Taxes Today, Taxes Tomorrow: LGBTQ+ Strategies for Smarter Retirement Planning

Episode 72: Audio automatically transcribed by Sonix

Episode 72: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Speaker2:
Welcome to Take Pride in Retirement, the podcast dedicated to helping members of the LGBTQ+ community protect and grow their hard earned money. Get set for a show full of education and insights with your host and advisor, Matt McClure. We recognize every family is unique. The goal of the show is to help you achieve financial freedom so you and your loved ones can have the retirement you've always dreamed of, a retirement you can take pride in. No matter who you are, where you're from, or who you love. So now let's start the show. Here's Matt McClure.

Speaker1:
Hello and welcome to another edition of Take Pride in Retirement. Matt McClure here with you, your host, your advisor, your friend, your pal, and your confidant. Thanks so much for being a part of things. Uh, always do, uh, really appreciate getting together and you spending time with me, just knowing that you are there and that you're listening and that you're hoping to get some gems of wisdom, makes me want to bring those gems of wisdom to you each and every week. So I do appreciate it very, very much. You know, this is the show where we, uh, you know, address issues of LGBTQ+ retirement, retirement planning, um, so that you can have the retirement that you've always dreamed of, that retirement that you can take pride in. And that is the the purpose here of helping you live your purpose. Right. Um, you know, invest with confidence, live your best life no matter who you are, uh, who you love, where you come from, how you identify, how much money you have, any of the things. All right, uh, what I want you to do is, uh, go online to the website. Actually, I want you to do a couple of things. One is go online to the website and take pride in retirement. That's take pride in retirement. You can reach out to me with any questions there. You can go to the the contact page. Fill out that form. It just goes directly. It just sends an email directly to my inbox. And I can answer those questions for you.

Speaker1:
Or if you would like to schedule a free consultation. And when I say free, I mean free. It's 100% free of any cost, any obligation, anything like that. Uh, just just do that, if you will, and, um, see if we can make your retirement plan better. See if we can make things work better for you. Um, again, that's what I do. That's why I do what I do. And, um, I really would appreciate that. Also, on the website or really, anywhere you get your podcasts, you can find every episode of the show, right? So subscribe wherever you get your podcasts. I would appreciate that. Leave us a nice rating and some nice comments there. You know, if you if you enjoy the show, if you get something from it, tell your friends. If you don't tell your enemies, I don't know, just, uh, spread the word. I'd appreciate that very much. It really does help the algorithm. Also, check us out on YouTube. The numbers there keep getting better and better each week. I want that like snowball effect though, you know, where it just eventually just becomes this huge thing that just kind of takes off. And I would appreciate you being a part of that as well. So subscribe. Take Pride in retirement on YouTube. Just search for us there and you'll find it easy breezy like some videos go through. And just make sure you're subscribed and I would appreciate it. Also, if you are watching on YouTube, um, usually a couple of days later after the audio version comes out, then the video version will come out.

Speaker1:
If you're watching on YouTube, you're like, wait a minute, this background looks different. Yeah it does. I am coming to you from the, uh, the field office in New York. Now. I am in New York City, though I've been here for about a week. Uh, just working from here and, uh, and, you know, actually doing some dog sitting for my brother in law. And so that is, um, That's been very, very fun. I am though, as of this recording about to. After this is done, head out to the airport to get back to Atlanta for Atlanta Pride. This is Atlanta Pride weekend and I will be there on Saturday and on Sunday with a booth at pride. And so I would appreciate it if you're in the Atlanta area or I mean, this is one of the biggest pride festivals in the country. So hey, if you are planning to come, please come by and say, hey, say I listened to the podcast. Um, I'd appreciate that as well. Hey, maybe you'll get to go home with a t shirt or something. You never know. Or some. Definitely some swag. Uh, all right, so come and say hi to me. I would appreciate it very, very much. That's Atlanta Pride Piedmont Park in midtown Atlanta this weekend. All right. So that is, uh, that what's coming up on the show? Okay, Matt, get to the point.

