July 31, 2025 • 24 mins
The new federal budget bill makes the 2017 tax cuts permanent, creates a temporary senior deduction, and raises estate exemptions, but also adds $3.4 trillion to national debt while cutting social safety nets. We explore what these changes mean for retirement planning and identify strategies to maximize the limited window of opportunity created by today's low tax environment.
• Tax cuts from 2017 now permanent, but historically "permanent" tax changes typically last only 8-12 years
• New senior deduction of $6,000 (single) or $12,000 (couples) for those 65+ available for tax years 2025-2028
• Estate tax exemption raised to $15M individual/$30M couples
• $1 trillion in cuts to Medicaid, Medicare and Affordable Care Act
• Required minimum distributions and tax rates likely to increase in future
• Projected $78 trillion shortfall in Medicare and Social Security over next 75 years
• Strategic Roth conversions during this tax window can provide tax-free growth and withdrawals
• Need for greater portfolio diversification beyond market investments
• Importance of planning for self-reliance as social safety nets weaken
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Evan (00:06):
What does the new budget bill mean for you?
Hey folks, welcome back andthank you for joining us.
Welcome to Master PlanRetirement Consultants
Retirement Roadmap.
My name is Evan, with me, asalways, retirement planner Mark
Fricks.
During today's show we're goingto discuss what the newly
signed federal budget bill maymean for older Americans and
retirees and its impact on yourretirement tax strategy.
(00:29):
There's a lot to get throughhere, Mark.
In fact, we were discussingbefore this show if we were
really going to go through thisthoroughly.
It's going to take multipleepisodes.
Mark (00:37):
.
Four episodes.
Evan (00:38):
We're going to really try to the first half plow through
just a 10,000-foot view of whatwe'll be discussing and then the
second half try to get intomore of the details of how that
actually can impact retirements.
Mark (00:52):
Yeah, I'm concentrating more on the retiree.
There's a lot of differentpieces to the bill, as you know,
as you just mentioned, butwe'll hit most of those in the
beginning, like you said, andthen let's apply it to you as
upcoming retirement or futureretirement or current retirement
.
How it affects that, yeah.
Evan (01:04):
So, number one.
We already know our current debtsituation in the United States
at $36.2 trillion or somethingat this point.
Mark (01:11):
That was 20 minutes ago.
Evan (01:13):
That was yesterday, maybe.
So this bill is also introducingmore of a debt impact.
The bill adds an estimated $3.4trillion to the national debt
over 10 years, withwide-reaching implications for
household finances and thebroader community.
What national debt over 10years with wide-reaching
implications for householdfinances and the broader
community?
What does debt have to do withretirement planning?
We'll get into that a littlebit later, but there's a little
bit of a what goes around comesaround, kicking the can down the
(01:34):
road, so to speak, with thisbill.
Mark (01:36):
Bills have to be paid.
Government has to pay bills too.
They just tend to put them oncredit over and over again.
That credit credit's gettingbigger and bigger.
So even though we've got a niceextension which we'll talk
about, an unexpected extensionof these tax cuts, right, a
blessing there, but again it'sgoing to affect us down the road
, like Evan said, and we'll lookat that a little bit.
Evan (01:57):
We've got some major tax changes.
Now there are some calls topraise in this.
We've permanently extended the2017 tax cuts.
This does benefit higherearners most, but lower earners
may actually lose out on some ofthis.
But nearly 70 tax provisionsokay were included, including
tax deductions on tips up to 25K, increased child tax credit,
(02:19):
new deductions, things like that.
But the 2017 tax cuts have nowbeen made permanent, with an
asterisk.
Mark (02:26):
That's right.
Yeah, nothing's permanent inWashington.
I think you may mention thislater.
But going back to the Kennedyyears, it averages every eight
to 12 years that cuts have beengone back up again, down, up,
down up.
So every eight to 12 years isgoing to be a change, and so
this has been extended.
But the only I wouldn't call ita guarantee but the only semi
(02:48):
guarantee is that's going to gothrough at least the current
administration.
Evan (02:51):
Yeah, absolutely.
So, there's a lot of revenuerecapture moves to offset the
losses.
Bill raises the state and localtax salt deduction cap.
That was at 10,000.
Now it's up to $40,000, butthis is temporary, only to 2029,
so you can basically choosewhether you want to itemize
deductions or not.
(03:12):
If you do, you have up to$40,000 until 2029 and that goes
away.
Cuts to Medicaid we are endinggreen energy tax credits,
there's some tariff loopholesthat are being closed, just
things like that.
But there's really a mixedimpact by income level.
Okay.
So the new senior deductionhelps modest earners but
(03:33):
excludes, like I said, lowerincome retirees who are already
not paying taxes on socialsecurity likely.
Mark (03:39):
Yeah, it's hard to lower taxes when folks are not paying
taxes.
And I'm not saying that's bad,I'm just saying that folks that
don't make much money,thankfully, are not paying very
much, if any, in taxes.
And so you know, when peoplesay, well, you know it doesn't
help the people that are inlower brackets, well, we can
give them money back, I guess,but you know, at a zero tax rate
.
So it's a little bit of apolitical statement when people
(04:01):
say that, but it does help agood bit, the middle of America
for sure.
Evan (04:05):
Yeah, absolutely.
And, like you said, you can'tlower taxes if you're already
not being taxed on your socialsecurity benefits in that sense,
but with some of the programsthat are being cut, then we do
definitely see some of thestrain on those lower income
folks.
But there is a phase out forthe higher earners as well.
So individuals who are 65 orolder by the end of the tax year
(04:25):
and have a modified adjustedgross income below certain
thresholds Okay.
So the deduction amount up to$6,000 deduction for each
eligible senior, that'sindividual, $12,000 for a
married couple where both areeligible.
This is in addition to thoseexisting standard deductions for
seniors and so the phase out isthe deduction begins to phase
(04:47):
out for those whose incomes are75k or above and is eliminated
entirely at 175k for individualsand that doubles for couples.
Mark (04:56):
Right, right, and the phase out is, like I don't know,
six cents per.
