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Every financial decision you make is cru crucial, which is why we’re laying out this plan to help you maximize tax advantages, manage future income, and avoid costly surprises. Peter, good to see you. Welcome back, everyone. Today’s video is for anyone who is nearing retirement. We have a four-step action plan for success. So, if you are nearing retirement, you’re in what’s known as the retirement red zone. Every financial decision you make is cru crucial, which is why we’re laying out
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this plan to help you maximize tax advantages, manage future income, and avoid costly surprises. So, step number one, max out those tax advantaged accounts, including taking advantage of those catch-up contributions, which can be incredibly generous, Peter. >> Yeah, absolutely. Um, and and when we talk about these tax advantaged accounts, these are your retirement accounts. that are known as qualified accounts. There can be a couple different types of tax advantages. And I know that a lot of us are now familiar
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with these, but just to summarize very quickly, we can put the money in and get a tax deduction and then grow tax deferred, but then taxes are due on the back end. Or we can prepay the taxes. This is Roth. put the money in after we’ve already paid the tax and then the money grows and can be taken out in retirement tax-free. So those are the qualified types of accounts. You qualify for some tax benefits there. And at a certain age, we have the ability to take even more advantage of these accounts
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with these ketchup contributions. I don’t know, maybe the government figured that the the kids were up and raised, some of the expenses were down, or maybe they just realized that some of us needed to supercharge our retirement savings. And when do we have that best opportunity? In our peak earning years, right in the home stretch before retirement. But if you are age 50 and above, you have extra room to do this savings in your 401k this year for 2026. Your max is 24,500. But if you are age
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50 or above, you get an extra 8,000 to put in there. So that’s up to 32,500. And then even a special max that a lot of people uh aren’t aware of right now. But between age 60 and 63, you can actually put an additional amount even over and above that, $35,750 total into your 401k. And your IRA has a catch-up contribution as well. uh it’s $7,500 for all of us, but if you’re over age 50, it’s $8,600. I want to circle back to that 401k for a moment, though, Aaron, and and do mention that as of
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this year, it is a requirement. If you are taking advantage of the catchup and you are a high income earner, which the government probably figured out, if you’re able to do this, then likely you’re a higher income earnner. It is a requirement now that you put your catchup contributions over on the Roth side. And that’s if you’re earning over about $145,000. So I think they figured out that if you’re in your higher in income earning years and you’re capable of saving this
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much money than likely in retirement you’re going to be in a little bit lower tax rate. So why not tax you more for getting those retirement contributions in? I still don’t think it’s a bad thing. Not enough people have enough Roth money. So, let’s take advantage while we’ve got that opportunity available to us. Uh, but you do need to know and understand that those catch-up contributions if you’re a quote unquote air quotes here, higher income earnner are now required to go in on the Roth
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side. And by the way, if your company matches and you’re making Roth contributions, your company’s still going to match those dollars. It’s just that most companies, even though they’re nice enough to match, aren’t nice enough to pay your taxes for you. So often times the match their dollars is going to go in on the tax deferred side. >> So you’ve mentioned a couple things that I do want to kind of talk about. Number two, max out open those IAS. And the question here is do you make all of that
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money contribution as a Roth? Because I do think Peter, as you mentioned, a lot of us have typically saved in those tax deferred accounts. Yeah, it it depends, Aaron. And I know that’s not a very direct answer, but we’ve got to look at the individual’s set of circumstances. What are they making? What are they earning today? Uh versus what do we expect those expenses to be once they are retired? And this is actually a little easier for somebody who is within that red zone, very close to retirement,
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than it is for people who are years and years in front of retirement. But we we need to understand what life costs us in order to have realistic projections for what retirement is going to look like. And we also know what we’re earning today. So we can compare those two things. Is there a realistic expectation that we are going to drop tax brackets once we do retire? Well, if so, maybe saving on the deferred side still makes a lot of sense. But on the other hand, is the brackets are pretty wide. Is
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there a more realistic chance that we will be in about the same tax bracket once we retire? Well, if so, prepaying the taxes and paying them while we have a paycheck to pay them with rather than out of our nest egg might make more sense on the Roth side. And then o overarching on all of this conversation uh is there are limits and limitations on being able to make certain types of contributions. The government on one hand wants us to save for our own retirement. On the other hand, they say, “Well, if you make too much, you can’t
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put money directly into a Roth.” There generally are still ways to get dollars into a Roth for almost everyone. It’s just we might have to go about it a little different way. So, you’ve got to you answer to the question directly, you’ve got to consider the specifics of your individual circumstance. You can’t go off what your brother or neighbor or cousin are doing, nor any generic advice that you hear on the radio or view on a podcast, sit down with a professional and really look at your specifics,
