Wealth from Wisdom

5 Things You MUST Know About Your IRA and 401K!

March 31, 2018
Wealth from Wisdom
5 Things You MUST Know About Your IRA and 401K!
Chapters
Wealth from Wisdom
5 Things You MUST Know About Your IRA and 401K!
Mar 31, 2018
Carson Wealth
Show Notes Transcript

How will you make the most out of your IRA and 401K? Learn the 5 things you MUST know about your retirement accounts on this episode.

Speaker 1:
0:00
Okay. And here's the legal Mumbo jumbo, the opinions voiced and welfare 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 Cwm, LLC and SEC registered investment advisor
Speaker 2:
0:31
Doug 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 200 and feet. The skyrocketing cost of healthcare and retirement could now run 350,000 planning for retirement today is now 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 and 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. Do you have an IRA? 401K these retirement accounts could
Speaker 3:
1:14
probably are for most people, if it's not social security. Retirement accounts are the single biggest asset that is going to really drive your retirement and the success of your retirement for decades to come. Yet IRAS and four zero one ks are widely misunderstood. And when I say largely ignored, meaning how do they fit into the overall piece of the puzzle, the picture. And if you're not careful, these accounts, IRA's 401k's can really spell big trouble because they can create all kinds of tax ramifications. You're listening to wealth and wisdom. I'm Ron Carson and thanks for joining today. I've got a special cohost, Jim Caldwell. Contributing money to your IRA or 401k is so simple, it's so easy. You put it away. Most of you get the tax deduction because you don't do the Roth. And that may be a mistake all unto its own. But getting money out of these accounts now that's a totally different story.
Speaker 3:
2:15
And if you don't know what you're doing, if you're just blindly withdrawing money with no rhyme or reason, you could lose more than half of your hard earned money to the government and taxes, penalties and fees. Let me say that a good up to half and taxes, penalties and fees. So you need to really be conscious, careful and coordinate these withdraws with other income sources. Some questions you should ask yourself is, how do I pay fewer taxes? We all want to do that and I'm I better off converting to a Roth or some other type of an account prior to taking distributions maybe. And how do you know the best way to take required minimum distributions? There's a lot of different ways you can do this. Ways you can actually,
Speaker 4:
3:01
I don't want to say game the system, but that's really what it is. Game the system so you legally pay as few taxes as possible. And Jim, you know we talk about social security, a lot of wealth and wisdom. This is the other holy grail when it comes to how successful people are going to be in really securing the kind of income they want throughout retirement. You know, the, the tax sequence of how you withdraw and how you coordinate with your other force, uh, sources of income when you're retired is important. I mean, most of the time we look at, start with your RMDs because that's, that's required obviously. Then look at taxable accounts, then look at your tax deferred accounts and then in the end, use your tax exempt accounts like a Roth or whatever. But what you really got to watch is when you're doing these withdrawals, number one, it probably going to put you in a higher tax bracket or it might push a close.
Speaker 4:
3:54
Number two, how's that gonna Affect? So security like you just said. And number three, you're probably going to trigger a capital gain tax, all of which are not good and need proper planning. So if I'm out there listening in to the site to, should I really care if you care about some of these things, if you care about the performance of your account, if you care about the fees that you're paying, they pale in comparison and to getting the tax sequencing right on these withdrawal. So if you're already caring about that stuff, that's why you should care. And the problem is that there's just not a lot of really good planning being done around these. And it really does take some time and effort upfront. And if you don't do it, if you only knew, and Jim, I, I would love to know nationwide, every year how much money is just wasted, thrown away from poor planning.
Speaker 4:
4:44
There's pain and consequences and not putting, putting the time in. And this is, this is one of those areas. A lot of times people come in and just want to invest. I just want to get going, don't want to do the plan. And you know, reluctantly sometimes we ended up doing that. But boy, just getting, putting some front end time, getting the plan, keeping it current just drives tremendous value for the client. Especially as it relates to retirement accounts and, and I feel like a lot of people wait until maybe 64 66 68 to start thinking about everything you just mentioned, Ron, they ought to be starting thinking about this when they're in their early fifties late fifties starting to, to get from the accumulation stage into the distribution stage. And how's that all gonna work out? I mean we talked to a lot of folks here where we start somewhere, you know, late fifties early sixties how are we all going to take it out, what effects are going to have tax wise. The other thing is when you were talking about 401ks earlier, I mean that we could spend a whole day on that. But I mean from an investment standpoint, you know, are you able to play any defense inside those portfolios? Everything I see from a 401k is all pedal to the metal chasing returns, not getting much a management.