Yeah, it's a weird formula, butit does phase out the more
money you make, which is fair.
Evan (05:05):
And a really key takeaway, because there was a lot of
rhetoric on both sides of thisleading up to the passing of the
bill there's no direct SocialSecurity tax cut.
Mark (05:14):
Right.
Evan (05:15):
People say "why don't you want no taxes on Social Security
?
Well, you know that comes witha whole other barrel of monkeys
to discuss.
But this is just a bonusdeduction that could help some
retirees.
Mark (05:26):
Yeah, if you got rid of the tax on Social Security, you
just lost part of the funding ofSocial Security, so you've
killed it that much quicker.
So they really couldn't do that.
So really they came back doorand said well, we'll give you a
tax deduction that helps offsetmaybe some of what you're paying
to Social Security, but SocialSecurity taxation on that has
not changed.
Evan (05:44):
And this is also temporary- this is till the end
of the 2028 tax year, unlessagain renewed by Congress.
Something else we really need toconsider as people planning for
retirement or current retireesis the social safety net cuts.
The bill includes nearly $1trillion in cuts to Medicaid,
Medicare and the Affordable CareAct.
New Medicaid work requirementsand stricter eligibility checks
(06:07):
could leave 12 million morepeople uninsured by 2034.
Supplemental nutritionassistance programs SNAP as we
all know benefits are also beingtightened.
We'll get into this a littlebit later, but really the
discussion here is we need to bemore self-reliant in retirement
and make sure that we'vecovered all of our bases, but
we'll get into the details onthat in a bit.
(06:27):
There are weakened consumerprotections and loan changes.
The Consumer FinancialProtection Bureau's budget is
cut in half, potentiallyreducing investigations and
refunds, like cracking down onillegal junk fees, tackling
discrimination in housing,protecting service members and
students from scams.
Why do we bring that up?
That can directly affect yourfinances.
So we need to be a little bitmore vigilant as individuals.
(06:49):
It seems in that sense as well.
While business tax cuts mayboost the economy temporarily,
they also come with $3 trillionin additional to national debt.
Again, we need to include thisdebt discussion, because that's
going to come up in ourconversation later.
Major spending includes $1trillion of defense and
immigration enforcement, plus$90 billion for the border wall
and detention facilities.
(07:09):
And again, we also know withthe increase in SNAP we're also
losing the temporary increase inSNAP.
We're also losing our energyincentives for clean energy, tax
credits, things like that.
All right, so now the meat andpotatoes of the conversation.
If you'd like a transcript oftoday's show, just em ail us.
(07:30):
I did all that in one breath.
Okay.
So what does it mean forretirees?
All right, so we have acolleague in the industry, Becky
Swansburg, and she's said thisseveral times the one constant
in Washington DC is what, Mark?
Mark (07:46):
Change.
Evan (07:47):
Change, the one constant.
Right.
So tax rates and standarddeduction made permanent.
Okay, so for middle America,about 30% lower rates pre-reform
from the 90s and the 2000s andnow they're permanent.
And again, we said that'spermanent with an asterisk and
government until Congress makesa change, because we know, as
you like to say, tax laws arewritten.
Mark (08:09):
And let's really let's hammer that home really quick.
The tax cuts in 2017 were big.
It's one of the biggest taxcuts in history of the US
Average American less 20 to 30%taxes.
So that extension is huge.
We've been looking at this datefor a long time almost like in
disbelief.
When a Republican got the WhiteHouse and the Senate and the
(08:33):
House both got Republican, thatallowed them to extend that, and
so that's a huge part.
A lot of negatives in the billa lot of things that will
increase debt and again, maybeit kicks the can down the road
that much further, but it doesgive us a window of things that
will increase debt and again,maybe it kicks the can down the
road that much further, but itdoes give us a window of
opportunity which we're going totalk about.
Evan (08:48):
There's a really interesting average here.
So most permanent tax cuts lastbetween 8 to 12 years.
Historically, that's reallyreasonable when looking at our
history.
But we are in extremelyvolatile times and we're seeing
the pendulum swing back andforth.
Politically, very much so 8 to12, volatile times and we're
seeing the pendulum swing backpolitically with.
Politically very much so eightto twelve.
(09:08):
Let's maybe cut that down toeight to ten, or even less these
days, we don't know, but we'reso, so volatile right now.
Okay, so we know we've also gotthe enhanced senior deductions.
All 65 plus individuals havethe opportunity for those tax
deductions on top of theexisting deductions.
We we mentioned that earlier6,000 single, 12,000 for couples
, not permanent.
(09:29):
2025 to 2028 tax years, nextfour years.
Why do we bring this up again?
Roth conversions will need tobe examined closely so you don't
lose the extra deduction.
Mark (09:41):
Yeah, because there's an income limit and Roth
conversions count toward incomeand so, just like other areas
can be affected, it's not justyour federal tax, but it could
be tax credits, tax deductions,things of that nature.
So you do have to be careful,and if you're working with
somebody that doesn't understandthis and all of a sudden, in
April of the next year, you getthis big tax bill from whatever
(10:02):
source, which we'll talk aboutin just a minute that's a big
no-no.
That's not whether they're notknowledgeable, whether they're
not fiduciaries and they justwant to do whatever.
It's always a good thing toconvert, but you've got to use
math, you've got to be strategic.
Evan (10:17):
Absolutely and combining that with SNAP as well over the
next four years where yourdeductions might be coming from,
trying to build in some Rothconversions leading to
retirement at the same time or,in retirement, trying to balance
that with Medicare and IRMA.
There's a lot to balance here.
There already was a lot tobalance in retirement, Now
there's a couple more layers.
(10:39):
Absolutely.
Some more good news $30 millionestate exemption.
So we've raised our estate taxexemption now to $15 million for
individuals, $30 million forcouples.
Mark (10:52):
That is now permanent with an asterisk high and just folks
that may not be familiar withthis is you pass away as an
individual.
Your first 15 million of yourestate is estate tax free.
(11:15):
After that it begins beingtaxed and not too many people
have that much money that'smostly the very high and wealthy
or semi-wealthy right but itcan affect you.