Speaker1:
We're going to talk some about taxes today. And, um, it's kind of like the way I'm sort of looking at it and framing it is taxes today and tomorrow. So the taxes today part. I'm going to talk in a few minutes here to Mark Steber, who I've had on the show before. He is with Jackson Hewitt Tax Service. He's their chief tax information officer. Uh, he, you know, is very, very good at kind of like spelling out complicated tax issues in a very straightforward and plain spoken way. So I'm going to talk to him about some tax changes for this year for tax year 2025. And I know we're not in April or anything like that because that's usually when we talk taxes. But what I want to do with this conversation is get you prepared before the end of the year, so that if you need to make any adjustments to the way that you're handling things right now, you can do that and you can seek out the advice of a tax professional. I just want you to be prepared for taxes today, and the bulk of the show is going to be about taxes tomorrow, taxes down the road, how you can plan for better, a better tax situation and really kind of retire smarter, not harder. Right. All right. So that is coming up. But first, let's get a little inspiration for our conversation, shall we? We'll do that with our quote of the week.

Speaker3:
And now for some financial wisdom. It's time for the quote of the week.

Speaker2:
And this week.

Speaker1:
The quote comes from Sarah McBride, who is a US representative from the state of Delaware, who says this visibility without security is not true equality. Visibility without security is not true equality. Powerful, powerful words there. And obviously not talking directly about retirement planning when she said those words. Um, if you know anything about Sarah McBride, you know she's been through it. Um, she's a trans member of Congress, first openly trans member of Congress, and, um, has had to really fight some, some things going on in D.C., uh, just to be able to exist within the halls of Congress as herself. And, um, I find that sad. But I also find her very inspiring because she has not backed down from that, and she continues to be just a source of inspiration. So obviously not like talking directly about retirement planning in that quote, but we can take that and apply it to retirement planning because, you know, you can be as visible in life as you are. You can be living as your authentic self and all of that, but without the security of a solid retirement plan. That's not true equality either, you know? I mean, you need to have a solid retirement plan. You need to have something that you can feel secure in. And does that mean that we can take, you know, okay, I've got, you know, 50 bucks in the bank, let me retire.

Speaker1:
And just, like, wave a magic wand. No, but what I can do is, if that's your situation, can help direct you can help lead you to making the situation better, making sure that you have your Social Security maximized, making sure that you're working on building up a nest egg so that you can turn that into income later on so that you can actually live on that income in retirement and do the things that you want to do on top of it. All right. So that is the the plan. That is what I love to do for folks. And really and truly, I, um, love that quote from Sarah McBride because it says a lot. Uh, and you can apply it to different, different things in different concepts. And it's what we're doing here. Well, millions of taxpayers are going to see some pretty big changes when they file their 2025 taxes come next year. Child tax credit increasing. Uh, seniors may qualify for more deductions. Some other, uh, updates there, like the changes for tips and overtime all the things. And here to clear away the cobwebs, hopefully clean things up for us so we can understand what's going on, is Mark Steber, chief tax officer at Jackson Hewitt. Hey, Mark, how are you, sir?

Speaker4:
Great mat. Very exciting time to be talking about this important topic.

Speaker1:
Yeah, it is a very important topic now. I do usually speak to you. I'm very used to speaking to you in the run up to April 15th. Um, but why is now a good time for us to be talking taxes?

Speaker4:
Well, that's because taxes no longer are just a one day event or a tax day event. Not if you really want to get the best result on your tax return, the least stress, and quite frankly, the biggest refund or the lowest balance due. There's still enough time to make changes that can impact your 2020 tax return over two months, or 4 or 5 more payroll cycles, or distribution from your retirement plan cycle, whatever you want to call it. Because once you hit January 1st, there's not much anyone can do to impact 2025. You'll just be doing the oh, I wish I had right now. You still have plenty of time to review last year's tax return. If any mistakes are made, you can amend it. But more importantly, you can take some action based on your life, your life changes, or any of the recent super tax law changes that have happened. And you can start that today with a little bit of time not to get in a hurry and have the result that you like, the result that you expect, and again, get what you want out of your single largest financial transaction, namely your tax return, which you'll have to do every year in perpetuity forever.

