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Speaker 1: Welcome to How to Money. I'm Joel, and today we're

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Speaker 1: talking about cutting taxes and retiring sooner with Cody Garrett. Okay,

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Speaker 1: so Benjamin Franklin knew how to deliver alignment, one of

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Speaker 1: the best ones ever. He said, in this world, nothing

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Speaker 1: is certain except death and taxes. But the other certain

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Speaker 1: thing about taxes is that we all have the ability

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Speaker 1: to change our tax rates by the actions we take.

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Speaker 1: So my guest today, Cody Garrett, he has thoroughly internalized

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Speaker 1: that reality. He is an advice only CFP at Measure

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Speaker 1: twice financial who specializes in helping folks make a comprehensive

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Speaker 1: financial plan and that includes the role taxes play in

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Speaker 1: your ability to meet your goals. So his new book

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Speaker 1: helps folks plan intentionally around a giant expense we all face.

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Speaker 1: The name of that book is tax Planning to and

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Speaker 1: Through Early Retirement. So Cody, thank you so much for

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Speaker 1: joining me on the show today.

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Speaker 2: Thank you so much, Sjoel. That's always an honor.

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Speaker 1: Yeah, glad to have you here. First question, I got

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Speaker 1: to ask you, what do you like to sporge on?

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Speaker 1: I like craft beer. Matt my sometimes co host most

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Speaker 1: of the time co host Matt loves craft beer too.

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Speaker 1: We spend wildly sometimes on craft beer. What is that

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Speaker 1: sporte for you?

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Speaker 2: Oh gosh, if someone gave me, you know, if somebody

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Speaker 2: gave me money that I had to spend. I'm not

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Speaker 2: allowed to save and invest or give it away, I

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Speaker 2: would say it would be. I'm really focused right now

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Speaker 2: in like physical and mental health. I know it's a

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Speaker 2: it's definitely a trend right now, but something I'm really

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Speaker 2: considering is having a mentor in every part of my life.

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Speaker 2: So that's my physical health, mental health, spiritual practice, and

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Speaker 2: also you know, relationships. So you know, right now, I

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Speaker 2: go to a therapist every week. I'm really big into

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Speaker 2: like breaking down the stigma around mental health. So I believe,

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Speaker 2: like you know, everybody can benefit from therapy counseling. So yeah,

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Speaker 2: Really thinking about my next splurge would be hiring an

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Speaker 2: accountability partner for exercise. Okay, for the physical health, I've

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Speaker 2: got the mental health part, you know, quote unquote covered,

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Speaker 2: but I'm thinking about really splurging on. I already have

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Speaker 2: the garage gym. I did the thing where I bought

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Speaker 2: all the stuff on Amazon and so forth, so I've

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Speaker 2: got the garage gym. But it's hard. It's hard to

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Speaker 2: keep myself accountable. So I want somebody who kind of

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Speaker 2: gives me a program but also like helps me follow

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Speaker 2: through along the way. So that will be my future splurge,

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Speaker 2: along with my previous slurge with actually buying all the

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Speaker 2: all the heavy metal stuff in my garage.

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Speaker 1: Well, I love that you're I think sometimes in the

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Speaker 1: world of personal finance, especially the further along you get

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Speaker 1: into it, the more you nerd out it, can you

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Speaker 1: can go down the rabbit hole too far and maybe

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Speaker 1: not be willing to part with money to increase your

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Speaker 1: joy in success in other areas of life. So I

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Speaker 1: love that you're willing to splurge on that stuff. Maybe

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Speaker 1: what's been the most impactful dollars that you've spent so

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Speaker 1: far in that endeavor?

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Speaker 2: In that endeavor, I guess we'll find out, because I

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Speaker 2: haven't quite lifted as many weights. I will say this

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Speaker 2: is kind of ironic that the best money we ever

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Speaker 2: spent as a married couple. I've been married for almost

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Speaker 2: ten years this year with my wife Maria, the best

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Speaker 2: money that we quote unquote spent was her being a homemaker,

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Speaker 2: being a stay at home wife and a lot of

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Speaker 2: people kind of think like, oh, well, you know, it

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Speaker 2: doesn't make sense to you know, stay at home until

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Speaker 2: you have kids. But I would say that in our family. Again,

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Speaker 2: my wife, from the very beginning, she said, hey, like my, my, like,

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Speaker 2: my my dream in life is to you know, be

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Speaker 2: a stay at home spouse, like to take care of

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Speaker 2: our home, to take care of you, take care of

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Speaker 2: future kids if we have them or adopt them. We're

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Speaker 2: actually in the adoption process right now. So ironically, the

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Speaker 2: best money we spent was actually her not making money

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Speaker 2: outside of the home because again, we have home cooked

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Speaker 2: meals all the time. We have again, I can eat,

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Speaker 2: I can eat you know, pretty much every meal with

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Speaker 2: my wife if I wanted to. So we eat dinner

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Speaker 2: every every day together. We have a very simple life

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Speaker 2: that we you know, our annual spending is about sixty

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Speaker 2: thousand dollars a year. Again, we you know, we save

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Speaker 2: and invest a lot on the path to five by forty.

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Speaker 2: But with that said, yeah, we we decide not to

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Speaker 2: make more money so that we can spend more time together.

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Speaker 1: I think it's beautiful and I think that's the situation.

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Speaker 1: I think more people are finding themselves in as they realize, well,

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Speaker 1: there's a limit to the joy that more money can

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Speaker 1: bring me. There's other things I want to prioritize in

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Speaker 1: my life, whether that is being at home, whether you

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Speaker 1: have kids or not more often, or not working on Fridays,

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Speaker 1: working part time, and in order to live Like I

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Speaker 1: was talking to a friend who is a nurse practitioner

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Speaker 1: and he works two days a week and he still

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Speaker 1: gets benefits and he gets to be at home more.

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Speaker 1: And so it requires more intentionality, more frugal living. But

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Speaker 1: I'm seeing more people make those intentional life choices, and

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Speaker 1: I think that's a beautiful thing. Let's talk about your book.

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Speaker 1: Your book, it's really aimed at early retirees. I'm curious,

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Speaker 1: are you pitching to the fire crowd, the financial independence

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Speaker 1: retire early? Are you talking to people who are in

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Speaker 1: their mid to late fifties and they see retirement on

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Speaker 1: the cusp? Like, who are you really trying to help

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Speaker 1: with this book?

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Speaker 2: Yeah, it's really funny when we first started talking about

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Speaker 2: the book, so Sham Mulaney, CPA, I'm Cody Garrett, you'll CFP.

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Speaker 2: So we kind of combine our financial planning and tax

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Speaker 2: planning expertise. But What's funny is both of us actually

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Speaker 2: serve as financial advisors. You know, I'm not, by the way,

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Speaker 2: like this is not an advertisement for my firm not

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Speaker 2: accepting new clients, et cetera. But we kind of came

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Speaker 2: into this saying, hey, like there's the fire community, right,

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Speaker 2: like the you know, financial independence community. You know, we're

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Speaker 2: real committed to like you know, choose FI some of

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Speaker 2: those common platforms around FI. We first were thinking, okay,

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Speaker 2: like the fire community really finally needs a book that

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Speaker 2: doesn't just talk about what we think we should do

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Speaker 2: or like hey, here's some like possible tactics. We really

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Speaker 2: wanted to put in a book with talking about both

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Speaker 2: accumulation so on the path to retirement and through early retirement.

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Speaker 2: And what's funny, we first started thinking early retirement is

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Speaker 2: kind of focused on like the fire financial independence, retire

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Speaker 2: early community. But what we realized in our bibliography is

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Speaker 2: like many mini pages long as in terms of the

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Speaker 2: research we did. But we found out there's a study,

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Speaker 2: you know, well respected study that says seventy percent of

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Speaker 2: Americans report retiring before age sixty five.

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Speaker 1: That does sound shocking to me, Like we hear about

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Speaker 1: the retirement crisis, you're seeing like three quarters of people

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Speaker 1: essentially retire before that full seventy retirement age.

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Speaker 2: That's right. And I would say too that even if

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Speaker 2: you don't plan to retire early, you should probably plan

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Speaker 2: for it because, as you know, there's a lot of

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Speaker 2: voluntary involuntary retirements happening. There's a lot of you know now,

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Speaker 2: and certainly industries have their ups and downs of like

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Speaker 2: layoffs and agism and things like you know, somebody's in

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Speaker 2: their mid fifties and they lose that job they've had

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Speaker 2: for thirty years, Like what do they do now? So

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Speaker 2: you know, we encourage you know again, you know, you

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Speaker 2: definitely want to live for today and tomorrow. But I

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Speaker 2: would say that early retirement, just like the kind of

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Speaker 2: the work from home type of thing, it's becoming more

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Speaker 2: of a really thoughtful, intentional practice of Hey, by the way,

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Speaker 2: I call it fire financial independence, recreational employment. I don't

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Speaker 2: actually plan to like, you know, you know, retire, go

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Speaker 2: Lana Hammock for five hours a day, Like I plan

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Speaker 2: to become financially independent, work optional, so that I can

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Speaker 2: work because I want to, not because I have toeah

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Speaker 2: and also if I'm able to work without needing money.

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Speaker 2: That actually gives me permission to really lean into my

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Speaker 2: value of generosity. So how can I give more to

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Speaker 2: others without expecting something in return when I'm financially independent,

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Speaker 2: hopefully you know, by forty or so. Again, not that

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Speaker 2: I have to get there, but if we're five by forty,

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Speaker 2: that means to the rest of my life, the rest

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Speaker 2: of our life, we get to lean into our core

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Speaker 2: values and we don't really you know, there's there's just less,

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Speaker 2: you know, fewer boundaries between us and really doing what

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Speaker 2: we think is best with our time, energy, and financial resources.

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Speaker 1: I'm curious to know how big the stakes are when

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Speaker 1: we're talking about saving money on taxes, because I think

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Speaker 1: I think most people don't really understand Cody how much

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Speaker 1: they pay in taxes right, largely because it's taken out

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Speaker 1: of their paycheck and they're not really paying attention to

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Speaker 1: self employed people have more of a visceral pulse on

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Speaker 1: because those you know, quarterly estimated tax payments, they have

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Speaker 1: a better idea of what they're paying in taxes. But

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Speaker 1: I do think a lot of people they think, oh,

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Speaker 1: my tax is probably not that high, and I get

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Speaker 1: that sweet, you know, tax refund in April every year,

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Speaker 1: so the stakes, I mean they can't be that large, right.

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Speaker 2: Well, it's really interesting. I think you know, before, before

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Speaker 2: you embrace the financial independence community and your financial education

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Speaker 2: out there, you might just not know that your taxes

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Speaker 2: are pai paid out. There's this kind of folk joke

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Speaker 2: about I think it might've been like a Seinfeld episode,

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Speaker 2: like who's this spik a person taking all my money?

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Speaker 2: That you know when you're working as an employee. It's

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Speaker 2: a fascinating that you brought that up. That when you're

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Speaker 2: working as a W two employee, like most of your

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Speaker 2: listeners most likely, whenever you know those taxes are automatically

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Speaker 2: withheld by their employer, you know, whether you get a bonus,

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Speaker 2: like there might be supplemental income like a bonus where

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Speaker 2: they're you know, they're they're automatically withholding twenty two percent

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Speaker 2: on that, which may or may or may not be

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Speaker 2: the accurate withholding for what you need. But it's fascinating

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Speaker 2: how when it's automatically taken out and Joel, I'll ask you,

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Speaker 2: when's the last time you actually received like a pay stub,

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Speaker 2: so like you got to check and then there's this

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Speaker 2: stub attached to it that you ripped off.

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Speaker 1: Oh, I guess it's been four and a half years.

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Speaker 2: Now, probably, right, So it's fascinating.

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Speaker 1: It might even longer than that. It was probably just

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Speaker 1: digital at that point. You're right, it probably wasn't even

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Speaker 1: a physical thing, that's right.

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Speaker 2: So at this point, the only way you'll know that

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Speaker 2: you're paying taxes and how much is by logging into

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Speaker 2: your portal and intentionally saying, how much am I paying taxes?

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Speaker 1: You know what?

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Speaker 2: How is that labeled on the pay statement on O

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Speaker 2: federal state FIKA? What's FIKA is Social Security Medicare. There's

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Speaker 2: a Social Security wage base. And you're like, I have

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Speaker 2: no idea how this works. And then hopefully the goal

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Speaker 2: is for a lot of taxpayers, is I hope that I,

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Speaker 2: you know, I file my tax return and hopefully I

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Speaker 2: get a few thousand dollars back and hopefully I can

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Speaker 2: use that money to Again, probably for the average the

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Speaker 2: average American is saying like, oh, like that'll help me

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Speaker 2: pay off some consumer debt, right, yeah, things like that.

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Speaker 2: So I think the first level of intentionality is like

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Speaker 2: first understanding that you are paying taxes. But then it's funny,

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Speaker 2: there's this binary shift of like no awareness whatsoever about taxes,

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Speaker 2: and then once you become aware. I think the financial

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Speaker 2: media there's so much fear based marketing around taxes. Again,

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Speaker 2: if you think about it too, you kind of thinking like, well,

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Speaker 2: you know, what's the end in mind, like, what is

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Speaker 2: the actual goal of this this media, right, And usually

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Speaker 2: fear is used to sell products and services. So I

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Speaker 2: would say you either don't know anything about taxes, and

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Speaker 2: once you start learning about taxes, you're typically learning from

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Speaker 2: somebody who's trying to convince you that you're going to

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Speaker 2: get crushed in taxes. The government's going to take everything.

