Latest / The Jon Sanchez Show / The Retirement Tax Bomb: How the IRS Becomes Your Biggest Beneficiary

Transcript

The Retirement Tax Bomb: How the IRS Becomes Your Biggest Beneficiary · The Jon Sanchez Show

• Jon G. Sanchez, CEO: Good Wednesday afternoon to you. Welcome to the Jon Sanchez show on News Talk which pleasure to be with you on this hunt day and a pleasure to bring you a whole bunch of news once again. I you what a phenomenal time to have a financial show. I tell you there is never a lack of things to talk about and boy is today no different. We had a lot of things thrown out of direction today. We had some strength, we had some weakness, we had oil prices up, we had oil prices down. But of course all that matters is where we close at one o'clock and it was a small loss today, at least on the downside of things and. small decline on the S &P and a small gain on the NASDAQ. Gonna give you all the details of what happened today, what happened with oil prices, the big eminent news that everyone was awaiting on, which was the strategic petroleum reserve release by 32 countries around the world. Didn't make much of a difference though, gonna tell you why. Then I'm gonna get into my topic, can't wait to talk to you about this. You know, many of you spend, what, 20, 30, 40, sometimes 50 years. building up your retirement accounts, right? You started when you were young, hopefully, and you continue to do that. But you build all this up only to discover that your biggest partner is not your spouse when it comes to your retirement accounts. Your biggest partner is the IRS, that's right. I'm gonna be discussing what I call the retirement tax bomb. How IRAs, 401Ks, required distributions, and even social security taxes. could actually cost you hundreds of thousands of dollars unnecessarily unless you have a strategy. And that's exactly what I'm gonna help you with this afternoon is go through the strategy so you do not have a retirement tax bomb. You know, I was prompted cover this. had a discussion with a client earlier today and were talking about social security, we were talking about capital gains tax, we were talking about all kinds of different things as. He enters into that golden window, as I call it, the five years until retirement. I was running projections with him and going over asset allocations and telling approximately what we think that he can count on when it comes to retirement. And I said, but this is the gross number that I'm telling you. This is the gross number. Because what do you mean? I said, well, obviously, lot of your are in retirement accounts, other than the social security calculation. But with the income that you're expecting in retirement, you're gonna have your social security taxed also. That was a big surprise to him. So by the time we ran the calculations, he went from, oh, let me look at my notes here, roughly, let's see, about $13,000 a month in income to maybe about 10,000. Significant difference. But then I brought on some of my famous strategies, as I like to said, how about you think about forming a small business when you retire? said, what do you mean? So I went through what he does for a living and how I thought that he could form a business, make a little extra money, not that he needed the money, but he's gonna need the tax advantage. He's also a California resident. So he really needs the tax advantages. And the light bulb went on in his eyes. He said, wait a minute here, that's a phenomenal idea. I yeah, I do this a lot for our clients. So there are ways to avoid the retirement tax bomb, but you have to have a strategy into it. You just can't go into it blind. I've shared this with you many, many times over the course of the years of this show. And I said, look at one of the biggest surprises I see people incur when they hit retirement is that first meeting with their tax advisor after they've been retired for a year. And the tax advisor says, well, you you made some really good income being retired, know, portfolio income, social security, this and that and everything else. but you underpaid on your taxes. So therefore going forward, you're gonna have these great things called quarterly tax payments. Well, most people don't know what quarterly tax payments are when you're a business owner, you do, but not if you were a nine to five type employee. And it's a major shock to them. And then they have to restructure their budget because they've got quarterly lump sum payments due. I mean, there's all kinds of things that become a surprise when it comes to taxes when you are a retiree. So I'm gonna lay these out for you and hopefully again, I can avoid some of you. I've kind of geared this towards if you're 10 years or less away from retirement, these are things you really need to start thinking about because we all know 10 years will go by in a blink of an eye. So it's gonna be a great topic for you, the retirement tax bomb, how the IRS can become your biggest beneficiary. We don't want