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. Phil, how are you today?
Upgrade? Cynthia. Good morning.
Good morning, I’m so excited to be in the studio with you. Because I know you’re so very busy. And yet you always take the time to come in to do the shows and deliver high quality information to our viewers at home.
I love it. I especially love being with you. There’s a lot of great chemistry. And yes, we begin on a lot of calls we’ve been getting over. We’ve been averaging, I’m gonna say like eight to 10 calls per show. And we only take the first five, because that’s all we can fit in with our other, you know, with our heavy schedule with the workshops that we’re doing, and all of that. So. But yeah, so we special and, and now that we’re in tax season, even more so. So, let’s go ahead and kick it off. What do you want to talk about today?
Well, something that a lot of people are thinking about right now, because there’s been a lot of conversation regarding this, and perhaps some changes that are coming in the near future social security. Wow. Let’s talk a little bit about that today. Phil, a lot of people are concerned that their benefits are just going to evaporate and go away. What do you see on the horizon? If you had your crystal ball?
Well, so you know, that’s a great, there’s a great topic, because many of the folks that come into our office believe that social security is going to go bankrupt. That’s almost like a scare tactic that we’re seeing. Folks, let me tell you Social Security is in the red, it’s not going bankrupt. They will never end Social Security no matter who’s running the country. The reason is, because it’s a political hot potato. Nobody wants to touch it. However, what they will do, it’s and what they are doing with Social Security is they’re taxing the living daylights out of it. Oh, boy. So, one of the and today in today’s topics, we’re you know, we like to focus on tax free retirement income planning, but we’re going to look at techniques to use Social Security and what techniques can you use to make sure that your Social Security remains tax free, tax free, at the very least tax efficient, a lot
of questions surrounding that, because a lot of people I know are under the understanding that once they start receiving those benefits, hey, that’s money that they’ve paid into the system all their working years, right. So that can be taxed. Wow, right out of the gate. That’s probably shocking. For some of the folks that are watching today
it is and for a lot of folks, what they’re hearing, especially from financial advisors, or the naysayers is file Social Security early before it goes bankrupt. If you file it 62 or 63, you’ll collect social security for many more years, and you’ll be able to get your money out of it before it goes back bankrupt. And that’s just totally ludicrous.
It really is, is crazy, because it may not be the right fit for someone it is in fact,
the complete opposite is true. Folks, in order to get your Social Security tax free, and this is one of the services that we specialize in in our office, one of the things that we start with a social security planning, one of the things is we have to make sure each year that we take a look at what’s called the provisional income formula. Okay. And this was designed back in the 1980s, when President Reagan and Chip O’Neill did that balancing Budget Act, that’s when that’s when Social Security went from tax free to up to 50% of your Social Security could be taxable, based on this provisional income formula. We’re going to talk about it. I don’t want to bore you to death, but we’re going to talk about it today and help you understand it.
No, it’s not boring. I’d like to talk to you about what are the income thresholds you have to stay within. Because that’s a fascinating topic.
Yeah. So, first of all, if you’re single and your provisional income is under 25,000, not your income, your provisional income, and I’ll explain that in a second. None of your Social Security is taxable. Wow. Now, one of the benefits of that is only half of your Social Security benefit goes into the provisional income formula. So for instance, let’s assume for a moment you’re collecting $30,000 from Social Security, half of that or 15,000 will go into the provisional income formula. And let’s assume that your goal retirement income is 75,000 a year we’ll just take that arbitrary Number. Now you have to take money from other sources, you have to take money from, let’s say pensions or if you don’t have a pension, your dividends or interest or your RMDs, or just a distribution from the IRA, well, the more you take from your IRA, the higher that taxable then is on your Social Security. Wow. All right. So, we’re going to talk about that half of your social security goes into your provisional income. So, let’s assume for a moment, you you’re getting $50,000 A year from Social Security. Now you’re receiving 50,000 for Social Security, right? Half of that goes into the provisional income formula 25,000. Let’s assume that you’re married filing joint. Now that threshold is 34,000. Okay, so now I can take money from my IRA. Any distributions you take from your Roth IRA does not count in your provisional income formula. Wow. So many of the folks that we have come into the office, they’re like, wait a second, Phil, I didn’t know that. You know, my financial advisor didn’t talk to me about that. Well, in all probability, many the financial advisors nowadays really are tax advisers. Yes. And, and so they either don’t know or the discussion never comes up. So, when you call our office, when you come into our office, the first thing that we want to do if you haven’t filed for Social Security, is we want to structure a Social Security Maximization report, it’s going to explain what your Social Security benefits are at each and every age from 60 to 63, straight on up to age 70. Okay, remember, for those of you who are born in 1954, or earlier, your full retirement age is 66. Okay, so if you file early for Social Security 62, you only get 75 cents on the dollar, oh, wow, you only get 75% of what you paid into it. If you file at 63, you only get 80%. Okay, via 64, it’s 86 and two thirds 93. And a third is 65. And you get a full 100% of your primary insurance amount or Social Security benefit, as 66. So many folks like to beef up their Social Security, since we’re only putting half that Social Security into the provisional income formula. And they like to build what’s called delayed retirement credits. Each and every year that you delay collecting Social Security benefits, you build an additional 8%. So, it’s 67, you get 108% of what your primary social security benefit would be. That’s amazing. It really is so and then. So on at 68 is 116% plus the COLAs, Wow, 69 124%. And then at 70, you get 132% of what your Social Security benefit is. And since only half goes into the provisional income formula, this is one of the many techniques that we use and teach folks to implement to get your Social Security tax free.
