Latest / Money In Motion with Klaas Financial / Getting to Know ROTH

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Getting to Know ROTH · Money In Motion with Klaas Financial

• 0:10
  Speaker 1: Great opportunity right now.
• 0:12
  Speaker 2: If you've got a question for our retirement planning professionals,
• 0:15
  Speaker 2: give us call. We'll get you right on the air.
• 0:17
  Speaker 2: Six oh eight three two one thirteen ten. That's six
• 0:20
  Speaker 2: oh eight three two one thirteen ten gets you on
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  Speaker 2: the air with CJ Closs and Eric Schwartz again. They
• 0:24
  Speaker 2: are our retirement planning professionals from Class Financial.
• 0:27
  Speaker 1: You can learn more online the website class financial dot com.
• 0:30
  Speaker 2: That's Class k l aa S financial dot com and
• 0:34
  Speaker 2: their telephone number six oh eight four four two five
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  Speaker 2: six three seven. No charge for the initial get to
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  Speaker 2: know your appointment at Colss Financial. It will be complimentary
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  Speaker 2: to you again their telephone number six O eight four
• 0:45
  Speaker 2: four two five six three seven. C J, how you
• 0:47
  Speaker 2: doing this morning?
• 0:49
  Speaker 3: I'm doing great. Is a little bit slick on the
• 0:51
  Speaker 3: way in this morning, but besides that doing well.
• 0:53
  Speaker 1: That is a little slippery out there. Good to hear. Eric.
• 0:56
  Speaker 1: How is your drive in this morning?
• 0:58
  Speaker 4: You know it was it was slip as well, But
• 1:01
  Speaker 4: meet it in without any injuries.
• 1:02
  Speaker 2: That's the That is the ticket that is key on
• 1:05
  Speaker 2: days like dan as we're talking about this, do be
• 1:07
  Speaker 2: carefully on those sidewalks even are very very icy this morning.
• 1:11
  Speaker 2: We're going to talk about about conversions this morning and
• 1:15
  Speaker 2: roth conversions and what folks need to know. It's a
• 1:17
  Speaker 2: it's a really cool conversation, I head, so you're definitely
• 1:20
  Speaker 2: gonna want to sit tight for that. A couple of
• 1:21
  Speaker 2: things too, to keep in mind as we have our
• 1:23
  Speaker 2: conversation with every tirement planning professionals from COSS Financial, don't
• 1:26
  Speaker 2: forget if you ever miss part of the program, or
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  Speaker 2: you want to listen back to it, or you want
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  Speaker 2: to share it, if you head on over to Classsfinancial
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  Speaker 2: dot com. There's a link to the podcast right there
• 1:34
  Speaker 2: again the website class Financial dot com. Telephone up for
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  Speaker 2: Class Financial six oh eight four four two five six
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  Speaker 2: three seven. I want to hold on to that telephon
• 1:42
  Speaker 2: number as well, because later in the program we'll do
• 1:43
  Speaker 2: the Class Quiz Question the Week, your chance to win
• 1:46
  Speaker 2: a fantastic prize provided by our friends at Class Financial.
• 1:49
  Speaker 2: This week's prize a twenty five dollars gift card to
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  Speaker 2: Texas Roadhouse. Pay close attention because most of the time,
• 1:54
  Speaker 2: the question and answer to the Class Quiz Question of
• 1:56
  Speaker 2: the Week come up during each week's program before.
• 2:00
  Speaker 1: We get to this week's conversation.
• 2:01
  Speaker 2: Let's actually roll back and take a look back at
• 2:03
  Speaker 2: last week's show and get the question and answer there
• 2:06
  Speaker 2: as well.
• 2:08
  Speaker 4: Yeah, so thank you to everyone for listening. As always,
• 2:11
  Speaker 4: our question for last week was what is the new
• 2:14
  Speaker 4: standard deduction for single taxpayers in twenty twenty five? Your
• 2:18
  Speaker 4: choices were ten thousand or fifteen thousand dollars and our
• 2:22
  Speaker 4: winner from last week, Sandra from Middleton, knew the correct
• 2:26
  Speaker 4: answer was fifteen thousand dollars.
• 2:28
  Speaker 1: Congratulations Sandra.
• 2:30
  Speaker 2: You two can be like Sandra's Pekle's Tension program your
• 2:33
  Speaker 2: chance to win a twenty five dollars gift card to
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  Speaker 2: Texts Roadhouse and we'll do that a little bit later
• 2:37
  Speaker 2: on in the program. As mentioned today, we're going to
• 2:39
  Speaker 2: be talking about an essential topic for retirement planning, and
• 2:42
  Speaker 2: that is roth iras WROTH four to oh one case
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  Speaker 2: and of course roth conversions CJ.
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  Speaker 1: What in those areas do we need to know?
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  Speaker 3: Yeah, this is This is a fascinating subject with a
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  Speaker 3: lot of nuances, So I encourage people to listen kind
• 2:57
  Speaker 3: of carefully and closely, and obviously talk to your advisor
• 2:59
  Speaker 3: or out to us if you have any questions after this.
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  Speaker 3: But many people are familiar with the traditional retirement savings vehicles.
