Retirement Tax Nightmare you Need to Know About!

Mark Elliot: Welcome back to The Retirement Income Show with the CEO and founder of Oak Harvest Financial Group. That, of course, is Troy Sharpe. You can find out more on the website Oakharvestfinancialgroup.com. Phenomenal website, a lot of information there about Troy and the team, but also a lot of information for you as a pre-retiree or even you’re already retired. There’s some great information on the website Oakharvestfinancialgroup.com.

 

The office of Oak harvest is located at 920 Memorial City, way right off I-10 in Bunker Hill. The number, if you have questions, 800-822-6434, and you can always go to the YouTube channel, search for Troy Sharpe and Oak Harvest. There’s 200 videos out there. They put out five new ones all the time. Jess is even the co-founder with Troy, who is coming out with some videos about women and retirement. That’s something to really look forward to. That’ll be neat.

I want to go back to something you said, and then you can get back into what we’re talking about today, kind of going through the 2022 guide to retirement, if you will. You were talking about, you go to your CPA, every April, we do taxes. This year, it’s April 18th, because April 15th is a Friday, so they thought, “Well, the weekend might help us get everything done, [unintelligible 00:01:10] last-minute person doing taxes.”

Your CPA typically, Troy, does not know everything that you have, whether it’s real estate or how much is in your 401k, your IRAs, or you have life insurance, you have annuities, whatever you have in your tool belt, they don’t know the whole picture. That’s the difference, I think, from going to a CPA talking about taxes than going to a retirement planner talking about taxes. Is that fair to say?

Troy Sharpe: Yes. Absolutely. CPAs, it’s an excellent profession. Most of them do really, really good work. I do have a bone to pick, let’s call it, with the industry in general, and that’s just that they are historians. When we’re talking about retirement and all the money you’ve worked your entire life for, especially those of you that have done all the right things and you’ve contributed to that 401k, and you’ve got that company match. You probably, if you’re 50, 55, 40, 45 listening to this, you’ve probably have never even given thought to what a tax nightmare you’re going to possibly have down the road, because you’ve been told to just put money into that 401k, get that company match, max it out, max it out, max it out.

As a retirement planner, someone who has a firm that is entirely built on planning forward, not just with investments like most financial firms, that’s just step one of our process here. We build income plans. What is an income plan? Where should you take your income from? The IRA, the non-IRA, the Roth? If you have other sources? The tax plan, how does the tax plan overlay on top of the income plan with respect to the investment strategy, because the more aggressive your investment strategy, typically the more taxes you’re going to pay over time?

When you just look at the 1099s that you get issued every January, February, or March, and you take them to your CPA and they look at those documents and they file the tax return and they have 600 different tax returns to do, and they’re just knocking them out, knocking them out, from my experience, and I could be wrong here, you could have a CPA that does this for you, but I’ve been doing this for a very long time and I’ve never met one CPA that does, never met one client that has a CPA that does this.

This is why we’ve opened this department here at Oak Harvest Financial Group. We’ve done this for clients for many years, but now we’ve brought the CPAs in-house to do this for our clients as well. What they’re not doing and what I don’t see happening in the industry, and this is where I have a bone to pick, and it’s not really a bone to pick, let’s say, it’s just I wish clients got more from their CPA relationship, but I understand why they don’t because comes tax time, you can barely get your CPA on the phone.

Their business model is such that they have to pump out these tax returns and that’s their earning season and I do get it. If you’re not taking the dollars you have in your retirement account, the expected growth moving forward, the income needs that you have, your social security, you have to understand how social security is taxed because that’s pretty complex, dividends, interest, capital gains, but then also the big one is required minimum distributions, you’re forced to start taking out of that portfolio.

At 72, the percentage you have to take out increases every year. When you look at that income multiplied by the expected account balance based on– it’s easy if you just do a sensitivity analysis where we’re looking at, what happens if it grows at 4%, 7%, 10%, that’ll give you an idea of what your expected balances are in the future. You Google RMD, forced withdrawals, RMD percentage withdrawals, find that distribution percentage at 72. It starts at around 4%, and it goes up to 4.5%, 5%, 5.5%, 6%, 6.5%,7%, so on throughout retirement. Now, you’ll start to get an idea of how much income you’re going to be forced to distribute. You have to extrapolate out that account value into the future, minus withdrawals. Then, look at RMD percentages with all of your other incomes.

As you can imagine, for some of you, I’ve probably lost you already. For some of you, you are following along. My point here is that CPAs aren’t forward-looking. They’re too busy, they’re backwards-looking, they’re historians. What you need at this stage of life if you’re 45, 50, 55, you need to be looking towards retirement. If you’re 60, 65, 70, you’re in retirement most likely or getting very close. If you’re not aware of these challenges, you’re running out of time to be proactive and make some serious adjustments that can save you potentially hundreds of thousands of dollars over the next 20, 30 years. We do it all the time.

Most of our clients come from other financial advisors, because other financial advisors aren’t providing, from our experience, the type of planning that most people want and need in retirement. That’s where most of our clients come from. When we do the analysis in the first visit, when we have with a prospective client, we’re just gathering that data. We’re looking to see, “Are you a good fit for us?” Of course, you’re trying to make sure we’re a good fit for you. We have to gather all that information.

