This Saturday on WHAS11 with our new TV Show “The Money Puzzle”. This week Chris Vaughn and Eric Douglas got to have their chance to take calls from real people with questions and concerns that they have experienced while going through their financial journey. Many of you may have some of the very same questions! As always phone lines are open during and after the show.. if you’d like to speak with one of our advisors or need more information regarding any of the topics discussed on today’s show, please give us a call!

Speaker 1 [00:00:20] And welcome to the money puzzle, my name is Cynthia DeFazio, and I’m joined today by Chris Bowen and Eric Douglas of Family Wealth Planning Partners. Eric, how are you today?


Speaker 2 [00:00:30] Fantastic. Cynthia, thank


Speaker 1 [00:00:31] you. It’s so good to see you again. Well, you as well. Thank you so much, Chris. How are you?


Speaker 3 [00:00:35] I’m doing great as well, Cynthia. Thanks.


Speaker 1 [00:00:37] Great. I’m so excited to be back in the studio with you both because I know that things have been so incredibly busy for you. Obviously, this show is doing so well. People are curious about the money puzzle. They want to put all of their pieces and parts together. So Eric, I should ask you right off the bat, if you will. What types of questions are you hearing more than anything else right now for people that are coming into the office for the first time?


Speaker 2 [00:01:01] Well, for the first time, because there’s so much uneasiness in the market right now and inflation is certainly a hot topic. We’re seeing a lot of volatility in the market and we’re seeing a lot of questions around what should we be doing right now? Is there anything that we should be changing in regards to, you know, what we’re currently doing versus how we can optimize our overall portfolio or retirement plan? And really, the way to do that is to go through the planning process itself. The plan is the puzzle that that is what we’re referring to, right? So you put that puzzle those puzzle pieces together. So it forms that nice complete picture that you can see and most importantly, understand. So you can really, truly, truly see what the roadmap to your retirement looks like.


Speaker 1 [00:01:39] Absolutely. And Chris, that is the most important thing, correct? Putting those pieces together for that puzzle so that it’s peace of mind in retirement?


Speaker 3 [00:01:47] Absolutely. The peace of mind is exactly right when you have a good plan, when your puzzles put together and the pieces are all in the correct places. It just takes this huge weight off your shoulders, and you don’t have to worry and stress about those things so much anymore.


Speaker 1 [00:02:02] Yeah, that makes sense. Well, gentlemen, we’ve had an overwhelming response to two topics in particular Social Security and taxes. And so I have some viewer questions to get through today. And I know the viewers are excited about that because they love this type of show. So do you mind if we get started right away? Go ahead. All right, Eric, I’m going to guide this first one to you. Actually, Chris, I changed my mind when it comes to you, just just to flip it up a little bit. All right. Is it best to file at 62 and start receiving payments or wait until age 70? Can’t I start receiving my payment early and invest it to earn more?


Speaker 3 [00:02:37] Well, you can, but that doesn’t mean you should. The answer to the question really is it depends on everybody’s situation is unique. So there are pros and cons to everything. If you file at 62, which is the earliest that you can. The biggest problem is that you’re going to get a whole lot less eligibility than what you would have if you have filed later. And I believe it’s about a 25 percent hit on the total availability. Wow. If you file that early now, you compound that problem with getting less in the first place. With the fact that they have what’s called an earnings test. So more and more people are working past 60 to at least some. OK. So if you filed before your full retirement age, which is depending on when you were born anywhere between 66 and 67 years old, if you filed before that, you’re subject to that earnings test. And basically the way it works is if you’re continuing to work. Even though you’ve already filed Social Security, then the the amount of money that you make in it’s nineteen thousand five hundred sixty dollars currently. So for every two dollars that you make over that amount per year, not a lot per year, OK, you lose one dollar in your Social Security, so you don’t have to make a huge income to be so far into that earnings test that even though you filed for Social Security, you actually don’t receive any wow because of that earnings test. So those are the two biggest issues with filing early, filing late. OK, you don’t get the opportunity to invest that money, as you said. So there’s pros and cons to both. The big issue, I think, is not when you can file, it’s when should you file? Yes. And that’s a concept that we call optimization. Hmm.