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>> right? And I understand our audience right now, people who are nearing retirement, right? We I said that at the very beginning. >> I think that’s who’s paying attention. Yeah. >> Yes. However, if I had had the wherewithal when I was in my 20s to open a Wroth, that would >> Yeah. Yeah. You know, I hear the the comment a lot, Aaron. Wow, I I should have done all of my savings on the Roth knowing now what what I wish I had known then I would have done more. I get it. I
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I get it. But saving the way that this generation has saved in these tax deferred accounts has not been a mistake. like taxes have come down over the last 30 35 years. Yeah. And earnings have have gone up and and those account balances are are not a regret that we should have. It’s just that now is the moment in time that we should shift our paradigm. I mean, Roth has not been around nearly as long as the traditional tax deferred retirement savings. and and it certainly wasn’t available inside of
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401ks until like the mid 20ou I think 2006 is when it got put into 401ks somewhere around there if that’s not the correct year but somewhere around then and then it took a little while to even really catch on that companies were adopting it that you you are beholden to your company’s rules and availability. So don’t kick yourself for saving in a great and tax advantaged way. It’s just that now, especially as we are looking at, you know, forward into the future and and kind of in this red zone period
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of time, now’s the time to look at managing and controlling the ultimate tax liability. And I think that that is one of our best financial opportunities. >> Absolutely. Okay. You know, I I do like looking back though and feeling guilty because it’s just in my nature sometimes. >> Hindsight is 5050, said the great Cam Newton. That being said, one of the other things on my list, HSAs, health savings accounts. These I feel like it took me way too long to learn about and they are
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uniquely triple tax advantaged which comes in very helpful when we are in retirement. >> Yeah, absolutely. And especially for like uh those those Medicare premiums, long-term care expenses, uh there’s very very few opportunities for truly taxfree money in life. So where we’ve got those opportunities, if we’ve got access to them, we should strongly consider taking advantage. And HSAs are one of those very few and limited opportunities for truly tax-free money. We can earn the money and put it
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away into these specialized accounts and not pay tax on them. Then the growth is also tax-free. And if we pull it out for qualified medical expenses, which again include your Medicare premiums, include long-term care potential expenses, certainly, you know, those routine kind of costs and expenses that come up that are health related, we can pull it out tax-free. So triple tax-free. I love it. Take advantage of those HSAs. Now, you do have the ability to roll over your HSA balance into an IRA, but we would
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lose that final layer of tax-free utilization. So, that is a consideration that we should weigh very carefully once we get to age 65, which is where that uh that opportunity opens up to us. >> All right. Next, understand required minimum distributions. RMDs are one reason a lot of people assume that they will be in a lower tax bracket when they retire, but that’s not always the case. So, you really need to have a plan for those RMDs now. >> Yeah. Very, very few people have really
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looked out and projected what RMDs are going to mean from for for them. Um, most people can tell me within a pretty close margin of error how much they have in their retirement accounts. Very few people can tell me how much they’re going to be required to take out of those retirement accounts for RMDs and how much they’re going to pay in taxes on those RMD withdrawals. That is something that we crunch for our clients. We show you the numbers at Rashad Planning as part of the outline for the optimized retirement plan and
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then show you how you can potentially control and bring down that tax liability. Now, on the other hand, I have a lot of people worried about RMDs that are already living off of their IRA. RMDs are potentially a non-factor if you are already withdrawing enough out of your IAS, but there’s a lot of people who have surplus IRA and 401k savings and might not need it, but the government still has a plan to collect your tax off of it. That’s what these required minimum distributions are all about. And uh the rules and the ages
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have changed as you can see on your screen. They used to be uh used to begin at 70 and a half, then it moved up to 72, then 73, and eventually 75 if you’re born in 1960 or later. But this is the government’s plan to collect as much as possible if you have no plan or intention of paying them. Well, the government’s plan might not be probably is not the plan that is in your best interest. So, if you’ve got some time between now and when required minimum distributions will be mandated upon you
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and you aren’t going to need that income to live off of anyway once you get there, that is what we call your window of opportunity. That is where you can do some of the most effective tax planning for your financial future in the time between your income earning years when you’ve built up this retirement savings and when RMDs are placed upon you. That is a great window not to be ignored, not to be overlooked. There’s some fantastic opportunities there to do some proactive planning, and we’ve got some great
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software that can show you the lifetime tax bill, what you can bring it down to, how many years you should consider doing tax planning and management over for Roth conversions, how much that’s going to cost, how much you should do each year, and then we continue to review and evaluate that until we have given you a lifetime tax efficient plan so that you can pay the least, keep the most possible. That’s part of again the optimized retirement plan. That is specifically the tax planning element.