• 3:07
  Speaker 3: These are things like four to one k's, four H
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  Speaker 3: three b's, and iras. But understanding the WROTH options can
• 3:13
  Speaker 3: really elevate your retirement strategy. The choices available to you
• 3:17
  Speaker 3: do often depend on whether or not your employer offer
• 3:20
  Speaker 3: certain of these elements, and of course your personal financial situation,
• 3:24
  Speaker 3: so you know, make sure again that you talk to
• 3:26
  Speaker 3: your advisor or your accountant as a follow up to
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  Speaker 3: anything we discussed today. But traditionally, contributions to retirement accounts
• 3:33
  Speaker 3: have been made on a pre tax basis. That's often
• 3:37
  Speaker 3: why they call them traditional IRA contributions. Traditional just means
• 3:42
  Speaker 3: the longest standing and the longest standing rules were that
• 3:46
  Speaker 3: you could make pre tax contributions to your retirement account,
• 3:49
  Speaker 3: whether through your employer's sponsored retirement plan or a traditional IRA.
• 3:54
  Speaker 3: This approach allows your money to grow tax deferred, but
• 3:58
  Speaker 3: you'll pay taxes when you start withdrawing funds in retirement
• 4:01
  Speaker 3: based upon your tax rate at that time in retirement.
• 4:05
  Speaker 3: So you get the idea. The traditional contributions have been
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  Speaker 3: around for a long time. I earn one hundred thousand dollars,
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  Speaker 3: I put ten thousand dollars into a four to one
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  Speaker 3: K plan on a traditional pre tax basis, meaning I
• 4:16
  Speaker 3: save the taxes on that ten thousand dollars. It then
• 4:19
  Speaker 3: grows tax deferred, and when I get into retirement, then
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  Speaker 3: I pay ordinary income taxes on that when I pull
• 4:26
  Speaker 3: it out. However, since the introduction of roth iras in
• 4:30
  Speaker 3: nineteen ninety seven, individuals have had the opportunity to save
• 4:34
  Speaker 3: for retirement using after tax dollars. And yes, you did
• 4:38
  Speaker 3: hear me right, nineteen ninety seven, it's not that old, everybody.
• 4:43
  Speaker 3: Roth IRA contributions are kind of a newer concept when
• 4:46
  Speaker 3: we think of it in the in the grand scheme
• 4:48
  Speaker 3: of things here. And while you don't get an upfront
• 4:52
  Speaker 3: tax deduction on ROTH contributions, the key benefit is that
• 4:55
  Speaker 3: qualified withdrawals in retirement are generally tax free. So often
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  Speaker 3: Eric and I when we're talking to people will say
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  Speaker 3: traditional contributions are pre tax, tax deferred and then taxable.
• 5:08
  Speaker 3: WROTH contributions are basically the opposite. You get no tax
• 5:13
  Speaker 3: deduction today on a WROTH contribution, it grows tax free,
• 5:18
  Speaker 3: and as long as you abide by the rules, which
• 5:20
  Speaker 3: we'll be talking about here in a little bit, when
• 5:22
  Speaker 3: you get into retirement, you pay no tax on the withdrawals. Now,
• 5:27
  Speaker 3: I will warn everybody as I start going into some
• 5:29
  Speaker 3: of the key aspects of this, there are some errors
• 5:32
  Speaker 3: that people make in their simple logic, which is tax
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  Speaker 3: free is better than taxable. So I'll do all wroth
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  Speaker 3: no matter what. Now, that's not really the way the
• 5:41
  Speaker 3: math works out on this. If you don't believe me,
• 5:43
  Speaker 3: call us and we'll walk you through the math. Then
• 5:45
  Speaker 3: you'll have a couple of aha moments where you go, oh,
• 5:48
  Speaker 3: that's true. That's true. So roth versus pre tax is
• 5:51
  Speaker 3: a lot more nuanced than just one sounds better than
• 5:54
  Speaker 3: the other. There's a lot that goes into that consideration.
• 5:58
  Speaker 3: But here's some important aspects to consider about roth irays.
• 6:02
  Speaker 3: So wroth iray contributions are made with after tax dollars.
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  Speaker 3: Again a meeting, there's meeting, there's no immediate tax deduction,
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  Speaker 3: and in essence, you pay taxes now to enjoy tax
• 6:12
  Speaker 3: free withdrawals later. Contribution limits for roth irays are the
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  Speaker 3: same as traditional iras, so in twenty twenty five you
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  Speaker 3: can contribute up to seven thousand dollars to a roth
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  Speaker 3: ira if you're under fifty and eight thousand if you're
• 6:26
  Speaker 3: over fifty. Thanks to what's called a catchup contribution, you
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  Speaker 3: do need to have earned income to contribute to a
• 6:33
  Speaker 3: roth ira, and if your earnings are less than the
• 6:36
  Speaker 3: contribution limit, then you can only put put in money
• 6:40
  Speaker 3: up to the amount that you earn. Furthermore, you can
• 6:43
  Speaker 3: do contributions for non working spouses, again provided that you
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  Speaker 3: have enough income to support those contributions. One of the
• 6:52
  Speaker 3: most important things about roth contributions is income eligibility. In
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  Speaker 3: twenty twenty five, single file can contribute fully with income
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  Speaker 3: under one hundred and fifty thousand, and then they're phased
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  Speaker 3: out between one fifty and one sixty five, and for
• 7:09
  Speaker 3: married couples filing jointly, contributions are allowed under two hundred
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  Speaker 3: and thirty six thousand, with phaseouts from two thirty six
• 7:15
  Speaker 3: to two forty six. Some of you are going, what
• 7:17
  Speaker 3: the heck are you talking about. Well, you have to
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  Speaker 3: have earned income to be able to contribute to a wroth,
• 7:23
  Speaker 3: but you can't have too much earned income. That's the
• 7:26
  Speaker 3: idea here, right, So if I want to do a
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  Speaker 3: roth ira, and the key component here is ira wroth
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  Speaker 3: war one days are different. We're going to be talking
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  Speaker 3: about that in a moment when Eric gets to it.
