and the employer plan and all the good stuff that’s out there right now. And actually, I remember client that I saw with the other week, okay? And that’s client, he’s from Austin, and we know that a lot of technology company in Austin, and this gentleman, he had a big 401(k), 7-figure 401(k), okay. And big position that he had in there was his company stock. So, some of the benefit the employer give for the employee is actually giving them an option to get their company stock as a 401(k)… in the 401(k). And talking to him, he actually sat with me, advisors before us, and nobody brought to him the idea that there is a special tax treatment in his 401(k), that by rolling over this account the right way. Okay, it’s shipping it in two pieces. Meaning is, I’m going to move the stock position differently in a taxable account, because that’s not treated as an income when you do it, right? So, you move that one separately and get the remainder of the 401(k) into the traditional IRA as he retires. So, you’re talking about saving substantial amount of taxes between paying only capital gain, okay, on the stock and reporting that as income down the line. So, some of the strategies that I know, a lot of the advisors out there that are very busy, okay, very busy, they don’t pay attention to, okay, but just food for thought. Something else, it came to my mind that was actually in the break there is strategies out there. We call it the triple tax advantage strategies, okay, is your HSA, okay? Health Savings Account. As you work, it’s an account. If you take advantage of it, you can put a defer or deduct money, put it into it, okay, I believe up to 1000 or so, okay, for managed financially every single year. And don’t just put it in there. Let it grow. You can actually invest it. Let it grow, tax deferred, so you don’t have to be any capital gains on the growth. And as you retire or throughout your career, you can use the money that you pull out of it, if you use it for the right medical expenses or some really needed expenses for Medicare and stuff like that. You can use it tax free, so you put money, get a deduction, you grow it without have to pay the taxes, but you also get to take it out without paying the taxes on the money that you take out. So, this is one of the strategies I think a lot of family miss on. Okay, so this is that we can also talk about that using the muni, as Mr. Capriotti said, but also what we call it an I-Bond. It’s like an inflation bond that’s offered and it’s out there that actually give you an exemption, okay, on the on the federal and the state level. Okay, so this is that there is a lot of strategies out there, 529 if you have kids, okay, using a 529 and using the- a lot of the Coverdell and the accounts that out there for their kids, okay, growing money for them tax free. Okay? To get it out tax free is really critical. Last thing that I can come to my mind, I’m gonna let Mr. Cappriotti finish. It’s a strategy that I believe a lot of the advisors or the planner shy away from. Okay, it’s using the tax code, 7702a, okay, it’s leveraging the value of using a cash value life insurance policy. Okay? A lot of people, when they hear life insurance, they say- but I dealt with a lot of high-income earners in the age group of 30s and 40s and so on. Those folks are in good position, health wise and income wise, that they want to put money in grow it okay, and not have to pay the taxes in the future and maybe access the money before 59 and a half. Okay? We call it the rich person, the rich people Roth, which is a cash value rife insurance. It allows you a lot of opportunities. Banks use it. There’s something called BOLI: bank owned life insurance. Wow, it’s becoming your own bank. So, if it’s done the right way, okay? So, it has to be done the right way, selecting the right product design, it the right way. So, you can actually take advantage of the tax treatment of owning a life insurance policy as well.

 

Leah Woodford  25:18

Well, that’s why you need to call Phil and his team to make sure that it’s implemented correctly.

 

Philip Capriotti  25:24

Yeah, and that’s code 7702a, that’s really where we can put unlimited amounts of money into these. A lot of your bank presidents and big executives have it when they’re funding up to the max. And the 401(k), and the way it’s treated is you’re not taking a withdrawal of cash value that would be taxable, but what you are doing is taking a loan from the face amount of the life insurance policy. And because it’s a policy loan, it comes to you as a tax-free payment. Great strategy to use in coordination with the Roth, I would say, some of the key retirement reality, critical talking points, far as I’m concerned, where people actually miss the boat, not doing proper tax planning, is where they’re paying unnecessary taxes. The first is withdrawing only from your pretax accounts. So, when you’re doing that many times, they’re ignoring tax bracket management. So, let’s say I want to stay in the 12% bracket or the 22% bracket. I only want to take a stated amount out of that pretax. I also want to look at what am I going to do with Roth conversions. But then I want to take a look at managing. So, for many of our- giving an example. When I set up a retirement plan, we’ll have equal amounts of money in pretax, post-tax Roth. And many of these folks don’t have pensions, so we maximize their social security. So, we’ll take- they want their Social Security tax free, so we’ll take half out of the Roth, half out of the pretax. And what happens is that 70,000 a year in Social Security, only about 11,000 is taxable income, which, with the standard deduction, becomes tax free. I know we’re coming to the end of this topic. I mean the end of this show, so I’m going to hand it on over to you. I will say this. Give us a call if you haven’t already, dial 888-818-6557, come on in and meet John myself and the rest of the team. Like I said, we have 25 employees. They’re all licensed. We’re all a fiduciaries. And I would say, if you’re not doing this type of planning, give us a call now.

 

Leah Woodford  27:38

Well, and I’m just going to say it’s time to get that second opinion. If you don’t like the first opinion, don’t go back. Call Phil and his team. You have the number, the QR code is at the bottom of the screen, but give us a call, 888-818-6557, we’ll see you next time.