Wealth from Wisdom

Taxes Could Be Costing You More Than 50% of What You Earn

October 27, 2018
Wealth from Wisdom
Taxes Could Be Costing You More Than 50% of What You Earn
Chapters
Wealth from Wisdom
Taxes Could Be Costing You More Than 50% of What You Earn
Oct 27, 2018
Carson Wealth
Show Notes Transcript

In a very special episode of Wealth From Wisdom, Paul and Jim are joined by Paul’s daughter, Cece West. They discuss taxes, money memories, the “Parent Tax,” and what babysitting, soccer refereeing, and lemonade stands have in common. Make sure you listen to this episode to hear all about what teenagers think about money, and how you can help your kids understand it better.

Speaker 1:
0:00
Okay, and here's the legal Mumbo jumbo, the opinions voiced and Wellframe wisdom with Rod Carson or for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged. I may not be invested into directly. Investing involves risk including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CW m L L C an SEC registered investment advisor.
Speaker 2:
0:30
The stock market hit another all time. Records as much as $10 billion in social security benefits go unclaimed every single year. Federal Reserve announced that they will raise interest rates by 250 the skyrocketing cost of healthcare and retirement could now run 350,000 planning for retirement today is a whole new ball game. It's loaded with challenges, obstacles, and trap doors that you can do this and we can be your guide. Welcome to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. Straightforward and objective advice and how you could make your money go further in retirement. And now here's your host, Ron Carson. If I've asked you how much money
Speaker 3:
1:08
you've saved for retirement, could you tell me that number? You probably could, even with the recent gyrations you've seen in the market, you probably know where you stand, but if I asked you how much you'll pay in taxes on that money and your retirement, could you give me an accurate number? Well, I bet not. And this number can be a lot bigger. Yeah, you're going to pay a lot more taxes than you think. Hey, welcome to wealth from wisdom on Paul West and don't panic just yet because today we're going to reveal the potential tax consequences you have in retirement and some strategies that can help save you thousands of dollars. And I'm joined by my cohost today, Jim Caldwell. Jim, welcome to the show. Thanks Paul. Hey, glad to have here. And we're going to secret surprise guests in a little bit. We're going to share with you who's going to share some fantastic ideas about what the next generation thinks about money and how it impacts them and their lives.
Speaker 3:
1:58
So that's going to be a surprise coming up soon. But Jim is, we think about retirement. Most people are getting in there. What they're worried about is this mine field of taxes going on, you know, taxes on your Ira, taxes on your 401k, taxes on your pension and other retirement accounts. Oh yeah. Even social security is taxable by the way. And if you choose to do nothing, you're really at what I call at the mercy of Uncle Sam. Or if you want, you can take advantages of the strategies that are available to you now that can help really save a small fortune in your retirement. So coming up, we're going to talk about five retirement tax traps and really how you could save thousands of dollars when you withdraw money to a loophole with the Trump tax plan. That could be a financial windfall for you. And three, how you can avoid, or at least at the minimum, Jim, get the least amount of taxes paid on your social security benefits. So Jim, I mean, I love talking about this because as we know from our listeners and clients across the country, this is one of the most important things that they ever want to cover your writing. Actually,
Speaker 4:
3:00
it applies to everyone, every single household because social security is a big item and in some situations it's the only retirement plan that people have. They don't have anything else. So they're relying on 100% on social security. If you don't get it right the first time, you don't get a Mulligan.
Speaker 3:
3:16
No, it's not. It's not like golf. You don't get a second chance here. It's not like a Ohio state gets a second chance to play Purdue. Oh, that, I'm sorry. I had to bring it back out for a team that's finally one in six now I got to get to get my one chance that Nebraska actually won in Ohio state.
Speaker 4:
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I was proud of Nebraska Saturday. They played with great enthusiasm and energy, which I think has been lacking a little bit. But Minnesota is a good football team, so that's a great win for them.
Speaker 3:
3:41
Yeah. Well I mean, and I was sitting there doing the math on this. So if Purdue beat Nebraska by less than Purdue beat Ohio state, does that mean Nebraska's better than Ohio state?
Speaker 4:
3:53
We'll find out November 3rd. Okay.
Speaker 3:
3:54
Oh yeah, that is discussions about that. As we move closer to that magic date, we will, um, you know, and there's a lot I want to talk about here today, Jim, on social security and all those things. But I also want to talk about some pressing news stories here cause I think there's so relevant and I think people gloss over these on your news feed and what happens. And so one of the stories I want to share, and I think this is really what we're all about here on the wealth from wisdom radio network. So think about this. Elizabeth Warren has come out and said she wants wells Fargo to fire it's CEO and she wants the feds help to actually do this. I mean, it's crazy to me. So, and there's so many reasons why they want this to happen. One is just the pure mistreatment that she says of their customers and the employees too.
