More Knowledge, More Wealth - Ep 152: Financial Planning Techniques to be Aware Of

More Knowledge More Wealth - Episode 152 Jul 30

[00:00:00] Gabriel: Good afternoon. This is Gabriel Shahin certified financial planner, and your host more knowledge, more wealth you're on every weekend. Talking about all important topics of personal finance. My goal is to give you the knowledge you need to increase your. Now to the listener, you can always reach out to myself or any one of our colleagues here at Falcon wealth planning.

[00:00:57] Our phone number is eight five five nine six three. 25 26 that's 8 5, 5 96, Falcon like the bird, or visit our website at Falcon wealth, planning.com. That's Falcon wp.com for short. Now I'm a principal of Falcon wealth planning. We are a fee only financial planning firm. We do manage money as well, but we are really specialize in everything that involves a dollar sign folks that talks about where you are today.

[00:01:26] How retirement looks like, talk about taxes, insurance, estate, planning, investments, folks, you name. Anything that involves a dollar sign. We can help. And we are offering a free financial assessment. We help people all across the country. Give us a call. We normally used to charge for this, but for you guys, it's absolutely no cost for you.

[00:01:45] Feel free to reach out to us. We would love to relate this show to your specific situation. Our phone number is (855) 963-2526. That's 8 5 5 96, FAL. Like the bird we would love to share with you kind of some of the low hanging fruits that people just aren't aware of. We really can help answer those questions that are out there.

[00:02:10] It's just this industry, whether it's on the wealth management side or on the tax planning side of it is so cliche with selling product versus selling brain, which is like what we do at FAL wealth planning. We like to be the most comprehensive. Of wealth managers in the country and we've been rated by multiple outlets.

[00:02:29] Like city wire is one of the fastest growing in the country. Second fastest in California by wealth management magazine by the LA business journal. By register investment advisor, Intel as some of the best firms in the country. We are proud about that. And yet again for the six year in a row, financial advisor magazine as well, and we continue to have 50% growth year over year, which has made us we've officially broke the top 500 of the largest companies, uh, for red share investment advisory firms.

[00:03:00] In the country through financial advisor magazine. So we'd like to share with you these things and with that comes, what could we share with you and what type of value could we be offer? the answer to that is taking a look at where you're getting most of your financial advice from. And most people are getting their advice, not from their financial advisor.

[00:03:19] Why? Because not everybody has a financial advisor. Most people are getting their advice from their tax professional. Their tax professional are giving them the advice of what to do, but the problem is, and no fault of theirs is that they. Uh, preparers. They are historians. These are individuals that look backwards, which doesn't really make sense for your situation because a lot of the strategies have to be done by December 31st of last year, but you're doing the taxes this year.

[00:03:54] How does that make sense? , this is why there is no shortage. There's no shortcut. There is no way truly an accountant can do tax planning. They have to be comprehensive and it's difficult for them to do. This is why our industry of tax planning exists. Something as simple as understanding what your current mortgage is.

[00:04:15] What's the rate. What's the. take a look at your investments. Where do you have it? Are they in retirement accounts, tax deferred? Are they in Roth? Where are you saving? Based on today's income. What's your future income look like? Well, how does. plan out. Well, depending on if you get rental income, is there mortgages on those cuz then if not, and they get paid off in retirement.

[00:04:34] Now you have higher income. Are you getting social security? If so, how much that is? When are you gonna take it? When's the best time to take it? How much you have in IRAs or retirement accounts, those required minimum distributions that are eventually gonna hit those. You get what I'm saying? Some simple, I love doing this sometimes and I don't do it intentional.

[00:04:52] I'm not trying to be rude, but some people have come in with a simple. And almost has a lawyer talks. You explain to them the 15 to 25 different variables of why I can't simply answer that simple question. Not trying to be rude. I'm telling you. That's just how it works because the right answer in tax planning is.

[00:05:14] it depends. and it's true. It truly depends. That's the right answer for you. I don't know the right answer because you can have the same dollar amount, the same goal, but the answer could be different five different times depending on the person situation. So be. of your situation and what you should be doing.

[00:05:36] And I'll give you a quick example and I wanted to do this, and actually I'm gonna prolong the example of a SEP IRA versus a solo 401k. This is a fantastic example of also what good advice is, but what old advice and how it can change to good advice with the newer. Options available to you by the way, folks, if you're just joining us, you're listening to Gabriel Shahin, certified financial planner and your host of more knowledge, more wealthier every weekend, talking about all important topics of personal finance.