Speaker 5:
5:58
And we'll talk about fees later, but those are usually rather
Speaker 3:
6:01
or a higher in those type of products. Another spot that we see a not a lot of thought given to our really beneficiaries on these accounts and beneficiaries are not created equal. A great benefit by the way of an IRA is your ability to transfer your wealth without going into probate. And you ask what is probate? It's just a process of moving your assets to whoever you hope to get them. And by the way, if you don't have a will or a trust, um, that creates other problems for other assets. But the nice thing about an Ira, you can actually designate who the beneficiary is going to be. So even if you don't have a will or trust, you're still going to get it going to the right spot. And, but there are opportunities to also get into trouble by doing this right? Who should be the beneficiary?
Speaker 3:
6:47
For example, a spouse can claim Iras as their own and take them over and start making contributions of withdrawal. So that's what's Nice. You're, your spouse can take it over. No tax ramifications of this especially can be beneficial if this files is younger, you know, think of the amount of deferral, um, that they could have. Also beneficiaries that are not spouses. So think of children and grandchildren cannot take them over like your spouse can and in most cases they have to empty the account within five years of the owner's death or over their life expectancy. So when it comes to, and we deal a lot of times with someone has a second marriage, third marriage, his kids, you really want to think about what these assets and who they're going to go to because much more, lot more options for the spouse to get these then to children that are going to maybe in their prime earning years and you're going to have to throw all this income on top of them.
Speaker 5:
7:45
So Ron, you referred to the planning process earlier. And really that's the centerpiece of what we do here. I mean sure, we manage money and we want to make people money and we're in the business, but the plan, so every year when we do annual reviews, we talk about part of that as a beneficiary review. You know, here are your accounts. Are these still your wishes? Is this how you want things to flow? Uh, especially with Iras, do you want to try to stretch that money to other generations? Um, do you have contingent beneficiaries on there? So husband and wife going out to dinner, unfortunate happening. They both go at the same time. How does that work and how does that
Speaker 3:
8:22
tie in together? And Jim, you meet with a lot of retail clients a lot more than I do. But when I used to me at lot, here's the thing that I was shocked at. Lot of times they came in and had no beneficiaries. Yes, exactly. And I'm like, why did you not have any? Well I, you know, when they ask, I really wasn't sure and I just didn't get around to it. I mean put somebody in there, you know at least your brother or a sister or an uncle, somebody that you know, so it's just not left up into the air. And especially if you don't have a, if you haven't got around to that, you probably haven't got around to all the other estate planning. You end up in a
Speaker 4:
8:56
test date, which is a real mass because then someone else decides who's going to get it. Let's talk about fees inside of these retirement accounts or recent survey showed 67% of Americans don't think they pay any fees inside their 401k them. They're absolutely dead wrong on this one. Yes, and I see this all the time. We have our, our digital allocation tool here that we're able to take somebody 401k and we do this all the time and we plug in everything they own. Not only can we measure how much risk, but we can go inside each of those different investment vehicles and figure out what the hidden fees are. And you know, Ron, we talk around here a lot about transparency and being a fiduciary, which we are not everybody out there falls into that sandbox. So very, very important to understand exactly what you're paying because it, it will affect your net returns every year.
Speaker 4:
9:51
Another point to watch is you have to pay taxes when you withdraw this money, unless it's a Roth. And this is, I see this in divorces, all assets aren't created equal. So we want you to be conscious of the fact that if you have $500,000 of Union Pacific stock and your cost basis is $400,000 you only have a hundred thousand dollar gain and that gain is going to be taxes, long term capital gain, probably at least a short term capital gain if you have 500,000 in a retirement account, all of that, it's ordinary income tax, all of it, hundred percent of it. So when you look at 500,000 a stock that has high cost basis, 500,000 and I've literally seen times where the one spouse got all of the high cost, face the stock and the other one got all the retirement accounts and they got an equal amount.
