Retire With Style

Episode 153: The Financial Advisor's Guide to Roth Conversions

In this episode, Alex Murguia and Wade Pfau are joined by Rob Cordeau to discuss the complexities and strategies surrounding Roth conversions. They emphasize the importance of long-term tax planning and the various factors that influence the decision to convert traditional IRAs to Roth IRAs. They explore the perspectives of financial advisors versus accountants, the timing of conversions, and the emotional aspects of financial planning. The conversation also touches on the implications of national debt and future tax rates, providing insights into how clients can navigate these decisions effectively. Listen now to learn more!
 
Takeaways
Roth conversions can lead to significant tax savings over time.
It's crucial to consider long-term tax implications rather than just immediate savings.
Tax projections should be done annually to adjust strategies as needed.
Advisors and CPAs may have differing perspectives on Roth conversions.
Clients often have preconceived notions about Roth strategies that need addressing.
Using standard deductions effectively can enhance tax efficiency in retirement.
Roth conversions should be viewed as a hedging strategy against future tax increases.
Chapters
00:00 Introduction to Roth Conversions01:31 Understanding Roth Conversions03:08 The Accountant's Perspective on Roth Conversions05:06 When to Consider Roth Conversions08:02 Analyzing the Break-Even Point12:15 Adjusting Strategies Over Time14:11 Emotional Aspects of Financial Planning16:17 Advisor vs. CPA Perspectives19:58 Client Perspectives on Roth Conversions22:26 Predicting Future Tax Rates25:14 The Role of National Debt in Tax Planning30:31 Hedging Against Future Tax Increases31:12 Maximizing Roth Conversions33:02 Conclusion and Next Steps
 
Links
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”

Episode 152: Navigating Holiday Money Talks

In this episode, hosts Wade Pfau and Alex Murguia engage with Dan Veto to discuss the complexities of money conversations that arise during the holiday season. They explore the concept of the 'family bank,' where family members often turn to one another for financial support, and the emotional dynamics that accompany these requests, including love, guilt, and cultural influences. The conversation also touches on the importance of setting boundaries and understanding the implications of lending money within families. They also touch on creative ways to decline financial requests while maintaining family relationships, emphasizing the significance of context in these interactions. Listen Now to learn more!
 
Takeaways
The holiday season often brings about awkward money conversations.
The concept of the 'family bank' describes family members who provide financial support.
Loans to family members should be treated as gifts to avoid complications.
Cultural differences can influence how families approach money and lending.
Setting clear boundaries is crucial when lending money to family members.
Understanding the implications of repeated financial requests is important.
The IRS has specific guidelines for family loans that should be considered.
It's essential to communicate openly about financial expectations within families. Family financial dynamics can be complex and nuanced.
Understanding the context of financial requests is crucial.
It's important to align financial decisions with your partner.
Recognizing the motivations behind requests for money is essential.
Establishing clear boundaries around financial assistance is necessary..
Being aware of family members' financial situations can inform decisions.
Planning ahead for potential financial requests can ease stress.
Chapters
00:00 Introduction to Holiday Money Conversations02:15 Understanding the Family Bank Concept10:33 Navigating Family Money Requests14:54 Emotional Dynamics in Family Lending20:34 Cultural Perspectives on Money and Family27:39 Setting Boundaries in Family Financial Requests29:01 Navigating Family Financial Dynamics31:48 Personal Family Money Philosophies35:31 Understanding Requests for Financial Help39:00 Responding to Financial Requests49:36 Creative Ways to Say No51:30 Aligning Financial Decisions with Your Partner
 
Links
Join us TODAY 11/12 at 2pm for RWS Live! If you can't join us, submit your questions for Wade and Alex here: www.retirementresearcher.com/ask. Use this link to join us live on YouTube: https://risaprofile.com/live
Join the team at Retirement Researcher for a FREE webinar, “The Holiday Season: Making Memories...and Awkward Money Moments” hosted by Dan Veto, CSA on 11/19/24 at 1PM ET. Register to save your spot now at risaprofile.com/podcast  
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips
 

Episode 151: Financial Strategies for Early Retirement

In this episode of 'Retire with Style', hosts Alex Murguia and Wade Pfau with Jessica Wunder from McLean Asset Management delve into the complexities of early withdrawals from retirement accounts, specifically IRAs and 401(k)s. They discuss the penalties associated with early withdrawals, the Rule of 55, and various exceptions allowing penalty-free access to funds. The conversation highlights the differences between IRAs and 401(k)s, including specific exceptions applicable to each type of account. In this conversation, the speakers discuss the new exceptions introduced by Secure Act 2.0, including emergency withdrawals and disaster recovery relief. They delve into various early withdrawal exceptions, such as those for death, disability, and medical expenses. A significant focus is placed on the 72T approach, which allows for early withdrawals without penalties under specific conditions. 
 
