Latest / Money In Motion with Klaas Financial / Don’t Let the Tax Tail Wag the Dog

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Don’t Let the Tax Tail Wag the Dog · Money In Motion with Klaas Financial

0:04
Speaker 1: And our phone lines are open to you right now
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Speaker 1: six oh eight three two one thirteen ten. Love to
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0:15
Speaker 1: We are joined this morning by our retirement planning professionals
0:17
Speaker 1: from Class Financial, CJ. Closs and Kyle Kite. They'd love
0:20
Speaker 1: to take your call. Love take your question this morning
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Speaker 1: one thirteen ten. That's six soh eight three two one
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Speaker 1: Colss Financial the team at c loss Financial. There's separate divisions.
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Speaker 1: You can also schedule free complementary conversation. You can also
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Speaker 1: listen back to this in previous shows podcast Again. That's
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Speaker 1: number six oh eight four four two five six three seven.
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Speaker 1: It will be complementary ech you again their number six
1:01
Speaker 1: oh eight four four two five six three seven and
1:04
Speaker 1: joining us this morning our CJ.
1:05
Speaker 2: Closs and Kyle Kite, CJ. How you doing this morning.
1:09
Speaker 3: I'm doing great, Sean.
1:10
Speaker 2: How are you doing fantastic? Kyle? How have you been?
1:13
Speaker 4: I've been good, Sean.
1:14
Speaker 2: It's good to talk with both of you.
1:15
Speaker 1: And we're going to be talking about the taxes and
1:18
Speaker 1: don't let the tax tail wag the dogs. I love
1:21
Speaker 1: the title I should be and I got a chance
1:23
Speaker 1: to kind of preview some of the questions and some
1:25
Speaker 1: of the conversation head it's going to be a good one,
1:27
Speaker 1: really really great insight ahead as we talk with CJ
1:30
Speaker 1: on Kyle, don't forget, as I mentioned, of course, the
1:33
Speaker 1: website class financial dot com and the telephone number. You're
1:35
Speaker 1: also want to hold on too, that teleph number because
1:37
Speaker 1: a little bit later on in the program, we're going
1:39
Speaker 1: to do our class quiz question Leak. It's your chance
1:41
Speaker 1: to win a fantastic prize from our friends at Class Financial.
1:44
Speaker 1: This week's prize a twenty five dollars gift card to
1:47
Speaker 1: the Olive Garden. We'll tell you how you can win
1:48
Speaker 1: that a little bit later on in the show, and
1:50
Speaker 1: before we get rolling on this week's topic. In this
1:53
Speaker 1: week's conversation, let's actually look back at last week's show,
1:56
Speaker 1: Kyle and get the question and answer to the class
1:59
Speaker 1: quiz question the week.
2:00
Speaker 4: Yeah, and thanks again everybody for listening, and congrats to
2:03
Speaker 4: our winner from last week. So last week's question was
2:06
Speaker 4: true or false? Most people experience lifestyle inflation when they're
2:10
Speaker 4: in income increases which causes spending to rise along with earnings.
2:14
Speaker 4: And this answer was true.
2:16
Speaker 1: That was, and that was as we talked about that
2:18
Speaker 1: show last week, that was a really really informative one
2:21
Speaker 1: about sometimes some of the habits that we can develop
2:25
Speaker 1: in some of the mistakes sometimes that folks made and
2:27
Speaker 1: lifestyle inflation conversation was a really really good one. Listen
2:30
Speaker 1: back to that at Clossfinancial dot com. That's Closs Klaas
2:34
Speaker 1: Financial dot com. Don't forget to pay close attention to
2:36
Speaker 1: this week's program because you'll have another chance to win
2:38
Speaker 1: with the class quiz question of the week. So are
2:40
Speaker 1: we talking about making smart financial decisions while keeping taxes
2:44
Speaker 1: in proper perspective?
2:45
Speaker 2: And CJ.
2:46
Speaker 1: As we talk about that title, don't let the tax
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Speaker 1: tail wag the dog, Let's start with basics.
2:52
Speaker 2: What does that phrase actually mean?
2:56
Speaker 3: Well, first things first, I mean you mentioned it the
2:58
Speaker 3: visual right, anybody who who has like an excited young
3:02
Speaker 3: puppy that has a big tail and it gets wagon
3:06
Speaker 3: before you know, it's like, oh my gosh, I feel
3:08
Speaker 3: like that tail is wagging the dog. The whole body
3:10
Speaker 3: of the dog is excited from the tail moving. So
3:15
Speaker 3: think of that in terms of taxes. So when we
3:18
Speaker 3: make this statement, don't let the tax tail wag the dog,
3:21
Speaker 3: it means taxes are important, but they shouldn't be the
3:24
Speaker 3: sole reason you make a financial decision. We all want
3:28
Speaker 3: to be tax efficient. Nobody enjoys paying taxes, but sometimes
3:32
Speaker 3: individuals become so focused on minimizing taxes that they lose
3:36
Speaker 3: sight of the bigger financial objectives in their life. A
3:40
Speaker 3: good decision isn't necessarily the one with the lowest tax
3:42
Speaker 3: bill today. A good decision is the one that best
3:46
Speaker 3: supports your long term goals and increases your overall after
3:50
Speaker 3: tax wealth. In our experience, the most successful financial plans
3:54
Speaker 3: consider taxes as one factor among many including risk, cash flow,
4:00
Speaker 3: retirement goals, of state planning objectives, and personal preferences. So
4:04
Speaker 3: just are the title of our show today, It's all
4:07
Speaker 3: about don't let the tax tell wag the dog. Because unfortunately,
4:11
Speaker 3: in our line of work. We see some people that
4:13
Speaker 3: they're especially some small business owners, their sole focus is
4:19
Speaker 3: avoidance of taxes, and unfortunately that can come with some
4:23
Speaker 3: nasty consequences.