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Speaker 2: There's no way you can retire with the way tax

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Speaker 2: rates are going to be now in the future. So

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Speaker 2: we're kind of this middle ground and saying, hey, like,

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Speaker 2: we definitely want to make you aware and educated about

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Speaker 2: the federal income tax system, but we want to back

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Speaker 2: it up with real math. For example, the book includes

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Speaker 2: over one hundred and twenty step by step calculation examples

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Speaker 2: of exactly how income is taxed on the way in

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Speaker 2: on the way out, including all those forms of income

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Speaker 2: from you know, the w two, the self employed, the

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Speaker 2: real estate, social security, the pensions, and really understanding. Hey,

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Speaker 2: when we put all that together, there's actually a pretty

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Speaker 2: simple step by step formula of how you know understanding

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Speaker 2: how income is or is not taxed. And one thing

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Speaker 2: you mentioned, you mentioned Benjamin Franklin earlier, I would say,

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Speaker 2: you know, to the financial media out there, that's just

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Speaker 2: all about fear and you know you're gonna get crushed

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Speaker 2: in taxes. Nobody can retire anymore. I would tell them,

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Speaker 2: like Benjamin Franklin, to go fly kite.

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Speaker 1: So you mentioned that a lot of people are actually

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Speaker 1: retired by sixty five, a majority of Americans now. But

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Speaker 1: ess interesting when you look at the average retirement account

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Speaker 1: balance of people in their fifties and sixties, it's not

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Speaker 1: terribly heartening. I'm guessing some of these people are retiring

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Speaker 1: with less than they'd ideally like. One percentage of folks

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Speaker 1: fall into that camp. And is that Yeah? Do you

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Speaker 1: see that as a meaningful problem for a lot of

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Speaker 1: Americans just not having enough money saved up by the

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Speaker 1: time they are quitting, whether it's through their own volition

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Speaker 1: or from their employee letting them go.

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Speaker 2: Yeah. I think there's a few elements here. One is

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Speaker 2: you see what we call defined benefit pension plans. A

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Speaker 2: lot of people, you know, decades before most people listening

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Speaker 2: to your parents most likely had a pension, private or

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Speaker 2: public pension. Pensions slowly got They're still around, right, there's

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Speaker 2: still pensions teachers, things like that, but you'll notice that,

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Speaker 2: you know, pensions of slowly going away while they are

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Speaker 2: introduced what are called defined contribution plans. Those are the

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Speaker 2: four to one k's. A lot of you might have

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Speaker 2: access to a four or three B four fifty seven B,

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Speaker 2: and so it's really on the taxpayer now right to

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Speaker 2: really be in control of their own retirement success. Which

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Speaker 2: again what's hard is they implement these changes, but the

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Speaker 2: education like lags behind, sometimes decades behind. So now we're

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Speaker 2: finally getting to a point where there's more education around

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Speaker 2: how four on one k's work. But I also say one

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Speaker 2: great thing in the four to one K qualified plan

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Speaker 2: space is a lot of four one k's are actually

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Speaker 2: doing auto enrollment. So as soon as you start your job,

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Speaker 2: you're automatically enrolled. And let's say maybe you know, like

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Speaker 2: a four to five percent depends on your employer, but

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Speaker 2: maybe four to five percent that you're an elective contribution

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Speaker 2: as an employee. But secondly, the auto enrollment investment option

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Speaker 2: is now becoming target date retirement funds, Whereas in the past,

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Speaker 2: again your employer did not want to give investment advice

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Speaker 2: to the employees, right, so they would have you start

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Speaker 2: contributing and it was up to you to choose how

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Speaker 2: to invest. I would say, at least for like the

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Speaker 2: last like five to ten years, this has been shifting

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Speaker 2: where instead of your automatically automatic enrollment investment being cash

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Speaker 2: that stable value fund, it's now people are investing in

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Speaker 2: these balanced you know, maybe a twenty or thirty year

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Speaker 2: old maybe investing in like a ninety percent stock portfolio.

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Speaker 1: Right.

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Speaker 2: It's going to get you know, more conservative over time

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Speaker 2: if you stick to that target date. But I would

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Speaker 2: say that the you know, the the worker is retiring

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Speaker 2: right now at sixty five, they're kind of like that

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Speaker 2: mixed bag of maybe having a small pension but maybe

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Speaker 2: being under saved and invested themselves. So I really think

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Speaker 2: that that also comes into play with the social security

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Speaker 2: Many people who are retiring before sixty five, if they're

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Speaker 2: in between sixty two sixty five, they're probably claiming social

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Speaker 2: security early, you know, which is hurting them from a

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Speaker 2: you know, future potential increase on Social Security benefits, but

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Speaker 2: you know, if that's your only form of income, you're

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Speaker 2: definitely going to claim early.

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Speaker 1: I think there was an article in I want to say,

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Speaker 1: the New York Times recently about how the biggest asset

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Speaker 1: most Americans have is actually Social Security. I think it's

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Speaker 1: the overall amount that they're going to receive in Social Security.

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Speaker 1: And I would love to see more people have more

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Speaker 1: assets in other places and social secured not to be

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Speaker 1: their biggest one. That's a big part of the goal

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Speaker 1: of this show. I'm curious to a lot of people

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Speaker 1: think about taxes as the enemy. It's like it is

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Speaker 1: this visceral fight to keep as much money of their

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Speaker 1: own as possible. I didn't get that vibe from reading

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Speaker 1: your book. And you say actually in the book at

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Speaker 1: one point that when it comes to retirement planning, the

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Speaker 1: tax code is more likely to be your friend than foe.

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Speaker 1: Can you elaborate on that, and how do you think

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Speaker 1: what sort of relationship should people have to the taxes

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Speaker 1: are paying?

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Speaker 2: Yeah, so I would say a lot of people think that,

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Speaker 2: you know, liking or disliking taxes is a political thing

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Speaker 2: that like, oh, you you know, if you don't like taxes,

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Speaker 2: you must be on this side of that political spectrum,

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Speaker 2: et cetera. But it's funny work as a financial planner.

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Speaker 2: Every conservative, you know, every Republican client I work with

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Speaker 2: assumes I'm a Republican assumes I'm a Republican, And every

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Speaker 2: Democrat client assumes I'm a Democrat because we lean into

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Speaker 2: tax planning as a way to be just be smart

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Speaker 2: with intentional about our planning. So with that said about

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Speaker 2: the political spectrum being made, it's kind of funny that effectively,

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Speaker 2: over the last ten years, both parties have made taxes

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Speaker 2: way more favorable, specifically for retireees. Yeah, but I think

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Speaker 2: I know Sean Mlaney has the actual data on this.

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Speaker 2: But you know, over fifty five percent of voters in

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Speaker 2: the last election were over fifty years old, Right, so

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Speaker 2: the voting block, like the ones who are really you know,

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Speaker 2: the politicians running right, are actually incentivized to if they

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Speaker 2: are going to raise taxes, retirees are probably the last

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Speaker 2: people they're gonna you know, the last cohort that they're

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Speaker 2: going to raise them on.

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Speaker 1: And that rang true right in this last major bill

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Speaker 1: that was passed because who got one of the best

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Speaker 1: tax breaks in there. It was it was older Americans.

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Speaker 2: Yeah, So I mean, great example. I mean we have

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Speaker 2: you know, we could talk about that, you know, all

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Speaker 2: the changes of the the one big beautiful bill or

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Speaker 2: the one big ugly bill, depending on how you feel

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Speaker 2: about it. But I will say, I mean, yeah, the

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Speaker 2: permanent extensions of those lower tax brackets and the higher

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Speaker 2: standard deductions, they actually increase the standard deduction by seven

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Speaker 2: hundred and fifty dollars per taxpayer. Well you mentioned the

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Speaker 2: senior deduction specifically for people sixty five and zs. Yeah,

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Speaker 2: Like that's up to twelve thousand dollars of ordinary income

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Speaker 2: that's tax free. That means, by the way, this is

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Speaker 2: kind of fun for a married couple sixty five and

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Speaker 2: older this year, you know, with income, let's say their

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Speaker 2: income falls, you know, within one hundred and fifty thousand

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Speaker 2: or less of modified adjuster gross income that you know,

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Speaker 2: they could be getting with their standard deduction of thirty

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Speaker 2: one five hundred plus their additional standard deduction per taxpayer

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Speaker 2: over sixty five of sixteen hundred each, plus the senior

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Speaker 2: deduction of twelve thousand, which is six thousand for each taxpayer.

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Speaker 2: Like you're looking at like almost fifty thousand dollars of

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Speaker 2: ordinary income and retirement being completely tax free federally.

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Speaker 1: Wow.

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Speaker 2: So it's very rare for me to see a retiree,

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Speaker 2: especially in early retiree, who's effective also called the average

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Speaker 2: tax rate your tax liability divided into your total income.

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Speaker 2: It's very rare for me to see that go over

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Speaker 2: ten percent federally.

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Speaker 1: Which okay, And I want to dial in on those

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Speaker 1: specifics in a little bit because that matters, especially when

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Speaker 1: we're thinking about what we take advantage of the accounts

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Speaker 1: we contribute to. Now, for most of our listeners in

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Speaker 1: their higher earning years right there, they're in these most

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Speaker 1: of our listeners in their thirties, forties or early forties,

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Speaker 1: and they're like, yeah, it feels like the right thing.

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Speaker 1: Maybe like to put more in the roth horn, k.

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Speaker 1: But maybe it's not. So I want to get on

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Speaker 1: that in a little bit. But just from a general perspective,

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Speaker 1: the tax code incentivizes certain behaviors and it disincentivizes others.

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Speaker 1: How should those incentives drive our behavior? For instance, like

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Speaker 1: ordinary income versus investment gains, those are taxed differently, and

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Speaker 1: so how should we think then as investors when realizing

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Speaker 1: those incentives exist.

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Speaker 2: Yeah, that's such a great question, jol. So think about

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Speaker 2: the incentives in and out. So first of all, you know,

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Speaker 2: the government, the IRS, incentivizes us to take advantage of

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Speaker 2: tax deferral. So instead of you know, being taxed on

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Speaker 2: that income today, let's contribute to those traditional four oh

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Speaker 2: one k's, four O three b's four fifty seven B

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Speaker 2: your alphabet soup of accounts. Also HSA health savings accounts fsays,

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Speaker 2: if you're on that side of the table with the

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Speaker 2: flexible spending accounts, but they're incentivizing you to not pay

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Speaker 2: tax while you're working, which is most likely when you're

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Speaker 2: going to pay the most tax. So they're incentivizing deferral

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Speaker 2: of that. And specifically you kind of think, well, you know,

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Speaker 2: why would they incentivize us to pay less taxes because

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Speaker 2: guess what you know you're for example, when you retire

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Speaker 2: your traditional IRA, which might have been a rollover from

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Speaker 2: that traditional four oh one K, we view it as

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Speaker 2: as an asset on the balance sheet, but the IRS

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Speaker 2: views that account simply as income that hasn't been taxed yet. Yeah,

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Speaker 2: so you are incentivized to defer that income. But also

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Speaker 2: incentivized to take that money out when you're actually you know,

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Speaker 2: the plan with the initial plan of when you're going

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Speaker 2: to spend that. So they incentivize you to defer money

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Speaker 2: into retirement accounts so that you'll actually live off that

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Speaker 2: money in retirement.

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Speaker 1: I'm curious. So you're speaking also to people who want

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Speaker 1: to retire early, people who want to reach tin intil independence.

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Speaker 1: And so when you're talking about the person in their

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Speaker 1: fifties and sixties with the average retirement account balance of

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Speaker 1: one hundred and five thousand dollars or whatever it is,

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Speaker 1: you are actually speaking so much of the time to

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Speaker 1: people who might have and will likely have at least

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Speaker 1: seven figures in some of those accounts that will grow

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Speaker 1: even more in the coming decades. So does that change

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Speaker 1: things because at some point that becomes a potential tax

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Speaker 1: taking time bomb that massive. It's a beautiful thing to have,

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Speaker 1: but it could create a tax nightmare down the road.

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Speaker 2: Yeah, it's funny. So for the for the person who's behind,

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Speaker 2: like catching up to five, you know, in their incentive

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Speaker 2: actually by deferring, they're actually being able to save more money. Right,

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Speaker 2: So when you defer that novel only reduces your taxes,

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Speaker 2: But what do you do with that tax savings is

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Speaker 2: really important?

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Speaker 1: Right?

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Speaker 2: So if I reduce you know, if I contribute ten

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Speaker 2: thousand dollars to an account and save twenty two percent,

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Speaker 2: or like, what am I doing with the money I

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Speaker 2: just saved? Am I investing it into maybe increasing my

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Speaker 2: four oh one K contributions? Am I putting that money

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Speaker 2: into tax with brokerage account or roth IRA. So for

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Speaker 2: the the lower earner, again, those incentives are actually helping them,

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Speaker 2: and then the higher earning, the higher earners, and like

432
00:19:57,880 --> 00:20:00,000
Speaker 2: you said, the ones who are building up these significant

433
00:20:00,080 --> 00:20:04,399
Speaker 2: can't you know, seven figure you know, traditional retirement accounts. Thankfully, again,

434
00:20:04,480 --> 00:20:07,560
Speaker 2: the tax laws, including these new changes, are actually giving

435
00:20:07,600 --> 00:20:11,720
Speaker 2: you incredible years of opportunity. Just quickly, I'll step back

436
00:20:11,760 --> 00:20:15,040
Speaker 2: that people think traditional four oh one k versus WROTH

437
00:20:15,040 --> 00:20:16,959
Speaker 2: four o one k? Right, should I pay taxes an

438
00:20:16,960 --> 00:20:20,359
Speaker 2: hour later? But what's what's hard is even in that thought,

439
00:20:20,520 --> 00:20:23,560
Speaker 2: a lot of people think that it's WROTH now or never.