Speaker 3:
4:41
They opened millions of fake accounts. I mean talk about sales tactics and sales pressure. And I applaud Elizabeth Warren for you may like or dislike some of her beliefs, but the reality is is we got to stop this type of corporate corruption. We've got to stop doing business with people who aren't fiduciaries. I mean, there some fascinating things. I mean, you could read a whole series of articles, you know, I'm sharing with one of you just saw on CNN. I mean they're actually, Jim, think about this. Wells Fargo has to pay back $285 million to 85 to refund their wealth management clients for stupid things that happened. You know, one was pet insurance and like all these other, you know, miss priced fees, not done appropriately. I mean, these are crazy things and you can go read a lot more about it. But if, if you don't understand what's going on, just the fact that that number of 285 million being refunded to customers doesn't give you enough caution and concern. I don't know what does so more of that to come, but know who you're doing business with and we've talked about the f word on the show before fiduciary, making sure someone has a legal, and I wouldn't say just legal, Jim Ethical belief that if you always do what's in someone's best interest, it always works out.
Speaker 4:
6:03
You know, that came up in one of our, our households came in, they wanted a second opinion under current portfolio and they were in last week and one of the first questions out of their mouths was, are you a fiduciary? And so that kind of led us into being able to educate and talk about that. So it's, it's on everybody's mind out there. And for you listeners out there, it should be top of mind for you.
Speaker 3:
6:25
Yeah. Well, I mean, I look at it like all professions though, Jen. I mean, just because someone's got a law license, does that mean that they're going to be the best attorney out there? No. If somebody got their CPA license, are they the best tax preparer? Maybe. Are they the best tax planner? Huge difference. And we're going to talk about that on today's show, on how that works. But also, I mean it's same thing with a financial advisor. Are you working with a firm that has financial planners, CPAS, trust professionals, CFPs, all of those things that really help you versus another way. So the reason why I bring this up is, you know, retirement tax trap number one we want to talk about on today's show is so security and, and Jim, this is what we call the Gotchas, right? Gotcha. Before you realized it, did you know that you could pay tax on as much as 85% of your social security benefits?
Speaker 3:
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85 wow. Yeah. Well, I mean most people don't. They think, Hey, I've been putting money into my paycheck my entire life and now I'm going to get it all back. But what if it's taxed? And so they're like, what? What, what, what, what do you mean? How does that really happen? So, and it's not, you don't have to go a very far way to figure this out. So really, I mean, if your income gets above $34,000 for example, um, 85% of your, your social security benefits now become taxable. And that's a big number. I mean, 44,000 if you're a couple. So if you think about that's $3,000 a month or $4,000 a month. And we're going to talk about the compounding effect. No different football games. You know, like we talked about it, it was great to see Nebraska when they had compound effect of high energy. Things go their way. It's a little bit like when you make a snowball and you start rolling it downhill, what happens? It gets bigger and bigger momentum. It's just, you know, the physics, right? Well, the same way that happens on your money. Once your income gets above a certain level, it's the law of momentum then is if it keeps going up, your taxes keep going up and no one likes that at all.
Speaker 4:
8:27
So we've talked on previous shows, Paul, you brought up the fact that when do you start preparing for this and it's never too early. I mean really late forties in your 50s for sure. You need to be looking at, okay, where am I income streams going to come from? Are they, you know, we're going to be taking a paycheck from myself. So how do you integrate? So security with, let's say you do have a pension even though those don't exist everywhere, but the big thing is in your 401k when you have to take our RMTs after 70 and a half, what if you, those earlier in your
Speaker 3:
8:56
sixties you need to start now putting a plan together to minimize that tax burden. And Jim, I, you know, actually I said we're going to have a special guest here in a little bit on the show. And somebody who was in that next generation of money and figuring out is they don't want any gotchas when they grow up and they don't understand how all these things work. And I think about when I first got on the workforce, no, I had a lot of Gotchas. Wow. Taxes and social security. I thought it was making x thousand dollars a year. Well, the reality is you're not at all. Some other gotchas that had, remember when you first, you know, you're not on the parent's payroll anymore and you're done with high school and college and you go get that first house and you're like, holy cow, I can't believe how much insurance costs.
Speaker 3:
9:40
Holy Cow. I can't believe now I gotta pay electric and gas and all these things. And they add up like crazy. And what you think is easy isn't easy with related to money, right? I mean, there's always those extra costs that you have that baked in yet. Like if you own a car or especially if you own a boat, I mean, owning a boat is just like owning a second home to me. So all the upkeep and you have to store it in the winter if you're in a climate that changes. So yeah, you have to plan ahead for those things while they're fun, they're fun to own. And so you have to balance, are you okay? Is the, is the peace and enjoyment and pleasure you get from all of those things? Great. And Jim, I think we'd be remiss if we didn't talk about this week.
Speaker 3:
10:20
Um, you know, certainly these lotteries that had been going on and you know, what should people do with their money or not? And I won't forget, I was down at the Nebraska game last weekend and someone was like, well, Paul, what's your financial planning recommendation? Should I buy a mega millions ticket or a powerball ticket? And the, you know, my answer back to them was absolutely. And they're like, really? They said it's the worst financial decision I can make. That's what everyone else is telling me. And I said, I don't disagree from a financial perspective, but I completely disagree. Buying a lottery ticket brings people enjoyment. It brings them hope. It brings them fun conversation. So here's my example. If you're going to go out and you're going to meet someone for happy hour and you buy a beer or glass of wine or soda or whatever it is, what are you doing?
