Don't Downgrade Your Retirement

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Episode Transcript

(00:00):
The advice given on the following programdoes not necessarily represent the views of iHeartMedia
It's Management ten staff. Since individualsituations can and will be different, please
consider this when exercising any options givenby our guests. It's time to get
your retirement plan in order. Welcometo the Empowered Retirement Show with Pete Simbolac

(00:21):
and Nicktoman CFP. Reach out tothe Empowered Financial Team now at six zero
eight two one two seventy three hundredor visit their website EMPOWEREDFM dot com.
Now here's your host, Pete Simbolacand Nicktoma. Hey everybody, this is
Saturday, it's beautiful and it istime for the Empowered Retirement Radio Show.

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This Pete Simbolac here with Nick Tooman, certified financial Planner. We are from
Empowered Financial Management over in Middleton.Our phone number six zero eight two one
two seven three zero zero or ourwebsite retire Madison dot com. Nick,
I hope you're having a great startto the day. I'm having a fantastic

(01:03):
It's Saturday, and you know,for most people in retirement, every day
feels like Saturday. That is true. I'm saying that we got to bring
that back. That's one of myfavorite things that you used to say.
I haven't said it too often complately, have I. But we're excited here,
Well, we are excited, andI'm excited for today's program. Although
you know it's gonna start off folks, don't go away, but we're gonna

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start off with some tough questions.Have you ever have you ever liked not
just felt right, like something's wrongand you know it and I don't know
you have some symptoms. I don'twant to necessarily put any particular symptoms on.
And what do you do when thathappens? You know, you're just
not feeling right and you know somesymptoms are happening, and what do you

(01:45):
what do you do? What dowe all do when we have that?
Well, it depends if it issomething you've had before. Creep up,
you might know we're talking about somethingnew. Okay, like you don't know
what it is. You don't knowwhat it is. Um sometimes you just
wait and see how it progresses.Oh, come on, what do we
do? I'll go to the internet. Oh yeah, okay, right,

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we all go look up what thosesymptoms are web md right, Mayo Clinic
And every time we read something new, it like gets worse and more right,
because it could be a thousand differentthings, and then you go to
the doctor and you know it waslike you had an infection in your science
there or something like that. Imean, something easy to fix. But
sometimes idiot is something worse right,and sometimes it is something dangerous or malignant

(02:32):
or something that you have to gothrough. And um, I don't want
to I want to be real carefulhow I handle that, because you know,
I again, we don't want tobe too negative. But this week,
I think the US economy, theUnited States government had one of those
symptoms. That was through the creditrating drop. Yep, it fitched downgraded

(02:58):
US credit rating. And it's beenthe first time this has happened. I
don't remember the last time. Yearsit's been about twenty years or so since
we've seen this. It's been awhile, so and it took everybody off
guard, right. Nobody saw itcoming, and of course the markets reacted
pretty negative to it, especially thefirst couple of days as they're trying to
moll through. But it's kind oflike everybody in the market now they start

(03:20):
becoming that self reflective. They're startingto look on the Internet. What are
we missing? What's this symptom?And here's the catch and why bring this
up or why I want to usethis as the starting point for our conversations
today because the government does spend alot of money and actually, Fitches the
reason they said was because of theirvery loose spending and that it is out

(03:45):
of control and it is hurting theirreputation, the United States government reputation because
they're spending like drunken sailors and ifit doesn't get under control, this is
how people get into real trouble.How does that translate to you? And
I? Why are we talking abouton a retirement show? Why are we
talking about these things? Because it'sgoing to affect us in the future on

(04:06):
two things. Taxes at the veryleast, it's going to affect us on
taxes, also benefits like so security, better care could effect there. And
then the other part is income.How does it affect your income? And
that's what I want to jump offof. Using this situation with Fitches downgrading
the economy or downgrading the US government. How can that affect you? Getting

(04:30):
ready to go into retirement, arealready in retirement? Taxes, income,
things like that because I think that'sa discussion we need to have. So,
folks, this should be a lotof fun. It should be good,
it should be informed. It'd getthat pen and paper because we need
your retirement better. This is theEmpowered Retirement Radio Show. We'll be right
back, folks. Welcome back everybodyon a Saturday morning. This is the