Takeaways
The Rule of 55 allows penalty-free withdrawals from 401(k)s after age 55.
Public safety employees have unique exceptions for early withdrawals.
You can withdraw for medical insurance premiums if unemployed.
Educational expenses can be covered by early withdrawals from IRAs.
The 72(t) strategy allows for substantially equal periodic payments.
There are strict rules governing early withdrawals from retirement accounts.
Early withdrawal exceptions include death, disability, and medical expenses.
The 72T approach allows for substantially equal payments from retirement accounts.
Chapters
00:00 Introduction and Guest Introduction01:38 Understanding Early Withdrawals from Retirement Accounts04:02 Exploring the Rule of 5511:09 Exceptions for IRAs vs. 401(k)s15:57 Common Exceptions for Early Withdrawals18:00 New Exceptions in Secure Act 2.022:00 Understanding Early Withdrawal Exceptions30:00 The 72T Approach Explained35:59 Planning for Retirement Cash Flow Needs
 
Links
Click here to download Retirement Researcher’s free resource, “Exception to Early Withdrawal Penalties“: https://retirement-researcher.ontralink.com/tl/476
We’re hosting another YouTube LIVE Q&A episode for RWS! Click here to submit your questions: www.retirementresearcher.com/ask
Watch this episode on YouTube: https://youtu.be/EzdIgudCkPQ?feature=shared
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”

Episode 150: Lump Sum or Annuity: What’s Right for You?

In this episode of 'Retire with Style', Wade and Alex discuss the complexities of pension decisions with Jason Rizkallah from McLean Asset Management. The conversation delves into the critical choices retirees face regarding pension options, including whether to take a lump sum or annuity payment, the implications of each choice, the importance of comprehensive financial planning, and the potential benefits of external annuities. They discuss the importance of evaluating commercial annuities, understanding the structures and benefits of different annuity options, and the credit risks associated with pensions and insurance companies. The conversation also covers strategies for diversification, the significance of rate lock procedures, and the impact of income decisions on overall retirement planning. Listen now to learn more!
 
Takeaways
Annuities provide reliable income but come with liquidity issues.
Tax implications are significant when taking a lump sum.
External annuities can be competitive with pension options.
Comprehensive financial planning is essential for retirement success.
The choice between lump sum and annuity should consider long-term goals.
Market conditions can affect the competitiveness of annuities. Consider all options before deciding on a pension or lump sum.
Commercial annuities may offer better income rates than pensions.
Evaluate the structure of annuities for survivor benefits.
Credit risk varies between pensions and insurance companies.
Diversifying annuities can mitigate risk but may lower income.
Rate lock procedures are crucial in securing favorable annuity rates.
Understand the implications of income on Medicare premiums.
Ask providers about the potential repercussions of retirement choices.
Partial rollovers may be possible but are often all or nothing.
 
Chapters
00:00 Introduction to Pension Decisions02:35 Understanding Pension Options: Lump Sum vs. Annuity05:54 Exploring the Third Option: External Annuities08:51 Pros and Cons of Taking a Lump Sum16:17 Evaluating Annuity Options25:49 The Case for External Annuities27:23 Evaluating Pension vs. Lump Sum Options30:53 Understanding Annuity Structures and Benefits34:34 Assessing Credit Risks in Pensions and Annuities38:18 Exploring Partial Rollovers and Diversification Strategies42:09 Navigating Rate Lock Procedures for Annuities47:11 Considering the Impact of Income on Retirement Planning
 
Links
Click here to download Retirement Researcher's free flowchart resource, "Should I take my pension as a lump sum?": https://retirement-researcher.ontralink.com/tl/474
We’re hosting another YouTube LIVE Q&A episode for RWS! Click here to submit your questions: www.retirementresearcher.com/ask
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”

Episode 149: The Various Aspects of Tax Planning

In this episode of 'Retire with Style', Wade and Alex delve into various aspects of tax planning, focusing on strategies such as front-loading taxes, tax loss harvesting, and deduction bunching. They discuss the implications of tax filing status changes, particularly for surviving spouses, and the impact of the Secure Act on inherited IRAs. The conversation emphasizes the importance of strategic Roth conversions and planning for future tax rates, providing listeners with valuable insights into effective tax management in retirement. The discussion also highlights the potential benefits of front-loading taxes and the implications of the SECURE Act on retirement accounts. Listen now to learn more!
 