But I mean just a few years agoit was six million, before that
it was three million.
So anything above three millionyou were taxed at 50 percent.
So that's a good extensionagainst it.
It's permanent until it'schanged.
Evan (11:34):
Right.
Did the majority of Americansneed it that high?
That's a different conversation, for sure, but the the risk
that we were worried about wasit going in the opposite
direction and lowering it?
Risk that we were worried aboutwas it going in the opposite
direction and lowering it?
Because we know it was on thetable to get to three million.
Um, and you know you, eventhree million might seem like a
lot for some people, but whenyou start adding in life
insurance, IRA, 401k,
Mark (11:54):
Your residents.
.
.
Evan (11:55):
Your residence.
.
.
Mark (11:56):
Your rental house.
.
.
Evan (11:57):
Right, you get there real fast, yeah.
So we do want to take a moment,folks, while we're uh
plowingowing through thisepisode, to point you to our
website, masterplanretirecom.
There you can schedule yourcomplimentary consultation to
discuss your own retirement.
Have a series of reports ranfor you as well.
See where you stand.
That's MasterPlanRetirecom.
(12:17):
Or call us at the office,770-980-9262.
So the Medicaid and the SNAPcuts these are permanent.
Why do we bring these up?
We did discuss briefly earlierthat our social safety net is
starting to be pulled frombeneath us.
So why does that affectretirees?
(12:37):
Well, obviously we need toconsider long-term viability of
our social safety net structure.
In America, funding shortfallsare projected for the Medicare
program.
Currently we do not have enoughrevenue coming into the
government or being allocated tocover all of the benefits that
we owe people.
So over the next century, thenext 75 years, there's about a
(12:58):
$78 trillion shortfall inMedicare and Social Security
benefits alone.
That's a big number, you think.
75 years, that's going to beour kids' retirement.
There's one of two things thatthe government can do, or they
can do both of them, actually,but let's think of the two
options.
One they can raise taxes orthey can reduce benefits.
Mark (13:20):
And from what I've read, you pretty much have to do both.
Evan (13:23):
That's exactly right.
Mark (13:24):
One or the other one, I mean you'd have to raise taxes
to the 1940 highest rate, whichwas 90%.
Would we accept that?
Probably not, but certainly.
And it's not just federal taxes, it's all these little pieces
that come together that you know, just like the IRMA or Medicare
Part B that goes up every year,but it also increases based on
(13:46):
income, and so that's kind of ahidden tax.
People don't realize, and sothat's just another piece I
think will be introduced as wego through time.
But I do think, absolutely, asyou're hitting, that our kids
and grandkids are going to bepaying the price.
Evan (14:01):
So we already can anticipate an increase in taxes.
I mean, we are at ahistorically low point in our
tax history.
There's really nowhere to gobut up, especially when we start
to dig into our deficit.
But let's talk about thebenefits.
Who are they going to reducebenefits from Savers with more
income?
So it's critical we want toplan for Medicare and Social
(14:22):
Security benefits.
We need to include those, butwe also want to ensure that we
have strategies, income sourcesand long-term care protection.
So if the government decidesthat folks need to take more
responsibility upon themselves,it won't blow up our retirement
plans.
Mark (14:38):
Yeah, so many people have so much money in IRA traditional
IRA, 401ks, things of thatnature and these are just
ticking time bombs that, as theycontinue growing and if your
kids inherit that, whichhopefully they will they've got
to take that money out over 10years.
What's their tax rate going tobe?
Well, they'll be in their 50sand 60s We've talked about taxes
almost assuredly will be higher, and now they're forced to take
(15:01):
money out of that inherited IRAalong with whatever income
level they're at.
If they're forced to take moneyout of that inherited IRA along
with whatever income levelthey're at, well, if they're in
their 50s and 60s, they verywell could be in their highest
income bracket at that point aswell, and that has just put a
burden on them as well at maybea rate that could be double what
we're at now.
So it is so critical.
You know one of the stats Ipicked up here and maybe we're
going to share that earlier, butin 2024 tax year we had $4.9
(15:25):
trillion in taxes come into thegovernment.
The programs that are mandatorySocial Security, medicare,
medicaid the interest on ourdebt I'm not talking about
defense, I'm not talking aboutany other program Going out was
$4.9 trillion.
Does that sound familiar?
That's exactly what came in, sothat doesn't include these
(15:49):
things that they have to kind oflook at every year like defense
spending.
Do we want to get rid of ourdefense Totally?
We can't right.
And so what about things thatare passed in Congress over the
year?
You know new programs, you knowfunding more for FEMA because
of more disasters, all this kindof stuff, and so there is no
way you're going to avoid havinga deficit every year which
(16:09):
increases the interest payments.
I think defense last year was$1.8 trillion.
Evan (16:14):
All of discretionary spending.
So exactly Our mandatoryspending, which is written in
law, was $4.8 or $4.9.
Mark (16:23):
Yeah, so that's exactly what came in, so that doesn't
include all the other stuff.
Evan (16:27):
Yeah, that's 1.8 additional, 1.8 trillion
additional.
Yeah, absolutely so.
Do we think we are likely, as anation, to decrease government
revenue or increase governmentrevenue?
Mark (16:38):
Well, again, they're going to have to do both.
They're definitely going toincrease.
And see, you know, a lot of thepeople in Washington want to
add more programs too.
So you, you're going to have tohave that much more in taxes to
catch that up as well.
I mean, literally, we taught aclass, what was about two months
ago, where the debt was 34trillion yeah.
Two months later it's 36trillion, yeah.
(16:59):
And so this, this is justbuilding upon itself, and you
know, I'm not trying to alarmanybody, but we need to wake up
and say what can be done todayto relieve the burden when taxes
do go up.
And so, you know, there's acouple of things that I'm sure
you're going to talk about, butI do want to kind of pound on
this a little bit more.
One of the problems isdemographics.
We have an aging population,more and more people going into
(17:21):
Social Security, medicare, maybeMedicaid in many cases as well,
so that aging population, fewerpeople working to pay into
Social Security and with thehigher income levels to be able
to pay into taxes.
