Episode Transcript
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Speaker 1 (00:00):
Live for the WGY iHeart Studios. Welcome to Retirement Ready
with your host Dave Kopek for the Retirement Ready Show.
Every week, Dave and his team discuss the ways they
can help people make informed decisions about a wide array
of retirement planning information that can support you and developing
a more certain financial future for you and your family.
(00:21):
Now it's time for Dave Kopek, WGY's retirement planning specialist.
Speaker 2 (00:43):
All right, I'm Dave Kopek. This is Retirement Ready, which
is a topic specific show heard right here an iHeartRadio WGY,
the mother Ship. We're glad to be here. Beautiful day
outside today, sixty five and sunny, so hopefully you're out
(01:04):
there enjoying some of the Vitamin D enjoying your day.
I know that my son is over heading over to
Indian Ladders. You ever been over there, Zach, Indian Ladders
for apple picking?
Speaker 3 (01:17):
No, I'm going to fear a bush on Monday.
Speaker 2 (01:21):
All right? Is that where you're going? So I pick
my apples at market thirty two.
Speaker 3 (01:27):
I bet you're real good attitude day.
Speaker 2 (01:29):
I get an assortment, you know, I can get all
the different types of apples that I like. But it's
good to be here. Hopefully everybody's had a good week.
I know our friends and our loved ones, and a
lot of our clients live in Florida. Thoughts and prayers
are with them that they're going to get a speedy recovery.
I have three of my children that live there now,
(01:51):
my two daughters and my son. One lives in Sarasota,
one lives in Tampa, and one lives in Boca. The
ones in Sarasota and the one in Tampa are having
a hard time. They're safe, they're secure, but my son
says it doesn't look like where he lives in Tampa
that they're going to get power back until Thursday. So
we're thinking of you, we're praying for you, and we
(02:14):
hope that everybody gets up and gets going. It's a
speedy recovery and the events are over with enough with hurricanes.
So today, this topic is a topic that there's trillions
of dollars in trillions, and it's a topic that we're
starting to see at the retirement Planning group that is
(02:38):
becoming extremely problematic for people that are beneficiaries. And what
we're going to be talking about today are assets that
you do not you do not want to transfer to
the next generation for wealth transfer. Now, some people will
transfer these assets, but for the ones that are transferring
significant amount of moneies, we're going to talk a little
(03:01):
bit about what you're creating and why you want to
rethink this, especially if you're in the early stages of
your retirement or the early stages of thinking about retirement.
You've heard me talk over the years about iras, non
qualified annuities and series E bonds. These are the achilles
(03:23):
Heel of wealth transfer iras. There's trillions of dollars annuities.
I think there's a trillion or a couple trillion dollars
in annuities, Series E bonds. I have absolutely no idea,
but all of these assets, all of these mondays have
what we call an ird income and respect to with deceedon.
(03:44):
If you don't spend the money, you're sending a tax
liability to the next generation. So in IRA, never a
step up and basis always tax does ordinary income. Now
there's new rules and regulation which we'll go through as
far as non spouse beneficiaries, how they affect you. What
(04:08):
happens if you're a non spouse beneficiary for the second time,
meaning that the primary, the first non spouse beneficiary received
the assets that person passed away, and then you're named
as a beneficiary on that account. And how this is
becoming a very slippery slope in one that you need
to understand. We see individuals all the time in our
(04:30):
practice that have six, if not seven figures in qualified
assets IRA four O one K New York State deferred
compensation TSP, whatever it may be, and we always ask
them what is the destination for this money? What are
you trying to create? And for a lot of you,
(04:54):
the answer is pretty simple. Well, during my accumulation years,
I used it to all set some of my tax liability,
and because I have a pension and my wife has
a pension, we have social Security benefits. Really, to be
honest with you, we really don't have a destination for
the assets. We really want to transfer this money to
the next generation and use it maybe for special items,
(05:18):
special trips, special things that we want to do in
our lifetime. The problem with that for a lot of
people is procrastination filters into your decision making and when
you ultimately look at that pot of money, whether you're
sixty five, seventy seventy five years old. You say to yourself, Wow,
(05:38):
now what am I going to do? Because I've created
this huge tax liability not qualified annuities. Let's briefly go
through then. We've seen people right now that have hundreds
of thousands of dollars in non qualified annuities. Remember in
the eighties and nineties, we used to get ten, eleven, twelve,
fourteen to fifteen percent. Sometimes we just get six percent guaranteed.
(06:02):
Now somebody put fifty sixty eighty one hundred thousand dollars
into these accounts, they have three four hundred thousand dollars
in non qualified annuities. That's a tax liability. Anything over
the cost basis is a tax liability for your errors.
Series E bonds. We talked briefly about Series E bonds.
You buy them at a discount to the face value,
(06:24):
never a step up in basis, Never any tax preference,
never any capital gains. Always tax does ordinary income when
you cash it in. This was a favorite for my parents,
for a lot of seniors. Series E bonds. So we're
going to talk about what you should be doing with
these assets that We're going to be talking a little
bit about what I'm seeing in my practice. Let's highlight
(06:49):
a little bit what I'm seeing in my practice. We
have individuals that have elected not to get married, not
to have children, more so than you think. And those
individuals that have been successful that have accumulated assets in
(07:10):
four oh one k's iras, etc. Now leave those assets
to a loved one, which we call a non spouse beneficiary.
The non spouse beneficiary rules are different than a spouse rules.
Non spouse beneficiary has to have the entire balance of
(07:34):
that IRA withdrawn from the IRA ten years from the
original account holder's death. This is known as the new
ten year rule that applies to most beneficiaries of iras
owned by anyone who passed away after January first of
(07:56):
twenty twenty, which was the Secure Act one. Beneficiaries also
take required minimum distributions, meaning that they have to take
distributions throughout the year right or once a year in
order to meet the required minimum distribution to satisfy what
(08:19):
the government is looking for. This can result in a
huge tax liability. To minimize taxes, you got to start
considering different alternatives ways that you can start taking these distributions,
such as charitable donations withdrawing more money during your go
(08:42):
go years. When you're healthy, you have blue skies and
sun in front of you, and the big thing is
to make sure that you're sitting down with your financial
team and having a discussion exactly what your intention are
for these types of assets iras. Right now there's an
(09:04):
excess of twenty trillion with a t trillion dollars in
IRA assets. If you inherit a traditional ira, the government
has a plan for you. If you're a non spouse
beneficiary and receive assets in a wroth ira, the government
has a plan for you. That means that even though
(09:25):
it's a wroth ira and it's tax free assets, you
still have to have that money out within ten years
and you're also going to be subject to required minimum distributions.
Bottom line is this, non spouse beneficiaries who inherited iras
(09:47):
before December thirty first of twenty and nineteen, you're grandfathered
in on that magical world that we called the stretch IRA.
This rule only requires them to withdraw what we call
the rm D and that's the base amount of money
that's on life expectancy. On life expectancy, So let's go
(10:11):
through a situation that I have right now at the
retirement Planning Group and how we are considering different options
for our client. Our clients will say they're Jack and Jill.
(10:32):
Jill had a sister that was extremely successful in business.
She had a seven figure investment portfolio and she also
had a seven figure IRA. That IRA, she had her
sister named as the primary beneficiary and then she had
(10:54):
her nieces and nephews for the contingent beneficiary. When she
rolled over those assets to the retirement planning group, she
wanted to think about the nieces and nephews. So what
happened is that we ended up making the sister as
the primary beneficiary with her coming back and having more
(11:17):
detailed conversations of legacy planning. Well, that conversation never happened
because she passed away. Now the sister's in a position
right now. She's had a very successful career. Both her
and her husband were teachers. They now have this seven
figure non spouse inherited IRA and she's in a situation
(11:43):
where they don't need the money, but they have to
take the distributions because it's a non spouse beneficiary and
that money has to be out within ten years. Those
distributions are going to be an excess of one hundred
thousand dollars a year in the next ten years in
order to satisfy what the government is mandating required minimum distribution.
(12:10):
Husband's upset it's pushing their Medicare premium, pushing them in
a much higher tax bracket. They don't need the money.
They're trying to figure out what is the best way
in order to satisfy the legacy that she wishes to
leave for her family members nieces and nephews and both
(12:31):
are her children, and still and still put themselves in
a position where they're going to be able to buffer
this tax liability. So when we come back from break,
I'm going to go through some suggestions and ideas that
we've discussed with them, and we're going to talk about
this is a dilemma that some of you will face
(12:53):
because of the vast amount of wealth that's out there
in qualified assets, iras, four oh one ks, TSPs, DEFERD, compensation, etc.