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  Speaker 3: But if I want to make a contribution to a
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  Speaker 3: roth IRA, I have to have earn enough earned income
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  Speaker 3: to offset that contribution. But if I have too much
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  Speaker 3: earned income, then I am phased out of having the
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  Speaker 3: ability to make that contribution. So some interesting things, and
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  Speaker 3: I will just say, you can contribute to a roth ira.
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  Speaker 3: One one quick point. You can contribute to it up
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  Speaker 3: to the tax filing deadline. You can do what are
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  Speaker 3: called like prior year contributions right before April fifteenth of
• 8:04
  Speaker 3: this year. If you talk to your account and you
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  Speaker 3: account says you should do a roth IRA contribution, you
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  Speaker 3: can actually attribute that contribution to the prior year up
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  Speaker 3: into the tax filing up until that tax filing deadline.
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  Speaker 3: So there you go. A few things to know about
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  Speaker 3: roth iras.
• 8:17
  Speaker 1: Really good stuff this week with CJ.
• 8:19
  Speaker 2: Closs and Eric Swartz, our retirement planning professionals from Class
• 8:22
  Speaker 2: Financial their website Class financial dot com. That's Class k
• 8:26
  Speaker 2: l a A S financial dot com. I hope you've
• 8:29
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• 8:30
  Speaker 2: check that out. If you haven't, head on over there
• 8:32
  Speaker 2: this morning. Don't forget you can listen back to the
• 8:34
  Speaker 2: podcast on the website and subscribe as well. Speaking of subscribing,
• 8:38
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  Speaker 2: you again their number six oh eight four four two
• 9:00
  Speaker 2: three seven. So Eric, Now, let's just say you have
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  Speaker 2: access to a four WROTH four oh one K. Should
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  Speaker 2: you consider contributing to that?
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  Speaker 4: Yeah, that's a great question, Sean. And as TJ said,
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  Speaker 4: we were we've been talking here about roth iras. So
• 9:16
  Speaker 4: those are individual retirement accounts, but when we get into
• 9:20
  Speaker 4: the employer sponsored plan space, things get a little bit more. Well,
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  Speaker 4: you get a few more options. So a ROTH Flora
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  Speaker 4: one K is an employer sponsored retirement account that allows
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  Speaker 4: you to contribute after tax dollars, just like a ROTH IRA,
• 9:35
  Speaker 4: which gives you the opportunity for tax free growth, tax
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  Speaker 4: free withdrawals in retirement, and these these were introduced around
• 9:43
  Speaker 4: two thousand and six, but honestly it was a pretty
• 9:45
  Speaker 4: slow adoption for employers. But they've gotten pretty popular here
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  Speaker 4: over the last couple of years, and as of a
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  Speaker 4: couple of years ago, now almost ninety three percent of
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  Speaker 4: employers offer a ROTH four one K option. Now, one
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  Speaker 4: thing to know about WROTH for one ks is it's
• 10:03
  Speaker 4: not actually a separate account that you're opening. So often
• 10:06
  Speaker 4: people say, well, I only have a pre tax four
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  Speaker 4: O one K or a ROTH four oh one K.
• 10:12
  Speaker 4: It's all one account. It's just whether or not the
• 10:14
  Speaker 4: employer allows you to put WROTH dollars into the account,
• 10:17
  Speaker 4: and then the record keeper obviously is going to is
• 10:21
  Speaker 4: going to keep those separate so that you can understand
• 10:25
  Speaker 4: how dollars are going to be taxed when you're taking
• 10:27
  Speaker 4: them out. But the fact that it's one account is
• 10:29
  Speaker 4: going to come into play here when we talk about
• 10:31
  Speaker 4: contributions in a moment. So whether you should contribute to
• 10:35
  Speaker 4: a WROTH for one K, it depends on a lot
• 10:37
  Speaker 4: of factors. I mean, it depends on your income. You
• 10:40
  Speaker 4: know what your current tax bracket is what we think
• 10:42
  Speaker 4: your future tax bracket will be. But here's just a
• 10:46
  Speaker 4: few things to think about when you're considering whether or
• 10:48
  Speaker 4: not you want to make WROTH contributions to your four
• 10:51
  Speaker 4: oh one K or four oh three B or or
• 10:53
  Speaker 4: four fifty seven whatever type of plan your employer offers.