So they're going to have to taxthe seniors more to capture
that back right.
And then, like we just weretalking about the debt and
deficits that we'll have to paymore and more interest on as
(17:43):
well.
So that's two.
That's just two things thathave combined to come together
to just explode the situation.
So we're celebrating a littlebit today because of the
extended tax cuts, but it givesus kind of a window yeah, like
we talked about, and the windowwhich you may get into and I
hate to step over your outline,but we've got, at least we think
(18:04):
, four years to take advantageof the taxes on sale mentality,
being careful, because again youget into messing up some
deductions, you get into payingmore for Medicare Part B, so
what is that amount we canconvert into some tax-free
vehicle.
There's a couple of them outthere that we really like to use
.
Roths are one of them.
(18:26):
You pay the taxes as itconverts into that Roth or other
tax-free vehicle that iscurrently in an IRA and now it's
never going to be taxed againto you, your kids, whoever
inherits it.
So whatever those rates are,when your kids are inheriting
that Roth IRA, no taxes.
You also don't have anyrequired minimum distributions
(18:47):
on a Roth, so you're not forcedto take money out in older age.
And if I'm 65 now and at age 75,taxes go up tremendously.
That's the age I had to starttaking money out of my IRA.
And what if I don't need it?
I still take it out, and sothat's a taxation as well.
So this is the opportunity thatwe're really promoting today is
(19:08):
to work with someone thatunderstands.
Not just, hey, I can fill out aform and convert some of my IRA
to a Roth, but strategically,so I don't hurt myself too much
now.
Now there is a pain period toomuch now.
Now there is a pain period.
There is some pain now becauseyou are going to be paying more
in taxes because you areconverting, but not as much as
you'll be paying over the next10, 15, 20 years and your kids
(19:29):
will be paying over the next 10years after that.
So really work with someonethat understands all of these
laws, understands the changesthat have taken place and
understand the importance oftax-free income in the future
and understand how to do itstrategically.
Evan (19:45):
Absolutely, and right now, especially when people are
looking at okay, we've justgotten these tax cuts extended
and made permanent.
What are you guys complainingabout?
Are we still harping on theRoth conversions?
Yes, because now is the time todo it.
If you are younger and youdon't have as much to convert,
now is the time to make sure youare allocating younger and you
don't have as much to convert.
Now is the time to make sureyou are allocating your
contributions to tax-freevehicles, roths, some of these
(20:08):
other vehicles Marcus mentionedbefore.
Folks, like I mentioned before,we're not on a low tax rate
forever.
Okay, we've got 8 to 12 years,historically on average, before
a change in the permanent taxbracket.
We're super volatile.
Now it could be the end of thisterm, a presidential term, and
again when we spoke about thependulum back and forth is
(20:29):
getting more and more extreme.
What's the next?
Mark (20:32):
Yeah, and what Evan means by that too is the fact that in
Washington, we have new peoplein Washington every two years.
You know the House is every twoyears, the White House is every
four and the Senate is everysix.
New people, and the majoritychanges almost every time in at
least one or two of those places, maybe all three, like they did
this last time.
And so the changes come, and weall know that certain parties
(20:56):
want to spend and certainparties want to save.
Some of them have kind ofmerged together, want to do a
little bit of both, okay, and soit's got to come from somewhere
, otherwise our economy is goingto collapse under the weight of
the debt, and so this is notnecessarily a problem for our
children and grandchildren, it'sa problem for our country and
our economy.
And so what happens in four,six or eight years we don't know
(21:18):
.
We're already with theextension will be eight years
into the tax cuts.
Right and so.
But help yourself now by gettingthat money into a tax-free
situation and also being betterdiversified.
You know I talk about aneconomy or going into a
recession or whatever because ofthis debt.
Be better diversified forretirement, don't just put all
(21:39):
your money in the market andhope for the best, because we
know we have a bear market everyfive years on average, and the
average drop is 34%, and so it'snot just about taxes.
It's also about preserving yourmoney.
So when we are designing aportfolio for retirement, we're
using multiple portfolios.
We're using precious metals,gold and silver which react
differently to the market.
(21:59):
We use protected accounts thatprovide income, and so you need
to look at it differently thanyou did over the last 30 years
when you were growing.
So this is a taxed discussion,but it's also a discussion about
being prepared for whatever itcould trigger.
Evan (22:14):
Yeah, and I also like when you discuss the political
parties, it's not a Democrat orRepublican conversation.
You know you might be thinking,well, we'll just get another
conservative the next year ornext year.
Elections have impact, but theyreally only serve to slow or
accelerate this path where wecan't afford to provide services
to the demographic growth thatis coming in the future.
It's inevitable.
(22:34):
It's really not a politicalproblem.
A lot of the future spending isjust simply a math problem.
Mark (22:39):
It is a math problem and again it's going to take both
chopping blocks.
You're gonna have to cutprograms.
Nobody likes that.
I mean, you mentioned cuttingMedicare.
You mentioned cutting SocialSecurity.
People are outraged.
Of course they are.
Well, let's cut defensespending.
The world is getting reallydangerous.
You know it's tough to cut that.
So what do you start cutting?
(23:01):
Okay, well, you start cuttingsome of these other programs
that's going to affect somebodyelse, but also, at the same time
, they're going to have to raise.
Economists tell us you've gotto do both.
You've got to cut spending andraise taxes.
There's no other way around it.
And the longer we wait, themore we've got to do with both.
Evan (23:24):
As if we didn't need more complexity to retirement
planning.
However, folks, if you wouldlike to discuss your own
retirement with retirementplanning professionals, please
do visit our website,masterplanretire.
com.
There we have conversationsabout your retirement hopes,
dreams, fears, goals and then werun a series of reports, a
10,000-foot view of your ownretirement.
We put the key in the ignitionand see okay, how far does your
money go, stress that, test thatand then have an opportunity to
(23:44):
create your own retirement.
We put the key in the ignitionand see okay, how far does your
money go, stress that, test thatand then have an opportunity to
create your own retirement plan.
Mark (23:47):
Including the impact of taxes on your future as well.