What I call the Achilles Heel, the gideap as far
as wealth transfer. Natalie Choate, nationally recognized attorney, the mortgage
(13:14):
on your IRA. Ed Slott, CPA IRA Expert. He calls
it the retirement time bomb. What are you going to
do about it? Do you sit on the fence or
do you motivate and you start building out a plan
that's specific for all of these qualified assets. I'm Dave Kopek.
This is retirement Ready, and today we're talking about assets
(13:37):
that you do not want to transfer to the next
generation for wealth transfer. We'll be right back the eighty
six percenters. Do you know that eighty six percent of
the population has no defined benefit pension plan. For most
of us, we have to take our life savings and
create a paycheck for the rest of our lives in retirement.
What is your plan for retirement income distribution? How you
manage your assets during the most critical years of your lifetime.
(13:59):
No Prize winning economist William Sharp has called retirement income
distribution the nastiest, hardest problem in finance. He points out
that investment, uncertainty, and mortality can derail the most careful
laid out retirement income plan. Call our offices today to
start the process of building a retirement income distribution plan.
After forty one years of being in the financial services business,
(14:21):
you need to start taking action to start building your
own personal retirement income distribution plan. How do you do
that to take action five one eight five eight zero
one nine one nine. That's five one eight five eight
zero one nine one nine or RPG retire on the web.
Don't procrastinate, motivate to start building your retirement income distribution
(14:41):
plan five one eight five eight zero one nine one nine.
Will we run out of money in retirement? Will your
investments provide income for possibly decades? How do you navigate
the two greatest risk in retirement? Sequence of returns in longevity?
At the Retirement Planning Group, Our Bucket of Money approach
addresses these concerns and we offer a complementary consul take
to discuss this with you. Call our office today for
(15:02):
a free complimentary consultation to develop your own personal retirement
income distribution plan at five eight five EID zero one
nine nine that's five eight five ead zero one nine
one nine Shine. Good afternoon, and this beautiful Saturday in
(15:32):
upstate New York. Hopefully you're listening and enjoying the day.
All of our listeners outside the five to one and
eight area code welcome. We have a lot of listeners
throughout the nation now because of iHeartRadio, and we appreciate
you tuning in and enjoying the show hopefully. Today we're
talking about IRA assets, in particular trillions of dollars that
(15:56):
are out there right now. There's eighty to eighty five
trillion dollars of wealth transfer that's going to happen over
the next twenty to thirty years. Of that, a good
portion of that money is IRA assets. These are what
I would considered to be very complicated assets to transfer
to the next generation, primarily because of that little thing
(16:19):
that they did legislation wise called the Secure Act and
which mandates that a non spouse beneficiary must withdraw the
entire inherited IRA balance within ten years of the original
owner's death. And you start taking six, seven, eight figure accounts,
(16:42):
that's resulting in a large, huge tax liability and eliminating
the previously available what they used to call, when we've
heard it a million times, the stretch IRA strategy, where
you as the beneficiary could spread the withdrawals over your lifetime,
making it less taxable and more efficient as far as
(17:05):
long term wealth transfer. And there used to be multiple,
multiple different types of strategies in order for you to
do this. So what can be done? How do you
manage this type of wealth well. First and foremost, the
most dynamic document that you have besides a trust document,
(17:29):
is a little thing called the beneficiary form. Beneficiary forms.
Of course we're on our qualified assets, our iras, our
life insurance, our annuities. You can go through a little
whole thing where there's beneficiary forms. Why is this so
important because on that document you have a primary beneficiary
(17:50):
and then you have contingent beneficiaries. Those contingent beneficiaries are critical,
especially if it's important for you to transfer wealth than
the next generation, if it is not needed for quality
of life. I just gave you a situation where a
husband and wife or in a situation now where they're
(18:10):
going to get well over six figures. They don't want
the money. They're trying to figure out how to manage
these assets reduce their tax liability, and it's going to
be difficult. But there are options available to them as
long as they look at them logically and look at
the numbers as far as does it make sense for
(18:31):
me to move in a different direction. You need professional
guidance on this. You need to sit down with a
wealth management team in order to build out a comprehensive
a state plan that takes into consideration these specific circumstances
(18:53):
and the potential strategies to minimize the tax burdens when
you're transferring large IRA assets. As an example, since all
of these assets that I'm talking about are what we
call pre tax assets, the balance in those accounts will
(19:14):
be subject to what we call ordinary income when it's
passed on to the beneficiaries, never a step up and basis,
never any tax preference, never any capital gains. So you
have to figure out, is there are a different way
in order for me to slice and dice, to carve
(19:35):
this up, to create a legacy to maximize the IRA assets.
If it's important to you. If it's important to you,
so let me go through some concepts and ideas, especially
for the individuals that are locked and loaded. The cake
has been baked. If you're in a situation where you
(19:58):
have large IRA assets and you're trying to figure out
how can I transfer this wealth with the least amount
of tax to the beneficiaries. I'm willing to subject myself
to some taxation, but I don't want to put my
loved ones in a situation where they're going to have
huge tax ramifications because of the legacy that I'm transferring
(20:22):
to them. Now, some saple will say, listen, why don't
you do a roth Ira conversion? That is an option.
That is an option where you can do a roth
Ira conversion. Okay for a lot of people, though when
you start doing this a lot of time, they're already
at the R and D level requirementium distribution RMD is
(20:44):
not allowed to be put into the conversion. Anything over
and above the rm D is So you're talking about
a substantial amount of money that would not be allowed.
And now you're adding additional tax liability with the additional
moneies that you're bringing out of the traditional IRA. There
(21:07):
is a strategy called the carve out where you take
a portion of the IRA, you put it into a
payout plan, and you purchase either a single life or
a survivorship life insurance policy. As an example, husband and
(21:27):
wife use that situation that we're in right now, they
might say, listen, we're going to keep five hundred thousand
dollars of this money. We're going to satisfy the required
minimum distribution and maybe accelerate it with the other five
hundred thousand dollars, and then what we're going to do
is we're going to go out and we're going to
(21:48):
seek a quote, and we're going to find out exactly
how much life insurance are they willing to ensure us.
As far as wealth transfer legacy, a lot of times
we do this in a five pay, a ten pay,
or a fifteen pay, depending on the age of the
individuals and their insurability. So as an example, we'll just
(22:12):
do some simple arithmetic here. This is all hypothetical. Husband
and wife. Let's say there are seventy two, she's seventy.
They know what's coming as far as their rm ds
on their own personal accounts. They also know what they're
being forced to do. As far as non spouse beneficiary withdrawals.
(22:33):
We've done some future projections. They're flabbergast as far as
what their tax liability is. They're willing to pay it,
but we're eroding this legacy that was transferred to them.
If I do a wroth conversion, if I do fifteen
thousand dollars or twenty thousand or fifteen thousand dollars, whatever
it may be, that money is in the wroth. That
(22:57):
is the money that's going to be there for the conversion.
If I do life insurance life insurance adds velocity. So
let's just keep it simple. Let's say I do fifty
thousand dollars a year for the next ten years. For
the fifty thousand dollars that's going to buy me, approximately
for people at age with good health, about a million
dollars worth of life insurance one million dollars. So I
(23:20):
take the fifty thousand, I have it paid out. It
buys me a survivorship policy. We buy it inside of trust.
I've got one million dollars of tax free assets payable
for ten years. At the end of ten years, it's
been paid. There's no more premium payments. It's good to
age one hundred and twenty one. Now why would you
(23:44):
do that, Because you're eliminating the ability for you to
have more erosion to those assets. You're also limiting the
ability for you to transfer wealth that is not burden
by tax ab And when your loved ones receive these assets,
they're receiving the assets tax free. That means that once
(24:09):
they go into the pot they grab the money, it
comes out tax free. Because life insurance, which is one
of the greatest things about life insurance, is a tax
free wealth transfer benefit. As long as it's set up properly,
and they emphasize that as long as it's set up properly.
So fortunately for you, there are ways to preserve and
(24:32):
protect these hard earned assets, pass them on to the
next generation, and achieve what most people are looking for
is wealth transfer the most tax efficient way. So by
creating a legacy by these large IRA assets, someone's going
(24:54):
to have to take the tax set It's a question
do you get proactive and do it in your lifetime,
or do you leave this major tax liability to the
next generation, which could encumber them to be put into
a situation where Medicare is increasing, tax liabilities are increasing.
(25:14):
It's just a question of how you ultimately want to
leave these assets. That is one way. When we come back,
we're going to talk about some other options that are
available to you. But as always, if anything is of
interest to you, our company is the Retirement Planning Group.
We have five locations here in New York State. Give
us a call. Our telephone number is five one eight
(25:36):
five eight zero one nine nine. That's five one eight
five eight zero one nine one nine. Check us out
on the web rpgretire dot com. I'm Dave Kopek the
president of the Retirement Planning Group. We're here every Saturday
from twelve to one. This is Retirement Planning. Good afternoon, beautiful,
(26:25):
beautiful day outside. Hopeful you're enjoying it. I'm going to
be joining it in a very few minutes. I'm going
to a ninety fifth birthday party for a client of mine.