• 10:57
  Speaker 4: Unlike roth aires, there's no income limit for contributing to
• 11:01
  Speaker 4: a WROTH four to one K, so this actually makes
• 11:03
  Speaker 4: it accessible to higher earners. CJ was talking about some
• 11:07
  Speaker 4: of those those upper upper end income limits that you
• 11:12
  Speaker 4: know a which point you can't put money into a
• 11:13
  Speaker 4: roth iray, we avoid that on the WROTH forur oh
• 11:16
  Speaker 4: one K side, And speaking of contributions for for twenty
• 11:20
  Speaker 4: twenty five, the total contribution limit to a four to
• 11:23
  Speaker 4: oh one K, so that includes any dollars you put
• 11:26
  Speaker 4: in before taxes or traditional and wroth, so the total
• 11:31
  Speaker 4: is twenty three thousand, five hundred or thirty one thousand
• 11:34
  Speaker 4: dollars if you're over fifty and you take advantage of
• 11:36
  Speaker 4: that catchup and then we've talked about this before too,
• 11:39
  Speaker 4: but if you're between sixty and sixty three, you can
• 11:43
  Speaker 4: actually add an additional ketchup contribution of eleven, two hundred
• 11:47
  Speaker 4: and fifty dollars, which brings your total to thirty four thousand,
• 11:51
  Speaker 4: seven hundred and fifty dollars. Now you don't have to
• 11:53
  Speaker 4: do contributions. You know, you don't have to choose to
• 11:56
  Speaker 4: do all pre tax or all WROTH. You can do
• 11:58
  Speaker 4: you can do some of both. And you know that's
• 12:01
  Speaker 4: something that your advisor can help you determine based on
• 12:03
  Speaker 4: your your tax strategy and where you are in life.
• 12:09
  Speaker 4: One final update, and this is a this is a
• 12:10
  Speaker 4: pretty new one. As of last year, r m d's
• 12:14
  Speaker 4: required minimum distributions are no longer required for four o
• 12:17
  Speaker 4: one ks. So previously you had to actually roll over
• 12:21
  Speaker 4: the WROTH dollars before hitting r m D age or
• 12:24
  Speaker 4: they would make you take out. You know that whatever
• 12:27
  Speaker 4: portion was attributable to your ROTH dollars from your four
• 12:30
  Speaker 4: oh one K, now you didn't have to pay taxes
• 12:33
  Speaker 4: on it, but you lost the ability to continue getting
• 12:35
  Speaker 4: that tax free growth. So this this is a fix
• 12:38
  Speaker 4: that that allows you to avoid those rm ds.
• 12:40
  Speaker 2: The really important updates there for sure. As we talked
• 12:43
  Speaker 2: this week with Eric Schwartz and CJ. Colss, they are
• 12:46
  Speaker 2: our retirement planning professionals from Class Financially. Don't forget their
• 12:50
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• 12:53
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• 12:56
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• 12:58
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• 13:00
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• 13:03
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• 13:10
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  Speaker 2: about their separate divisions, how they can help you or
• 13:14
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• 13:17
  Speaker 2: you at cossfinancial dot com. They're teleph number six oh
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  Speaker 2: eight four four two five six three seven. No charge
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  Speaker 2: eight four four two five six three seven. And if
• 13:31
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• 13:32
  Speaker 2: this morning telephe number here at station six oh eight
• 13:34
  Speaker 2: three two one thirteen ten. That's six oh eight three
• 13:37
  Speaker 2: two one thirteen ten. May have heard us mention Roth conversions.
• 13:40
  Speaker 2: We're gonna get the details from CJ. We will do
• 13:43
  Speaker 2: that next as Money in Motion with Costs Financial continues
• 13:46
  Speaker 2: here on thirteen ten.
• 13:47
  Speaker 1: Wiv A.
• 13:51
  Speaker 2: Talking this week with our retirement plan professionals from Class
• 13:53
  Speaker 2: Financial talking about Roth iras WROTH four oh one k
• 13:56
  Speaker 2: is and Roth conversions and we'll get into those conversions
• 13:59
  Speaker 2: in just a moment.
• 14:00
  Speaker 1: But if you haven't been to the.
• 14:00
  Speaker 2: Website yet, head on over there learn more about COSS
• 14:03
  Speaker 2: Financial and so much more available at cossfinancial dot com.
• 14:07
  Speaker 2: That's k l a A S Financial dot com. They're
• 14:09
  Speaker 2: telling for number six O eight four four two five
• 14:12
  Speaker 2: six three seven. No charge for that initial get to
• 14:14
  Speaker 2: know your appointment at Costs Financial. It will be complimentary
• 14:17
  Speaker 2: to you. Again, they're number six O eight four four
• 14:19
  Speaker 2: two five six three seven. So we've talked about accessing
• 14:23
  Speaker 2: WROTH and of course some things some of the interesting
• 14:27
  Speaker 2: aspects of Roth. What about those Roth conversions, CJ, who
• 14:30
  Speaker 2: might be a good candidate for the excuse me, I
• 14:33
  Speaker 2: pardon me, Eric, who might be a good candidate for those.
