Steadfast Wealth Planning Podcast

Lifetime Tax Strategy: Minimizing Your Financial Burden

• Cody Stansell • Episode 11

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Tax Planning 101: Strategies For Today And In The Future?

Minimizing your tax burden requires more than just annual filing strategies—it demands a lifetime perspective on wealth management. In today's riveting discussion, we dive deep into the world of comprehensive tax planning that most financial advisors and CPAs simply don't address.

The concept of "tax windows" could transform your financial future. These are specific years when your income situation deviates significantly from your norm—perhaps due to an unexpected bonus, job change, or temporary income reduction. By identifying these windows, we can implement strategic moves like accelerating charitable donations during high-income years or executing Roth conversions during low-income periods. These tactical decisions can save you thousands over your lifetime.

For our younger listeners in their 30s and 40s, we challenge conventional wisdom about tax deductions. While the immediate gratification of tax breaks feels good, we explore why prioritizing Roth contributions and HSAs might actually be your smartest long-term play. With historically favorable current tax rates and the likelihood of increasing income (and potentially tax rates) in your future, building tax-free retirement assets now could be your most powerful wealth-building strategy.

Retirement brings an entirely new tax planning landscape that requires specialized navigation. Those transition years between stopping work and claiming Social Security create golden opportunities for tax optimization that many retirees miss. Remember—you're only newly retired once, and maximizing those early retirement years can dramatically impact your financial security for decades to come.

Ready to transform your approach to taxes? Visit Steadfastwealthplanning.com for a complimentary consultation or call 469-606-2040 to start building a tax strategy that works across your entire lifetime, not just until next April.

To learn more about Steadfast Wealth Planning visit:
https://www.SteadfastWealthPlanning.com
Steadfast Wealth Planning
5550 Granite Pkwy, STE 270
Plano, TX 75024
469-606-2040

Speaker 1:

Welcome to the Steadfast Wealth Planning Podcast, where faith and financial wisdom come together. Hosted by Cody Stansel, owner and senior wealth advisor, we provide comprehensive Christian-based financial planning to help families, individuals and business owners build a life they're proud to live. From investment management and tax planning to preparing for retirement, we're here to guide you with clarity, integrity and purpose. Let's get started.

Speaker 3:

Tax season may come and go, but smart tax planning lasts a lifetime. Learn foundational strategies to minimize liabilities now and bless your legacy later. Welcome back everyone. I'm Sophia Yvette, co-host and producer, back in the studio today with Cody Stansel, Senior Wealth Advisor at Steadfast Wealth Planning. Cody, how's it going today?

Speaker 2:

Good morning Sophia. I'm doing well. How are you guys?

Speaker 3:

Also doing well here. Thanks for asking, cody. Now great to have you back on. Let's talk about Tax Planning 101. What are some strategies for today and in the future?

Speaker 2:

Yes, riveting topic taxes. Doesn't everyone love it? We do a lot of tax planning for our clients. It's a passion of mine actually, all joking aside, really is, of all the services that we provide besides managing investments, it's the most beneficial topic of someone's finances in our opinion. So every client wants to pay less in taxes. I've never met someone that's like oh yeah, I don't, I don't care, I'll, I'll pay as much as I can't. Like no one says that everyone wants to pay less in taxes. I've never met someone that's like oh yeah, I don't care, I'll pay as much as I can. Like no one says that Everyone wants to save on taxes. So it's a big topic of ours in our firm.

Speaker 2:

I come from a tax planning mindset and background. My first job out of college was in an accounting department at a bank. My mother's an accountant and over my career I've seen how confusing and complex the tax code is and how clients would love someone in their corner helping them plan around it. Full disclosure I'm not a CPA. I don't claim to be. This isn't tax advice. We don't do tax preparation, but we do coordinate with your CPA, making sure all the T's are crossed eyes are dotted. Also, what we found is not a lot of CPAs do the planning piece, right, they look in the rearview mirror, mirror, send us all of your tax information 1099s, w2, all that and then it's a lot of rear view looking hey, here's your taxes. Okay, see you next year. Right, there's not a lot of planning for the next five, ten years down the road, and that's where we come in.