440
00:20:24,280 --> 00:20:26,600
Speaker 2: They think, if I don't contribute to ROTH, I'll never

441
00:20:26,640 --> 00:20:28,960
Speaker 2: get the advantages of WROTH, which is tax free growth.

442
00:20:29,000 --> 00:20:32,000
Speaker 2: Everybody likes the idea of tax free growth. So when

443
00:20:32,040 --> 00:20:34,320
Speaker 2: they contribute to a traditional four to one k. They're like,

444
00:20:34,359 --> 00:20:37,040
Speaker 2: I said no to wroth, Like, like, I must be

445
00:20:37,119 --> 00:20:39,040
Speaker 2: so silly because all these people are telling me to

446
00:20:39,040 --> 00:20:40,280
Speaker 2: go wroth and I didn't go roth.

447
00:20:40,440 --> 00:20:43,000
Speaker 1: Like It's like that one time that a hot person

448
00:20:43,040 --> 00:20:44,480
Speaker 1: asked you out when you were in school and you

449
00:20:44,480 --> 00:20:46,320
Speaker 1: said no, and you're like, I'll never have that chance again.

450
00:20:46,359 --> 00:20:48,520
Speaker 1: But it's not true. You can go back and ask

451
00:20:48,560 --> 00:20:49,960
Speaker 1: them if you if you made the wrong, if you

452
00:20:50,000 --> 00:20:51,159
Speaker 1: made a mistake, you can go back and ask them

453
00:20:51,160 --> 00:20:51,760
Speaker 1: as absolutely.

454
00:20:51,760 --> 00:20:53,399
Speaker 2: So. Yeah, by the way, that same example happened with

455
00:20:53,440 --> 00:20:55,920
Speaker 2: me where I met my wife earlier when I was

456
00:20:55,960 --> 00:20:58,160
Speaker 2: not mature enough to date her and was like, oh man,

457
00:20:58,240 --> 00:20:59,879
Speaker 2: I didn't date her, and then we actually ended up

458
00:20:59,880 --> 00:21:01,240
Speaker 2: get marry ten years later, so I.

459
00:21:01,160 --> 00:21:02,560
Speaker 1: Get see maybe a fun example.

460
00:21:02,680 --> 00:21:05,280
Speaker 2: Yeah, but also you know, it's really not wroth now

461
00:21:05,359 --> 00:21:09,359
Speaker 2: or never, it's wroth now, later or never. And for

462
00:21:09,440 --> 00:21:13,280
Speaker 2: most people, I serve, there's an incredible opportunity in early retirement.

463
00:21:13,680 --> 00:21:16,320
Speaker 2: There's phase one, which is really retiring early all the

464
00:21:16,359 --> 00:21:18,840
Speaker 2: way to sixty five when you're really caring about the

465
00:21:18,880 --> 00:21:22,600
Speaker 2: cost of health insurance, maybe through the marketplace, but sixty

466
00:21:22,640 --> 00:21:25,480
Speaker 2: five through sixty nine. We call these the golden years,

467
00:21:25,880 --> 00:21:27,240
Speaker 2: and these are the years where you don't have to

468
00:21:27,240 --> 00:21:30,480
Speaker 2: worry about income affecting your cost of health insurance. Right

469
00:21:30,560 --> 00:21:33,240
Speaker 2: in terms of there's no marketplace insurance. You're probably on Medicare,

470
00:21:33,760 --> 00:21:36,760
Speaker 2: but there's there's actually like multiple years and even sometimes

471
00:21:36,840 --> 00:21:40,200
Speaker 2: a whole decade of opportunity to take that traditional money

472
00:21:40,200 --> 00:21:43,080
Speaker 2: you deferred maybe at twenty two, twenty four, thirty two,

473
00:21:43,160 --> 00:21:46,480
Speaker 2: thirty five, thirty seven percent, and then convert it to

474
00:21:46,600 --> 00:21:49,480
Speaker 2: ROTH at those lower effective tax rates at you know, five, ten,

475
00:21:49,640 --> 00:21:50,320
Speaker 2: fifteen percent.

476
00:21:50,359 --> 00:21:52,240
Speaker 1: So you're basically saying, take the bird in the hand,

477
00:21:52,359 --> 00:21:54,679
Speaker 1: which is the significant tax savings now if you're in

478
00:21:54,680 --> 00:21:58,120
Speaker 1: your higher income income years, and then down the road

479
00:21:58,400 --> 00:22:00,360
Speaker 1: you can make that decision to turn that money into

480
00:22:00,480 --> 00:22:02,920
Speaker 1: ROTH at a much lower income tax rate exactly.

481
00:22:02,960 --> 00:22:06,840
Speaker 2: So that's exactly what's incentivized by these tax laws. And second,

482
00:22:06,880 --> 00:22:09,639
Speaker 2: you mentioned there's also an incentive to invest, you know,

483
00:22:09,800 --> 00:22:12,919
Speaker 2: ordinary income versus long term capital gains income. Right, So

484
00:22:12,960 --> 00:22:16,280
Speaker 2: the difference between having income from a job, maybe you know,

485
00:22:16,359 --> 00:22:19,639
Speaker 2: net real estate income, net self employment versus in a

486
00:22:19,680 --> 00:22:22,680
Speaker 2: taxbi brokerage account when you invest in stocks, right, when

487
00:22:22,720 --> 00:22:25,399
Speaker 2: you invest in securities when you if you own them

488
00:22:25,440 --> 00:22:27,840
Speaker 2: for longer than one year and sell, the gain is

489
00:22:27,880 --> 00:22:30,479
Speaker 2: tax at a lower tax rate than the ordinary income. Right,

490
00:22:30,520 --> 00:22:32,040
Speaker 2: So there's like kind of the two ways to think

491
00:22:32,040 --> 00:22:36,000
Speaker 2: about tax calculation. And that's another incentive. So the government

492
00:22:36,040 --> 00:22:39,280
Speaker 2: wants to incentivize us as savers and investors to invest

493
00:22:39,400 --> 00:22:42,000
Speaker 2: in companies. You know, they probably definitely want us to

494
00:22:42,000 --> 00:22:45,480
Speaker 2: invest in US companies, but overall just inequity that you know,

495
00:22:45,520 --> 00:22:48,960
Speaker 2: we want. They want not just employ employees when they

496
00:22:49,119 --> 00:22:52,240
Speaker 2: earn their income, also to invest in the growth of GDP,

497
00:22:52,560 --> 00:22:55,160
Speaker 2: not just by working, but like investing in other companies.

498
00:22:55,400 --> 00:22:58,240
Speaker 2: So they've incentivized us to grow again to like, you know,

499
00:22:58,280 --> 00:23:00,640
Speaker 2: we're all in this party together. We're get enough tax

500
00:23:00,640 --> 00:23:03,359
Speaker 2: break specifically so that we can set ourselves up for

501
00:23:03,359 --> 00:23:05,960
Speaker 2: a future retirement that the government doesn't have to subsidize

502
00:23:05,960 --> 00:23:08,800
Speaker 2: as much. But also they're incentivizing us to invest in

503
00:23:08,840 --> 00:23:11,440
Speaker 2: companies so that we all grow, you know all you know,

504
00:23:11,480 --> 00:23:13,080
Speaker 2: all boats rise with the tide.

505
00:23:13,160 --> 00:23:15,800
Speaker 1: Yeah, Okay, we got more to get to Cody. A

506
00:23:15,800 --> 00:23:18,120
Speaker 1: lot of details that we got to hammer out here

507
00:23:18,359 --> 00:23:21,040
Speaker 1: when we're talking about tax planning for early retirees. I'm

508
00:23:21,040 --> 00:23:24,080
Speaker 1: assuming there's a lot of listeners out there who are

509
00:23:24,400 --> 00:23:26,720
Speaker 1: curious to get into some of that, and also just

510
00:23:27,560 --> 00:23:29,600
Speaker 1: maybe it'll peak their interest. Even saying I didn't even

511
00:23:29,600 --> 00:23:33,840
Speaker 1: think about retiring earlier, how planning properly with taxes could

512
00:23:34,119 --> 00:23:36,440
Speaker 1: facilitate that for me. We'll get into some of that

513
00:23:36,520 --> 00:23:46,400
Speaker 1: stuff with Cody right after this r we're back still

514
00:23:46,400 --> 00:23:49,199
Speaker 1: talking with Cody Garrett talking about cutting taxes so that

515
00:23:49,240 --> 00:23:53,280
Speaker 1: you can retire sooner and Cody this we talked about

516
00:23:53,320 --> 00:23:55,119
Speaker 1: just how people have a lot of people have very

517
00:23:55,119 --> 00:23:57,119
Speaker 1: little knowledge of what they're paying in Texas. They just

518
00:23:57,119 --> 00:23:59,760
Speaker 1: have very little relationship. Whereas if we had to proactively

519
00:23:59,760 --> 00:24:02,600
Speaker 1: make it tax payment, we would probably feel a different

520
00:24:02,800 --> 00:24:06,479
Speaker 1: way about taxation in general and what we're paying taxes

521
00:24:06,480 --> 00:24:08,439
Speaker 1: in particularly, we might pay more attention to it. But

522
00:24:08,520 --> 00:24:10,119
Speaker 1: a lot of people too are thinking about taxes on

523
00:24:10,160 --> 00:24:12,480
Speaker 1: a year by year basis, right, And how does that

524
00:24:12,880 --> 00:24:18,120
Speaker 1: approach limit our ability to minimize our overall tax burden? Because, Yeah,

525
00:24:18,160 --> 00:24:20,840
Speaker 1: if the goal is literally just to pay as little

526
00:24:20,840 --> 00:24:23,199
Speaker 1: in taxes in twenty twenty five as possible, we're going

527
00:24:23,240 --> 00:24:25,480
Speaker 1: to potentially make a different decision than if we're thinking

528
00:24:25,480 --> 00:24:26,320
Speaker 1: about the big picture.

529
00:24:26,840 --> 00:24:28,719
Speaker 2: Yeah, it's such a great point. So there's a difference

530
00:24:28,760 --> 00:24:32,720
Speaker 2: between tax preparation and tax planning. So tax preparation is

531
00:24:32,760 --> 00:24:35,399
Speaker 2: all focused on kind of what happened last year and

532
00:24:35,440 --> 00:24:38,840
Speaker 2: this year. Tax planning is ultimately about reducing your lifetime

533
00:24:38,880 --> 00:24:41,920
Speaker 2: tax liability. And by the way you think lifetime, it

534
00:24:42,000 --> 00:24:44,359
Speaker 2: might not just be your lifetime, but also maybe extending

535
00:24:44,400 --> 00:24:47,719
Speaker 2: into your errors. Right, So if you might be aware

536
00:24:47,760 --> 00:24:51,480
Speaker 2: of retirement accounts, if I passed away and my kids

537
00:24:51,480 --> 00:24:53,880
Speaker 2: in the future were to inherit my retirement accounts, they'd

538
00:24:53,920 --> 00:24:56,480
Speaker 2: probably have ten years to unwind those, right, ten years

539
00:24:56,480 --> 00:24:58,879
Speaker 2: to take that money out. Again, the IRS doesn't want

540
00:24:58,880 --> 00:25:00,200
Speaker 2: these deferred forever and ever.

541
00:25:00,160 --> 00:25:01,240
Speaker 1: At some point they want their cut.

542
00:25:01,280 --> 00:25:03,439
Speaker 2: Yeah, exactly. And again some people use the fear of like,

543
00:25:03,560 --> 00:25:05,359
Speaker 2: you know, the IRS has their hand in your pocket,

544
00:25:05,400 --> 00:25:08,680
Speaker 2: et cetera. But I would just say that tax planning

545
00:25:08,880 --> 00:25:11,280
Speaker 2: is there's kind of two parts to this. One is

546
00:25:11,800 --> 00:25:14,160
Speaker 2: you know, pay tax. When you pay less tax, that's

547
00:25:14,160 --> 00:25:16,600
Speaker 2: a that's an annual decision of saying, hey, will I

548
00:25:16,640 --> 00:25:19,040
Speaker 2: pay less tax on this money today or in the future.

549
00:25:19,400 --> 00:25:21,959
Speaker 2: That can kind of get you kind of rounded in

550
00:25:22,000 --> 00:25:25,040
Speaker 2: the tax preparation part. But the tax planning is saying

551
00:25:25,280 --> 00:25:27,920
Speaker 2: how can I reduce my lifetime tax liability by using

552
00:25:28,000 --> 00:25:32,280
Speaker 2: various strategies and tactics, you know, again in accumulation on

553
00:25:32,320 --> 00:25:35,280
Speaker 2: the path two retirement and also in distribution draw down

554
00:25:35,440 --> 00:25:36,720
Speaker 2: on the path to retirement.

555
00:25:37,040 --> 00:25:40,360
Speaker 1: So we kind of talked about this just a little bit.