Speaker 4:
10:41
It's like wow, someone wasn't doing their job and really trying to equalize what's the net effective uh, benefit each actually have with these assets. Yeah. And if you look at the new, the new tax laws, which we've been doing some some seminars and workshops with, you know, the highest rate is 39.6% and the, here's the big thing you got, that's the federal, now you got to add in the state side. And, and I looked at something the other day. The top 10 states are between a 7.65 and 13.3% yeah, I had it all up. It's a killer. And if you live in New York City, he gets paid the city tax on top of all of those taxes. So speaking of the Trump tax plan, there's been little, if any attention as to how the impacts the retired or people that are getting close to retirement. And you may not know this, but there could be a, there are huge opportunities for you in this new tax plan. Opportunities that will save you thousands of dollars, possibly much more. In fact, this could be one of the best years for saving taxes actually in 30 years. I mean it's been a boom. Um, especially if you've got some flexibility and I don't know if we're ever
Speaker 3:
11:54
going to see taxes as low as they are right now. So now's the time to take advantage of that. Let us prove to you how we can maximize your taxes, make them as low as possible in every legal way so you know exactly what the benefit is. Also taking a look out into future years what that means, what the taxes could be. There's no cost, there's no obligation to get a second opinion. And by the way, if we can add value will tell you that if we can't add value, we're going to tell you that as well. You're going to get it fully transparent, honest assessment of where you're at. Give us a call. Eight eight eight four nine 85 13 there's no costs. You've got nothing to lose. Eight eight eight four nine 85 13 remember, it's not what you make, but it's what you keep. Call us. Eight eight eight four nine 85 13 I'm Ron Carson was Jim Caldwell and you're listening to wealth and wisdom.
Speaker 2:
12:48
Trust, transparency, accountability. These are the values that drive Ron Carson and Carson wealth. You're listening to wealth from wisdom with baron, tall 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 wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. You could pay fewer taxes on your right
Speaker 3:
13:13
IRA or your four o one k are you better off converting to a Roth IRA or some other type of retirement account and how will you best manage those required minimum distributions. Welcome back. You're listening to wealth and wisdom and I'm your host Ron Carson with my cohost Jim Caldwell. If you don't have the answers to these questions, you could earn race, years of hard work, saving and sacrifice and no time at all. And Jim, people focus on all you know, how are they doing as far as the performance of soft, which is important, what are the fees that I'm paying? They give little little thought to maximizing social security, reducing the taxes. What kind of impact did these have? And these RMDS are important because there's some rules around it and ways that you are required. Matter of fact, you're required to take your first distribution the April following the year. You're 70 and a half and have you start planning at that time. You're going to probably not have nearly the options if you started doing planning when you're in your early sixties mid sixties
Speaker 5:
14:21
if you look at the RMDS, I mean just to kind of give everybody a little bit of the basics there. When you're, you're required to take out, your first distribution is about 3.65% of all your Iras. Some people out there, and I've seen this many times, they think if they have 10 IRA accounts, they got to take a little bit out of each one. Right? And that's part of, they're not doing any planning. They'd never had any RMD planning done for them because basically the rule of thumb we use here is what's your least performing asset? Do
Speaker 4:
14:52
you want to take it out of, uh, of an account that's making you 10 12, 14% or do you want to take it out of that maybe CD that you've had for a few years making 2% so that's real important. And the other thing people need to be aware of, Ron, is the government wants more of your money. So the older you get, the higher the percentage, you get up to 80 you're talking 5.35 you lived to be 90 year over 8% these things need to be dealt with and they need to be planned for and if you don't take it, the penalty is stiff. It's 50% of what you were required to take out. And Jimmy, here's another point that I love to make, and I don't understand why everybody does, doesn't do the recalculation each year because that gives you the minimum required amount, but you can always take more versus doing some of these other methods of withdrawing it that force you into taking out a higher amount.
Speaker 4:
15:45
So the RMD planning is really big. The other is doing a rollover into a retirement account. A traditional IRA allows tax free contributions, but when you withdraw that money, you have to pay taxes on a Roth IRA does not allow tax free contributions, but you pay zero tax when you withdraw the money and retirement and you just gotta do the math to figure out which one of these are better. You can also roll over depending upon your situation and may be beneficial for you to convert your 401k or traditional IRA to a Roth or simply save a portion of your retirement savings in a Roth and the, and there's also this Roth re characterization. This is a big change and the new tax plan and just how they, the way that the taxes are actually handling that. It's a big, big benefit there. If I may, let me, let me address your role over conversation.
Speaker 4:
16:39
This, this is something that's always been a pet peeve of mine. People talk about rollovers versus trustee to trustee transfers and this is huge right now because you go back to January one 2015, the new rule says you're only allowed one rollover per year and a roll over as I look at it is okay, you've got an IRA account, you're going to move it to another IRA account and you take possession of that check. In other words, it's made out to uh, James Caldwell for the benefit of or Parbi TD Ameritrade for the benefit of James called. Well, I take possession of that. Then I put an x, a rollover. Right. Well, and actually this was to be clear, that money could actually just be to you and this is a mistake. I mean, once it's out of there and the government did this to say in case you don't get around to it or you don't realize you made a mistake, as long as you get those funds replaced within 60 days, it's as though you never had possession of the money.
