Where Are You Saving Your Retirement Dollars | The Retirement Income Show | Retirement at 60’s

 

 

Welcome back to the retirement income show with Troy Sharpe, the CEO and founder of Oak Harvest Financial Group. You can find out more on the website OakHarvestFG.com. You can always search for Troys over 100 videos on YouTube.

Just search for Troy Sharpe and Oak Harvest and you will find him. There’s no subscription fee. Just subscribe to it. You can watch them all at your leisure. Any questions 1-800-822-6434. Troys talking today about your preparation for retirement.

Troy, I know you’ve got a lot of points to get to and you wanted to kind of wrap up point number one, which is where are you saving your dollars to? To recap the end of that first segment there, we were talking about where to save the 401K dollars.

Should you put it into the pretax? Should you put it into the Roth? And I want you to be aware that there’s an after tax part of your 401K as well. So the pretax you get a tax deduction.
Now it lowers your taxable income. But if you make one hundred, a hundred and twenty five thousand dollars a year, your effective tax rate right now is probably around about 10 percent. That deduction may not be that valuable.

You definitely want to be contributing and get to somewhere in the 401K to at least get your employer match. But maybe for you it makes sense to put it into the Roth 401K. If your combined, family income is 200, 250, 300, somewhere in that range.

Well, it might make more sense to take the tax deduction today, put it into the pretax or tax deductible part of the 401K. But if you’re if you’re in that situation where you have a very good income and you’re really trying to ramp up savings for retirement, you can only put so much into either the Roth or

the pretax 401K, depending on your age it’s somewhere around about 26, 27 thousand. If you’re able to save more than that, instead of putting it in the bank, you might want to consider putting it into the after tax part of your 401K, because those after tax contributions will be able to be rolled over into a Roth IRA
. So, again, I think it’s revenue rolling. 201454 from the IRS came out several years ago. And what they say is you can now separate; there used to be this kind of cream in the coffee rule where once you had after tax contributions and earnings on those contributions, it’s kind of like putting cream in the coffee.

You can’t take the cream out of the coffee. It’s already mixed in. They have now made this clear and your 401k has to keep track of this. Those after tax contributions can roll into a Roth IRA.
The earnings on those contributions can roll into the traditional IRA. But why this is important is because if you want to, once you’ve maxed out your 401K pretax or Roth contributions, if you want to put money into a Roth, well, if you make over, it’s about two hundred thousand dollars a year of what we call modified adjusted

gross income. You’re unable to contribute to a Roth IRA outside of your 401K account. You make too much money even if you make less than that and you’re just a diligent saver. The maximum you can contribute to a Roth IRA is around 65 to seventy five hundred dollars, again, depending on your age.
So you have very limited means outside of the 401K to contribute to a Roth. Saving seven thousand dollars a year isn’t going to get you any closer to retirement. It’s nice. Go ahead and do it if you qualify.

And it makes sense for your situation. But if you want to supercharge that Roth contribution and you’ve maxed out the Roth inside your 401K or even if you’ve maxed out the pretax part, you can put after tax dollars in. The total amount is somewhere, they change every year,

I think it’s $57,000, It might be 54,000, somewhere in that range. That’s the total amount of money that you can put into the 401K. So that’s on top of maxing out your 401k contributions. You can make an after tax contribution, let’s call it another roughly thirty thousand dollars.

You make that contribution upon retirement. You can roll that into the Roth. So that’s why you want to consider it and at least be aware that it is an option if you’re looking to supercharge those contributions. Now, why is that important?

Let’s tie that point to what retirement looks. Day in, day out. We’ve helped thousands of people. We review portfolios. We review income and tax situations every single day here. One of the biggest mistakes we see people who are leading up to the retirement phase, one of the biggest mistakes that they make in those earlier
years is not planning for the distribution phase, not intelligently looking ahead. And it’s not because. Well, one, it’s because you simply oftentimes don’t have that perspective. You’re so busy with life and family, you don’t think, oh, my goodness, when I get to retirement, at least most people do not until it’s too late.