556
00:25:40,400 --> 00:25:42,960
Speaker 1: But tax rate arbitrage is that what we're is that

557
00:25:43,200 --> 00:25:45,400
Speaker 1: essentially kind of the term that you're using when we're

558
00:25:45,440 --> 00:25:48,200
Speaker 1: talking about paying the most tax when it makes sense

559
00:25:48,240 --> 00:25:52,119
Speaker 1: and avoiding avoiding paying tax in those in those later

560
00:25:52,240 --> 00:25:54,760
Speaker 1: years where you have more tax planning ability.

561
00:25:55,000 --> 00:25:58,920
Speaker 2: Yes, that's absolutely it. So tax rate arbitrage effectively means

562
00:25:58,920 --> 00:26:01,960
Speaker 2: that I'm going to defer income when it would have

563
00:26:01,960 --> 00:26:04,320
Speaker 2: been taxed at a higher tax rate, then want toll

564
00:26:04,359 --> 00:26:07,640
Speaker 2: distribute or convert that money later on. So one example,

565
00:26:07,720 --> 00:26:11,000
Speaker 2: as let's say a high earner, they're fifty four right now,

566
00:26:11,000 --> 00:26:13,240
Speaker 2: they're going to retire at fifty five, go them very

567
00:26:13,240 --> 00:26:15,520
Speaker 2: early retirement, that's great. Let's say that they're in the

568
00:26:15,560 --> 00:26:18,600
Speaker 2: thirty two percent tax bracket when they contribute to their

569
00:26:18,600 --> 00:26:22,119
Speaker 2: traditional four oh one K, those contributions are excluded or

570
00:26:22,119 --> 00:26:25,960
Speaker 2: deducted from income at the thirty two percent federal marginal.

571
00:26:25,640 --> 00:26:27,199
Speaker 1: Tax bracket, substantial savings.

572
00:26:27,240 --> 00:26:29,439
Speaker 2: Yeah, absolutely, like a third of that money. Again, they

573
00:26:29,440 --> 00:26:31,600
Speaker 2: have all this money. Now on top of that the

574
00:26:31,680 --> 00:26:35,439
Speaker 2: extra tax, the tax savings for making that contribution, that

575
00:26:35,520 --> 00:26:39,160
Speaker 2: doesn't just disappear. Their their net pay increases right when

576
00:26:39,160 --> 00:26:42,560
Speaker 2: they choose traditional versus rot there, but the arbitrage really

577
00:26:42,600 --> 00:26:45,040
Speaker 2: comes in that they retire at fifty four, after that

578
00:26:45,480 --> 00:26:49,320
Speaker 2: big income year at fifty five, what are their income sources.

579
00:26:49,680 --> 00:26:52,040
Speaker 2: Let's say their only source of income is taking money.

580
00:26:52,200 --> 00:26:53,679
Speaker 2: They're saying, hey, I'm going to take money out of

581
00:26:53,680 --> 00:26:55,520
Speaker 2: tax will accounts. First, I'm gonna take I'm going to

582
00:26:55,600 --> 00:26:58,879
Speaker 2: live off of my checking savings and tax with brokerage accounts.

583
00:26:59,080 --> 00:27:00,840
Speaker 2: You know, by maybe I have to sell some stock

584
00:27:00,880 --> 00:27:03,040
Speaker 2: that's appreciated, but again it's tax at those lower tax

585
00:27:03,119 --> 00:27:06,720
Speaker 2: rates they might have. Let's say they actually distribute. They

586
00:27:06,720 --> 00:27:09,159
Speaker 2: need two hundred thousand dollars to live in retirement at

587
00:27:09,160 --> 00:27:11,879
Speaker 2: fifty five, right, they might get one hundred thousand of

588
00:27:11,880 --> 00:27:14,560
Speaker 2: that right from just their checking and savings account with

589
00:27:14,600 --> 00:27:17,120
Speaker 2: no taxes. Then they'll get the other one hundred thousand

590
00:27:17,680 --> 00:27:20,400
Speaker 2: by you know, one hundred thousand dollars of income by

591
00:27:20,520 --> 00:27:23,320
Speaker 2: maybe having realized capital gain of you know, twenty five

592
00:27:23,359 --> 00:27:26,760
Speaker 2: thousand dollars, so they've only had income of twenty five thousand.

593
00:27:26,840 --> 00:27:29,480
Speaker 2: Right now, it's actually tax at zero because there's a

594
00:27:29,520 --> 00:27:32,119
Speaker 2: long term capital gains taxert of zero percent on income

595
00:27:32,160 --> 00:27:35,320
Speaker 2: that low. But now the arbitrage comes in. Wait a minute,

596
00:27:35,720 --> 00:27:38,640
Speaker 2: I put that four to one K contribution in at

597
00:27:38,720 --> 00:27:42,639
Speaker 2: thirty two percent, I save thirty two percent. Maybe I

598
00:27:42,680 --> 00:27:45,159
Speaker 2: can convert move some of that traditional four to one

599
00:27:45,240 --> 00:27:48,160
Speaker 2: K money over to a roth ira, you know, very carefully,

600
00:27:48,160 --> 00:27:51,240
Speaker 2: step by step, but by converting it and paying taxes

601
00:27:51,280 --> 00:27:53,640
Speaker 2: on it, I'm going to intentionally choose to, let's say,

602
00:27:53,640 --> 00:27:56,320
Speaker 2: convert you know, one hundred thousand, two hundred thousand dollars

603
00:27:56,359 --> 00:27:59,439
Speaker 2: of that money over and again, I'm filling up the

604
00:27:59,440 --> 00:28:03,280
Speaker 2: standard toduction, the ten percent, the twelve percent bracket. Like

605
00:28:03,320 --> 00:28:05,240
Speaker 2: I might not even pay even twenty two percent on

606
00:28:05,280 --> 00:28:06,360
Speaker 2: that conversion.

607
00:28:06,000 --> 00:28:07,760
Speaker 1: Any of those dollars, Yeah, on any.

608
00:28:07,600 --> 00:28:10,120
Speaker 2: Of those dollars, Yeah, where I'd excluded it from income

609
00:28:10,160 --> 00:28:12,040
Speaker 2: at thirty two. So in the book we call this,

610
00:28:12,119 --> 00:28:15,000
Speaker 2: you know, you beat the irs, But yeah, tax rate

611
00:28:15,080 --> 00:28:17,399
Speaker 2: arbitrage is a big part of that decision on you know,

612
00:28:17,440 --> 00:28:19,000
Speaker 2: paying tax when you pay less tax.

613
00:28:19,040 --> 00:28:20,920
Speaker 1: It's it's important to talk about the intentionality and the

614
00:28:20,920 --> 00:28:24,000
Speaker 1: specifics of that, right because I think some people think, Okay, wait,

615
00:28:24,040 --> 00:28:25,920
Speaker 1: I hit sixty five, I'm in the zero. I'm not.

616
00:28:26,040 --> 00:28:28,320
Speaker 1: I'm not actually making money anymore. Let me make this

617
00:28:28,400 --> 00:28:31,400
Speaker 1: lump sum roth conversion with all of my traditional IRA

618
00:28:31,560 --> 00:28:34,879
Speaker 1: dollars or traditional four to one K dollars. But depending

619
00:28:34,920 --> 00:28:37,680
Speaker 1: on how big that sum is, that could be a big,

620
00:28:38,000 --> 00:28:40,400
Speaker 1: a big tax bomb. You're giving yourself too if you

621
00:28:40,440 --> 00:28:42,920
Speaker 1: do it all at once, whereas making a plan to

622
00:28:42,960 --> 00:28:47,120
Speaker 1: do it over many consecutive years would be Like how

623
00:28:47,160 --> 00:28:49,720
Speaker 1: do you think about those roth conversions? When to make

624
00:28:49,760 --> 00:28:51,160
Speaker 1: them and how much to make?

625
00:28:51,400 --> 00:28:53,640
Speaker 2: Yeah? I think I think roth conversions are a very helpful,

626
00:28:53,640 --> 00:28:57,160
Speaker 2: helpful tactic and retirement especially. But a lot of people

627
00:28:57,240 --> 00:29:00,320
Speaker 2: hear about roth conversions and they get really excited about them,

628
00:29:00,680 --> 00:29:03,040
Speaker 2: and they kind of, you know, they get a little

629
00:29:03,080 --> 00:29:04,520
Speaker 2: too excited, and they go, hey, I'm just gonna do

630
00:29:04,560 --> 00:29:05,920
Speaker 2: all of it all at once. Yeah, And like you said,

631
00:29:05,960 --> 00:29:09,920
Speaker 2: let's say somebody has a million dollar traditional IRA age

632
00:29:09,960 --> 00:29:12,440
Speaker 2: sixty five, they just retire, they have no other forms

633
00:29:12,480 --> 00:29:14,840
Speaker 2: of income to make this simple, that's a lot of money.

634
00:29:14,920 --> 00:29:17,320
Speaker 2: A million dollars. It's a lot of typing on my calculator.

635
00:29:17,480 --> 00:29:20,040
Speaker 2: So that million dollars, let's say this is a retired couple,

636
00:29:20,520 --> 00:29:23,160
Speaker 2: you know, married couple sixty five. They have the standard

637
00:29:23,200 --> 00:29:25,680
Speaker 2: deduction this year and twenty twenty five of thirty one

638
00:29:25,800 --> 00:29:28,840
Speaker 2: five hundred, they each get a standard deduction additionally of

639
00:29:28,880 --> 00:29:33,200
Speaker 2: sixteen hundred each. Right, so their taxable income is nine

640
00:29:33,200 --> 00:29:35,920
Speaker 2: to sixty five three hundred. And it's always dangerous to

641
00:29:35,960 --> 00:29:38,320
Speaker 2: do calculations on a podcast. I think this will work out.

642
00:29:38,560 --> 00:29:42,560
Speaker 2: So so they're actually gonna be into the marginal thirty

643
00:29:42,600 --> 00:29:44,880
Speaker 2: seven percent tax rate. And I kind of like the

644
00:29:45,040 --> 00:29:47,320
Speaker 2: last dollars of that conversion. But let's see how much

645
00:29:47,360 --> 00:29:49,880
Speaker 2: taxes they owe on that, right, So you know, I'm

646
00:29:49,880 --> 00:29:53,600
Speaker 2: gonna do my quick calculation here. So on that roth

647
00:29:53,640 --> 00:29:57,160
Speaker 2: conversion of a million dollars, federally, they're going to pay

648
00:29:57,480 --> 00:29:59,600
Speaker 2: two hundred and eighty one thousand dollars in taxes.

649
00:29:59,640 --> 00:29:59,920
Speaker 1: Wow.

650
00:30:00,200 --> 00:30:02,240
Speaker 2: So talk about ripping the band aid off and paying

651
00:30:02,760 --> 00:30:05,040
Speaker 2: They had a twenty eight percent effective tax rate, by

652
00:30:05,040 --> 00:30:06,520
Speaker 2: the way, by doing it all at once.

653
00:30:06,360 --> 00:30:07,080
Speaker 1: Which is not good.

654
00:30:07,200 --> 00:30:09,480
Speaker 2: Yeah, so they can do better. So let's say, for example,

655
00:30:09,640 --> 00:30:11,640
Speaker 2: instead of doing a million, they're going to do two

656
00:30:11,760 --> 00:30:13,400
Speaker 2: hundred and fifty thousand, so they're going to do a

657
00:30:13,400 --> 00:30:15,240
Speaker 2: fourth of it, but over the next four years, so

658
00:30:15,280 --> 00:30:17,720
Speaker 2: two hundred and fifty thousand per year. So we talked earlier,

659
00:30:17,760 --> 00:30:19,520
Speaker 2: by the way, that if they did it all at once,

660
00:30:19,600 --> 00:30:21,720
Speaker 2: it's a twenty eight percent effective tax rate on a

661
00:30:21,800 --> 00:30:24,800
Speaker 2: million dollars. Let's say we did two hundred fifty thousand instead,

662
00:30:24,840 --> 00:30:27,320
Speaker 2: but for four years, so two hundred and fifty thousand

663
00:30:27,600 --> 00:30:33,480
Speaker 2: minus their significant standard deduction minus their additional standard deduction. Right,

664
00:30:33,520 --> 00:30:36,040
Speaker 2: So right here I have their taxbile income is now

665
00:30:36,080 --> 00:30:39,160
Speaker 2: at two hundred and fifteen thousand, three hundred. So now

666
00:30:39,400 --> 00:30:41,440
Speaker 2: that actually puts them, by the way, in the twenty

667
00:30:41,480 --> 00:30:44,400
Speaker 2: four percent marginal tax rate, so the highest dollars tax

668
00:30:45,160 --> 00:30:48,200
Speaker 2: at the twenty four percent. But now I'm going to

669
00:30:48,240 --> 00:30:53,320
Speaker 2: do my little handed handy tax calculation, and they're paying

670
00:30:53,560 --> 00:30:57,160
Speaker 2: federal income tax of thirty seven thousand dollars on that

671
00:30:57,160 --> 00:30:58,520
Speaker 2: that roth conversion of two hundred and.

672
00:30:58,480 --> 00:31:01,360
Speaker 1: Fifty thousand, Okay, so multiple that way is four right.

673
00:31:01,480 --> 00:31:04,960
Speaker 2: Right, and their effective rate annually for four years is

674
00:31:05,520 --> 00:31:07,200
Speaker 2: fourteen point nine percent.

675
00:31:07,280 --> 00:31:08,600
Speaker 1: So basically cut in half.

