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Alright. Hello everyone, uh thank you all for coming to our webinar today. We are letting people in at the top of the hour; however, just to make sure that we get all the people that may be running a little bit behind, we’re going to start in about four minutes. So, thank you all, of course, for being on time. We promise not to punish you, uh, for being on time any more than that.
Alright, I, uh, feel that’s a good enough amount of time. Uh, Elliot, why don’t you start us off?
Thank you all for joining us for today’s webinar. My name is Elliot Jones, I’m the Director of Marketing here at AAPL, and we’re excited about this new partnership with My Financial Coach. This new partnership gives AAPL members access to financial planning technology that will help alleviate the stress of common financial struggles such as student loans and budgeting, and allow members to focus on excelling in their careers.
We have William MacDonald and Enpo Tu from My Financial Coach here with us today, who will be sharing their expertise on the topic of financial strategies for all phases of a physician’s career. I’ll let them introduce themselves and My Financial Coach. So, I’ll turn it back over to Enpo here.
All right, thank you all. So, my name is Enpo Tu. I’m the Chief Operating Officer here at My Financial Coach, and we’re really excited to partner with AAPL. We understand that there are a lot of moving pieces when it comes to not just your personal lives, but also the careers that you lead, and all of that has to do with your personal finances.
Now, we understand, after working with many physicians and physician leaders, that oftentimes they already have a number of financial professionals that they’re already working with, whether it’s a CPA or some sort of insurance or investment advisor. And we’re not there to disrupt that sort of relationship. Instead, we are there to help bring financial clarity and organization. And how we do that is we do not offer any financial products outside of our process as a service.
What that means is we’re there to look at everything from your cash flow to your budgeting, to the assets as well as liabilities that you’ve accumulated throughout your financial lives. Now, Bill MacDonald is going to give you an example of what that may look like as you go throughout your career. And depending on what you do to build wealth, there may be some areas where you can either get on track to reach your financial goals or if you’re already on track, where you can think of being a little bit more efficient with how you accumulate as well as decumulate wealth as you go through your financial journey.
So, with that, we are also excited to announce that we will be seeing everyone in Chicago next month. Come by our booth, and if you are not going to be at the Chicago conference, we invite you to go on to the site where you can learn a little bit more about our partnership with AAPL.
So, I’d like to now turn it over to Bill MacDonald who will take it from there
Alright, thank you. Yeah, just to expand on what Enpo said, we put the company together about five years ago. My background has been designing executive benefits strategies for Fortune 500 executives and large medical operations, with a lot of tax strategies. One thing I noticed was that a lot of people had “financial advisors” who really didn’t understand the complexities of what they were doing. They were more in the realm of selling products and services. So, our whole mission was to provide unbiased and unconflicted financial advice to people, and that’s how we put together My Financial Coach.
As Enpo mentioned, we don’t sell products or services. We have a number of subject matter experts, and if you go to our website, MyFinancialCoach, inside our University, you can see a lot of strategies on tax strategies. Today, I’m going to talk about navigating and understanding your options and tax implications.
I love surveys, and I love to take a look at data coming from people. There was a recent survey done of retired people, and they were asked what was the number one financial surprise in retirement. Now, you would have thought they would have said the cost of living, the cost of medical insurance, inflation, but they said taxes. I mean, how can taxes be the number one financial surprise? I mean, they’ve been paying taxes their entire life, they’ve been putting money into pension plans like 401(k)s, etc. These were tax-deferred, they knew they were just kicking the can down the road and they had to pay taxes someday. But the number one surprise was taxes in retirement.
Now, the same survey asked how many advisors they worked with on average before retirement, and the average was three. That same survey asked how many advisors after retirement, and the average was one. Now, it wasn’t their best friend that they had accumulated a relationship with over the years, or it wasn’t the best golfer in the group. It was the one who spoke to them about asset distribution and who understood that they no longer were building this nest egg for retirement, but they had to take what they had today and live on it for the rest of their life.
So, they were talking about distribution in a tax strategy, taking into account the future consequences of taxes. We often think about accumulating money, but we don’t always consider what taxes will look like in the future. Today, we’re going to walk you through an example.
Let’s talk about how people save for retirement. As Enpo said, we take a look at your cash flow, your income coming in, and we explore more efficient ways to manage your cash flow, including tax considerations. We’re going to use an example of a 35-year-old, whom we’ll name Henry. Henry stands for “high earner, not rich yet.” Through this example, we’ll show you how Henry becomes richer and richer.
For many of you in your careers, we’ll be able to provide tax strategies for the later years. But let’s start from the beginning, with Henry making good money and looking for ways to put those dollars away for future retirement.
