July 29, 2025 • 15 mins
“Hey Mike, a lot of the Big Beautiful Bill tax changes revolve around the MAGI. What is it and what do we do about it?” Discover what is the Modified Adjusted Gross Income and why that matters when it comes to your retirement plan.
Text your questions to 913-363-1234.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mike (00:05):
Welcome to How to Retire On Time, a show that answers
your retirement questions. Saygoodbye to the oversimplified
advice. This show is all aboutgetting into the details so so
you can determine what is rightfor you. As always, text your
questions to (913) 363-1234. Andremember, this show is not
financial advice.
It's information to continueyour exploration. With me in the
(00:26):
studio today, mister DavidFransen. David, thanks for being
here.
David (00:29):
Yes. Hello. Thank you. David's gonna read your
questions,
Mike (00:31):
and I'll answer them. Let's jump in.
David (00:34):
Hey, Mike. A lot of the big beautiful bill tax changes
revolve around the MAGI. What isit, and what do we do about it?
Mike (00:43):
Yeah. MAGI, not to be confused with MAGA, is an old
school tax term. It meansmodified adjusted gross income.
K. Is that not a mouthful?
David (00:54):
It is. It is. And so I'm wondering what's the difference
between the MAGI, m a g I n, andjust regular old AGI? The AGI.
Yeah.
AGI. So
Mike (01:03):
let's add one more in there because you need to have
it for context, and that's theprovisional income calculation.
David (01:09):
Okay.
Mike (01:10):
So when you're doing your tax returns, there's an order or
a sequence that must be done tofigure out what you qualify for
and what you don't qualify for.The provisional income, just by
quick definition, is for SocialSecurity. The adjusted gross
income is really about how muchyou're gonna pay in taxes. The
MAGI is the qualifier on whichbenefits or deductions you may
(01:33):
qualify for and which penaltiesyou might pay.
David (01:35):
Okay.
Mike (01:35):
K? When I say penalties, the easiest one is IRMAA. So if
you are 65 or older and you'reon Medicare and you go above a
certain threshold, not accordingto your adjusted gross income,
you know, the amount you pay ontaxes, but your modified
adjusted gross income, you maypay additional premiums in
Medicare. Uh-huh. That's whatIrma was intended to do is say,
well, the ultra wealthy can paymore for this, so let's have
(01:58):
them pay for it.
So the one big beautiful bill,which is the proper name,
whether you believe it's big,whether you believe it's
beautiful or not. It's 900pages. I went through it
personally. It was big. Mhmm.
Whether it's beautiful or not,that's up for you to decide. But
many of the tax breaks andchanges are only for certain
people, and that is soimportant. And so that's why
(02:20):
right now, a lot people aresaying, well, what's the magic?
What's the modified adjustedgross income? How does that
qualify?
How does that quantify? How dohow do you run this calculation?
Now they're starting to pay moreattention to tax planning. And
what a wonderful thing. I'm notsaying that we all should become
accountants.
I'm not saying that anyone'sgonna enjoy diving into their
taxes, but you have thousands,if not tens of thousands of
(02:43):
potential savings if youunderstand how to do tax
planning.
David (02:47):
Yeah. And so the people who would save are, like,
retired folks? Is that reallywhen we Anyone. Oh, anyone.
Mike (02:53):
Yeah. Good clarification. Understanding your adjusted
gross income and your modifiedadjusted gross income as you're
working, you need to understandwhere are you going so that once
you get there, you understandhow to then maintain your
retirement. Many times peoplewill spend their working life
saving in a certain way and notrealize that they're creating
problems for themselves later onin life. So you wanna pay
(03:16):
attention to these things asyou're working and once you
retire.
It's a coordinated effort.
David (03:21):
That's good. Super.
Mike (03:22):
Great clarification. So just real quick, going back to
provisional income, the purposeof it is to figure out, is your
Social Security gonna be taxedat 0%, 50%, or 85%? And the
reason why I'm starting here isit's kind of a simpler version
of the modified adjusted grossincome. So here's how the
provisional income calculationworks. You're gonna take half of
(03:43):
your Social Security.