Speaker 3:
11:13
You're going there to have conversation. Sure. Right? You're going to go and enjoy it. But do you get your money back after you consume that glass of wine or those Nachos or whatever you've got at your happy hour? No. But you went and had fun. I think about so many people. I saw at last week's husker game, we're talking about the power ball and how mega millions, and I said, look how much time we just spent 20 minutes about how much fun things we had to talk about. We know we're probably never ever going to win. The likelihood is so small, but there is a fun factor. I call it a return on psyche. Something that you're able to enjoy. So I don't, I don't think you should go spend hundreds of dollars on a lottery ticket by any means. But if you get pleasure out of it, like this, same way you do from drinking a glass of wine or going off to dinner or your your Latte, then be smart about it and enjoy it in a way that's helpful for you because you know, you really, as you think about your life is, you know, there's a lot of ways you can protect yourselves from not losing every nickel of you have that you have.
Speaker 3:
12:15
And one of the ways Jamie and we keep talking about this is social security. So let's help you figure out the biggest picture items rather than worrying about a $2 investment in powerball. But if you think about social security, there are so many ways you can, we can have strategies to eliminate or minimize your taxes, to actually boost your spousal benefits and to help reduce your medicare premiums. So if you want help with this, give us a call. (888) 419-8513 we will take the guesswork out of claiming your benefits. (888) 419-8513 you're listening to well from wisdom,
Speaker 2:
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trust, transparency, accountability. These are the values that drive Ron Carson and Carson wealth. You're listening to wealth from wisdom with and tall the fame advisor, Ron Carson, he's a published author. Andy. Yeah, he's
Speaker 3:
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been featured in Forbes, investment news, the Wall Street Journal, CNBC, and more. Now, back to wealth from wisdom with Barron's hall of Famer, Divisor Ron Carson fast you how much you're going to pay in taxes on the money you've saved for retirement. Could you really give me an accurate number? Hey, probably not, but you are not alone here, but the reality is this number could be a lot bigger than you'll ever know. Hey, welcome back to wealth and wisdom on Paul West, my cohost, today's Jim Caldwell, and today we're talking about how you could save and really avoid five retirement tax traps that could cost you thousands of dollars. In this segment, we're going to spend some time talking about how to protect yourself when you have to take money from Your Ira, your four zero one k your pension or other retirement accounts. And Jim, we just spent some time talking about social security.
Speaker 3:
13:52
We know that's a huge trap out there and it's amazing to me. People will go work their entire lives, but when it comes time to actually withdraw money from their social security, they spend like 30 minutes getting ready for it. It's not enough. No, no. I mean, we've talked before that, you know, the old thing about people planning a trip to go to Disney world, right? And they get on the Disney website and they, they plan it out, plan it out, and plan it out in aid to take it a step further that they actually call the Disney representatives and asked for assistance. Whereas with so security or retirement income planning, they'll either try to do it themselves or as you said, they'll spend 30 minutes ago. Okay, I'm set. No worries. Yeah, it's, it's, it's amazing. You know, and I think about, um, you know, they spent their whole life putting money away.
Speaker 3:
14:39
And then I actually think about Jim and I'm excited to talk about this for a moment is, is like I think about our first money memories in life and what happens. So we actually have a special guest on today's show, various, I'm very excited to have her here. Her name is Sisi, she is a sophomore at Omaha. Maryanne, welcome to the show cc. Hi Paul. Hey, thank you. Glad to have you here. So one of the things and why we asked her to be on the show is we get questions from our listeners about money and how do we explain money to our kids and our grandkids is so we thought it'd be fun to have a young up and coming, um, successful person doing really well on high school here and cc, you know, one of the things we'd love for you to share with us is, I mean, here you are, you're a sophomore in high school, you're really learning about life and you're going to learn this things. But money's important. A lot of people, but you as a child or now a young adult, whatever you want me to call you is w I just love to hear from you. What was like your first memory you've ever had about money?
Speaker 5:
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First Time I earned money myself was from a lemonade stand when I was probably around six or seven years old and I earned about $4 from it. $4. Yeah. How'd that feel though? It felt really good because I earned it myself.
Speaker 3:
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Yeah, that was neat. And so you think about it. What'd you have to do for that? Did you make signs or what did you do?
Speaker 5:
15:59
Yeah, I made signs and I made cookies and I made lemonade and I sat at her driveway for a couple hours and made some money.
Speaker 3:
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Nice. And did you have any helpers getting you ready for the lemonade stand?
Speaker 5:
16:10
My brother's kind of helped me, but it was mainly me. Yeah,
Speaker 3:
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off. I remember I was a witness for this, that I think you, you did the majority of the work, but how did you feel like when you gave somebody a cup of lemonade and then they gave you money, how did that make you feel?
Speaker 5:
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It felt good because I felt like I was being successful and I felt like I had a job and I was helping people.