Henry looks at the most obvious place, a qualified pension plan or what I call the tax-deferred bucket. If Henry is employed by an organization, they may have a 401(k) plan where he can put away $22,500. If Henry works for a non-profit organization, it would be known as a 403(b) plan. In many cases, non-profit organizations have a 457(b) plan, which allows you to double up on those contributions. Once Henry hits the age of 50 and beyond, he can put an additional $7,500 away.
This is a great place to start, tax-deferred. Notice that the money goes into that bucket before taxes, and it grows income tax-deferred. It’s an excellent starting point. Now, many of you early in your careers might be wondering whether you should contribute to a 401(k) or not. I remember my daughter, years ago when she took her first job, she asked me if she should put money in the 401(k). I asked her if they had a matching contribution, and she said yes, 50 cents on the dollar up to six percent.
I told her to think about it. That’s a 50% return on her money. She asked how long she had to stay, and she said three years. I explained to her that if she thinks she’ll stay for three years, she’s essentially getting a 50% return based on their contribution. And if she leaves before that, all the money she put in is her money, and she can roll it over, and so forth.
So, as we take a look at this picture for Henry, the contribution limit mentioned earlier is a good number for him. If his income, let’s say, is around $300,000 a year, it’s kind of a drop in the bucket to get started. Now, I know that many people on the call today are also independent contractors who don’t work for an employer, so they may have other options.
Enpo, why don’t you walk us through what some of the options are and provide a deeper dive on what these programs are and what people should be looking for?
Thank you, Bill. Oftentimes, as you go throughout your career, you’ll have the ability to either work as part of a hospital group or perhaps directly as part of a practice. Under the employed category, you can contribute up to your limit to your 401(k), 403(b), potentially a 457 plan, and in rare circumstances, your employer may also contribute to a pension plan. The pension plan can come in various forms, including a cash balance pension plan or a defined benefit pension. However, there are only a few things that you can control when you are in the employed category, such as how much you contribute and how your investments are made.
Now, under the self-employed or 1099 route, this is where you strike out on your own or perhaps you are part of a group that allows for some flexibility in how you receive income. This is where you can be a lot more creative and oftentimes on the recommendations of your CPA in order to lower your taxes for any given tax year they may recommend things such as a SEP or a SIMPLE.
If these options seem familiar, it’s because in the past they were inexpensive to set up and allowed you to defer money and create a retirement account for yourself to invest those funds. This way, you could achieve growth beyond what you may see in a savings account. Additionally, they may just say “hey let’s just put your money inside of a traditional IRA that way you’re able to deduct a slight
Amount”. Especially when you’re first starting out, gives you a lot more flexibility in that area now.
Recently, due to changes in legislation from the Secure Act one and two, they have lowered the cost of these grouped employer plans the 401(k) and 403(b) so you’re seeing those starting to become a lot more popular. Finally, you have the flexibility to create your own pension, usually after exhausting other savings techniques. This allows you to defer more money and have more income as you reach retirement.
Thanks, Enpo. You know, a number of Physicians that are looking to take positions with organizations has a 1099
or going to work as a W-2. They’re kind of thinking “what are the advantages and the disadvantages”. You can go to My Financial Coach University on our website (https://myfinancialcoach.com/portfolio/1099-vs-w-2-tax-planning-for-1099/) and there’s a great video
there done by one of our subject matter experts who’s a tax attorney as well as
a CPA and he’s got a great case study to show you the pros and cons of 1099 versus W-2.
Henry comes to us at this point after he has put money into his tax-deferred bucket and asks, “What else do you have for us?”. Before he does that there’s a major intervention that’s happening here. It’s called the IRS. So if you take the IRS and you put them together what does
it spell? “Theirs.” You know Chris Rock before he got slapped by Will Smith came out with a comment. He said “You don’t pay taxes they take taxes.” This is uh really true especially if you’re a W-2 employee because the money is being withheld
before you even see it. So for people like Henry, the tax is being taken and he’s not paying too much attention to what’s happening with all of those withdrawals coming out of his paycheck. But, he should and there’s obviously great ways of managing those. So now, uh he gets down to what we call the “Financial Advisor’s World” whoever his advisor might be. He’s already filled that bucket up with his tax deferred money being sponsored by his employer or his own entity as a 1099 beyond that IRS line.
The next option for Henry is to put money into a taxable bucket. Now you’ll notice that this is a much larger bucket and you have lots of investment options. You can put in things like stocks, bonds, mutual funds, ETFs, hedge funds, real estate. All kinds of things that go in and there’s no government limit on the amount you can save in this taxable bucket but the issue with this taxable bucket is this nagging little spigot on the left-hand side called “taxes”. Taxes are being drained out in the form of capital gains tax or potentially ordinary income so the money is in the bucket but when you grow that money and you have gains in it and you start to pull those dollars out in the future you’ve got tax consequences we’re going to talk later about how you can minimize that capital gain on appreciated assets and how you can maybe even eliminate in some cases.