Speaker 4:
17:36
Correct. But, but for some reasons, if you do two of those in a given year, you're, you have a 6% penalty. Yup. How do you avoid that trustee to trustee transfers so you can it today, it used to be Ryan, as you know, you call 10 different places. You've got 10 different sets of paperwork now you can get on the line with the client. We can call a van guard or anybody else on the line and say, this is what we want to do. Here's the account number. We want this money to go straight to fidelity or straight to TD Ameritrade. That's a trustee to trustee transfer. That does not apply to the one rollover rule. Yes, yes. Trustee to trustee. And that's the way you should handle it. Those are unlimited by the way, are you can do as many as you want. Can we get, and we've had some email questions, but these are the most common questions I've gotten regarding 401ks.
Speaker 4:
18:25
One is can I use my money before I retire? And the answer is absolutely yes. You can. People don't realize that you can take a 72 I think as a cue or 72 72 t two t distribution. Um, and it just says, and this is where planning comes in, you, you can take it out as long as it's based on your life expectancy. So just some planning has to go into that. So the answer is, can I take my money before I retire? Yes. What if I retire before 59 and a half? Again, back to this, you have to do the 72 t calculation. If not, the penalty is 50% no, no. If I just take money out, it's temperature. 10%. Okay. That's all right. Um, how much can I contribute to my 401k and we have new rules in 2018 and 2018 it is increasing to 18,000 from $18,000.
Speaker 4:
19:27
There's also an increased supplies of four o three B plans and four 57 plans as well as the federal government thrift savings plan. If you're 50 or older. There's also a ketchup presents a provision, which means if he just didn't get money put away, you can contribute 6,000 more to the maximum contribution of 24,500 in 2018. Those are big numbers and part of the tax planning for most people can be how do you Max that out? You should try to Max out all your contributions. You look at IRA's, if you're over 50, you can put $6,500 in there a year or 100% of your income, whichever is less. Uh, a lot of people don't take advantage of that. I want to go back and make a point about RMDs. If I can't. With regards to Roth Iras, the rule across the board is your basic Roth.
Speaker 4:
20:21
You don't have to take an RMD, it comes out tax free. However, how and why is that? Because the government says we're not going to get any benefits, so when I can make you start taking it out. Exactly. But we had a, we had a client come in where they had an inherited Roth Ira, which is totally different. Even though it's a rough, because it's inherited, they need to take an RMD. Yes. Without the planning we did, they'd have had a major down the road. Other common question, how much should I contribute? Now this gets tricky and first of all, all of you out there that are not maximizing your match at your employer, that is free money that you're leaving on the table. You maximize your ears, right, Andrew? Yeah, and I look at the census on some of these sayings and people are just not.
Speaker 4:
21:12
They go, well, you know what? I want to spend the money now. I live now. I was like, my Gosh, you're getting like 100% return because there's a 50 or a 100% match on those as far as how much. Make sure you're maximizing it. Then after that, look at all your options. It may not make sense. Even though it's tax deferred, it depends on what you think your taxes are going to be. Your tax rate's going to be in the future. It may make sense to do other things. Also, Jim, people don't know this big mistake made company owned stock. Oh you can take that and we see this, you know, sometimes it gets sold and rolled over. What a mess. You can actually take the distribution and get long term capital gains tax on those stocks. The stock for a company that you actually worked for, one of the tremendous amount of value can be created there.
Speaker 4:
22:00
Um, when, what does it mean to be vested and invested? Simply means your own money is always vested immediately. So why don't you put it into chairs. But if you have somebody making a match, vested means that they're going to say, we want you to stick around for a while to earn the money we put in there. Um, and it could be a five year graded schedule. So there are different vesting schedules that you can have that just means that the money someone else put on your behalf is yours to keep. Even if you leave, I want to go back and address a coaching point with what you were talking about, about how much to put in and the free money with the match and all that. If you're, again, you made a great point right about projecting where you think taxes are going to be down the road and right now as we've all talked about, they're probably going to be as low as they're going to be now.