Speaker 3:
16:30
Yeah. That's neat. And I think, um, something I remember about this is you have to learn early on that hey, to actually make the lemonade. Guess what it did cost something. You had to buy the lemonade, right? Yeah. And you had cookies, which is smart to do at a lemonade stand. I always, you know, cookies and lemonade go out together. So what, the cookies probably weren't free. No, no. You had to make those are by those at the store. So it was this combination of things. So what'd you end up doing with the money that you earned? I kept it. You kept it. Where'd it go? Like in your bank or anyone in my piggy bank. Oh, piggy bank. Yeah. I think those are fun. I think actually we as parents. Whom did you buy your children? Piggy. Piggy banks. That was awesome. Yeah, it was a lot of fun.
Speaker 3:
17:13
I mean, and I think there's something I would call it ceremonial about that, that I think as we think about children and grandchildren is, is we want to instill the values that we've learned through our life. And I think about the piggy banks is it's something about putting the money they've earned or found on the street because I would say children are much more, um, willing these days to pick money off the ground. Then I would say adults are right. Am I right? Cc. Okay. You guys still do, you're getting excited about, if I see a penny on the ground, unfortunately I don't spend as much as I probably used to to grab that. But we want people to learn. So what do you do now? I mean, are there things you have to do now trying to make money because I know you, what do you like to do? You like to go out with your friends, you like to go to haunted houses, you'd like to go to movies. What are ways that you, you know, as somebody who was in highschool can go out and earn money?
Speaker 5:
18:09
Well now you can babysit, which a lot of people do. And I also ref soccer games on the weekends and on the week nights. But it's kind of hard cause in high school you're super busy and you have tons of homework, you have sports and you want to hang out with your friends. So you just have to manage your time really well.
Speaker 3:
18:24
Yeah, that makes a lot of sense. I mean and I think, you know, importantly his schoolwork always comes first, right? And then family and then um, you figure out ways. And I think a lot of people your age, it's important. I mean, and what are the reasons why, so why besides maybe your mom and dad telling you you should go word money, but what are the reasons that like you want to earn money? Yeah.
Speaker 5:
18:45
Well you have to think of the future cause like you want a car, you want to go to college and you want all this cool stuff, but if you don't have any money then you can't get it right.
Speaker 3:
18:54
Yeah. No you're definitely right. It doesn't, money doesn't grow on trees, does it? We don't have one of those. And I don't think anybody does. And I think Jim, I mean we could ask this question all the time from our listeners is people earn money, but how much should they keep giving to their children and grandchildren? And this is often one of the hardest conversations that we see families house.
Speaker 4:
19:14
Well it is. And the reason is because you don't want to spoil your children, right? You want to, you want them to understand the value of a dollar. You want them to have that lemonade stand like cc hat or babysitter, you know, there's that feeling of what I put something into it and got something back. It's different than just walking around with your palm facing up. Okay. So as parents, yeah, we want our kids to have everything. Maybe we didn't have or have more than what we have, but sometimes you just got to say the word no and draw the line in the sand.
Speaker 3:
19:44
Yeah. Well I mean there's something about working hard and um, you know, someone sees it, you said earlier is like you felt good, like when you worked hard to put together a lemonade stand or did that and you were done and somebody gave you money is you have to realize there's this feeling of that sense of accomplishment after a hard day work. I'm at you, Jim. I don't know if you know this about me or not, but I like one of my first jobs was one, I worked as a busboy here for a restaurant in Omaha. It was hard, hard work and I didn't make a lot of money, but boy, I felt good at the end of the day. I also spent time in high school. I'm doing construction, so I was a labor. I'm hauling things up and down on the job site. And why are you laughing?
Speaker 3:
20:23
Is that funny? I didn't know that. You didn't know? Hey, okay. Well, there's a lot of things that we, you'll learn later in life that I've done, but where you, you don't need to hear them all now. So, but I mean, as we think about why I did that is because I needed to earn money. I'm in high school. I, there's things I want to do. I love to go out with my friends on the weekend. I wanted to eat, didn't eat well. We probably ate way too much fast food at times in her life, but that's okay. Um, you know, I would, uh, one other question may be a half for you, C C C is, is you know, how much of this money do you save? I mean, how much of it have you decided that you want to keep for those things, but how much also do you want to save so that hey, you can go have fun with your friends?
Speaker 5:
21:05
Well, I try and save most of it cause me and my friends all the time, we try to do stuff that doesn't involve money or we try to do cheaper stuff. But then occasionally I'll take some money out and use it for fun stuff. Yeah. Like what's fun stuff like going to haunted houses are going to football games or going to the pumpkin patch.
Speaker 3:
21:21
Yeah. All Fun things. You can tell it's fall seasons because we were talking about pumpkin patch and football games and all those things. And I think there's that right balance of things that happen. And I think, you know, I remember this distinctly, it wasn't for you cc, but it was for one of your siblings is they started their own lawn business and you know, created a little card about how he was going to mow different lawns and his father made him learn how to write a ledger. You know, and I didn't let him, they were laughing and, and you're all African in here even though you're not saying loud. I can see your Greens on your faces. Um, but I think the reality is, is if we teach those principles and our children, they last much further in life. And I'd be willing that if we go look how they're doing later in life financially they're doing well because we have to instill these principles at a younger age.