[00:06:07] and today I just wanna give you an example of how there's old advice and new advice, and even the advice that you were given three years ago, five years ago, 10 years ago, 10 years seems obvious, but there are still people implementing strategies that they heard back in 2012. Keep in mind the financial crisis we had was in 2008, it was still fresh in people's mind.

[00:06:27] Taxols changed on four separate occasions. Since then, these are things to be aware of. You have to understand each situation is. Different. You have to understand that your situation might have changed as well. So I'll give you an example of a situation where people were being recommended a SEP IRA for a long time.

[00:06:47] And a step IRA works like this it's step stands were self-employed and that made sense for a lot of people back when they were trying to save towards retirement, a normal IRA, you can only save six to $7,000, depending on your age with a set IRA, you can save over $50,000. So what's my. My point is simple, is that back in the day, if you were netting a hundred thousand dollars and you were, let's just say a sole proprietor, you were able to save 25% of whatever you were netting.

[00:07:18] So what is 25% of a hundred thousand dollars? 25% is 25,000. You could save $25,000 into that SEP I. simple enough, right? Seems great. Sure. Better than the 6,000 as before now, you are a max allowed to put over $50,000. You are, and it's actually closer to 60,000 now, but let's just keep it simple to take 50.

[00:07:43] But you know, if you can only max put 25%, if you're making $200,000 net, well, then you put the 50,000 that we just discussed. But in this case you're only netting a hundred. so you can only put in that 25,000. So this has been a very normal, traditional advice that accountants has given to their clients.

[00:08:02] And that is to open up a Shi rate cuz by putting money into the S IRA will help reduce their tax burden because they get a write up on both the federal and the state side. Sounds fantastic. Right? No. Remember you can't go running, opening up step IRAs. Number one, you have to be self-employed and number two, you have to see if it makes.

[00:08:22] For you to do. And I'll also see is if you have employees and depending on a few other factors, let's now discuss a solo 401k yet. Again, I just wanna highlight how the laws and the recommendations have changed, and yet I still see people saving into a step irate today. So let us discuss now a solo 401k is very similar to a SEP, uh, IRA.

[00:08:46] They're both a retirement accounts for self-employed. So that's why it's solo 401k for a sole practitioner. For someone who's just independent on their, on their own running their own business could be a department store or maybe a general merchandise store, or it could be, uh, a lawyer or whatever. It may be just a one man shop or woman.

[00:09:05] Excuse me. uh, so. Going into detail. If you net a hundred thousand dollars of the solo 401k, you are allowed to put up, put in up to $27,000 as a contribution from the employee. So if you're under the age of 50 that's 20,500, if you are over the age of 50, it is $27,000. So that's what you can put in. Now, I know what you're thinking.

[00:09:29] You can only, you can do the same thing with a step it's 25% in compensation. So what's the big difference. The difference is is in this example, all you have to. Is we'll call it 27,000 for you to save 27,000. Let's use simple math. If you made $30,000 net, well, with a set, you can only save 25% of that, which is $7,500.

[00:09:52] But with a solo 401k, you could save $27,000 way more than 25%. And that example it's like 90%. Let me continue that. Let's say you have a hundred thousand dollars net and on step IRA, remember you are contributing yet again, 25% of what you've net, which is 25,000, but with a sole. Solo 401k. You can max that $27,000 into the 401k as a contribution from the employee, which is you.

[00:10:25] The match side is the same as the set, which 25%. So you could put in $25,000 of that hundred, plus the 27, you could say $52,000 versus the 25,000 earlier. With a step IRA. This is a great example, how laws change. So 401ks became really popular around 10 years ago. And if you don't know about that, you are missing out how much you can contribute into the account.

[00:10:53] This is an unfortunate thing, and we see happen often. These are factors that can impact your situation, whether it's through tax savings or saving in the right. you could even say, well, I don't want to save too much in a retirement account because maybe my tax situation will drop in such a low rate that it's not financially beneficial for me to do it.

[00:11:16] I'm gonna talk in more detail of that. When we come back of additional strategies, you can do to help maximize this savings. And retirement savings, especially if you're in the catch up years of your life. If you need help with this, if what I'm sounding sounds like it could help you. If you could relate to this conversation, or if you know somebody that can give us a call, we do this on a daily basis, and this is why we're offering one to two hours, one to two meetings.

[00:11:41] Of our time at no cost folks. Our phone number is (855) 963-2526. That's 8 5, 5 96. Falcon like the bird we can help relate this show to your situation. We can help identify things that you are doing that could have been right 10 years ago, but are flat out incorrect or not as efficient today. Give us a call.