K? So whatever that amount is,divide it by two, plus all of
your taxable income. So think ofw two ten ninety nine, your IRA
distributions. That's prettyeasy to get that part of it. And
then you have to put back inyour tax exempt, if you will,
(04:03):
income, not your Roth, but thinkof, like, your municipal bond
interest, Things like that.
K?
David (04:10):
K. Got
Mike (04:10):
it. You put that back in there. You add it all up, and
that will determine your SocialSecurity calculation. Now that's
the first thing that's done.When you get to the modified
adjusted gross income, whatyou're doing is you're taking
your total taxable amount, youradjusted gross income, and I
apologize for all the thesemantics here.
I know it's it's dense, but youneed to know this. There are
(04:31):
thousands of dollars on the lineevery year if you don't get this
and don't plan accordingly. Soyou've got your adjusted gross
income, and then what you do isyou then add back in the amount
that you put into your IRA thatyou've deferred. So let's say
you took a $160,000 income as asalary, but you put $20,000 in
as in your IRA, so you're notpaying taxes on that. You've
(04:54):
deferred that for a period oftime.
So your adjusted gross incomewould be a 140,000. So a
160,000, take it down by 20,000because that's what went in your
04/2001 k. Now you're at a 140Are you with me? Yep. I follow
that.
K. The modified adjusted grossincome would say, well, you
gotta take that back in for thiscalculation, and now you're it's
(05:16):
a 160,000. Oh. So it's a way toprevent wealthier individuals
who are deferring taxes to say,well, how much really is at
stake here? And would youqualify for certain benefits or
not?
So for right now, you've got oneof the new things. It's the 65
plus additional standarddeduction that's gonna be
(05:37):
happening for the next fiveyears. Okay? So this is new,
what you're saying? New for onebig beautiful bill.
David (05:41):
Okay.
Mike (05:42):
And if you're 65 years or older for the next couple of
years, about five years till2031, I believe, you can deduct
6,000 if you are single or12,000 if you are married in
addition to your standarddeduction. They did this really
to try and help more people notpay taxes on their Social
(06:02):
Security because they couldn'tmake Social Security tax free. I
know people have said, well,Trump said, or so and so said
they made Social Security taxfree. They didn't. They made
Social Security tax free formore people, but not for all
people.
David (06:14):
Okay.
Mike (06:15):
And so because they're doing this based on your
modified adjusted gross income,many people that are wealthier
just are still gonna pay tax ontheir Social Security. Does that
make sense? Yeah. Kind of howthis works out?
David (06:26):
Yeah. It's just it's expanding the amount of people.
They're casting a wider net ofwho can get Social Security tax
free.
Mike (06:34):
So Yeah. It's more technical to qualify for these
benefits. Mhmm. So for a marriedcouple, if your modified
adjusted gross income is a150,000 or less, k, Modified
adjusted gross income, not youradjusted gross income. You're
modified.
So you've got to include themunicipal bond interest and all
the other things that could beadded back in there.
David (06:53):
Okay.
Mike (06:53):
Are you deducting by contributing to an IRA because
you're still working, whateverit is? You gotta add that all
back in there. It's a $150,000or less, then, yeah, you get to
take your 30 some thousanddollar standard deduction, and
then add another $12,000 in thestandard deduction. Plus there's
the other addition bonus of,like, a couple thousand dollars.
There's a lot of additionaldeductions that are standard.
(07:14):
It's very difficult for peopleto itemize their deductions
right now, but you need toqualify for it based on that
modified adjusted gross income.Now what happens if your
modified adjusted gross income'slike a 160,000 or a 170,000? It
phases out. So you might not getall of this new senior deduction
that's for the next five years,but maybe you get part of it.
(07:36):
The rule of thumb is, if Iremember right in the
calculations, a 195,000 or lessfor your modified adjusted gross
income, you should be able todeduct something from this new
benefit.
David (07:49):
Okay. What if you're somebody who doesn't have a
bunch of income from othersources? What if you're just
solely relying on SocialSecurity as your income right
now? Yeah. This probably doesn'tchange much for you?
Doesn't change a thing. Okay.