Speaker 4:
22:48
Okay. But down the road, if you think they're going to go up, and I've seen this a lot with people coming in, we're 90% of their retirement is in a 401k. They're going to get smacked upside the head tax wise. So what I'm saying to people is, hey, put as much in up to your match and look at some alternatives. Maybe you want to do a systematic investment program outside of your 401k. Maybe you want to do a Roth if you're eligible to do that based on your income level. So there's backward planning piece and maybe when we see this, they have high credit card debt. I mean getting that credit card debt paid off, it's nondeductible, it's high interest rate. I would rather see you pay that off before making, after you've gotten the free match. There's no case where you shouldn't get the free match. Even if you've got this terrible credit card debt, I want you to, I want you to get that Max has it. It is a powerful, powerful way to really grow and accumulate a significant,
Speaker 3:
23:46
well, if you hate paying taxes now, just wait until you start withdrawing money from your IRA or 401k. And I love the quote, thank God we don't get all the government we pay for it because we've zero send a lot of money to wash and the taxes. If you're like me, I'm a good American, I want to pay, but I only want to pay what I'm legally required to pay and I don't want to pay any more than that. Required minimum distributions could force you or withdraw money, Iras and four zero one k's and other retirement accounts whether you want to or not. And this in fact, we just talked about all of the unintended consequences. This can trigger an avalanche of taxes and every year it could get worse. Let us show you how some of these little known strategies and we've talked about a couple of 'em on the show today, could save you thousands of dollars in taxes with your Ira, four zero oneK or other retirement of counselors and absolutely no cost and there's no obligation.
Speaker 3:
24:42
Give us a call to schedule. People are standing by eight eight eight four nine 85 13 many people pay through the nose when they withdraw money from their Ira. 401K pippy, the smart, savvy few who legally legally pay far less? Eight eight eight 41985138884 nine 85 13 we come back. We're going to continue down the most common questions. Couple other items in the last night. We're going to talk about the market. This week's been crazy volatile compared to 2017 I got some really great stats on that. I'm Ron Carson with your cohost Jim Caldwell and you're listening to Walter Wisdom.
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 [inaudible] belts
Speaker 3:
25:26
from wisdom with Barron's hall of Fame Advisor Rod Carson. He's a published author. Andy 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. Contributing money to your IRA or 401k is so simple, it's really pretty easy, but was drawing this money and retirement. Now that is a totally different story. Welcome back. You're listening to wealth and wisdom. I'm Ron Carson and thanks for joining us today with my cohost Jim Caldwell. If you're blindly withdrawing money from these accounts in retirement, you could lose more than half of your hard earned money to the government and taxes, penalties and fees, or continue to talk about just all the pitfalls, all the things you can do. And by the way, if you are tuning in the middle of this show, you're going to actually pick up our show either iTunes or go to Carson group.com and we actually have all the segments on there. You go back and you know, just double check or we had something that you liked or you wanting to send the segment to one of your other advisors. You're more than more than welcome to do that. Let's continue down with a question. It's a, can I borrow from my 401k should I borrow from my 401k and I've had, I might, you know, my opinion is actually changed on this topic, Jim, over the years I used to tell people never, never borrow from your
Speaker 4:
26:44
401k and then as you get older you realize something happens called life and there's just sometimes that, I mean I'd like it still to be the last resort but there are times it makes sense to borrow from yourself. And the reason I say don't do it, cause a lot of times people just don't get the money back in there. Exactly. That's my big bone of contention there is that when you take it out, I've, I rarely have ever, I can't think of a situation where they ever put it back. Really analyze. I've had many where they put it back. Well, you're younger than that because here's the concern. We're all living longer, so if you're living longer, you're going to need more money in your ladder, retirement years. So you know, to stay disciplined and keep that money in there where you can use it down the road to me, makes a lot of sense.
Speaker 4:
27:29
Here's one, what are my options with my old employers? 401K and this is where you see a battlefield of people were at five or six different places and they have balance, consolidate them together just so you can, it's easier to keep track of them. If you're working with an advisor, then you know, and, and, and really consolidate them with where you have the most options. It may make sense to put it into an IRA. So you have unlimited options. That's one of the drawbacks. The retirement accounts, as you have very limited options. Many times they don't employ things we use there at the Carson group, irreplaceable capital, which were, it's really try or dampen the volatility of accounts and have downside protection. You really don't have that in bonds used to be that thing. You can diversify and bonds. They're so low now, they're not going to be that buffer that they, that they once were.