4:24
Speaker 2: Understanding that big picture. This morning, as we talked with CJ.
4:27
Speaker 1: Closs and Kyle Kite, our retirement planning professionals from Class
4:30
Speaker 1: Financial Online, Class Financial dot com. That's Closs, k l
4:34
Speaker 1: A A S Financial dot com. They're twelphe number six,
4:36
Speaker 1: so eight four four two five six three seven. So
4:39
Speaker 1: let's got to make this practical, Kyle, where do most
4:42
Speaker 1: you see most people commonly making decisions based primarily on taxes?
4:46
Speaker 2: What should be looking at there?
4:48
Speaker 4: Yeah, it's a great question, Sean, and I would say
4:50
Speaker 4: primarily this happens when people are looking at their investments,
4:54
Speaker 4: especially like single stock investments. Maybe it was their employer
4:57
Speaker 4: that they worked at for many many years, or maybe
5:00
Speaker 4: they know somebody that works there. For instance, we have
5:02
Speaker 4: one in the local area down here in Rockford that
5:04
Speaker 4: the stock price has gone up over two hundred percent
5:07
Speaker 4: in the last three or four years. Right, So it
5:09
Speaker 4: looks really really good on a piece of paper, but
5:12
Speaker 4: they know that if they were to sell that stock,
5:14
Speaker 4: that's going to create some capital gain taxes, so they
5:17
Speaker 4: avoid selling it all together, which doesn't sound like a
5:20
Speaker 4: bad thing. Again, like CJ said, nobody likes paying taxes,
5:23
Speaker 4: but there's two real big things that you've got to
5:26
Speaker 4: think through this with them. So at first glance, like
5:29
Speaker 4: I said, it sounds reasonable, but over time, if the
5:31
Speaker 4: stock continues to grow, it can become a huge portion
5:35
Speaker 4: of your overall portfolio. Get into thirty forty, you know,
5:38
Speaker 4: even fifty percent of your total portfolio tied up into
5:41
Speaker 4: this one stock. So this is what we call concentration risk.
5:45
Speaker 4: So that's something that we've talked about in the past
5:47
Speaker 4: as well, and they're basically putting their portfolio out of
5:50
Speaker 4: whack as far as risks, tolerance, and things like that,
5:53
Speaker 4: just to avoid a tax bill. The other thing is
5:56
Speaker 4: individual stocks can go up and down very very quickly.
5:59
Speaker 4: You know, it's not uncommon for an individual stock to
6:02
Speaker 4: drop fifteen or twenty percent in a year. The overall
6:05
Speaker 4: market doesn't do that as often, but one individual stock
6:08
Speaker 4: can do that. And if you're holding this stock and
6:10
Speaker 4: it drops twenty thirty forty percent, that financial damage, that
6:14
Speaker 4: lost money may be far greater than the taxes that
6:16
Speaker 4: you were trying to avoid So sometimes paying a little
6:19
Speaker 4: bit of tax on the is the price of creating
6:21
Speaker 4: a healthier, better diversified portfolio.
6:24
Speaker 2: Throwing that balance out of whack.
6:25
Speaker 1: This morning, as we talked with Kyle Kite and CJ
6:27
Speaker 1: Closs out retirement planning professionals from Class Financial, great day
6:30
Speaker 1: to make that appointment at Claus Financial.
6:32
Speaker 2: Don't forget at first one. It's going to be complementary
6:34
Speaker 2: to you.
6:34
Speaker 1: All I got to do this morning is to pick
6:36
Speaker 1: up a phone give him a call six oh eight
6:37
Speaker 1: four four two five six three seven. Again that number
6:40
Speaker 1: six oh eight four four to two five six three seven.
6:44
Speaker 1: You can also schedule that complementary conversation right at Cossfinancial
6:47
Speaker 1: dot com. That's Coss Klaas Financial dot com and c J.
6:51
Speaker 1: Kyle did a great job with an example there. Can
6:53
Speaker 1: you share another situation where this mindset may appear.
6:57
Speaker 3: Yeah, I just want to be clear with people as
6:59
Speaker 3: we go through these examples. Some of you, it's gonna,
7:02
Speaker 3: you know, strike a chord and you're going to think, oh,
7:04
Speaker 3: that's me and and I don't like you know what
7:07
Speaker 3: they're saying about this particular thing because they must not
7:10
Speaker 3: like X, right, they must not like individual stocks, or
7:13
Speaker 3: they must not like real estate, or they must not
7:15
Speaker 3: like gold, and are wad be No, No, not at all.