Phil, why in the world would anyone take it early after listening to what you just said, it only makes sense to delay it as long as you can lack of knowledge, right?
Lack of knowledge. I’ve had folks come in; I didn’t want to I thought I was doing something wrong. But my financial advisor said, delay as long as you can taking, you’re taking distributions from your investment accounts. One of the other things, folks that we want to focus on, if you’re in that retirement red zone, and you’re thinking about retiring over the next 510 years or over the next year or two is you need to have a retirement income strategy that maximizes Social Security. Men, one of the ways that we maximize your Social Security is to implement Roth conversions. So, if I delay Social Security, that’s income I’m not receiving. So, it allows me to execute Roth conversions, taking money from my IRA to the Roth IRA, you have to have in retirement, are you going to get taxed? You’re gonna get taxed at a level you’re not going to be happy with.
Exactly, exactly.
So, while you’re delaying Social Security, you can now execute Roth conversions at a much lower tax bracket. And this is the type of information you learn when you work with a financial advisor, who’s also your tax advisor.
Well, Phil, I know how very busy you are and the team but you have set aside specific spots for today’s show. Let’s talk about what that looks like before we open the phone lines.
Yeah, so when you call our office man, by the way, a lot of folks been watching this for the last four years, Cynthia, and I’m having folks and yeah, I’ve been watching it for the last four years. You know, you’re right before the preacher who I, who I watch you know that the, the Osteen No, no, no, I wish it was show Oh yeah, no, no, it’s, it’s one of the local Christian churches in Austin, I can’t really mention the name, but at any rate. So, if you’re one of those folks dial 888-818-6557, call up schedule a complimentary retirement income planning appointment. Now, we’re in order to structure a tax efficient Social Security Plan, the only thing you need when you call, we’re going to ask a few questions, get some information, but we’re going to need your earning statements from Social Security. So, we’ll give you instructions. If you don’t already have it. You’ll log into Social Security, and you’ll want to print out the earning statements. I don’t need your social security number. I don’t need any private information, the earning statements, folks, this shows each year what you paid into Social Security at 75, what have you pay in 7680 90. These are all of the values and the values that we use to plug into our software in order to structure a, a tax not only a tax efficient Social Security Plan, but an accurate, accurate number. Social Security doesn’t provide you with all those numbers. Call be one of the first five callers come on into the office. And let’s talk about tax planning and getting your Social Security tax free in retirement.
Phil, thank you so much to our viewers at home, there are five spots for you to claim this week. That’s all Phil has time for, all you have to do is pick up the phone and call in 888-818-6557. Or if you don’t have a pen handy, 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 and you can claim one of your five spots. We’re gonna take a very short commercial break, don’t go anywhere. I have so much more with Phil and so security and tax planning when we return.
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 and receiving money from 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 one $120,000 A year 10,000 a month. And I have clients that we’ve worked with the last 10 years that pay zero taxes on that income.
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 all about Social Security and how to be tax efficient. Phil, I wanted to ask you a question. Obviously one of the things obviously you’re so passionate about is proper tax planning. And I want to talk a little bit about choosing tax efficient investments. Can we talk a little bit about that pertains was so skewed.