Then, on that second visit, where in between those first two, our planning teams, our tax teams, the planning team, they’re doing the tax analysis that I’m talking about right now for us to discuss on that second visit. Many times we see where if you keep going without a tax plan, you’re looking at $400,000, $600,000, $800,000 in additional taxes paid in retirement, that you simply don’t have to pay if you have a proactive tax strategy that you’re implementing over many years. If you wait and all of a sudden you’re 72, and you haven’t done anything, at that point, typically it’s too late. Everyone’s situation is a bit different.

 

If you want to go through this process, if you want to look at your situation, give us a call at 1-800-822-6434, go to the YouTube channel. I go through numerous examples of this calculation, of this analysis on the YouTube channel. If you haven’t seen it, if you haven’t been to the channel, just go check it out. We have tons of videos there to help you understand tax planning, income planning, investment planning. If you decide to call us and work with us, great. Either way, I implore you to go to the channel and take some time to be proactive about learning in retirement, because these are things they don’t teach you.

I have a finance degree, didn’t learn any of this stuff in school. I have a CFP designation, Certified Financial Planner professional designation. Don’t learn about this in the CFP school. Now, there’s a lot of valuable stuff we go through as CFPs in the education process and continuing education process, but this is stuff that you only learn from doing this with thousands of people over many years of proactive retirement planning.

We’ve added those CPAs to the team to not only complement what we do on the tax planning side as financial planners, that’s retirement professionals, but then to also keep us up to date with our estimated payments, to file those taxes for you, to have everything done under one roof. That’s a very exciting addition to Oak Harvest Financial Group in 2022. Now, we don’t have to call your CPA for information in February or March, when we’re doing reviews with you, to request tax returns for last year or to request tax documents or to get information about some type of investment that you have and how much of that is return of capital, how much of that is interest, how much of that is dividend.

Now, we have all that in-house, so your financial advisor can walk right down to the CPA, pull up that file and look at that information, and then use that information inside your financial tax plan. If you don’t have that, if you’d like to learn more, give us a call, 1-800-822-6434. Let’s sit down and look at your situation. Again, If we work with each other, great, If not, that’s fine, too, but you’re going to benefit from having this analysis done. You’re going to benefit from going to the YouTube channel. That is our mission here, to help as many people as possible.

Again, if we’re the firm for you, excellent. We understand that we are not right for everyone, and everyone is not right for us. When we go into that process with an open mind and an understanding that we’re just trying to add value to your life, we’re just trying to add value to your retirement. If we do that, we as a firm will be okay in the long run. That’s just part of our core beliefs. I do encourage you to visit the YouTube channel. Just go to YouTube, search Oak Harvest Financial Group and watch the videos.

Mark Elliot: 800-822-434 as well, if you’d just like to call, the YouTube channel is incredible. There’s over 200 topics on there and different videos that you can watch on all different topics. 800-822-434, if you’d like to stock with the team. Remember this, step one of this planning process at Oak Harvest is the investment plan. Step two, the income plan. Step three, the tax plan. Step four and five, we haven’t talked much about those, but we’re not going to give them the time that they probably really deserve, but step four is the health plan. Step five is the estate plan. You’ve got two and a half minutes. I figured you might want to touch on those as we wrap it up today.

Troy Sharpe: When we look at a comprehensive retirement plan, we have to look at healthcare expenses, because healthcare– I saw a study recently, I believe it was from JP Morgan. Going back over the past, I want to say 50 or 60 years, healthcare has averaged about 5% inflation per year. It’s probably a little bit higher than that right now, so healthcare is a huge part of it. We want to make sure that those expenses are built into budget, but if you retire prior to 65, prior to Medicare, your income and tax plan needs to take into account whether or not we’re going to try to plan to qualify for a subsidy to help reduce the cost of health insurance to cover you from whenever you retire to age 65.

That’s a big part of this process. We have many clients that retire at 60, 61, 62, or want to at least, and they don’t know if they have enough or how they’re going to pay for health insurance. If that’s you, give us a call because we’ll build out that plan that not just looks at saving money today, but looks at how do we also save money over the long term when it comes to taxes. Then, tying it all together with our process with our plan is the estate side of things. So many times over the years, we’ve seen clients work with other attorneys to create trusts or family limited partnerships or LLCs and they don’t actually do anything after those legal entities are created. They don’t update their documents, they don’t update their beneficiaries. They don’t update their wills when we have major life changes.

We’ve hired a new certified financial planner who is also an attorney, the estate planning side of things. She is a separate entity. You don’t have to work with her. We’ll also give you a list of other attorneys to work with, but for those who want to work with her, absolutely an option, and we’ll have all of those things, no matter who you work with on the legal side. It’s part of our process, it’s step five, it’s the estate planning. We want to make sure that everything is updated. You have the right trusts, that your legacy is not going to go to your daughter’s husband if they get divorced, or your son’s wife if get Give us a call, 1-800-822-6434. Visit the YouTube channel and check us out. Give us a call when you’re ready to talk.

Mark Elliot: Investment advisory services offered through Oak Harvest Financial Group, LLC. Oak Harvest Financial Group is an independent financial services firm that helps people create retirement strategies using a variety of insurance and investment products. Investing involves risk, including the loss of principal. Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products.

Insurance and annuity product guarantees are backed by the financial strength and claims paying ability of the issuing insurance company. Oak Harvest Financial Group LLC is not permitted to offer and no statement made during this show shall constitute tax or legal advice. You should speak to a qualified professional before making any decisions about your personal situation. We’re not affiliated with the US government or any governmental agency. This radio show is a paid placement.