I'll look forward to it. Be there in another hour
and a half or so, and we're gonna do a
little festivity. As far as turning ninety five, my oldest
(26:45):
client is one hundred and two. Have got clients to
go all the way down to sixteen, seventeen, eighteen years old,
so multiple generations. This is my forty third year in business,
and I'm talking about probably the number one giddy up
Achilles Hill for a lot of you, how to transfer
(27:09):
wealth the most tax efficient way, especially if you've been
a good saver in what we call pre tax accounts.
When I talked about the three accounts, you don't want
to transfer to the next generation for a lot of reasons.
The biggest is a tax liability force liquidation not when
(27:29):
you want the money, but when you're forced to take it.
Is i RAS, Series E bonds and non qualified annuities.
And as I said, how hard is it to transfer
these assets, Well, it's pretty easy because on the form
you have what we call a beneficiary designation for that
(27:52):
trump's your will, any other document, whatever name is on
that document, that's where the money goes. So if you're
looking at that document and you're trying to figure out
how am I going to transfer this money to my kids?
But I also want to leave assets to my wife
(28:13):
or my husband, and I want to make sure that
there's more than enough money there in order for them
to have quality of life, because, as we're quite well aware,
ninety percent of us today do not have pension benefits.
(28:36):
So when we look at this big, huge pot of money,
we're trying to figure out how long will it last?
And we're also trying to figure out I don't want
to be in a situation where it's going to go
to a nursing home or to the county. I want
to make sure that it goes to my family. There
(28:57):
is one key document which I've talked about. I actually
had numerous phone calls the last time I did this show,
and I talked about it, and I had a long
conversation with the gentleman on the phone. There's a document
that you should have fidelity has it. It's called a disclaimer,
(29:17):
an IRA. Disclaimer and disclaiming an IRA is basically exactly
as it sounds. You're disclaiming an inheritance and you're you're
basically declining to receive these inherited assets. Well, Dave, why
(29:38):
would I do that? Well, a lot of times, no
one has a crystal ball? How long Bobby Susie, husband
and wives are gonna live for? No one has a
future or crystal ball. What are hell's going to be
like a lot of times, whether it's the male or
the female one of you, typically you're top heavy, one
(30:00):
has way too much money pretax at least what we
see consistently. And if that is the case, you only
want to leave to the surviving spouse. What is going
to be adequate enough in order for that person to
have quality of life, especially if you're in your eighties
and nineties, Because the government, depending on your zip code,
(30:26):
has different rules and regulations as far as mediciate eligibility
in order for you to get care in a nursing home,
and depending on your state, your county that you live in,
there's different rules and regulations as far as how they
handle homes and iras. So as unlikely as it may seem,
(30:51):
I know, you know, people say, why would I do that.
Some beneficiaries prefer not to receive inherited assets, and the
reasons can vary. That was one, that was one, and
often the beneficiary would prefer that the assets be given
to someone else, and over time the original beneficiary doesn't
(31:13):
want to be taxed on those assets. And if done correctly,
you can disclaim these assets and you can get it
to the contingent beneficiaries. So if you're considering this, here
are some of the scenarios that we've seen and we've
(31:33):
used in our practice. Number One, Mom and Dad have aged.
Dad's going to pass away. He has a short lifespan.
Dad was very successful. He has a seven figure IRA account.
(31:53):
That IRA is not necessary for Mom for quality of life.
She has a small pension, more than adequate, soul secure
and other investments the IRA. Even though she's the primary,
she has Bobby, Billy and Susie as the contingent beneficiaries.
Those three contingent beneficiaries can receive the assets even if
(32:19):
Mom is still alive and she's considered to be the
primary beneficiary. Her status as the beneficiary if she disclaims
it is fully annult So why would she do that.
She's sick, she's ill, she doesn't need it. She's subject
(32:41):
to large distributions, not because she wants them, but because
they're now forced because of requirement of distribution she disclaims
these assets. Its act is if she had already predeceased,
those monies go to the three named children, Bobby billion,
(33:01):
Susie and now Bobby billion Susie can now stretch that
money out over a ten year period of time, but
they will be forced to do required minimum distributions. Disclaiming
IRA assets is not only to avoid the taxes, but
(33:26):
as I said, depending on your zip code where you live,
those assets could be subject to a Medicaid spend down
if you do not have long term care insurance. Now
what happens. What happens once those assets go to the
(33:51):
three children, Well, they're forced to liquidate those assets. There's
no more As I said, there is no more stretch
IRA available. Only if you have received the assets before
January one of twenty and twenty do you have access
(34:11):
to the stretch IRA. The Secure Act which we talk
about modified those rules from inherited iras that after December
thirty first, twenty and nineteen. Under the new legislation, you're
now required to have those payments over a ten year
(34:35):
period of time, what we call the ten year rule.
So there are strategies that you can utilize to buffer
have a bumper to some of the protection. She could
have done all of it in this example, where she
(34:58):
could have taken one hundred percent one of the IRA
assets and transferred transferred them to the three children, and
there would have been no impact on her whatsoever, simply
because what I said was that she had adequate amounts
of monies in her own IRA plus what she had
(35:19):
in investments. A small pension and social security benefit does
not have to be all, doesn't have to be half.
The percentage can be what is necessary for quality of life.
So if there was a million dollars there and she
only wanted five hundred thousand of it, or she only
(35:41):
wanted two hundred thousand of it, then the remaining assets
would go to the children, divided equally, if that's the
way it was specifically set on the disclaimer form. So
what happens if assets are properly disclaimed. What happens if
(36:09):
the beneficiary properly disclaims the inherited assets, it's as if
they never were designated as the beneficiary. Their status as
a beneficiary is fully anult The problem with the example
that I had on the front end of this is
(36:31):
that there was complications in the family. She had no
idea what she wanted to do as far as the
percentages with the kids, the nieces and nephews. She named
her sister as the primary beneficiary with the anticipation that
she was going to go back to the well, and
she never did. She never did. Now the sister's in
(36:52):
a situation where she has large tax liabilities. She has
to figure out how she's going to attack the move
these moneies around in order for her to satisfy not
only the tax burden that they're receiving now the increase
that they're receiving in their Medicare payments, but also how
(37:13):
does she satisfy how she ultimately wants to transfer these
assets to the next generation. Now here's the key thing.
That ten year rule is only in existence once she
passes away. Now there's a second non spouse beneficiary. It's
still on the timeframe of the original ten year period.
(37:40):
So the bottom line is this qualified assets iras four
oh one k's four O three b's TSAs tiakraf. All
the pretext money, all the pre tax money, is complicated money.
(38:05):
You need to sit down with your wealth management team
and build out a plan for your own particular circumstances
and make sure you understand the circumstances as far as
what your tax liability will be for your primary and
(38:25):
your contingent beneficiaries. Make sure they understand that the disclaimer
form has been filled out. And the most critical component
to all of this bar none, never ever ever take
a distribution from a qualified plan or roll money over
(38:50):
until you have sat down with competent legal, tax and
investment professionals to make sure you understand exactly not only
what you're doing, but also what your tax liability will
be today and in the future. I'm going to take
my final break. Anything that I'm discussing today is of
(39:11):
interest to you, you can give us a call at
our corporate headquarters in Malta, New York. Five win eight
five eight zero one nine nine. That's five one eight
five eight zero one nine one nine. Check us out
on the web rpgretire dot com. We have five locations
now in Florida or excuse me here in New York
to in Florida. You can give us a call if
(39:33):
you want to sit down with us face to face,
if you want to meet with us over the internet.
We do a lot of zoom and ring central meetings.
Whatever you would prefer to do is good with us
because we're here to facilitate what your needs are. Again,
our telephone number is five one eight five eight zero
one nine nine. I'm here live in the studio today.
(39:58):
If you have any questions anything that I talked about today,
I'm here one eight hundred talk WGY. That's one eight
hundred eight two five fifty ninety nine, one eight hundred
talk WGY. I'm Dave Kopek, the president of the Retirement
Planning Group WG WYS Retirement Planning Specialists. We'll be right back.
Your partner for success, David Kopek here WG WISE Retirement
(40:21):
Planning Specialists, the Retirement Planning Group. We understand that retirees
face many important decisions that can affect their long term
financial success. Some of these decisions revolve around making investments
that will help create a hedge against outliving their assets,
the impact of inflation, taxation, and rising healthcare costs. Most
(40:42):
of our clients like the time, the desire, or the
experience to manage their own investment portfolios. We consider it
to be an honor and a privilege to help our
clients make sound investment decisions that will contribute to a
secure financial future for them. Because over ninety percent of
our alliance or retirees with similar concerns, we are in
(41:02):
the best position to approach such challenges with experience and skill.