Mike (08:02):
Yeah. It's for people that typically are wealthier, that
have more moving parts in theirplan, they are the ones they
have to pay attention to. But ifyou're married and your total
income is, let's say, 120,000 orless, so 10,000 net a month,
somewhere around there, there'sa good chance that you can be in
this threshold and maximize thefull benefit. It's gonna depend
(08:23):
on your IRA to Roth conversions.It's gonna depend on your income
sources, and is it all from yourIRA, or is it not?
Did you take the pension? Do youhave Social Security? And so
these things are gonna matter.This is one of the main reasons
why I have shouted from therooftops, so to speak, of saying
don't lock yourself up into afixed income retirement plan.
David (08:48):
Yeah. Tell us why.
Mike (08:50):
You want flexibility.
David (08:51):
Okay.
Mike (08:52):
So for all the people that have their Social Security,
maybe they have a pension, maybethey have an annuity, but it's
underneath, you know, let's say,70,000 in total. They have
enough flexibility to manipulatetheir situation to potentially
take advantage of thesedifferent new opportunities,
because the tax code is writtenin pencil unless you can adjust
(09:12):
your income, your plan, yourincome sources, your
conversions, I mean, all of theabove. Unless you can really
adjust that, you could haveended up opting out and making
it impossible for you to reallyenjoy these benefits. Rigidity
and fixed income, that's allyou're doing and you're a higher
net worth individual, you couldbe really missing out on these
(09:32):
opportunities, because you justlooked for that oversimplified
set it and forget it retirementplan. There's a cost.
David (09:38):
Set it and forget it may have worked in times past, but
are we beyond that, or has thisnever been a good idea?
Mike (09:45):
Set it and forget it really is summed up in the
following expression. Okay. Itworks until it doesn't. Yeah.
And if the tax code is writtenin pencil, it's just a matter of
time before there's a missedopportunity.
It's about balance. It's aboutunderstanding. Maybe you want
your basis to be covered. Yougot your Social Security, and
maybe I mean, I wrote the wholebook, how to retire on time,
(10:05):
which you can download it stillfor free at the time that's
recording the the this podcastand on the radio show. You can
still download it for free,retireontime.com, but it's an
argument against locking all ofyour assets up into a lifetime
income stream and that set itforget it plan.
And the reason is there's a lotof legacy planning and tax plan
that can be done along the waywithout not necessarily taking
(10:28):
more risk. It's just a differentpath to plan your retirement.
There's 10 ways you can takeincome in retirement. The
annuity lifetime income annuityoption is one of the 10
different ways. You just need tounderstand what's rigid, what do
you not have negotiating powerover, and what can you adjust so
(10:48):
that you maximize theseefficiencies, so that you
maximize the opportunities aheadof us.
Because I can tell you rightnow, even though the current law
says that these tax brackets arepermanent, they're permanent
until they're not. It doesn'tmatter until it matters. That's
just how it is. Yeah. So itcreates pause for me when
(11:09):
someone says, I just wanna buy abunch of annuities, turn on
income, and then that's it.
David (11:13):
And so we we talked a lot about MAGI, AGI, and other kinds
of income. Pro V, provisionalincome. Pro V. Yeah. Haven't
heard that one.
Mike (11:21):
It's just made that up.
David (11:22):
You heard it here first. So are are people gonna have to
get an accountant to, like, doall this? Will will TurboTax be
able to figure this out?
Mike (11:29):
That's that's actually a really good question. TurboTax
and TaxSlayer, by the way, whichis an alternative to TurboTax
and a number of these othersoftwares we have, you
David (11:39):
can buy TaxAct. We could list a lot.
Mike (11:41):
About $50.60, $70 or so. Do it yourself. They are
incredible softwares. I do notwanna diminish anyone from using
them. Love them.
A lot of our clients use them.They will get the calculations
perfect. I mean, they're I can'tguarantee their services, but
(12:01):
they're really, really good.Like, you're gonna get that tax
return right. The problem iswhen do you use it?
You're using it after your taxyear has finished. You're just
reporting what happened. Goodpoint. Any change you make in
your tax return, if you're doingtax planning and you're being
proactive, you make one change,it affects five to seven other
(12:23):
parts of your ten forty. And so,yes, you can file your taxes,
and it will show you thebenefits and things like that of
all these things.