(05:01):
Empowered Retirement Radio Show. Your host, Nick Tooman and Pete symbolach here on
a Saturday helping to make your retirementbetter. If you want to connect with
us, there's two ways you cando that. Call us at six O
eight two one two seventy three hundredor visit our website or updated website at
retire Madison dot com. As always, folks, there's a ton of good

(05:23):
resources on that website, including someKiplinger articles that we wrote recently, and
also dates for upcoming retirement courses inthe fall. People have inquired about that,
so go to our website at Retiremadisondot com. Now, Pete,
today, we are going to startout by talking about something you brought up
in that first segment. Recently orthis week, we saw the US government's

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credit rating, unfortunately get downgraded firsttime in over twenty years, and we
want to talk about how that couldimpact people preparing for or in retirement.
We're going to start out by talkingabout the tax impact that that could have
when you think about those next fewyears if you're within a few years of
retirement. So you know, aswe talk about taxes, I want to
set this up a little bit,folks, because obviously we want to talk

(06:08):
about saving taxes, maybe some taxstrategies that we can have, but let's
talk about the situation we're in becausethe government has spent. You know,
if you go to US debt clockdot org, which by the way,
I am on it right now,and if I look at the national debt
right now, it is approaching thirtythree trillion dollars trillion with a T trillion.

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Now it's still just okay, let'ssay thirty two for simplicity's sake.
But you know, since Bill Clintonleft office, there was five trillion dollars
of debt. Musing round numbers mightbe off by a couple bucks, but
there have been thirteen years of orthirteen trillion dollars of presidents that have an

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R by their name, and therehave been thirteen trillion dollars worth of debt
with the president that have a Dby their name. And so, first
of all, I want to say, this is everybody's problem. This is
not a conservative, liberal, RepublicanDemocrat problem. It's everybody problem because no

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matter what side of the aisle folksare on, guess what they spend,
spend like a drunken sale. Ifyou're a citizen of this country, it's
going to affect all of us atsome point. And we're talking specifically to
people who are approaching their retirement years, are in retirement, but it's going
to affect all of us, includingour kids and grand kids, without questions.
So the last time we had thislarge of a debt load on our

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national government was back in World WarTwo. That was the last time after
World War Two that we had thiskind of a debt issue. But what
did they do? What did thegovernment? They are the government, what
did they do after World War Two? Well, they did two things.
They increase taxes and they cut spending, something that it seems like no politician

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has been willing to do for quitesome time. And so they got the
debt under control. Do you knowwhat the debt to gross domestic product is
GDP? What the country produces today, it's one hundred and nineteen percent.
Now, can we fix this problem? Well, we have fixed it in
the past, but it took someintestinal fortitude that I don't know if politicians.

(08:26):
By the way, when I bringup politicians, let's go to the
Greek word polly means many, Right, what multiple? What ticks? What
our ticks? A little blood suckinginsects? Right? Haven't heard that one
in a while? Well, no, where do we come on? Right?
I mean, this is we gottabringing a little humor because this is

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such a hard subject. But we'retalking about retirement, We're talking about taxes,
We're talking about irresponsibility with our governmentand where we're at and the largest
outside of interest payments. Now,you know, we've got our obligations to
sociecurity, which if nothing has done, it looks like we'll run out of
the trust fund money by twenty thirtytwo. If we do nothing, we'll

(09:13):
run out of trust fund money forMetacare by twenty twenty seven. And people
are really dependent upon this, right, Nobody wants to see this go down.
Last year there was what any pointsix percent increase to your social security
largest in a long time, right, But it's because it keeps up with
inflation. That's the idea, keepsup with inflation, and it's by law

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that they do that. But it'salmost like a circular system because the more
they print money, the more yourmoney gets devalued. That's right. And
even at eight point six doesn't reallykeep up with the devaluation of your money,
that's right. And in the conversationsthat I've had over the last two
three four years, Pete and I'mgoing to make some generalizations. One and
why I think that this problem isn'talways at the forefront of the minds of