Speaker 2:

So our view on taxes it's a lifetime of tax. So think of your future. Whether you have 20 years left on this earth or the lord bless you 60 years left, whatever your the rest of your life, you will pay income taxes on your income. That's just how it is. Death and taxes, only two guarantees. How do we lower that overall number over your remaining years of your life? That's the question that we want to answer. Sometimes that means paying more in taxes today to save down the road. Other times it's vice versa Saving today, maybe we'll pay a little bit more in the future. But once you stand back and look at how much taxes that you owed over your lifetime, let's make sure that overall number is as low as it can be.

Speaker 2:

And when clients come on board, if I meet with someone brand new and they decide to become a client, we ask for their last two years of tax returns, just so we have a better understanding of where they are. There's a lot in someone's tax return that will give us insight into their other information in their financial journey. So we talked through that as well and then we practically talk about is there any big changes to your income, any obvious changes that are going to be different than compared to last two years? You got a new job and your income is just a lot higher. Last two years income Tax returns are beneficial, but we obviously got a plan for this year and future years. Maybe you just sold a business. Income is going to be different going forward. Maybe you just retired and you'll have much less income coming in. So there's some obvious differences for the future compared to the past. But the last two years tax returns definitely give us a good insight into your financial plan.

Speaker 2:

So three topics we'll discuss today. We may only have time for two of them. The last one could be its own podcast and we actually probably will shoot one for its own podcast. But the three topics are are there any tax windows in your life? And what I mean by that I'll get into here in a little bit. The second one is if you are younger, recognizing your taxes will probably go up in the future. Younger, recognizing your taxes will probably go up in the future. Right, your income will probably go up, and so how do you plan on that? Once again, lifetime of taxes. Recognizing where you are and where your income taxes will probably be down the road helps you take advantage of this time in your life. And then the third topic that we will make its own podcast. We'll talk a little bit in depth here Tax planning in retirement.

Speaker 2:

That's a big one for folks it's a different ball game and things change and you've never been retired before, so you don't really know. There's a lot of topics we can touch on that. The first two are there any tax windows in your life? What I mean by that is are there any calendar years that are going to be abnormal income to you Higher, lower, whatever it may be? Once again, your company could have paid you a bigger bonus than you could have ever imagined. You didn't think that was going to happen, but here you are and you're in a very high tax bracket for this particular year. Right, that's a great year to get as many tax deductions as we can. Maybe we need to give to our church or favorite charity more this year, not so much next year, but let's give more this year to take advantage of that and get those deductions this year. On the flip side, maybe you were just laid off, or usually you're paid a higher bonus than you have been in the past, but for this year company was slower and you just weren't paid as much. Right, we can take advantage of those tax windows as well. So, prime example okay, let's not give. If we're going to give me the lower tax bracket, maybe let's not give as much to our church or charity this year. Let's give it next year. We'll just take the standard deduction this year, but let's get the bigger tax deduction next year. And that's just one example. You can do several things, but it's looking for those tax windows in your life that you much higher than usual, much lower than usual, and obviously go through there.

Speaker 2:

Another one is if you're in one of those tax window years converting some money from your traditional 401k or traditional ira to a roth ira or roth 401k some people may be aware of this, some people are not you can move money from your traditional 401k into your roth 401k or your traditional ira into a roth ira. It's called a roth conversion. You are converting traditional IRA money into Roth money. Why would you do this? Remember, roth accounts are tax-free when you withdraw them in retirement. We want that bucket of money to be as big as it can be because it's tax-free money to you.