Give us a call today at five one eight, five
eight zero one nine one nine five eight five eight
zero one nine one nine or RPG. Retire on the web.
The greatest risk in retirement Most of us have no
plan for We're insurance to cover the expense. A long
term care event can impoverish a spouse, drain your life savings,
(41:26):
and cost stress and anxiety on your family. What is
your plan and how will you pay for a long
term care event? Call the Retirement Planning Group today discuss
options you should consider to protect your estate and have
choices and independence. Take action call today five one eight
five aid zero one nine nine or RPG retire on
the web. All right, let's just listen to that man
(42:27):
a little Doobie. Amen. What a group they were? You
like the seventies and eighty music?
Speaker 3 (42:38):
I do? You know?
Speaker 2 (42:40):
You like rap rapper?
Speaker 3 (42:42):
Anything that gets my feet moving? I enjoyed.
Speaker 2 (42:46):
I like that. Oh you like that one? Like pok
You like Polka's Yeah?
Speaker 3 (42:53):
Yeah, the one that we normally play.
Speaker 2 (42:55):
Yeah, yeah, yeah, we won't play that one today. It's
good to be here, folks. You know, this has been
a crazy week. You know, I got three kids in Florida,
and you know, I'm going back and forth here. My
son has no power, he's got no gas in his car,
and I'm just trying to figure out what I'm gonna
do here. So if I seem a little distracted today,
I apologize. But this has really been crazy, crazy, crazy,
(43:16):
crazy crazy week. He's safe, he's in his apartment. But
Florida's really going through a horrible time. Horrible time, horrible time.
Say some prayers for the people in Florida because they
need it. I got a daughter in Sarasota and a
daughter in Boca, and it's you know, Florida's being challenged
right now. But today I'm talking about what I see
(43:40):
is the biggest Achilles Hill for a lot of us,
the amount of money that's in pre tax accounts. And
I'll talk a little bit now to the people that
are still accumulating. If you've got a lot of money
pre tax account stop, just stop, Okay. Know the difference
between a traditional four O one K and a wroth
four O one K. If you're working through an employer
that offers you the four wroth for ONK. When I
(44:01):
say this, it's the greatest thing since slice bread, the
wroth for OW and K. You pay taxes on your
contributions when you make them, your earnings grow tax free.
You're never subject to requirement of distribution as the owner.
And guess what, when you withdraw the money, it's tax free,
(44:22):
tax free, tax free. The only thing that even comes
close to the wroth for OK is the HSA account
health savings accounts. And Zach knows and all my employees
now I am a major, major, major, major advocate of
health savings accounts. Why is that? Well, you're starting to
(44:42):
see it. You're going to see it more. I talked
to a consultant the other day. You're going to be
looking at about a forty percent increase in your healthcare
premiums when they come and hsas help you buffer the
cost for one case, help you buffer the costs. Some
(45:03):
of your health is dictated off of income WROTH. It's
like phantom income. It doesn't exist. Right, you have no
tax liability. So if you think your marginal tax back
will be higher in retirement, it's for some of us
it will depending on the zip code and where we live. Right.
(45:23):
The WROTH account may make a lot of sense. I
don't care. It always makes sense. So as an example,
we'll have people come in. They got eight hundred thousand
dollars in their four oh one K, they got one
hundred thousand dollars in they're WROTH, right, very common, And
I'll say to them, let's let's stop the contributions. You
(45:43):
got a few more years left to go. Let's load
up on WROTH four oh one K, and let's try
to make more contributions to your IRA accounts, your WROTH iras,
because that is money that we can utilize in order
for us to bridge bridge to some of the benefits
that might be more benefit issue and retirement. What am
I talking about? Healthcare talked about healthcare. This morning on
(46:06):
my morning show from seven to nine, the retirement planning show.
This is Retirement Ready. Retirement Ready is topic specific. Now
we're talking about pre tax account I RAH accounts. What
kind of contributions that you have to make, where should
you make them, What are the withdrawals, what happens when
you pass away? What are the tax consequences. It is
(46:27):
a nightmare for a lot of people. That's why I
overemphasize you should be working with a financial team. I
don't care if it's Fidelity, Schwab, Vanguard, they all say
the same thing, every single one of them. Working with
a financial advisor will help you not only build out
(46:47):
your plan, but also will help you as far as
your net return on your investments, because a lot of
us get one emotional and you've got to take emotion
out of investing because emotion doesn't work well well when
you basically pull the plug on things where you shouldn't
be pulling the plug. We're going to Fidelity Monday, Tuesday,
(47:10):
and Wednesday next week. I leave Monday morning for Fidelity
in Boston for a three day conference, and we will
go over a lot of these topics that I talk
about consistently on the radio, WROTH, Traditional IRA, health savings accounts,
et cetera, et cetera. Okay, why do they differ? What
(47:33):
is the difference between the WROTH four O and K
the Roth IRA? What is the difference between the traditional
four oh and K and just a regular IRA? How
can I get money out of those plans? Can I
get money out before age fifty nine and a half?
Answers yes, Which when can I get it out of?
(47:54):
I'll give us a call. We'll tell you. I'm a
major advocate of education, major advocate, not a sales pitch,
but an informed investor, because once you're informed and educated,
then you're going to make a logical decision with your
(48:16):
financial team of what you should be doing right. There's
always a couple of key takeaways with WROTH and traditional
simply put paying taxes now or paying taxes later, marginal
(48:39):
rate higher in the future, lower in the future. Having both,
possibly a Traditional and a Wroth could be appropriate. A
lot of times your employer will make the match through
the traditional. Once you receive the match, we always say
to people, not always a lot of time times, let's
(49:01):
now you got the match. Now, let's start loading up
on the row four oh one K. How you choose
your retirement savings during your accumulation years plays a huge
impact in your post retirement. Right, you're no longer an accumulator.
(49:21):
Now you're a person that's taking distributions. So your upfront
decisions and your considerations are critical on how you basically
bake your cake. So there's a lot of attacks things
you should consider. Retirement accounts. Like I said, four oh
one K, four O three b's iras blah blah blah,
(49:41):
go TSPs, New York State deferred compensation that goes through
the whole list of them. So big thing is this,
I can prove it to you. We can sit down,
I can show you the information, the data, working with
a team, a team of professionals will help you. The
(50:04):
numbers speak for themselves. So is an IRA right for you?
I don't know. Is a Roth IRA right for you?
We have to sit down and chat. But I can
tell you one thing for sure. In my forty three
years of doing this, I'm in the camp that HSA
(50:26):
accounts and ROTH accounts are probably some of the best
things that ever came out of Washington to see. So
if you want to determine if you're on track. You
want to sit down and have a consultation. We offer
a complementary consultation at any of our five offices here
in New York. Give us a call. Our telephone number
(50:46):
is five one eight five eight zero one nine nine.
That's five one eight five eight zero one nine one nine.
You can check us out on the web rpgretire dot com.
You can give me a phone call at the office.
I won't be back in untill Thursday. I'm out Monday,
Tuesday and Wendy Wednesday in Boston with Fidelity. But I'd
(51:09):
be more than happy to have a chat with you,
either a Ring Central or Zoom meeting and we'll find
out if you're on track. Now, here's the big Ancelada.
Here's the one that I want to hear from my man, Zach.
Zach's a sports guy. Are we going to have a
Subway series? I'm hoping so. The Mets are hot and
(51:31):
the Yankees are looking good, So I'm hoping so. Derek
cole had that was good to see. So again, folks,
say a prayer for our friends and our loved ones
and our family members in Florida. Be generous. The American
Red Cross is working out there aggressively. I know that
there's other ones that are out there that might be
(51:54):
closer to your heart. They need help. There's a lot
of people hurting down there in Florida right now. God
bless you all, and we'll see you next week for
another Retirement Ready.
Speaker 1 (52:03):
Thank you for listening to Retirement Ready, hosted by Dave Kopek,
w G wise retirement planning Specialist. If you'd like to
talk with Dave for someone of the Retirement Planning Group,
call five twenty five eight zero nine one nine. That's
five twenty five eight zero one nine one nine during
business hours, or visit rpgbretire dot com. The Retirement Planning
(52:26):
Group has five convenient offices located in Albany, Malta, Glens Falls, Syracuse,
and Oneana. Tune in again next week for retirement planning
strategies with Dave Kopek right here on WG wise Retirement Ready.
The information our services discussed on this show is for
informational purposes only and as not intended to be personal
(52:47):
financial advice. The investments and services offered by us may
not be suitable for all investors. If you have any
doubts as to the merits of an investment, you should
seek advice from an independent financial advisor.
