EP. 126 More Knowledge, More Wealth: AM 590 Radio Show

Transcript:

Announcer:

This is More Knowledge, More Wealth, with your host, Gabriel Shahin. Gabriel is a certified financial planner and a registered investment advisor at Falcon Wealth Planning. This show does not intend to provide personalized investment advice through this broadcast and does not represent that the services or securities discussed are suitable for any investor. Investors are advised not to rely on any information contained in the broadcast in the process of making a full-informed investment decision. More Knowledge, More Wealth on AM 590 The ANSWER. Now, here's your host, Gabriel Shahin.

Gabriel Shahin:

Good afternoon. This is Gabriel Shahin, certified financial planner, your host of More Knowledge, More Wealth, here on every weekend going over all important topics of personal finance. I'm excited to share with you the knowledge you need to increase your wealth. Now, I'm proud to be on the station, AM 590 The ANSWER, the Inland Empire's leading talk station. Now, to the listener, you can always reach out to myself or anyone of my colleagues here at Falcon Wealth Planning, our phone number is 855-963-2526, that's 855-96-FALCON, like the bird, with any personal questions you have that you want to relate this show to your specific situation.

Gabriel Shahin:

Now, I'm the principal of Falcon Wealth Planning, a registered investment advisory firm. We are a fee-only financial planning firm. We also manage money as well, but we really go over all important talks of personal finance. Guys, that's everything that involves a dollar sign. Folks, if you need help, whether it's on your cash flows, whether it's getting out of debt, whether it's about mortgage, what should you do rent versus lease versus owning, whether it's cars or vehicles or investments, avoiding high fees, cost commissions, getting properly invested, talking about cryptocurrency, talking about anything, guys, that involves a dollar sign, we would be happy to help, folks. Give us a call. We'd be happy to do it. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird, or visit our website at falconwealthplanning.com. That's falconwp.com for short.

Gabriel Shahin:

Now, folks, today, we're going to talk about a bunch of items for you as we are always in tax season, I feel like, because we have the normal April 15th, then some of you guys do extensions up to October 15th. And then after October 15th, we have year-end planning that has to be done until December 31st. So there's always times to talk about taxes. But really, I want to be specific because 'tis the season for taxes. And folks, most of you may have a tax professional. Now, you have to ask yourself a question, "Is your tax professional more tax planning or tax preparation?" Okay. Are they preparing your taxes? Are you meeting with them multiple times throughout the year? Okay. Because if you're not, they're just tax prepared. They're just taking the information you have and putting it in, which is fine. There's a need for that. But the goal is understanding the difference, and there truly is a difference with that.

Gabriel Shahin:

Because think about it, a lot of the tax strategies have to be done by December 31st, right? Maxing out your 401(k), has to be done by the end of the year, which means should you save it to a Roth or traditional, which will talk about later on today. Charity is a write-off, but it's during the tax year, January and December. There's actually very few tax strategies that allow you to do until April 15th of the next year. Most tax strategies have to happen at the end of the year, which means are you meeting with your tax professional at the end of the year? Are you getting advice from them multiple times, meeting with them multiple times throughout the whole year?

Gabriel Shahin:

Most of you, I know 99% of you just because the industry doesn't do tax planning really, are meeting with them only once, once or twice a year. You're meeting with your accountant, whether it's CPA, tax preparer, enrolled agent, whatever they are, once or twice a year, which is great. They're just preparing your taxes, but tax planning is so crucial. You don't know it but it is, for most people, the biggest expense that they have. Your biggest expense and you're getting no advice on it? Who are you getting tax advice from? It's crazy when I see people doing terrible tax.

Gabriel Shahin:

Listen, yeah, I get it. I have a W-2. My situation is simple, no big deal. I don't own a home. I get it. But getting advice, the ramifications of that over the next 5, 10, 20, 30-plus years could be tens of thousands, if not hundreds, thousands, if not, millions of dollars. And that's where I go back to Roth versus traditional because it could be you, your child, your parent, your whatever that have money in a regular 401(k) or an IRA that you may have rolled over, and you have to think to yourself, "Hey, I've heard of this Roth thing. It sounds new. It doesn't make sense for me." And I have the answer for you. It's very simple. The answer is it depends. It depends because it depends on your situation. It depends on how much you make now. It depends if you're married, depends what your write-offs are, depends when you plan to retire. It depends what your future income is. Are you getting a pension? Are you going to be eligible for social security? Are you self-employed?