Speaker 2 [00:04:27] I want to add to on that earnings test because, you know, there’s so many people come in and they think, Well, I can do a better job investing my money and I can make a better return on my Social Security income than what the government’s going to give me if I delay receiving my payments. And so they will decide to maybe start receiving their payments prior to what’s called their foray their full retirement age, OK? However, if they’re still working, they’re not even going to receive that benefit, because that’s really where that earnings test comes into play. So the government’s not going to let you take that money while you’re still working and then use that as an opportunity to to make more off of their back because they don’t want to start paying that money out if you truly don’t, don’t need it to his point. If you do file early as well, something very important to consider if you file at 62 versus your full retirement age, that is a 25 percent reduction, as Chris stated. Wow. But it’s also worth noting that that is a permanent reduction, right? So it’s not like it’s not like your Social Security payment goes up once you hit full retirement age and then it goes up again when you get to the maximum age that you can file, which is 70 years old. There’s also a difference between filing at 62 and 70 because if you file it 62 versus your full retirement age, which for most folks right now, it’s going to be between 66 and 67. But if you file between 60 and sorry, between sixty two and your full retirement age, that is a 25 percent reduction. The difference between 20 62 years old and 70 years old is about a seventy six percent difference in your monthly payment. Oh my gosh. So there is some serious value to be able to delay receiving your Social Security if you’re able to, and if you’re able to build that into your plan, there is a serious value to be able to delay receiving your Social Security benefits up until your full retirement age, because that’s only going to allow you a much greater amount of income every month. And once again, that’s a permanent, predictable income that you can receive throughout the remainder of your life.


Speaker 3 [00:06:26] And I would even add to that Eric was referencing, If you take your, your retiree, take your Social Security benefits early and I can invest them better than the government can. Well, for every year that you leave them in, they increase between seven and eight percent. And what that eligibility is all the way up through age 70. So if you went to an investment advisor and they told you that they could guarantee that it would go up by that amount, you’d probably be pretty happy. Well, that’s what the government is doing. It is increasing by that amount based upon when you start it every single year. That’s why it’s such a huge, huge impact.


Speaker 1 [00:07:03] Absolutely. So, Eric, it’s basically a cornerstone correct of your retirement. Like, it shouldn’t be just everything it is.


Speaker 2 [00:07:10] It is not a cornerstone for most people. It is the cornerstone, OK? It is usually the biggest puzzle. So when you think about a puzzle, the way you construct the puzzle, what do you typically do when you put a puzzle together? What are the first pieces that you find the corners, the corner pieces, right? Absolutely. So Social Security is absolutely one of those major corner pieces that you need to find first, because we typically build a plan around what your Social Security income might be. And that’s usually a big question that we have to address is when is the most optimal time to turn on your Social Security income? So that’s where we get into the idea, because you were saying the idea of optimizing your Social Security income, so much of what you see in the financial news media is around maximizing your Social Security income. Yeah, and there’s a whole cottage industry around, you know how best to maximize your Social Security income? I’m a break it down here for you in five seconds. This is the way to maximize your Social Security income. Wait until 70 years old to fail and then live to eighty three. It’s very simple. You’re maximizing your monthly benefit. And then if you make it to 80 that it’s usually between 82 and 83 years old. If you make it to that long, at that point, you hit that break even point where you would have made more money by waiting to file at 70 versus filing early and receiving payments for a longer period of time. Wow. That’s the key to maximizing your Social Security income the other way to do it. Let’s say you don’t plan to live until maybe you’re not lucky enough to live until 82 83 years old. If you give me one key piece of information, I will tell you all day long when the best month, specifically down to the month to to file for your Social Security benefit is to receive the maximum number of payments from the government. That key piece of information most people, however, don’t have, and that is if you can tell me the month that you’re going to die. If you can give me that key piece of information, I’ll tell you the best, most optimal time to file for Social Security. But unfortunately, most people don’t know that. That’s why we spend so much time talking about optimization, not maximization. Maximization is easy. That doesn’t always fit in best with your retirement plan, with your puzzle if you retire at sixty two. You don’t want to delay receiving your payments until 70 years old. That’s eight years worth of income that we have to find somewhere else in your portfolio. It might make more sense. It might be more optimal for your specific situation to go ahead and file early, even if your benefit is going to be reduced. Because we’re not having to draw down from the rest of your assets to such a degree that we’re having to fund your entire lifestyle through your retirement accounts or anything else that you’ve got within your portfolio.


Speaker 1 [00:09:49] Wow. Again, this is information that you can’t find just by going to Google. I mean, you have to come in and talk to someone that’s a professional. Chris, I know that you have a very special offer that you would like to present to the viewers at home for you from you and Eric. I can’t talk today. Let’s talk about what that is. Before we open the phone lines?