Speaker 3:
22:10
And I think we have to be teachers and educators and Jim, we talk about this on wealth from wisdom. Big reason why is the name of the show is is wisdom and education. Wisdom and making the right decision. And in a, one of the things that your benefits cc is you don't have to worry as much about today cause you're babysitting and your income's below a certain level is this tax word. And you, I know you've heard us talking to the show and you're probably like what in the world is all of this about the taxes is Jim and I help these people in our teams across the country is this is like it's painful for them. So imagine your lemonade stand and you made a dollar and I you had immediately had to go give me a quarter of it cause we've got to go pay taxes.
Speaker 3:
22:53
How does that make you feel? Mad. Mad. Yeah. That's a great word. Actual, what if your brother Louie was like the tax man? Wouldn't that make you feel double mad? Oh yeah, yeah, yeah, it would. I mean, so but what happens though in real life is, is this, you've got to pay. And so one of the big tax traps we see Jim is when people take money out of their IRA or 401k, they a don't know or probably be forget that those are taxable. And so then this creates a problem for them because they think, hey, I'm going to need x thousands of dollars to live a month, but they have to take out a lot more than that because they're going to pay taxes. So here's something that's pretty fascinating. So according to Forbes, some taxpayers over 70 and a half can find themselves subject to a 55% marginal tax rate.
Speaker 3:
23:46
Am I going to go through all the details for that means when you imagine instead of a dollar cc, you would only keep 45 cents. How would that make you feel? Triple Med. Yeah, it would certainly me. I don't care what age you are, whether you're a high school or whether you're 70 years old or 80 or 50 whatever the number is, no one wants to have to pay more in taxes. So we have to help people think about what I call the sequencing of your tax situation for your retirement accounts. So what, what, what type of accounts do you have are always taxed, your checking, your savings, your brokerage, what our tax later you're 401ks, your Iras, etc. And what's really tax, rarely your Roth Iras, Muni bond, interest in life insurance and those types of things. And you know on the show we're going to keep talking about this because these are all so relevant, but have you ever actually done a tax reduction analysis?
Speaker 3:
24:37
It's really a way for you to figure out opportunities that exist in your world. And there's so many times people that Jim, you and I sit down with people and find them. Just small little tweaks that can save them thousands of dollars. If you want to talk to us about that, hey, just give us a call. (888) 419-8513 if email is easy, easier for you info@carsonwealth.com if you're the kind of person who needs to make the most out of every dollar you've saved for retirement, give us a call. (888) 419-8513 coming up. Next, we're going to continue to talk about tax savings techniques and our special guests will be a little bit back, a little bit to share more of her ideas about money you're listening to. Well, from wisdom radio network.
Speaker 2:
25:21
He seemed good times and bad times and he's got the gray hair to prove it. You're listening to wealth from wisdom with Barron's hall of fame adviser, Rod Carson. Is it possible you could pick fewer taxes in retirement and keep this money for yourself? You could learn right here and right now on wealth and wisdom with bear and tall of foam advisor, Ron Carson. It's been reported that Americans will
Speaker 3:
25:44
overpay their taxes to the tune of $1 billion every single year. Yeah, that's 1 billion with a capital B. And is it possible you could save yourself thousands of dollars in taxes every year in retirement? Hey, you bet cha. And today we're going to show you how, Hey, welcome back to wealth and wisdom. I'll Paul West drove on my co host Jim Caldwell and our special guests cc a sophomore at Omaha. Maryanne, glad to have you back on the show. Cc. Glad to be back, Paul. All right, thank you. Hey, I love how you make that sound there. So today we're talking about retirement tax traps that could cost thousands of dollars, but we're also learning and insight from every generation of investor and people what they learn about money and their wealth and come out in this segment, we're gonna talk about a technique. Um, it really, how do you convert to a Roth now that could really save you a lot of money in your, in your retirement.
Speaker 3:
26:38
But also there's so many other ways just to make quick savings or tax avoidance techniques that are out there. And like I said, we've got CC, she's a sophomore at Omaha and Maryanne, we're so glad to have her. I mean and see some of the things that you haven't probably learned yet about life and money. We'll talk about like how do parents or how to grandparents help pay for your education? How do they help pay for your high school? How do they help pay for your college? There's things that are out there called you know, UTMA accounts and Coverdells and five 29 plans and we can spend a lot of time on the show. But I was just curious, you know like you know, as you're sitting there, you know, you learn obviously from your parents, from your siblings, your, your friends about money. But do you get to spend any time in high school?
Speaker 3:
27:26
Is High School teach you anything about money? Well, not yet it hasn't, but at my school they offer a class, a personal finance class and they also offer a business and personal law class that teaches you about money. Oh, that's a great idea. I love to hear that because I think, I think it's important. The earlier people start the better. Um, and I think it's good. So I hope you take that class cause it sounds like a good one. The thing is it's not required though. So not as many people take it then they should. Yeah. Actually maybe we should talk because I think it should be required for a lot of people. I mean we've talked about this across the country is the sooner people learn because people tend to be, what are we, what do we call Jim Money? Avoiders is people tend to stay away from it and we don't want them to because it's money is the one of the most important topics we have.