So there's a button, a littlegreen button schedule a meeting.
That's complimentary.
I hope you do that, but again,I hope today was helpful.
A lot of information, weunderstand what's going on so
hopefully you'll come see us.
Until then, plan well andprosper.
Take care.
This was Retirement RoadmapRadio with Mark Fricks of Master
(24:07):
Plan Retirement Consultants.
To schedule a complimentaryconsultation, go to
masterplanretirecom or call770-980-9262.
Thanks for listening andremember plan well and prosper.
What does the new budget bill mean for you?
Hey folks, welcome back andthank you for joining us.
Welcome to Master PlanRetirement Consultants
Retirement Roadmap.
My name is Evan, with me, asalways, retirement planner Mark
Fricks.
During today's show we're goingto discuss what the newly
signed federal budget bill maymean for older Americans and
retirees and its impact on yourretirement tax strategy.
(00:29):
There's a lot to get throughhere, Mark.
In fact, we were discussingbefore this show if we were
really going to go through thisthoroughly.
It's going to take multipleepisodes.
Mark (00:37):
.
Four episodes.
Evan (00:38):
We're going to really try to the first half plow through
just a 10,000-foot view of whatwe'll be discussing and then the
second half try to get intomore of the details of how that
actually can impact retirements.
Mark (00:52):
Yeah, I'm concentrating more on the retiree.
There's a lot of differentpieces to the bill, as you know,
as you just mentioned, butwe'll hit most of those in the
beginning, like you said, andthen let's apply it to you as
upcoming retirement or futureretirement or current retirement
.
How it affects that, yeah.
Evan (01:04):
So, number one.
We already know our current debtsituation in the United States
at $36.2 trillion or somethingat this point.
Mark (01:11):
That was 20 minutes ago.
Evan (01:13):
That was yesterday, maybe.
So this bill is also introducingmore of a debt impact.
The bill adds an estimated $3.4trillion to the national debt
over 10 years, withwide-reaching implications for
household finances and thebroader community.
What national debt over 10years with wide-reaching
implications for householdfinances and the broader
community?
What does debt have to do withretirement planning?
We'll get into that a littlebit later, but there's a little
bit of a what goes around comesaround, kicking the can down the
(01:34):
road, so to speak, with thisbill.
Mark (01:36):
Bills have to be paid.
Government has to pay bills too.
They just tend to put them oncredit over and over again.
That credit credit's gettingbigger and bigger.
So even though we've got a niceextension which we'll talk
about, an unexpected extensionof these tax cuts, right, a
blessing there, but again it'sgoing to affect us down the road
, like Evan said, and we'll lookat that a little bit.
Evan (01:57):
We've got some major tax changes.
Now there are some calls topraise in this.
We've permanently extended the2017 tax cuts.
This does benefit higherearners most, but lower earners
may actually lose out on some ofthis.
But nearly 70 tax provisionsokay were included, including
tax deductions on tips up to 25K, increased child tax credit,
(02:19):
new deductions, things like that.
But the 2017 tax cuts have nowbeen made permanent, with an
asterisk.
Mark (02:26):
That's right.
Yeah, nothing's permanent inWashington.
I think you may mention thislater.
But going back to the Kennedyyears, it averages every eight
to 12 years that cuts have beengone back up again, down, up,
down up.
So every eight to 12 years isgoing to be a change, and so
this has been extended.
But the only I wouldn't call ita guarantee but the only semi
(02:48):
guarantee is that's going to gothrough at least the current
administration.
Evan (02:51):
Yeah, absolutely.
So, there's a lot of revenuerecapture moves to offset the
losses.
Bill raises the state and localtax salt deduction cap.
That was at 10,000.
Now it's up to $40,000, butthis is temporary, only to 2029,
so you can basically choosewhether you want to itemize
deductions or not.
(03:12):
If you do, you have up to$40,000 until 2029 and that goes
away.
Cuts to Medicaid we are endinggreen energy tax credits,
there's some tariff loopholesthat are being closed, just
things like that.
But there's really a mixedimpact by income level.
Okay.
So the new senior deductionhelps modest earners but
(03:33):
excludes, like I said, lowerincome retirees who are already
not paying taxes on socialsecurity likely.
Mark (03:39):
Yeah, it's hard to lower taxes when folks are not paying
taxes.
And I'm not saying that's bad,I'm just saying that folks that
don't make much money,thankfully, are not paying very
much, if any, in taxes.
And so you know, when peoplesay, well, you know it doesn't
help the people that are inlower brackets, well, we can
give them money back, I guess,but you know, at a zero tax rate
.
So it's a little bit of apolitical statement when people
(04:01):
say that, but it does help agood bit, the middle of America
for sure.
Evan (04:05):
Yeah, absolutely.
And, like you said, you can'tlower taxes if you're already
not being taxed on your socialsecurity benefits in that sense,
but with some of the programsthat are being cut, then we do
definitely see some of thestrain on those lower income
folks.
But there is a phase out forthe higher earners as well.
So individuals who are 65 orolder by the end of the tax year
(04:25):
and have a modified adjustedgross income below certain
thresholds Okay.
So the deduction amount up to$6,000 deduction for each
eligible senior, that'sindividual, $12,000 for a
married couple where both areeligible.
This is in addition to thoseexisting standard deductions for
seniors and so the phase out isthe deduction begins to phase
(04:47):
out for those whose incomes are75k or above and is eliminated
entirely at 175k for individualsand that doubles for couples.
Mark (04:56):
Right, right, and the phase out is, like I don't know,
six cents per.
Yeah, it's a weird formula, butit does phase out the more
money you make, which is fair.
Evan (05:05):
And a really key takeaway, because there was a lot of
rhetoric on both sides of thisleading up to the passing of the
bill there's no direct SocialSecurity tax cut.
Mark (05:14):
Right.
Evan (05:15):
People say "why don't you want no taxes on Social Security
?
Well, you know that comes witha whole other barrel of monkeys
to discuss.
But this is just a bonusdeduction that could help some
retirees.