(09:58):
people going into retirement. Is one, when you say thirty two or thirty
three trillion dollars, I think overtime we've become numb to that number.
We hear it, how does thataffect our daily lives? And Number two,
when you talk about needing to fundthings like Social Security, Medicare and
those type of things, I dothink there's a prevailing thought out there that
we'll just kick the can down theroad during my lifetime and we'll just sort

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of figure out a way Rob Peterto pay Paul for the next fifteen twenty
years and not deal with this headon. So I think it's hard for
some people to understand that it reallycould impact and will impact their lives,
or at least their children's lives orgrandkids live. That's in my conversations the
last figures the feeling that I getwhy it's not at the forefront of people's

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mind who are going in a retirement. Well, with this credit downgrade,
I think it needs to come backto the forefront of our listeners minds because
it is a telltale. I believeit is a telltale of what's to come,
because there's gonna have to be reforms. And by the way, you
go back to World War two andwhat was the highest tax bracket back then?

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It was over ninety right, crazyninety percent. Even in the seventies,
our highest tax bracket was in theseventy percent range. Back I think
it was two thousand and seven.Sorry, yeah, two thousand and seven.
The former comptroller, which is basicallythe big accountant for the government,

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said that he figured by twenty thirtythe government would have to raise taxes to
an average of forty five percent.Right now, the average tax that people
get large and small is eighteen percent. Let that set in from moment.
Folks, what happens to your incomeif you go from an average of eighteen

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percent today to a forty five percent? How much it's going to be left
in your pocket? But I don'tthink people honestly believe that is going to
happen. We're giving you the numbers, Okay, well staring at these numbers,
but I just don't think that peoplebelieve that that is really going to
happen during their lifetime. The handwritingsalow right, it's there, So if

(12:09):
they don't believe it, they canturn the show off right now. I
gotta tell you, because we believeit. Now, whether it's to forty
or forty five or thirty eight,who knows, it's going to be significantly
higher than what it is today.So folks, what are you going to
do about it? In your ownpersonal planning? You have to be aware

(12:31):
of this situation. Now, let'sgo from the governmental big picture kind of
things to the individual household things,because where are we putting most of our
money? Putting most of our moneyand things like irase traditional iraise four O
one case for fifty seven plans,this is where we put our money because

(12:52):
we get a tax break up front, so to speak. I'm doing air
quotes in our folks, But it'sa tax break with a bit of a
problem. Right, If you everbought a house to a kind a mortgage,
did you know what your interest ratewas? I assume so if you
had a fixed rate, more goodshirt, right, even adjustable rate,

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it was adjustable for a while,and I mean it was fixed for a
while within the adjustment that could adjustafter a certain amount of time. But
you did that for what three years? Five years? You didn't do that
for the whole mortgage. Well,here we're making a deal with the government
to irs that we are going tonot pay tax now. We're going to
put money away as whole dollars andwe're gonna pay tax in the future on

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a tax rate. We don't knowwhat it is, but pete. People
in retirement presume, in many casesthat their income is going to go down
in retirement. So that's what you'vebeen told. So and it can happen.
It can happen. But who I'mtalking to here, let's really define
this. You're a good saver,right, you're listening to this right now.
You're a good saver. You've putto weigh a million dollars, two

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million dollars, three million dollars.You feel really good about that, and
you should probably a household income.You made eighty two, one hundred and
twenty thousand dollars, right middle classto not like super rich. You might
feel rich because it used to bea million dollars was a lot of money.
But you did a good job puttingthat money away. Now what Now

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what? Because now we have touse this money in retirement or we have
to live at such a penance,right, we have to live so below
our standard of living that we've beenliving at to avoid using that money,
which, by the way, alot of people do. I was talking
with a client this week that they'vedone a good job saving that money,

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and they said to me, P, everything's going We're doing our annual visit
right, And he said to bePe, everything's going to fine, incomes
fine, but I really would likea little extra money for you know,
that that date night out, ora long weekend or even another vacation.
I would really like that. Sowe're reviewing everything, and of course this

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person has tens of thousands of dollarsin their bank account. Oh, why
aren't you spend well, because I'vesaved it. It's really hard to spend,
folks. That's what retirements about,is spending that in enjoying that extra
weekend or that golf trip or thatvacation, or going to see the kids
that date night, those kind ofthings. That's what that money is for.

