Mark Elliot: Welcome back to the Retirement Income Show with Troy Sharpe, the CEO, and founder of Oak Harvest Financial Group. I’m Mark Eliot, we’ll talk about a lot of things as we always do every week on this program. Of course, we have questions or concerns that we touch or that Troy does not touch on about where you are on your road to retirement. Call the team, they’re here to help at (800)-822-6434.
There is no cost, there is no obligation, there is no pressure whatsoever. The team is here to help if they can. They don’t know until you reach out. (800)-822-6434. Of course, you can always check out the website, great website, OakHarvestfinancialgroup.com, OakHarvestfinancialgroup.com. Of course, we’re talking the Youtube channel right now. You can always search for Troy Sharpe at Oak Harvest, and there’s over 200 videos on there.
You talked about a couple already but I know you wanted to get into the Social Security video and with inflation going the way it was, we’re the highest increase in I don’t even know how long for Social Security recipient’s history of 5.9%. Inflation is not slowing down. I’m 62, should I look for my Social Security to be even growing more, with more bumps in my Social Security cap?
Troy Sharpe: The downside there yes we did have a huge Social Security increase but Medicare premium jumped about 15%. [laughs]
Mark: You know that was the crazy part of that, Troy. We talked about it last fall when they put that in, the 5.9% bump for Social Security recipients for 2022. The guess was your premium for Medicare part B is going to be from $148.50, it’s going to go up probably to $158.50. Well, it went over $170. It was a bigger jump even than expected.
Troy: Yes, this is healthcare, and I don’t want to go down this rabbit hole because I want to talk about what I intended to talk about. I guess what I wanted just to get across, in general, is there is so much about retirement spending, expenses, costs, inflation, taxes that the average person who is entering retirement or a few years away from retirement or hasn’t been retired for very long simply don’t understand. You don’t know what you don’t know until you go through it.
Look, I’m 41 years old but I feel like I’ve lived through my 60s, my 70s, and my 80s thousands and thousands and thousands of times because we’ve helped people go through their 60s and 70s and 80s and seen these things happen, proactively planned and learned a lot along the way. There’s certain things you just don’t know until you go through them or you have a client go through them.
Our job is to proactively help you at 50, at 55, at 60, 62, 65 to position you and your family to where these minefields that are waiting for you down the road don’t simply blow up and cause you tremendous increases to tax or loss of income or whatever it may be. Yes, it’s not just the Medicare part B and part D premiums but the out-of-pocket stuff, the co-pays, deductibles, prescriptions.
We have to bake this into a retirement income plan. We also have to bake it into a tax plan. We don’t always have to convert all of your retirement account because right now a certain level depending on your age of medical expenses with copays, deductibles, prescriptions above and beyond 7.5% or 10% of your adjusted gross income are deductible expenses. Essentially, we can later in life take out the IRA 100% tax-free if we’re earmarking those dollars for medical expenses. It just depends how unhealthy you are, or how healthy you are? What your other expenses are?
These are simple conversations that we’ll have throughout the planning process. Planning is dynamic, it’s fluid, it’s not just, “Here you go, here is your plan, see you never again.” It’s an ongoing. We meet with clients typically twice a year for planning. Four times a year is usually there’s not much that can change quarter to quarter. We can have conversations and some of our advisors do have conversations for their clients quarterly but the truth is markets don’t change that much in a quarter and your financial plan isn’t going to change that much.
Typically, twice a year is the right number for some people who don’t have that level of complexity or they’re pretty much in coast mode, once a year can be fine. Either way or no matter your situation, the planning component is something that’s fluid. It’s changing, it’s adjusting not just based on your circumstances but legislative, and policy changes and economic shifts.
Yes, it’s ongoing and planning for a lot of these things that you don’t know about because you haven’t retired or been retired for 10 years, that’s where we come in. That’s where we provide a lot of value is we’ve been there, we’ve done that. This is what we do, we only work with people who are in retirement or nearing retirement and we’re planners. We have the investment component, we have the income, the tax planning we have all that, and we whip it all into a plan that’s customized for you in your situation. We don’t fit you into a box. We simply build the box around you, based on everything we’ve talked about.
Getting back to my main point here, Social Security is one of those huge components. Those of you who know me, you know I like to talk about how mainstream or conventional retirement advice simply is antiquated. It’s old. It’s inaccurate, it’s not customed to your particular situation. Some of it is anecdotally true. Again, you’re unique. Your needs are unique, your risk tolerance, your willingness to take risk, your income needs, your inflation needs, the tax situation, all of this, your longevity, it’s all unique to you. We need to build that box around you so you have a custom plan, as opposed to something cookie cutter.
One of the videos we recently did on the YouTube channel, we simply dove into the taxation of Social Security. We always hear, no matter where you’re at, it’s defer Social Security, defer Social Security, all the way until you’re 70, but they only talk about the reason of doing this is to have more income from Social Security. One of the things that they don’t talk about, and it’s a really, really, really valid reason, I think, probably just as important, if not more so than what you normally hear is when you defer Social Security longer, you want to create more room in the tax brackets to do Roth conversions.
If you’re a fan of the show, if you’ve been listening to me for any time, you know, you need to take money out of that IRA. It’s a tax-infested account, it is a ticking tax time bomb and if you do nothing, it’s probably going to go off and blow up. If you start to do these conversions, while deferring Social Security, you’re going to do a few things. One, you’re going to get into a situation to where your required distributions are much lower in the future and this has tremendously a domino effect of benefits throughout retirement income and tax planning.