676
00:31:08,600 --> 00:31:10,960
Speaker 2: So yeah, they basically cut their tax liability in half

677
00:31:11,160 --> 00:31:14,440
Speaker 2: just by having some patience and intentionality and spreading that

678
00:31:14,480 --> 00:31:17,720
Speaker 2: out from sixty sixty five, sixty seven, sixty six, sixty seven,

679
00:31:17,800 --> 00:31:18,280
Speaker 2: sixty eight.

680
00:31:18,520 --> 00:31:18,640
Speaker 1: Right.

681
00:31:18,680 --> 00:31:21,600
Speaker 2: Yeah, And what's what's really powerful about that is they

682
00:31:21,640 --> 00:31:24,640
Speaker 2: also by doing those conversions, it didn't change how much

683
00:31:24,640 --> 00:31:27,600
Speaker 2: they're paying for health care. Right again, we can talk

684
00:31:27,640 --> 00:31:30,320
Speaker 2: about you know, IRMA and the Medicare surcharges and how

685
00:31:30,400 --> 00:31:32,440
Speaker 2: much those might cost them. By the way, it's only

686
00:31:32,440 --> 00:31:35,080
Speaker 2: going to be up to three percent nuisance tax versus

687
00:31:35,080 --> 00:31:36,880
Speaker 2: their income, so it's not really going to be changing

688
00:31:37,000 --> 00:31:39,280
Speaker 2: their lived experience. But you can see right there just

689
00:31:39,560 --> 00:31:42,800
Speaker 2: one example, not advice for you, but one example of hey,

690
00:31:42,880 --> 00:31:46,320
Speaker 2: just being patient and thoughtful and intentional with roth conversions

691
00:31:46,360 --> 00:31:49,280
Speaker 2: over time. By the way, their rm ds, the required

692
00:31:49,280 --> 00:31:52,360
Speaker 2: minimum distributions, aren't going to start until their mid seventies,

693
00:31:52,520 --> 00:31:55,000
Speaker 2: so they might not even do all of it between

694
00:31:55,040 --> 00:31:57,280
Speaker 2: sixty five sixty you know, sixty nine.

695
00:31:57,120 --> 00:31:59,480
Speaker 1: Because that that can has been kicked down the road

696
00:31:59,640 --> 00:32:03,040
Speaker 1: prepare actually over in recent legislation. So yeah, that's starting

697
00:32:03,120 --> 00:32:05,760
Speaker 1: later and later, whereas that was hanging over people's heads

698
00:32:05,760 --> 00:32:09,280
Speaker 1: at an earlier, earlier retirement age that's been pushed back.

699
00:32:09,600 --> 00:32:12,560
Speaker 1: What would you say to someone, Because we're talking largely about,

700
00:32:12,680 --> 00:32:15,720
Speaker 1: you know, tax planning for early retirees, and I think

701
00:32:15,760 --> 00:32:18,080
Speaker 1: for people we're listening right now, they're like, Okay, yeah,

702
00:32:18,080 --> 00:32:20,719
Speaker 1: maybe those traditional accounts make more sense to the time being.

703
00:32:20,800 --> 00:32:23,880
Speaker 1: I can always wroth later. I don't have to wroth

704
00:32:24,040 --> 00:32:26,120
Speaker 1: so hard right now because it might be costing me

705
00:32:26,160 --> 00:32:28,360
Speaker 1: more intacts than I need to pay. But what about

706
00:32:28,400 --> 00:32:31,200
Speaker 1: someone who's like starting late and they are let's say

707
00:32:31,200 --> 00:32:34,400
Speaker 1: they're forty five, and that feels you know, but I

708
00:32:34,520 --> 00:32:36,840
Speaker 1: think the average American starts saving for retirement what like

709
00:32:36,840 --> 00:32:38,920
Speaker 1: the age of forty Basically that's like when the light

710
00:32:39,040 --> 00:32:41,280
Speaker 1: clicks on for most people. So it's it's late, but

711
00:32:41,320 --> 00:32:42,600
Speaker 1: it's not that late. We've got a lot of go

712
00:32:42,600 --> 00:32:45,560
Speaker 1: getters who who listen to the show, but they hear

713
00:32:45,600 --> 00:32:47,480
Speaker 1: this sort of retire early talk and they're like, oh,

714
00:32:47,520 --> 00:32:49,240
Speaker 1: it must be nice. But I don't know if that's

715
00:32:49,280 --> 00:32:52,040
Speaker 1: for me. I don't know if I could possibly possibly,

716
00:32:52,120 --> 00:32:54,719
Speaker 1: you know, hit that retire by fifty five now when

717
00:32:54,720 --> 00:32:57,920
Speaker 1: I've just gotten started. What tips What would you suggest

718
00:32:57,920 --> 00:32:59,400
Speaker 1: to people who feel like they're starting late.

719
00:32:59,480 --> 00:33:02,200
Speaker 2: So if you're starting late. Well, we talked about earlier.

720
00:33:02,320 --> 00:33:04,360
Speaker 2: We call these the compelling three. By the way, so

721
00:33:04,400 --> 00:33:06,280
Speaker 2: Sean and I in the book, the compelling three are

722
00:33:06,560 --> 00:33:10,720
Speaker 2: making traditional retirement account contributions at work, making roth IRA

723
00:33:10,880 --> 00:33:14,320
Speaker 2: contributions at home, maybe even it's called the backdoor roth IRA,

724
00:33:14,720 --> 00:33:16,840
Speaker 2: and then taxi brokege accounts if you have enough income

725
00:33:16,920 --> 00:33:18,080
Speaker 2: left after all that.

726
00:33:17,960 --> 00:33:19,680
Speaker 1: Why, by the way, quick question, why do you go

727
00:33:19,720 --> 00:33:23,360
Speaker 1: roth IRA instead of traditional IRA given kind of your

728
00:33:23,400 --> 00:33:26,920
Speaker 1: penchant to save on tech? Because I feel the same way.

729
00:33:27,040 --> 00:33:28,640
Speaker 1: I like the roth But then I'm like, oh, I'm

730
00:33:28,680 --> 00:33:31,040
Speaker 1: curious to hear Cody's take on why why he's pro

731
00:33:31,080 --> 00:33:31,520
Speaker 1: wroth IRA.

732
00:33:31,640 --> 00:33:33,920
Speaker 2: Yeah, it's a great question. So when you're at higher

733
00:33:33,960 --> 00:33:36,920
Speaker 2: tax rates, higher income levels. Again, by the way, there

734
00:33:36,920 --> 00:33:40,120
Speaker 2: are no income thresholds for making traditional four oh one

735
00:33:40,200 --> 00:33:42,640
Speaker 2: K contributions through work. So when you're contributing it a

736
00:33:42,680 --> 00:33:44,920
Speaker 2: through a qualify plan, whether you're in the even if

737
00:33:44,920 --> 00:33:46,880
Speaker 2: you're in the thirty seven percent tax bracket, you can

738
00:33:46,920 --> 00:33:51,800
Speaker 2: deduct exclude that contribution through work. But roth IRA contributions

739
00:33:51,840 --> 00:33:55,320
Speaker 2: directly actually have income thresholds. So most of the people

740
00:33:55,320 --> 00:33:57,560
Speaker 2: who are maxing out their four oh one K, their

741
00:33:57,560 --> 00:33:59,560
Speaker 2: income is probably too high to make a direct roth

742
00:33:59,600 --> 00:34:03,240
Speaker 2: IRA com contribution, but also even a lower threshold to

743
00:34:03,280 --> 00:34:06,520
Speaker 2: deduct a traditional IRA contribution when you're covered by a

744
00:34:06,560 --> 00:34:09,560
Speaker 2: workplace plan. At work, it's a very low income threshold.

745
00:34:09,600 --> 00:34:13,160
Speaker 2: So even if you wanted to deduct a traditional IRA contribution, many,

746
00:34:13,440 --> 00:34:15,799
Speaker 2: many people, especially late in their careers, cannot do that.

747
00:34:16,200 --> 00:34:18,560
Speaker 1: Okay, let's talk about taxo changes. We just experienced a

748
00:34:18,560 --> 00:34:21,719
Speaker 1: really big taxic change, the one big beautiful bill or

749
00:34:21,719 --> 00:34:26,040
Speaker 1: whatever it's called. There's like fluid stuff happening right like these.

750
00:34:27,160 --> 00:34:30,480
Speaker 1: It feels like, how do you plan when the ground

751
00:34:30,560 --> 00:34:32,960
Speaker 1: is always subtly shifting under your feet?

752
00:34:33,320 --> 00:34:35,200
Speaker 2: Well, I'm going to go to kind of cognitive behavioral

753
00:34:35,200 --> 00:34:38,120
Speaker 2: therapy of you know, don't believe everything you think. I

754
00:34:38,120 --> 00:34:42,279
Speaker 2: would say that I call anxiety the fear of future uncertainty.

755
00:34:42,640 --> 00:34:44,680
Speaker 2: We actually in the book, by the way, look at

756
00:34:44,680 --> 00:34:46,760
Speaker 2: my table of contents here, we actually have a chapter

757
00:34:47,600 --> 00:34:51,360
Speaker 2: called Planning for Uncertainty, Chapter twenty. So our take is

758
00:34:51,400 --> 00:34:55,439
Speaker 2: really make decisions this year based on what's currently known

759
00:34:55,800 --> 00:34:58,920
Speaker 2: and within our control. So what do we know right now?

760
00:34:58,920 --> 00:35:02,759
Speaker 2: Our income sources? Right we can control, We can have

761
00:35:02,840 --> 00:35:05,680
Speaker 2: some control over our income sources. Control of how much

762
00:35:05,719 --> 00:35:09,359
Speaker 2: we save and best spend to give. But the uncertain parts,

763
00:35:09,360 --> 00:35:11,400
Speaker 2: the parts that are out of our control. If you

764
00:35:11,400 --> 00:35:13,640
Speaker 2: think about these columns, like what's what's within my control?

765
00:35:13,719 --> 00:35:16,640
Speaker 2: Tax planning wise, what's outside of my control? I think

766
00:35:16,680 --> 00:35:18,759
Speaker 2: a lot of the fears that uncertainty on the right

767
00:35:18,760 --> 00:35:20,279
Speaker 2: side of the column, which is.

768
00:35:20,239 --> 00:35:22,439
Speaker 1: There's even uncertainty baked in by the way, right where

769
00:35:22,480 --> 00:35:25,200
Speaker 1: some things are literally just gonna sunset in a few years, like, yeah,

770
00:35:25,200 --> 00:35:26,600
Speaker 1: we're gonna try this thing for a few years and

771
00:35:26,600 --> 00:35:28,960
Speaker 1: then we'll see what the politicians cook up, right, you know,

772
00:35:29,719 --> 00:35:31,439
Speaker 1: a couple of years from now. And so I think

773
00:35:31,440 --> 00:35:33,759
Speaker 1: that's another kind of like mind modeling thing for a

774
00:35:33,800 --> 00:35:36,400
Speaker 1: lot of people. Is it's not just that it's changing

775
00:35:36,440 --> 00:35:39,319
Speaker 1: in that different political parties have different goals, but it's

776
00:35:39,360 --> 00:35:42,840
Speaker 1: that even in the literal legislation, it's like, yeah, we'll

777
00:35:42,880 --> 00:35:44,600
Speaker 1: do this through twenty twenty nine and then we'll figure

778
00:35:44,640 --> 00:35:45,560
Speaker 1: something else out, right.

779
00:35:45,600 --> 00:35:47,440
Speaker 2: And what's funny about the last ten years is we

780
00:35:47,520 --> 00:35:50,759
Speaker 2: realize that nothing's more permanent than a temporary tax cut

781
00:35:50,760 --> 00:35:54,239
Speaker 2: for retirement apparently. Yeah, yeah, so, and we talk about

782
00:35:54,239 --> 00:35:57,480
Speaker 2: that word permanently, right, Permanent means until somebody changes that

783
00:35:57,520 --> 00:36:00,520
Speaker 2: which we've seen, like somebody can and will change the right.

784
00:36:00,600 --> 00:36:02,880
Speaker 2: But I would say with all that said, you know

785
00:36:02,920 --> 00:36:07,280
Speaker 2: that that chapter on planning for uncertainty, it's yes, realizing

786
00:36:07,320 --> 00:36:09,440
Speaker 2: what's in and out of our control, but also saying

787
00:36:09,800 --> 00:36:12,920
Speaker 2: what has happened historically. You know again both you know,

788
00:36:13,360 --> 00:36:15,919
Speaker 2: either political party maybe even future political parties we don't

789
00:36:15,920 --> 00:36:18,040
Speaker 2: know about yet. By the way, there are also a

790
00:36:18,040 --> 00:36:22,680
Speaker 2: lot of other ways to increase tax without focusing on retirees.