7:19
Speaker 3: As a matter of fact, most of the things that
7:21
Speaker 3: we're going to talk about here can have great places
7:24
Speaker 3: inside of a portfolio. The question becomes like, can can
7:28
Speaker 3: we all cognitively understand that the risk associated with owning
7:34
Speaker 3: thousands of stocks, or thousands of properties, or thousands of
7:39
Speaker 3: anything is going to be on average much lower than
7:43
Speaker 3: the risk of owning one of those things, right, And
7:46
Speaker 3: if you don't believe me, just like, come in and
7:48
Speaker 3: I'll take five minutes and do a little bit of
7:50
Speaker 3: a download about the education of the markets over time,
7:53
Speaker 3: and you'll quickly understand like, oh my gosh, the two
7:55
Speaker 3: aren't even comparable. Therefore, when Kyle talked earlier about like
8:00
Speaker 3: the risk of a stock, it's not that the market
8:03
Speaker 3: doesn't have risk. The market has tons of risk, but
8:05
Speaker 3: the risk of the market going down and never coming
8:07
Speaker 3: back up. Listen to everybody, It's never happened in the
8:10
Speaker 3: history of the market. Whereas conversely, what's the risk of
8:13
Speaker 3: a stock, an individual stock going down and never coming up? Oh,
8:16
Speaker 3: it's happened hundreds and hundreds of times. You see the
8:19
Speaker 3: point right. So the next area where we see this
8:23
Speaker 3: kind of like lack of desire to pay any tax
8:26
Speaker 3: and so it leads to more risky behaviors is in
8:29
Speaker 3: real estate. We meet individuals who have owned, say, rental
8:32
Speaker 3: properties for decades. Again, we like rental properties, we're not
8:36
Speaker 3: anti rental property. But the property they have may have
8:39
Speaker 3: appreciated considerably and they know a sale could trigger some
8:43
Speaker 3: capital gains taxes, and as a result, they continue holding
8:46
Speaker 3: a property they no longer enjoy managing. Meanwhile, they're dealing
8:49
Speaker 3: with maintenance issues, tenants, concerns, rising expenses, lack of liquidity
8:54
Speaker 3: that comes with owning real estate. The question shouldn't only
8:57
Speaker 3: be how do I avoid the taxes on this run property?
9:00
Speaker 3: The question should be is this still the right investment
9:03
Speaker 3: for me? If the property no longer supports your goals.
9:06
Speaker 3: The tax bill alone shouldn't dictate the decision. Listen, everybody,
9:11
Speaker 3: if you actually kind of study tax like we do
9:14
Speaker 3: and like other professions do, real estate is actually one
9:17
Speaker 3: of Congress's babies. I don't want to get into the
9:20
Speaker 3: weeds of why, but there's depreciation schedules and ten thirty
9:23
Speaker 3: one exchanges and ways to basically kick the can down
9:25
Speaker 3: the road on real estate, and this can create what
9:28
Speaker 3: we call like a tax loop in real estate where
9:30
Speaker 3: people end up intentionally or unintentionally getting most of their
9:34
Speaker 3: net worth tied up in rental real estate. And that's fine,
9:38
Speaker 3: I don't It's one way to live life and to
9:40
Speaker 3: try to build some income in retirement. But at some
9:44
Speaker 3: point some people will get to a place where it's
9:46
Speaker 3: like it's more pain than it's worth. You're having to
9:48
Speaker 3: reinvest or the return is too low, or whatever it
9:51
Speaker 3: might be, and we would just say you have to
9:53
Speaker 3: sit down with somebody who understands both sides of the equation,
9:57
Speaker 3: both sides being kind of like risk and opportunity, along
10:00
Speaker 3: with the tax impact of your decisions. This doesn't mean
10:03
Speaker 3: we would suggest you go out and blow out of
10:05
Speaker 3: everything and just pay a boatload of taxes. By no
10:08
Speaker 3: means do we suggest that, But often we find people
10:11
Speaker 3: who are holding onto assets they shouldn't be just because
10:14
Speaker 3: they're afraid of the tax bill.
10:16
Speaker 1: Really good perspective this morning talking with CJ. Closs and
10:19
Speaker 1: Kyle Kite. They are our retirement planning professionals from Class
10:22
Speaker 1: Financial Online Coss Financial dot com. That's coss k l
10:25
Speaker 1: aas Financial dot Com and Kyle, let's talk about retirement
10:30
Speaker 1: planning because taxes, of course, seem to really dominate most
10:35
Speaker 1: folks retirement conversation.