• 14:38
  Speaker 4: Yeah, that's a great question, and I think CJ probably
• 14:41
  Speaker 4: can answer this question. A lot of our days talk
• 14:45
  Speaker 4: to tell you talking about Roth conversions. Now it's it's
• 14:48
  Speaker 4: it's become a really really interesting topic, mostly because there's
• 14:51
  Speaker 4: a lot of strategies we can employ around roth conversions.
• 14:55
  Speaker 4: And so a roth conversion it basically involves moving funds
• 14:58
  Speaker 4: from a traditional ira or pre tax ira into a
• 15:03
  Speaker 4: roth ira, So you're paying the taxes on the converted amount,
• 15:07
  Speaker 4: and now you get the tax free growth of a
• 15:09
  Speaker 4: roth ira and then obviously tax free withdrawals later. Now
• 15:13
  Speaker 4: you can do this at any age, and it actually
• 15:15
  Speaker 4: avoids that ten percent early withdrawal penalty that people in
• 15:19
  Speaker 4: cur if they take money out of an ira prior
• 15:22
  Speaker 4: to fifty nine and a half. So in this case,
• 15:24
  Speaker 4: you're just taking money from a traditional moving it over
• 15:27
  Speaker 4: to a wroth, so you're avoiding that ten percent withdrawal penalty.
• 15:31
  Speaker 4: But remember the amount that you convert is tax in
• 15:34
  Speaker 4: the year of the conversion. Okay, so it's going to
• 15:36
  Speaker 4: increase your taxes the year that you actually perform the transfer,
• 15:42
  Speaker 4: but then again you're going to get the tax free
• 15:44
  Speaker 4: growth and then tax free withdrawals in the future. But
• 15:47
  Speaker 4: why would someone actually choose to do this, right, Generally
• 15:50
  Speaker 4: people are avoiding taxes and trying to defer them. Well,
• 15:54
  Speaker 4: pre tax retirement accounts they are fully taxable upon withdrawal.
• 15:57
  Speaker 4: So that's whether that's by you or by your your
• 16:00
  Speaker 4: beneficiaries if you don't, if you don't spend all your dollars,
• 16:04
  Speaker 4: but moving the money earlier it does allow you to
• 16:07
  Speaker 4: control the tax rate and you can be strategic about
• 16:10
  Speaker 4: how much you're converting and when you're doing it. And
• 16:14
  Speaker 4: one thing I mentioned there was you know, taxes are
• 16:16
  Speaker 4: due on your your pre tax withdrawals, either by you
• 16:20
  Speaker 4: or your heirs. So keep that in mind because your
• 16:24
  Speaker 4: beneficiaries or your heirs in many cases they are they
• 16:28
  Speaker 4: benefit the most from moalth conversions. So that's something you
• 16:31
  Speaker 4: want to talk through with your with your advisor, depending
• 16:33
  Speaker 4: on your goals. But then this can be a really
• 16:37
  Speaker 4: good strategy for taking a little bit more control over
• 16:39
  Speaker 4: your your tax liability. So let's look at an example here,
• 16:42
  Speaker 4: a recent retiree who maybe hasn't started Social Security yet,
• 16:46
  Speaker 4: or they there's no pension income for them. Maybe they
• 16:50
  Speaker 4: have a large retirement account and they do have you know,
• 16:54
  Speaker 4: maybe they saved up for a couple of years just
• 16:56
  Speaker 4: in their savings account before retirement, and they have tax
• 16:58
  Speaker 4: free dollars they can live off of for a couple
• 17:00
  Speaker 4: of years.
• 17:02
  Speaker 1: Well, they're going to be in a.
• 17:02
  Speaker 4: Really low tax bracket, and they actually might find it
• 17:06
  Speaker 4: advantageous to convert funds during those low income years, right,
• 17:10
  Speaker 4: fill up those those tax those lower tax brackets and
• 17:14
  Speaker 4: get more dollars moved over to WROTH before they actually
• 17:17
  Speaker 4: start their required minimum distributions. Right, So we're accelerating distributions
• 17:22
  Speaker 4: to lower future rmds. We're taking advantage of those lower
• 17:26
  Speaker 4: tax rates. There's lower tax brackets that they're in right now,
• 17:30
  Speaker 4: and it's generally most tax efficient when you do a
• 17:33
  Speaker 4: conversion to actually pay from a separate account like a
• 17:37
  Speaker 4: bank account for the tax rather than actually converting more
• 17:42
  Speaker 4: and then withholding dollars from the conversion, because it allows
• 17:47
  Speaker 4: you to get the most dollars into the WROTH and
• 17:50
  Speaker 4: the most tax free growth.
• 17:52
  Speaker 1: Talking this morning with CJ.
• 17:53
  Speaker 2: Glass and Eric Schwartz, they are our retirement planning professionals
• 17:56
  Speaker 2: from Class Financial. I hope you have a chance to
• 17:58
  Speaker 2: head on over to the website. If not, it's a
• 18:00
  Speaker 2: great time to do that right now. Class financial dot com.
• 18:03
  Speaker 2: That's Class k l aa S Financial dot com. Great
• 18:06
  Speaker 2: resource and website to learn more about colass Financial mentioned
• 18:09
  Speaker 2: the podcast. Not only can you listen back to this
• 18:11
  Speaker 2: in previous shows, you can also subscribe right online at
• 18:14
  Speaker 2: classfinancial dot com. While you're in the subscribe in mood,
• 18:17
  Speaker 2: do what I did. It's been a number of years
• 18:18
  Speaker 2: since I've signed up for the weekly Market Pulse newsletter.