So Enpo, um one other point I want to mention on the mutual funds is many times people own mutual funds and you don’t sell the mutual fund but you’re being taxed uh and that’s called taxing the realized gains so you have to be really cognizant of what’s going on in this taxable bucket now it’s not uh obviously a great name but it’s really giving you the um the gist of what this bucket is doing. You’re putting after tax dollars into it and then those dollars are being taxed. On the other side so info why don’t you give us an example of what some of our clients are doing in this taxable bucket and maybe some of the things that they should be looking out for.
Absolutely. So oftentimes when you’re talking about how to build wealth as a physician outside of the tax deferred buckets you start especially because there is no limit. A lot of our physicians have built themselves a little bit of what I call a real-estate empire/Monopoly in real life, where they own a few rental properties they’re able to collect the income from that we model that in using our planning software.
However, one thing that that shocks them is this idea that once they’ve gone ahead and working with a good CPA fully depreciated out their rental properties they’re surprised to realize that our planning software does show that that is slowly pushing up their income when they
reach retirement right at about the same time that the government is requiring them to take required minimum distributions.
So actually, their income continuously increases to the point where they might even make more income at retirement than they did pre-retirement especially depending on the amount and the type of real estate that they have acquired now there are a lot of different strategies where they mitigate that but we do definitely see especially amongst our physician clients an inclination to do a lot more
things with that rental property uh we also see a few that especially when they want to retire early they have been putting money into the stock market outside of any special arrangement with the IRS so many people they might have a friend that helps them trade stocks or
they might have a investment into some sort of venture from friends and family. A lot of those are creating taxable situations for them either directly or indirectly when they’re holding these assets this also includes private positions which are very popular
such as real estate investment Partnerships and those also come with the added risk that there may be management fees that are hidden below the surface that are often a net drag on the performance especially depending on how the gains are being presented to our
So, as part of our service we definitely look over any sort of Investments that they bring to us and these are some of the most common things that we’re seeing Bill back to you.
Thanks. So now, Henry here starts to get a little wealthy. Some advisor introduces them to a new instrument called an annuity now an annuity is also tax deferred so he’s putting after tax dollars into the annuity it’s growing income tax deferred. Just like the other tax deferred bucket, now annuities have become popular. Recently because of interest rates going up but one thing you have to be careful of is all of the Riders and features inside these contracts the load structure and all of that. I would I would caution you at looking at some of these and I would advise you to have somebody that’s not selling you the annuity do the analysis to determine I think annuities are great they fit for certain people. But again, you’ve got to be cautious on the type of annuity that you purchase. Now, here is the key to this line down below and this is really where it really matters.
This line is the day that Henry retires. Everything above the line is called “the accumulation phase” when he’s putting money away in these different buckets, looking for some day where he’s going to retire. Everything below the line is when he starts to withdraw Dollars called the distribution phase. So, it doesn’t matter what you’re worth above this line. What really matters is what you’re worth below the line. You can have great accumulation but it’s not what you accumulate it’s what you end up keeping here so a lot of our clients come to us and say can you calculate my net worth in fact the software that Enpo talked about is we’re able to aggregate everything you own in real time so on your iPhone your iPad or computer you can see your entire net worth in real time. So, if Henry comes to us and said “look I have two million dollars in an IRA plan up in that tax deferred bucket”, we would give Henry credit for 2 million in net worth but we all know it’s not worth 2 million below the line because of the taxes so if you take a look at net worth assets minus liabilities we’re really not taking into consideration this real liability which is what is the taxes that you’re going to pay when you take distribution. And as Enpo said, there is one thing we’re going to talk about a little later call required minimum distributions where the IRS has said “look I’m tired of waiting for my money I’m going to require you to take some money out of here so we can tax you”. So, I’d like to talk about the taxes because this is what is going on with Henry right now. We talked about the IRS the federal tax so you’re paying federal tax on all of your earnings you’re paying state tax depending on
where you live you’re paying Medicare tax of 1.4% plus that 80 basis points above the Medicare limit and if you’re self-employed you’re
doubling up on the 1.4 although there are strategies that we work with to reduce the employer portion.