10:36
Speaker 4: What do you see there, Yeah, definitely, Sean. So one
10:40
Speaker 4: of the most common examples involves retirement account withdrawal. So
10:43
Speaker 4: think like four oh one k's, IRA's four oh three b's,
10:45
Speaker 4: those types of accounts. And it's because many most people,
10:50
Speaker 4: if this is like a traditional four to one K,
10:51
Speaker 4: traditional four h three B, you've never paid tax on
10:54
Speaker 4: this money as you put it in and let it
10:55
Speaker 4: grow for all these years. So as you take that
10:58
Speaker 4: money out, that's what's going to try figured the income taxes.
11:01
Speaker 4: So retirees become extremely concerned about taking a distribution because
11:05
Speaker 4: they don't want to increase that tax will income and
11:08
Speaker 4: it's for a number of reasons. It can be because
11:10
Speaker 4: you're worried about we've talked about the Medicare IRMA right,
11:14
Speaker 4: the IRMA adjustments before it can be you're getting into
11:16
Speaker 4: the next tax bracket, that kind of stuff. So obviously
11:19
Speaker 4: those taxes matter and you want to be mindful of them.
11:22
Speaker 4: But retire accounts were built to support retirement, so We've
11:26
Speaker 4: seen situations where people are hesitant to spend money on travel,
11:30
Speaker 4: home improvements, experiences, or other goals because they're worried about
11:34
Speaker 4: paying taxes on withdrawals. And you know, a common example
11:37
Speaker 4: that a lot of people think about is, you know, oh,
11:39
Speaker 4: I'm at the top of the twenty two percent income
11:41
Speaker 4: tax bracket, right, and if I take more money out,
11:43
Speaker 4: I'm going to go into the twenty four percent tax bracket.
11:46
Speaker 4: And that's yes, that's an increase in taxes, but it's
11:49
Speaker 4: only a two percent increase on the dollars that you're
11:52
Speaker 4: taken out, not every dollar that you've taken out out
11:54
Speaker 4: to this point. So meaning an extra ten thousand dollars
11:57
Speaker 4: you know, would cost you a couple hundred bucks in
11:59
Speaker 4: tax is more than it would have at the last bracket. Right.
12:02
Speaker 4: So again, people get so kind of tied to these numbers.
12:05
Speaker 4: But at the end of the day, this account, you
12:07
Speaker 4: saved all this money to do those experiences, and so
12:11
Speaker 4: it's important to remember why those assets exist. The purpose
12:15
Speaker 4: isn't to simply keep the account balance as high as possible.
12:17
Speaker 4: You know, see that number on the piece of paper
12:19
Speaker 4: go up every month or every year. It looks cool,
12:22
Speaker 4: but what does that do to support your lifestyle and
12:24
Speaker 4: your objectives? And so if paying some taxes now to
12:28
Speaker 4: take the trips enjoy retirement is though for the way
12:31
Speaker 4: that you envisioned it, that may be a perfectly reasonable
12:33
Speaker 4: trade off for doing that.
12:35
Speaker 2: And CJ.
12:35
Speaker 1: As we're talking this morning about the taxes and financial
12:40
Speaker 1: decisions when it comes to keeping those in perspective, let's
12:42
Speaker 1: talk Roth conversions. I know there's obviously it's been become
12:46
Speaker 1: very popular. How does today's topic kind of kind of
12:49
Speaker 1: mesh with that and apply in that area?
12:52
Speaker 3: Yeah, great question. So Roth conversions are one of our
12:55
Speaker 3: favorite examples because they're often presented as universally good, but
13:00
Speaker 3: the reality is it's more nuanced than that. A Wroth
13:04
Speaker 3: conversion means voluntarily paying taxes today in exchange for potential
13:09
Speaker 3: tax benefits in the future. For some individuals, that can
13:12
Speaker 3: be extremely valuable. For others, it might not make sense
13:16
Speaker 3: depending upon what bracket they're in today versus what we
13:19
Speaker 3: project them being in the future. So when we help
13:22
Speaker 3: clients determine whether a Roth conversion is right for them,
13:25
Speaker 3: we evaluate factors such as current tax bracket, expected future
13:29
Speaker 3: tax rates, estate planning goals, time horizons available, cash to
13:34
Speaker 3: pay the tax on the conversion, so on and so forth.
13:38
Speaker 3: The mistake occurs when someone decides to convert simply because
13:41
Speaker 3: they dislike the idea of paying future taxes. The better
13:46
Speaker 3: approach is understanding whether the conversion improves your overall financial outcome.
13:51
Speaker 3: The strategy should support the plan, not the other way around.
13:56
Speaker 3: So listen, everybody. Here'd be another kind of like more
13:59
Speaker 3: common example that we can all connect to what we're
14:02
Speaker 3: talking about here. Don't let the tax tail wag the dog.