791
00:36:22,960 --> 00:36:26,880
Speaker 2: I would actually guess that there's gonna be more taxes

792
00:36:26,920 --> 00:36:29,279
Speaker 2: on workers than there will be retirees, because, by the way,

793
00:36:29,360 --> 00:36:32,040
Speaker 2: who needs more money? Right, kind of like you know,

794
00:36:32,040 --> 00:36:34,759
Speaker 2: who's more scared about money? A lot of By way,

795
00:36:34,840 --> 00:36:37,360
Speaker 2: even the retiree with six million dollars, you know, and

796
00:36:37,400 --> 00:36:39,600
Speaker 2: in their portfolio is scared to death that they're going

797
00:36:39,640 --> 00:36:41,960
Speaker 2: to run out of money. Sure, is that really the

798
00:36:42,120 --> 00:36:43,919
Speaker 2: Is that really the cohort of people that we want

799
00:36:43,920 --> 00:36:46,600
Speaker 2: to increase taxes on the ones who are already fearful

800
00:36:46,920 --> 00:36:48,600
Speaker 2: and and you know they're scared about you know, they're

801
00:36:48,600 --> 00:36:51,800
Speaker 2: scared of social security going away. They're very conservative and

802
00:36:51,800 --> 00:36:54,959
Speaker 2: their assumptions of like, you know, the Social Security isn't

803
00:36:55,000 --> 00:36:56,719
Speaker 2: just the gravy on the mashed potatoes. They think it's

804
00:36:56,760 --> 00:36:59,319
Speaker 2: the main entree and it's somebody's taking away my meal

805
00:36:59,520 --> 00:37:00,799
Speaker 2: that I've paid for along these years.

806
00:37:00,840 --> 00:37:05,799
Speaker 1: Yeah, the political viability of going after the people, yeah,

807
00:37:05,440 --> 00:37:07,600
Speaker 1: it just doesn't It doesn't make my sense. It's not

808
00:37:07,640 --> 00:37:10,160
Speaker 1: a winner given who votes and the impact that I'll

809
00:37:10,160 --> 00:37:13,520
Speaker 1: have and the people being super upset in the streets

810
00:37:13,560 --> 00:37:16,200
Speaker 1: about taking away social security benefits. You mentioned social Security,

811
00:37:16,239 --> 00:37:17,600
Speaker 1: so I feel like I have to ask you about this,

812
00:37:17,719 --> 00:37:21,200
Speaker 1: especially given kind of the news about the soci Security

813
00:37:21,239 --> 00:37:25,120
Speaker 1: Trust Fund running out. And I know when you look

814
00:37:25,160 --> 00:37:28,759
Speaker 1: at the polls, people in their thirties and forties tend

815
00:37:28,760 --> 00:37:31,759
Speaker 1: to think, yeah, I'll be surprised if I see much

816
00:37:31,760 --> 00:37:35,239
Speaker 1: of that, right, And that's another I think politically unpopular

817
00:37:35,239 --> 00:37:37,480
Speaker 1: thing is to shore up or touch Social Security, but

818
00:37:37,520 --> 00:37:40,040
Speaker 1: also getting rid of it is politically unpopular. So how

819
00:37:40,040 --> 00:37:43,880
Speaker 1: do you think about the role how people who are

820
00:37:43,880 --> 00:37:47,160
Speaker 1: hoping to retire early, planning to retire early should think

821
00:37:47,160 --> 00:37:49,719
Speaker 1: about how social security plays into that.

822
00:37:50,000 --> 00:37:52,200
Speaker 2: I love this question so much so most people I

823
00:37:52,280 --> 00:37:53,960
Speaker 2: talk to who are in their thirties forties, you know,

824
00:37:54,000 --> 00:37:56,800
Speaker 2: at least ten plus years out from social Security. So again,

825
00:37:57,239 --> 00:37:59,920
Speaker 2: fifty two or younger, they're thinking, I'm not going to

826
00:38:00,040 --> 00:38:02,799
Speaker 2: include social security in any of my analysis because it'll

827
00:38:02,800 --> 00:38:04,439
Speaker 2: probably won't be there by the time I get there.

828
00:38:04,680 --> 00:38:09,319
Speaker 2: And even avoiding the political part, again, what can we control, right,

829
00:38:09,640 --> 00:38:12,920
Speaker 2: we can control some like some actual math. We can

830
00:38:13,280 --> 00:38:16,360
Speaker 2: actually control the assumptions we put into our calculations. So

831
00:38:16,480 --> 00:38:17,960
Speaker 2: I actually have a you know, a video on this

832
00:38:18,000 --> 00:38:19,120
Speaker 2: that I could share with you if you want to

833
00:38:19,120 --> 00:38:21,120
Speaker 2: share things in the show notes. But I actually have

834
00:38:21,120 --> 00:38:23,560
Speaker 2: a calculation showing hey, when you look at your social

835
00:38:23,600 --> 00:38:27,359
Speaker 2: Security statement, if you look at page one, it'll show

836
00:38:27,400 --> 00:38:30,840
Speaker 2: you what you're anticipated retirement benefits will be at sixty

837
00:38:30,880 --> 00:38:35,000
Speaker 2: two sixty seven full retirement agents age seventy. But those

838
00:38:35,160 --> 00:38:38,640
Speaker 2: estimates assume you earn what you did last year all

839
00:38:38,680 --> 00:38:40,400
Speaker 2: the way until the year you claim those benefits.

840
00:38:40,440 --> 00:38:42,880
Speaker 1: So if you're assuming that, then you might be assuming

841
00:38:42,880 --> 00:38:43,760
Speaker 1: something it's too rosy.

842
00:38:43,800 --> 00:38:46,439
Speaker 2: Exactly, you're assuming something too rosy. On the flip side,

843
00:38:46,520 --> 00:38:49,240
Speaker 2: I also wouldn't say I'm gonna assume no social Security because,

844
00:38:49,280 --> 00:38:52,520
Speaker 2: like you said, if social Security goes completely away, like

845
00:38:52,560 --> 00:38:54,719
Speaker 2: you won't really be worried about your stock market investments.

846
00:38:54,719 --> 00:38:56,680
Speaker 2: We're gonna be chasing dogs on the on the street

847
00:38:56,680 --> 00:38:59,240
Speaker 2: with sticks at that point. Yeah, So I would say

848
00:38:59,480 --> 00:39:02,800
Speaker 2: it's really important to use some Social Security calculators, including

849
00:39:03,239 --> 00:39:05,960
Speaker 2: SSA has their own helpful calculators where you can say,

850
00:39:05,960 --> 00:39:09,680
Speaker 2: I'm going to type in my historical earnings record, but

851
00:39:09,760 --> 00:39:11,920
Speaker 2: I'm going to assume that this point forward, I'm not

852
00:39:11,960 --> 00:39:14,920
Speaker 2: going to earn any more money. So you're making the

853
00:39:14,960 --> 00:39:18,040
Speaker 2: assumption that if I retired today and never worked another

854
00:39:18,080 --> 00:39:21,520
Speaker 2: day in my life, what would my anticipated Social Security

855
00:39:22,239 --> 00:39:25,799
Speaker 2: A retirement benefit be at age sixty two to sixty seven?

856
00:39:25,920 --> 00:39:28,920
Speaker 1: Coming up with a more realistic or pessimistic at least

857
00:39:28,920 --> 00:39:30,080
Speaker 1: sort of Yeah, what's.

858
00:39:29,920 --> 00:39:31,719
Speaker 2: Fun about that? I actually think it's more on the

859
00:39:31,719 --> 00:39:35,000
Speaker 2: pessimistic side, but it's still much better. Like if I,

860
00:39:35,040 --> 00:39:36,840
Speaker 2: you know, me it in my mid thirties, if I

861
00:39:36,880 --> 00:39:39,560
Speaker 2: put that calculation in right now, it's it's telling me

862
00:39:39,560 --> 00:39:42,160
Speaker 2: I'm going to receive most likely about three thousand dollars

863
00:39:42,200 --> 00:39:45,279
Speaker 2: a month in today's dollars, so inflation adjusted. So you know,

864
00:39:45,400 --> 00:39:48,040
Speaker 2: some people, if I my Social Security statement will tell

865
00:39:48,080 --> 00:39:49,719
Speaker 2: me that I'm going to get fifty thousand a year,

866
00:39:50,239 --> 00:39:52,600
Speaker 2: and you know, some people say I'm not getting it,

867
00:39:52,640 --> 00:39:54,840
Speaker 2: so zero dollars per year. I like this kind of

868
00:39:54,920 --> 00:39:57,400
Speaker 2: like Goldilocks, just right of saying, yeah, I'm going to

869
00:39:57,440 --> 00:39:59,440
Speaker 2: assume no more earnings and see what it says, and

870
00:39:59,480 --> 00:40:01,880
Speaker 2: it says about thirty six thousand a year, which is

871
00:40:02,160 --> 00:40:04,440
Speaker 2: I should not be excluding that from my really important

872
00:40:04,440 --> 00:40:06,200
Speaker 2: you know, long term projections.

873
00:40:05,960 --> 00:40:08,440
Speaker 1: Probably helpful way to plan. How do you think about

874
00:40:09,800 --> 00:40:13,480
Speaker 1: when you claim social Security? So for the early retiree,

875
00:40:13,640 --> 00:40:16,239
Speaker 1: is this one of those things where you're like, man,

876
00:40:16,320 --> 00:40:19,000
Speaker 1: punt it till seventy so you get the max drawn

877
00:40:19,040 --> 00:40:21,440
Speaker 1: and I know so much of it depends on health,

878
00:40:21,800 --> 00:40:24,920
Speaker 1: marriage status, and you know when your spouse claims all

879
00:40:24,920 --> 00:40:27,480
Speaker 1: that kind of stuff, and then what you're gonna do

880
00:40:27,480 --> 00:40:29,160
Speaker 1: with the money? Right? So like, yeah, how do you

881
00:40:29,160 --> 00:40:31,200
Speaker 1: think about and how do you advise people when they're

882
00:40:31,200 --> 00:40:33,200
Speaker 1: thinking about tapping Social Security?

883
00:40:33,520 --> 00:40:36,520
Speaker 2: So there's a few concepts in terms of social security claiming.

884
00:40:36,560 --> 00:40:38,680
Speaker 2: One is do you need the money? Right? You talked

885
00:40:38,680 --> 00:40:40,920
Speaker 2: about the you know, the late starter, maybe the never starter.

886
00:40:41,200 --> 00:40:44,480
Speaker 2: Maybe they retire at sixty seven and they said, hey,

887
00:40:44,520 --> 00:40:46,560
Speaker 2: should I claim it now or should I wait till

888
00:40:46,560 --> 00:40:48,760
Speaker 2: seventy and get that eight percent you know annual increase

889
00:40:48,800 --> 00:40:51,320
Speaker 2: to my benefits. If you need the money to maintain

890
00:40:51,360 --> 00:40:53,520
Speaker 2: your desired lifestyle, like you know, I would go ahead

891
00:40:53,520 --> 00:40:55,839
Speaker 2: and claim it right. Other than that, there's a few

892
00:40:55,840 --> 00:40:58,480
Speaker 2: benefits to delaying. You know. I mentioned the eight percent

893
00:40:58,520 --> 00:41:03,560
Speaker 2: annual simple interest increase, but also you think about tax planning, right.

894
00:41:03,920 --> 00:41:06,800
Speaker 2: The later you claim social Security, the more years in

895
00:41:06,880 --> 00:41:10,480
Speaker 2: early retirement you have with less taxes because social Security

896
00:41:10,520 --> 00:41:12,560
Speaker 2: benefits up to eighty five percent of those will be

897
00:41:12,600 --> 00:41:16,520
Speaker 2: included in your gross income based on your household income. Again,

898
00:41:16,560 --> 00:41:18,960
Speaker 2: there's a fun calculation that of courses in the book.

899
00:41:19,160 --> 00:41:21,480
Speaker 2: But I'll say that the later you claim, the more

900
00:41:21,480 --> 00:41:24,840
Speaker 2: benefits you'll receive, most likely, especially if you're already sufficient

901
00:41:24,920 --> 00:41:28,480
Speaker 2: in retirement your retirement portfolio and other income sources. But

902
00:41:28,560 --> 00:41:31,600
Speaker 2: you'll also actually pay less tax in the years before

903
00:41:31,640 --> 00:41:34,280
Speaker 2: you claim those golden years when you're doing those awesome

904
00:41:34,320 --> 00:41:36,799
Speaker 2: Wroth conversions we talked about, like spreading out that wrath

905
00:41:36,840 --> 00:41:40,160
Speaker 2: conversion over four years. If you had claimed social Security

906
00:41:40,200 --> 00:41:42,280
Speaker 2: at that age, guess what that gives you less room

907
00:41:42,600 --> 00:41:45,719
Speaker 2: to do those conversions and those lower you would have

908
00:41:45,719 --> 00:41:49,399
Speaker 2: filled up the standard deduction probably with just social Security taxingg.

909
00:41:49,160 --> 00:41:50,960
Speaker 1: You might need to either take more years through those

910
00:41:51,000 --> 00:41:54,560
Speaker 1: wroth conversions because you've got additional income or pushing back

911
00:41:54,600 --> 00:41:56,799
Speaker 1: on taking social Security so that you have so that

912
00:41:56,840 --> 00:41:58,560
Speaker 1: you can do it in that truncated timetable.

913
00:41:58,560 --> 00:42:01,239
Speaker 2: That's right. So yeah, okay, we have probably like five

914
00:42:01,320 --> 00:42:03,919
Speaker 2: or six reasons to claim later. And again we don't

915
00:42:03,920 --> 00:42:06,799
Speaker 2: benefit individually by you claiming earlier in later, but we

916
00:42:06,840 --> 00:42:09,280
Speaker 2: see a lot of people. Again, the fear of taxes

917
00:42:09,280 --> 00:42:12,040
Speaker 2: and the fear of not having social Security makes people

918
00:42:12,160 --> 00:42:14,560
Speaker 2: make again it feels rational, but it really is an

919
00:42:14,680 --> 00:42:17,560
Speaker 2: irrational planning decision to just, you know, say, just jump

920
00:42:17,600 --> 00:42:19,399
Speaker 2: the gun. I'm getting what I've paid in what if.