If you’re self-employed and then we have this thing called SALT tax (State And Local Tax). That’s your property tax, and as you all remember just a few years ago there was a cap with ten thousand dollars put on your the deductibility of your real estate taxes so if you have a real
estate tax uh personally for your residents of say twenty thousand dollars you can only deduct ten now some states there are a strategy for deducting the entire 20. So there are states that have rebelled against this cap have actually come up with Tax Strategies that they have made available for people to minimize that tax. But, people should be aware, as you take a look at this map, the darker the color the higher the state income tax. You have so if you’re living in California or you’re paying a maximum of 13.3 percent for income tax and if you’re living down there in Texas Nevada Wyoming the gray States here zero state income tax so many clients especially in my days of working with Executives and major companies they would live in California and they would use one of those tax deferred buckets where they would grow the money tax deferred now tax deferred means federal taxes and state taxes.
But then all of a sudden, I would notice they have a new residence called “Incline Village”, Nevada and they retire over in Nevada. There’s actually a provision within the tax code that’s not known by many CPAs called “The Source Tax provision”. It says if you take distribution from that tax deferred bucket for 10 years or longer you only pay tax in the state you reside in uh hence I’m living now in Arizona after accumulating money in California so we’re at 4.5 here soon to go to a 2.5 flat tax so where you live in retirement plays a big factor.
Years ago, I had a client that accumulated quite a bit of money in a tax deferred strategy and they already made the election to take his money over 15 years in his case and he said to me you know I’m going to be retiring soon to Lake Tahoe and I said great you’re going to be on the right hand side of the lake right I was just being facetious he said “actually I’m buying a home on the California side”.
“I know. Why? Do you have family there?”
He said “no, actually the homes are a lot cheaper in Nevada on the California side of Lake Tahoe… I’m sorry California side of Lake Tahoe versus the Nevada side. And I said “you know you’ve already elected 15 years if you establish residency six months in in Nevada any distributions you take from that pension plan you won’t pay any income tax of California so you could save 13.3 percent”
He said “are you sure?”
I said “I’m sure, but let’s check with your CPA I’ll give them the Code sections and let’s um take a look”.
I remember one day he called me from the porch of a house that they’re about to buy and they said “Are you sure that I can save that 13.3 percent??“
And I said “I’m positive but let’s bring your CPA into the picture”. So, where you live during retirement is very important and uh having an opportunity to accumulate in States like New York you see a lot of people move to Florida, it’s for the weather but it’s also for the taxes. I worked with a CEO of a major company up in Minnesota you can see 9.85% retired in Florida didn’t have to claim those state income taxes on those tax deferred buckets so really understanding how the taxes work is important but there’s no free lunch here because if you look at Texas you say “well there’s no income tax in Texas”. So, this is property tax so you take a look at they’re rank 1 to 50 one being
the best which happens to be in New Mexico and 50 the worst happens to be Connecticut this is where they rank as
the amount of property tax so my son lives outside of Dallas he lives in a home about $700,000 and he pays twenty thousand dollars a year in property tax and as we talked about earlier it can only deduct 10 of that.
Now if he had that same home in California if you could ever find a seven hundred thousand dollar house in California he would pay about 50% less in property taxes so you’d have to balance off the property tax the sales tax the corporate tax and all of the taxes of where you’re going to live especially when you get into your retirement years so tax strategy uh definitely uh plays a major part here so when you take the money out of these qualified plan buckets that you’ve established uh you’re going to have to pay ordinary income or what the IRS
calls adjusted gross income so the IRS monitors this so let’s take a look at the five major surprises that people face in retirement and let’s use Henry as the example:
So, Henry’s advisors say you know Henry you’ve done great in your medical practice you’ve uh grown a lot of Assets in your tax deferred and
taxable bucket maybe you should think about early retirement at age 55. Henry gets hit with this surprise called age 59 and a half
if you take any money out of those tax deferred buckets before age 59 and a half the IRS is going to hit you with a 10 penalty so Henry might think “maybe I should have done better planning if I wanted to retire early” or maybe I have to extend my retirement to
um to a later date because if I take money out of the taxable bucket we talked about earlier I’m going to pay capital gains tax and ordinary income tax unless he starts to work with some of the Tax Strategies that we’ll mention a little later.
So now Henry uh reaches the ripe age of 62 and how this adjusted gross income comes into play he finds out that all that money that he’s been paying to sell security over the years that 85 percent of it is going to be taxable uh he thought it was all tax-free but it’s taxable if your earn as a single filer over thirty four thousand dollars a year. So, you got to manage that adjusted gross income a little better to avoid that
payment so now Henry and his wife reached the ripe old age of 65 and they apply for
Medicare so they go to medicare.gov to this chart and they start to look down based on their adjusted gross income if it’s let’s say $300,000 filing $306,000 filing jointly you can see their premiums are going up so they’re paid they’re being impacted by that adjusted gross income number when they start to pay for Medicare tax and remember this is 2023 rates if you’re 40 year old today or 50 year old what are these numbers going to look like in the future so it gives you a good time as you’re doing planning as a young person today to start thinking about how am I going to manage my adjusted gross income because these rates could go up uh much higher in the future.