Live for the WGY iHeart Studios. Welcome to Retirement Ready
with your host Dave Kopek for the Retirement Ready Show.
Every week, Dave and his team discuss the ways they
can help people make informed decisions about a wide array
of retirement planning information that can support you and developing
a more certain financial future for you and your family.
(00:21):
Now it's time for Dave Kopek, WGY's retirement planning specialist.
Speaker 2 (00:43):
All right, I'm Dave Kopek. This is Retirement Ready, which
is a topic specific show heard right here an iHeartRadio WGY,
the mother Ship. We're glad to be here. Beautiful day
outside today, sixty five and sunny, so hopefully you're out
(01:04):
there enjoying some of the Vitamin D enjoying your day.
I know that my son is over heading over to
Indian Ladders. You ever been over there, Zach, Indian Ladders
for apple picking?
Speaker 3 (01:17):
No, I'm going to fear a bush on Monday.
Speaker 2 (01:21):
All right? Is that where you're going? So I pick
my apples at market thirty two.
Speaker 3 (01:27):
I bet you're real good attitude day.
Speaker 2 (01:29):
I get an assortment, you know, I can get all
the different types of apples that I like. But it's
good to be here. Hopefully everybody's had a good week.
I know our friends and our loved ones, and a
lot of our clients live in Florida. Thoughts and prayers
are with them that they're going to get a speedy recovery.
I have three of my children that live there now,
(01:51):
my two daughters and my son. One lives in Sarasota,
one lives in Tampa, and one lives in Boca. The
ones in Sarasota and the one in Tampa are having
a hard time. They're safe, they're secure, but my son
says it doesn't look like where he lives in Tampa
that they're going to get power back until Thursday. So
we're thinking of you, we're praying for you, and we
(02:14):
hope that everybody gets up and gets going. It's a
speedy recovery and the events are over with enough with hurricanes.
So today, this topic is a topic that there's trillions
of dollars in trillions, and it's a topic that we're
starting to see at the retirement Planning group that is
(02:38):
becoming extremely problematic for people that are beneficiaries. And what
we're going to be talking about today are assets that
you do not you do not want to transfer to
the next generation for wealth transfer. Now, some people will
transfer these assets, but for the ones that are transferring
significant amount of moneies, we're going to talk a little
(03:01):
bit about what you're creating and why you want to
rethink this, especially if you're in the early stages of
your retirement or the early stages of thinking about retirement.
You've heard me talk over the years about iras, non
qualified annuities and series E bonds. These are the achilles
(03:23):
Heel of wealth transfer iras. There's trillions of dollars annuities.
I think there's a trillion or a couple trillion dollars
in annuities, Series E bonds. I have absolutely no idea,
but all of these assets, all of these mondays have
what we call an ird income and respect to with deceedon.
(03:44):
If you don't spend the money, you're sending a tax
liability to the next generation. So in IRA, never a
step up and basis always tax does ordinary income. Now
there's new rules and regulation which we'll go through as
far as non spouse beneficiaries, how they affect you. What
(04:08):
happens if you're a non spouse beneficiary for the second time,
meaning that the primary, the first non spouse beneficiary received
the assets that person passed away, and then you're named
as a beneficiary on that account. And how this is
becoming a very slippery slope in one that you need
to understand. We see individuals all the time in our
(04:30):
practice that have six, if not seven figures in qualified
assets IRA four O one K New York State deferred
compensation TSP, whatever it may be, and we always ask
them what is the destination for this money? What are
you trying to create? And for a lot of you,
(04:54):
the answer is pretty simple. Well, during my accumulation years,
I used it to all set some of my tax liability,
and because I have a pension and my wife has
a pension, we have social Security benefits. Really, to be
honest with you, we really don't have a destination for
the assets. We really want to transfer this money to
the next generation and use it maybe for special items,
(05:18):
special trips, special things that we want to do in
our lifetime. The problem with that for a lot of
people is procrastination filters into your decision making and when
you ultimately look at that pot of money, whether you're
sixty five, seventy seventy five years old. You say to yourself, Wow,
(05:38):
now what am I going to do? Because I've created
this huge tax liability not qualified annuities. Let's briefly go
through then. We've seen people right now that have hundreds
of thousands of dollars in non qualified annuities. Remember in
the eighties and nineties, we used to get ten, eleven, twelve,
fourteen to fifteen percent. Sometimes we just get six percent guaranteed.
(06:02):
Now somebody put fifty sixty eighty one hundred thousand dollars
into these accounts, they have three four hundred thousand dollars
in non qualified annuities. That's a tax liability. Anything over
the cost basis is a tax liability for your errors.
Series E bonds. We talked briefly about Series E bonds.
You buy them at a discount to the face value,
(06:24):
never a step up in basis, Never any tax preference,
never any capital gains. Always tax does ordinary income when
you cash it in. This was a favorite for my parents,
for a lot of seniors. Series E bonds. So we're
going to talk about what you should be doing with
these assets that We're going to be talking a little
bit about what I'm seeing in my practice. Let's highlight
(06:49):
a little bit what I'm seeing in my practice. We
have individuals that have elected not to get married, not
to have children, more so than you think. And those
individuals that have been successful that have accumulated assets in
(07:10):
four oh one k's iras, etc. Now leave those assets
to a loved one, which we call a non spouse beneficiary.
The non spouse beneficiary rules are different than a spouse rules.
Non spouse beneficiary has to have the entire balance of
(07:34):
that IRA withdrawn from the IRA ten years from the
original account holder's death. This is known as the new
ten year rule that applies to most beneficiaries of iras
owned by anyone who passed away after January first of
(07:56):
twenty twenty, which was the Secure Act one. Beneficiaries also
take required minimum distributions, meaning that they have to take
distributions throughout the year right or once a year in
order to meet the required minimum distribution to satisfy what
(08:19):
the government is looking for. This can result in a
huge tax liability. To minimize taxes, you got to start
considering different alternatives ways that you can start taking these distributions,
such as charitable donations withdrawing more money during your go
(08:42):
go years. When you're healthy, you have blue skies and
sun in front of you, and the big thing is
to make sure that you're sitting down with your financial
team and having a discussion exactly what your intention are
for these types of assets iras. Right now there's an
(09:04):
excess of twenty trillion with a t trillion dollars in
IRA assets. If you inherit a traditional ira, the government
has a plan for you. If you're a non spouse
beneficiary and receive assets in a wroth ira, the government
has a plan for you. That means that even though
(09:25):
it's a wroth ira and it's tax free assets, you
still have to have that money out within ten years
and you're also going to be subject to required minimum distributions.
Bottom line is this, non spouse beneficiaries who inherited iras
(09:47):
before December thirty first of twenty and nineteen, you're grandfathered
in on that magical world that we called the stretch IRA.
This rule only requires them to withdraw what we call
the rm D and that's the base amount of money
that's on life expectancy. On life expectancy, So let's go
(10:11):
through a situation that I have right now at the
retirement Planning Group and how we are considering different options
for our client. Our clients will say they're Jack and Jill.
(10:32):
Jill had a sister that was extremely successful in business.
She had a seven figure investment portfolio and she also
had a seven figure IRA. That IRA, she had her
sister named as the primary beneficiary and then she had
(10:54):
her nieces and nephews for the contingent beneficiary. When she
rolled over those assets to the retirement planning group, she
wanted to think about the nieces and nephews. So what
happened is that we ended up making the sister as
the primary beneficiary with her coming back and having more
(11:17):
detailed conversations of legacy planning. Well, that conversation never happened
because she passed away. Now the sister's in a position
right now. She's had a very successful career. Both her
and her husband were teachers. They now have this seven
figure non spouse inherited IRA and she's in a situation
(11:43):
where they don't need the money, but they have to
take the distributions because it's a non spouse beneficiary and
that money has to be out within ten years. Those
distributions are going to be an excess of one hundred
thousand dollars a year in the next ten years in
order to satisfy what the government is mandating required minimum distribution.
(12:10):
Husband's upset it's pushing their Medicare premium, pushing them in
a much higher tax bracket. They don't need the money.
They're trying to figure out what is the best way
in order to satisfy the legacy that she wishes to
leave for her family members nieces and nephews and both
(12:31):
are her children, and still and still put themselves in
a position where they're going to be able to buffer
this tax liability. So when we come back from break,
I'm going to go through some suggestions and ideas that
we've discussed with them, and we're going to talk about
this is a dilemma that some of you will face
(12:53):
because of the vast amount of wealth that's out there
in qualified assets, iras, four oh one ks, TSPs, DEFERD, compensation, etc.