Speaker 4:
28:17
The, the big thing is, and you touched on it, is to defensive strategies with all this volatility we were having this year versus last year. Uh, people's 401ks are all over the map right now and they're worried they're concerned. The ability to do a couple things. Number One, and we've talked about this before, the inservice distribution where you're still working at a company, but a lot of places will allow, you may be a onetime, hey, I'm going to take a chunk out. I'm going to roll it. Trustee to trustee over to, uh, an advisor, put it in an investment account, give it some downside protection. Very, very powerful. It is. Nope, I liked that. How should I invest my 401k now this is, this is again, it's a such a, we're all snowflakes, right? We're all here. We're all new, unique, unique, and it has to be what we know are you young?
Speaker 4:
29:05
If it is, go with the more aggressive investments. If you're nearing retirement, you're going to want to definitely directs the portfolio and this is where there is no pat answer. Generally speaking, these are the assets that should have a longer time horizon. If you're in your 50s because you're probably not going to elect a 72 t and start taking, taking it out early. Anything to add to that, Jim? Yes, but here's the concern I have and this, this doesn't apply to everybody, so I'm not throwing everybody under the bus, but most of the time, whoever's watching your 401k, whatever company you have it through, the rep comes out once a year, they stand up in front of the room, maybe 10% of the employees show up. The guy says, or Gal says, Hey, any questions on your accounts? Nobody raises their hand and that way anybody else want to enroll?
Speaker 4:
29:52
And maybe one or two people. And then of course anybody want to change their allocations even though you can do that online. But the problem there is Ron people are making those decisions and are qualified to make them. They really don't know what they own and they're probably too far out over their skis risk wise or you get the traders that are trying to game it and they're moving it around all over the place. Again, random decisions in anything and especially as it pertains to planning for your future, your financial future. I even hate to call it retirement. Uh, as you know, really having a coordinated plan, not just guessing, guessing is rarely something that works well, you know, unless you're playing some sort of board game or charades or something like that. Um, the other question is can I contribute to a four o one k and an IRA?
Speaker 4:
30:36
And the answer is gym. Yes and no. You have to take into consideration their people's income limits and that has to be coordinated and that has to be that figured out or you're in for a problem. That's where the tax planning piece and and obviously we're fortunate here to have all that in house where we can walk down the hall and find those answers for people when they need them so they don't make that mistake. So here, here's if you're saying, okay, what are, what are my limits? Ira Contribution limit is still 50 502,018 and the catch up provision 50 and older will stay at a thousand. If you turn 50 in 2018 you can make the full $6,500 contribution. Um, and so you don't need to wait until your birthday just if you're going to do it, you can actually do it. Now even if you're going to turn say in November, December of this year, the income limits and qualified and make a Roth IRA contribution will increase slightly in 2018 filing taxes, a single or head of household, the maximum amount that can be tribute it to a Roth Ira.
Speaker 4:
31:36
If modified adjusted gross is less than 120,000, the contribution will phase out completely. Once that modified adjusted gross income tops out 135,000 unless it up from 118,000 to 133,000 and 2017 married couples filing jointly, the maximum amount you can can be contributed if your mag is less than 189,000 with the amount phasing out above 199 up from 186 to a full phase out of 196,000 2017 so there's lots of numbers there. Um, but definitely there are some limits on what you're able to do as it relates to contributions. I'll throw another nugget out there. Real live situation. Um, I have a client that is over 70 and a half. The, the man will probably work forever. He's still able to contribute to his four o one k plan at work and he's maxing out and they've got a nice match and all those good things. But here's the kicker. He has other IRA accounts outside of that that he's accumulated over the years because he's rolled some
Speaker 5:
32:40
things around. He's left a couple other places, tax planning. He does not have to take from the four o one k bucket, any kind of an RMD that does not get calculated. And he must take him from all his traditional IRA accounts. So the picture here is without proper tax planning, he might've thought, hey, I got to take out of my 401k because I'm over 70 and a half and look at that tax bill and how that's going to apply. So he doesn't have to touch it until if he retires this year. He still doesn't have to touch it till next year because it's based on the value. December 31 the previous year. Just a little nugget there, everybody listening today and that can make
Speaker 3:
33:21
different than a big volatile, you know, or if you have a concentrated position. Um, and something happens to radically to that account up or down. And then one of the number 10 most common questions we get is I get a tax break for my four o one k contributions. And the answer is it really does. I mean it's, it's not, it was through, you have the IRA contribution, you get to deduct that off your adjusted gross income. Here it's going in prior to, so indirectly you do because you're not getting, um, taxable income is being reduced by that amount you're putting before tax dollars the same as, yeah, it's, it has the same, same exact impact, but a lot of cross currents, lot of things you need to be aware of when you're planning for retirement. It's not as easy as just doing it, making a random decision on it and social security, getting social security, right.
