2021 Was The Year Of The TAXES | The Retirement Income Show

Mark Elliot: Glad you’re with us today for The Retirement Income Show with Troy Sharpe, the CEO and Founder of Oak Harvest Financial Group, the office located at 920 Memorial City Way right off I-10 and Bunker Hill.

You can come in and sit down with the team. You have questions about your retirement. “When can I retire? Do I have enough? Will my money last as long as I do? Will my loved ones be okay if something happens to me?” Those are big questions. You can have a phone call with the team. You can have a Zoom meeting with the team. You can come in in person. The number is 800-822-6434, 800-822-6434.

Great website to just do your own due diligence, find out more about Troy and the team, just go to oakharvestfinancialgroup.com, oakharvestfinancialgroup.com. Then, of course, we’ve been talking this whole past year, really last couple of years, about the Youtube channel that Troy has started. It’s got great reviews. There’s over 100 videos on it. Just search for Troy Sharpe and Oak Harvest and you’ll probably find a topic that you were interested in and wanted to know more about. Troy’s probably got a video on it. Just search for Troy Sharpe and Oak Harvest.

Final segment of today’s show, Troy. 2022, another year. Here’s my question. 2020, the year of the pandemic, the year of furloughs and people being laid off, and a lot of people really scared about something that we didn’t understand at all at the time and we really decided that 2020 was the year of the emergency fund. Holy cow, that’s important. I need to have an emergency fund in case I got laid off or furloughed or something happened. The emergency fund was really big.

2021 really seemed to be about taxes. That seemed to be the big topic. Would that be fair to say that 2020 was about emergency funds, 2021 was about taxes?
Troy Sharpe Yes. We’ve got to the point to where we know in 2021 the Build Back Better Act is not going to pass. I assume they’re going to pick it up in 2022 but I honestly I don’t know how it’s going to pass unless they really scale back some of the social programs that Joe Manchin is very adamantly opposed to.

Mark Elliot: I will say Joe Manchin had a really good point, I thought, and because I’m 62, so this is in my wheelhouse is that he said, “I don’t know how he can add all these programs.” He goes, “They’re great programs. They probably make sense for a lot of people but we can’t pay for Social Security and Medicare the way we should be able to. We need to have a plan for that first.” I was on board with that in my age.

Troy Sharpe Yes. Social Security and Medicare are the trust funds, are in very, very, very dire condition. Now, there are a few simple steps they can take to improve the Social Security reserve fund. For example, people my age, they can increase our full retirement age out to 70 or so. People younger than me, in their 30s or 20s, they can increase their full retirement age out to maybe 71, 72, so that extends out the time we have for money to be invested before they start to receive it.

The big concern that a lot of my clients have is are they going to take it away? Are they going to means-test the Social Security? I don’t believe they’re going to take it away but I also want to put a lot of things past a certain segment of Congress as far as their desire to take away from those that have been successful and those that have money and those that are deemed high earners.

There will be people in the country that, because they’ve done a good job saving, they have a million dollars, they have $2 million inside their IRA. Let me be very clear about this, most people that have 1 to 2 million dollars or 3 million in their retirement account, they were typically– they’re educated, they have college degrees but they’re engineers, they have different professional jobs throughout their career, but for 35, 40, 45 years, they have been saving and contributing to these accounts and the power of the stock market has helped to grow and propel those accounts.
I guess my point here is that there’s many of those people, and I’m talking about our clients here, I’m talking about the people listening, I’m talking about you, I’m talking about the people watching on YouTube here that you’ve done the right things for 30, 35, 40 years. You’ve saved, you invested, you’ve done all the right things.

Now you’ve accumulated 2, 3 million dollars, maybe it’s a million. Whatever that number is, without a tax plan in place, you’re going to get to the point at 72 where you’re forced to start distributing 4% a year. Then it goes up to 4.5 and 5 and 5.5 and 6, these are called required minimum distributions.

Here’s my concern with Social Security. Those of you that do not have a tax plan, that are just allowing those tax-infested retirement accounts to continue to grow, grow, grow, grow, you need to start doing some math. You need to look at your situation because it’s very possible that you’ll start to have income, we’re talking about not just what’s called your adjusted gross income but modified adjusted gross income. That’s where you add back any what we call above-the-line deductions and any tax-free interest from muni bonds into your income to get to your modified adjusted grossing income.

When you look in the future at your required distributions, extrapolate this out, what happens if your portfolio earns an average of 4% a year or 7% a year or 10% per year? What is your account balances? Then multiply that times what your RMD will be and then look at that in a spreadsheet. If you can’t build a spreadsheet, find someone who can. Extrapolate that out and look and you’ll see when you add your required minimum distribution on top of your Social Security for you and your spouse, if you’re married, on top of any other income that you may have, you’ll start to see that many of you are going to be in this high-income area where your income in your 80s will be 200, 220, 240, 280.