14:04
Speaker 3: Would be the equivalent of somebody saying, hey, I want
14:07
Speaker 3: to train to become a great soccer player. For those
14:11
Speaker 3: who don't know, I used to play soccer back in
14:13
Speaker 3: the day, so this World Cup timeframe was really great
14:15
Speaker 3: for me. I loved it. But let's say I want
14:17
Speaker 3: to train to become a great soccer player. And so
14:19
Speaker 3: you practice, and you do ballwork and skill work, and
14:22
Speaker 3: you get a private coach and all these things. But
14:24
Speaker 3: then it turns out you become more infatuated with looking
14:28
Speaker 3: like a great soccer player, and so you get all
14:31
Speaker 3: the gear right, and you kind of stop the practicing
14:34
Speaker 3: because you're not focused on the outcome of becoming a
14:36
Speaker 3: great soccer player, which is to contribute to a team
14:39
Speaker 3: and help them win. You just want to look like
14:41
Speaker 3: a great soccer player. This is the equivalent of letting
14:45
Speaker 3: the tax tail wag the wrist dog. You have lost
14:47
Speaker 3: sight of the whole purpose. The whole purpose of being
14:51
Speaker 3: tax wise or tax efficient is not to always mitigate
14:56
Speaker 3: present taxes. That's not the goal. The goal is to
14:59
Speaker 3: maximize long term outcomes, and that requires a lot more
15:05
Speaker 3: nuanced than just avoiding taxes today. And listen, good accountants
15:09
Speaker 3: know this. Some accountants are just like you know, I'll
15:13
Speaker 3: minimize your taxes today. But good accountants will say, well,
15:17
Speaker 3: I care about your taxes today, but I want to
15:19
Speaker 3: know how this is going to potentially impact you five, ten, fifteen,
15:22
Speaker 3: twenty years down the line. So, financial planners, this is
15:25
Speaker 3: one of our greatest kind of roles or or ways
15:28
Speaker 3: that we can help advocate for you as an investor
15:31
Speaker 3: and as a financial somebody needing financial planning is to
15:34
Speaker 3: make sure the decisions you're making are keeping in line
15:38
Speaker 3: with your long term objectives and not just to minimize
15:41
Speaker 3: taxes today.
15:42
Speaker 1: Really important perspectives here this morning as we talk with CJ.
15:44
Speaker 1: Closs and Kyle Kite. They are our retirement planning professionals
15:48
Speaker 1: from Class Financial. Head on over to the website Class
15:50
Speaker 1: financial dot com. That's Coss klaas Financial dot com. You
15:54
Speaker 1: can learn all about Class Financial. You can also subscribe
15:56
Speaker 1: to the podcast listen back to this in previous shows.
15:59
Speaker 1: You can all so share that right online at class
16:01
Speaker 1: financial dot com. Great day to pick up phone gamme
16:03
Speaker 1: call six so eight four four two five six three seven.
16:07
Speaker 1: No charge for that initial get to know you appoyment
16:09
Speaker 1: at COSS Financial. It will be complementary to you again
16:12
Speaker 1: their number six oh eight four four two five six
16:15
Speaker 1: three seven. We'll continue our conversation with CJ.
16:17
Speaker 2: Kyle and you.
16:18
Speaker 1: We will do that next as Money in Motion continues
16:21
Speaker 1: right here on thirteen ten WIV eight talking with our
16:25
Speaker 1: retirement planning professionals CJ. Closs and Kyle Kites. Of course,
16:28
Speaker 1: you can learn more about CJ. Kyle and the whole
16:30
Speaker 1: team at Loss Financial on their website Class financial dot com.
16:34
Speaker 1: That's Class Hey l aas financial dot com. Great website.
16:38
Speaker 1: You can also schedule a complementary conversation right online at
16:42
Speaker 1: cossfinancial dot com, or if you prefer, you can always
16:44
Speaker 1: call the office right here in Madison at six oh
16:47
Speaker 1: eight four four two five six three seven. That first
16:49
Speaker 1: apployment that's going to be complementary to you. Again, all
16:52
Speaker 1: I got to do is give the call six oh
16:53
Speaker 1: eight four four two five six three seven talking about
16:56
Speaker 1: making smart financial decisions while keeping taxes in the proper
17:01
Speaker 1: perspective and Kyle, are there situations where maybe paying more
17:04
Speaker 1: in taxes today can actually be the It feels weird
17:08
Speaker 1: to say this might actually be the better financial decision.
17:12
Speaker 5: Yeah, absolutely, Sean, it does feel weird sometimes, that's for sure.
17:15
Speaker 5: But we love this stuff because this is where the
17:17
Speaker 5: numbers will tell you one thing. But you know, as
17:19
Speaker 5: financial planners were also we joke that we play a
17:22
Speaker 5: little bit of therapists sometimes too and keeping people away
17:25
Speaker 5: from themselves. So a simple example where this, you know,
17:28
Speaker 5: might be a good, good trade off is suppose that
17:31
Speaker 5: somebody invests purchased a fund years ago for one hundred
17:34
Speaker 5: thousand dollars and today it's worth two hundred and fifty
17:37
Speaker 5: thousand dollars, so it's gone up you one.