Speaker 3 [00:10:06] Absolutely. Well, if you’ll give the number at the bottom of your screen or call 844 nine hundred five two one zero. Schedule some time to come in and talk to us. What we’ll do is we’ll look at your Social Security options if you haven’t filed your. What what it’s going to do if you file at 62 versus a different age, if you’ve already filed there some tax implications, some pretty major ones that will go into how those things can minimize your tax burden because taxes is really going to be the most expensive thing that you’re going to deal with in retirement. So we’ll go through all of those things with you. Figure out the best way to optimize your Social Security.


Speaker 1 [00:10:45] Chris, thank you so much. Eric, thank you so much to the viewers at home. The phone number to call is on your screen. That number is eight four four nine zero zero five two one zero. We know you have a lot of questions for Chris and Eric about how to put your retirement puzzle together. These gentlemen have the answers for you. Again, don’t miss the opportunity to call in eight four four nine zero zero five two one zero. We’re going to take a very short commercial break, but don’t go anywhere. I have more viewer questions. The next one could be yours. Stay tuned.


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Speaker 1 [00:12:52] And welcome back to the money puzzle, my name is Cynthia DeFazio, and I’m joined today by Chris Bowen and Eric Douglas of Family Wealth Planning Partners. Gentlemen, a wonderful show we’re having today. Obviously, the viewer questions are always so interesting and I love the fact that they’re really honing in on Social Security and taxes today. So, Eric, I’m going to guide the next one to you. I think this is an amazing question, actually, says Eric. I’ve recently filed for Social Security and I thought Social Security was tax free, but now I’m hearing that that is not necessarily the case. How does Social Security affect my overall tax liability?


Speaker 2 [00:13:29] So let’s go back in time a little bit to when the program was first started. So the golden promise was the Franklin Delano Roosevelt Roosevelt when they launched the Social Security program. The golden promise was we will never tax Social Security. And when you think about Social Security in and of itself, what is it? It’s it’s taxes that you paid throughout your entire working career. You paid into the program so you pay taxes on Social Security, then you receive your benefits and it is true. Unfortunately, now they have added some taxes to your Social Security benefits. So if you go back to the early 80s, the Social Security program was in a little bit of trouble. So they added basically a tax, not necessarily a tax on the benefit, but what they do is they calculate your provisional income. And so not necessarily every single dollar of your benefit is taxed, but a certain percentage of your Social Security benefits are going to be treated as taxable income. It started off as up to potentially 50 percent of your benefits would be taxable if you’re making about thirty two thousand dollars as a married couple, and this was in the early 80s. OK. In the early 90s, they said, Well, that tax works so well, we increase the coffers of the Social Security program. Let’s run that back. Let’s do it again. Let’s add another one. So he added another layer of taxation or another threshold, I should say. So now if you are married filing jointly, you make a combined income of about $44000 in total in retirement and you are receiving a Social Security benefit. In addition to that, up to 85 percent of your Social Security benefits will be treated as taxable income. Wow. You have to put that on on your own as treated. You have to add that into your modified adjusted gross income every year. Eighty five percent. Up to 85 percent. Absolutely.


Speaker 1 [00:15:14] Oh my gosh, Chris, that’s staggering when you think about it.


Speaker 3 [00:15:18] It is. It really is. And you know, I had an example that I work with somebody a few years back. We were just looking at some different types of things that you could do, and they were right at that forty four thousand dollar threshold. And we did the math if he took a thousand dollars out of his IRA, which IRA is subject to tax. When you take that money out, OK, if he took out a thousand dollars, it would cause him to go over that forty four thousand dollar threshold, and it makes his entire Social Security go from 50 percent to 85 percent of it being taxable. Oh my. The taxes on the thousand dollars ended up being a little over twenty six hundred. So it’s so important that you have all these different pieces put together when you’re dealing with that because of that provisional income that they’ve put on Social Security now.


Speaker 2 [00:16:12] It’s also worth noting that most people think and this is a big retirement myth and there’s a there’s a ton of them out there, but one of the biggest myths in retirement is my biggest expense is going to be on health care. Not true. That’s usually probably two or three, but the biggest expense that most retirees have is going to be taxes. That doesn’t change. That’s interesting. You’re still going to have to pay taxes throughout your retirement. And so we talked about one of the cornerstone pieces of your plan needs to be Social Security. Another is taxes. Absolutely. And we have to do tax planning in conjunction with creating the most optimal retirement income scenario for you throughout retirement. Because if we can reduce your tax liability, then we’re, you know, obviously able to keep more money in your pocket throughout the entirety of your retirement.