921
00:42:19,280 --> 00:42:21,279
Speaker 1: You don't need the money? But you're like, I think

922
00:42:21,320 --> 00:42:24,040
Speaker 1: I can do better than that eight percent guaranteed return,

923
00:42:24,239 --> 00:42:27,480
Speaker 1: Like and I want I would rather put the onus

924
00:42:27,520 --> 00:42:29,600
Speaker 1: on me to invest this. Well, what do you think

925
00:42:29,600 --> 00:42:30,000
Speaker 1: about that?

926
00:42:30,280 --> 00:42:33,240
Speaker 2: Sure or sure? So that's definitely a personal, intentional decision

927
00:42:33,239 --> 00:42:35,640
Speaker 2: that you may or may not make. Thankfully, there are

928
00:42:35,680 --> 00:42:38,359
Speaker 2: some calculators that show break even analysis of like if

929
00:42:38,400 --> 00:42:40,560
Speaker 2: you claim at this, if you claim at this age

930
00:42:40,760 --> 00:42:42,680
Speaker 2: and you invest that money at this you know, this

931
00:42:43,000 --> 00:42:45,080
Speaker 2: annual rate, then this is how long you'd have to

932
00:42:45,120 --> 00:42:48,080
Speaker 2: live to like outlive that strategy, so thankfully, again, there

933
00:42:48,080 --> 00:42:51,120
Speaker 2: are some tools that will kind of tell you, you know, quantitatively,

934
00:42:51,160 --> 00:42:53,719
Speaker 2: if that's actually a good decision, assuming let's say you're

935
00:42:53,719 --> 00:42:57,200
Speaker 2: going to outperform the eight percent with maybe starting a business, right,

936
00:42:57,440 --> 00:42:59,200
Speaker 2: you know, starting a or again, I guess the best

937
00:42:59,200 --> 00:43:01,760
Speaker 2: way to outlive retirement is to start a new business

938
00:43:01,760 --> 00:43:03,399
Speaker 2: in retirement and be successful with it.

939
00:43:03,640 --> 00:43:05,719
Speaker 1: That's a good point. Yeah, Okay, I got a few

940
00:43:05,719 --> 00:43:08,080
Speaker 1: more questions for you, Cody, including what about running out

941
00:43:08,080 --> 00:43:09,920
Speaker 1: of money and the four percent rule. It feels like

942
00:43:09,920 --> 00:43:12,440
Speaker 1: it's not really a rule anymore, so I'm curious to

943
00:43:12,480 --> 00:43:14,399
Speaker 1: hear your thoughts on, Yeah, how much you can take

944
00:43:14,400 --> 00:43:16,279
Speaker 1: out of your retirement accounts each and every year as

945
00:43:16,320 --> 00:43:18,799
Speaker 1: an early retiree. We'll talk about that right after this.

946
00:43:26,640 --> 00:43:29,120
Speaker 1: We're back still talking with Cody Garrett and talking about

947
00:43:29,320 --> 00:43:32,200
Speaker 1: retiring early and a big part of what makes that

948
00:43:32,360 --> 00:43:34,839
Speaker 1: easier to do is keeping more of your money, paying

949
00:43:34,920 --> 00:43:38,400
Speaker 1: less in taxes, and just being thoughtful really about how

950
00:43:38,520 --> 00:43:43,160
Speaker 1: you go about tax planning. And so, Cody, I'm curious

951
00:43:43,239 --> 00:43:45,680
Speaker 1: to hear your thoughts that either is that you mentioned

952
00:43:45,680 --> 00:43:47,920
Speaker 1: the six the retire with six million dollars and how

953
00:43:47,920 --> 00:43:50,319
Speaker 1: they're still worried about running out of money even if

954
00:43:50,320 --> 00:43:53,920
Speaker 1: that worry even like even if that retiree lives on

955
00:43:54,040 --> 00:43:57,800
Speaker 1: so much less than they need, that worry still exists.

956
00:43:57,840 --> 00:44:01,640
Speaker 1: That remains for a lot of people. Early retirees have

957
00:44:01,960 --> 00:44:05,640
Speaker 1: many more years to fund oftentimes. So what do you

958
00:44:05,680 --> 00:44:07,799
Speaker 1: say to people who are worried about running out of

959
00:44:08,080 --> 00:44:10,160
Speaker 1: money early in retirement? Like did I save enough? Do

960
00:44:10,200 --> 00:44:12,120
Speaker 1: I need to keep working in order to mass a

961
00:44:12,160 --> 00:44:15,040
Speaker 1: bigger a bigger amount? And then how do you make

962
00:44:15,120 --> 00:44:17,080
Speaker 1: me give help people have some peace of mind when

963
00:44:17,080 --> 00:44:19,040
Speaker 1: it comes to knowing that they can pull the trigger

964
00:44:19,080 --> 00:44:19,319
Speaker 1: on work.

965
00:44:19,360 --> 00:44:21,359
Speaker 2: Yeah, so I think going to that column of what

966
00:44:21,360 --> 00:44:24,040
Speaker 2: we what can we control? I think it's really important

967
00:44:24,040 --> 00:44:26,720
Speaker 2: for everybody to create. Of course, you know a network statement,

968
00:44:26,840 --> 00:44:28,279
Speaker 2: that balance sheet of what do I ow? You know,

969
00:44:28,320 --> 00:44:30,759
Speaker 2: what do I what do I own? Minus what do

970
00:44:30,800 --> 00:44:34,640
Speaker 2: I owe my assets liabilities? But also I think that

971
00:44:34,880 --> 00:44:38,080
Speaker 2: sometimes we skip this idea of saying, when I retire,

972
00:44:38,280 --> 00:44:42,080
Speaker 2: what will my forms of income be? Again? You know

973
00:44:42,120 --> 00:44:44,759
Speaker 2: you're no longer working for an income? You say, you

974
00:44:44,760 --> 00:44:47,960
Speaker 2: know which sources will I receive? Will it be maybe

975
00:44:48,080 --> 00:44:49,480
Speaker 2: social Security? Right?

976
00:44:49,520 --> 00:44:49,800
Speaker 1: Maybe?

977
00:44:49,840 --> 00:44:52,640
Speaker 2: By the way, maybe an inheritance. You probably don't want

978
00:44:52,640 --> 00:44:55,000
Speaker 2: to rely on inheritance, but that is a big part

979
00:44:55,000 --> 00:44:58,080
Speaker 2: of It's funny talking with people who say, I finally

980
00:44:58,160 --> 00:45:00,880
Speaker 2: have enough to retire, I retire, and then like a

981
00:45:00,920 --> 00:45:03,759
Speaker 2: week later they inherit three million dollars from their parents, right,

982
00:45:03,840 --> 00:45:05,200
Speaker 2: and they're like, oh, well, I guess I could have

983
00:45:05,239 --> 00:45:07,000
Speaker 2: retired early had I known this inheritance.

984
00:45:07,719 --> 00:45:09,799
Speaker 1: I probably should have like thought about that ahead of time.

985
00:45:09,840 --> 00:45:11,759
Speaker 1: Maybe don't count your chickens where they hatch, but at

986
00:45:11,800 --> 00:45:13,520
Speaker 1: least think through what might be hatching.

987
00:45:13,560 --> 00:45:16,680
Speaker 2: Yeah, So I think there's this, you know, the four

988
00:45:16,719 --> 00:45:20,120
Speaker 2: percent rule. This has been really big lately, especially Bill

989
00:45:20,120 --> 00:45:21,840
Speaker 2: BEng And just released a new book that talks about it.

990
00:45:21,840 --> 00:45:24,560
Speaker 2: You're gonna hire withdrawal rate possibly a safe withdrawal rate.

991
00:45:25,000 --> 00:45:27,239
Speaker 2: I really think that the four percent rule, by the way,

992
00:45:27,360 --> 00:45:31,279
Speaker 2: that's saying, you know, really multiply, you know, if you

993
00:45:31,320 --> 00:45:34,280
Speaker 2: want to, again very generally here, multiply your annual spending

994
00:45:34,880 --> 00:45:37,279
Speaker 2: by twenty five, right, that kind of becomes like what

995
00:45:37,400 --> 00:45:40,319
Speaker 2: you need quote unquote in your portfolio. I think that's

996
00:45:40,360 --> 00:45:43,000
Speaker 2: a directional rule of thumb of saying, hey, if I'm

997
00:45:43,080 --> 00:45:45,359
Speaker 2: getting close to that point, I should probably be doing

998
00:45:45,440 --> 00:45:48,319
Speaker 2: some deeper analysis. I don't think it means, oh, I'm

999
00:45:48,320 --> 00:45:51,160
Speaker 2: gonna wait till you know my my portfolio can provide

1000
00:45:51,200 --> 00:45:54,040
Speaker 2: four percent, you know, inflation adjusted, you know, following the

1001
00:45:54,440 --> 00:45:56,680
Speaker 2: white paper. That was never intended to actually be a

1002
00:45:56,760 --> 00:46:00,839
Speaker 2: retirement distribution strategy. So just keep in eye it's it's

1003
00:46:00,840 --> 00:46:04,480
Speaker 2: an academic study, not a real way to draw down. Secondly,

1004
00:46:04,719 --> 00:46:06,920
Speaker 2: you know, once you've done that analysis, you'll also realize,

1005
00:46:06,960 --> 00:46:09,400
Speaker 2: wait a minute. If I retire let's say early at

1006
00:46:09,440 --> 00:46:12,360
Speaker 2: fifty five, and I start pulling four percent from my

1007
00:46:12,560 --> 00:46:16,600
Speaker 2: portfolio and then I claim social security at seventy, right,

1008
00:46:16,680 --> 00:46:20,680
Speaker 2: fifteen years later, do I adjust that withdrawal from my

1009
00:46:20,760 --> 00:46:24,399
Speaker 2: portfolio now that over half of my income, potentially over

1010
00:46:24,480 --> 00:46:26,960
Speaker 2: half of my spending is coming from social security? Right?

1011
00:46:27,040 --> 00:46:29,000
Speaker 2: So how do I how do I look at variable

1012
00:46:29,320 --> 00:46:32,359
Speaker 2: sources of income and expenses over time? And that's where

1013
00:46:32,560 --> 00:46:36,400
Speaker 2: using more I wouldn't say complex, but you know, just

1014
00:46:36,520 --> 00:46:39,320
Speaker 2: more thoughtful tools are out there. Like I don't have

1015
00:46:39,360 --> 00:46:42,000
Speaker 2: any affiliation, but like Bolden, for example, I used to

1016
00:46:42,000 --> 00:46:44,879
Speaker 2: be called new Retirement. There's there's a few others out there,

1017
00:46:45,000 --> 00:46:47,280
Speaker 2: and you know Prolana for people who are more spreadsheet

1018
00:46:47,280 --> 00:46:49,400
Speaker 2: oriented you can you can at least make some more

1019
00:46:49,480 --> 00:46:54,400
Speaker 2: directional like thoughtful you know, variable projections, including things like

1020
00:46:54,480 --> 00:46:58,760
Speaker 2: social security, pensions, future income sources. But once you retire,

1021
00:46:59,360 --> 00:47:02,480
Speaker 2: let's say, so, so, Joel, what part of the country.

1022
00:47:02,200 --> 00:47:04,160
Speaker 1: Do you live in. I'm in the southeast. I'm in Atlanta.

1023
00:47:04,440 --> 00:47:06,320
Speaker 2: So let's say that you take a flight from Atlanta

1024
00:47:06,400 --> 00:47:09,040
Speaker 2: to Montana. Right, my, my Norwegian brother, We're going to

1025
00:47:09,120 --> 00:47:10,120
Speaker 2: Montana from Atlanta.

1026
00:47:10,400 --> 00:47:10,920
Speaker 1: A big uh.

1027
00:47:11,320 --> 00:47:12,880
Speaker 2: That sounds that sounds like a book, right there a

1028
00:47:13,320 --> 00:47:16,600
Speaker 2: show going Montana from Atlanta. So let's say we're flying

1029
00:47:16,600 --> 00:47:19,840
Speaker 2: from Atlanta to Montana and we just took off, and

1030
00:47:19,920 --> 00:47:22,600
Speaker 2: then we look at our sensors and it says, hey,

1031
00:47:22,719 --> 00:47:24,359
Speaker 2: if you just took off from Atlanta and you said

1032
00:47:24,360 --> 00:47:26,160
Speaker 2: there's a five percent chance you're going to hit a mountain,

1033
00:47:26,680 --> 00:47:28,640
Speaker 2: how much adjustment do you need to make right now

1034
00:47:29,440 --> 00:47:31,600
Speaker 2: to that that you know your your flight plant?

1035
00:47:31,960 --> 00:47:35,319
Speaker 1: I mean, you're in the air, right, I guess I'd

1036
00:47:35,360 --> 00:47:36,640
Speaker 1: have to go talk to the pilot. I'm not the

1037
00:47:36,719 --> 00:47:38,480
Speaker 1: one flying this thing, Cody, So do I I don't

1038
00:47:38,480 --> 00:47:39,200
Speaker 1: know what do I do? Well?