Takeaways
Front loading taxes can increase after-tax wealth.
Inherited IRAs have new tax implications post-Secure Act.
Roth conversions can be beneficial for beneficiaries.
Tax planning should consider future income levels.
Understanding tax liabilities is crucial for inheritance planning. Consider front-loading taxes to take advantage of current rates.
Tax loss harvesting can add value to portfolio management.
Deduction bunching can maximize tax benefits from charitable contributions.
Donor advised funds offer flexibility in charitable giving.
Appreciated shares can be donated to avoid capital gains taxes.
Increasing after-tax spending power is a key goal in tax strategy.
Chapters
00:00 Introduction to Tax Planning Conversations05:12 Reasons to Front Load Taxes08:01 Implications of Filing Status Changes10:28 Embedded Tax Liabilities in Inheritance12:39 Strategic Roth Conversions for Beneficiaries14:51 Planning for Future Tax Rates18:11 Tax Strategies for Retirement Planning32:10 Maximizing Charitable Contributions43:34 Future Tax Planning and Legacy Considerations
 
Links
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

Episode 148: Tax-Efficient Income Stacking

In this episode of 'Retire with Style', Wade and Alex discuss the complexities of tax-efficient retirement planning, focusing on understanding preferential income, tax brackets, and the implications of additional income on tax rates. They explore the net investment income tax, strategic Roth conversions, and the significance of timing in retirement income planning. The conversation emphasizes the need for careful management of social security and Medicare surcharges, particularly during the fragile decade of financial planning leading up to and following retirement. Listen now to learn more!
Takeaways
Preferential income includes long-term capital gains and qualified dividends.
Understanding how income stacking affects tax rates is crucial.
The net investment income tax can increase effective tax rates significantly.
Roth conversions should be timed carefully to avoid higher tax brackets.
Social security decisions can influence tax planning strategies.
Chapters
00:00 Introduction to Tax-Efficient Retirement Planning02:46 Understanding Preferential Income and Tax Brackets06:01 The Impact of Additional Income on Tax Rates09:02 Navigating the Net Investment Income Tax11:53 Strategic Roth Conversions and Tax Planning14:55 The Importance of Timing in Retirement Income Planning18:08 Managing Social Security and Medicare Surcharges20:58 The Fragile Decade of Financial Planning24:04 Conclusion and Future Planning Strategies
 
Links
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”
 

Episode 147: Navigating Medicare and Tax Planning

In this episode, Alex Murguia and Wade Pfau delve into the complexities of tax planning related to healthcare, focusing on Medicare premiums and the implications of income on these costs. They discuss the Income Related Monthly Adjustment Amount (IRMA) and how it affects Medicare premiums, emphasizing the significant impact of seemingly small increases in income. The conversation also covers the Affordable Care Act subsidies, highlighting the double-whammy effect of income on both Medicare and ACA costs. The importance of holistic financial planning is underscored, as the hosts stress the need to consider these factors together to avoid costly pitfalls in retirement planning.
 
Takeaways
Medicare premiums can increase significantly with small income increases.
IRMA can lead to extremely high effective tax rates on additional income.
Understanding the different parts of Medicare is crucial for planning.
Affordable Care Act subsidies can be impacted by income levels.
Planning for healthcare costs is essential in retirement.
There are specific life events that can help reduce Medicare premiums.
Holistic financial planning is necessary to navigate retirement income.
Software tools can help analyze the impact of income on healthcare costs.
It's important to monitor income levels to avoid unexpected costs.
Effective retirement planning requires integrating various financial factors.
Chapters
00:00 Navigating Medicare and Tax Planning04:22 Understanding Medicare Premiums and IRMA09:52 The Impact of Income on Medicare Costs15:58 Affordable Care Act Subsidies Explained22:04 The Double Whammy of Income and Healthcare Costs29:59 Holistic Financial Planning for Retirement
 
Links
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

Episode 146: The Concept of the 'Tax Torpedo'

In this episode of 'Retire with Style', hosts Alex Murguia and Wade Pfau delve into the concept of the 'tax torpedo', a phenomenon affecting the taxation of Social Security benefits. They explore how increased taxable income can lead to a significant rise in the percentage of Social Security benefits that are taxed, particularly for middle-class retirees. The discussion covers the mechanics of the tax torpedo, the implications of provisional income, and strategies for effective retirement income planning to mitigate its effects. Through case studies and real-world examples, the hosts emphasize the importance of proactive tax planning to avoid unexpected tax burdens in retirement. Listen now to learn more!
 