• 18:21
  Speaker 2: It's a great weekly email you received from Class Financial.
• 18:24
  Speaker 2: Gives you a link to the most recent podcast. Also
• 18:26
  Speaker 2: some pertinent, important and important information about things that have
• 18:29
  Speaker 2: been going on in the markets. Again, just head on
• 18:31
  Speaker 2: over to class financial dot com. That's k l a
• 18:34
  Speaker 2: A S Financial dot com for that information. The telephon
• 18:37
  Speaker 2: number for Class Financial six oh eight four four two
• 18:40
  Speaker 2: five six three seven. Again that number six oh eight
• 18:43
  Speaker 2: four four two five six three seven. No charge for
• 18:45
  Speaker 2: that initial gets to know you appointment at Class Financial.
• 18:47
  Speaker 2: It will be complementary to you. You heard Eric allude
• 18:50
  Speaker 2: to what about kids, grandkids, the family? What does that
• 18:53
  Speaker 2: have to do when it comes to Roth conversions? Are
• 18:56
  Speaker 2: there reasons to be thinking wroth if you've got kids
• 18:58
  Speaker 2: or grandkids. With the tails from CJ and we'll do
• 19:01
  Speaker 2: the Money in Motion Class Quiz question week next. As
• 19:03
  Speaker 2: Money in Motion continues right here on thirteen ten, wu
• 19:06
  Speaker 2: ib A talking with CJ. Closs and Eric Schwartz. They
• 19:10
  Speaker 2: are our retirement planning professionals from Class Financial the website
• 19:14
  Speaker 2: Class financial dot com. That's Class k l a as
• 19:18
  Speaker 2: Financial dot com. They're telephone number six oh eight four
• 19:21
  Speaker 2: four two five six three seven. No charge for that
• 19:24
  Speaker 2: initial get to know your appointment at costs Financial. It
• 19:26
  Speaker 2: will be complimentary to you again that number six oh
• 19:29
  Speaker 2: eight four four two five six three seven. Talking this
• 19:32
  Speaker 2: week about Roth iras Roth four oh one ks Roth
• 19:37
  Speaker 2: conversions and CJ. If someone wants to leave assets to
• 19:41
  Speaker 2: maybe their kids or grandkids, does a Roth conversion?
• 19:45
  Speaker 1: Does? Does that make sense in that case?
• 19:48
  Speaker 3: Yeah? It can. Before I mentioned that, I just want
• 19:52
  Speaker 3: to pause on what Eric was just referencing there regarding
• 19:55
  Speaker 3: Roth conversions. Again, we often get people who go, what's
• 19:58
  Speaker 3: the difference between a conversion a contribution? And just remember
• 20:01
  Speaker 3: conversions are money that are already in a retirement account.
• 20:04
  Speaker 3: As Eric mentioned, that gets converted from a pre tax
• 20:06
  Speaker 3: bucket to a Roth bucket, and in so doing you
• 20:09
  Speaker 3: have to pay taxes. They the key element that Eric
• 20:13
  Speaker 3: was talking about. There is often between when you initially
• 20:16
  Speaker 3: retire and maybe when you turn on Social Security or
• 20:19
  Speaker 3: when you initially retire, your highest marginal income tax bracket
• 20:24
  Speaker 3: comes plummeting down. Now for a lot of you, you're like,
• 20:27
  Speaker 3: I don't know if I believe this. I don't understand. Listen,
• 20:30
  Speaker 3: I get it. I totally understand that you are skeptical.
• 20:34
  Speaker 3: But one of the biggest mistakes people can make is
• 20:36
  Speaker 3: assuming they're gonna get it from me in some way.
• 20:39
  Speaker 3: It just doesn't matter. Oh my goodness, that is not true.
• 20:44
  Speaker 3: That is just I'm not saying you're not gonna pay
• 20:47
  Speaker 3: any tax. I'm saying there is a high degree of
• 20:51
  Speaker 3: control that you have over what tax bracket you pay
• 20:55
  Speaker 3: and when. So, for those who are listening to Eric
• 20:58
  Speaker 3: talk about roth conversions, thinking, is this it's really a thing?
• 21:00
  Speaker 3: Should I really be slowing down and thinking about it? Absolutely,
• 21:05
  Speaker 3: especially if you are retiring and gonna not draw SOLI
• 21:09
  Speaker 3: security immediately. Okay, enough rambling about that. Just encourage you all.
• 21:14
  Speaker 3: Talk to your financial advisors, talk to your accounts about
• 21:16
  Speaker 3: this concept of lower marginal income tax brackets after you
• 21:19
  Speaker 3: initially retire. But yes, coming back to your original question, Sean,
• 21:23
  Speaker 3: you know, hey, how does this what does this mean
• 21:25
  Speaker 3: for children and grandchildren? You know, should I be considering
• 21:29
  Speaker 3: roth conversions. If I care about legacy goals, and the
• 21:32
  Speaker 3: answer is absolutely now, it doesn't mean you're gonna do it.