Speaker 3:
28:12
We talk about relationships and people get married. What often breaks up marriages or problems is money because people don't look and don't have some similar type of alignment. When by the way, Jim and we've been talking about taxes on today's show, I think one of the biggest mistakes we see people make is they want to pay for their kids or their grandkids college. And so what do they do? They just give them money. Um, it was just nice by the way, don't, I'm not being rude. That is not a nice gesture. But why aren't they using vehicles like five, 29 savings plans? I mean, you've seen this for people and it's a surprise. They don't take advantage of this. They're, they're excellent. I mean they have, they have multiple tax advantages. You feel good about yourself putting the money in there. You could take it out tax free.
Speaker 3:
28:57
It could be used for an assortment of expenses. It's just the right way to go. Yeah, well and it gives people options. And I think number one is it helps avoid taxes. So if you're doing a lot of money, it can actually help avoid gift taxes. But if you're doing a little bit, you actually get state tax breaks now it depends on what state you're in. So I'm not going to give any tax advice here on the show. I can tell you in the state of Nebraska, there is a benefit for us. So I mean it's something I take advantage of with my children is I make contributions into their five 29 plans. And I think one of the best things I can say is the earlier you start, the better. So if you have a brand new grand baby brand new kid, putting in $100 a month or $200 or whatever you're most comfortable with can lead to a significant dollar amount time by the time they're 18 and 19 years old and you'd be amazed what can be in there and I can help cover one or two years.
Speaker 3:
29:50
Now I can't tell you how much college is going to cost 18 years from now. I know if you go to um, the University of Nebraska, Lincoln or Creighton or another place, it's not going to be an insignificant sum of money. And while we're all wishful grandparents and parents that our kids are going to get scholarships everywhere, the reality is that doesn't always happen and we have to figure out ways. So if I can help get money in my three children's five 29 plan and get a tax break, that sounds like a double win for me rather than Double Pane,
Speaker 4:
30:23
good gym. The other area and I think we're going to lead into it here soon. It would be your Roth conversions, a topic that we've talked about before on on shows and I'm going to tell you right now, great story. We had people come in and actually listen to the radio show. They wanted a second opinion and we went through a few things, ask a few questions last week and they said, well we want to do a Roth conversion. And they were under the impression that they had until April of 2019 to do that. No, they only had until December 31st of this tax year. So saved them there. I mean just by them coming in and chatting with us, we were able to help him out there.
Speaker 3:
31:00
Yeah. Well I'm going to go back to cc here for a moment. I mean, so I love to hear that your school is offering a personal finance class cause I think it's important, but there's only so much you can teach people in one class. And so you know me pretty well cc and you know that I got the certified financial planner designation over this last year and you saw how much time I spent studying for this, right? Yeah. Yeah. It was too much probably, but it was enough and I had to take six classes plus, by the way, I have 20 years of experience and I don't know everything. And I certainly don't attest to knowing everything. You don't have to keep shaking your head like, you know, I know everything. So thank you for that. I'm glad this isn't on TV. Uh, but we have a, we work in this world of teenagers learning, but I look at it as like the fundamentals is at least if children or your grandchildren are being educated on the fundamentals of money, it's a really cool thing for all of you, right?
Speaker 3:
31:54
Yeah. Yeah. So, I mean, it's no different than you have to figure out, like as, as a parent or grandparent, where do you spend your money? So first I got to make sure, what would you have the basic needs. You've got a house or you got shelter, you get food so you can eat, you have water so you can sustain and live life. And then I can keep spending money on other things that make sense, but you have to follow, I call it this value stack of life, of figuring out what's the best ways to make money. But one of the things that people have to learn is how to avoid extra costs. So don't spend money where you shouldn't. Um, but also don't pay taxes when, when you don't need to. So Jim, let's talk about this retirement tax trap three is people that don't switch to a Roth when they should because they're making a huge mistake.
Speaker 3:
32:46
Because the really, you know, with this Trump tax plan, depending on your situation, it can be super beneficial to you. I mean we're talking thousands of dollars that can be at your benefit if you take advantage of this but don't think, and here's like I think about ccs, personal finance classes. They may be tell them what the name of it is, but here's what's going to happen. She's going to go get on her phone later in life and Google what's a Roth Ira again or how to use that. She's looking at me like I still don't understand what it is, but you're not going to learn everything from a website cause you're stuck on one website and teach her everything. Everybody's situation's different. It's like your fingerprint, right? It's your unique or it's like your face Id. I got the new iPhone gym and now it's a fight in my household over who's a face ID is now put on my phone. Is it? Mine is at CCS. Is that Louise is iliums or whoever's it is is, but it's a unique thing just like your own Roth conversion. It has to be done separately. Your, your face image has to be done in that Roth conversion analysis.