17:39
Speaker 4: Hundred and fifty percent. Then you cash for a major
17:42
Speaker 4: life goal. Maybe they're helping the kid buy a house,
17:45
Speaker 4: or funding excuse me as a significant retirement expense. And
17:49
Speaker 4: sometimes they'll tell us I don't want to sell because
17:51
Speaker 4: I don't want the tax bill. But if that money
17:54
Speaker 4: helps fund an important goal and improves quality of life,
17:57
Speaker 4: that tax might be entirely justified. So one of these
18:00
Speaker 4: things that we talk about all the time is that
18:02
Speaker 4: you know, people like we're talking about to say, get
18:04
Speaker 4: so fixated on these taxes. But the reason that you're
18:07
Speaker 4: paying taxes is because you've made money, You've earned interest
18:11
Speaker 4: on this kind of stuff. The only way to not
18:13
Speaker 4: pay taxes is to lose money, and trust me, that
18:16
Speaker 4: feels a lot worse than paying taxes on some gains
18:19
Speaker 4: for sure. So again, people treat taxes as a penalty,
18:23
Speaker 4: but in reality, they're a byproduct of financial success. So again,
18:27
Speaker 4: the fact that a gain exists usually means that you've
18:29
Speaker 4: done well in this investment, and it's really you know,
18:33
Speaker 4: nobody wants to pay taxes unnecessarily, but there's a difference
18:36
Speaker 4: between avoiding unnecessary taxes and allowing taxes to prevent you
18:41
Speaker 4: from achieving something important.
18:43
Speaker 1: Wells put and well great great insight this morning as
18:46
Speaker 1: we talk with Kyle Kite and CJ. Coss of COSS
18:48
Speaker 1: Financial Online, Coss Financial dot Com that's Coss k l
18:52
Speaker 1: a A S Financial dot Com and CJ as you know,
18:55
Speaker 1: as advisors, how do you help clients evaluate all these
18:58
Speaker 1: decisions objectively?
19:01
Speaker 3: Oh, that is a challenge. We typically start with with goals.
19:04
Speaker 3: So I was kind of hinting at this previously that
19:06
Speaker 3: you need to focus on your long term objectives. But
19:09
Speaker 3: before talking about taxes, we ask what are you trying
19:12
Speaker 3: to accomplish? Because at times somebody will say, Hey, I
19:16
Speaker 3: have no children, I have no desire to have long
19:20
Speaker 3: term maximize tax outcomes for the next generation, and so
19:24
Speaker 3: I just want to maximize life today. And that can
19:26
Speaker 3: look very different from a tax planning strategy than somebody
19:30
Speaker 3: who has three children that they want to leave their
19:32
Speaker 3: estate to. So we're going to ask questions like are
19:34
Speaker 3: you trying to reduce risk? Are you trying to generate income?
19:38
Speaker 3: Are you trying to create flexibility? Do you want to
19:40
Speaker 3: leave assets to errors? Things like this. Once we understand
19:44
Speaker 3: the objective, we can evaluate whether a particular strategy actually
19:47
Speaker 3: helps you accomplish that objective. Then we layer into the
19:51
Speaker 3: analysis some sort of like tax outcome that you're trying
19:54
Speaker 3: to trying to achieve that's usually a much more effective
19:58
Speaker 3: process than starting with taxes. Because this is what Kyle
20:02
Speaker 3: and I often hear. It'll you know, if we go
20:04
Speaker 3: through this process in the right order. Back to like
20:07
Speaker 3: my athlete example, right, like, what are you trying to
20:09
Speaker 3: do become a great soccer player? Okay, here's the things
20:11
Speaker 3: you need to do well. In a similar way, what
20:13
Speaker 3: are you trying to accomplish? If somebody says pay no taxes,
20:17
Speaker 3: we go, okay, what kind of life do you want
20:22
Speaker 3: to live between now and death? Because to pay no taxes,
20:25
Speaker 3: like we got to do a lot of things today,
20:27
Speaker 3: they are going to be extremely painful to you, maybe
20:31
Speaker 3: even quitting your job so you have no earned income.
20:34
Speaker 3: Right you see my point? Like, is paying no tax
20:38
Speaker 3: really a goal that you can have? Now? Some of
20:42
Speaker 3: you might be listening to me and saying, yes, I'll
20:44
Speaker 3: live off the grid. Great, We're probably not going to
20:46
Speaker 3: work with you anyways, because you're you don't want to
20:52
Speaker 3: kind of engage society. And that's not a knock. By
20:54
Speaker 3: the way, I'm totally fine with that. Somebody wants to
20:58
Speaker 3: live off the grid and pay absolutely no taxes, Great,
21:01
Speaker 3: you're going to still have to figure out how you're
21:02
Speaker 3: going to buy something when you actually have a need
21:04
Speaker 3: but whatever, or make it for yourself. So this is
21:08
Speaker 3: not a place of judgment as much as to say,
21:11
Speaker 3: to just state that your only goal is to avoid
21:15
Speaker 3: all taxation isn't really addressing what kind of life you
21:19
Speaker 3: want to live, right, It's just addressing avoidance of paying
21:23
Speaker 3: something to quote unquote the man or to the government.
21:26
Speaker 3: So we would say, what are you trying to accomplish.