Speaker1:
Yeah. Now talk about some of those changes because there are several changes to the tax code for the year 2025. Um, talk about some of the big ones that people will need to keep in mind.

Speaker4:
Yeah, there's no shortage and probably beyond the scope of this segment, but I'll simply say some of the highlight ones that have generated both interest and confusion. You know, if you were watching over the last half a year on July 4th, they passed the big beautiful bill in. There were a variety of new and frankly, new for the first time ever, tax breaks. You mentioned the one for seniors. If you're a senior 65 or older or married couple, there's a brand new deduction of $6,000 per person. Now, it's confusing because there's already a senior tax deduction for those that take the standard deduction. This is not that. This is a new new additional deduction for seniors. Make sure you watch out for that whether you receive Social Security or not. And any of the other things that you might have heard on the internet. If you're over 65, you qualify for the new new deduction in addition to the others. Now there's a new deduction or new tax credit, child tax credit $2,200. Now that one's been around a while, but it was super sized and the refundable amount also larger. There's a new deduction on tips $25,000 per person tax deduction. If you're an income earner that gets tips, there's a new one on overtime a $12,500 deduction if you've got overtime. Uh, and then there's a deduction for interest on an American manufactured or assembled, I should say, more importantly, assembled the automobile that you borrow money a new $10,000 deduction. Now, again, there's other stuff in there. New standard deduction amount, a new state and local deduction amount that can help you if you're an optimizer and many, many more changes. Not even mentioning, you know, life changes or state changes. So there's a lot to watch. The dollars have never been bigger or more important, and the rules have never been more confusing, quite honestly. But there's a lot to watch, suffice to say, and a lot to watch out for. But the complexity is really the price tag for fairness, and there's a lot of good stuff coming on 2025 tax returns.

Speaker1:
Yeah, it's it's you know, just when we thought it couldn't get any more confusing, they they make it more confusing. And one of the, I think uh, kind of questions that just came to my mind anyway was, okay if I am someone who earns tips, you mentioned that $25,000 deduction, I believe for that. How is that going to be, um, documented for the IRS to say, okay, you're not just trying to pull one over on us here and say, you got all these tips, you actually are proving it to us.

Speaker4:
Yeah, that's a great question. And one that's fraught with confusion and a lot of, frankly, misinformation out there similar to the overtime one. And quite honestly, as I called out that senior deduction. A lot of bad information out there on that one as well. But I think it goes to the important point that is timeless, which is it's really important to keep good records for your tax year and your tax return. You don't have to have an exhaustive approach, but you should keep good records, whether it's on your overtime, your tips, your side gig full or part time, your investment if you've got crypto or stocks in your bases and other things that go on in your life. And so 2025 is a complicated year. It's what we refer to as a transitional year. As I mentioned, this law was passed in July. It's not, you know, in place for, you know, the duration of time. So the IRS is quickly putting out new rules and new requirements. In particular, they just listed a host of occupations that qualify for the tips, you know, things like beverage and food service workers, entertainment workers, hospitality workers, and the list goes on and on.

Speaker4:
That says if you're one of those people, you probably get this, even though it's not absolutely restricted to those people. But then the second part is, well, how do you know how much? Well, your own records are a good starter set and most employers are supposed to provide that next year. You know, after this year it'll be on the W2 of the box and so forth. But what I would tell your listeners right now is keep your own good books and records, much like anything, whether it be deductions or credits or other things you put on your tax return. So that should somebody come asking the IRS or state, you have that and it's always a good idea on anything, but especially on some of these new ones where it's not completely handled by the employer or the payer. At this time, your records should tie to their records, and there should be a reporting requirement coming out. More guidance on that coming, but you're always in your best interest to keep good records, tips over time. Uh, all the rest is a starter set this year alone.