• 21:37
  Speaker 3: It just means it should be an absolute consideration if
• 21:40
  Speaker 3: you care about legacy goals for the children and grandchildren.
• 21:44
  Speaker 3: The Secure Act now requires non spousal beneficiaries. And when
• 21:48
  Speaker 3: I say non spousal, just mean it means anybody but
• 21:50
  Speaker 3: your spouse. That they have to take out all the
• 21:55
  Speaker 3: money from those retirement accounts when they inherit them, generally speaking,
• 22:00
  Speaker 3: within ten years. Okay, So imagine that I leave a
• 22:04
  Speaker 3: pre tax traditional IRA to my children, say my wife
• 22:09
  Speaker 3: has predeceased me. I leave money to my children and
• 22:13
  Speaker 3: they are adults. If I leave them a million dollars
• 22:16
  Speaker 3: in a retirement account that is pre tax, each one
• 22:20
  Speaker 3: of my children has ten years to get all that
• 22:22
  Speaker 3: money out. And if I leave it to them too
• 22:24
  Speaker 3: early and they're working, what do we just talk about.
• 22:26
  Speaker 3: When you're working, your highest marginal income tax bracket is
• 22:29
  Speaker 3: typically higher. And then I leave them this retirement account,
• 22:32
  Speaker 3: I mean, don't mis hear me. That's great and all
• 22:34
  Speaker 3: my children are going to really appreciate that. But the
• 22:37
  Speaker 3: marginal bracket that they're going to pay income taxes on
• 22:40
  Speaker 3: as they pull that money out over the next ten years. Yeah,
• 22:43
  Speaker 3: it's going to be really high. So, as you can imagine,
• 22:47
  Speaker 3: this leads to saying, well, could Dad have done anything different? Now,
• 22:51
  Speaker 3: if Dad dies young and unexpectedly, then the answers generally know.
• 22:55
  Speaker 3: But if Dad would have been a little bit more strategic,
• 22:58
  Speaker 3: and in this case, Dad is me in this, if
• 23:02
  Speaker 3: Dad could have been a little bit more strategic, what
• 23:05
  Speaker 3: Dad could have done is when he initially retired and
• 23:07
  Speaker 3: his income was lower because he's just living off excess savings,
• 23:11
  Speaker 3: and maybe if social securities turned on, but marginal income
• 23:15
  Speaker 3: taxes have come plummeting down, Dad could have converted those
• 23:19
  Speaker 3: traditional IRA dollars to wroth quote unquote, leveling out his
• 23:24
  Speaker 3: tax liability throughout his retirement, and then when he died
• 23:27
  Speaker 3: he would have left the children Wroth money. Now, interestingly enough,
• 23:33
  Speaker 3: Wroth money still has to come out of the Wroth
• 23:35
  Speaker 3: irate to non spousal beneficiaries within ten years. So the
• 23:37
  Speaker 3: same rule of it, I got to get the money
• 23:39
  Speaker 3: out in ten years applies to my children. But what's
• 23:41
  Speaker 3: the difference. It's tax free, that's the difference. So That
• 23:46
  Speaker 3: is the whole concept here of if I'm going to
• 23:49
  Speaker 3: leave money to my children or grandchildren who might be
• 23:51
  Speaker 3: in their peak years when they receive this inheritance, one
• 23:55
  Speaker 3: thing I might want to really slow down and consider again.
• 23:58
  Speaker 3: If legacy planning is one of my goals, and if
• 24:01
  Speaker 3: I'm confident that I can leave money to to them,
• 24:04
  Speaker 3: I may want to really slow down and consider doing
• 24:06
  Speaker 3: a Roth conversion before before I die.
• 24:10
  Speaker 2: Great great guidance this week and a really fantastic show.
• 24:13
  Speaker 2: By the way, If you missed any part of the program,
• 24:15
  Speaker 2: don't forget you can always listen back online Coss Financial
• 24:18
  Speaker 2: dot com. That's Closs k l a A S Financial
• 24:21
  Speaker 2: dot com. Great website and subscribe and listened back to
• 24:24
  Speaker 2: the podcast all on the website. Classfancial dot com. Tel
• 24:27
  Speaker 2: for number six O eight four four to two five
• 24:29
  Speaker 2: six three seven. No charge for that initial gets no
• 24:32
  Speaker 2: appointment at Loss Financial. It will be complimentary to you
• 24:35
  Speaker 2: again their number six O eight four four two five
• 24:38
  Speaker 2: six three seven talking this week with CJ. Closs and
• 24:40
  Speaker 2: Eric Schwartz, and I mentioned the telephone number, went hold
• 24:43
  Speaker 2: on to it because it's time now for the class
• 24:45
  Speaker 2: quiz question. The week works like CJ. By the way,
• 24:47
  Speaker 2: was there something you want to add there? I also
• 24:50
  Speaker 2: I started talking like I think we CJ have somebody.
• 24:53
  Speaker 3: I have one of them.
• 24:54
  Speaker 2: Okay, you know you and I've been doing the show
• 24:57
  Speaker 2: together log enough kind to get a feeling like I'm.
• 24:59
  Speaker 1: Like, I feel like, c you want to add one.