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So, yes, you have achoice. You could avoid a lot
of these things for a while byjust spending absolutely nothing. You could do
it. But you can also puttogether planning that allows you to mitigate the
tax risk so that you can actuallyspend and get more whole dollars without taxes
down the road. Because we allhave choices. We have choices whether we're

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going to do the tax deferred routeright, qualified plans, retirement accounts,
we can do taxable accounts, andwe can do tax free accounts. What
are we going to do about it? Well, folks, considering what's happening
right now out there with the government, I would suggest, and I would
hope you've already said, well,I'd like that tax free account. That's

(16:18):
what we're going to spend some timetalking about as we go forward. But
folks, if you do not havethis already in your planning, I would
suggest, and we're going to makeit available for the first seven callers that
called during the program to get afree consultation to see if we can lead
you down that road to get atax free retirement. Our phone number six
zero eight two one two seven threezero zero six zero eight two one two

(16:41):
seven three zero zero free consultation aboutforty five minutes to an hour. If
you're meeting with Nick, it's probablygoing to be about an hour and fifteen.
But aside from that, we're justgoing to get to know each other,
see where you're at, see ifwe could be a benefit. If
it looks like we can, wego to a second visit, and from
there that's where you really dig in. The only decision you're making in the
first visit is whether we have asecond visit. Folks, give us a

(17:04):
call six eight two one two seventythree hundred, leave a message. Our
staff is off on Saturday. They'regoing to give you a callback on Monday.
So just leave your information, yourname, your phone number, maybe
an email address to get hold ofyou, and we'll go forward from there.
Folks, now is the time totake action, and by the way,
take action, we're going to takea break for a few commercials,

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and then we're going to come backand start talking about some of these strategies
that can help you have that taxfree retirement. Welcome back everybody on this
Saturday morning, where yes we're talkingabout retirement, but we're also talking about

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the government. We're talking about theircredit being downgraded, and we're talking about
how do we protect ourselves and maybeput ourselves in a position potentially to have
a tax free retirement. This isthe Empowered Attirement Radio Show. Pete Sam
black Nick tooming certified financial planner withEmpowered Financial Management over in Middleton. By

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the way, just as a quickaside, we do have I think,
let's see if I can remember thisoff the top of my head. I
don't have them in front, butwe do have retirement courses coming up in
m ATC or Madison College, andthat's on September twenty ninth and twenty first,
Right, is that right? Ihave to verify that. That's why

(18:32):
I think everybody's go to our website. That's right. It's more reliable than
you and I spitting this out offthe top of my We have some courses
coming up. They're an hour anda half each night to ninth. Super
valuable for a lot of people.If you're near a retirement, maybe you
just retired, you do things onyour own, you want to double check

(18:52):
some things, find out what youdon't know. It's a great time to
come to I just wanted to sharereal briefly here for thirty seconds, some
feedback a recent conversation I had withsomebody who attended a course back in March
Pete and I asked him, youknow what prompted him to come in and
have a conversation, And he said, you know, I came to the
course thinking a certain way about whatmy retirement was going to be about.

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And we opened their eyes to somemaybe different ways of thinking about things,
and he actually felt more positive thatthey could retire early if they had just
addressed some of these issues head on. So I think it's a valuable hour
and a half spent each night.It's a two night course if you come
out, whether you're within three,four, five years of actually retiring.
I encourage business owners who are thinkingof divesting or selling a business and going

(19:37):
to that next phase in their lifeto come out. There's some good ideas
there, or maybe you've been retiredfor three four years and it feels like
managing everything is just overwhelming. Comeon out. There is something for everybody.
It's a good learning opportunity. We'rethere for some time afterwards to answer
questions, So come out. Registeron our website at retire Madison dot com.