Speaker1:
Yeah, definitely. And one more quick thing here with the senior, um, deduction. I know that's kind of been or this new, new senior deduction, I guess, uh, that's kind of been billed as, you know, no tax on Social Security, but that's not exactly what it is. Um, kind of maybe clean up just a little bit of that confusion as well.

Speaker4:
Yeah. Taxes are a lot like making sausage. You don't really want to see what's in there in some cases. Some of these tax rules are kind of that way. When it was originally promised by the current administration, they promised several things run up to the election, you know, no taxes on tips, no taxes on overtime, no taxes on Social Security. Once the tax writers got into business, they found that's a much more complicated thing to do. You know who's Social security? How much social security, what are the earnings means based testing. They finally just said, hey, let's just say make it easy $6,000 per person, whether you're getting Social Security or not, provided you're 65 or older at December 31st. So it's kind of a shortcut way. That kind of back ended into that political promise. And so the easiest way to understand it is, you know, they put this new deduction in not just because of seniors. They already kind of had one if they were taking that standard deduction. This one is new. And it was kind of meant to offset that. But you don't have to receive Social Security to qualify. But that was the original intention. You know the shortcut around the barn to get in. We're just going to give you a $6,000 deduction if you are a senior, whether you've applied for Social Security or not. And that's critical. I've seen a lot of misinformation that says you have to be receiving Social Security or eligible for Social Security. That's not true. In its final form, this rule says 65 or older at midnight. Bang. You get the $6,000 deduction for each person that meets that qualification. Now there is an earnings threshold and a phase out for high income earners. But know this if you're 65 you get this deduction on your tax return if you otherwise qualify. Whether you get Social Security or not. But that was the original intent back in the day when it was originally teed up by the administration.

Speaker1:
Well very good. Well, Marc, just about time to wrap things up here. But anything else that you wanted to mention, sir, that we haven't talked about that comes to mind?

Speaker4:
Yeah. Two final points. Retirees have some of the most complicated returns on the earth, much different than my family's generation 20 years ago. You no longer just have pension and Social Security. Now you have continuation of work. You have different types of retirement income. You have different types of benefits and deductions. A lot to watch out for. Don't shortcut it. Just do it fast and dirty with some janky pro at the end of the day. Find somebody you trust. Keep a relationship year round. Keep a relationship on. Your life changes. The second one is more important. Watch out for uncredible tax pros that creep into the system. Looking to take advantage of people with fake promises or fake schemes. Use somebody you know. Use somebody convenient that you trust on your largest financial transaction. Watch out for bad guys. Watch out for misinformation, and know that your tax return is your largest single financial transaction. A lot of money on the table there, but it also has some of the most valuable information your name, your social, your family's information, bank accounts. Trust that with somebody you trust and you'll get a better, stress free, higher refund, lower balance due experience. If you pay a little bit of attention and you focus on it year round, starting here in October and you pay attention to it, it's a better way to go. I promise you.

Speaker1:
Very good. Well, Mark Steber, chief tax officer with Jackson Hewitt, thanks so much, sir. Always great to talk to you.

Speaker4:
Thank you Matt. Have a great day. We'll talk towards April.

Speaker1:
All right. Let's talk then. All right. So that kind of covers the you know taxes for today. Part of our conversation. Uh, what about taxes for tomorrow? Taxes in the future. Well, what we want to do in retirement, I talked about income a little bit earlier and retirement income and having sources of income, multiple sources of income, not only just Social Security, not relying solely on that because Social Security is not going to really be able to meet your needs in retirement, quite frankly. And so what you need to do is have multiple sources of income. Now, it used to be people had pensions, may only have pensions anymore. They are kind of gone unless you work for the government or you, you know, have a job that has, um, union representation where you've got, um, a negotiated pension as part of that deal. Those are kind of different animals, but by and large, like the corporate pensions went the way of the dinosaur. And, you know, I mean, they started this shift a few decades ago where it was like, okay, we're going to shift the burden of retirement planning from the company to the individual. And that's what we have now. So you can't really rely on a pension for your retirement income. It's sort of a form of a pension, a little bit of Social Security. But when you're looking at a corporate pension, probably not going to have it. If you do, great and then you've got more security already.