Speaker 1 [00:16:57] Eric, you just said the magic two words you said tax planning. Let’s talk about the difference between tax planning and tax preparation if someone in the viewing audience is wondering that.


Speaker 2 [00:17:07] Yeah, so so tax preparation is basically what an accountant does, and they’re obviously very, very important. And I’m not minimizing what they do by any means. But an accountant’s job is typically to minimize your tax burden in any individual year, any single year that they are preparing your taxes and filing your taxes. They typically want to get you the biggest return or reduce the amount that you have to pay. Mm-Hmm. When we talk about tax planning, we typically talk about it from a macro level. Think about it as an umbrella. We want to do tax planning over the course of your entire lifetime. So we’re not necessarily focused on the amount of taxes you’re going to pay in this individual year. We’re focused on the amount of taxes you’re going to pay in five, 10, 15, 20 years down the road. So if we have to take an opportunity to maybe pay some more money or pay some more taxes? Today, yeah, and we’ve actually got a little bit of a window right now until taxes increase in twenty twenty six. Maybe we can take some of the taxes we might pay in the future, pay them at today’s lower rates. From a macro perspective, that’s going to save you a ton of money in taxes that you have to send to the government every year.


Speaker 1 [00:18:10] That makes perfect sense, Eric. Thank you so much. Chris, why is it a common misconception that taxes will go down once you hit retirement? We hear that all the time that people think they’re going to be paying less taxes, but that’s not necessarily true.


Speaker 3 [00:18:23] Well, I think part of it goes back to what Eric was talking about. The golden promise that FDR made Social Security wouldn’t be taxable when we’ve already discussed that’s no longer true. Yeah, that’s a big part of it. There’s, you know, who are you getting your information from? Well, it was probably your parents or grandparents at some point in time that put that information in your head now sticks, but the rules have changed. Another part of it is you’re kind of expecting that you’re going to have a lower level of income during retirement than you did during your working years. I’ve heard that myth. That’s another one a million times. Most of the clients that we see want to make the same amount or even more in retirement than they made during their working years so that they can have that lifestyle that they want. So your taxes are not going to go down, they’re highly likely that they’re going to go up. So that’s where the tax planning is so important to, to spread that out over the right amount of time and to minimize the amount of taxes that you pay in total critical step.


Speaker 1 [00:19:21] Absolutely. Eric, I know that you and Chris have a very special offer to present to the viewers at home today. Why don’t we talk about what that is once again before we open the phones?


Speaker 2 [00:19:30] Yeah, absolutely. So have you turned on Social Security yet? Are you at the age where you’re starting to think about what the most optimal way for you to receive your Social Security benefits might be? Do you turn them on early? Do you turn them on late? Do you have questions, concerns? You know, how does that fit in with the rest of your overall plan in regards to how much longer do you plan to work? How much income do you truly need in retirement? All of these different things, all of these different puzzle pieces bring them into us. We’re going to take those pieces and put them together for you in a nice, clear picture so we can plan for your retirement roadmap.


Speaker 1 [00:20:06] Eric, thank you so much. Chris, thank you so much to the viewers at home. The phone number to call is on your screen. That number is eight four four nine zero zero five two one zero. If you’re wondering how the pieces of the puzzle will fit together for you and your retirement planning, Eric and Chris have the answers for you. Don’t miss the opportunity to call in eight four four nine zero zero five two one zero. When we come back from this very short commercial break, I do have more viewer questions and the next one could be yours. Stay tuned.


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Speaker 1 [00:22:03] And welcome back to the money puzzle. My name is Cynthia DeFazio, and I’m joined today by Chris Bond and Eric Douglas of Family Wealth Planning Partners. A wonderful show we’re having today. Obviously, the viewer questions are always so interesting and they’re focusing in on taxes and Social Security. So, Chris, I’m going to guide this next one to you. This is a great question. It says, Chris. What things impact? How much of my Social Security income is taxable?