What I call the Achilles Heel, the gideap as far
as wealth transfer. Natalie Choate, nationally recognized attorney, the mortgage
(13:14):
on your IRA. Ed Slott, CPA IRA Expert. He calls
it the retirement time bomb. What are you going to
do about it? Do you sit on the fence or
do you motivate and you start building out a plan
that's specific for all of these qualified assets. I'm Dave Kopek.
This is retirement Ready, and today we're talking about assets
(13:37):
that you do not want to transfer to the next
generation for wealth transfer. We'll be right back the eighty
six percenters. Do you know that eighty six percent of
the population has no defined benefit pension plan. For most
of us, we have to take our life savings and
create a paycheck for the rest of our lives in retirement.
What is your plan for retirement income distribution? How you
manage your assets during the most critical years of your lifetime.
(13:59):
No Prize winning economist William Sharp has called retirement income
distribution the nastiest, hardest problem in finance. He points out
that investment, uncertainty, and mortality can derail the most careful
laid out retirement income plan. Call our offices today to
start the process of building a retirement income distribution plan.
After forty one years of being in the financial services business,
(14:21):
you need to start taking action to start building your
own personal retirement income distribution plan. How do you do
that to take action five one eight five eight zero
one nine one nine. That's five one eight five eight
zero one nine one nine or RPG retire on the web.
Don't procrastinate, motivate to start building your retirement income distribution
(14:41):
plan five one eight five eight zero one nine one nine.
Will we run out of money in retirement? Will your
investments provide income for possibly decades? How do you navigate
the two greatest risk in retirement? Sequence of returns in longevity?
At the Retirement Planning Group, Our Bucket of Money approach
addresses these concerns and we offer a complementary consul take
to discuss this with you. Call our office today for
(15:02):
a free complimentary consultation to develop your own personal retirement
income distribution plan at five eight five EID zero one
nine nine that's five eight five ead zero one nine
one nine Shine. Good afternoon, and this beautiful Saturday in
(15:32):
upstate New York. Hopefully you're listening and enjoying the day.
All of our listeners outside the five to one and
eight area code welcome. We have a lot of listeners
throughout the nation now because of iHeartRadio, and we appreciate
you tuning in and enjoying the show hopefully. Today we're
talking about IRA assets, in particular trillions of dollars that
(15:56):
are out there right now. There's eighty to eighty five
trillion dollars of wealth transfer that's going to happen over
the next twenty to thirty years. Of that, a good
portion of that money is IRA assets. These are what
I would considered to be very complicated assets to transfer
to the next generation, primarily because of that little thing
(16:19):
that they did legislation wise called the Secure Act and
which mandates that a non spouse beneficiary must withdraw the
entire inherited IRA balance within ten years of the original
owner's death. And you start taking six, seven, eight figure accounts,
(16:42):
that's resulting in a large, huge tax liability and eliminating
the previously available what they used to call, when we've
heard it a million times, the stretch IRA strategy, where
you as the beneficiary could spread the withdrawals over your lifetime,
making it less taxable and more efficient as far as
(17:05):
long term wealth transfer. And there used to be multiple,
multiple different types of strategies in order for you to
do this. So what can be done? How do you
manage this type of wealth well. First and foremost, the
most dynamic document that you have besides a trust document,
(17:29):
is a little thing called the beneficiary form. Beneficiary forms.
Of course we're on our qualified assets, our iras, our
life insurance, our annuities. You can go through a little
whole thing where there's beneficiary forms. Why is this so
important because on that document you have a primary beneficiary
(17:50):
and then you have contingent beneficiaries. Those contingent beneficiaries are critical,
especially if it's important for you to transfer wealth than
the next generation, if it is not needed for quality
of life. I just gave you a situation where a
husband and wife or in a situation now where they're
(18:10):
going to get well over six figures. They don't want
the money. They're trying to figure out how to manage
these assets reduce their tax liability, and it's going to
be difficult. But there are options available to them as
long as they look at them logically and look at
the numbers as far as does it make sense for
(18:31):
me to move in a different direction. You need professional
guidance on this. You need to sit down with a
wealth management team in order to build out a comprehensive
a state plan that takes into consideration these specific circumstances
(18:53):
and the potential strategies to minimize the tax burdens when
you're transferring large IRA assets. As an example, since all
of these assets that I'm talking about are what we
call pre tax assets, the balance in those accounts will
(19:14):
be subject to what we call ordinary income when it's
passed on to the beneficiaries, never a step up and basis,
never any tax preference, never any capital gains. So you
have to figure out, is there are a different way
in order for me to slice and dice, to carve
(19:35):
this up, to create a legacy to maximize the IRA assets.
If it's important to you. If it's important to you,
so let me go through some concepts and ideas, especially
for the individuals that are locked and loaded. The cake
has been baked. If you're in a situation where you
(19:58):
have large IRA assets and you're trying to figure out
how can I transfer this wealth with the least amount
of tax to the beneficiaries. I'm willing to subject myself
to some taxation, but I don't want to put my
loved ones in a situation where they're going to have
huge tax ramifications because of the legacy that I'm transferring
(20:22):
to them. Now, some saple will say, listen, why don't
you do a roth Ira conversion? That is an option.
That is an option where you can do a roth
Ira conversion. Okay for a lot of people, though when
you start doing this a lot of time, they're already
at the R and D level requirementium distribution RMD is
(20:44):
not allowed to be put into the conversion. Anything over
and above the rm D is So you're talking about
a substantial amount of money that would not be allowed.
And now you're adding additional tax liability with the additional
moneies that you're bringing out of the traditional IRA. There
(21:07):
is a strategy called the carve out where you take
a portion of the IRA, you put it into a
payout plan, and you purchase either a single life or
a survivorship life insurance policy. As an example, husband and
(21:27):
wife use that situation that we're in right now, they
might say, listen, we're going to keep five hundred thousand
dollars of this money. We're going to satisfy the required
minimum distribution and maybe accelerate it with the other five
hundred thousand dollars, and then what we're going to do
is we're going to go out and we're going to
(21:48):
seek a quote, and we're going to find out exactly
how much life insurance are they willing to ensure us.
As far as wealth transfer legacy, a lot of times
we do this in a five pay, a ten pay,
or a fifteen pay, depending on the age of the
individuals and their insurability. So as an example, we'll just
(22:12):
do some simple arithmetic here. This is all hypothetical. Husband
and wife. Let's say there are seventy two, she's seventy.
They know what's coming as far as their rm ds
on their own personal accounts. They also know what they're
being forced to do. As far as non spouse beneficiary withdrawals.
(22:33):
We've done some future projections. They're flabbergast as far as
what their tax liability is. They're willing to pay it,
but we're eroding this legacy that was transferred to them.
If I do a wroth conversion, if I do fifteen
thousand dollars or twenty thousand or fifteen thousand dollars, whatever
it may be, that money is in the wroth. That
(22:57):
is the money that's going to be there for the conversion.
If I do life insurance life insurance adds velocity. So
let's just keep it simple. Let's say I do fifty
thousand dollars a year for the next ten years. For
the fifty thousand dollars that's going to buy me, approximately
for people at age with good health, about a million
dollars worth of life insurance one million dollars. So I
(23:20):
take the fifty thousand, I have it paid out. It
buys me a survivorship policy. We buy it inside of trust.
I've got one million dollars of tax free assets payable
for ten years. At the end of ten years, it's
been paid. There's no more premium payments. It's good to
age one hundred and twenty one. Now why would you
(23:44):
do that, Because you're eliminating the ability for you to
have more erosion to those assets. You're also limiting the
ability for you to transfer wealth that is not burden
by tax ab And when your loved ones receive these assets,
they're receiving the assets tax free. That means that once
(24:09):
they go into the pot they grab the money, it
comes out tax free. Because life insurance, which is one
of the greatest things about life insurance, is a tax
free wealth transfer benefit. As long as it's set up properly,
and they emphasize that as long as it's set up properly.
So fortunately for you, there are ways to preserve and
(24:32):
protect these hard earned assets, pass them on to the
next generation, and achieve what most people are looking for
is wealth transfer the most tax efficient way. So by
creating a legacy by these large IRA assets, someone's going
(24:54):
to have to take the tax set It's a question
do you get proactive and do it in your lifetime,
or do you leave this major tax liability to the
next generation, which could encumber them to be put into
a situation where Medicare is increasing, tax liabilities are increasing.
(25:14):
It's just a question of how you ultimately want to
leave these assets. That is one way. When we come back,
we're going to talk about some other options that are
available to you. But as always, if anything is of
interest to you, our company is the Retirement Planning Group.
We have five locations here in New York State. Give
us a call. Our telephone number is five one eight
(25:36):
five eight zero one nine nine. That's five one eight
five eight zero one nine one nine. Check us out
on the web rpgretire dot com. I'm Dave Kopek the
president of the Retirement Planning Group. We're here every Saturday
from twelve to one. This is Retirement Planning. Good afternoon, beautiful,
(26:25):
beautiful day outside. Hopeful you're enjoying it. I'm going to
be joining it in a very few minutes. I'm going
to a ninety fifth birthday party for a client of mine.