Mark (05:26):
Yeah, if you got rid of the tax on Social Security, you
just lost part of the funding ofSocial Security, so you've
killed it that much quicker.
So they really couldn't do that.
So really they came back doorand said well, we'll give you a
tax deduction that helps offsetmaybe some of what you're paying
to Social Security, but SocialSecurity taxation on that has
not changed.
Evan (05:44):
And this is also temporary- this is till the end
of the 2028 tax year, unlessagain renewed by Congress.
Something else we really need toconsider as people planning for
retirement or current retireesis the social safety net cuts.
The bill includes nearly $1trillion in cuts to Medicaid,
Medicare and the Affordable CareAct.
New Medicaid work requirementsand stricter eligibility checks
(06:07):
could leave 12 million morepeople uninsured by 2034.
Supplemental nutritionassistance programs SNAP as we
all know benefits are also beingtightened.
We'll get into this a littlebit later, but really the
discussion here is we need to bemore self-reliant in retirement
and make sure that we'vecovered all of our bases, but
we'll get into the details onthat in a bit.
(06:27):
There are weakened consumerprotections and loan changes.
The Consumer FinancialProtection Bureau's budget is
cut in half, potentiallyreducing investigations and
refunds, like cracking down onillegal junk fees, tackling
discrimination in housing,protecting service members and
students from scams.
Why do we bring that up?
That can directly affect yourfinances.
So we need to be a little bitmore vigilant as individuals.
(06:49):
It seems in that sense as well.
While business tax cuts mayboost the economy temporarily,
they also come with $3 trillionin additional to national debt.
Again, we need to include thisdebt discussion, because that's
going to come up in ourconversation later.
Major spending includes $1trillion of defense and
immigration enforcement, plus$90 billion for the border wall
and detention facilities.
(07:09):
And again, we also know withthe increase in SNAP we're also
losing the temporary increase inSNAP.
We're also losing our energyincentives for clean energy, tax
credits, things like that.
All right, so now the meat andpotatoes of the conversation.
If you'd like a transcript oftoday's show, just em ail us.
(07:30):
I did all that in one breath.
Okay.
So what does it mean forretirees?
All right, so we have acolleague in the industry, Becky
Swansburg, and she's said thisseveral times the one constant
in Washington DC is what, Mark?
Mark (07:46):
Change.
Evan (07:47):
Change, the one constant.
Right.
So tax rates and standarddeduction made permanent.
Okay, so for middle America,about 30% lower rates pre-reform
from the 90s and the 2000s andnow they're permanent.
And again, we said that'spermanent with an asterisk and
government until Congress makesa change, because we know, as
you like to say, tax laws arewritten.
Mark (08:09):
And let's really let's hammer that home really quick.
The tax cuts in 2017 were big.
It's one of the biggest taxcuts in history of the US
Average American less 20 to 30%taxes.
So that extension is huge.
We've been looking at this datefor a long time almost like in
disbelief.
When a Republican got the WhiteHouse and the Senate and the
(08:33):
House both got Republican, thatallowed them to extend that, and
so that's a huge part.
A lot of negatives in the billa lot of things that will
increase debt and again, maybeit kicks the can down the road
that much further, but it doesgive us a window of things that
will increase debt and again,maybe it kicks the can down the
road that much further, but itdoes give us a window of
opportunity which we're going totalk about.
Evan (08:48):
There's a really interesting average here.
So most permanent tax cuts lastbetween 8 to 12 years.
Historically, that's reallyreasonable when looking at our
history.
But we are in extremelyvolatile times and we're seeing
the pendulum swing back andforth.
Politically, very much so 8 to12, volatile times and we're
seeing the pendulum swing backpolitically with.
Politically very much so eightto twelve.
(09:08):
Let's maybe cut that down toeight to ten, or even less these
days, we don't know, but we'reso, so volatile right now.
Okay, so we know we've also gotthe enhanced senior deductions.
All 65 plus individuals havethe opportunity for those tax
deductions on top of theexisting deductions.
We we mentioned that earlier6,000 single, 12,000 for couples
, not permanent.
(09:29):
2025 to 2028 tax years, nextfour years.
Why do we bring this up again?
Roth conversions will need tobe examined closely so you don't
lose the extra deduction.
Mark (09:41):
Yeah, because there's an income limit and Roth
conversions count toward incomeand so, just like other areas
can be affected, it's not justyour federal tax, but it could
be tax credits, tax deductions,things of that nature.
So you do have to be careful,and if you're working with
somebody that doesn't understandthis and all of a sudden, in
April of the next year, you getthis big tax bill from whatever
(10:02):
source, which we'll talk aboutin just a minute that's a big
no-no.
That's not whether they're notknowledgeable, whether they're
not fiduciaries and they justwant to do whatever.
It's always a good thing toconvert, but you've got to use
math, you've got to be strategic.
Evan (10:17):
Absolutely and combining that with SNAP as well over the
next four years where yourdeductions might be coming from,
trying to build in some Rothconversions leading to
retirement at the same time or,in retirement, trying to balance
that with Medicare and IRMA.
There's a lot to balance here.
There already was a lot tobalance in retirement, Now
there's a couple more layers.
(10:39):
Absolutely.
Some more good news $30 millionestate exemption.
So we've raised our estate taxexemption now to $15 million for
individuals, $30 million forcouples.
Mark (10:52):
That is now permanent with an asterisk high and just folks
that may not be familiar withthis is you pass away as an
individual.
Your first 15 million of yourestate is estate tax free.
(11:15):
After that it begins beingtaxed and not too many people
have that much money that'smostly the very high and wealthy
or semi-wealthy right but itcan affect you.
But I mean just a few years agoit was six million, before that
it was three million.
So anything above three millionyou were taxed at 50 percent.
So that's a good extensionagainst it.
It's permanent until it'schanged.
Evan (11:34):
Right.
Did the majority of Americansneed it that high?
That's a different conversation, for sure, but the the risk
that we were worried about wasit going in the opposite
direction and lowering it?
Risk that we were worried aboutwas it going in the opposite
direction and lowering it?
Because we know it was on thetable to get to three million.