Gabriel Shahin:

It is so crucial to understand all these different aspects of your personal situation, which is why tax planning is so difficult. To answer a simple question like that, you have to understand 30 other items to determine if a Roth and a traditional makes sense, which one makes sense for you.

Gabriel Shahin:

Folks, if that's something you want help with, if that's something you always were questioning what should you do, we can help with that. That's what we do on a daily basis. Some of you might say, "Hey, what's a Roth conversion?" I will go over that today. I will go over the difference of traditional and Roth. Folks, if you want help with this, reach out to us. Give us a call. We do this on a daily basis. This is no cost to it. We are offering a free financial assessment. We would love to have put this together and answer those questions for you. Our phone number, folks, and we have offices all across Southern California, including the Inland Empire, our phone number is 855-963-2526. That's 855-96-FALCON, like the bird, or visit our website at falconwealthplanning.com. That's falconwp.com for short. And you can fill out a questionnaire for a pre-assessment. We'll help you out.

Gabriel Shahin:

Folks, by the way, if you're just joining us, you're listening to Gabriel Shahin, certified financial planner. Your host of More Knowledge, More Wealth here on AM 590 The ANSWER. We are going over all important topics of personal finance, and we are talking about tax time. Most of us here meet with our accountant once or twice a year. And unfortunately, you meet with them the year after. You meet with them now potentially for last year. We're in 2022. Why are you meeting your accountant in 2022 for things that need to have been done by 2021, by December 31st? You're meeting with your accountants probably in February, March, or April. Well, it's too late. A lot of the strategies had to have been done by December 31st. It's crazy to think that's what you're doing.

Gabriel Shahin:

Folks, I heavily recommend you meet with a tax planning firm, a company that will do it. And folks, we are offering that to you at no cost. You always want to take the first initiative for your New Year's resolutions or things that you could do to make your financial situation better. We do it for our health, we do it for cosmetics. We do it for many things, but how come we're not doing it for our finances? This is the time to do it, and that's why we're offering a free financial assessment fixating on tax planning. Folks, give us a call. We'd love to help you with it. Phone number is 855-963-2526. That's 855-96-FALCON, like the bird.

Gabriel Shahin:

Now, folks, I'm going to talk to you about the difference of a traditional and a Roth IRA, okay? I really want to go over that with you. I think it's extremely important, okay? And really, the difference amongst the two are simple. One of them, when you save into a traditional IRA, it reduces your tax liability. That's a fancy jargon. What the heck are you talking about? Well, it's quite simple. When you save into a Roth, or excuse me, into a traditional IRA, you are in fact reducing your income.

Gabriel Shahin:

So if you make $100,000 a year and you save $10,000 into a traditional 401(k), which is the same as an IRA, if you save 10,000 and you make 100,000, the government's only going to tax you on $90,000. Well, if you're in the 22% tax bracket, that saves you $2,200 in taxes. That's just on the federal level. It could be 9% on the state. We'll call it 10 for simple math, saves you another thousand dollars on the state. So by saving $10,000 into a traditional 401(k) or a traditional IRA, you can get 22% backs on the feds, 10% back on the state. You get back $3,200 in tax savings by saving 10,000. That's pretty cool. It almost feels like you just got a 32% return on your money. That's why so many people do it.

Gabriel Shahin:

You know what I call that for some people is a tax trap. Look how smart the IRS is. I swear, they're geniuses. It's so easy to make fun of our government and call them stupid, but they're really one of the smartest entities out there. They trick you into making mistakes. Let me explain how they trick you. They tell you, "Hey, look, you can get this money upfront." So the government, in essence, is taking one step back for multiple steps forward. Why? Because they're getting you only a write-off today at 10,000. They're giving you 3,200 bucks, but that 10,000 grows over time. Over 30 years, that 10,000 should be 80,000 over 30-year period, assuming it doubles every 10 years. Is my math right? 10 years, it goes to 20,000, then it goes to 40 after 20 years, and after 30 years it goes 40 to 80. Yes, I was right. And then, you're later taken out, and now you have to beat taxes on the 80,000 at whatever the future tax rates are. Folks who are over $30 trillion in debt, we've just printed $10-plus trillion over the past 24 months.