that to happen. Love the IRS, just don't want them to be your beneficiary. let's get down to today's stock market activity. You know, it looked like this could be a day that we could rally. We had two things that we were looking forward to in the pre-market session. The first was a benign CPI report. No one was calling for retail inflation to be anywhere out of whack. So we thought, okay, we can have a pretty benign report that will then bring the Federal Reserve back into the equation, right? We're not hearing much chatter about these, about the Fed, as I mentioned on the show yesterday with Aaron and Dwight. So look, no one's really talking about the Fed. Matter of they're talking about, well, no interest rate cuts this year, but maybe an interest rate increase inflation holds up, meaning oil would have to continue to be strong. But we don't think that's the case. I still think we're going to have one to two interest rate cuts this year. ⁓ as I said on the show yesterday, I still confident that we're going to get a surprise interest rate cut when Kevin Warsh becomes the new Federal Reserve Chairman in mid-May. If he gets Senate confirmation, it's not. There's a few Democrats that are saying, no, we're not going to confirm him and they may stall the process. I don't know. But it's always the gamesmanship among the congressional when it comes to approving the other party coming into a cabinet position or a major like most powerful man in world, the Federal Reserve chairman. So I'm sure they'll get done, but they're going to play some games. anyways. So we come back to what the street is looking for as far as interest rate cuts. So we come into this CPI report today. the line was once this number came out, the market kind of yawned at it because it wasn't really all important of a number when it was all said and done. CPI, this is February's report, CPI month over month was up 3 tenths of a percent. That was right in line with Wall Street's expectation. Year over year, it was up 2.4%, unchanged from the month of January. So that's a good thing. It's still up 2.4%. Now if we look at the core where we strip out the food and energy, that increased 2 tenths of a percent month over month, in line with expectation, and up 2.5 % year over year. Again, unchanged on a year over year basis. So overall, was a fairly benign number. And again, this came out at 5.30, so we still had an hour before the stock market started to trade. But like I said, the market really didn't react all that much to it. Matter of fact, it actually went down a little bit after the report was released. Man, that is really strange. then we go on to the next big ⁓ of the day, is when are the members the International Energy Administration, the IEA, when are they going to release the SPR, the Strategic Petroleum Reserve amounts? So we waited, we waited, and finally that report came out. Don't hold me to this, I think it was around 7, 7.30, somewhere around. And it was a massive number, massive, massive number that I'll share with you the details in a second. But instead of oil prices going down, oil prices actually ticked up. And then they spent the rest of the day just kind of just barely moving a little bit up, a little bit down, so on and so forth. But we finished the day up $3.03 on oil to $86.88. Now listen closely. Tell me if you think based upon this news, oil prices should have risen anything. This should have been one of those big pullback days. But they weren't. And that's the reason that we languished a bit on the downside of things. So let's go to this International Agency report. think I it Associations Agency, International Energy Agency, IEA, and tell you what they said. So I'll preface before I tell you that what I'm going to tell you now is The SPRs, the Strategic Petroleum Reserves, that these 32 countries are going to release is the largest ever, ever in history. Think about that. This goes all the way back to 1974 in response to the oil embargo that was again imposed by the Arabian producers over the US support for Israel during the 1973 Arab-Israel war. It goes all the way back to that time period. We've never seen this number. Here we go. They agreed. Well, actually, you know, before I explain this, let me go back up a step. I'm assuming everyone knows what SPR is. every country, country, I will say, around the world has SPRs, or strategic petroleum reserves. So instead of having an emergency savings account, it's an emergency oil account. ⁓ they have strategic supplies of oil that they have stashed around the world. event of something like this, just like a rainy day fund that most people have as far as emergency cash, but this time it's oil. combined these 33 or 32 countries hold 1.2 billion barrels in SPR. Okay, so keep that number in mind. 1.2 billion barrels. Well, today the IEA said that the members have agreed that they're gonna release 400 million barrels of oil. Think about that. 400 million barrels of oil. That's how bad they see this whole