Um, and you know you, eventhree million might seem like a
lot for some people, but whenyou start adding in life
insurance, IRA, 401k,
Mark (11:54):
Your residents.
.
.
Evan (11:55):
Your residence.
.
.
Mark (11:56):
Your rental house.
.
.
Evan (11:57):
Right, you get there real fast, yeah.
So we do want to take a moment,folks, while we're uh
plowingowing through thisepisode, to point you to our
website, masterplanretirecom.
There you can schedule yourcomplimentary consultation to
discuss your own retirement.
Have a series of reports ranfor you as well.
See where you stand.
That's MasterPlanRetirecom.
(12:17):
Or call us at the office,770-980-9262.
So the Medicaid and the SNAPcuts these are permanent.
Why do we bring these up?
We did discuss briefly earlierthat our social safety net is
starting to be pulled frombeneath us.
So why does that affectretirees?
(12:37):
Well, obviously we need toconsider long-term viability of
our social safety net structure.
In America, funding shortfallsare projected for the Medicare
program.
Currently we do not have enoughrevenue coming into the
government or being allocated tocover all of the benefits that
we owe people.
So over the next century, thenext 75 years, there's about a
(12:58):
$78 trillion shortfall inMedicare and Social Security
benefits alone.
That's a big number, you think.
75 years, that's going to beour kids' retirement.
There's one of two things thatthe government can do, or they
can do both of them, actually,but let's think of the two
options.
One they can raise taxes orthey can reduce benefits.
Mark (13:20):
And from what I've read, you pretty much have to do both.
Evan (13:23):
That's exactly right.
Mark (13:24):
One or the other one, I mean you'd have to raise taxes
to the 1940 highest rate, whichwas 90%.
Would we accept that?
Probably not, but certainly.
And it's not just federal taxes, it's all these little pieces
that come together that you know, just like the IRMA or Medicare
Part B that goes up every year,but it also increases based on
(13:46):
income, and so that's kind of ahidden tax.
People don't realize, and sothat's just another piece I
think will be introduced as wego through time.
But I do think, absolutely, asyou're hitting, that our kids
and grandkids are going to bepaying the price.
Evan (14:01):
So we already can anticipate an increase in taxes.
I mean, we are at ahistorically low point in our
tax history.
There's really nowhere to gobut up, especially when we start
to dig into our deficit.
But let's talk about thebenefits.
Who are they going to reducebenefits from Savers with more
income?
So it's critical we want toplan for Medicare and Social
(14:22):
Security benefits.
We need to include those, butwe also want to ensure that we
have strategies, income sourcesand long-term care protection.
So if the government decidesthat folks need to take more
responsibility upon themselves,it won't blow up our retirement
plans.
Mark (14:38):
Yeah, so many people have so much money in IRA traditional
IRA, 401ks, things of thatnature and these are just
ticking time bombs that, as theycontinue growing and if your
kids inherit that, whichhopefully they will they've got
to take that money out over 10years.
What's their tax rate going tobe?
Well, they'll be in their 50sand 60s We've talked about taxes
almost assuredly will be higher, and now they're forced to take
(15:01):
money out of that inherited IRAalong with whatever income
level they're at.
If they're forced to take moneyout of that inherited IRA along
with whatever income levelthey're at, well, if they're in
their 50s and 60s, they verywell could be in their highest
income bracket at that point aswell, and that has just put a
burden on them as well at maybea rate that could be double what
we're at now.
So it is so critical.
You know one of the stats Ipicked up here and maybe we're
going to share that earlier, butin 2024 tax year we had $4.9
(15:25):
trillion in taxes come into thegovernment.
The programs that are mandatorySocial Security, medicare,
medicaid the interest on ourdebt I'm not talking about
defense, I'm not talking aboutany other program Going out was
$4.9 trillion.
Does that sound familiar?
That's exactly what came in, sothat doesn't include these
(15:49):
things that they have to kind oflook at every year like defense
spending.
Do we want to get rid of ourdefense Totally?
We can't right.
And so what about things thatare passed in Congress over the
year?
You know new programs, you knowfunding more for FEMA because
of more disasters, all this kindof stuff, and so there is no
way you're going to avoid havinga deficit every year which
(16:09):
increases the interest payments.
I think defense last year was$1.8 trillion.
Evan (16:14):
All of discretionary spending.
So exactly Our mandatoryspending, which is written in
law, was $4.8 or $4.9.
Mark (16:23):
Yeah, so that's exactly what came in, so that doesn't
include all the other stuff.
Evan (16:27):
Yeah, that's 1.8 additional, 1.8 trillion
additional.
Yeah, absolutely so.
Do we think we are likely, as anation, to decrease government
revenue or increase governmentrevenue?
Mark (16:38):
Well, again, they're going to have to do both.
They're definitely going toincrease.
And see, you know, a lot of thepeople in Washington want to
add more programs too.
So you, you're going to have tohave that much more in taxes to
catch that up as well.
I mean, literally, we taught aclass, what was about two months
ago, where the debt was 34trillion yeah.
Two months later it's 36trillion, yeah.
(16:59):
And so this, this is justbuilding upon itself, and you
know, I'm not trying to alarmanybody, but we need to wake up
and say what can be done todayto relieve the burden when taxes
do go up.
And so, you know, there's acouple of things that I'm sure
you're going to talk about, butI do want to kind of pound on
this a little bit more.
One of the problems isdemographics.
We have an aging population,more and more people going into
(17:21):
Social Security, medicare, maybeMedicaid in many cases as well,
so that aging population, fewerpeople working to pay into
Social Security and with thehigher income levels to be able
to pay into taxes.
So they're going to have to taxthe seniors more to capture
that back right.
And then, like we just weretalking about the debt and
deficits that we'll have to paymore and more interest on as
(17:43):
well.
So that's two.
That's just two things thathave combined to come together
to just explode the situation.
So we're celebrating a littlebit today because of the
extended tax cuts, but it givesus kind of a window yeah, like
we talked about, and the windowwhich you may get into and I
hate to step over your outline,but we've got, at least we think
(18:04):
, four years to take advantageof the taxes on sale mentality,
being careful, because again youget into messing up some
deductions, you get into payingmore for Medicare Part B, so
what is that amount we canconvert into some tax-free
vehicle.