I have all this money inside this tax infested account. What if I need to pull out $50,000 or what if I want to buy a second home? I need to make 100 or 200 thousand dollar withdrawal. Well, if it’s all in your IRA and you need two hundred thousand dollars for a down payment on a second home
, you’re going to have to pull out two hundred and seventy thousand or somewhere in that range, $250,000 because you’re going to have to send that tax money to the government and be left with two hundred thousand dollars to make that down payment.
So why do we want to be thinking about where we’re saving money? It’s because when we start designing tailored or customized retirement income plans for our clients, and these are things that we need to review every single year, because the amounts where we’re withdrawing it from, it very often changes.

But. What we want to do is we want to pull X amount from the retirement account. We want to pull X amount from savings. Maybe we’re targeting a specific income tax bracket where we don’t want to go past the 10 percent or the 12 percent or maybe the 22 percent or whatever the tax brackets may be in
the future. We want to let that Roth IRA defer as long as possible, because that’s tax free growth. No, I have no concerns about the government coming in down the road. I get this question all the time, especially on YouTube.

No, I’m not concerned about the government eventually making your Roth tax free. That would be the same or excuse me, making it subject to income taxes. That would be the same as the government coming in and saying, well, in 1992, you paid this amount of tax.

We’re going to change the tax laws in 1992 and you owe us fifteen thousand more dollars. It’s not going to happen. There’s case law. There’s precedent. We don’t want to be afraid of those types of changes happening and allow them to stop us from making contributions or conversions into this
very, very powerful tax free account. So custom income plan, custom tax plan as part of our Retirement Process process, this is what we do for clients. How much are you pulling out from here? How much are you pulling out from there?

How are we optimizing your income taxes? Not just today? Oftentimes it’ll make more sense to pay tax today to avoid paying a heck of a lot more tax down the road. So we’re looking at it not just in the lens of this year.
We’re looking at it through the lens of what decisions we’re making today. How do they impact five years, 10 years, 20, 30 years out? And so in order to do this, we need to have a relationship with you.

It’s the investment management, it’s the income plan, it’s the tax plan. They all work together. Sometimes we’ll get people call us and say, Troy, I just want you to help us with the planning. We don’t do that.
I wish we could do that. But we simply we don’t do it. And I’m not going to get into why we don’t do it. But it’s inefficient. It’s like having two steering wheels in a car. You’re constantly being tugged in two different directions.

And there’s there’s many other reasons. But for those of you that are serious and that understand that having an investment plan, working in concert with an income plan and a tax plan, that there is efficiency there, there’s synergy created.
Those are the people that we want to work with. If that’s you give us a call, one 1-800-822-6434 and start the Retirement Process process, whether you’re five years away, two years away, whether you’ve been retired for five years, maybe you just got notified this week or you have a feeling that
you might be about to be let go. 1-800-822-6434. If you’re calling on the weekends, you’re going to leave a message. Frank, who’s been with me for more than 10 years, is going to give you a call back.

He’s simply going to have a conversation. See if you’re a good fit for what we do over here at Oak Harvest Financial Group, we do have a $500,000 investment minimum. And also answer any questions that you have.
So if we’re a good fit for each other, Franck’s then going to schedule either a phone call or an in-person visit if you’re here in Houston. Our offices are at I-10 and Bunker Hill. Come in, see us. Let’s sit down, have a cup of coffee, have a glass of water and go through.
Get to know you and what’s important to you. But to take that first step, 1-800-822-6434. This is the retirement income show. 1-800-822-6434, So choice talk about the preparation that goes into retirement planning and kind of the aha.

Moment, you know, the light bulb moment as most people have it, like a year into retirement. They’re like, holy cow. There’s a lot of moving pieces here. You were talking about the difference between the accumulation phase, working years versus distribution phase retirement years.
And you’re talking about the rate of return on our money, which is super important during your accumulation phase. I would imagine it’s still important in your distribution phase of life. But it’s more about rate of return during working years, rate of income during retirement years.