So many folks, one of the many misnomers about tax efficiency, okay? And not having access to taxation on your Social Security is folks believe that muni bonds, municipal bonds, provide you tax free benefits and are not included in the variable, this provisional income formula to tax Social Security. That’s incorrect. Okay. So even though municipal bonds give you federal tax-free retirement income, they are counted in as income when it goes to taxing your social security. So, any income you receive from municipal bonds is counted into that provisional income formula? Yes, it’s federally tax free, but it counts towards taxing your Social Security at a higher rate. Oh, wow. Yeah. So, this is why it’s so important to do the tax planning. Many folks don’t know that. They think muni bonds tax free, great. Not so much. Because one of the big things that again, I talk about this frequently, Social Security will not change significantly for many of us who were born from 1970 68 to 70. Okay, and later, okay, so for those who were born 1965 to 70, and earlier, we’re going to be we’re going to have the same social security plan, no significant changes, folks. All right, however, they are going to tax it. Remember, up to 85% of your Social Security can be considered taxable income. Based on the provisional income formula, you need to understand that. Now, for many of us, I’ll give you another example, distributions from your Roth IRA. Many times, what we’ll have is we’ll have folks, they delay the Social Security, they retire in their 60s. And they’re like, I really don’t need the money out of the IRA, or they’re an or they may have pensions, they may have other income, they may have rental income, from, from rental properties, things of that nature. Okay, so many folks, what we’ll do is we’ll want to delay Social Security. So, we don’t add that Social Security into your overall into your overall tax plan. While we delay Social Security and build delay retirement credits, we’re now doing Roth conversions. We’re moving 50,000 A year 75,000, a year, 100,000, a year, little by little year by year, we’re paying a tax on the seed, moving it to the Roth, accumulating at least equality between the accounts, I don’t want to have more in my IRA that’s going to be taxed forever. I call it my government taxable account. And very little in my tax-free account, my Roth IRA, I want to have equality. So, you must structure a Roth conversion process, especially while you’re delaying Social Security building delayed retirement credits. This is one of the many keys to a tax free, not only retirement income plan, but social security plan. If I’m receiving $50,000, a year from Social Security, I don’t want one penny of that going back as taxes. Why? Why is that? If you’re receiving 50,000, to Social Security, that’s that much less that you have to take from other retirement accounts. If you’re not writing a check to Uncle Sam, and having, say, 35,000 have it considered taxable. And year after year after year, it really adds up?
Absolutely, it does. And again, you’ve worked your entire life to get to the retirement years, these are things that need to be considered and factored in. So, I want to talk to you a little bit about is it ever a good idea for couples to file separately? When it comes to security strategies and tax planning? Do you recommend that?
Yeah, it is. And it all depends on ink on the income. So, for some of us, who is the main wage earner, and we can take a look at that many times. And not a lot. It doesn’t we don’t normally see this a lot. But if you’re married, filing separate, that’s different than just filing single, married, filing separate, depending on your income sources can be an excellent method and an excellent technique to use to make sure that your Social Security is tax free. Okay, even if my high wage earner. So, for instance, my wife receives $25,000 a year in Social Security, I will receive, say $50,000 in Social Security a year and Social Security, the average cola adjustments that Social Security folks have in the last 20 years has been 2.2% increase in Social Security. If I’m if I have the ability to keep all of that 50,000 And my wife keeps that 75,000 And we want to and we want to retire it’s a 10,000 a month, 120 grand a year. That’s that much less I have to take out of my other investments. Absolutely. Yeah. So married filing separate is also a strategy. We don’t use it a lot because it doesn’t apply. But there are cases where it would apply. And you’re going to want to know whether it applies to you or not. Absolutely. One of the other benefits. One of the other benefits or features of a tax efficient Social Security Plan is taking distributions from health savings accounts. HSAs. Okay, so this is something that folks don’t see when you take a distribution from your HSA, whether it’s to pay for your medical insurance premiums, whether it’s to pay for prescriptions, or any type of a sundry items that you would get at say a Walgreens or CVS at a drugstore. None of those distributions are considered taxable. None of those distributions affect the taxation of your social security. So many folks will look at that and are like, I didn’t know that. Well. Many. I’m gonna tell you Oh, each and every one of you give us a call come into the office, especially if you’re current advisor. I’m sure they’re wonderful. There’s a lot of very good advisors. But if your current advisor is not a tax advisor, you need to have a, you really need to have a tax plan in retirement, because the more you get to keep, the less you have to take from other investment accounts.
Well Phil, this is the perfect time for us to take our second commercial break. To our viewers at home. There’s a number to call on your screen 888-818-6557 Phil and his team have set aside five spots this week only for your complimentary consultation. come into the office. Let Phil and his team get to know you what your plans are for your retirement. What does your security look like and what Is your tax implication look like? Let them design a plan that’s going to suit your needs. That number again is 888-818-6557. Or if you have your smartphone handy, go ahead, grab it, click on that QR code at the bottom corner of your screen. That is a great way for you to claim one of the five available spots this week. I’m not sure how many we have left Phil; we’ll have to check on that. But we started with five again 888-818-6557 We’re gonna take a very short commercial break, but we’re talking all about Social Security and being tax efficient. Stay tuned.
We know the market is going to get worse from here. This is the biggest monthly decline in 10 years, people’s 401 K’s took a major hit.
My investments are tanking retirement isn’t going as planned. I can’t believe I let my kid talk me into buying crypto. I mean, what is that anyway?
This was the fourth worst contraction in history.