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And when we pull income from investments, there’s tax implications. When we look at health care and how much that costs, there’s tax implications. And the income can cause the health care to cost more than it needs to. So all of these things are interconnected and most people have really unfortunately only looked at one part of it which is investments and access to the market but not how all of the rest of these things are ultimately going to be coordinated either in your favor or working against
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you if you have not planned appropriately. >> Right. And just to kind of say this explicitly because you touched on it with Roth conversions, Roth accounts do not have RMDs. >> They do not have RMDs. uh they do require to be liquidated for your next generation when you leave them behind. But ultimately, if if we’re in a place where our IRA is is any kind of substantial amount and we are looking at the potential advantages of a Roth, like I I think most people know the tax-free growth and the tax-free income, but
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Roths have some additional supplemental benefits in that um Roth income is not going to be counted against you for your Irma thresholds. Roth conversions today might keep a surviving spouse from being knocked into higher tax bracket, possibly avoiding the widows penalty. And Roth conversions ultimately are tax-free to the next generation. But the government has put laws in place that they can’t keep that going forever and ever. Even beneficiaries need to take that out and liquidate those accounts even though
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they’ve already been taxed within 10 years. But if you leave an IRA to the next generation, if you like you’ve got two kids, then a lot of times the IRS is your biggest beneficiary. I hear people say, “Well, I’ll leave them money. They can deal with the taxes.” I get that statement, but we don’t want to leave the IRS as the as the biggest benefit of of our legacy and hard work either. So, it’s it’s all about planning, Aaron. And that’s that’s why we coordinate all of
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this with the optimized retirement plan. >> Right. And then I think our conversation kind of leads us into our last bonus action step. Consulted an adviser, right, Peter? I mean, you live in this world. You see these pitfalls. You help plan for them. It really is worth people’s time to sit down with somebody who this is their job. It shouldn’t be yours in retirement to create that plan. >> Yeah. And unfortunately, Aaron, uh this is one that I feel pretty strongly about. Not to uh not to talk badly about
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any particular e advisor out there. I think the industry as a whole has done savers and investors a a little bit of a disservice in the fact that access to the market is important. But that is not the only piece of the picture. You should deal with an adviser who is talking about the tax implications of your investments of your retirement accounts down the road. who was helping you plan strategically to make that as efficient as possible. And again, all of these pieces are interconnected. They are pieces of a puzzle painting your
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full financial picture. And and that’s why we we take the time to to really examine all these pieces. And what we find in our conversation is oftentimes the the tax implications of the income, the withdrawal, the RMDs, that has been ignored or overlooked or just not discussed at all. And that’s kind of an it’s the tip of the iceberg, honestly. It’s an indication that you might be missing more important parts of the conversation. >> Absolutely. Well, you mentioned it a lot, but Peter, if somebody would like
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to sit down with you and get that optimized retirement plan, how can they reach you? >> Uh, give me a call. 919-30005886. Let’s let’s start a conversation. If you have not had these kind of conversations, if you feel like you’ve been missing this or or overlooked, you absolutely deserve to have a better understanding of this. And and that’s why as a complimentary courtesy service, no cost to this, we’ll put together your optimized retirement plan looking at income, investments, taxes, health care,
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and legacy for you just for calling the show. 919-3000-5886 91930005886. You can also text your name to that number 919-300-5886. If you are viewing the podcast, I’m sure we’ll put a a link in the description where you can schedule a time for a quick phone call. Or if you’d like to see your retirement tax bill, you can go online. We’ve got a tool for that online. Your retirement tax bill calculator is at 919retired.com. 919retired.com. You can see the numbers, do it on your own, calculate your own retirement tax
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bill. >> Great, Peter. Thank you very much. >> Thank you, Erin. Hey folks, Peter Rashan here with Rashan Planning. So glad that you are enjoying the podcast Planning Matters Radio. You know, one of the tools that we’ve put out there that people really seem to appreciate and really are are finding of value is at 919.com. It is your retirement tax bill calculator. If you’ve got any kind of retirement account, your tax deferred 401k or IRA, this is the website. This is the resource where you can go, you
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can plug in your own numbers, your information. You can slide the the the tool calculator up and down for your tax rate or your amount of savings and see what your tax bill is likely to be if you default and defer to the IRS’s plan versus what you could potentially bring that tax bill down to. A lot of times it is a very significant savings. So if you have not yet, go to the website 919retired.com. Run your numbers on the retirement tax bill calculator. >> This has been planning matters radio.
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>> The content of this radio show is provided forformational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax, or legal advice from an independent professional adviser. Any investments and/or investment strategies mentioned involve risk, including the possible loss of principal. Advisory services offered through Brooks Own Capital Management, a registered investment adviser. Fiduciary duty extends solely to investment advisory
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advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management, while insurance products pay a commission, which may result in a conflict of interest regarding compensation.
