22 min
Chapter 4 – ”Taxes” Control Your Retirement Destiny
-
- Investing
In this episode, podcast host and author of “Control Your Retirement Destiny” covers Chapter 4 of the 2nd edition of the book titled, “Taxes.”
If you want to learn even more than what there is time to cover in the podcast series, you can find the book “Control Your Retirement Destiny” on Amazon.
Or, if you are looking for a customized plan for your retirement, visit us at sensiblemoney.com to see how we can help.
*In this recording, Ms. Anspach incorrectly stated "At least 12% right? After all, in 2017 that was the lowest tax rate." The 12% tax rate was implemented in 2018, not 2017. The correct sentence would be "At least 15% right? ...at 15% they would pay just over $31,500 in federal taxes.
Chapter 4 – Podcast Script
Hi, this is Dana Anspach. I’m the founder and CEO of Sensible Money, a fee-only financial planning firm. I’m also the author of Control Your Retirement Destiny which was initially published in 2013. A 2nd edition was published in 2016, and now, I am working on the 3rd edition. Why a 3rd edition? Well, the tax laws changed - and we want to update Chapter 4, which covers taxes.
This podcast covers the material in Chapter 4, and I’ll be discussing both the old tax rules and the new tax rules. We’ll continue to follow the case study of Wally and Sally based on the 2nd edition of the book.
The book has incredible 5-stars reviews on Amazon. If you like what you hear today, go to Amazon and search for Control Your Retirement Destiny. You won’t be disappointed. And if you are looking for a customized plan, visit sensiblemoney.com to see how we can help.
Ok, let’s get started. In this podcast, I’ll be covering the highlights from Chapter 4 on the topic of “Taxes.”
-----
There are very few people I know who enjoy doing their taxes. That includes me. I have actually never done my own tax return. To me, it is worth it to pay someone else to handle this task.
Yet, I know a tremendous amount about personal tax rules. So why wouldn’t I do my own tax return? Well, a tax return is a historical account of what happened. Once it is time to file your return, there is nothing you can do to change the outcome.
I prefer to use my tax knowledge to figure out how to pay less in taxes. And, to help other people pay less. To me, that is one of the most rewarding parts of my work.
To pay less in taxes, you have to plan ahead. How far ahead? The more you want to save, the farther ahead you’ll plan.
Think of tax planning in three levels.
Level 1 is pretty basic. For example, assume you turn your tax documents in to your tax preparer, and he or she let’s you know you could fund an IRA for the previous year, and thus reduce your tax bill. That wasn’t really planning ahead, but you did learn a step you could take to reduce current year taxes.
But is this really the right step to take to lower your taxes in the long run? Not for everyone. Some people are better off funding a Roth IRA instead of a Traditional Deductible IRA. With a Roth, you make after-tax contributions and from that point on, the money grows tax-free. The Roth IRA has several unique advantages for retirees when they enter the phase where they are regularly withdrawing money. For example, Roth withdrawals do not count in the formula that determines how much of your Social Security is taxable. And Roth IRAs do not have what are called Required Minimum Distributions, which begin at age 70 ½ and require you to take out specified amount each year. These unique advantages of Roth IRAs are often missed by traditional tax preparers.
The reality of Level 1 planning is that many tax preparers are so focused on what you can do to reduce this year’s tax bill, that the advice they are giving, with the best of intentions, may not be advice that is ideal for you.
Next, we have Level 2 tax planning. You must tackle Level 2 planning in the fall, and run a tax projection. The bummer part of doing this is that you have to gather estima
In this episode, podcast host and author of “Control Your Retirement Destiny” covers Chapter 4 of the 2nd edition of the book titled, “Taxes.”
If you want to learn even more than what there is time to cover in the podcast series, you can find the book “Control Your Retirement Destiny” on Amazon.
Or, if you are looking for a customized plan for your retirement, visit us at sensiblemoney.com to see how we can help.
*In this recording, Ms. Anspach incorrectly stated "At least 12% right? After all, in 2017 that was the lowest tax rate." The 12% tax rate was implemented in 2018, not 2017. The correct sentence would be "At least 15% right? ...at 15% they would pay just over $31,500 in federal taxes.
Chapter 4 – Podcast Script
Hi, this is Dana Anspach. I’m the founder and CEO of Sensible Money, a fee-only financial planning firm. I’m also the author of Control Your Retirement Destiny which was initially published in 2013. A 2nd edition was published in 2016, and now, I am working on the 3rd edition. Why a 3rd edition? Well, the tax laws changed - and we want to update Chapter 4, which covers taxes.
This podcast covers the material in Chapter 4, and I’ll be discussing both the old tax rules and the new tax rules. We’ll continue to follow the case study of Wally and Sally based on the 2nd edition of the book.
The book has incredible 5-stars reviews on Amazon. If you like what you hear today, go to Amazon and search for Control Your Retirement Destiny. You won’t be disappointed. And if you are looking for a customized plan, visit sensiblemoney.com to see how we can help.
Ok, let’s get started. In this podcast, I’ll be covering the highlights from Chapter 4 on the topic of “Taxes.”
-----
There are very few people I know who enjoy doing their taxes. That includes me. I have actually never done my own tax return. To me, it is worth it to pay someone else to handle this task.
Yet, I know a tremendous amount about personal tax rules. So why wouldn’t I do my own tax return? Well, a tax return is a historical account of what happened. Once it is time to file your return, there is nothing you can do to change the outcome.
I prefer to use my tax knowledge to figure out how to pay less in taxes. And, to help other people pay less. To me, that is one of the most rewarding parts of my work.
To pay less in taxes, you have to plan ahead. How far ahead? The more you want to save, the farther ahead you’ll plan.
Think of tax planning in three levels.
Level 1 is pretty basic. For example, assume you turn your tax documents in to your tax preparer, and he or she let’s you know you could fund an IRA for the previous year, and thus reduce your tax bill. That wasn’t really planning ahead, but you did learn a step you could take to reduce current year taxes.
But is this really the right step to take to lower your taxes in the long run? Not for everyone. Some people are better off funding a Roth IRA instead of a Traditional Deductible IRA. With a Roth, you make after-tax contributions and from that point on, the money grows tax-free. The Roth IRA has several unique advantages for retirees when they enter the phase where they are regularly withdrawing money. For example, Roth withdrawals do not count in the formula that determines how much of your Social Security is taxable. And Roth IRAs do not have what are called Required Minimum Distributions, which begin at age 70 ½ and require you to take out specified amount each year. These unique advantages of Roth IRAs are often missed by traditional tax preparers.
The reality of Level 1 planning is that many tax preparers are so focused on what you can do to reduce this year’s tax bill, that the advice they are giving, with the best of intentions, may not be advice that is ideal for you.
Next, we have Level 2 tax planning. You must tackle Level 2 planning in the fall, and run a tax projection. The bummer part of doing this is that you have to gather estima
22 min