Speaker 4:
33:52
So two weeks ago we had a situation here where people came in and they wanted to talk about Roth conversions. Uh, but the bulk of their money, Paul was tied up in their 401k, which a lot of people have that scenario. So we were able to contact our custodian and do what we call an inservice distribution, which means they can take it one time only a bunch of money and do a direct rollover it a traditional Ira. Once we did that, then now we're going to put a plan together to convert that money over a period of time. And here again, they're 54 so they have plenty of time to get this done cause they started early and we'll be able to convert that money to a Roth because the Roth 401k was not offered inside their plan.
Speaker 3:
34:37
Yeah, it's, I mean, yeah. And I think you have to work with a progressive firm and figuring out what's going on. And I think about the development of how all of these things work. And what happens is, is we're all, you know, you know, I hate the B word, right? A busy. I hate hearing that. I like The p word. I don't like the word Bucke I either. Right? No. See you should ask him how his buckeyes did this last weekend.
Speaker 4:
35:02
How did they do last weekend? I'll cc. I don't even think they played Saturday night.
Speaker 3:
35:06
Well they did, but I mean again, like I said in Purdue, beat them and hey, Purdue beat Nebraska. So maybe we're about the same. So we'll see. As you said, it's on November 3rd but what's not the same as everybody's Roth analysis is not the same. It's impossible. It can't happen. So if you want help and it's personalized, (888) 419-8513 there's no cost to you. You've got nothing to lose for this analysis. (888) 419-8513 or if you want to email us just for your Info Info at Carson, wealth.com I n f o@carsonwealth.com make it simple for yourself. Cause right now this conversion can be the best thing for you. (888) 419-8513 I'll Paul West and you're listening to well from wisdom.
Speaker 2:
35:52
How could you make your money go further in retirement? Learn how next unwell from wisdom with Barron's hall of Fame Advisor Ron Carson, he's a published author and has been featured in Forbes Investment News, the Wall Street Journal, CNBC and more. Now back to well from wisdom with Barron's hall of Fame Advisor Ron Carson. Hey, there's a big difference between tax preparation and tax planning.
Speaker 3:
36:16
If you think about it, tax preparation is something you do all along with your accountant or your CPA, but if you really want to pay fewer taxes in retirement, that takes a forward looking tax plan. It's not a rear view mirror. You got to figure out the right way to go. Hey, welcome back. I'm Paul West and today we're talking about how you can avoid five retirement tax traps that could cost you thousands of dollars. In this segment we're going to keep talking about some ways to avoid taxes and to really not be in a high tax bracket and some techniques we can share with you. My Co host, today's Jim Caldwell. Jim, welcome back. And also we have special guests. CC, she's a sophomore here in Omaha at Omaha. Marianne, glad to have you on the show today. CC, glad to be here. All right. We like to hear that you've provided some great insight, but cc as a sophomore of course, is just learning how to drive.
Speaker 3:
37:05
And so actually, as we think about preparation versus planning you to prep, right? You had to go to a class and learn how to drive, right? Yeah. That was riveting, wasn't it? Oh yes. Oh yeah. But you have to, you have to go through that to learn and then you get a plan. So you get to go drive somewhere. So you're going to drive from your house to school. What do you have to figure out what direction you're going to go, how fast are you going to drive? Speed limit, right? Yeah. Good answer. All right. Um, but what, when do you need to leave to get there ahead of time? All of those things are planning, but you know, remember you're driving the vehicle when you're looking out forward. That's your planning. You're looking ahead what's ahead of you. But why do we use the rear view mirror?
Speaker 3:
37:45
We're prepping for what's behind us if we're getting ready for that. And financial and money is all about that too, is we have to be able to look forwards but also learn from the past when we do. So I think about like my early money memories and I talked about this on the show a couple of weeks ago. Jim, I talked about picking up walnuts. I've talked about construction, I've talked about working, um, you know, at a restaurant, all of those things. Um, so I'm curious, you know, for Jim, what do you remember, what did your parents teach you about money?
Speaker 4:
38:14
Well, we, we started working, we were nine years old. All right. And it was basically, we lived in an affluent community and my parents were both teachers. So right off the bat it was we needed to help out to take care of ourselves. There weren't any, uh, Hey dad, can I borrow five bucks for the weekend? That didn't happen. So we cut grass, delivered newspapers. And I remember one time I highest state 1968 went to the rose bowl, right. They play USC, Oj Simpson. I was 10 years old and I wanted to go to the game. Well that wasn't going to happen. Okay. So long story short, I went out with my paper route money and bought a GE color TV so we could watch the Rose Bowl parade and the football game on TV in color because we didn't have a color TV. So it taught me the value of money right off the bat. But also when you could do something for somebody else, the warm and fuzzy feeling you got doing that.
Speaker 3:
39:06
Yeah. I just imagine how good you felt like, how, how, how much your heart was warmed and all of those things. And um, you know, it's not always to do that. It's easier to spend it and it's easier to waste it or blow it or whatever thing you want to do. So I'm going to flip this one over to UCC. So like what's, what's the first thing that you remember about your mom and dad teaching you about money and then were they always told me to save it cause I would always want to spend my money on like toys when I was a kid, candy, candy. And they always wanted me to save it for the future. Yeah. So ice cream or whatever other fun things, right? Hey, there's nothing wrong with ice cream and there's nothing wrong. But why do you think they were so forceful or strong about wanting you to actually say that?