So, as we had this conversation with Henry, now he is slumped down on his couch looking a little depressed and he goes “okay so what am I going to do about all of this?”
Well we have something for Henry it’s called the fourth bucket. It’s called the “tax advantage bucket”. it’s where money goes into the bucket like the taxable bucket on an after-tax basis but a gross tax deferred and pays out below the line income tax free now what goes into this bucket things like a health savings account now you think about a health savings account of as being something to supplement your
medical expenses but it’s probably one of the best tax shelters you have I actually talked to a CFO of a major company several months ago and he told me he was in pretty good health and uh he took a low deductible on his medical insurance and I said why don’t you take a higher deductible and use a health savings account and he said because a health savings account is a use it or lose it benefit and I go no that’s not
the case you can roll this thing over all the way into your retirement in fact you can use that on a tax-free basis to pay your part b Medicare and you can which is a premium which we just showed that chart and you can use it for you pay your drugs and you can use it for medical expenses and there’s even strategies where you can take it out on a taxable basis uh too so uh there’s also strategies that you work with by converting some of your tax deferred money to a Roth type plan and many of your employers if you’re employed by an organization allow you to pick between a Roth after tax money going in today but growing tax deferred and paying out tax-free or a pre-tax number and of course you can do what is called a backdoor Roth where you can convert some of that money so that you pay your taxes today because taxes are going up in 2025. remember when the legislation came in and dropped the tax rates today they uh end in 2025 it’s going from 37 percent back up to 39 plus your state.
So you start to think about strategies and what Enpo talked about earlier when we do the cash flow modeling and we’ve cash flow model into your retirement it’s to take a look at the after-tax monies that you’re going to be able to spend uh for living there’s also many Insurance strategies that are being used now we’re not talking about whole life insurance or anything an agent would bring to you but there are strategies that have like a hundred percent cash in the policy day one you’ve got a portfolio of Investments like in your taxable bucket but they’re all inside this cellophane wrapper that grows tax deferred in anything you take out of the bucket is tax free and that’s being used by a lot of high net worth individuals now one of our subject matter experts who does a lot of work with non-profit organizations has developed a strategy for non-profit people that want to defer money and one of the problems you have uh in a non-profit is you’ve got your 403b that you can put money into in your 457(b) and many organizations offer a 457(F) plan but for a non-profit if you invest in that plan you have to pay tax even though you didn’t take a distribution so nobody puts money away into that 457(F) plan maybe the organization puts money in for you nobody puts their own money so this strategy that they put together is called a Triad plan where you can tax defer the money taking a reduction in your income you can grow a tax deferred and like a Roth you can take an income tax free.
My message here is there’s a lot of strategy that can be used inside this bucket so think about this bucket no taxes no state or federal taxes no Medicare taxes there’s this other tax called ACA which is the Obamacare tax so in time inside that taxable bucket you’re going to pay 3.8 on investment earnings so in this strategy none of that and there’s no early withdrawal penalties coming out. So one of the things that happens for Henry here is when he hits the ripe old age of 73 and soon to go to 75 the government’s going to require him to take distributions from his tax deferred bucket this one doesn’t have it so really managing your Taxation and your adjusted gross income is very important so if you haven’t listened to anything I’ve said about that bucket so far and you want to write something down write non-reportable income so this doesn’t get reported as any income which goes back and affects all the other things you’re doing with that adjusted gross income so you have an opportunity to take a look at this now there are lots of plans out there. So Enpo, why don’t you walk us through some of the things they can do and maybe some of the limits and opportunities that people have as an employee and people that are self-employed in 1099.
Yeah- thank you, Bill. So, if you were to think about the types of retirement accounts that you have access to, there’s certainly a number of things that you could do on your own but we’re just going to focus on the things that your employer can do for you so going into that employed bucket again oftentimes looking through your benefits package you know that 200 Page monster that after you sign the contract you throw away uh, there are certain Provisions in there that explain hey this is how your retirement accounts work here’s how your health insurance works and it’s in those documents that you can find out if you can contribute to a Roth version of your 401k or 403b
now note that if your employer does any sort of matching or does any sort of a thing where they’re able to put in something on your behalf it’s only recently that with the secure Act 2 that they were able to also have you pay taxes on that so you can take it all tax free but before that it was all considered pre-tax as well so I would really look back on those documents and see if there are any changes happening
in this year or the next because it could be that you are able to make Roth contributions and your employer is also able to make Roth contributions on your behalf and you will be able to have all of that tax free at retirement otherwise a portion of that will still be taxable
now in your HSA that is going to be a limited vehicle now you have to have a high deductible plan and for many of our physician clients that have a family it may not make sense especially if they have kids and they get sick often or if they have any sort of personal health issues.