• 25:00
  Speaker 3: More and you can sense it from two miles away.
• 25:04
  Speaker 3: You can sense Sean stop. Hey. One other thing everybody
• 25:08
  Speaker 3: often I mentioned that when your income goes down, So
• 25:11
  Speaker 3: when you retire, say sixty sixty five, whether you turn
• 25:15
  Speaker 3: on Social Security or not, again, generally your highest marginal
• 25:18
  Speaker 3: income tax bracket comes plummeting down again. If you don't
• 25:21
  Speaker 3: believe me on that, just come and I can show
• 25:22
  Speaker 3: you a number of different models of why that happens.
• 25:25
  Speaker 3: But then at seventy three or seventy five, typically these
• 25:29
  Speaker 3: things called required minimum distribution kick on, which then jacks
• 25:33
  Speaker 3: your income back up to those similar higher income tax brackets.
• 25:36
  Speaker 3: So it is really in that range of if you
• 25:38
  Speaker 3: retire before your require distribution age, or even if you
• 25:41
  Speaker 3: partially retire and your income is way lower, it is
• 25:44
  Speaker 3: in those years that often Roth conversions should come into play.
• 25:48
  Speaker 3: In final thought, here we have become so wealthy as
• 25:51
  Speaker 3: a society that people like Eric and I sit around
• 25:54
  Speaker 3: and talk about these tax maneuvers that are really great,
• 25:57
  Speaker 3: really really really great. But if you are sitting here
• 26:00
  Speaker 3: saying legacy goals, I'm just hoping to be able to
• 26:03
  Speaker 3: support myself, that's fantastic. God bless you and like and
• 26:07
  Speaker 3: by the way, we work with tons of people who
• 26:10
  Speaker 3: are not doing roth conversions, right, because really roth conversions
• 26:14
  Speaker 3: are for those people who say, I'm probably pretty good
• 26:16
  Speaker 3: here and I have so much that I'm gonna leave
• 26:18
  Speaker 3: extra to my kids and grandkids. So just understand, you know,
• 26:21
  Speaker 3: kind of the lifestyle the rich and famous here. If
• 26:23
  Speaker 3: that doesn't apply to you, don't feel guilty, and know
• 26:26
  Speaker 3: that we work with a lot of people who do
• 26:28
  Speaker 3: not do this because they're focusing on, you know, making
• 26:31
  Speaker 3: sure they don't run out of money themselves.
• 26:33
  Speaker 2: Really good and thank goodness, I asked you, I had
• 26:36
  Speaker 2: a feel and there was something that's something to add
• 26:37
  Speaker 2: there and a really good perspective for sure.
• 26:39
  Speaker 1: From CJ.
• 26:40
  Speaker 2: Closs and Eric Schwartz, our retirement planning professionals from Class
• 26:43
  Speaker 2: Financial mentioned the website class financial dot com that's colss
• 26:46
  Speaker 2: K l AA S Financial dot com. They're tough number
• 26:49
  Speaker 2: six O eight four four two five six three seven.
• 26:52
  Speaker 2: No charge for that initial get to know you appointment
• 26:54
  Speaker 2: at Loss Financial hich will be complimentary to you.
• 26:56
  Speaker 1: Again.
• 26:56
  Speaker 2: They're number six O eight four four two five six
• 26:59
  Speaker 2: three seven. You want to hold on to that number
• 27:01
  Speaker 2: now because it's time for the class quiz Question the week.
• 27:03
  Speaker 2: It works like this and just a moment, I'll ask
• 27:05
  Speaker 2: you the class quiz question a week. Well, then if
• 27:06
  Speaker 2: thirty minutes from the today's program, call the Class Financial
• 27:08
  Speaker 2: Office right here in Madison at six oh eight four
• 27:11
  Speaker 2: four two five six three seven. If you are the
• 27:13
  Speaker 2: first cost correct answer, you win this week's prize, which
• 27:16
  Speaker 2: is a twenty five dollars gift cards to Texas Roadhouse.
• 27:19
  Speaker 2: This week's coss quiz question the week is this true
• 27:22
  Speaker 2: or false? A wroth Ira conversion means you are paying
• 27:26
  Speaker 2: taxes on the converted amount now in the year of
• 27:29
  Speaker 2: the conversion to enjoy tax free withdrawals later. Is that
• 27:34
  Speaker 2: true or is that false? Telephon number six oh eight
• 27:36
  Speaker 2: four four to two, five, six three seven. If you
• 27:38
  Speaker 2: are the first cost correct answer, you won a twenty
• 27:40
  Speaker 2: five dollars gift card to Texas Roadhouse. And don't forget
• 27:42
  Speaker 2: that's class Financials office right here in Madison at teleph
• 27:45
  Speaker 2: number six oh eight four four two five six three seven.
• 27:48
  Speaker 1: C Jay Eric.
• 27:49
  Speaker 2: It's always great talking with both of you, guys. Enjoy
• 27:51
  Speaker 2: this beautiful day and we'll do it all again real soon.
• 27:54
  Speaker 1: Thanks Sean, Take care guys. Th Sean see Eric. Doctor
• 27:57
  Speaker 1: Marty Greer joins US next year on thirteen ten w
• 28:00
  Speaker 1: I b I