Speaker 3:
39:49
Because they thought that college was more important than toys. Yeah, I mean that's a tough one. College or toys sues you rank the priorities there, but also don't you wonder if they're trying to teach you about, um, life and that you're going to need something down the road. So preparing for it and thinking about it, um, you were joking with me during the break here that you ref soccer and I think you've shared some great way you make money and I think it's good thing for you to do. But then you said your dad then takes it from you, right? Is that what you said? Yeah. Yeah. Okay. Takes is the wrong word. Your Dad just transfers it to your bank account because what happens is if something's sitting in your piggy bank at home or in your wallet or your purse or wherever you hold your money, I should think now with most kids, it's on their cell phones somewhere on Venmo or other apps is messy.
Speaker 3:
40:36
Our producer Andrew is looking at it or cash app or whatever else you have is if you don't get it out of your account or your spending bucket, it just disappears. It's amazing for me how many people's money disappears on just stuff that can't even imagine. Like if so that they had $20 and their wallet, it's just gone. They don't even know what they spent it on. They went out to lunch one extra time or that I went to target or they went to shields or they did those things. And I think when people remember, and I won't forget this to Jim, you know, when I went to college and that first time I saw how much money I had saved from my different jobs, I was like, wow. And you know how good that felt to see that really good. And it also then when you're in your opportunity, so see, so when you go from high school to college, you have more control than you ever will in your life over your money. You gotta make the smart decisions. And so if you've got money saved, you don't want to go blow it all on, oh, let's go buy a fancy new or this or that. Because otherwise, guess what, you've got to work even harder for your money. What happens there?
Speaker 4:
41:40
I remember Paul, you know, you go back to when we had those first jobs, but then when I was in college, I worked at a warehouse. It was a, it was a grocery store warehouse and I remembered my favorite part of the night we'd work, you know, the minimum eight hours is the boss would come around and say, do you want over time? And I knew that over time met time and a half and I was all over over time, always a worked over time, never turned it down. And then when you got that paycheck minus those extra taxes, of course you've got more money to put in your pocket and spend.
Speaker 3:
42:10
Yeah. And it, it goes a long way. And I think cc, one of the things you and your friends, and Aaron's going to realize it as soon as you get your first paychecks and see taxes taken out here and be like, this isn't fair. Right? I mean, yeah, it'll be a big deal. And what I'm trying to share with you, and I hope our listeners understand is we don't think it's fair at any point life, but it's, the reality is this is where we live, this is our tax system. And if there's techniques that are legal and ethical and make sense for our clients, it's our job to recommend what they are. And one of the biggest ones we see is not having the right estate plan in place. And I what I mean by this is don't rely only on your will, don't rely only on your power of attorney.
Speaker 3:
42:55
Again, I'll use CC as an example. She's a sophomore in high school if something happened to our parents. And by the way she's had this conversation with her mom and dad is number one who takes care of you, right? I mean that's a question that we've told you and talk to you about and I think is a great family conversation to have. I'm actually, by the way, not just because she's in high school and her parents are um, you know, here, but I mean actually have this with parents and grandparents or if you're in your seventies, I would be having a conversation with your children. Who is your trusted contact is something happened to you, your financial advisor should know who your trusted contact is so they know who to work with. And they know who to help or who to contact in case something happened.
Speaker 3:
43:37
But also making sure I can see a huge fear of mine cc. And I've made sure to protect this, that if something would ever happened to me that I've made sure there is enough money put away via life insurance and other techniques that you and your brothers and everybody else as well taken care of. And people have to think about that because for many of us family is the most important thing we have. And so making sure, and I hope and I'm sure your personal finance class, we'll talk a little bit about this, is helping people understand why we save money and we do this is so we can have more time with their families and spend more time with our friends and do those types of things. So we have to carve out time actually to learn about those things and actually get them done.
Speaker 3:
44:21
And that's why I call it the parent tax. Why we make you transfer your money. I yeah, it's hard. Tags is I don't take the money, I just transfer it. The parent transfer. So that way they are well protected in their life and a lot of people, you know Jim and you're laughing because I remember you told me, you know you felt so good that first time you saw you had $5,000 in your account when you were younger because you made the right decisions and your parents taught you are the right decisions and everyone needs a plan in place. And I think for all of our listeners today is you don't want to pay any more in taxes than you ever have to, but you need to talk to professionals. (888) 419-8513 (888) 419-8513 hey, I want to thank Jim and I want to thank our special gas cc for joining us. Appreciate your insight, your wisdom and your humor here with us as well. So thanks for joining the show. Thanks for having me. Glad to have you. You've been listening to the wealth from wisdom radio, network
Speaker 2:
45:16
risk, social security, income taxes, estate planning. Every week we talk about how to make your money go further in retirement right here on wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson.
Speaker 1:
45:29
Okay. And here's the legal Mumbo jumbo. The opinions voiced and wealth and wisdom with Rod Carson or for general information only, and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged. I may not be invested into directly. Investing involves risk, including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CW m L L C an SEC registered investment advisor.