oil situation is on the global economy. Again, a number like this has never, been done. And we only, again, the world only has, like I said, 1.6 billion, sorry, 1.2 billion in overall reserves. So it's a significant number, right? That number came out, like, ⁓ my God, we're gonna see oil prices plummet, we're gonna see the stock market rally. But like I said, oil ended up rising. I'll tell you why when we come back. It's a fascinating story that unfolded today. Let's turn it over to Kristin Snow. She's in the Right Now Traffic Center. Hello, Kristin. Mike the Jon Sanchez showing his talk 780 k which pleasure view with you this Wednesday afternoon. Once again, we're going to get to our topic, the retirement tax bombs, how the IRS can be your biggest beneficiary if you don't plan correctly. But first, let's continue on our story about with the action in today's trading session. So as we finished, like I said, it was it was mixed today. 289 loss on the Dow 0.61 % decline. Dow closed at 47,000 for 17 small gain of 19 on the NASDAQ closing at 22,716. and a very small decline on the S &P 500 down just six points. On the commodity side, as I said earlier, we gained $3.03 on oil to $86.88 at barrel. Gold lost $63.40 to be exact, closing at $5,179.48 an ounce, and a big move in the bond markets. Seven basis point increase on the 10-year treasury yield. 4.21 % was our closing level. All right, let's go back to the oil stories of the day because again, everybody was anxiously awaiting to hear what the International Energy Agency, the IEA, was gonna say this morning. And boy, did they deliver a blow. 32 countries around the world have agreed to release 400 million barrels of oil to address the ongoing disruption issue. Okay, let's do a little bit of math here. Okay, million barrels. we're losing 20 million barrels a day because of the Strait of Hormuz basically having no traffic. Remember, 20 % of the world's output, meaning the oil, flows through the Strait of Hormuz. So we've lost that 20 % of the world. Okay, again, that equates to about 20 million barrels a day. let's do some simple math, right? They're gonna release 400 million, but it's not as good as it sounds. It never is. 400 million barrels are gonna release from these 32 countries. We're losing 20 million barrels. So that means we essentially, let's say they turned on the spigots, everybody turned on the spigots today. Let's just hypothetically say this. And all of a sudden 400 million barrels are released into the global oil system. We take 400 million divided by the 20 million, this is my math, I haven't seen anybody else do this. Take the 400 million divided by the 20 million barrels that we're losing today. That means that release of 400 million barrels is only 20 days worth oil, assuming that no traffic begins flowing, or starts I should say, ⁓ through the of Hormuz. So as we said right now, basically no traffic through the Strait of Hormuz, spigots come on 400 million barrels, that's 20 days. It's not long. It's definitely not long. And I want to share with you some of the comments. that the director of Fatih Barol, he's the director of the IEA, had to save some interesting comments. But this IEA group, again, as I said, there's 32 members, mainly all advanced economies from Europe, North America, Northeast Asia, et cetera. Of course, we're part of it also. And again, this group was created, as I said earlier, after the 1974 oil embargo mess. But 400 million barrels, they have never, ever released this amount. Okay, so once again, here's what the gentleman had to say. He said, conflict in the Middle East is having significant impacts on global and gas markets with major implications for energy security, energy affordability and the global economy for oil. He says, I now can announce that the IEA countries have unanimously decided to launch the largest ever release of emergency oil stocks in our agency's history. As I said, they own 1.2 billion barrels and here they're letting go of 400 million. Now, just as a little side note, again, they've got 1.2 billion altogether. There's an additional 600 million barrels under government obligation. I don't know what that term means under government obligation, meaning they're basically already planned to be used by the government. I don't know. It's a very vague term, as you'll find out here, along with the rest of the announcement of the IEA today. Now the chief went on to say the release is designed to address the immediate impacts of the supply disruption, but tanker traffic must resume through the Strait of Hormuz to bring stable oil and gas flows back to the global markets, he said. see. ⁓ I want to mention this. Japan, earlier today, the IEA announcement, ⁓ their prime said that the intends to release oil stockpiles from its natural reserves as early as next week. Some are saying Monday, citing an exceptionally high level of dependence on the Middle East. You know, again, as keep touching on each and every day on the show, ⁓ keep in