[00:12:07] We'll be happy to help. We can help people all across the country. We have multiple office as well. We'll be right back. We're gonna take a quick little break, but we look forward to talking to you more after this short period of time.

[00:12:21] Welcome back folks. This is Gabriel, Shahin certified financial planner, and your host of more knowledge, more wealth here and every week, and talking about all important talks of personal finance. And today we are discussing just simple advice that you could be getting from a financial professional. Most of these individuals that you work with and get a financial advice from are accountants.

[00:12:40] And I love accountants. We have accountants here at work at Falcon wealth. as tax planners they're necessary. Unfortunately, most of 'em focus just on tax preparation, and this can hurt you based on all the advice that you could be getting. because tax planning is much more complex. And I'll give you an example of something as simple as knowing with you, if you should be saving it to a traditional or a Roth 401k or IRA or SEP, the problem is on a SEP retirement account.

[00:13:09] You may not easily be able to decide if you could save into a Roth versus traditional, most steps are only offered into a traditional aspect where you could only reduce your tax savings, uh, reduce your tax liability. So by saving in there, you pay less tax, cuz that's a write on, but there are situations.

[00:13:30] And I mentioned earlier, why a solo RO uh, solo 401k makes sense. Now, ideally you can also open a, so. Roth 401k. That'd be great. But now there might be not a place where you can do that. A lot of the places that we're offering it have restrictions where you cannot open one of these up. It's becoming more growingly difficult, especially if you're looking for a low cost option.

[00:13:53] but what you could do is as you save it to a solo 401k, you can then do a Roth conversion out of that. Because when you save into that solo 401k, it actually reduces your taxes by taking the money out and moving it into a Roth. It increases your taxes, but equal to where it would've been. If you didn't do it anyway, it's a tax neutral strategy that could make sense for.

[00:14:17] In your situation. And I've seen multiple people that could, in that example, I gave previously that hundred thousand dollars. I've seen people where if in a so, uh, SEP IRA, they could save 25,000. If you had a solo 401k, the max could save is 52,000. What would, if you only wanna save 30, so that extra 22,000 will save you on a very low bracket, like the 12% bracket that's not really beneficial to you, is it exactly?

[00:14:43] So what you could do in that specific example, Nice to do a Roth conversion of 22,000, which would make you to the top of that 12% bracket. For example, it may make a lot of. For you folks, this is why we offer for your financial assessment. Cuz what we're talking about sounds great. Make, could make a lot of sense for you and could save you tens of thousands of dollars throughout your lifetime.

[00:15:04] If not hundreds of thousands in tax savings, not just now, but throughout your lifetime. This is why we recommend talking to a professional and this is why we help people all across the country. And this is why we're offering that free financial assessment. We offer one to two hours, one to two meetings of our time at no cost to you.

[00:15:21] We recommend you give us a. This is what we do on a daily basis. Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the bird, or visit our website@falconwealthplanning.com. That's Falcon wp.com for sure. Be happy to help out answer these questions that you may have or relate this show to your situation.

[00:15:47] This is what we do on a daily basis. And we talk, there is a difference with a PR planner versus a prepare and as a tax planner, it's important that you understand the difference because really the tax preparer's job is to make sure you pay the least amount of tax possible legally. and so that doesn't always help long term, because what that could be doing is really hurting your long term planning and what your long term tax situation looks like.

[00:16:17] It may be better to forfeit some, none, or all of your tax deferral, depending on your situation. I've seen an. Over in Northern California, that was, had some losses that was still saving 27,000 a year at the time. I think it was 24,000 in a solo 401k. They were getting zero write off for it and still saving in there.

[00:16:44] My question and comment to him was why in God's name, would you do that only to take out the money later and pay taxes? I could argue. It makes sense to take money out of the solar 401k while it's cheap, arguably tax free to do it this yet again is a great example, why tax planning is necessary. And I see this every day and I don't want you to make that mistake.

[00:17:08] I don't want you to have these problems. I don't want you to go through this nonsense because you will find out later the mistakes that you. They call be bold, gr be old men for a reason later on in life. Typically after 72 years old. And the reason is, is because they're forced to do these mandatory withdrawals, whether you need the money or not.

[00:17:29] I don't want you to go through that same mistake. By the way folks, if you're just joining us, you're listening to Gabriel Shahin certified financial planner and your host of more knowledge, more wealth here on every weekend, talking about all important topics of personal finance. And so for some of you that are on the video, hello there, we also do a webinar version of this.