Is that fair to say? Yeah, I mean, Our number one job is to protect your money. I mean, that that’s it. Be a good steward of the money. Focus on preservation of principle, making sure that your money is part of an overall plan.
But the focus is on protecting the money. Now, we do that multiple different ways. And I don’t have time to get into that right now. But you do bring up a very, very key point, Mark. And that is earlier I said we require the investment management relationship in order to have a relationship with you.

And that’s because too many times over the years, we’ve had people come in and they say, Troy, I don’t want stocks or bonds because I’ve worked with, you know, X firm or Y firm. And over a five year period, I paid them more in fees than they ever made money for me.

We hear this time and time and time again, and we hear this from very, some very, very, very wealthy people who have worked with the private banks over at this place and that place in the private wealth managers.
And it’s all, look, I don’t attack any other firm, OK? But a lot of the stuff in the financial industry is smoke and mirrors it’s to get you in the door. It’s to get you to sign up and then to start charging your fees or selling your products.
The truth of the matter is, we require that relationship on the investment side is because we know what we’re going to do. We can have a pretty good idea of what that investment portfolio is going to perform at in different market environments.
And that ties directly into the income plan and the tax plan. If someone else is out there managing the money and most people are overconfident in their own abilities, by the way, also. But if we’re out there and.

Joe Blow is managing the account over at Firm X, and he tells us it’s supposed to to do this in a bull market and then you come in a year later and it only made four or five percent because you’re too heavy allocated to bonds because his boss won’t allow him to go more than 60 percent equities
. Well, guess what? Our income and tax plan is now messed up. OK, so, yes, leading up to retirement is it’s about the average rate of return. You want to stay invested. You want to. For most people, be as aggressive as you can.

Maybe tapered back a little bit when you get closer to retirement and more near the distribution phase once you get to retirement, the investment plan does need to be working in concert with the income and the tax plan, because sequence of returns, risk comes into play.

And that is the number one determinant of, if you will, run out of money or not in retirement. We’ll touch on that coming back after the break. So the sequence of returns risk is really kind of interesting, and Troy can’t describe that in one minute.

So it’s really kind of interesting. And might be eye opening for some of you because kind of when, and where, the markets go right after you retire is really important to the success of your money lasting as long as you do.
We just did a we just did a video, Mark, if you go to the YouTube channel, it’s a really good video. We found a piece from BlackRock on the Web and it’s called, “Two Portfolios, Both Average 7%,
One Runs Out Of Money, The Other One Doesn’t.” And it does a very good job depicting the difference between the accumulation phase and the retirement phase. So go check that out on YouTube search Troy Sharpe, Oak Harvest the video is Two Portfolios.
Both Average 7%, One Runs Out, One doesn’t. You can probably search that on YouTube as well. So we’re going to touch on that when we come back. Our final segment straight ahead. This is the retirement income show with Troy Sharpe, the CEO and founder of Oak Harvest Financial Group.
Hey, your friend Sean Hannity here during these uncertain times with the market in constant flux. You need a financial professional with a steady hand who can help protect your assets and your important retirement. Now, that’s why it is important that if you’re concerned with your retirement income in particular, you work with someone that is conservative and I
don’t mean conservative in politics, but more importantly, someone who is conservative when it comes to investing in here in Houston, Troy Sharpe and his team at Oak Harvest Financial Group. Give him a call right now 800-822-6434. Look, we all want to preserve our wealth, but a great first step is to call Troy’s team for a retirement income
analysis. That’s 800-822-6434. Call Troy Sharpe and the team at Oak Harvest Financial Group, 800-822-6434. Oak Harvest Investment Services is registered investment advisory firm. Troy Sharpe is an investment advisor, representative and insurance professional.
Investing involves risk, including the possible loss of principal. Sean Hannity has been remunerated and is not a client.