Speaker 3 [00:22:28] Well, it really depends on where the income is coming from. So during your working years, what we call the accumulation phase, your income is typically coming from a job and people get that when you’re actually retired, you’re the one paying yourself. And that’s coming from any number of different sources, Social Security being one of the big ones. Sure. But it could be coming from four one KS IRAs, Roth IRAs. Each one of those things has a different tax implication. So, for example, we talked about the provisional income on Social Security being depending upon your total income being zero, 50 or 85 percent. Well, some of the things that count towards that income would be money that you take out of a 401k that is 100 percent subject as income tax because you’ve never paid on it before. So whatever money you take out of that is going to count towards that zero or excuse me, towards that that threshold that determines the zero fifty or eighty five, excuse me, traditional IRAs are exactly the same. And there’s a bunch of other what we call qualified accounts that have that same level of tax treatment. Mm-Hmm. But there’s some other ones the big one that everybody’s been talking about over the last few years. You’ve heard the whole concept of Roth conversion. Yes. So a Roth IRA and there are a lot of Roth 401Ks and four or three b’s out there now as well. Those work a little bit differently because you had paid the tax before the money was put in. Now, when it’s taken out, there’s no tax implications to it. So when you’re taking money out of a Roth type of account, it doesn’t count towards that income. It’s not taxable and therefore it can hold your Social Security income to a lower threshold on how much of that is taxable. There’s another thing that we call non-qualified accounts. Those are subject to capital gains, either short or long term capital gains. But with the exception of a few pieces dividends, things like that, that growth is not subject to income tax. It’s capital gains tax. So that’s not going to impact Social Security either.


Speaker 1 [00:24:31] Wow.


Speaker 3 [00:24:32] OK. And that all goes back to knowing the different puzzle pieces that you have and figuring out the right way to put them together.


Speaker 2 [00:24:39] Yeah, separately. And everyone is going to have a different tax liability, obviously. But when we talk about, you know, paying taxes at today’s rates, rates are not only historically low. They’re also artificially low in these rates are artificially and historically low for a government that has spent, quite frankly, more money in the last couple of years, and they’ve really spent at any other time in their history. Yeah, yeah. Government’s currently, we just a couple of weeks ago crossed the thirty trillion dollar threshold for the amount of debt that we’ve got. The only way that the government can fund the things that they want to do is to what tax you take your money. Taxes are not going to go any lower and we already know the current tax rates are set to sunset after the year 2025. Wow. So this is where we try to put together what’s called the Roth conversion strategy, where we take all of those 401Ks and IRAs that you’ve spent a lifetime paying into contributing to you contributed to those things pretax. You haven’t paid any dime’s worth of taxes on any of those accounts. Uncle Sam wants their money at some point. Sure. So that’s where it might be beneficial to look at how effective converting some of that into today’s tax dollars versus paying it at a higher tax rate later on down the line might be for you. Sure.


Speaker 1 [00:25:54] And I love that once again, it encapsulates the importance of tax planning versus tax preparation. You want to be prepared, and I love the fact that we’re talking about the cornerstones of the retirement plan, if you will, the money puzzle. Because that way people have clarity and peace of mind when they’re planning what their future years are going to look like. Hmm. Well, Eric, we only have about a minute and 40 seconds left of the show this week, and I know that you have some final words of wisdom and guidance you would like to give them before we close.


Speaker 2 [00:26:21] Yeah. No, absolutely. So the numbers should be shown up on the screen. Give us a call eight four four nine hundred five to one zero. Do you have a plan in place if you have a plan in place? What does it look like? How? Where? How well-prepared are you? How much tax planning have you done within your portfolio, within your plan to account for what tax rates are not only today, but what they’re going to look like in 15 20 years down the line? Give us a call. Come on in. We’ll go through all of those things together with you. We’ll start taking those two cornerstone pieces right? And we’ll put them together and we will start building that puzzle for you.


Speaker 1 [00:26:56] And Eric, how long does that first consultation typically take?


Speaker 2 [00:26:59] The first consultation really, really depends on how many. Questions, you ask us to be perfectly honest, but usually no more than an hour and a half or so.


Speaker 1 [00:27:06] OK. And again, a very comfortable, casual conversation. No pressure. Just getting to know one another, sit down.


Speaker 2 [00:27:12] Our office will give you a cup of coffee and we’ll just have a little bit of a chat.


Speaker 1 [00:27:16] Did you say coffee on there? Eric, thank you so much. Chris, thank you so much to the viewers at home. More specifically, we’d like to thank you for spending time with us again this week on the money puzzle. That number is eight four four nine zero zero five two one zero. We know that you have a lot of questions about how to plan your perfect retirement. Chris and Eric have the answers for you again. Don’t miss the opportunity to call in. Eight four four nine zero zero five two one zero. Be safe, be happy, be blessed, and we’ll see you back again next week on the money puzzle. Take care! And.