My concern with Social Security is, will that person then be considered rich or wealthy and not need their Social Security in the eyes of the government? Means testing, is it a possibility? I absolutely think it is a possibility. It’s been floated before. I don’t remember the specific details, but part of the Greenspan Commission back in, I wanted to say the early ’90s, could have been 1986 tax reforms under Reagan, floated the idea of we can either increase taxation on Social Security, or we can introduce a means-testing income program to where if those that have this amount of income or assets receive a reduced Social Security.

Yes, Manchin made some very, very good points there. Look, we can’t start trillions of dollars in new social spending while we have hundreds of trillions of dollars in unfunded liabilities currently when it comes to the existing mandatory programs of the federal government.

Just to tie a bow on that. There’s two ways the government spends money. It’s either mandatory spending or discretionary spending. Mandatory spending are things that are constitutionally mandated to be paid. The money comes into the treasury and it goes directly out. Typically, in what we call a transfer payment form. Mandatory expenses are interest on the debt, Social Security, Medicare, Medicaid, the Affordable Care Act subsidies now I believe are constitutionally mandated, and a few other government programs.

We’re are not far away at all from 100% of tax revenue being earmarked for just our mandatory existing spending. Pretty soon, it will exceed 100% of all tax revenue. Then we have the discretionary side of the budget, which is the FBI, CIA, Homeland Security, funding for the states. You name it. That’s all discretionary. That’s what they negotiate in the reconciliation bills, the budget bills, et cetera.

We are in the position currently or soon to be, where all of that wealth to be borrowed. That increases the deficit. When you increase the annual deficit, you add to the national debt. I believe 28, 29 trillion in national debt, soon to be 30, 32, 34, 38, 40, 45, adding especially what they were doing with these budget tricks, where they have– and I don’t want to get too political here. That’s not the goal. The point is, yes, Joe Manchin had some very, very good points. We have significant structural shortcomings with the existing social programs. We should probably look to fix those first before we introduce new social spending with budget tricks or gimmicks that essentially make the CBO score much less than it actually will be. Yes, he’s right on there.

Mark Elliot: We’re going to wrap up today’s show. We got just a few minutes left. I think everybody gets excited about a new year. Once you get to my age at 62, you’re like, “Okay, I just hope I’m here tomorrow.” Basically, at my age, 62, Troy, the time’s running out. I think one thing that, if you’re a resolution person, one of the things I think if you’re getting closer, maybe this is the year you retire, 2022 or maybe it’s 2025 or even 2030, that maybe this is the year you actually sit down and talk. There’s no cost, there’s no obligation but talk to a retirement planning firm like Oak Harvest. To me, it seems like it’s a no-brainer.

Troy Sharpe: Yes. Talk to us. Talk to anyone. Talk to someone. Like I said earlier, you want to find someone who cares. That’s my first number one rule. A team that cares. I personally don’t like the way a lot of the financial industry is set up. I’m not going to throw names against the wall or do that but I’m going to tell you from my experience, from the stories I’ve heard, a lot of the financial industry is set up to not put the consumer first, and that is a shame because many of you have been hurt, you’ve been burned, you’ve lost money, you’ve spent years not making money, your advisors have made more than you and it creates fear and uncertainty. I get that.

Whether you reach out to us, you reach out to someone, my number one rule is find someone who cares. You can have a fiduciary responsibility and not act as a fiduciary. You could not have that fiduciary responsibility. Let’s say you’re a broker, but still act as a fiduciary. It’s really what’s in someone’s heart, not what’s in the law.
Yes, you find the right firm, and that’s what I’ve built here at Oak Harvest Financial Group. Is my vision of what a firm should be in the financial and retirement world. That’s what we’ve built. We’re not perfect by any means but we strive every day for excellence. We strive to be better today than we were yesterday and we’re committed to bringing in the greatest amount of talent. We focus on people that are humble, that are hungry, that are honest, that are intelligent, and we try to surround ourselves day in and day out with people who are very similar from the client-side of things, but that’s who we hire and that’s how we grow and that’s our commitment to you.

If that’s something that you value, something you could see as possibly being a part of your retirement, give us a call. The phone number is 1-800-822-6434. I would appreciate if you do give us a consideration. Go to oakharvestfinancialgroup.com. Give us a call, let’s sit down, have a conversation about your retirement and see if we’re a good fit for one another.
The phone number is 1-800-822-6434. Check out the videos on YouTube and, of course, go to the website. We have a ton of good information out there, oakharvestfinancialgroup.com.
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