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All right, Nick, so I'mgoing to verify it. It is
Tuesday, September nineteenth, and thenthe second one will be the twenty sixth,
and then Thursday September twenty first,and it finishes on the twentieth.
By the way, there's also coursesin October and those are the seventeenth and
nineteenth as far as the first nightsof those. So yeah, it is

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important people do learn and hopefully theyget a new perspective out of their say
what we want isn't that everything hasto be you think like us, but
you need to be aware of allthe things. And we have a tendency
to go into retirement just thinking,well, I got the money. I
say, that's right, it's justmy so security, maybe a pension,
and we're often running it's way morecomplicated than that. In fact, it

(20:45):
proves it out because we're talking abouttaxes today when we Think about it again,
right, folks, we're talking abouttaxes, how they're effective, or
how we're going to get affected.Are most likely going to get affected by
government spending if nothing else. Thinkabout this for a moment. People think
their taxes are going to go down. What's the average What would you say?

(21:07):
It is probably the average income?Nick and I haven't talked about this,
so this might be dangerous. Butwhat's like the average income that you
would say most of your clients receivein retirement. Here's where I'm saying most
of my clients, no matter howmuch money they have spent. I mean,
there's would be some outliers here,but for the most part, people

(21:27):
are getting between six and probably ninethousand dollars a month. That's what I
typically see as a couple, sixto nine thousand dollars a month from Social
Security, maybe a pension, sosecurity, pension aduities. In general,
that's what I see for income.Now, what tax bracket does that put

(21:48):
you in? If you are married, well, that's going to put you
in about a twelve percent tax bracket. But now what happens if you pass
away? You're changing filing status.Now you're going from married to single,
which is not any more favorable whenyou look at that. Those tax brackets

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PA. So when you look atthis, if you think about it,
you go from a potentially let's sayyou're making nine thousand dollars a month,
okay, so you go from atwelve percent tax bracket with a standard deduction
all the way to a twenty twopercent tax bracket with a standard deduction.

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That's a big hit. It's ahuge hit, especially if you didn't budget
or prepare that way. I mean, it's it's it's interesting your income could
go down, but your tax billcould go up, and that happens a
lot. Why because that's how we'redesigned. We've we've deferred not only the

(22:51):
money that's in a four oh oneK, but the taxes on it as
well, which was the advantage.Right, Maybe we were making one hundred
and twenty thousand dollars, so wewould have paid me be a little bit
more. Maybe we'll pay less inretirement, that's always the thought. But
why are we going into poverty willfullywhen we've got a million two million dollars
set aside in a four o oneK. So there's three buckets we can

(23:12):
deal with. Tax deferred tax,a bowl and tax free. Wouldn't you
agree you want to move? Speciallyconsidering the debt. Right, we're almost
thirty three trillion dollars with the word, we're at one hundred and nineteen percent
debt to gross domestic product, grossdomestic produ Why do I bring that up?

(23:33):
That's what the whole US economy producesas income, as revenue. That's
right. We got more debt thanwe have what we're producing. The only
time we've been like that previous tothis was World War Two. What did
they do? They raise taxes andclut spending. What have we done so

(23:53):
far? Nothing? Just bend,spend, spend. It's gonna catch up
with us, that's right. Andspending our own consumption, our own household
spending. You know something you justsaid a few minutes ago, Pete,
you said, what's the average incomehousehold income that we see when we talk
to people, our clients. Theymight have a pension sold security and we
said between you know, maybe seveneight and nine thousand a month, whatever

(24:17):
the case is. I think aboutsome of the clients that we serve that
as professionals late in their career mighthave been making one hundred fifty hundred sixty
hundred seventy thousand, two hundred thousanddollars a year. Point, that is
a huge pay cut if you thinkgoing into retirement, we've been taught you
take a twenty percent pay cut,and most people agree, Okay, I
can live with that. Maybe youpaid off your mortgage, you paid off
all your debt. Okay, Butif the average income between Social Security and

(24:41):
pension guaranteed sources is seven eight ninethousand, which isn't bad, but you're
used to living off of one hundredand fifty hundred and sixty thousand, two
hundred thousand dollars a year as aprofessional, that is almost a fifty percent
pay cut. Are you prepared totake that pay cut? And then are
you going to be prepared for yourattempt? That's exactly right. So these
go hand in hand, the taxesand the income. So, folks,

(25:03):
that's what we have to do isstart planning how do we take that money
that's in those retirement accounts that aredeferred and actually get ourselves into position where
we can actually pay lesson taxes.Now, look, there is no way
around it. You're gonna have topay tax on that money. It is
not. This is not a schemewhere you get to avoid paying taxes.