Gabriel Shahin:

Social security is not so secure. We have inflation coming. If I was a betting man, if you were a betting person, would you say taxes are going up or taxes are going down? Well, we know with in current Congress and current administration, they made it very clear, they want to increase taxes. So why would you get a write-off today at a lower rate just to take it out later at a higher rate? That's what most Americans are doing. And the misconception for a majority of Americans is they think they're going to be in a higher tax bracket. Excuse me, they're going to be in a lower tax bracket later in retirement. That is true for people, for a lot of people. But the people our firm sees on a daily basis sees roughly 30% to 40% of the people are actually in a higher tax bracket in retirement than they ever were working, and I will explain that to you guys here in a little bit.

Gabriel Shahin:

Now, folks, if you have to go, because I know sometimes this is playing and you're pausing and going, if you are intrigued by what we're saying because it is logical, it does make sense, I'm speaking facts of how the system works, and if you want to know the difference between a traditional and a Roth IRA or 401(k), folks, we can help. We can help customize a plan to tell you what you should do, how much you should do, and what makes the most sense of what's your tax bracket today and throughout retirement or what it would look like and what you should do and where you should save. Folks, give us a call. This is what we do on a daily basis. No reason to do it on your own. There's no cost for it. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. We can help put together a customized plan to make the right decision for you. Folks, give us a call. Now, we're going to go on a short break. If you have any questions, please give us a call. We'd love to help.

Gabriel Shahin:

This is Gabriel Shahin, certified financial planner, your host of More Knowledge, More Wealth that's on every weekend covering all important topics of personal finance. We're going over retirement planning, making sure you're prepared for retirement, social security and strategies, real estate, taxes, avoiding them now and in the future, investments, reducing fees, commissions and so on, insurance and estate planning. Folks, we are offering a free financial assessment that you could take advantage of. We have offices all across Southern California, including the Inland Empire. Give us a call to take advantage. It's a $500 offer. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. Or visit our website, falconwealthplanning.com. That's falconwp.com for short. Enjoy the show. We look forward to serving you.

Announcer:

AM 590 The ANSWER.

Gabriel Shahin:

Welcome back, folks. This is Gabriel Shahin, certified financial planner, your host of More Knowledge, More Wealth here on every weekend. We are talking about all important topics of personal finance but because this is the season, always the season, of taxes, we are going to fixate on the difference between traditional and Roth IRA. You've been hearing the debates for a long time. You've been hearing the conversations, you've been seeing the options on your 401(k) or at your brokerage accounts or through your employer. Folks, we are talking about the benefits of a traditional IRA versus a Roth IRA and vice versa. And then, we're going to talk about later on this show of how some people are actually in a higher tax bracket in retirement than they ever were working.

Gabriel Shahin:

Now, we talked a lot about traditional 401(k) or traditional IRA, they're synonyms, they pretty much are the same thing, outside of how much you could save and working. And we've discussed how it may make sense for some people to save it into a traditional IRA. Because if you make $100,000 and you save 10,000 into a retirement account, traditional, that means you only get taxed on 90,000, not the 100,000 you made, but 90,000. Well, if you're in the 22% federal bracket, 10% state bracket, that means 32% you get as a write-off, which means you get back 3,200 in state and federal taxes instantly back in tax savings. It's extremely important. So that is how it works.

Gabriel Shahin:

And then, I discussed how certain individuals actually feel like, "That's great because I'm going to be in a lower tax bracket in retirement." So let me, before I discuss that part, explain to you how a Roth IRA works. When you have a Roth IRA or a Roth 401(k)... By the way, the limits are $6,000 is what you can contribute if you're under 50. If you're over 50, you could save up to 7,000, and then on a retirement account, you could save 20,000 roughly and up to 26,000 on a 401(k). And so, if you are over the age of 50, that's rather traditional 401(k).