Speaker 3:
34:16
Maximizing that benefit in addition to these qualified plans. If you get both of those right, there's just a tremendous amount of value. You're able to really create a within your portfolio. So if you have 500,000 in an IRA or 401k, it's really not 500 we were just talking about it. There's all these taxes and depending upon how you withdraw that money can really make an impact on how much of, let's say that 500,000 you get to keep. Many people will pay through the nose in taxes, withdrawing money from their IRA or 401k in retirement, but a small, smart, savvy few will legally always like to throw that in there generally say like that and I think it's your responsibility and right to legally pay as little tax as as possible. We want you to pay your fair share, but no more than your fair share and doing this and optimizing it will and can make a huge difference.
Speaker 3:
35:10
Give us a call. You have absolutely no obligation and nothing to lose. (888) 419-8513 we will charge you a dime. Give us a call. Eight eight eight four nine 85 13 you have a choice. You can overpay taxes to the IRS or you can keep, or you can have a strategy to keep more of that money and put it directly in your pocket. Discover how we could save you thousands of dollars. Eight eight eight four nine 85 13 that's eight eight four nine 85 13 coming up. Next segment. We're talking about the crazy volatility that's all of a sudden showed up this last week and just what does it mean to you and how should you be thinking about it? I'm Ron Carson with Jim Caldwell and you're listening to wealth and 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. Is it possible you could pay fewer taxes in retirement and keep this money for yourself? You could learn right here and right now on wealth and wisdom with Barron's hall of Fame Advisor, Ron Carson. Your IRA or 401k could
Speaker 3:
36:15
probably is the single most important asset that help you through decades of retirement. But these amounts are widely misunderstood and not properly planned for when you're taking taxes are not taking taxes into consideration. You need to really pay close attention. And we've covered today and like I said, if you miss today, show we've of treasure trove of information here at Jim, get it to your professional, listened to it or come in. We've been more than happy to help you navigate this. You can go to Carson Droop group.com. That's Carson group.com. And listen and go to iTunes. Actually listen to past radio shows. I want to change gears away from the retirement accounts and want to talk about just some markets. Um, in 2017, we had the lowest volatility year we've had in the financial markets. It just, you know, it was very good, didn't really scare anybody out.
Speaker 3:
37:10
People became complacent. All of a sudden we started having more volatility in the markets this year and it started to accelerate. And through this week, we've had six weeks where we've had the worst or five, six, yeah, six times. We've had a decline already this year, worse than last year's worst decline. And we've had for where the market was actually up more than the best time last year. So we've had already, in this short amount of time, we've had dramatically expanding volatility. And this week what really drove that Jim was continued protectionism out of Trump, uh, the Federal Reserve and Facebook. And let's just talk about these protectionism. Uh, you know, China, um, there's $60 billion worth of goods that Trump wants to put tariffs on. The trade deficit with China is 375 billion. China has, and I'm not for protectionism, but China has had and gotten a great deal. And it's just not, it's at, I mean, a business person looks at this, Trump looks at this list in a business. This was crazy. Why on earth would we not have a agreement
Speaker 4:
38:36
that was the same both ways, but it's not like that at all. Chinese companies can come over, they can buy companies, they don't have to have, um, uh, you know, 51% local partner, like we're doing China. And the fact is that Trump is out there in negotiating this publicly. I actually think it's good because he's, that's why we elected him. He's, you know, on some of these things he's going to do. Um, but it's created noise in the market, but it really hasn't changed a fundamentals. And I guess if he, and he's smart enough businessman, he's not going to let this really get, uh, he understands that a full blown trade war is bad for the u s and bad for the global economy. But you've gotta be willing to negotiate and I think he's going to get real negotiations out of this. It's going to benefit as longterm.
Speaker 4:
39:24
Well, you know, what we have is we have basically a businessman running our country. And so, you know, his big thing is the art of the deal. And we talked about this on our morning call yesterday morning and you know, he likes to be out there in public and, and, and sharing with people what is discussions our previous presidents, uh, regardless of which side of the aisle you're on. You know, they did that internally. They did that, you know, closed doors. And so the markets really need to adjust and get used to this, this new way of communication. But one more thing that's happening out there too, and um, you know, if you look around, the light rates are moving up a little bit. And I feel like if you look at what was hit last Thursday, Friday financial stocks really took a beating. And I think there's a lot of loans out there that are going to be mostly commercial loans that are going to be affected by this move in the library.