mind, again, % of the world's oil flows to the Strait of Hormuz. It's not flowing right now. That equates again to about 20 million barrels a day. And most importantly, ⁓ China gets a vast majority of its oil from the Strait of Hormuz, from the Gulf region there. So they're not getting that. And that's why I shared with you yesterday, I had a client say that ⁓ he saw some news stories where there's mile long gas lines in Now, let's see, chief painted a dire of the situation. Middle East producers are cutting production ⁓ and the refinery operations disrupted. ⁓ with major implications for diesel and jet fuel supplies in particular. continue to damage energy and energy related infrastructure. That's great point that the ⁓ gentleman from the IEA. No one's really talking about that. All we're about is, OK, miracle happens, Strait Hormuz is open, ships start going and everything's going to be fine. It doesn't work that way. In reality, I heard one on CNBC today make a point that it was good. He was an oil analyst and he said, no one's talking about is it takes a minimum, minimum weeks. for an oil tanker to get ready to sail, to get loaded, to get the ship ready, to get the crew ready, to get the cargo ready, to get everything. So it's not like, again, they can just pick up and the car and head on out. It doesn't work that way. It takes weeks, if not longer. And from what I'm hearing, I don't hear anybody saying, ⁓ yeah, all these big oil tankers, the 70 plus that are in the straight, ⁓ they're just sitting there they're up at the dock and they're loading and everything. No, CNBC reported today that a bunch of these tankers got hit with fragments from drones today. So it's a very, very intense situation going on there. And we haven't touched on really since the war began is the natural gas, the LNG side of things. That's been reduced by 20%. So, you know, natural gas, has to be chilled, it has to be put into liquid form, then it's loaded on the tanker for export. Now remember, that's used for electricity production, home heating around the world, used for so many different things. So no one's even talking about that. you the bottom line is, let's go back to the release of 400 million barrels. Here's the problem that a lot of people have, including myself. Number what type oil is the IEA, these members, gonna release? Is it West Texas? Is it crude? Is it this? Is it that? Remember, there's all different kinds of oil around the world. They didn't say that. So a country may be able to release it, but then it's got to go through the refining process before it can be put into cars and homes and everywhere else that it needs to go, and into gasoline, diesel, et cetera. When are they going to do that? We don't know. They left that little minute fact out of the announcement today. They were focused in on 400 million barrels. They thought that was going to calm the market. And I think that's why we saw oil prices rise today. It was very, very lax as far as details. We don't know the type. We don't know when it's going to start. We don't know how long it's going to start or how long it's going to last. We don't know really anything about it other than there's going to be 400 million barrels. We don't know what countries it's coming from, so on and so forth. So remember the term that I said yesterday on the show, I said jawboning, that the president can move the market good or bad by jawboning? Well, I think investors both in the commodity side of things as well as in the stock market side, and I'm talking globally on the stock market side, are getting tired. They're getting tired of being jaw boned by government agencies, presidents, prime ministers, et cetera. nothing. You gotta remember, investors, especially commodity traders, they've gotta sink their teeth into something. They need something definite. And right now we're not getting it from anybody. All we're hearing are ideas and strategies and we're going to do this, we're going to do that. Well, remember the US government said that they're going to, you know, park about $20 billion to help ensure some of the ships coming out of the strait? Well, today the insurance giant, Chubb, came out and said, we're going to be the biggest insurer. So what happened to the government on that one? So this is what saying. I'm not criticizing the president. I'm not criticizing anybody. I'm just saying the markets lack definitive data at this point. And that's, think, why we're just Every day we're just kind of drifting a little bit lower and a little bit lower and a little bit lower. And the final thing I want to mention before we go to the show or go to a break, we've got to watch, I haven't touched on this in quite some time, but it is a brewing problem. I told you it's the cockroach theory where there's one problem, there's more. And it's starting to come that way. Concerns in the private credit market. There is one firm called Cliffwater. They're a $33 billion private credit fund. Their redemption's