There's a couple of them outthere that we really like to use
.
Roths are one of them.
(18:26):
You pay the taxes as itconverts into that Roth or other
tax-free vehicle that iscurrently in an IRA and now it's
never going to be taxed againto you, your kids, whoever
inherits it.
So whatever those rates are,when your kids are inheriting
that Roth IRA, no taxes.
You also don't have anyrequired minimum distributions
(18:47):
on a Roth, so you're not forcedto take money out in older age.
And if I'm 65 now and at age 75,taxes go up tremendously.
That's the age I had to starttaking money out of my IRA.
And what if I don't need it?
I still take it out, and sothat's a taxation as well.
So this is the opportunity thatwe're really promoting today is
(19:08):
to work with someone thatunderstands.
Not just, hey, I can fill out aform and convert some of my IRA
to a Roth, but strategically,so I don't hurt myself too much
now.
Now there is a pain period toomuch now.
Now there is a pain period.
There is some pain now becauseyou are going to be paying more
in taxes because you areconverting, but not as much as
you'll be paying over the next10, 15, 20 years and your kids
(19:29):
will be paying over the next 10years after that.
So really work with someonethat understands all of these
laws, understands the changesthat have taken place and
understand the importance oftax-free income in the future
and understand how to do itstrategically.
Evan (19:45):
Absolutely, and right now, especially when people are
looking at okay, we've justgotten these tax cuts extended
and made permanent.
What are you guys complainingabout?
Are we still harping on theRoth conversions?
Yes, because now is the time todo it.
If you are younger and youdon't have as much to convert,
now is the time to make sure youare allocating younger and you
don't have as much to convert.
Now is the time to make sureyou are allocating your
contributions to tax-freevehicles, roths, some of these
(20:08):
other vehicles Marcus mentionedbefore.
Folks, like I mentioned before,we're not on a low tax rate
forever.
Okay, we've got 8 to 12 years,historically on average, before
a change in the permanent taxbracket.
We're super volatile.
Now it could be the end of thisterm, a presidential term, and
again when we spoke about thependulum back and forth is
(20:29):
getting more and more extreme.
What's the next?
Mark (20:32):
Yeah, and what Evan means by that too is the fact that in
Washington, we have new peoplein Washington every two years.
You know the House is every twoyears, the White House is every
four and the Senate is everysix.
New people, and the majoritychanges almost every time in at
least one or two of those places, maybe all three, like they did
this last time.
And so the changes come, and weall know that certain parties
(20:56):
want to spend and certainparties want to save.
Some of them have kind ofmerged together, want to do a
little bit of both, okay, and soit's got to come from somewhere
, otherwise our economy is goingto collapse under the weight of
the debt, and so this is notnecessarily a problem for our
children and grandchildren, it'sa problem for our country and
our economy.
And so what happens in four,six or eight years we don't know
(21:18):
.
We're already with theextension will be eight years
into the tax cuts.
Right and so.
But help yourself now by gettingthat money into a tax-free
situation and also being betterdiversified.
You know I talk about aneconomy or going into a
recession or whatever because ofthis debt.
Be better diversified forretirement, don't just put all
(21:39):
your money in the market andhope for the best, because we
know we have a bear market everyfive years on average, and the
average drop is 34%, and so it'snot just about taxes.
It's also about preserving yourmoney.
So when we are designing aportfolio for retirement, we're
using multiple portfolios.
We're using precious metals,gold and silver which react
differently to the market.
(21:59):
We use protected accounts thatprovide income, and so you need
to look at it differently thanyou did over the last 30 years
when you were growing.
So this is a taxed discussion,but it's also a discussion about
being prepared for whatever itcould trigger.
Evan (22:14):
Yeah, and I also like when you discuss the political
parties, it's not a Democrat orRepublican conversation.
You know you might be thinking,well, we'll just get another
conservative the next year ornext year.
Elections have impact, but theyreally only serve to slow or
accelerate this path where wecan't afford to provide services
to the demographic growth thatis coming in the future.
It's inevitable.
(22:34):
It's really not a politicalproblem.
A lot of the future spending isjust simply a math problem.
Mark (22:39):
It is a math problem and again it's going to take both
chopping blocks.
You're gonna have to cutprograms.
Nobody likes that.
I mean, you mentioned cuttingMedicare.
You mentioned cutting SocialSecurity.
People are outraged.
Of course they are.
Well, let's cut defensespending.
The world is getting reallydangerous.
You know it's tough to cut that.
So what do you start cutting?
(23:01):
Okay, well, you start cuttingsome of these other programs
that's going to affect somebodyelse, but also, at the same time
, they're going to have to raise.
Economists tell us you've gotto do both.
You've got to cut spending andraise taxes.
There's no other way around it.
And the longer we wait, themore we've got to do with both.
Evan (23:24):
As if we didn't need more complexity to retirement
planning.
However, folks, if you wouldlike to discuss your own
retirement with retirementplanning professionals, please
do visit our website,masterplanretire.
com.
There we have conversationsabout your retirement hopes,
dreams, fears, goals and then werun a series of reports, a
10,000-foot view of your ownretirement.
We put the key in the ignitionand see okay, how far does your
money go, stress that, test thatand then have an opportunity to
(23:44):
create your own retirement.
We put the key in the ignitionand see okay, how far does your
money go, stress that, test thatand then have an opportunity to
create your own retirement plan.
Mark (23:47):
Including the impact of taxes on your future as well.
So there's a button, a littlegreen button schedule a meeting.
That's complimentary.
I hope you do that, but again,I hope today was helpful.
A lot of information, weunderstand what's going on so
hopefully you'll come see us.
Until then, plan well andprosper.
Take care.
This was Retirement RoadmapRadio with Mark Fricks of Master
(24:07):
Plan Retirement Consultants.
To schedule a complimentaryconsultation, go to
masterplanretirecom or call770-980-9262.
Thanks for listening andremember plan well and prosper.
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