Speaker 4:
40:14
So there's, there's noise, there's the protectionism. But I think there's also some other fundamentals that people, people need to be concerned about. I, we, I agree. I think you, you know, it's, it's, it's not, it's not this, but this creates volatility. And you were telling me that, how many calls did you have this week from clients? I got just two calls. Um, most of my clients have been with me forever. So they're used to this kind of a situation. They've been educated, they understand, you know, how to deal with volatility, but we're all human. I mean, I got it. I got one call from one of my clients, I, he, his wife had the nightly news on and he just couldn't take it anymore. So he took the dog for a walk. And of course he's 85 degree weather, so why not, right. Yeah. And he called and he just said, Jim, I'm just scared.
Speaker 4:
41:02
I'm just scared. So we spent about 10 or 15 minutes on the phone and by the time we were done, we'd, I'd put him at ease and, and he was happy to go back home and, uh, had dessert. So I mean we have got another call, a relatively newer client that just needed some education, just needed a little a hand holding, just needed to understand. I mean, he had had all his money on automatic pilot and a 401k and we did an inservice distribution. And so now, now we're watching it for him taking care of it. He just, we just wanted some assurance that we're, that we're going to be okay.
Speaker 3:
41:34
And in this increased volatility, hopefully as woke people up to the fact that what is your risk budget? What's, you know, if you've just blindly allowed this bull market to run and you've accumulated a lot more equities and not as many, you know, other assets and you're just taking a lot more risk, congratulations. Because you inadvertently taken respite, you've gotten paid for it, now's the time to protect that. And you know, we have most popular strategies are irreplaceable capital where we have very limited downside because we have always had, we always have protection it that if the markets do go down overnight or during the day, it really doesn't matter. Um, I do want to talk a little bit about, uh, just our take on things and we, this is a non consensus view that we have here at the Carson Grove and we've had this non consensus view now for several months really going back to last fall.
Speaker 3:
42:26
And that is that oil demand is strong. We then go over, prices are going to go up substantially. Um, maybe 80, $90 a barrel. And I was on Varney this week. Uh, Jim and we were talking about diamond, a couple of our favorites, diamond back energy. This is a really high quality driller and drillers, um, are the very first ones to benefit from an increase in energy. Then you've got services. And then third, our parts are our favorite name. There is National Oilwell Varco. And nearly every rig in the world has their parts. They are nowhere close to their all time high of around $88 back and 14. Um, however the world has written off the fact that we're never going to do offshore drilling again. And our non consensus view is demand is strong. Um, we're, you know, we're, we don't think that that uh, this demand is going to be met for a variety of reasons and did, it's one of the lower risk places and we've definitely added energy, uh, to many of our portfolio starting last fall.
Speaker 3:
43:37
And I love the energy play and, and how, how we like to approach her, at least I've done it, is energy's always going to be volatile. I mean, no matter how you approach it, because prices change in supply and demand and all that, that's a great solution to dollar cost average into meaning. As we talked earlier about setting up something outside your 401k do a systematic investment into an energy solution which we have here on a monthly basis that will give you an average cost and average cost basis. And hopefully I did the day. You'll be okay. Well, Jim, I want to invite our listeners, you know, it was a lot of things we covered today and one of the promises I'm going to give you as a founder and CEO of the Carson group is we will, if you come in and we look at all your stuff and we cannot add value, we're going to tell you that because we're not for just making a move for the sake of making a move on the hand.
Speaker 3:
44:32
If we can't add value beyond a doubt and we can demonstrate that to you and we're going to ask for the business. Um, and there's a lot, you know, the digital allocation tool, measuring downside risk, really looking at a plan. Has it been kept current? We have a lot of great subject matter experts. I, you know, we have a around 140 stakeholders right here in Omaha. Um, and, and we have, uh, you know, going on 75 locations around the country. We're good. And we're nationwide. Give us a call. Eight eight, eight four nine 85, 13. That's eight eight eight four nine 85 13 get a second opinion. You have the pain of consequences of not having a plan. Eight eight eight four nine 85 13 I'm Ron Carson was Jim Caldwell. And you're listening to author and wisdom
Speaker 2:
45:15
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 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 SCC registered investment advisor.