(25:26):
You pay them now where they're inexpensivecompared to where they're going. Right,
you get these on sale. That'sright. That's what we're talking about.
And again I'm gonna say this politically, it doesn't matter whether we're coming from
the right or whether we're coming fromthe left, or where we've got an
R or a D or whatever wedon't. It doesn't matter. They spend

(25:51):
and we have to pay for it. That's right, folks. When we
go into this next segment, we'rewrapping this particular segment up, we'll talk
about that. We're also going totalk about maybe how it affects your income
directly, but we definitely want totalk about this planning. What are the
tools we use, what are thesystems we use? Can you do this
on your own? Can you dothis with somebody else? These are the

(26:14):
things we're going to talk about whenwe come back, because it's folks,
it's super important. Taxes are notgoing to go away. They're going to
get bigger, they're going to getworse. You have an option of how
to deal with it. This isthe Empowered Retirement Radio show. We'll be
right back when we show you howwe deal with taxes. Welcome back everybody

(26:45):
to the Empowered Retirement Radio Show.This is Nick Toman and Pete Simboleac on
a Saturday morning, here to helpmake your retirement better. If you want
to connect with us, call usat six to eight two one two seventy
three D or visit our updated andrevised website retiremadicin dot com. Also,
you can check out those upcoming retirementand core states that we have scheduled for

(27:06):
the fall. A good time spentand for those of you within a few
years of retirement, I would suggestyou go to the website register. It's
a good hour and have spent eachnight very educational, so join us for
those events in September and October.PEAT and this last segment, let's continue
talking about potential solutions. We've beenframing this conversation around taxes and how it

(27:27):
affects our income and the real possibilitythat taxes could be higher for those people
going into retirement. Now, inthis segment, we want to talk about
some of the tools or solutions andstrategies that we can use that we've used
in the past to help people mitigatethis risk. So what I'm going to
use, first of all, areprobably the two most common that are like

(27:48):
wide variety, fits the most people, because obviously if you're a business owner,
a real estate owner, things likethat, there are some other strategies
we use as well. So we'renot going to necessarily talk about the today,
We're you're gonna talk about the mostcommon ones out there. The very
first and simplest and easy and mostaccessible to everybody is the roth Ira.

(28:11):
I hope, I pray that youuse the roth Ira or a roth four
O one k that's right, andpay the tax now. If you are
listening in you're not near retirement inyou're twenty five years old, yes,
I would say, get that rothIra now, funnel all the money you

(28:32):
possibly can into it as soon asyou can. That's the first thing I
told my son when he got outinto the working world as a professional,
is open up that roth Ira andif you have a four oh one k
roth option, fully fund that.Take advantage of that right now. Don't
get used to the tax break.Now, that's the challenge with many people
in the age demographic that we serveis and rightfully so, they took advantage

(28:53):
of a four oh one K taxdeferral, but now they're finding they have
to wean themselves away from that tomaybe shift some of those dollars into roth.
And we're not telling people not toparticipate in their four oh one k.
We're talking about how to work nowthat we're already in this spot.
So yes, if you're young,please go get that four oh one K.
No, I'm being in general.I'm not giving specific advice. Nobody

(29:15):
take it that way, but thisis a little bit of common sense.
Maybe that's right. So the nextthing is is, then, all right,
we already have a million, twomillion, three million dollars or more
in our four oh one k orfour one ks, irase things like that.
How do we deal with it?Well, there's a thing called a
roth for a roth conversion, right, and so you already have money that's

(29:40):
in an ira. And by theway, if you're making two three hundred
thousand dollars a year, right,you get cut out of being able to
contribute to a roth. There arethings, you know, like a backdoor
wroth and things like that. Sothere are ways or strategies to try to
work with that. But taking aroth conversion is as simple. That's not