reached 14 % today. So what's happening, these private credit funds, They've lent a bunch of money to AI-related companies, mainly software companies. And now, because of various reasons, investors want their money back. Well, once again, these private company, private equity firms like this, they're like, hey, you gotta read the fine print. We don't have to give you all your money back. A lot of them are like a 5 % of your redemption. Well, this company, again, got hit with 14 % redemption. They're like, nope, we can't do that. So when you start doing that, that creates panic in the street. That makes other... private equity or private credit fund investors of other companies begin to panic saying, uh-oh, there's a liquidity problem in the industry brewing. add insult to injury, this morning JP Morgan came out and that they've reduced the value of their loans, pledged as collateral by some of these private credit companies. Remember the old 0809 market meltdown? Well, that was called mark to market. If those of you listened to me back then, ⁓ that's you say an asset is worth, I'll pick a number of $100 onto your balance sheet. And then of different market factors, you gotta go. Nope, it's only worth, I don't know, a dollar. So you have to write that down. That impacts the financial statement of the fund. And it's, ⁓ again, just a cascading effect. So don't have time to spend a lot on that one. But that is something, again, we got to continue to watch in the background as this problem going on with the funds going on around country, around the world, actually. All right, turn it over to Jack Saban. He's got News, Traffic, Weather. Hello, Jack. Welcome back to the Jon Sanchez Show on Newstalk 780k, which time to get down to the retirement tax bomb, how the IRS can become your biggest beneficiary if you are not careful and you don't have a plan. listen closely, because I'm going to give you that plan. But first, let's go back to the market. 289 loss on the Dow. NASDAQ, again, gained 19 points in the S &P 500, lower by 6. All right, I spent the first half hour going through the details of today's market activity. Now let's get to our topic. retirees are not prepared. Let's kind of go back to what I like to call some of biggest misunderstandings in retirement. I've heard this so many times from clients over the years. My IRA is my money, it's nobody else's, right? Individual retirement account. Well, in reality, your traditional IRA is tax deferred. not tax free. Every that you would draw from a tax deferred investment becomes taxable ⁓ ordinary Not the lower capital gains tax. I get this question a lot. People are like, oh, you know what? I want to sell this highly appreciated investment that's inside my IRA. So I'm going get the preferential capital gains tax treatment, either 15 % or 20%. I'm like, no, no, no, no. There is no capital gains tax inside of an IRA account. It's all ordinary income tax. They're like, well, what do mean by that? I it's just like a wage that you earned. You've got to pay income tax on it, state and federal, if you're in a state that has state income tax, obviously. So like I said, the discussion I had with my client today, California resident, I had to keep reminding him, not only are going to pay federal income tax, but you're going to pay state of California income tax. And let me tell you, depending upon where your income level is, that number can go from roughly 5 % I see on average, all the way up to 13.3%. So if you're in the top bracket on the federal side, if you're just clicking right along, life is real good, and everything's going fine, and you make it to that top bracket of 37 % Well, guess what? Remember, anything over 768,000 or anything between 206,000, I'm talking filing jointly. So anything between, what will this call, make it simple here for discussion sake, anything over 768,700, you're at 37%. 35 % ends at 5, 12, 4, 50, and then up to 768, 700. You're at 37%. Add that to a state. Again, very easy to get up to almost a half, almost 50 % taxes. Pretty significant because again, all this money has been growing tax deferred. So this is one of most important things we have to do when we calculate retirement income, right? What's it really gonna cost? You know, just to make the numbers really simple, let's say you had a million dollar IRA. Say you're in the 25 % tax bracket, you decide to cash out that IRA. Crazy thing to do. I know I didn't want to cash out a million dollar IRA, but if you did, you're gonna pay 25 % in tax. Maybe not. You're probably going to pay 37%, as I just said, plus state if you're in a state that has the state tax. So in theory, you can kind of say, all right, if I have a million dollar IRA and I'm in the 37 % tax bracket, I'm going to lose 37 % if I take all my money out. And again, I know it sounds so basic. But let's make the number simple. Let's go to 25%. You're in the 25 % bracket. You got a million dollar IRA. Guess what? You really only have a $750,000 IRA. Because