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. We're excited to share with you the knowledge you need to increase your wealth. Now we're on every Saturday from 12:30 to one o'clock, going over all important topics of personal finance.

Now to the listener, if you want to reach out to myself or any one of our colleagues here at Falcon Wealth Planning, our phone number is (855) 963-2526. That's 855-96-Falcon, like the bird. Where we can answer any personal questions you have that you want to relate to show to your specific situation.

Now I'm a principal of Falcon Wealth Planning. We are a fee only financial planning firm, we do investment management, as well. But we are a registered investment advisory firm that also manages money, as well. And we go over all important topics of personal finance, guys. That's tax planning, retirement planning, cash flow analysis, whether you should own, whether you should rent. Talking about business planning, social security, folks, you name it, anything that involves a dollar sign, we go over. And it is so important, especially at times of volatility like now, folks. Now we are offering a free financial assessment if you want to help relate to show to your specific situation. If you do have any questions that involves a dollar sign, we are more than happy to help you answer those questions. Give us a call, folks. 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. We'll answer all questions that you may have in regards to personal finance.

But today I am looking to talk about three important topics regarding with the volatility that we are experiencing in the stock market. I mean, heck we looked at over 10% losses for year to date alone. I mean, we're still in the first month of the year and it's not uncommon for them market to be volatile. But I'm going to talk about three topics that has to do with tax planning, where market drops aren't always a bad thing. We're going to talk about tax house harvesting, Roth conversions on required minimum distributions and the strategies that you should be taking advantage of when the market drops.

Most people don't do anything when the market drops, they freak out. If anything, they sell, which is wrong, might I add? But that's what people do for some reason. God knows why they do it, but they do it. They just freak out, they don't know what steps they should be taking, which is normal. Even their financial advisors typically are not calling their clients at moments like this. Because most advisors out there don't have a strategy. I'll give you an example. There are tax strategies that should be done now. That's so important when managing the money. Not only can it make you more money, long term, by following some of these strategies. But it could save you on taxes, as well. Which is oh, by the way, most people's biggest expense.

Now most advisors say, "I'm sorry, we can't give tax advice. You have to talk to a tax advisor." Well, we are those tax advisors. And we can help you with that. Folks, if that's something you never have that conversation with. If that's something where you only meet with your accountant, you may say, "Oh, I have it because I have an accountant." But you only meet with your accountant once or twice a year. That's not a tax planner, that's a tax preparer. If you want help with that, we can do it. Give us a call. This is what we do on a daily basis, folks. Our phone number is (855) 963-2526. That's 855-96-Falcon, like the bird. We'll be more than happy to help put together a personal financial assessment of your situation and what you should be doing.

Especially times that are volatile like now. People are freaking out on volatility. Volatility is your friend. And by the way, it's normal. On top of all that, it's a normal occurrence. Volatility, nothing's uncommon about it, it's very normal for the market to drop 5-10%. It's actually healthy. I mean, you look at a pulse when you go to the doctor, you're connected to one of those machines. The heartbeat goes up and down, up and down and up, down. You don't want a flat line. You know what that is? That's death. This is a very natural occurrence. Stock market is normal, it's human. This is a very normal fact.

And so knowing that the market ... it's kind of like walking uphill. Imagine walking uphill with a yo-yo, for example. That is a very common thing for the markets to go up and down, but it always goes up. Yeah, sure, you can't guarantee past performance for future results because the market has done a historical 10% rate of return. But let's just say a 7% rate of return, 30% less in the historical returns. You still double your money every 10 years. That's important to note. Because you have no other options, as long as we believe that you and I are going to work to make money. As long as we believe, we're working for a paycheck. That's why the stock market goes up, we're capitalists. Which means that companies are in business to make money. They're going to find a way to make money, folks. That's their job.

So as long as we believe that we are investing in companies. Assuming you're investing in the S&P 500 and any other global indices. So assuming you're investing like that, then you have a high degree of confidence that you're going to make money long term. Because there are companies like Washington Mutual, Lehman Brothers, Barrett Sterns, Toys "R" Us, RadioShack, WorldCom, Enron, I mean, I can continue going on and on, on this. So companies can go out of business, but indices truly cannot.

So knowing that market drops are normal, they're not an uncommon event, they're part of investing, they're a part of markets or part of full financial cycles and economy. This is a normal occurrence. So knowing it's a normal occurrence, what are you doing to plan yourself accordingly? Most people do nothing.