Gabriel Shahin:

And some people say, by the way, "Oh, I make too much. I can't save in a Roth." That's not true. That is not true. There are always strategies where you could save into a Roth account despite your income and depends on how much you have in a retirement account, whether it's 401(k) traditional, how much you make. There's always a strategy. There's a back way of contributing into it. And so, I may be able to talk about that today. Most likely, it will be on another call or on another show. And if you are over those income limits and you think I would recommend just giving us a call because it's a little bit complicated of a strategy, but you can do it. By the way, if that's you, 855-963-2526. That's 855-96-FALCON, like the bird. We'll give you one to two hours of our time at no cost just as a thank you for listening to the show.

Gabriel Shahin:

Now, going back to Roth. If you make $100,000 and save 10,000 into a retirement account, you still get taxed on $100,000 because you get no write-off. You are forfeiting your write-off today for the future growth being tax-free. So you can take out the 10,000 plus growth. Let's say that. Same 30-year period, assuming you make a 7% rate of return over the next 30 years. The stock market, by the way, averages over 10%. By the way, past performance has no guarantee on your future results. Anything on the contrary is considered a felony. And so, my point is if you have $10,000 and it grows to 80,000, in 30 years from now, you could take out that 80,000 and pay no taxes on the principle and the growth. You pay no taxes on the federal or state level. Simple as that. That's it. Nothing more to discuss. That is how simple it is, okay?

Gabriel Shahin:

So what makes sense for you? It depends on your tax bracket today and what your tax bracket is tomorrow. Let's say you make $100,000 today, now that $100,000, you get write-offs on. Now, this is why it gets complicated. I don't know if you give to charity, I don't know what your property taxes are, I don't know if you have a mortgage. It's very possible if you make $100,000 with write-offs. The standard deduction alone is roughly 25,000, which means your taxable income assuming you're married is $75,000, which means you're not in the 22% bracket. That's mistake number one people make. They're actually in the 12% bracket. So now, what makes more sense to put it in? Well yet, again, it depends on what your future income looks like. It's hard to know the answer to these things, folks. We just don't know.

Gabriel Shahin:

So now, you have an idea. You have to take a look at your taxable income, not just what your gross income is, your taxable net taxation income. All right? And by the way, if the top of the bracket is 80,000 to go from 12 to 22, that's a pretty big jump. It goes from 10% to 12 to 22 to 24, 32, 35, to 37. That's not including a 30.8% surtax that they give. So the point with that, of course, is what makes sense for you. Well, let's look at the future. Now, nobody has crystal ball, but what you do know is what your social security will be.

Gabriel Shahin:

Now, I know everybody's talking about it may change, so on and so forth, so just say it's going to stay the same. Why? Because you will not be considering any inflation increases. Heck, everybody just got a 6% raise on social security from 2021 to 2022. But let's just assume it's flat, okay? Majority of Americans are going to give out $30,000 a year on social security. Well, if you're married, that's 60, assuming you and the spouse have the same amount. If your spouse did not work, then they would be getting at the minimum half of yours. Did you know that? That's in addition to yours. So if you get 30, your spouse gets 15. That's 45,000 total income.

Gabriel Shahin:

Now, assuming you were to save $15,000 a year between your 401(k) contribution and employer match, 15,000 a year, that's roughly 15% on $100,000 salary. What would be recommended, by the way? That's between you and your company. If you did that over 30 years, assuming you earned a 7% rate of return, you would have $3 million. Not bad. You would have $3 million if you did that over a 30-year period. So what does that mean? Start saving, folks, because you can be a multi, multi, multi, that's three, a multimillionaire by just saving roughly $1,000 a month, okay?

Gabriel Shahin:

Now yet, again, we're going to get to that point of what makes more sense, doing a traditional or a Roth. By the way, folks, if you're just joining us, you're listening to your host, Gabriel Shahin, myself, your host of More Knowledge, More Wealth. I'm a certified financial planner. I go over all important topics of personal finance and tax seems to be on everybody's hot button of what to go over. And today, we're talking about traditional and Roth. Right now, I'm trying to fixate on the fact of, if you have $3 million, assuming you save 15,000 a year over the next 30 years or 7%, you'll end with 3 million.