again, if you close the whole thing out, all the money out, government's going to get 25 % or $250,000. You get $750,000. So a million dollar IRA, your real value is really about $750,000. You gotta always remember that. Stole a lot of confusion in regards to the required minimum distribution. Remember after COVID and some other economic events, the government went from 70 and a half age limit before you had to start taking money out of your IRA. Now we're at 73. So remember at age 73, the government requires you to start an R &D or required minimum distribution. This can become a huge tax bomb for people. Now there's a calculation. I'm not gonna go through it obviously. But roughly you can figure out for your first year, it's generally, my underlined word generally, starts at about 4%. You have to take that out. If you're not taking at least 4 % out that first year after you're age 73, you're going to pay a substantial penalty. So you'll always want to take your RMD out. But even if you don't, here's the problem. a lot of complaints I hear from clients are like, I don't want the money. I don't need the money. What can you do to help me? And I'm like, I can't do anything unless we offset it with some other deductions and things. But the bottom line is you have a million dollar IRA, you got to take 40 % out, there's $40,000 worth of income that you weren't expecting. That's why the RMD, if you're up at 73 or above, that has to be calculated each and every year in your tax calculations. It's a forced IRS withdrawal. There's no way to get around it. So what are our risks with that? What's the tax bomb ideas there? Higher tax brackets. Also, it can impact your social security, which I'll get to in just a moment as far as the taxation on your social security. It can impact your Medicare surcharges and obviously less control over your income. So these can be really nasty and especially, again, a whole other subject. you wait until basically you turn 74, and I said 73, but there's a strategy where you can actually defer it until April of the following year after you turn 73. But to catch you in the tax bomb there is if you take it out in 74, you got to take it out for when the year you turn 73 and for the year you're 74. So in that example where you're taking 40 grand out, guess what? Now you're gonna take 80,000 if not more out. Definitely a good chance to move into a higher tax bracket. So you gotta plan for that. The next one is what I call the widow slash divorcee tax trap. Now this is a huge tax bomb. It's missed so many times. Here's what happens. Let's just use the divorce because it's the same for the widow side. You get a divorce, okay? And you think, okay, you don't think, give much thought, right? Your life has gone to hell, so you're not giving much thought to taxes, but you need to. And a lot of divorce attorneys I'm finding don't tell our clients about this, so we have to bring it to their attention. So here's what happens. You get divorced, your tax filing status changes from joint, married filing joint. to single. Same income, but guess what? Now you're in a higher tax bracket. I'm going to cheat if you're watching me on YouTube right now. I'm going to cheat. I'm going look over to my tax chart. I just want to give you an example. So I'm just talking on the federal side, right? Not even mentioning the state side. So let's pick an income. Let's say a maximum income of $201,775. Filing joint, your tax is going to be at the 24 % bracket. $17,966 in taxes. I'm sorry, that's if you're single. Pardon me, pardon me. $201,775 your tax at 24 % bracket, $17,996. If we go to the 24 % bracket for a married couple, you can make up to $403,550. You see how you're losing that higher bracket when you are single? And. I gotta do a show on this because there's another gotcha as far as the timing of your divorce, whether you divorced by a certain month of the year and you can still file a joint or if you get a file single, ⁓ a whole different mess there. But the bottom line is if you get divorced or forbid you lose your spouse and you have to again turn around and file single, be very, very aware. Make sure you talk to your accountant right away and figure do I need adjust my withholdings? What do I need to do? Because if you go from joint down to single, you're probably gonna go into a completely different tax bracket. Now sometimes, of course, you lose pensions and other forms of income, so it's not always a guarantee, but for most people that I have seen, when they get the divorce, they end up in a higher tax bracket when they're single. Another one that's not even related to taxes, insurance. I've seen it before where you get divorced and now you're a single person, your insurance company raises your rates. For some reason, they love married people. I'm not talking 20, 30, 40-year-olds, I'm talking 50, 60-year-olds. So you gotta watch that with your insurance company too, if you again lose your spouse or you get a divorce. right, we'll