[00:17:48] Uh, it's on our YouTube channel with more knowledge, more wealth through Falcon wealth planning as well. So feel free to look it up. And we're also on Spotify and the apple store through air. Uh, The, uh, podcast where you can pull up more knowledge, more wealth. So going into more detail and just talking and helping you and preparing you for the distinction between a tax prepar and a tax planner.

[00:18:11] And my final example truly is looking at something like a C corporation versus an S corporation. And we're, I've seen a lot of people get this recommendation from their accountant because a C corporation is allowed to pay for the medical expense. For the owners versus an S Corp. Technically it can still pay for it, but you have to get taxed on it.

[00:18:34] And so on the benefit piece of it. So there is distinctions there, but you have to also look at the big picture here. If you're trying to save two to 3000 medical insurance, write off costs through payroll tax, that might not be a big benefit when you compare the. To hundreds of thousands of dollars, you could potentially lose on the tax side with having a C Corp because as you know, there is double taxation and you have to look at what the comparison of the two, depending on your tax situation, if you're netting 10,000 to a hundred thousand dollars a year, You have to understand what makes more sense.

[00:19:10] If you're netting over a hundred thousand to $500,000 a year, you have to understand if a C Corp versus S Corp, or if you're netting over 500,000 or a million dollars a year, you have to see the difference between a C Corp and an S Corp. And what makes the most sense for you? And the problem is I just don't see that with most people.

[00:19:27] I don't see most individuals doing that type of long term comparison because an S Corp could be great for you. But maybe not later, depending on what the exit plan is, and depending on your tax situation and vice versa, a C Corp could be great for you now or later, depending on your financial situation, whether it's looking to expand the company or.

[00:19:52] Or looking to control the unnecessary taxation that potentially could happen through a double tax with the C Corp. These are great examples of why there is no substitute. There is no shortcut to knowing what's best for you. And this is why an accountant just can't do it. And this is why our industry, we.

[00:20:12] The standard of getting to know you and there's no substitute of short cutting or short changing the proper recommendation for you outside of spending that time with you getting to know you, seeing what makes sense for you and customizing that approach to you. Because depending on how much you make, depending on if you need funding for your business, depending on the expansion plans that you.

[00:20:39] Could make sense on how to structure the company. And the problem is not everybody has this skill set. And a lot of our skill set does help. Aspiring people want to become financially independent. That is our primary focus. And a lot of the people that do that are business owners are people in the tech industry or whatever it is.

[00:20:58] People with assets and high taxes. This seems to be a core audience for us who appreciates our help. Engineers are some of our best target clients as well for that reason, because they appreciate detailed numbers and we are offering a free financial assessment to help go through this process with me and my team, we got a large team here at FA wealth planning.

[00:21:19] That's how we're able to help people all across the country. Give us a call myself and my colleagues would love to help and identify what you're doing. What you're doing wrong and let's just flat out something you need to change. These are ways that we can help provide that value and answer at no cost.

[00:21:37] We are offering one to two meetings, one to two hours of our time at no cost folks. This is the best time to do it, especially since we're in this purgatory state of the market. Not sure what it wants to do, whether it's up or down people uncomfortable, rising interest. Rising inflation. Whole prices seems to have this weird stabilization where if you were looking to sell, you probably should have done three months ago.

[00:22:02] These are times where with markets being unstable with also retail numbers are lacking. People are now wondering and having issues about their future. Help us help. with identifying what you should be doing, because even if it doesn't make a good fit for us right now, doesn't mean number one, it won't be a good fit in the future.

[00:22:25] At number two, you can't spread the good word of the good stuff we've done for you. Give us an opportunity to help would love to do it. Our phone number is eight fifty five nine six three twenty five twenty six. That's 8 5 5 96, FAL. like the bird or visit our website at Falcon wealth, planning.com. That's Falcon wp.com.

[00:22:51] For sure. We have been recognized through multiple publications being one of the best, fastest growing honest firms in the country. And we would love. To be able to show that to you, by being one of the good guys in industry, by showing you your situation. There are so many different aspects of financial planning that could financially benefit you, even something as simple as social security strategies, depending if you have kids, young kids or just God forbid going through disability, or if you are surviving widow, I've seen people miss out, including my.

[00:23:28] On thousands, tens of thousands of dollars by not doing it right. And that was back when my father passed away few years back over a decade ago. So let us help you use our experiences to help you folks. That was a fast ass show. I want, thank you for tuning you with us. Feel free to join us every weekend here at.

[00:23:47] More knowledge more wealth. Our goal is to give you the knowledge you need to increase your wealth tune in every weekend is our goal is to help you with your situation and to relate this show to your situation. Uh, enjoy your weekend. Have a great week. God bless and appreciate you tuning in.