By the way, folks, if you're just joining us, you're listening to your host, Gabriel Shahin, certified financial planner and your host of More Knowledge, More Wealth here on every weekend, Saturday, at 12:30 to 1:00, going over all important topics of personal finance. And today I'm going to be talking about strategies on things that you need to be doing, things that you should be doing. Market drops aren't a bad thing. Oh my God, it's an opportunity, you've been waiting for an opportunity. And what are you doing about it?

I'll give you an example. First off, a Roth IRA, I want to explain to you what a Roth IRA is. A Roth IRA is an after tax account, which means you put in $5,000 in a Roth. And that 5,000 grows to 50,000. That growth plus the principle, is all tax free. You can take out that $50,000 and pay no money in taxes. All tax free growth. Roths are amazing. So let me talk to you about a strategy that you should be doing now when the markets are dropped. Now, when I say you should, please consult with a tax advisor. Oh, by the way, I know a good tax advisor, offices all across Southern California. We help people nationwide and our headquarters is here in the Inland Empire. I do know a firm, you can give us a call. Our phone number is (855) 963-2526. That's 855-96-Falcon.

By taking money out of your IRA or 401k or 457, 403(b), SEP, define benefit, whatever the case is. By taking money out of there and converting it to a Roth when the market drops, that's a no brainer, folks. Absolute no brainer. Especially those approaching 72 years old when you're forced to take the money out anyway. Folks, you can have money in that account. You're going to pay taxes on it sooner or later. And guess what? The tax rates are at all time lows pretty much. They're pretty much at all time lows, they're at the lowest 3% in the history of tax rates. So not only you're taking out a lower rate, but you're potentially avoiding higher taxes when you take it out later.

And think about this, you are capturing it at a lower amount. What does that mean? Let's say you have 100 shares, 100 shares of an investment that's worth $1000 a share. Let's just assume you have that. That means you have $100,000 in that one investment. Now let's say that drops 40% in value. Well, you don't have $100,000 anymore, you only have 60,000. But let's say you need to have $100,000 in there to rebalance the portfolio. Well, you can't have 100 shares anymore. You need to have over 1,600 shares to get you to that same $100,000. Now, where do you get the money from? You sell it from bonds and other investments, so on and so forth.

Now once the market comes back, like it did in the COVID crash where it was only four months for it to come back. It dropped almost 40%, four months later, you're back to normal, needless to say. You bought 1,600 shares. Now, once it goes back up to $100 a share from the 60, you don't have $100,000 anymore, you have $160,000. Because remember, you bought 1,600 shares at $100 a share. So the point is you get that growth. If it's in a Roth, if you converted it in a Roth, if you converted 1,600 shares, $100,000 worth into a Roth, you get that $60,000 completely tax free. That growth is tax free growth that you just took out. And you strategically did it, you want to wait for these market drops, these could be amazing opportunities for you to do something like that.

And most people don't do it. They buy and hold, they do nothing. On the contrary, they sell, which is absolutely crazy. These are people with no professional advice, they just sell. And those people still crying for what happened in the COVID crash, let alone, the financial crisis in 2008. People say it's expensive to hire a professional. I say it's expensive to be an amateur. I mean, seriously, I can't afford to be cheap anymore.

So the point I'm making with you is it could make all the sense in the world, depending on your situation to do a Roth conversion. There's very rare, you can find a period of a few weeks where you get a 10% discount on the market, if you liked it before you better like it now. It's extremely important to do that, extremely. So keep on the lookout for something like this, folks. Market drops are your friends. Because opportunity available to you.

Today, I'm just talking tax planning with you guys. Because your advisors are not, they're not allowed to. They say, "Please consult with a tax advisor." And as a tax advisor, I'm saying, this could make all the sense for you. If this is something you want help customizing for you, if this is something that you've always had questions on this Roth conversion. If you want to make sure that you should do it, number one. Number two, how much should you do? And number three, when you should do it? Give us a call, this is what we do on a daily basis, folks. 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. We can help put together a tax assessment and financial assessment for you to tell you exactly what you need to do. You pay nothing for this. The only time you pay is if you want us to do it on your behalf.

Spread the good word, that's how we grow out there, too. There's very few good people in this industry. And we're one of them and we got offices all across Southern California, including in the Inland Empire where our headquarters are. Folks, give us a call. I'm going to come back, we're going to go on a little break here and we're going to talk about a few things here. Two more items that could help from a tax strategic point of view. Stay with us, folks. We'll be back after a few words.