Speaker1:
That's automatic. But if you do not have a pension, which is the vast majority of people out there, the vast majority of people listening to my voice create your own and you can do that. So that's how you maximize your your income. How do you minimize your taxes at the same time? Well, you have to have a certain withdrawal strategy in place to determine how long your savings are going to last and how much goes to Uncle Sam at the same time. And here's the thing like LGBTQ plus, retirees often have non-traditional household structures. You know, I mean, I was speaking to this couple that I met actually at another pride festival last week, and they were talking about how they are not married. They've been together a long time. They're not married. That's one of those sort of non-traditional household structures, right? Unmarried partners. A lot of people even live with chosen families. You may not be in a romantic relationship. That may not be your thing, or that just may not be where you are in life. Whatever the case may be, and you may live with people who are not blood relations, but they're your chosen family. And so those types of different household structures and, you know, a lot of people who are married have kids and a lot of people who are married don't have kids. Like there's so many different things. And so making personalized withdrawal plans is essential, that it's just critical for LGBTQ+ folks to have this kind of planned out in advance.

Speaker1:
And when we look at that we look at kind of a three bucket strategy. You got to have a taxable bucket. You've got to have a tax deferred bucket and a tax free bucket of money. And then we'll talk about the way that those kind of work together in just a moment. But you got to make those definitions first. So that taxable bucket what does that mean. Well brokerage accounts so like your investment accounts that are not anything tax qualified right. Not inside a 401 K or an IRA or anything like that. So that um taxable bucket of money is that or you know, any after tax investments as well that may not be in a, in a brokerage account, but any alternative investments that sort of thing. Then you've got your. So that's your taxable bucket right. Then you've got your tax deferred bucket. That is things like your 401 K, your IRA, your traditional IRA, your 403 B Be, um, your, uh, tsp if you are a federal employee, uh, anything else that may fall into those categories where you put money in to it, but the taxes are not taken out just yet. All right. So those traditional IRAs is 401, all of those type of things, those are the things that you need to to watch out for in your retirement plan as far as tax deferred. And make sure that you have that definition straightened out.

Speaker1:
And then in your tax free bucket, you've got things like Roth IRAs, Roth 401 S, even life insurance. You know, we can take life insurance and actually can be kind of a more of a delicate process and a little bit of a complicated process to do it. This is why you work with a professional to do these things. Uh, but you can actually structure life insurance to be an income stream in retirement. There are ways to do that. And so it's important that you know that. And it's important that you know that those can be part of your tax free bucket of money in retirement. And so really the main takeaway here is a mix of all three of those buckets. Gives you flexibility and it gives you control, especially if your, you know, income or maybe your marital filing status changes in the future. So, you know, if you're part of the LGBTQ plus community and you're not sure which of those tax buckets to pull from, first, let me help you. All right. Just go to take pride in retirement comm. Take pride in retirement comm. You can schedule a consultation right there on the website. And, um, it's right there at the top right hand side of the home page to schedule a consultation. That's what it says. It says exactly what it is. All right. So visit take pride in retirement comm and do that or call 85524692178552469211. That is the number to call and schedule that complimentary consultation.

Speaker1:
All right. So sort those different tax buckets out. Right. You've got that the taxable the tax deferred the tax free. You know what the definitions are. And so what do we need to take into consideration when you're sorting those tax buckets. Well if you are filing jointly um we need to take into consideration if there are survivor benefits, we need to take into consideration your tax bracket. All of that can vary depending on a lot of different things, including your legal marital status. Some couples may have like multi-state tax complications as well. Like, I, um, we ran into this because we used to live in new Jersey and I worked in New York City. And so there was like that whole thing in the, the, um, deduction for that. And then that went away like there were changes to it. So it's, it's a consideration. Right. And so, you know, for those who who've experienced discrimination or any kind of financial exclusion in earlier life stages, optimizing those withdrawals now can help you catch up faster. So making sure that you have the plan to optimize those withdrawals and make sure that you are, let's say if you're over 50, you can make catch up contributions to things like your 401 K, your IRA, your Roth, those types of things as well. So you can contribute more than people who are of other ages. And don't forget your state as well. State level tax rules can have a big impact in some states.