Speaker 2:

With Roth conversions, there are no penalties, but you will just owe regular income tax in the year that you converted over. So if you move 20 grand from your IRA to your Roth IRA, you're just going to receive a 1099 tax document saying you have to pay taxes on that $20,000 that you moved over. Once again, no penalty, just ordinary income tax. So, once again, if you're one in one of those lower years hey, cody, I was laid off in May, you know, and I'm looking for a job at nothing, nothing. Yet we can take advantage of that year and hey, that might be a great year to move some of that money in that particular year when you're in a lower bracket, right? So those are just a few topics that we want to discuss with clients is are there obvious tax windows in your life?

Speaker 2:

Next topic I want to discuss is if you're younger. So stay with me here younger, as in, like, in your 40s or younger. Okay, I always try to encourage these type of clients that your income will probably go up in the future. Okay, always make this analogy how was you know? What were you earning? What was your income 10 years ago compared to today? You know a lot of people are like, oh yeah, I was earning a lot less than it was. Well, that same methodology 10 years from now. You know, maybe you won't be on that exact same trajectory, but it's gonna be the same concept. You're gonna be probably making a lot more in 10 years from now than you are today. So, recognizing that and okay, I'll probably be making more in the future. Also, today, 2025, we're in a historically low tax bracket, tax law environment, like a favorable tax environment. So who knows what tax law will be five, ten, twenty years from now? You know, could be higher, could be the same, who knows? But if your income, if you're in your 30s or 40s, always tell folks don't worry so much about the tax deductions, let's get as much tax-free money as we can for the future. What I mean by that, you know.

Speaker 2:

Same analogy contributing to a Roth 401k or a Roth IRA. Once again, contributing to a Roth, there is no tax benefit today, right, but that money grows and grows and grows is 100% tax-free for you in retirement, right? So those kind of things. If you're in the 24% tax bracket or less which most clients I ask don't even know what tax bracket they're in, so no shame if you don't either. But if you're in the 24% bracket or less, we highly recommend Roth 401ks or Roth IRAs. Also a health savings account, an HSA. But that's a double bonus. If you contribute to an HSA, you do get a tax benefit today, but that money grows and grows and grows and you can take it out 100% tax-free for medical-related expenses, as the IRS terms it, in retirement or even down the road before retirement or even down the road before retirement. So, once again, getting as much money into accounts and buckets that will be tax-free for you for the rest of your life is crucial. When you're in these years where like, yeah, we're making good money, but you're probably going to double your income or have significantly more income here in 10 or 15 years from now, it's just a big deal. So that's one, too, that I encourage those kinds of clients that really think long-term and not just saving and taxes. Today let's think about the long-term. And then the last topic.

Speaker 2:

We'll have a separate podcast on this one. It's tax planning and retirement. But I'll briefly touch on a couple topics. This is an entirely new world. You've never been retired before. You don't really know how it works out.

Speaker 2:

There are a lot of tax windows in retirement. Cody, I'm retiring at 64, I'm gonna turn on Social Security at 67. Well, if you, unless you have a pension or you own a rental property that the tenants pay you on the first a month, or you have an annuity that pays tenants pay you on the first of month, or you have an annuity that pays you, a lot of those clients have no kind of earned income for those three years, right? So, once again, as a financial planner, I get very excited because that means your tax window is three years long and your earned income is basically zero. We can do a lot of planning around that, and so retirement just offers a unique view into these planning topics, and that's why retirement planning is so crucial is because A clients have never been there before. They don't really know how to navigate it. B a lot of those years you don't get back. You're only early retirement once right, and so the benefits definitely are crucial in those time periods.

Speaker 3:

Wow, those were some great insights today.

Speaker 2:

Too much, too much, not enough.

Speaker 3:

Just right.

Speaker 2:

Okay, good, that's awesome.

Speaker 3:

Grateful, as always, to share this space with you. Until next time, keep planning with purpose. Thanks, sophia. Until next time, keep planning with purpose.

Speaker 2:

Thanks.

Speaker 1:

Sophia, thanks for joining us on the Steadfast Wealth Planning Podcast. Ready to take the next step in your financial journey, visit steadfastwealthplanningcom for a complimentary consultation or call 469-606-2040. Smart planning Christian values, a life well lived. We'll see you next time.