But, if you are younger and you are healthy oftentimes an HSA will allow you to get that additional tax free benefit at retirement based on where you’re put or how you’re spending the money and that’s where you would want to work with someone who really understands how these vehicles work. So, where it gets more interesting is if you write your own marching orders or you have 1099 income this is where you
can structure your own sort of benefits and elect your own version of the 401K which will allow you to build up that after tax tax-free income. Once more, HSA is something you can explore on your own Roth IRA is something that I know one of the questions what was around backdoor and I like to answer that in more detail later but that is something that you can consider especially as you are trying to balance out well how much money do I want to pay today in taxes of course knowing that if I pay no taxes today then I might have future tax liabilities
but if I don’t or if I do pay all my taxes today and I have no tax liability in the future I may not have as much of a total higher net worth
now I want to get to the pension because this is where you can do a lot of things oftentimes when you’re structuring your own personal pension it is made so that you’re able to take a tax deduction up front and there are ways and there are strategies where you can then try to take that out tax-free in the future however this involves a lot of sophisticated uh work that often you would require a specialist to really zero in on so you’re able to take that out tax-free in the future lastly I do want to mention insurance as Bill had talked about earlier your cousin who wants to sell you a whole life policy is probably not going to be uh the sort of policies we’re talking about instead as an employer there are certain tax deductions that you can take uh that will allow you your business to take a deduction but you yourself to get insurance that can be structured in a way where you are able to take that income tax-free in the future of course looking at the cost of the insurance itself and making sure that the tax savings uh is not being offset by the cost of the insurance so really it is important uh not to get these strategies mixed up I think that looking holistically at different types of retirement accounts that you can take on an after-tax basis it is important to note that there is a lot of nuance and whenever anyone says “hey why don’t I just do this one sort of strategy?” Oftentimes that will work for some people, but may not work for others.
So, we have seen a lot of different Physicians build up a lot of wealth using all of these strategies listed above so I would say there is a lot of differences between them but there’s also a lot of similarities and what sort of peoples would qualify and the good news is as Physicians you have the income that is going to give you the ability to choose between any or all of these strategies. Bill?
Yes, you know on that insurance contract also there are some riders that can be added for long-term care and critical illness type of protection too. So, the interesting thing here is you should have mentioned earlier all of our CFP®s are salaried employees, so they’re not motivated, they’re not on commission to sell products or Services. Their bonus plan is based on client satisfaction and retention so we have the ability through our network of subject matter experts is to vet out a lot of these strategies to see if they make sense for you and being able to gather information and understand where you are today and where you want to go is a great strategy as Enpo mentioned for those of you that are self-employed or have your own practices or companies you can put a lot more money into a tax deferred strategy as a pension plan might be a cash balance plan might be a defined benefit plan some ages can get up to a half a million dollars a year going into that bucket now what’s happening in those pension plans though is you’re kicking the can down the road to pay taxes in the future so if I took a survey today and asked people do you think taxes are going up or down in the future I would eventually say most would say up so you
have to think about strategies to minimize tax in the future and there are assets that can go in that bucket to produce income below the line and be tax-free so then for those of you who uh might be uh selling a practice or you may have uh an appreciated asset you
might have bought you know uh Microsoft at a low rate now you’ve got an 800 000 gain in the stock and as we talked about earlier if it’s in the taxable bucket and you sell it uh you got to pay tax so these are some of the strategies people are using either sell their practice or to do away with a real estate real estate that has uh you know a lot of appreciation and so forth the first one is called a charitable remainder trust.