21:28
Speaker 3: Is it helping your errors or maximizing your lifestyle today
21:33
Speaker 3: or you know, is what is the ultimate goal from
21:35
Speaker 3: your standpoint, and then our job is to help you
21:38
Speaker 3: get there. There are plenty of times, I don't want
21:40
Speaker 3: people to miss this. There are plenty of times in
21:44
Speaker 3: that process where we are absolutely trying to avoid as
21:49
Speaker 3: much taxation as we can today. So don't misunderstand that
21:53
Speaker 3: if your goal is to maximize your life today, we
21:56
Speaker 3: may try to avoid as much tax as we can
21:58
Speaker 3: today to do some map maximization. But the point of
22:02
Speaker 3: this show is it's kind of like the dog, right.
22:05
Speaker 3: Sometimes the dog gets so excited that the tail becomes
22:08
Speaker 3: the focus of the dog and the whole body of
22:10
Speaker 3: the dog gets out of control, we would just say,
22:13
Speaker 3: calm down, let's just assess whether or not that tail
22:16
Speaker 3: is as important as you're making it.
22:18
Speaker 2: And as we're talking this morning with CJ.
22:20
Speaker 1: Closs and Kyle Kite, it's a great data set that
22:21
Speaker 1: appointment at loss financial no charge for that initial conversation,
22:24
Speaker 1: that get to know you appointment to All I can
22:26
Speaker 1: do is give them a call. Six so eight four
22:27
Speaker 1: four two five six three of bits I started six
22:31
Speaker 1: eight four four two five six three seven speaking of things,
22:35
Speaker 1: my tongues wagging the rest of my mind.
22:37
Speaker 2: This morning, getting a little ahead of itself. Six eight
22:39
Speaker 2: four four two five six three seven.
22:41
Speaker 1: And Kyle, what other factors should people be considering beyond taxes?
22:45
Speaker 4: Yeah, there's quite a few, Sean, and we've touched on
22:47
Speaker 4: some of these already. But you know, risk is a really,
22:50
Speaker 4: really big concern. So holding on to an investment because
22:53
Speaker 4: you don't want to pay a capital gain can create
22:55
Speaker 4: unnecessary concentration and additional investment risk. But there's other ones too,
23:00
Speaker 4: like liquidity needs. So as CJ mentioned, you know, real
23:03
Speaker 4: estate is a is a great investment, but it's not
23:06
Speaker 4: the most liquid, So you know, if you need to
23:08
Speaker 4: cash and this comes into even people's own homes. You know,
23:11
Speaker 4: they want to pay off the house, which is great,
23:13
Speaker 4: but if you have no other assets and everything is
23:15
Speaker 4: tied up in your house, well we joke that you
23:17
Speaker 4: can't eat your house, right, You've got to have some
23:19
Speaker 4: cash somewhere, and that ties into the next one, which
23:21
Speaker 4: is cash flow. Right. So again, if you need that cash,
23:24
Speaker 4: you may have to sell some of those stocks or
23:26
Speaker 4: you know, real estate or whatever you're holding in order
23:28
Speaker 4: to get some cash to pay for your basic needs.
23:32
Speaker 4: And this is another one that we've talked about on
23:33
Speaker 4: previous shows, but estate planning consideration. So some of this
23:37
Speaker 4: can tie into estate planning considerations when it comes to
23:41
Speaker 4: you know, there's things called step up and basis that
23:43
Speaker 4: we've talked about in the past with real estate and
23:45
Speaker 4: stocks and things like that. But also when it comes
23:48
Speaker 4: to multiple properties, especially if it's in multiple states, that
23:51
Speaker 4: ties into its own estate planning considerations. And you know,
23:54
Speaker 4: there's estate taxes if you don't you know, pass on
23:57
Speaker 4: things in a tax efficient way as well, And then
24:00
Speaker 4: a lot of it is just personal preferences, right, So again,
24:03
Speaker 4: nobody likes paying taxes, but at the end of the day,
24:05
Speaker 4: you saved all this money, you worked hard for all
24:07
Speaker 4: these years to live the lifestyle that you've envisioned for yourself,
24:11
Speaker 4: and that should be one of the biggest things that
24:13
Speaker 4: you're paying attention to. And then opportunity costs again, if
24:16
Speaker 4: money is you know, sitting in the bank making zero
24:18
Speaker 4: versus being invested. You know, those types of things is
24:21
Speaker 4: what we talk about all the time, and basically what
24:24
Speaker 4: you're hearing from us is every decision involves trade offs.
24:28
Speaker 4: If avoiding taxes causes somebody to miss an opportunity, or
24:31
Speaker 4: delay an important goal, or maintain unnecessary risk, that's got
24:35
Speaker 4: to be part of the analysis, right Because trust me,
24:38
Speaker 4: if you you know, don't take that family trip because
24:40
Speaker 4: you don't want to spend thirty or forty or fifty
24:43
Speaker 4: thousand dollars because you don't want to pay the taxes
24:45
Speaker 4: on it, but that allows you to pass on an
24:47
Speaker 4: extra one hundred thousand dollars to the kids twenty years
24:49
Speaker 4: from now. I can assure you most of them would
24:52
Speaker 4: much rather had that memory with mom and dad of
24:54
Speaker 4: that great trip that we took, even though they're not
24:57
Speaker 4: getting as much if something were to happen to you
24:58
Speaker 4: later on. So This is what good planning looks like,
25:02
Speaker 4: and it's the entire picture rather than focusing on just
25:04
Speaker 4: the one variable.