come back and talk about the social security tax bomb when we return. Let's wrap it up with Kristen Snow, right now at Traffic Center. Hello, Kristen. for the Jon Sanchez Show on News Talk 780-KOH again, a ride on the street today. Didn't look like it by the time everything closed, but again, that matters is at one o'clock, 289 loss on the Dow, Nasdaq rose 19, S &P down five. All right, get down to our back to our topic, the retirement tax bomb. Again, you gotta plan very carefully. you're, let's say five, 10 years ideally, but if you're definitely within that five-year window, please give us a holler. We'd love to sit down with you, talk to you about the tax planning side of it for your retirement investments, right? I've helped thousands of people over my career do this. very critical because so many times everything based upon, ⁓ I'm gonna make X amount of dollars for my portfolio and my social security and everything else, and people fail to account for the taxes. ⁓ And all of sudden they start taking money out and, you know, everything that I've mentioned today, I'm not gonna repeat it. Let's go to the social security tax bomb. So remember folks, to 85 % of your social security can become taxable. Now remember, if you're single, If you make more than $34,000, your benefit, up to 85 % of your benefit's gonna be taxable. Just 34,000. But if you're married, 44,000. So you can, again, get to that income threshold really easy through IRA withdrawals, through pensions, through portfolio income coming out, whatever it is. Not too hard to get above that number these days. And again, all of sudden you're expecting X amount of dollars on your social security benefit, and then you get it and you go. Oh my God, I just got taxed, know, up to 85 % of my benefits taxed. Big, big nasty surprise. But let's leave you with some good news here. proper planning, there's many different things that you can do to lower this retirement tax bomb. You look at things like Roth conversions. You may be going, well, wait a minute here. If I convert a traditional IRA to a Roth, that's a taxable event. It is. again, you really have to run the numbers to see if it makes sense. Usually for the clients in their younger years, it makes a lot of sense. But when we get older, ⁓ You have to really sit back and calculate and go, okay, I'm gonna end up paying, I'll pick a number, $20,000 in income tax to convert this traditional IRA to a Roth. Sure, my Roth is gonna continue to grow tax-deferred, but it's gonna come out tax-free after I've owned it for five years. How long is it gonna take for me, is what people forget. How long is it gonna take for me to make back when I'm paying the IRS in taxes that $20,000 hypothetical here? A lot of times people don't account for that and you have to. The income smoothing side of things is another strategy we love to do. And that's again where we look at sure that we have a smooth flow of income from various sources, not just one, not ⁓ but as many income sources as we can. Three, withdraw sequencing. A good accountant, a good financial advisor, et cetera, will sit down with you and say, wait a minute, let's talk about withdraw sequencing, which is to make sure that you don't bump up to some of these higher brackets like I've mentioned. One the worst things that... people can find out is they were so used to for so many years being in a, I'll just pick it, 25 % bracket or somewhere around there. And all of a sudden they jump up to a higher bracket and it really screws them up. So that's again called withdraw sequencing where you try to plan. maybe instead of taking, let's say you're on a systematic withdraw, you know, for, I don't know, 11 months out of the year, you're taking, I'll just pick a number, $3,000 a month out of your IRA account. Well, withdraw sequencing, you may go, you know what? I'm going to budget so that I don't have to take that 12th month of income out. So I don't have to account $3,000 worth of income in December because I stopped it. But in January, maybe I'm going to take $6,000 instead. That's income sequencing or withdraw sequencing. Then, course, we talk about tax bracket management. We already touched on that. ⁓ And let's not forget one of my favorite topics, which is the estate planning strategies. There's a lot of things you can do from an income tax standpoint in regards to estate planning strategies. especially if you are in a high income bracket, if you're a high net worth person, there's all kinds of trust strategies that you need to take a look at, again, minimize the taxes. Not so much on the retirement side, but more so on the estate planning side and for those that are gonna inherit your money. So a lot things are out there. You just need a great financial advisor. We hope that you think of us when you wanna get one. Or if you have one, maybe you need a different one. Thanks so much for me today. I do appreciate it. God bless. Have a great afternoon. We'll see you tomorrow on the Jon Sanchez Show.