Takeaways
The tax torpedo refers to the taxation of Social Security benefits based on income levels.
Middle-class retirees are particularly affected by the tax torpedo.
Provisional income is a key factor in determining how much Social Security is taxed.
Taxation on Social Security benefits can range from 0% to 85%.
Roth conversions can help manage taxable income and reduce Social Security taxation.
The tax brackets can create significant jumps in effective tax rates due to the tax torpedo.
Understanding provisional income is crucial for retirement planning.
Tax planning before starting Social Security benefits can lead to significant savings.
The tax torpedo is a planning opportunity rather than just a snag.
Effective management of taxable income can lead to real tax savings.
Chapters
00:00 Introduction to the Tax Torpedo02:29 Understanding the Tax Torpedo Mechanics05:56 The Impact of Social Security Taxation09:38 Provisional Income and Its Implications13:09 Navigating the Tax Brackets18:05 Case Studies and Real-World Examples26:10 Planning Opportunities to Avoid the Torpedo
 
Links
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”

Episode 145: Mastering Tax-Efficient Withdrawals

In this episode of 'Retire with Style', Alex Murguia and Wade Pfau delve into tax-efficient withdrawal strategies for retirement. They discuss the importance of withdrawal order sequencing, the types of accounts available for withdrawals, and effective marginal tax rate management. The conversation highlights techniques for generating taxable income, including Roth conversions and long-term capital gains harvesting, while emphasizing the need to maintain asset allocation integrity throughout the retirement income distribution process. The episode sets the stage for future discussions on social security and Medicare implications in retirement planning. Listen now to learn more!
 
Takeaways
Tax efficiency can significantly impact retirement income.
Withdrawal order sequencing is crucial for tax-efficient distributions.
Understanding account types helps in planning withdrawals.
Effective marginal tax rate management can save money.
Roth conversions can enhance after-tax wealth.
Long-term capital gains harvesting can reset cost basis.
Maintaining asset allocation is essential during withdrawals.
Short-term sacrifices can lead to long-term benefits.
Taxable accounts should be spent down first to minimize tax drag.
Future discussions will cover social security and Medicare implications.
 
Chapters
00:00 Introduction to Tax-Efficient Withdrawal Strategies02:48 Understanding Account Types for Withdrawals06:00 Withdrawal Order Sequencing Explained08:54 Effective Marginal Tax Rate Management11:51 Techniques for Generating Taxable Income15:12 Roth Conversions and Tax Implications17:53 Long-Term Capital Gains Harvesting20:58 Maintaining Asset Allocation Integrity23:50 Conclusion and Future Topics
 
Links
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

Episode 144: Understanding the Rules of RMDs

In this episode of 'Retire with Style', Alex and Wade delve into the intricacies of Required Minimum Distributions (RMDs). They discuss the calculations involved, the implications of RMDs on retirement planning, and the recent changes introduced by Secure Act 2.0. The conversation also covers the consequences of failing to take RMDs, the aggregation of RMDs across different accounts, and provides examples of RMD calculations using life expectancy tables. Additionally, they touch on the topic of RMDs for inherited accounts and introduce the concept of Qualified Charitable Distributions as a strategy to manage RMDs effectively. Listen Now to Learn More!
 
Takeaways
RMDs are required to ensure taxes are paid on tax-deferred accounts.
The starting age for RMDs has changed to 73 or 75 depending on birth year.
RMDs do not apply to Roth IRAs or Roth 401(k)s.
Failing to take RMDs can result in significant penalties.
You can aggregate RMDs across multiple IRAs but not 401(k)s.
RMD calculations are based on the account value at the end of the previous year.
The uniform life table is commonly used for RMD calculations.
Qualified Charitable Distributions can help manage RMD tax implications.
Understanding RMDs is crucial for effective retirement planning.
RMDs can impact social security taxation and Medicare premiums.
Chapters
00:00 Introduction to Required Minimum Distributions03:00 Understanding RMD Calculations and Implications06:04 RMD Rules and Changes in Secure Act 2.009:10 Consequences of Not Taking RMDs11:59 Aggregating RMDs Across Accounts14:53 RMD Calculation Examples and Life Expectancy Tables21:04 Exploring RMDs on Inherited Accounts25:54 Qualified Charitable Distributions and Future Topics
 
Links
The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 
This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”