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 numbers (855) 963-2526. That's 855-96-Falcon, like the bird. Or visit our website at 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, your host of More Knowledge, More Wealth, here on every weekend. Going over all important topics of personal finance. Welcome back, folks, from our break. We are still going to continue on talking about all important topics here and focusing on tax planning, especially during volatility. Now, right now we're looking at volatility with the markets dropping and really hit over 10% down earlier in the week.

And so we wanted to talk about things that you should be doing. Now, revisiting the accounts, we talked about what a Roth conversion in and how that can make sense. Similar to that, I wanted to start going into additional comments for you on things that we believe could make a lot of sense. And that is doing a required minimum distribution during volatility. What does that mean? Why would you do such a thing? Why would you take money out while the market is low? That's contradictory of what I've been told, always, wait. And a lot of people wait until the end of the year to do the required minimum distributions. Here is why I say it could make a lot of sense for you.

And it's very similar to the Roth conversion, where if the shares drop in value and then you convert it into a Roth. Well, the rebound happens inside a Roth, which is tax free. Now you cannot do that with a required minimum distribution. You cannot put your required withdrawal, which by the way, folks happens at 72 years old. You can't put it into a Roth. The government is smart, they want you to take it out and put it in your bank account or put it into a brokerage account. Now, which means is when the market drops a required minimum [inaudible 00:14:45] could make sense if you take out shares. Don't sell the stock, tell your brokerage company to move shares over into your brokerage account. Especially when the market drops.

The reason that can make a lot of sense is because yet again, the rebound comes outside of the IRA. Folks, the IRA is the highest, most expensive taxable investment account that you have. Taxed account you should have. The Roth is the best. Why? It's tax free. You don't pay any taxes on the federal level, the state level, whether what you put in or what you take out or on the growth, you never pay tax on that. If you do a conversion, you have to pay the tax at the time. But all the growth is tax free. On a brokerage account, you only pay taxes on the gains and it's at a preferred rate. It's lower than your ordinary income taxes, which is at the IRA and 401k level. That has the highest tax rates, folks.

So which means is, if you have to take a required minimum distribution, take it out and put it into your brokerage account. That can make a lot of sense for you. Especially during volatility. Folks, if you need help with that, if what I'm saying sounds like it you could be a good candidate for, especially if you're over 72 years old, give us a call. This is what we do on a daily basis. Whether it's that, the Roths or the Roth conversions that we talked about earlier, we can help customize a plan for you. Our phone number is (855) 963-2526. That's 855-96-Falcon, like the bird. Where we can help put a personal confidential assessment for you and have a conversation. We'll be more than happy to put that together for you, folks. Typically advisors charge for this. We're giving this to you at no cost, one to two hours of our time with no cost at all, folks. Give us a call. Visit our website, as well, that's FalconWealthPlanning.com. That's Falconwp.com, for short.

Now, we're going to go into another strategy that I would like to discuss. And that is something called tax loss harvesting. Now some firms do it the wrong way, it's because they don't understand taxes. Most firms I talk to say, "Oh, it's a wash. You can wash your gains and your losses at the end the year." That makes no sense and here's why. Now, when you have an investment, I'll call it $100,000. And just like what happened earlier this week, you see the market drop 10%. That's a $10,000 loss at that point. Let's say you're invested in the S&P 500 Vanguard fund. You would sell that and re-buy, for example, a similar S&P 500 fidelity fund. You're not allowed to buy the same thing, it's called a wash sale.

So when that drop happens, you sell and you want to re-buy something the very same second. So you're never out of the market, you're just doing that to capture a loss. Think about that. So if it drops down 10%, then you sell it and you re-buy something similar. Why would you do that? You're at that point, 90,000. Nothing's really changed. But now you told the IRS, you have a loss of $10,000 because you captured that loss. Now what happens if at the end of the year, like what happened during the COVID crash, you end up making money at the end of the year. Let's just say it goes up 20% like it did during the COVID crash of 2020.

So now your $100,000 you invested in January is now worth 120,000. Now, you though have a $10,000 loss ... excuse me, that $10,000 loss that you show on your tax returns. Now you're only allowed to write off $3,000 a year. Now the important part of that is, what exactly are you able to write off? Well, you get to write off that 3,000 against your ordinary income. Let me explain the brackets. It goes 10% bracket, 12, 22, 24, 32, 35 and 37. You get to write that off. So whatever tax bracket you're in, let's just call it the 24% tax bracket. You get that 10,000 back over time, you get that $10,000 back written off that 24%. So you get $2,400 in your pocket. It's kind of cool.