I can actually give you a personal experience with this so I sold the company years ago to a New York Stock Exchange company and part of my company part of my uh price was their stock and their stock had my stock being transferred had a very low basis so I had a very high gain their stock happened to go up like 300 hundred percent so what I did was I took a portion of that stock and I put it into a charitable remainder trust not because I was philanthropic it’s because I wanted to be more tax efficient so money going in the stock going in was uh did
actually I got a tax break I was 50 years old at the time so I got an 11 tax deduction the older you are the the higher the deduction then we’re able to liquidate the stock with no tax and put it into a balanced portfolio and my wife and I were able to take a 7.3 percent
lifetime distribution from this bucket and then we set up a Family Foundation to be the beneficiary of this bucket so that my kids could be good citizens in the community it’s a strategy that’s overlooked I’ve become philanthropic since putting this together but it was all around taxes now there’s another strategy called a charitable LLC probably we read about Mark Zuckerberg doing something like this but it’s the ability to take that appreciated asset that rather than pay the taxes you put it into this charitable LLC and you can take tax-free income now today we don’t have time to dig into these and maybe in a future webinar we can do more of any one of these subjects you can take a look at a deferred sales trust you can take a look at Deferred Comp installment sale my point here is there’s a lot of Tax Strategies that are well proven well documented that you could take advantage of and the good news here is that we’ve got subject matter experts who
specialize in this so your CPA may not be up to date on all of the things we talked about or your lawyer may not be up to date because they may not be an expert in any of these but we can bring them together and collaborate with them to see if it makes any sense.
So uh, Enpo? Why don’t you uh just kind of summarize some of the things we talked about today and uh maybe some of the things people should be thinking about?
absolutely so kind of building on what Bill said oftentimes when you you are working with existing experts they may almost have that tunnel vision where if you’re working with your CPA they’re trying to get themselves retained so they want to lower your taxes as much as possible your insurance agent wants to make sure that they’re covering your liabilities as much as possible your investment advisor trying to increase
your total net worth no matter the cost as much as possible so some of the overlooked things and where we’re able to gain Clarity is hey is it appropriate for everything to be pre-taxed probably not is it appropriate for everything to be after tax probably not what’s the Right Mix so that at retirement I have various different buckets to draw on am I going to go in and uh take advantage of what my employer is already doing for me as an employee you have a lot of different levers to pull uh and and you want to make sure to pull them efficiently and be aware that these resources are out there when you want to spend you of course deserve it you’ve worked hard your whole life to uh not just study in a field that is financially rewarding but it should also then translate over to a good lifestyle so understanding hey what’s an
appropriate amount to to Really spend and how much do I need to save in order to maintain that spending lifestyle a lot of people come to us for student loan advice we do think through that foreign individual is it smarter to try to get it forgiven paid down paid off uh Finance these are all good questions uh and then of course that tax efficiency uh all throughout dovetailing into should everything be raw should
everything be pre-tax my personal favorite is of course shiny objects uh word gets around that someone’s a physician and suddenly uh everyone who has a money idea comes from the Four Corners to try to put shiny objects uh in front of you and it’ll solve all your
financial woes and set you up for a perfect future we have found that that is oftentimes uh misleading at uh best and oftentimes uh malicious at worse so having that person that’s unbiased and un impartial but also knowledgeable
looking through it to “suss” out what is a really good opportunity versus what may be less than ideal for your circumstance that is key to Building Wealth and what we’ve come to realize
Yeah, so we’re going to open it up to questions um there’s a chat section where you can uh put your questions in I don’t know if we have any questions coming in but on Enpo’s last Point uh one of the motivations for myself and some like-minded investors putting together my financial coach was again to provide that unbiased and unconflicted uh advice so I had for many years and I have still
I have a financial advisor who has a tax lawyer a CPA and a CFP® but I could never figure out whether he was working on his retirement plan or Mayan because he always pitched me pitched me a solution without really understanding everything and I think at my financial coach you’ll see that’s not the case we’re going to understand these uh opportunities and we can be a vetting process for you so when
people bring you those shiny objects we can be the one to help you really fully understand them educate you on them and show you other alternatives for what you’re trying to accomplish so again let’s open it up to any questions
Alright so the first question comes to us around backdoor roths so it sounds as if uh there are some questions around whether or not you should do it based on tax brackets being high uh you know doesn’t always seem like a slam dunk and they’re asking if uh how we determine if someone should do it versus contributing to a regular Roth so Bill did you want me to tackle this one? Alright so, I think that that kind of going to my last statement where you know everything seems to be a good idea uh on on paper at least uh according to whatever article you read whether it is an advertisement or whether it is you know just purely there for information the real question is is it a good idea for you and depending on what state you currently live in what your current tax rates are there’s certainly an argument for whether or not you should do backdoor roths uh I think one of the issues when it comes to backdoor roths is how your current assets are positioned what people may not know is that when you have an IRA that is pre-tax that you’ve rolled over from a previous employer okay and then you try
to do a backdoor Roth and the strategy is pretty sound where you put it on an after-tax basis and you instantly converted the IRS has said okay that’s pretty clever but hey I noticed you have this pre-tax Ira over here that you rolled over from your 401k what’s that okay well it’s my pre-tax Ira okay well what you really did then is you converted your traditional IRA into a Roth IRA proportional to what you’ve decided to to back door so sometimes you may not know this but you are depending on how many years this goes uncaught you’ve been making I suppose IRA uh your roller for Ira a uh a bit of a conversion and what you had thought was a pretty clever way to pay less taxes in the future uh may turn out to have actually bumped your tax rates up during those years so I think ultimately you know reading an article about a
backdoor Roth is great there are some great advantages but based on how your assets are currently positioned it may or may not make sense for you
Alright uh we have another question coming in uh it looks as if there’s a question around annuities uh so the first question around is who would be most situated for an annuity yeah so Empire you might want to talk about you know some of our clients who have brought to us you know should I consider an annuity maybe it can give us the uh you know the pros and cons or what type of situation what an annuity make sense.