(30:02):
really simple, folks, but we'lljust keep it very basic. It is
as simple as taking that IRA money, paying the tax on it now,
and then moving it to a rothira. It's as simple. Then we
pay the tax on, we neverhave to pay the tax again. That's
right, that's the beauty to it. So now the question comes how much
do you put it there? Right? And by the way, how do

(30:23):
you pay the tax? Well,the best way to pay the tax is
if you have it in a nonqualified account, meaning in a brokerage account
to paying money market things like that. That's the best way to pay.
But is it the only way.No, it definitely works out. The
numbers work out much better when youhave that stash of cash to pay that

(30:44):
off. But you can also payit right out of the taxes from the
IRA. So there's multiple ways todo this. The best way is to
have the cash on hand to paythe tax. One thing I want to
make very clear when we talk aboutthis topic that I think sometimes gets confusing.
Pete Is mentioned a few minutes agothat if you make too much money,
you're not able to necessarily contribute toa roth ira because you're just earning

(31:08):
too much, But that doesn't precludeyou from doing Roth conversions. Correct.
It's very distinct, and that comesup all the time. People will say,
well, I make too much todo Roth conversions. No, there's
not an incomp limitation on Roth conversions. It's initial or yearly contributions. So
they're two very different things that Iwant to be clear about. So if
you're out there and let's say youmake three hundred thousand dollars a year and

(31:30):
you're a single person, you canstill tax engineer your money by converting it
from tax deferred to tax free ifyou do it in the right way and
have a strategy to make the conversions. Absolutely. So talking about strategies,
let's cover well, how much doI move every Do I do it all
at one time? Do I doit over years? I would say there's
a couple of benchmarks out there.Twenty twenty six is one benchmark. As

(31:52):
we know taxes today, the bracketswill go back to what they were prior
to twenty sixteen, so they're goingto go up at that point. But
I think the probably the biggest benchmarkif I could use twenty thirty because I
think that's that breaking point within ourtax system. They have to do something

(32:14):
by twenty thirty as far as increasingtaxes, because so security all the other
stuff is such a message towards Sohere's just a simple example. All that
is is a simple example. Weused our clients or prospects or whatever word.
The average person is out there makingsixty seventy eighty one hundred hundred and

(32:37):
twenty thousand dollars a year. Mostof those people right now are in a
twelve percent tax bracket, but wecan easily go to a twenty two percent
if you're a couple, right,and we can jump that up to one
hundred and ninety thousand dollars. Soif you're making one hundred thousand dollars,
we now have ninety thousand dollars thatwe can convert and stay within a twenty

(32:58):
two percent tax bracket. But historically, if we go back and look at
taxes, that twenty five percent taxbracket, that's kind of like a for
me, that's a favorite spot.Goes above it gets a little iffy shady.
Whatever we stay below it, we'repretty happy. And the reason I
bring that up is that if yougo to the twenty four percent tax bracket,

(33:21):
you can go all the way upto three hundred and sixty four thousand
dollars. Right, So if you'remaking one hundred thousand, you can move
two hundred and sixty four thousand dollarsat one time and stay within a twenty
four percent tax bracket. Will thathurt you just went from a twelve to
twenty four. Yes, it's gonnahurt. It's gonna hurt a lot worse.

(33:42):
That's right when that tax bracket goesup to thirty five or thirty eight
or forty two or forty five percent. And when you're talking about that calculation,
p just so we're clear your factoragain, you know the standard deduction.
So when you're upping that and you'resaying, we have this much room
to work in that space within thenumbers, within those percentages, it's because
we take into account the standard deductionand that allows us some flexibility. So

(34:06):
it really depends each and every yearwhere your income is going to fall.
Maybe you're a commission worker, andwhen you anticipate having a good year and
it might not be as feasible thenext year, you might be down a
little and have some room to dothat, so it is very customized.
That's what this whole planning process isabout, is being very specific and customized
to what your income is, yourown income brackets. Absolutely, and I
love that we're customized, right,because that's what it is. It's going