But here's the thing, your cost basis went from 100,000 to 90. So that 10,000 you wrote off, you have to repay the tax on that gain. Now, because capital gains, long term capital gains are a cheaper rate than ordinary income, it's lower to recapture that gain. So that 10,000 it's only going to be at 15%. So you're going to have to pay $1,500 to recapture the 10,000 you wrote off, but who cares? You've got 2,400 back. You have to pay 15. You're still ahead $900. That's $900 you'll never see on your investment statement. That's the $900 you see in your overall wealth accumulation. That is what you see in taxes, in tax savings. That is $900 on $100,000, that's almost a 1%, almost like additional return that you gained, if you think about it, 0.9 to be exact, in this exact example.

By the way, folks, if you're just joining us, you're listening to myself, Gabriel Shahin, certified financial planner, your host of more knowledge, more wealth here on every weekend, talking about all important topics of personal finance. And today we're talking about tax planning and how you should be acting, what you should be doing when markets are volatile, when they go up and down. These are situations and strategies that can save you money. I just went over tax loss harvesting. When the markets drop, you sell, and then you re-buy something similar. And you're able to capture that loss and write it off on your personal tax return. It saves you money just by being tax strategic. And a lot of advisors are not doing that. And if they do it, they do it wrong. They sell it too early.

Why would you sell just to offset a gain? The gain is the best part because it's at a lower tax rate, it's at a capital gains rate. Those rates could be tax free. Could be 15%, 20% or 23.8% with the new Medicare cert tax that came out a few years back. No matter what, it's lower than 37. Heck if you're in the 12% bracket or less, your capital gains are tax free. It's crazy that financial professionals are not even looking at your tax return. It's absolutely mad. How can you actually manage somebody's money consciously without knowing their tax situation? Because depending on their tax bracket, you could purposely sell things for gain and pay no tax on the federal level. It's insane to me. And even on the state level, depending on the state you're in. It's absolutely crazy.

And yet I see this over and over and over again. Makes absolutely no sense. This is why it's important to talk to a professional that's holistic, that's a true financial planner, that's a fiduciary. That is and gives you tax advice on what you should do to save money today and throughout retirement. Folks, this can add up to thousands, tens of thousands, if not hundreds of thousands of dollars throughout your life. And it's crazy to me that people are not giving this advice. Absolutely insane.

And folks, if you need help with that, if that's something that you want to actually have for the first time, you'll probably have never had it exposed to you. Tax planning, give us a call. We can do that for you. Where other firms charge for this, we are giving a one to two hours away of our time at no cost for listening to this show. Myself and my colleagues would be happy to help, folks. We got a team of certified financial professionals that can help you put this together for you, folks. Give us a call, be more than happy to help. 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. We can help to put together a tax assessment for you, a financial assessment to really help relate this show to your situation.

Because we see it far too often. Markets drop, they're volatile. But guess what? It's actually a good thing because we know markets are going to rebound, they've only done it for 100 plus years, where they've always rebounded back. I mean, we're high degree of confidence in that. So if we know it's going to come back, then this is a time act and do strategy. Folks, there's no way around taxes. I'm not saying to embrace taxes, I'm saying tackle it head on. Understand the rules, when you go in for a fight, you do your study before the fight. Well you have to study the tax halls and because you don't have the time, the energy or the care to do that, that's what we specialize in and we can help you with that. Please let us do that for you.

And that's why we're offering one to two hours of our time at no cost. Because we want to open your eyes and lighten you and educate you on what you should be doing. And with that, you make the decision if you want to do it yourself. Which is fine, we grow ridiculously off referrals. But if you don't want to do, you don't have the time or you don't care to do it. That's what we can tell you what it looks like to work with us. But folks, start with the free assessment, there's no cost for it. Let us show you what you should be doing with the tax that are available for us. Give us a call, our phone number's (855) 963-2526. That's 855-96-Falcon, like the bird. Where we can help put this assessment for you. We would love to help. Those are the three things, folks, that I talked to you about that you should be doing during times of volatility. This is the time to do it, folks.

Hope you enjoyed this show today. Man, that was up fast 30 minutes. And as we close out, I want to thank you for two tuning in with us this Saturday afternoon. You can always reach out to myself or any one of our colleagues at (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 to help relate this show to your specific situation.

Tune in every Saturday from 12:30 to one o'clock 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. We want you to enjoy your weekend, enjoy your afternoon. Have a great week and God bless.