They're not gonna miss thattypically. But if you wanna be
proactive, then it's the yearbefore you're saying, here's the
tax environment. So in Novemberor in September, you're saying,
(12:46):
next year, how am I going totake my income? Am How I gonna
do my IRA to Roth conversions?How am I gonna maintain my cash
flow, plan for the dividends Iexpect, and so on, so that I can
take advantage of the differentopportunities proactively, not
reactively.
The problem is people expecttheir CPAs to fix their and do
(13:06):
this tax planning after it'salready happened. I'm sorry.
It's done. It's set in stone.You're not going back in
history.
The time machine's not beeninvented to re fix these issues.
You've gotta be proactive, andmost people aren't paying $2.03,
$4,000 a year for tax planningsimulation software to be able
to do that. That's why peoplecome to us. That's why people
(13:27):
will say, well, hey, Mike. Iwanna be proactive in this.
I wanna understand how do Iminimize my overall taxes. They
realize that maybe their entirestrategy is flawed because
they're going too fast. Now thatthey realize that the tax rates
are permanent, they've got morebreathing room. Now that they
realize that the RMDs won'tstart till 75, maybe they're
(13:48):
gonna take a step back and say,hey. Let's take a look at this
and be more strategic about howdo we keep more of our assets,
how do we minimize our taxburdens based on effective tax
rates, and how do we weave inthe various seasons, so for the
next five years, and then fiveyears after that, and then five
years after that, to be able totake advantage of the tax
legislation, the new tax lawsthat evolve over time so that
(14:13):
you're able to keep more of yourmoney, pay less in taxes, and
live a better life.
That takes proactive effort. Andif you expect your CPA, your
enrolled agent, or thesesoftwares like TurboTax to do
that, you're asking animpossible situation. It can't
happen. That's all the timewe've got for the show today. If
you enjoyed the show, considersubscribing to it wherever you
(14:36):
get your podcasts.
Just search for how to retire ontime. Discover if your portfolio
is built to weather flat marketcycles or if you're missing tax
minimization opportunities thatyou may not even know. Explore
strategies that may be able tohelp you lower your overall risk
while potentially increasingyour overall growth and
lifestyle flexibility. This isnot your ordinary financial
(14:58):
analysis. Learn more about YourWealth Analysis and what it
could do for you regardless ofyour age, asset, or target
retirement date, go towww.yourwealthanalysis.com today
to learn more and get started.
Welcome to How to Retire On Time, a show that answers
your retirement questions. Saygoodbye to the oversimplified
advice. This show is all aboutgetting into the details so so
you can determine what is rightfor you. As always, text your
questions to (913) 363-1234. Andremember, this show is not
financial advice.
It's information to continueyour exploration. With me in the
(00:26):
studio today, mister DavidFransen. David, thanks for being
here.
David (00:29):
Yes. Hello. Thank you. David's gonna read your
questions,
Mike (00:31):
and I'll answer them. Let's jump in.
David (00:34):
Hey, Mike. A lot of the big beautiful bill tax changes
revolve around the MAGI. What isit, and what do we do about it?
Mike (00:43):
Yeah. MAGI, not to be confused with MAGA, is an old
school tax term. It meansmodified adjusted gross income.
K. Is that not a mouthful?
David (00:54):
It is. It is. And so I'm wondering what's the difference
between the MAGI, m a g I n, andjust regular old AGI? The AGI.
Yeah.
AGI. So
Mike (01:03):
let's add one more in there because you need to have
it for context, and that's theprovisional income calculation.
David (01:09):
Okay.
Mike (01:10):
So when you're doing your tax returns, there's an order or
a sequence that must be done tofigure out what you qualify for
and what you don't qualify for.The provisional income, just by
quick definition, is for SocialSecurity. The adjusted gross
income is really about how muchyou're gonna pay in taxes. The
MAGI is the qualifier on whichbenefits or deductions you may
(01:33):
qualify for and which penaltiesyou might pay.
David (01:35):
Okay.
Mike (01:35):
K? When I say penalties, the easiest one is IRMAA. So if
you are 65 or older and you'reon Medicare and you go above a
certain threshold, not accordingto your adjusted gross income,
you know, the amount you pay ontaxes, but your modified
adjusted gross income, you maypay additional premiums in
Medicare. Uh-huh. That's whatIrma was intended to do is say,
well, the ultra wealthy can paymore for this, so let's have
(01:58):
them pay for it.