Secondly, you’re obviously going to have a lot higher Social Security income. There is nothing more secure in retirement than having a guaranteed lifetime income check from Social Security or any other source. It could be maybe rental income, although it’s not guaranteed, an annuity income is guaranteed, especially if that’s tax-free, increasing annuity income, which is out there. There’s nothing more secure than a guaranteed lifetime income check.
Whether it’s from personal resources allocated to a tool that helps accomplish that, or you defer Social Security. I’ve never had a client in their 80s come to me and say, “Troy, you know what? I’m really, really tired of this $8,000 a month being deposited, every single month into my account just doesn’t happen.” Here’s the cool thing. Social Security has tremendous tax advantages.
If I were to tell you right now, or if I were to ask, and obviously you can’t respond, you’re in your car, you’re at home, you’re listening but just think about this number in your head. How much Social Security income can you have before now, assuming you don’t have any other income? If you followed a lot of the planning that we do, you’re going to have Roth IRA, we’re going to have all this tax-free stuff going on. Assuming you have no other income, how much Social Security can you have before you start to pay tax on Social Security? Is it $20,000, $30,000, $50,000. Think about a number in your head right now. Mark, what do you think? Just take a guess.
Mark: I don’t really have any idea. There’s so many moving parts here and everybody’s situation is so different. That I don’t even know if I would have guess. The sad thing is, Troy, I’m 62.
You would think I would know these answers but I think that’s the challenge is that there’s no real common-sense way to figure this out.
Troy: No. I mean, unless you’re doing it every single day like we are. You can have almost $120,000 of Social Security income and pay zero taxes. With, $120,000 I think you’re at about $1,000 a year in taxes, but you could have $100,000 in Social Security and pay no taxes. Absolutely zero taxes. Now, it’s very surprising. Now, some of you may be saying, “Okay, Troy, how the hell do you get $100,000 of Social Security income?” Well, if you do defer until 70, and both husband and wife have worked, you’re looking at starting Social Security check over $4,000 a month. That’s over $8,000 both husband and wife if you defer it until age 70.
Mark: That’s super high. That’s a really high-income earner, though, to get to that point.
Troy: It’s a middle-income earner, but it’s 35 years in the workforce and you’re definitely not making $100,000 a year inflation-adjusted. If you’ve had two middle-income spouses, maybe a little bit on the upper end of middle income but no, you don’t have to have had a job where you’ve made $300,000 a year for for 25 years to get that. Once you hit, I forget what the number is right now. It’s around $140,000 of income. Everything above that no longer counts towards your Social Security income taxation. If I could tax to stop at a certain threshold but here is the point, I put the video out on Youtube and I go through all these different scenarios but then I tie it back to, ok now what happens if you have $40,000 of required distributions and $70,000 of Social Security income?
Now you’ve messed up the super benefit of Social Security taxation and now you’re paying $10,000 $12,000, $15,000 a year whatever that number is. Part of incoming tax planning is recognizing some of these benefits but then coordinating the rest of your incoming tax plan around your personal situation. This is what a custom retirement plan looks like and this is what we do for you here at Oak Harvest Financial Group.
Go to Youtube, search Oak Harvest Financial Group, it’s one of the more recent videos released, and check it out. It’s good stuff. If you want help, if you say, “You know what Troy? You’ve turned the light bulb moment on for me and I really don’t want to do this myself,” give us a call. For a good fit, we can work together and we’ll help you out. Go to the Youtube channel, even if you don’t want our help, even if you can do it yourself or if you’re working with somebody you already like and they’re pretty good at planning, bring the strategy to them, have them help you implement it.
Whatever way you decide to go, learn the information, become a more sophisticated retirement planner yourself and that’s what the Youtube channel is for. Go to Youtube search Oak Harvest Financial but if you say, “You know what Troy? I’d rather spend time with the grandkids and go fishing and play golf and go hunting and that’s what I want to do.” Then give us a call we’re here to help. (800)-822-6434.
Mark: Troy, while you were talking, I said, “Okay, here’s what I’m going to do, I’m to go to Youtube and I’m going to search for Youtube Troy Sharpe, newest videos 2022.” Here’s what happened. I’ve got the power of your decisions in retirement. I’ve got the bulb moment when you realized you were going into retirement. I have the impact of Social Security decisions on your retirement which you just talked about.
I’ve got, “I’m 60 with a million dollars can I retire?” There’s another one on there that’s like, “I’m 55, I’ve got $500,000, can I retire at 62 with $6,000 a month?” Then there’s also 2022 may be a challenging year for your portfolio, you’re prognosticating. Are you still on track with the 2022 financial goals? There’s up to 200 of these videos. It’s real simple to search Troy Sharpe that’ll work.
You don’t need to put in Oak Harvest. There’s a lot of opportunities for you to gain knowledge about different areas of retirement. Troy’s got a lot of great information out there. Chris Paris, the Chief Investment Officer has his as well. There’s just a lot of information on the Youtube channel. You can always go to the website as well, OakHarvestfinancialgroup.com and as Troy said, you can always call if you just want to, ” Hey, it’s time for me to figure out where I am on my road to retirement.” (800)-822-6434. (800)-822-6434.
Troy: Back with our final segment right after this. This is the Retirement Income Show with Troy Sharpe of Oak Harvest Financial Group.
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