Gabriel Shahin:

Here is the thing. Our government doesn't just allow you to have that type of wealth and not tax you on it. This is why I said they're genius. Our government will force you to take the money out, whether you need it or not. They will force you to take that money out at 72 years old. So if you retire at 65, there could be a period there where you are happy, "Hey, I'm in a low tax bracket. Things are great. I'm going to live off some savings. I'm going to pull just as much as I need to live on. I don't need to take any more. I love having all this money. This is great." So then, you turn 72 years old, then the government does what's called a mandatory withdrawal. That mandatory withdrawal forces you to take out roughly 4%. It's actually closer to 3.5%, but for simplicity, I'm going to say 4%. Folks, on $3 million, that's 120,000 forced withdrawal, and that's on top of your social security.

Gabriel Shahin:

So that brings your total income if you get 45,000 social security between your spouse or 60,000 to up to 180,000 income. And if you have only a $25,000 write-off, folks, you know I'm going with this, right, your income is almost twice as much in retirement than it ever was working, and that's because you were disciplined, delayed gratification, did the right things. That is terrible. You are being penalized by doing the right thing. And that's why it could make sense not to contribute to a traditional 401(k) because you could be getting a write-off at a low 12% rate only to take it out at a high rate at the 22% plus. That's madness. That makes no sense.

Gabriel Shahin:

Unfortunately, that's what we see on a daily basis at our firm, is people doing it wrong because they do not get proper tax planning. They get tax preparation. They might have a financial advisor that, oh, by the way, just fixates on investments. When was the last time your financial advisor asked for a copy of your tax returns or, more importantly, give you advice on what you should be doing? You know how I know they don't because advisors, financial investment people tell you, "I'm sorry. You have to talk to a tax consultant. We cannot give tax advice. You have to talk to a professional." Well, that's what we are, guys. We are tax planners. We are the tax professionals. We can help. We have CPA on staff, along with all of us being CFPs. We can help put that together for you, folks.

Gabriel Shahin:

We are offering a free financial assessment. We would love to help you out with it. Give us a call. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. We can help put a personal financial questionnaire for you together, an assessment I should say, and we can put that and answer all your tax questions that you may have relative to what we're talking about. So we would love to help, guys. This is what we do on a daily basis. That's exactly why you may want to consider a Roth IRA. You have to take a look at your situation today, what your income and growth potential is, what your asset accumulation potential is, what your future income is, your social security or pension, what your write-offs are. You may have a mortgage now, but in 30 years you may not have a mortgage so it means your write-offs are less. And then, throw that up in the air and see what spits out. There no substitute for customized approach, folks, and that's what we can help with. That's what we specialize in.

Gabriel Shahin:

The Roth is delayed gratification. You do not get the write-off today, but then you'll take everything out tax-free. Folks, we would love to help you answer that question. That's why we're offering a free financial assessment. We will be giving you tax analysis to help answer that question and, more importantly, explain to you how it works, not just what you should do, but the why behind it. Folks, give us a call. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird, where we can help put personal financial tax assessment for you guys at no cost. And if you want to work with us, we'll let you know when that happens. We charge for planning. We can charge by the hour. We charge for managing investments. We are not commission-based firm. We don't sell any product or anything. Folks, we would love to help you out. We do this on a daily basis and taxes are your biggest expenses for most of you, whether you know it or not.

Gabriel Shahin:

Folks, as we close out the show, man, this was a fast, fast class, I want to thank you for joining in with us this Saturday afternoon. You can always reach out to myself or anyone of our colleagues here at Falcon Wealth Planning. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. Or visit our website at falconwealthplanning.com. That's falconwp.com for short. Call us. We'll have a personal confidential conversation about your situation where we can help relate this show to your specific situation. We're on every Saturday from 12:30 to 1:00 PM as we go over all important topics of personal finance. Our goal is to give you the knowledge you need to increase your wealth. We want to thank you for listening. Enjoy your afternoon, have a great week, and God bless.