Speaker1:
You know, still tax retirement income differently or don't fully recognize, uh, spousal benefits for same sex couples. In all cases like like those types of things, you really need to just be mindful of that because those things are big considerations. So always coordinate your withdrawal strategy between those buckets. And so what I would encourage you to do, generally speaking, is take from the taxable and the tax deferred before you ever take money out of your tax free bucket. The reason I say that is because that allows you to let that tax free money grow for longer. Right. You've got more tax free income building and building and building and that then and it's you know, it's not really income yet. You can take it and turn it into income. Or you can have that there in case of, you know, some type of need or something that arises down the road, but always coordinate your withdrawal strategy. Um, not only with, you know, those buckets with each other, but also with your Social Security plan. And if you don't have a Social Security plan, get one. And you say, well, I thought that Social Security was like this thing that kind of happened and I didn't have much control over it. No, you've got control over more than you probably think you do. And I know I've gotten my registered Social Security analyst designation. And, um, that's why I, you know, you look there on the screen if you're watching the video version of this, uh, you see RSA beside my name, that's what that means.

Speaker1:
And so I can actually help you with what's called an RSA roadmap, where that will show you based on your earnings, your past earnings based on marital status, age, life expectancy, all of the different things, all the different factors that go into it. When is the best time for you to claim your Social Security benefit? When's the best time for you to start taking that? And so really, your withdrawal strategy and your Social Security strategy, those two things really go hand in hand, especially for married or widowed LGBTQ+ couples who may be eligible for spousal or survivor benefits. Go to take pride in retirement. Get in touch with me there. I would love to make sure that you have a withdrawal strategy in place, and a Social security strategy in place as well. Take pride in retirement. Well, now you know, let's say that you don't have any of that tax free money that we've been talking about. You don't have a Roth. You don't have that life insurance that maybe like an indexed universal life or something like that, that can be turned into an income stream in retirement. If you don't have any of that, you'll need to do a Roth conversion, perhaps, if it's right for you, if it makes sense for you, it makes sense for a lot of people, not everybody.

Speaker1:
Right. And so converting some of that pre-tax retirement savings into a Roth IRA can mean tax free income. Later you go ahead. You pay the taxes on it now when you do the conversion. So that way you've got this bucket of money that grows tax free and in retirement. Any withdrawals are tax free from that as well. And LGBTQ+ couples, you know, who might face higher combined income in the future, or who want to leave tax free assets to a partner, chosen family, um, anything like that, or relatives, whomever it might be, you could could benefit even more potentially from that. But you've got to avoid some common mistakes when it comes to Roth conversions. Number one. Don't convert too much too soon. Don't convert too much at once because that could push you into a higher tax bracket. You could have a much higher tax burden, especially depending on your current tax bracket. And, you know, some some tax brackets are just a little bit more. Right. And so any amount above a certain threshold you'll pay more taxes on that portion. Some of the you know there's a big jump between some of the different tax brackets. So what you need to do is pay attention to that. This is again why you need to work with a professional. I happen to know a guy because I happened to be that guy. Um. Who can help you do these things and do them right? Right.