Uh, so we get a lot of really great situations where clients come to us and all of my the financial coaches as well as myself we meet every Friday to discuss unique situations well our director of financial planning had a client who read a book I’m not sure if anyone here in the room is familiar with it it’s called die with zero and it’s a very interesting concept uh where over the lifetime that you are alive you do uh acts of giving you spend your life uh life savings on things that you’ve always wanted to do and ultimately when you pass away you you sort of bounce your last check so so it’s an interesting concept and for individuals who think like that uh it may make sense for you to look into
an annuity uh because it essentially guarantees hey this is going to be your lifestyle you know going forward forever now some of the drawbacks of course to how annuities are structured are that they don’t provide you uh with a cost of living adjustment at least the ones that are out there in the private Marketplace often do not so one of the major headwinds will be inflation uh if someone can guarantee you a hundred thousand dollars uh today that might seem like a good idea but a hundred thousand dollars 20 years from now may
look very different and so that’s where there are some concerns now there was a second part to this question uh it has to do with uh giving part of your estate to college for a determined income yearly it’s it’s a very interesting giving strategy that people use uh I I can say that that is something that we are hearing more and more uh and I would say It ultimately depends on what sort of Legacy goals you
have going back to that die with zero mentality there’s nothing wrong with lowering your net worth over time and really enjoying your savings and it’s there’s also nothing wrong with making sure that some elements of your current success such as your education is something you’d like to recognize are there better ways to do it and that’s where looking at your personal situation and seeing what charitable tools you have available as well as income producing tools for yourself are available just sorting through which one makes the most sense for your given lifestyle and for your stated goals and objectives if you have a really strong request you’d like to give that’s also something that that you can do more efficiently outside of giving a a sum to your college that then annuitizes back to you uh it almost feels like Indian giving in a way where you give them a gift but then you expect them to give it back to you over time so that’s that that’s where I would say just having that conversation around what is the intent of the gift all right uh so when it comes to questions I you know feel free to add them in in the chat um I believe that that one question that that we have has just come in around uh because we’ve brought up W2 and 1099 quite a bit uh does my financial coach help with any of this uh decision making especially for those that are trying to figure out what’s best for them
Okay yeah. As I mentioned earlier if you go to my financial coach’s website I would start by watching that video with our subject matter expert who’s a tax lawyer and CPA to get an idea of the differences between the two but as you go through the planning process you can work with our CFP®s and our subject matter experts in helping you know make those types of decisions and all right uh well a question that someone asked me the other day which is probably on the minds of people is this legislation out there um where I have student debt today always been should I pay my student debt down before I start saving money towards my retirement and I you probably know the date but um employers are going to be able to match your 401k and 403 b if you apply money towards your student debt so you know back to that employer book you ought to check with HR to find out is that’s the strategy that the company is going to adopt so if I put ten thousand
dollars towards my student debt that acts as a 401k contribution for the match so I’m not going to lose that match because I have student debt and I’m paying it down it’s something that’s in the recent secure act and a lot of companies are going to adopt that and back to what Enpo said earlier what we try to do is take your employer benefits and our CFP®s wants to understand how they all work so that they can show you how you can better utilize those benefits with your own personal assets and for those that have your own company we can show you how to use your own organization to produce uh you know better results for you so on the bottom of the screen you’ll notice myfinancialcoach.com AAPL that’s a link that takes you to a landing page and you’ll be able to see more about this benefit so the benefit is not only financial planning but part of the benefit is you can update your wills and your trusts and all of your legal documents without any additional charge and you’ll see how that’s all done together but you have full access to your own CFP® it’s not a call center
so you have your actual coach that’s assigned to you and he or she will know your situation be your coach be available 24/7 by email and you’ll have access to their calendar where you can book as many meetings throughout the year but work with your coach so your coach is someone who can help bring all of your advisors together and help you look at your total picture and do all the aspects of financial planning so thank you all uh today for attending and you have our contact information if there are any additional questions you can send an email to Enpo or myself and would be more than happy to answer those questions.