So how are you two doing? Your financial future doesn’t have to be uncertain. I’m Philip Capriatti, CEO of Empower Wealth and Tax if you amassed a nest egg, it’s time for a financial advisor to help you reach your retirement goals. This is one of the greatest tax windows in history. Now is the time to take advantage of this tax discount while 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 all about Social Security and how to be tax efficient. Phil, I want to ask you a question people are offering wondering where can they see you live out in public? Well, you have some workshops that you’ve been offering to the public. Let’s talk about what those are and where they can see you.
Thank you, Cynthia. So, folks, one of the reasons we can only accept the first five callers and I know that sounds, you know, like a sales pitch, it really isn’t. We do three workshops minimum per month at the local library at the local Chamber of Commerce, I don’t believe in doing dinner workshops, I don’t believe you need to buy up an individual dinner, to come to a worker to come to a workshop and a lot of advisors do that. Personally, it makes me feel dirty when I do that. But the educational workshops, so what we want to look at is if you go onto our website, and even if you click in form at empowering retirement.com, you’re going to see a list of our workshops at all of the different libraries. We do them in Marble Falls, we do them in Horseshoe Bay, we do them in cedar park, Round Rock, Pflugerville Georgetown, all over the entire city. Many folks like to come into the library to just gain knowledge. And when you come into the library, we also offer complimentary consultations for folks that take the time to come into the library. So go on to our, our website. And and if you’re a little apprehensive about making the call, I don’t know why. But if you are come to one of our workshops, and you’ll learn an awful lot, we will talk about so we talked about social security planning. We talked about RMD distribution, how to execute Roth conversions. It’s a plethora of knowledge. And we’ve been doing these workshops in the library for now for 13 years. Our team they don’t get old. They just don’t get old. Yeah, we still pull. We don’t even do mailing anymore. We just do like digital marketing and folks coming and we’ll get about 2025 people you know, that will come in that are getting ready to retire. And I think part of it is more and more people now more and more of us baby boomers are getting ready to retire. In fact, this year is going to be the most people who will be eligible for Social Security yet since the most Yeah. So, so we’re getting a lot of traction. So come on and see it’s one of the workshops, well,
their educational, they’re informative, and most of all with Phil, they’re fun. You’re going to enjoy being with him. Absolutely. Well, let’s switch gears a little bit. I want to talk to you a little bit about tax loss harvesting selling some investments to wonderful offset caps.
So, one of the things about tax loss harvesting many advisors are and, and even clients do it once or twice a year. We have our own software that does tax loss harvesting and taxable accounts monthly. Wow monthly. Okay, yeah, we just implemented the software and I absolutely love it. So automatically. If you have a taxable account, a stock bond account, you know, you have losers and you have winners. You don’t wait till the end of the year to do it. You at least wait do it once a year. But we can implement a process for you that each and every month we take the winners offsetting with the losers to balance your portfolio. Well, that’s a zero tax, some were. So, when we sell the losers sell some of the winners to offset it, we want to get into that 0% tax bracket. By doing that each and every month, it helps you to have a more balanced portfolio. And not only that a more tax efficient retirement income plan, especially with respect to Social Security. I love that. You’re right. One of the others. What are the other techniques that we use and that are not really not being properly utilized by folks are QCD? Yes, I wanted to talk about that. Yeah. So, folks, for those of you who might be unfamiliar with QCD, and you are charitably inclined, you know, you have your church, you have your SPCA, whatever the charity happens to be, if you’re taking RMDs required minimum distributions. If you receive them personally, it becomes taxable income, and also causes your Social Security to be taxed at a higher rate. Instead of right and and many folks will take that QCD and then write a check out to the church or the charity. No, that’s not the way to do it. That’s not tax efficient. Okay, what we can do is, let’s say your RMD is willing to choose an arbitrary $20,000, you can add, let’s say you contribute 15,000 or so, to charities, we can pay the charity directly, as long as it’s a 501 C three, we can pay the QCD or the RMD. Right directly to the charity that’s called a qualified charitable distribution that does not touch your tax return. Hence, it leaves your Social Security unscathed.
Amazing. I mean, Phil, this is why people tune in every single week. And I know that we’re coming to the end of our show already, but you’re sharing knowledge with the viewers at home that they are not hearing anywhere else.
Yeah, I believe that because when folks when you come into the office, you know we’ll visit with you normally about three interviews and sometimes it only takes two. But the very first interview what we want to do is we want to take a look at where your social security plan is and how does it fit into your retirement income plan. That is one appointment you’ll actually see Gregory and then you’ll see me or one of our other advisors. Fact of the matter is if you are not using, we have about 30 different techniques to help your Social Security become tax efficient. Call our office come in and let’s talk with you about a tax efficient retirement income plan.
Being a one stop shop is amazing. Phil, thank you to our viewers at home thank you for spending time with us today on Retire Smart Austin. Remember we have five complimentary spots. This is your time to claim one right now. 888186557 Thank you for spending time with us today. Be safe, be happy and be blessed. We look forward to seeing you back in one week. Take care.
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