Speaker1:
So don't trigger that higher tax bracket. Number two, using IRA funds to pay the conversion taxes. Don't do that. Use something else that's not tax qualified. Because if you take a portion of your IRA traditional IRA, convert that into a Roth and but use some of that money in that conversion to then pay the taxes, like paying the taxes on itself, essentially, you've got less money going into the tax free bucket to then grow, and then you've got less money in your tax deferred bucket to continue to grow. So what we want to do is if you've got some savings or if you've got, you know, maybe, um, if it makes sense, a brokerage account or some other sort of liquid assets pay the taxes with that, pay the taxes with that money and not something that has a tax qualification attached to it. Don't ignore the five year rule for withdrawals. You got to keep that Roth for at least five years before making the withdrawals, or else you could face tax penalties there as well. You take the Roth, you keep it for at least five years, then you can start making withdrawals from it. And those would be tax free. So you know, the big tip here is kind of the number one thing you need to look at is to spread your Roth conversions over multiple years to kind of smooth out your tax bill a little bit, lessen that burden of any extra taxes that you'll have to pay over several years so that you're not just converting it all at once.

Speaker1:
And then facing this one year of double and triple whammies and and here comes no whammies, no whammies. Stop. And you're getting knocked on the head by the whammy. A very old, uh, video, video game. Uh, I guess maybe it was a video game to, um, game show reference there, but there was a new version of Press Your Luck, wasn't there? Anyway, I digress, you don't want the whammies? Uh, you want big money. And so what you want is to spread those conversions over years so that you're not facing a huge tax burden now, and you have as much money in retirement that's going to be tax free as possible. You got to balance those things. All right. Converting during lower income years. That may make a lot of sense for you. Uh, before you, you know, claiming your Social Security or your your RMDs are starting at age 73, you really want to be done with it. Before that, take pride in retirement. Once again, is the website go to take pride in retirement. All right. A couple more things here. Excuse me that I wanted to share with you. Just kind of four key tax factors for LGBTQ plus retirees especially. Um, one thing that you need to consider Social Security taxes, social security taxes can creep up on you. Um, you may think a couple of things. You may think, oh, I thought Social Security was tax free or oh, I thought that this bill that was passed last year, kind of as I was talking about with Mark Steber earlier in the show, um, I thought that that meant no tax on Social Security.

Speaker1:
No. Not really. Still, even with that bill and even other pieces of legislation, up to 85% of your Social Security benefits may be subject to taxes. That depends on your income, though. There are different thresholds there that you need to look at. A lot of same sex couples saw their benefits change after marriage equality rulings, but legacy paperwork errors from a few years ago can still affect your taxes, so make sure that everything is in order. Make sure you've worked with your tax professional on that kind of thing. But also don't ignore those Social Security taxes because they are still taxable. Those benefits, especially if you claim before the age of 65. That's kind of the thing that got a little bit ignored in the whole debate over the Social Security tax credit thing. You got to be 65 or older. Well, there are a lot of people claiming Social Security benefits at 62, 63, 64. You don't get that or you're not going to get that Social Security or that, um, I guess older American, uh, tax deduction. However they've phrased it that others will. And so, you know, that sort of extra tax deduction there. And so that's something to be mindful of as well.

Speaker1:
It's a different aspect of things now because of these changes that you have to take into consideration. All right so number two here tax consideration is Irma our good friend Irma. Um, no, actually, Irma is not our friend. Because it is. It has to do with your income related Medicare adjustment amount. That's what Irma stands for. Um, Irma, you could face a surcharge on your Medicare, especially your Medicare Part B, because there's a two year lookback period. So let's say you're 63 and you make a lot of money come 65. That two year lookback period with Medicare is going to look back at your income at the age of 63 and say, whoa, you made a lot of money so you can afford this much higher premium on your Medicare Part B. Um, and so that's something to take into consideration as well. Those surcharges, those higher premiums are based on the income that you have earned two years prior. And so there's always that lookback. Always plan for that. Always work with a professional to make sure that you've taken that into account. That's number three. The required minimum distributions. So this is for kind of that that tax deferred bucket right. Your 401 K your traditional IRA. Anything that you haven't paid taxes on yet. Uncle Sam is awaiting. And right now at age 73 um, it'll eventually go up to 75 for people I believe born 1960 or later, it's, um, 75. But for people right now, uh, who are turning this age, it is 73.