25:05
Speaker 1: Really good stuff this morning from Kyle Kite and CJ Closs,
25:08
Speaker 1: our retirement planning professionals from Class Financial. We'll take it
25:11
Speaker 1: down the home stretch next as Money in Motion with
25:13
Speaker 1: Class Financial continues right here. I'm thirteen ten dell.
25:15
Speaker 2: Will you ibi.
25:18
Speaker 1: Talking with our retirement planning professionals, CJ Closs and Kyle Kite.
25:22
Speaker 1: Of course, they come to us from Class Financial online,
25:24
Speaker 1: Class Financial dot com. That's Closs k l Aasfinancial dot Com.
25:29
Speaker 1: Before we get to the class quiz question the week.
25:31
Speaker 1: Kind of wrapping things up this morning, CJ, is there
25:34
Speaker 1: anything you'd like? Kind of like the big takeaway you
25:37
Speaker 1: really want to make sure people take away from the show.
25:41
Speaker 4: Yeah.
25:41
Speaker 3: So again, the title of today's show was don't let
25:43
Speaker 3: the tax tail wag the dog, and so my biggest
25:46
Speaker 3: takeaway is this, don't measure success by how little tax
25:49
Speaker 3: you paid. Measure success by how effectively for your financial
25:53
Speaker 3: decisions helped you achieve your goals. Tax efficient planning is important,
25:58
Speaker 3: for sure, but financial planning is about much more than
26:02
Speaker 3: just taxes. The objective is building a strategy that supports
26:05
Speaker 3: the life you want to live.
26:07
Speaker 2: Well, said Kyle, what about you.
26:09
Speaker 1: Anything you want to add as far as final thoughts
26:10
Speaker 1: to this week's program.
26:12
Speaker 4: Yeah, absolutely, Sean CJ. Mentioned kin. Define the goal first,
26:15
Speaker 4: I mean, make sure you're clear about what you're trying
26:17
Speaker 4: to accomplish, and then evaluate the full impact, so the taxes,
26:20
Speaker 4: but also the risk, the cash flow, the flexibility, and
26:22
Speaker 4: your long term objectives, and make those decisions based on
26:25
Speaker 4: those overall outcomes. So the best decision is usually the
26:28
Speaker 4: one that improves your total financial picture, not necessarily the
26:31
Speaker 4: one that produces the lowest tax bill.
26:34
Speaker 1: Really well, standard fantastic show, don't forget you and listen
26:36
Speaker 1: back Colssfinancial dot com that's Coss Klaas Financial dot com.
26:41
Speaker 1: You can also schedule Compliment your conversation right from the
26:43
Speaker 1: website or call the office at six oh eight four
26:46
Speaker 1: four two five six three seven. That first deployment is
26:49
Speaker 1: Compliment to reach you at COSS Financial again their telephone
26:51
Speaker 1: number six So eight four four two five six three seven.
26:54
Speaker 1: You're going to want to hold on to that telephone
26:55
Speaker 1: number because it's also time for the Closs Quiz.
26:58
Speaker 2: Question of the week.
26:59
Speaker 1: It works like this and just a moment, I'll ask
27:00
Speaker 1: you the class quiz question week. You will then have
27:02
Speaker 1: thirty minutes from the end of today's program to call
27:04
Speaker 1: the Class Financial office right here in Madison.
27:06
Speaker 2: At six oh eight four four two five, six three.
27:09
Speaker 1: Seven if you are the first car with correct danswer
27:11
Speaker 1: to win this week's prize, which is a twenty five
27:13
Speaker 1: dollars gift card to Olive Garden. This week's class quiz
27:17
Speaker 1: question the week is this true or false? A Roth
27:20
Speaker 1: conversion is beneficial for everyone. Telephone number six oh eight
27:25
Speaker 1: four four two, five, six three seven. First cost correct
27:28
Speaker 1: answer win this week's prize. Don't forget as well. That's
27:30
Speaker 1: Coss Financials Office right here in Madison. They're telephon number
27:33
Speaker 1: six oh eight four four two, five, six three seven.
27:36
Speaker 2: CJ. Kyle, it's great chatting with both of you, guys.
27:38
Speaker 2: Enjoy this fantastic day. Thanks biding to take care. Guys.
27:43
Speaker 1: This is Money in Motion with Coss Financial Asset Advisors, LLC,
27:47
Speaker 1: a registered investment advisor registered with the SEC. The contents
27:52
Speaker 1: of this show are for informational purposes only and should
27:54
Speaker 1: not be considered individual investment advice. Class Financial does not
27:58
Speaker 1: offer tax or legal advice. Any opinion offered during the
28:01
Speaker 1: course of this show is the opinion of that particular
28:04
Speaker 1: investment advisor representative, and not necessarily the opinion of cost
28:09
Speaker 1: Financial