I'll look forward to it. Be there in another hour
and a half or so, and we're gonna do a
little festivity. As far as turning ninety five, my oldest
(26:45):
client is one hundred and two. Have got clients to
go all the way down to sixteen, seventeen, eighteen years old,
so multiple generations. This is my forty third year in business,
and I'm talking about probably the number one giddy up
Achilles Hill for a lot of you, how to transfer
(27:09):
wealth the most tax efficient way, especially if you've been
a good saver in what we call pre tax accounts.
When I talked about the three accounts, you don't want
to transfer to the next generation for a lot of reasons.
The biggest is a tax liability force liquidation not when
(27:29):
you want the money, but when you're forced to take it.
Is i RAS, Series E bonds and non qualified annuities.
And as I said, how hard is it to transfer
these assets, Well, it's pretty easy because on the form
you have what we call a beneficiary designation for that
(27:52):
trump's your will, any other document, whatever name is on
that document, that's where the money goes. So if you're
looking at that document and you're trying to figure out
how am I going to transfer this money to my kids?
But I also want to leave assets to my wife
(28:13):
or my husband, and I want to make sure that
there's more than enough money there in order for them
to have quality of life, because, as we're quite well aware,
ninety percent of us today do not have pension benefits.
(28:36):
So when we look at this big, huge pot of money,
we're trying to figure out how long will it last?
And we're also trying to figure out I don't want
to be in a situation where it's going to go
to a nursing home or to the county. I want
to make sure that it goes to my family. There
(28:57):
is one key document which I've talked about. I actually
had numerous phone calls the last time I did this show,
and I talked about it, and I had a long
conversation with the gentleman on the phone. There's a document
that you should have fidelity has it. It's called a disclaimer,
(29:17):
an IRA. Disclaimer and disclaiming an IRA is basically exactly
as it sounds. You're disclaiming an inheritance and you're you're
basically declining to receive these inherited assets. Well, Dave, why
(29:38):
would I do that? Well, a lot of times, no
one has a crystal ball? How long Bobby Susie, husband
and wives are gonna live for? No one has a
future or crystal ball. What are hell's going to be
like a lot of times, whether it's the male or
the female one of you, typically you're top heavy, one
(30:00):
has way too much money pretax at least what we
see consistently. And if that is the case, you only
want to leave to the surviving spouse. What is going
to be adequate enough in order for that person to
have quality of life, especially if you're in your eighties
and nineties, Because the government, depending on your zip code,
(30:26):
has different rules and regulations as far as mediciate eligibility
in order for you to get care in a nursing home,
and depending on your state, your county that you live in,
there's different rules and regulations as far as how they
handle homes and iras. So as unlikely as it may seem,
(30:51):
I know, you know, people say, why would I do that.
Some beneficiaries prefer not to receive inherited assets, and the
reasons can vary. That was one, that was one, and
often the beneficiary would prefer that the assets be given
to someone else, and over time the original beneficiary doesn't
(31:13):
want to be taxed on those assets. And if done correctly,
you can disclaim these assets and you can get it
to the contingent beneficiaries. So if you're considering this, here
are some of the scenarios that we've seen and we've
(31:33):
used in our practice. Number One, Mom and Dad have aged.
Dad's going to pass away. He has a short lifespan.
Dad was very successful. He has a seven figure IRA account.
(31:53):
That IRA is not necessary for Mom for quality of life.
She has a small pension, more than adequate, soul secure
and other investments the IRA. Even though she's the primary,
she has Bobby, Billy and Susie as the contingent beneficiaries.
Those three contingent beneficiaries can receive the assets even if
(32:19):
Mom is still alive and she's considered to be the
primary beneficiary. Her status as the beneficiary if she disclaims
it is fully annult So why would she do that.
She's sick, she's ill, she doesn't need it. She's subject
(32:41):
to large distributions, not because she wants them, but because
they're now forced because of requirement of distribution she disclaims
these assets. Its act is if she had already predeceased,
those monies go to the three named children, Bobby billion,
(33:01):
Susie and now Bobby billion Susie can now stretch that
money out over a ten year period of time, but
they will be forced to do required minimum distributions. Disclaiming
IRA assets is not only to avoid the taxes, but
(33:26):
as I said, depending on your zip code where you live,
those assets could be subject to a Medicaid spend down
if you do not have long term care insurance. Now
what happens. What happens once those assets go to the
(33:51):
three children, Well, they're forced to liquidate those assets. There's
no more As I said, there is no more stretch
IRA available. Only if you have received the assets before
January one of twenty and twenty do you have access
(34:11):
to the stretch IRA. The Secure Act which we talk
about modified those rules from inherited iras that after December
thirty first, twenty and nineteen. Under the new legislation, you're
now required to have those payments over a ten year
(34:35):
period of time, what we call the ten year rule.
So there are strategies that you can utilize to buffer
have a bumper to some of the protection. She could
have done all of it in this example, where she
(34:58):
could have taken one hundred percent one of the IRA
assets and transferred transferred them to the three children, and
there would have been no impact on her whatsoever, simply
because what I said was that she had adequate amounts
of monies in her own IRA plus what she had
(35:19):
in investments. A small pension and social security benefit does
not have to be all, doesn't have to be half.
The percentage can be what is necessary for quality of life.
So if there was a million dollars there and she
only wanted five hundred thousand of it, or she only
(35:41):
wanted two hundred thousand of it, then the remaining assets
would go to the children, divided equally, if that's the
way it was specifically set on the disclaimer form. So
what happens if assets are properly disclaimed. What happens if
(36:09):
the beneficiary properly disclaims the inherited assets, it's as if
they never were designated as the beneficiary. Their status as
a beneficiary is fully anult The problem with the example
that I had on the front end of this is
(36:31):
that there was complications in the family. She had no
idea what she wanted to do as far as the
percentages with the kids, the nieces and nephews. She named
her sister as the primary beneficiary with the anticipation that
she was going to go back to the well, and
she never did. She never did. Now the sister's in
(36:52):
a situation where she has large tax liabilities. She has
to figure out how she's going to attack the move
these moneies around in order for her to satisfy not
only the tax burden that they're receiving now the increase
that they're receiving in their Medicare payments, but also how
(37:13):
does she satisfy how she ultimately wants to transfer these
assets to the next generation. Now here's the key thing.
That ten year rule is only in existence once she
passes away. Now there's a second non spouse beneficiary. It's
still on the timeframe of the original ten year period.
(37:40):
So the bottom line is this qualified assets iras four
oh one k's four O three b's TSAs tiakraf. All
the pretext money, all the pre tax money, is complicated money.
(38:05):
You need to sit down with your wealth management team
and build out a plan for your own particular circumstances
and make sure you understand the circumstances as far as
what your tax liability will be for your primary and
(38:25):
your contingent beneficiaries. Make sure they understand that the disclaimer
form has been filled out. And the most critical component
to all of this bar none, never ever ever take
a distribution from a qualified plan or roll money over
(38:50):
until you have sat down with competent legal, tax and
investment professionals to make sure you understand exactly not only
what you're doing, but also what your tax liability will
be today and in the future. I'm going to take
my final break. Anything that I'm discussing today is of
(39:11):
interest to you, you can give us a call at
our corporate headquarters in Malta, New York. Five win eight
five eight zero one nine nine. That's five one eight
five eight zero one nine one nine. Check us out
on the web rpgretire dot com. We have five locations
now in Florida or excuse me here in New York
to in Florida. You can give us a call if
(39:33):
you want to sit down with us face to face,
if you want to meet with us over the internet.
We do a lot of zoom and ring central meetings.
Whatever you would prefer to do is good with us
because we're here to facilitate what your needs are. Again,
our telephone number is five one eight five eight zero
one nine nine. I'm here live in the studio today.
(39:58):
If you have any questions anything that I talked about today,
I'm here one eight hundred talk WGY. That's one eight
hundred eight two five fifty ninety nine, one eight hundred
talk WGY. I'm Dave Kopek, the president of the Retirement
Planning Group WG WYS Retirement Planning Specialists. We'll be right back.
Your partner for success, David Kopek here WG WISE Retirement
(40:21):
Planning Specialists, the Retirement Planning Group. We understand that retirees
face many important decisions that can affect their long term
financial success. Some of these decisions revolve around making investments
that will help create a hedge against outliving their assets,
the impact of inflation, taxation, and rising healthcare costs. Most
(40:42):
of our clients like the time, the desire, or the
experience to manage their own investment portfolios. We consider it
to be an honor and a privilege to help our
clients make sound investment decisions that will contribute to a
secure financial future for them. Because over ninety percent of
our alliance or retirees with similar concerns, we are in
(41:02):
the best position to approach such challenges with experience and skill.