Speaker1:
And so basically what happens is you haven't paid taxes all that time. You've been putting this money away, putting it away in that 401 K or the traditional IRA. Uncle Sam said, okay, I've been waiting long enough for my tax payout on this, so I'm going to make you make a withdrawal of a certain amount and that withdrawal you're going to have to pay taxes on, because you've never paid taxes on this money before. That's what a required minimum distribution is. Uncle Sam wants his cut and Roth IRAs. You don't have to worry about that because you don't pay taxes on those withdrawals. So they're not subject to RMDs. And that's another reason that they're so powerful long term for retirement planning in general, but especially for LGBTQ plus folks if you want that extra tax advantage. So make sure that you have that Roth in place and make sure that you don't ignore RMDs altogether. They happen at 73 now and then. Eventually, as I say, it'll go up to 75. And then number four, health care costs. Um, you say, well, why are you talking about this in, in a tax kind of discussion? A lot of, you know, LGBTQ plus retirees will rely on, on close friends, family, community, uh, rather than maybe their adult children, because maybe you don't have adult children. I am, you know, starting to think that I will not have adult children when I am old unless I'm just an elderly father to begin with.

Speaker1:
Um, and that, you know, makes advance planning for long term care even more essential. And there could be, you know, if you've got another bucket of money that's set aside in a certain type of account for that, it could be subject to taxation as well. And so you need to make sure that you have planned for that if you want to take those costs out of a Roth. And of course it's going to be tax free, but if it's in a traditional IRA or you're using that bucket of 401 K money, whatever it is, then you've got to think about those tax consequences. So make sure that you plan for that. Because anything that you that's counted as income is going to be taxed at whatever rate it's going to be taxed at. So make sure that you, you work with a tax professional for those current taxes. Make sure that you work with myself or another professional in planning to make sure that you have a tax efficient strategy going forward. You know, I mean, going back to that quote from earlier from Sarah McBride, you know, visibility without security is not true equality, you know. Financial security is part of equality as well. Having a plan that protects your income, that protects your loved ones, whether they're a partner, a spouse, kids, you know, sisters, brothers, uh, chosen family, um, you know, whatever the situation might be.

Speaker1:
So having a plan that protects your income, your loved ones and your dignity, quite frankly, that's how you. It sounds cheesy, but, hey, that's how you take pride in retirement right there. All right, so here's the bottom line with all of the conversations that we ever have on the show, but especially today, retirement planning, it is not one size fits all, especially for LGBTQ+ folks. Everybody's situation is so different and so smart. Withdrawal strategies can help you retire with a lot more confidence, a lot more security. Live more comfortably in retirement, protect your loved ones, leave a legacy after you're gone, and one that actually reflects your values. And so what I want you to do is schedule a free consultation. Once again, you go to take pride in retirement comm. To do that, take pride in retirement comm. Click on schedule a consultation. It'll walk you through it or call 855246 9211 (855) 246-9211. Uh, and speak with me about it. All right. Thank you so, so much. That's going to do it for this edition of the show. But, um, you know, I really do. Thank you once again for listening. Uh, just just really does, uh, mean so much it really means so much to me that you spend time with me and that hopefully you get something out of the show each and every time. And as I always say, take pride in yourselves and take care of each other. We'll see you next time.

Speaker2:
Thanks for listening. To Take Pride in Retirement. Members of the LGBTQ plus community deserve to work with the financial advisor who puts their needs first to schedule a free, no obligation consultation with Matt McClure and the team at Active Wealth Management. Call (855) 246-9211 or go online to take pride in retirement. Com investment advisory services offered through Brookstone Capital Management LLC. Bcm, a registered investment Advisor, BCM and Active Wealth Management Incorporated are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Matt McClure and Active Wealth Management are not affiliated with or endorsed by the Social Security Administration or any other government agency.

Speaker1:
Information provided is not intended as tax or legal advice and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional. Registered investment advisors and investment advisor representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosures of any conflicts of interest. Please refer to our firm brochure. The ADV two, item four for additional information.

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