So the one big beautiful bill,which is the proper name,
whether you believe it's big,whether you believe it's
beautiful or not. It's 900pages. I went through it
personally. It was big. Mhmm.
Whether it's beautiful or not,that's up for you to decide. But
many of the tax breaks andchanges are only for certain
people, and that is soimportant. And so that's why
(02:20):
right now, a lot people aresaying, well, what's the magic?
What's the modified adjustedgross income? How does that
qualify?
How does that quantify? How dohow do you run this calculation?
Now they're starting to pay moreattention to tax planning. And
what a wonderful thing. I'm notsaying that we all should become
accountants.
I'm not saying that anyone'sgonna enjoy diving into their
taxes, but you have thousands,if not tens of thousands of
(02:43):
potential savings if youunderstand how to do tax
planning.
David (02:47):
Yeah. And so the people who would save are, like,
retired folks? Is that reallywhen we Anyone. Oh, anyone.
Mike (02:53):
Yeah. Good clarification. Understanding your adjusted
gross income and your modifiedadjusted gross income as you're
working, you need to understandwhere are you going so that once
you get there, you understandhow to then maintain your
retirement. Many times peoplewill spend their working life
saving in a certain way and notrealize that they're creating
problems for themselves later onin life. So you wanna pay
(03:16):
attention to these things asyou're working and once you
retire.
It's a coordinated effort.
David (03:21):
That's good. Super.
Mike (03:22):
Great clarification. So just real quick, going back to
provisional income, the purposeof it is to figure out, is your
Social Security gonna be taxedat 0%, 50%, or 85%? And the
reason why I'm starting here isit's kind of a simpler version
of the modified adjusted grossincome. So here's how the
provisional income calculationworks. You're gonna take half of
(03:43):
your Social Security.
K? So whatever that amount is,divide it by two, plus all of
your taxable income. So think ofw two ten ninety nine, your IRA
distributions. That's prettyeasy to get that part of it. And
then you have to put back inyour tax exempt, if you will,
(04:03):
income, not your Roth, but thinkof, like, your municipal bond
interest, Things like that.
K?
David (04:10):
K. Got
Mike (04:10):
it. You put that back in there. You add it all up, and
that will determine your SocialSecurity calculation. Now that's
the first thing that's done.When you get to the modified
adjusted gross income, whatyou're doing is you're taking
your total taxable amount, youradjusted gross income, and I
apologize for all the thesemantics here.
I know it's it's dense, but youneed to know this. There are
(04:31):
thousands of dollars on the lineevery year if you don't get this
and don't plan accordingly. Soyou've got your adjusted gross
income, and then what you do isyou then add back in the amount
that you put into your IRA thatyou've deferred. So let's say
you took a $160,000 income as asalary, but you put $20,000 in
as in your IRA, so you're notpaying taxes on that. You've
(04:54):
deferred that for a period oftime.
So your adjusted gross incomewould be a 140,000. So a
160,000, take it down by 20,000because that's what went in your
04/2001 k. Now you're at a 140Are you with me? Yep. I follow
that.
K. The modified adjusted grossincome would say, well, you
gotta take that back in for thiscalculation, and now you're it's
(05:16):
a 160,000. Oh. So it's a way toprevent wealthier individuals
who are deferring taxes to say,well, how much really is at
stake here? And would youqualify for certain benefits or
not?
So for right now, you've got oneof the new things. It's the 65
plus additional standarddeduction that's gonna be
(05:37):
happening for the next fiveyears. Okay? So this is new,
what you're saying? New for onebig beautiful bill.
David (05:41):
Okay.
Mike (05:42):
And if you're 65 years or older for the next couple of
years, about five years till2031, I believe, you can deduct
6,000 if you are single or12,000 if you are married in
addition to your standarddeduction. They did this really
to try and help more people notpay taxes on their Social
(06:02):
Security because they couldn'tmake Social Security tax free. I
know people have said, well,Trump said, or so and so said
they made Social Security taxfree. They didn't. They made
Social Security tax free formore people, but not for all
people.
David (06:14):
Okay.