Give us a call today at five one eight, five
eight zero one nine one nine five eight five eight
zero one nine one nine or RPG. Retire on the web.
The greatest risk in retirement Most of us have no
plan for We're insurance to cover the expense. A long
term care event can impoverish a spouse, drain your life savings,
(41:26):
and cost stress and anxiety on your family. What is
your plan and how will you pay for a long
term care event? Call the Retirement Planning Group today discuss
options you should consider to protect your estate and have
choices and independence. Take action call today five one eight
five aid zero one nine nine or RPG retire on
the web. All right, let's just listen to that man
(42:27):
a little Doobie. Amen. What a group they were? You
like the seventies and eighty music?
Speaker 3 (42:38):
I do? You know?
Speaker 2 (42:40):
You like rap rapper?
Speaker 3 (42:42):
Anything that gets my feet moving? I enjoyed.
Speaker 2 (42:46):
I like that. Oh you like that one? Like pok
You like Polka's Yeah?
Speaker 3 (42:53):
Yeah, the one that we normally play.
Speaker 2 (42:55):
Yeah, yeah, yeah, we won't play that one today. It's
good to be here, folks. You know, this has been
a crazy week. You know, I got three kids in Florida,
and you know, I'm going back and forth here. My
son has no power, he's got no gas in his car,
and I'm just trying to figure out what I'm gonna
do here. So if I seem a little distracted today,
I apologize. But this has really been crazy, crazy, crazy,
(43:16):
crazy crazy week. He's safe, he's in his apartment. But
Florida's really going through a horrible time. Horrible time, horrible time.
Say some prayers for the people in Florida because they
need it. I got a daughter in Sarasota and a
daughter in Boca, and it's you know, Florida's being challenged
right now. But today I'm talking about what I see
(43:40):
is the biggest Achilles Hill for a lot of us,
the amount of money that's in pre tax accounts. And
I'll talk a little bit now to the people that
are still accumulating. If you've got a lot of money
pre tax account stop, just stop, Okay. Know the difference
between a traditional four O one K and a wroth
four O one K. If you're working through an employer
that offers you the four wroth for ONK. When I
(44:01):
say this, it's the greatest thing since slice bread, the
wroth for OW and K. You pay taxes on your
contributions when you make them, your earnings grow tax free.
You're never subject to requirement of distribution as the owner.
And guess what, when you withdraw the money, it's tax free,
(44:22):
tax free, tax free. The only thing that even comes
close to the wroth for OK is the HSA account
health savings accounts. And Zach knows and all my employees
now I am a major, major, major, major advocate of
health savings accounts. Why is that? Well, you're starting to
(44:42):
see it. You're going to see it more. I talked
to a consultant the other day. You're going to be
looking at about a forty percent increase in your healthcare
premiums when they come and hsas help you buffer the
cost for one case, help you buffer the costs. Some
(45:03):
of your health is dictated off of income WROTH. It's
like phantom income. It doesn't exist. Right, you have no
tax liability. So if you think your marginal tax back
will be higher in retirement, it's for some of us
it will depending on the zip code and where we live. Right.
(45:23):
The WROTH account may make a lot of sense. I
don't care. It always makes sense. So as an example,
we'll have people come in. They got eight hundred thousand
dollars in their four oh one K, they got one
hundred thousand dollars in they're WROTH, right, very common, And
I'll say to them, let's let's stop the contributions. You
(45:43):
got a few more years left to go. Let's load
up on WROTH four oh one K, and let's try
to make more contributions to your IRA accounts, your WROTH iras,
because that is money that we can utilize in order
for us to bridge bridge to some of the benefits
that might be more benefit issue and retirement. What am
I talking about? Healthcare talked about healthcare. This morning on
(46:06):
my morning show from seven to nine, the retirement planning show.
This is Retirement Ready. Retirement Ready is topic specific. Now
we're talking about pre tax account I RAH accounts. What
kind of contributions that you have to make, where should
you make them, What are the withdrawals, what happens when
you pass away? What are the tax consequences. It is
(46:27):
a nightmare for a lot of people. That's why I
overemphasize you should be working with a financial team. I
don't care if it's Fidelity, Schwab, Vanguard, they all say
the same thing, every single one of them. Working with
a financial advisor will help you not only build out
(46:47):
your plan, but also will help you as far as
your net return on your investments, because a lot of
us get one emotional and you've got to take emotion
out of investing because emotion doesn't work well well when
you basically pull the plug on things where you shouldn't
be pulling the plug. We're going to Fidelity Monday, Tuesday,
(47:10):
and Wednesday next week. I leave Monday morning for Fidelity
in Boston for a three day conference, and we will
go over a lot of these topics that I talk
about consistently on the radio, WROTH, Traditional IRA, health savings accounts,
et cetera, et cetera. Okay, why do they differ? What
(47:33):
is the difference between the WROTH four O and K
the Roth IRA? What is the difference between the traditional
four oh and K and just a regular IRA? How
can I get money out of those plans? Can I
get money out before age fifty nine and a half?
Answers yes, Which when can I get it out of?
(47:54):
I'll give us a call. We'll tell you. I'm a
major advocate of education, major advocate, not a sales pitch,
but an informed investor, because once you're informed and educated,
then you're going to make a logical decision with your
(48:16):
financial team of what you should be doing right. There's
always a couple of key takeaways with WROTH and traditional
simply put paying taxes now or paying taxes later, marginal
(48:39):
rate higher in the future, lower in the future. Having both,
possibly a Traditional and a Wroth could be appropriate. A
lot of times your employer will make the match through
the traditional. Once you receive the match, we always say
to people, not always a lot of time times, let's
(49:01):
now you got the match. Now, let's start loading up
on the row four oh one K. How you choose
your retirement savings during your accumulation years plays a huge
impact in your post retirement. Right, you're no longer an accumulator.
(49:21):
Now you're a person that's taking distributions. So your upfront
decisions and your considerations are critical on how you basically
bake your cake. So there's a lot of attacks things
you should consider. Retirement accounts. Like I said, four oh
one K, four O three b's iras blah blah blah,
(49:41):
go TSPs, New York State deferred compensation that goes through
the whole list of them. So big thing is this,
I can prove it to you. We can sit down,
I can show you the information, the data, working with
a team, a team of professionals will help you. The
(50:04):
numbers speak for themselves. So is an IRA right for you?
I don't know. Is a Roth IRA right for you?
We have to sit down and chat. But I can
tell you one thing for sure. In my forty three
years of doing this, I'm in the camp that HSA
(50:26):
accounts and ROTH accounts are probably some of the best
things that ever came out of Washington to see. So
if you want to determine if you're on track. You
want to sit down and have a consultation. We offer
a complementary consultation at any of our five offices here
in New York. Give us a call. Our telephone number
(50:46):
is five one eight five eight zero one nine nine.
That's five one eight five eight zero one nine one nine.
You can check us out on the web rpgretire dot com.
You can give me a phone call at the office.
I won't be back in untill Thursday. I'm out Monday,
Tuesday and Wendy Wednesday in Boston with Fidelity. But I'd
(51:09):
be more than happy to have a chat with you,
either a Ring Central or Zoom meeting and we'll find
out if you're on track. Now, here's the big Ancelada.
Here's the one that I want to hear from my man, Zach.
Zach's a sports guy. Are we going to have a
Subway series? I'm hoping so. The Mets are hot and
(51:31):
the Yankees are looking good, So I'm hoping so. Derek
cole had that was good to see. So again, folks,
say a prayer for our friends and our loved ones
and our family members in Florida. Be generous. The American
Red Cross is working out there aggressively. I know that
there's other ones that are out there that might be
(51:54):
closer to your heart. They need help. There's a lot
of people hurting down there in Florida right now. God
bless you all, and we'll see you next week for
another Retirement Ready.
Speaker 1 (52:03):
Thank you for listening to Retirement Ready, hosted by Dave Kopek,
w G wise retirement planning Specialist. If you'd like to
talk with Dave for someone of the Retirement Planning Group,
call five twenty five eight zero nine one nine. That's
five twenty five eight zero one nine one nine during
business hours, or visit rpgbretire dot com. The Retirement Planning
(52:26):
Group has five convenient offices located in Albany, Malta, Glens Falls, Syracuse,
and Oneana. Tune in again next week for retirement planning
strategies with Dave Kopek right here on WG wise Retirement Ready.
The information our services discussed on this show is for
informational purposes only and as not intended to be personal
(52:47):
financial advice. The investments and services offered by us may
not be suitable for all investors. If you have any
doubts as to the merits of an investment, you should
seek advice from an independent financial advisor.
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