(34:29):
to be different for each individual.By the way, you have a tax
what's the word, I want touse tolerance, right, just like you
have a risk tolerance. Right,you have a tax croun. Everybody's not
willing to spend the same amount ofmoney. There is no right answer.
It's what you can tolerate doing.We're running out of time, Nick,
this program is going by fast.I want to talk about at least one

(34:51):
other overly simplest I'm using over simplisticterms, but a life insurance retire plan
LARP. There are a lot ofthose out there, and either maybe you're
not able to put into a WROTH, maybe you need life insurance. There
are some tools with life insurance intoday's world that make fantastic alternatives to a

(35:17):
roth. IRA. Well, Ihave all the benefits. No, it'll
have some different ones, like thelife insurance itself that passes to your heirs.
One of the reasons you would doThis is again what if you really
want to control the money from retirement. So if you have a roth ira
or an ira, you cannot passthat on you used to be able to,
but you cannot pass it on toa trust. But the life insurance

(35:40):
you can pass it on to atrust, so you could control that money
from the grave. And for alot of people spend thrift kids or they
have a disability or something like thatthat they're dealing with, they want to
control that money to protect the kidsas much as give them money. Super
important, not to mention, youcan get some really nice it's always good

(36:00):
for life insurance obviously, that's whatit is, but it gets a pretty
good income streams tax free if youdo it right there as well, there's
tax benefits, there's certainly a statetax benefits. There might even be some
health benefits long term care. SoI like the term the Swiss army knife.
You've said that for years. It'sgot multiple benefits and it can be
a piece to your overall retirement,just like some of these other tools as

(36:22):
well. And yes, folks,we do use other tools as well,
but are the simple ones we wantto git Right up front, folks,
this is just the beginning. Thisis just the start. Are you utilizing
these strategies. Maybe you've used part, maybe you've thought about it, maybe
you've talked, oh, it's notworth it. By the way, a
lot of advisors don't like doing rothconversions because a lot of money comes out

(36:43):
of their pocket a lot of times. Right, that's right. Don't let
this put you off. Don't letthis sway you from doing what you need
to do to protect yourself. Becausethe tax time bomb, I think it's
coming. It's coming. So folks, pick up that phone and give us
a call at six zero eight twoseven three zero zero, and let's get
together and talk taxes. Let's gettogether and talk planning. Let's get to

(37:06):
know each other and find out whatyou're looking for and if we're even the
right people to do it for you. A lot of people talk, we
do. I think that's important.Six zero eight two one two seven three
zero zero. For the first sevencallers, A calledre in the program,
set up an hour visit with usin our office zoom, preferably in the

(37:29):
office. Right. But let's getthis office meaning going, and we're going
to get to know each other.The biggest decision we're going to make in
that is, are we going togo to a second visit, Because it's
in the second visit that's where wereally dig deep. We go through all
the analysis. By the end ofthat visit, if you want to become
a client, you're gonna have enoughinformation to decide whether you want to be

(37:50):
or not. Six o eight twoone two seventy three hundred. Give us
a call, leave a message.Our staff is off on Saturday, so
they'll give you a call back onMonday. Folks, this is coming down
the road, whether we like itor not, whether we think it is
or not, whether we agree withit or not, it's right, it's
coming. It's coming, so weneed to do something about it. Nick,

(38:13):
wrap us up. Yeah, fantasticshow is always We're running chart on
time. But if you want togo back to listen to past episodes or
relistening this episode, go to ourwebsite retire Madison dot com check out the
radio blog. On top of one, another fantastic week. We look forward
to you guys listening to us againnext week. This is Nick Tooman Pete
Simbolac on the Empowered Retirement Radio Showhere on a Saturday morning as always,

(38:36):
helping to make your retirement awesome.Investment advisory services offered through Track Capital Management
LLLC and SEC Registered Investment Advisor.Information presented is for educational purposes only and
it should not be considered specific.Investment advice. Does not take into consideration

(38:57):
your specific situation and does not intendto make an offer or solicitation for the
sale or purchase of any securities orinvestment strategies. Investments involve risk and are
not guaranteed, and past performance isno guarantee of future results. For specific
tax advice on any strategy, consultswith a qualified tax professional before implementing any
strategy discussed here In