Mike (06:15):
And so because they're doing this based on your
modified adjusted gross income,many people that are wealthier
just are still gonna pay tax ontheir Social Security. Does that
make sense? Yeah. Kind of howthis works out?
David (06:26):
Yeah. It's just it's expanding the amount of people.
They're casting a wider net ofwho can get Social Security tax
free.
Mike (06:34):
So Yeah. It's more technical to qualify for these
benefits. Mhmm. So for a marriedcouple, if your modified
adjusted gross income is a150,000 or less, k, Modified
adjusted gross income, not youradjusted gross income. You're
modified.
So you've got to include themunicipal bond interest and all
the other things that could beadded back in there.
David (06:53):
Okay.
Mike (06:53):
Are you deducting by contributing to an IRA because
you're still working, whateverit is? You gotta add that all
back in there. It's a $150,000or less, then, yeah, you get to
take your 30 some thousanddollar standard deduction, and
then add another $12,000 in thestandard deduction. Plus there's
the other addition bonus of,like, a couple thousand dollars.
There's a lot of additionaldeductions that are standard.
(07:14):
It's very difficult for peopleto itemize their deductions
right now, but you need toqualify for it based on that
modified adjusted gross income.Now what happens if your
modified adjusted gross income'slike a 160,000 or a 170,000? It
phases out. So you might not getall of this new senior deduction
that's for the next five years,but maybe you get part of it.
(07:36):
The rule of thumb is, if Iremember right in the
calculations, a 195,000 or lessfor your modified adjusted gross
income, you should be able todeduct something from this new
benefit.
David (07:49):
Okay. What if you're somebody who doesn't have a
bunch of income from othersources? What if you're just
solely relying on SocialSecurity as your income right
now? Yeah. This probably doesn'tchange much for you?
Doesn't change a thing. Okay.
Mike (08:02):
Yeah. It's for people that typically are wealthier, that
have more moving parts in theirplan, they are the ones they
have to pay attention to. But ifyou're married and your total
income is, let's say, 120,000 orless, so 10,000 net a month,
somewhere around there, there'sa good chance that you can be in
this threshold and maximize thefull benefit. It's gonna depend
(08:23):
on your IRA to Roth conversions.It's gonna depend on your income
sources, and is it all from yourIRA, or is it not?
Did you take the pension? Do youhave Social Security? And so
these things are gonna matter.This is one of the main reasons
why I have shouted from therooftops, so to speak, of saying
don't lock yourself up into afixed income retirement plan.
David (08:48):
Yeah. Tell us why.
Mike (08:50):
You want flexibility.
David (08:51):
Okay.
Mike (08:52):
So for all the people that have their Social Security,
maybe they have a pension, maybethey have an annuity, but it's
underneath, you know, let's say,70,000 in total. They have
enough flexibility to manipulatetheir situation to potentially
take advantage of thesedifferent new opportunities,
because the tax code is writtenin pencil unless you can adjust
(09:12):
your income, your plan, yourincome sources, your
conversions, I mean, all of theabove. Unless you can really
adjust that, you could haveended up opting out and making
it impossible for you to reallyenjoy these benefits. Rigidity
and fixed income, that's allyou're doing and you're a higher
net worth individual, you couldbe really missing out on these
(09:32):
opportunities, because you justlooked for that oversimplified
set it and forget it retirementplan. There's a cost.
David (09:38):
Set it and forget it may have worked in times past, but
are we beyond that, or has thisnever been a good idea?
Mike (09:45):
Set it and forget it really is summed up in the
following expression. Okay. Itworks until it doesn't. Yeah.
And if the tax code is writtenin pencil, it's just a matter of
time before there's a missedopportunity.
It's about balance. It's aboutunderstanding. Maybe you want
your basis to be covered. Yougot your Social Security, and
maybe I mean, I wrote the wholebook, how to retire on time,
(10:05):
which you can download it stillfor free at the time that's
recording the the this podcastand on the radio show. You can
still download it for free,retireontime.com, but it's an
argument against locking all ofyour assets up into a lifetime
income stream and that set itforget it plan.
And the reason is there's a lotof legacy planning and tax plan
that can be done along the waywithout not necessarily taking
(10:28):
more risk. It's just a differentpath to plan your retirement.
There's 10 ways you can takeincome in retirement. The
annuity lifetime income annuityoption is one of the 10
different ways. You just need tounderstand what's rigid, what do
you not have negotiating powerover, and what can you adjust so
(10:48):
that you maximize theseefficiencies, so that you
maximize the opportunities aheadof us.
Because I can tell you rightnow, even though the current law
says that these tax brackets arepermanent, they're permanent
until they're not. It doesn'tmatter until it matters. That's
just how it is. Yeah. So itcreates pause for me when
(11:09):
someone says, I just wanna buy abunch of annuities, turn on
income, and then that's it.
David (11:13):
And so we we talked a lot about MAGI, AGI, and other kinds
of income. Pro V, provisionalincome. Pro V. Yeah. Haven't
heard that one.
Mike (11:21):
It's just made that up.
David (11:22):
You heard it here first. So are are people gonna have to
get an accountant to, like, doall this? Will will TurboTax be
able to figure this out?
Mike (11:29):
That's that's actually a really good question. TurboTax
and TaxSlayer, by the way, whichis an alternative to TurboTax
and a number of these othersoftwares we have, you
David (11:39):
can buy TaxAct. We could list a lot.
Mike (11:41):
About $50.60, $70 or so. Do it yourself. They are
incredible softwares. I do notwanna diminish anyone from using
them. Love them.
A lot of our clients use them.They will get the calculations
perfect. I mean, they're I can'tguarantee their services, but
(12:01):
they're really, really good.Like, you're gonna get that tax
return right. The problem iswhen do you use it?
You're using it after your taxyear has finished. You're just
reporting what happened. Goodpoint. Any change you make in
your tax return, if you're doingtax planning and you're being
proactive, you make one change,it affects five to seven other
(12:23):
parts of your ten forty. And so,yes, you can file your taxes,
and it will show you thebenefits and things like that of
all these things.
They're not gonna miss thattypically. But if you wanna be
proactive, then it's the yearbefore you're saying, here's the
tax environment. So in Novemberor in September, you're saying,
(12:46):
next year, how am I going totake my income? Am How I gonna
do my IRA to Roth conversions?How am I gonna maintain my cash
flow, plan for the dividends Iexpect, and so on, so that I can
take advantage of the differentopportunities proactively, not
reactively.
The problem is people expecttheir CPAs to fix their and do
(13:06):
this tax planning after it'salready happened. I'm sorry.
It's done. It's set in stone.You're not going back in
history.
The time machine's not beeninvented to re fix these issues.
You've gotta be proactive, andmost people aren't paying $2.03,
$4,000 a year for tax planningsimulation software to be able
to do that. That's why peoplecome to us. That's why people
(13:27):
will say, well, hey, Mike. Iwanna be proactive in this.
I wanna understand how do Iminimize my overall taxes. They
realize that maybe their entirestrategy is flawed because
they're going too fast. Now thatthey realize that the tax rates
are permanent, they've got morebreathing room. Now that they
realize that the RMDs won'tstart till 75, maybe they're
(13:48):
gonna take a step back and say,hey. Let's take a look at this
and be more strategic about howdo we keep more of our assets,
how do we minimize our taxburdens based on effective tax
rates, and how do we weave inthe various seasons, so for the
next five years, and then fiveyears after that, and then five
years after that, to be able totake advantage of the tax
legislation, the new tax lawsthat evolve over time so that
(14:13):
you're able to keep more of yourmoney, pay less in taxes, and
live a better life.
That takes proactive effort. Andif you expect your CPA, your
enrolled agent, or thesesoftwares like TurboTax to do
that, you're asking animpossible situation. It can't
happen. That's all the timewe've got for the show today. If
you enjoyed the show, considersubscribing to it wherever you
(14:36):
get your podcasts.
Just search for how to retire ontime. Discover if your portfolio
is built to weather flat marketcycles or if you're missing tax
minimization opportunities thatyou may not even know. Explore
strategies that may be able tohelp you lower your overall risk
while potentially increasingyour overall growth and
lifestyle flexibility. This isnot your ordinary financial
(14:58):
analysis. Learn more about YourWealth Analysis and what it
could do for you regardless ofyour age, asset, or target
retirement date, go towww.yourwealthanalysis.com today
to learn more and get started.
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