1039
00:47:39,320 --> 00:47:40,960
Speaker 2: I guess I guess that means you hire an advisor

1040
00:47:41,000 --> 00:47:43,040
Speaker 2: at the time of it. Right, so you know you

1041
00:47:43,120 --> 00:47:45,320
Speaker 2: have your co pilot. But so I say, what's funny is,

1042
00:47:45,640 --> 00:47:47,359
Speaker 2: let's say if you made actually even like a one

1043
00:47:47,440 --> 00:47:50,920
Speaker 2: percent change in your trajectory, you might you might actually

1044
00:47:51,000 --> 00:47:53,279
Speaker 2: like fly to a completely different state. Right. You can

1045
00:47:53,320 --> 00:47:56,960
Speaker 2: see here that small changes over multiple decades make a

1046
00:47:57,040 --> 00:47:59,759
Speaker 2: big difference, not just in accumulation when you're looking at

1047
00:47:59,760 --> 00:48:03,280
Speaker 2: comp on interest in the excitement of money compounding, especially

1048
00:48:03,280 --> 00:48:06,000
Speaker 2: after saving for ten plus years, but if you have

1049
00:48:06,120 --> 00:48:09,600
Speaker 2: a thirty forty fifty year retirement, even just a slight

1050
00:48:09,680 --> 00:48:12,839
Speaker 2: adjustment can get you back up to whatever that probability

1051
00:48:12,880 --> 00:48:15,200
Speaker 2: of success is. And I would say you might hear

1052
00:48:15,280 --> 00:48:17,520
Speaker 2: this from other people that if you if you're using

1053
00:48:17,560 --> 00:48:20,120
Speaker 2: those advanced softwares, and it says you have a ninety

1054
00:48:20,200 --> 00:48:22,960
Speaker 2: nine percent chance, you know what they call a probability

1055
00:48:23,000 --> 00:48:25,560
Speaker 2: of success. That means a ninety nine percent chance running

1056
00:48:25,600 --> 00:48:28,399
Speaker 2: through these calculations mechanically of not running out of money

1057
00:48:28,440 --> 00:48:30,360
Speaker 2: by the time you die, which you're probably assuming, like

1058
00:48:30,440 --> 00:48:34,200
Speaker 2: age ninety five, you have very conservative assumptions. But here's

1059
00:48:34,200 --> 00:48:36,480
Speaker 2: the issue. If I have a ninety nine percent probability

1060
00:48:36,520 --> 00:48:41,359
Speaker 2: of success, quote unquote, let's invert that sentence. That also

1061
00:48:41,480 --> 00:48:43,920
Speaker 2: means I have a ninety nine percent chance of underspending

1062
00:48:44,000 --> 00:48:45,920
Speaker 2: and undergiving while I'm alive.

1063
00:48:46,080 --> 00:48:48,719
Speaker 1: Which is another risk that very rarely gets talked about.

1064
00:48:48,800 --> 00:48:51,040
Speaker 2: Absolutely, so, you know, again, it's one of those things

1065
00:48:51,080 --> 00:48:53,200
Speaker 2: where imagine that once you landed that plane, you have

1066
00:48:53,320 --> 00:48:56,080
Speaker 2: to throw all the gas. Yeah right, you don't get

1067
00:48:56,120 --> 00:48:57,640
Speaker 2: what's left in the gas tank. You don't get to

1068
00:48:57,719 --> 00:48:59,239
Speaker 2: use that for flying in the future because guess what,

1069
00:48:59,280 --> 00:49:03,120
Speaker 2: You're dead as a yeah guy. Appropriately, So again you

1070
00:49:03,239 --> 00:49:05,279
Speaker 2: want to say, hey, how do we utilize this, you know,

1071
00:49:05,600 --> 00:49:08,520
Speaker 2: my gas my portfolio in a way that I don't

1072
00:49:08,520 --> 00:49:10,719
Speaker 2: know exactly what I'm going to land or exactly where

1073
00:49:10,719 --> 00:49:12,920
Speaker 2: I'm going to land, but I don't want to run out.

1074
00:49:12,960 --> 00:49:14,759
Speaker 2: I don't want to actually have more gas than I

1075
00:49:14,800 --> 00:49:17,359
Speaker 2: started with when I when I get there. So again

1076
00:49:17,400 --> 00:49:20,080
Speaker 2: with the you know, kind of ignoring that analogy extended

1077
00:49:20,120 --> 00:49:24,719
Speaker 2: here that you know, moving into retirement, just remember that

1078
00:49:25,200 --> 00:49:28,240
Speaker 2: you have a lot of strengths. You have the strength

1079
00:49:28,800 --> 00:49:32,880
Speaker 2: to adjust and be flexible that if you see the

1080
00:49:32,920 --> 00:49:36,359
Speaker 2: market crashed by thirty percent, most likely you can say, hey,

1081
00:49:36,440 --> 00:49:37,960
Speaker 2: well I'm still going to go out to eat, but

1082
00:49:38,000 --> 00:49:39,640
Speaker 2: I'm not gonna get dessert with the you know, dessert

1083
00:49:39,680 --> 00:49:41,279
Speaker 2: with the meal. Or I'm still going to go on

1084
00:49:41,320 --> 00:49:43,600
Speaker 2: that trip, but I'm gonna fly you know, business class

1085
00:49:43,640 --> 00:49:45,719
Speaker 2: instead of first class, or I'm going to take the

1086
00:49:45,760 --> 00:49:47,479
Speaker 2: air I'm gonna go to the airbnb, but I'm gonna

1087
00:49:47,480 --> 00:49:49,520
Speaker 2: be a few blocks away from the beach rather than

1088
00:49:49,560 --> 00:49:51,560
Speaker 2: being right on the beach. So there are just slight

1089
00:49:51,640 --> 00:49:55,080
Speaker 2: adjustments you can make that won't again just use the

1090
00:49:55,160 --> 00:49:58,560
Speaker 2: four percent quote unquote rule of thumb directionally, but like

1091
00:49:58,640 --> 00:50:01,080
Speaker 2: as soon as you understand the direction, get out of

1092
00:50:01,160 --> 00:50:04,000
Speaker 2: that rule and start living life with more flexibility and

1093
00:50:04,120 --> 00:50:06,640
Speaker 2: understanding that you can adjust as time moves along.

1094
00:50:06,760 --> 00:50:10,280
Speaker 1: All right, Cody, this has been man such an enlightening discussion,

1095
00:50:10,760 --> 00:50:13,640
Speaker 1: and it makes me want to pay even more attention

1096
00:50:13,800 --> 00:50:16,080
Speaker 1: to those specifics as I'm, you know, in my early

1097
00:50:16,160 --> 00:50:18,200
Speaker 1: forties trying to think about what I'm going to pay

1098
00:50:18,400 --> 00:50:20,360
Speaker 1: win what and win I'm going to pay my taxes?

1099
00:50:21,080 --> 00:50:24,520
Speaker 1: But yeah, where can our listeners find more about you

1100
00:50:24,760 --> 00:50:25,799
Speaker 1: and about your new book?

1101
00:50:26,080 --> 00:50:27,680
Speaker 2: Sure, so if you want to, if you're interested in

1102
00:50:27,760 --> 00:50:30,279
Speaker 2: reading the book, it's thirty eight chapters pretty much everything

1103
00:50:30,360 --> 00:50:32,960
Speaker 2: Shamalany CPA and I know about tax planning is in

1104
00:50:33,080 --> 00:50:36,320
Speaker 2: that book, three hundred and fifty pages of pure magic.

1105
00:50:36,520 --> 00:50:39,160
Speaker 2: We think for our audience. So if you want to

1106
00:50:39,200 --> 00:50:42,759
Speaker 2: go to measure twice money dot com forward slash book

1107
00:50:43,080 --> 00:50:45,160
Speaker 2: if you want to learn more about kind of how

1108
00:50:45,200 --> 00:50:47,680
Speaker 2: I do financial planning. Again, I'm not accepting clients. But

1109
00:50:47,840 --> 00:50:49,480
Speaker 2: something that I've done that I think is pretty cool

1110
00:50:50,200 --> 00:50:52,880
Speaker 2: is if you go to the Measure twice money YouTube channel,

1111
00:50:53,160 --> 00:50:55,480
Speaker 2: you can actually watch real client meetings. So you can

1112
00:50:55,520 --> 00:50:58,960
Speaker 2: watch me serving real financial planning clients, including those examples

1113
00:50:59,040 --> 00:51:00,960
Speaker 2: we talked about with Hey, I'm about to retire with

1114
00:51:01,040 --> 00:51:03,080
Speaker 2: six million and I'm scared about running out of money.

1115
00:51:03,120 --> 00:51:06,439
Speaker 2: If you want to hear and see those conversations, real people,

1116
00:51:06,560 --> 00:51:09,360
Speaker 2: real numbers, real conversations, that's all on YouTube for you

1117
00:51:09,440 --> 00:51:10,080
Speaker 2: to watch for free.

1118
00:51:10,360 --> 00:51:11,520
Speaker 1: Very cool. All right, well links to it in the

1119
00:51:11,560 --> 00:51:13,160
Speaker 1: show notes. Cody, thanks for joining me today.

1120
00:51:13,360 --> 00:51:15,120
Speaker 2: Absolutely, thanks so much, my Norwegian brother.

1121
00:51:16,239 --> 00:51:18,520
Speaker 1: All Right, you got to appreciate somebody who can make

1122
00:51:19,120 --> 00:51:23,120
Speaker 1: taxes exciting, interesting and fun. I feel like Cody did that,

1123
00:51:23,719 --> 00:51:27,000
Speaker 1: and boy, that's so necessary in today's day and age,

1124
00:51:27,000 --> 00:51:30,880
Speaker 1: because I think about the like Ben Stein, Benstein's character

1125
00:51:31,160 --> 00:51:34,279
Speaker 1: in Ferris Bueller's Day off and just how most of

1126
00:51:34,360 --> 00:51:37,640
Speaker 1: the time for the average individual when someone is talking

1127
00:51:37,680 --> 00:51:40,799
Speaker 1: about taxes, it kind of sounds like that Superdroney voice

1128
00:51:41,200 --> 00:51:44,719
Speaker 1: or the Charlie Brown mom character, right, and so we

1129
00:51:45,040 --> 00:51:47,120
Speaker 1: just kind of tune out and stop paying attention. But

1130
00:51:47,480 --> 00:51:50,080
Speaker 1: the stakes are massive when it comes to when we

1131
00:51:50,200 --> 00:51:52,560
Speaker 1: pay taxes, how we decide to pay taxes, and they're

1132
00:51:52,600 --> 00:51:55,360
Speaker 1: all are there are all sorts of levers at our disposal,

1133
00:51:55,840 --> 00:51:59,560
Speaker 1: which Cody made incredibly evident in this conversation and even

1134
00:51:59,600 --> 00:52:02,680
Speaker 1: more in the book that they are just about to

1135
00:52:02,760 --> 00:52:06,040
Speaker 1: release of how powerful it can be when we take

1136
00:52:06,200 --> 00:52:09,040
Speaker 1: a little more ownership, when we're a little more thoughtful,

1137
00:52:09,080 --> 00:52:12,920
Speaker 1: when we're a little more proactive about our tax planning

1138
00:52:13,000 --> 00:52:15,719
Speaker 1: and the specific accounts we choose, when we choose to

1139
00:52:15,760 --> 00:52:17,279
Speaker 1: do Roth conversions, all that kind of stuff. So I

1140
00:52:17,320 --> 00:52:19,239
Speaker 1: think one of the big takeaways I had was when

1141
00:52:19,280 --> 00:52:21,080
Speaker 1: he was basically saying, Hey, there's a difference between tax

1142
00:52:21,120 --> 00:52:24,680
Speaker 1: planning and tax preparation, and you might find someone who

1143
00:52:24,800 --> 00:52:28,800
Speaker 1: is willing to file your taxes. Is that what you

1144
00:52:28,880 --> 00:52:32,320
Speaker 1: need or do you need somebody who is of this

1145
00:52:32,600 --> 00:52:34,680
Speaker 1: Cody Garrett stream of thought and says, no, no, no,

1146
00:52:35,120 --> 00:52:37,759
Speaker 1: it's not just about saving you as much money in

1147
00:52:38,160 --> 00:52:43,600
Speaker 1: this particular year. I want to think more about your

1148
00:52:43,640 --> 00:52:48,160
Speaker 1: taxes from a holistic perspective, and you knowing the information

1149
00:52:48,239 --> 00:52:49,680
Speaker 1: and the questions to ask is going to be half

1150
00:52:49,719 --> 00:52:52,200
Speaker 1: the battle. So I think hopefully this conversation gave you

1151
00:52:52,440 --> 00:52:56,280
Speaker 1: enough information enough AMMO, to talk to your tax person

1152
00:52:57,080 --> 00:53:00,440
Speaker 1: right about some of these ways of thinking about and

1153
00:53:00,680 --> 00:53:03,800
Speaker 1: potentially even being willing to switch what kind of accounts

1154
00:53:04,080 --> 00:53:06,360
Speaker 1: you're contributing to. Maybe you're like I was doing the

1155
00:53:06,400 --> 00:53:08,120
Speaker 1: wrath FORRAL and K, but I don't know. Cody makes

1156
00:53:08,160 --> 00:53:11,840
Speaker 1: a really really compelling case for the traditional foural O K,

1157
00:53:11,960 --> 00:53:13,640
Speaker 1: and then I can always turn that into roth dollars

1158
00:53:13,960 --> 00:53:16,759
Speaker 1: down the road. There's all sorts of things I think

1159
00:53:16,840 --> 00:53:20,839
Speaker 1: to reconsider when after listening to this episode. I love

1160
00:53:21,200 --> 00:53:25,800
Speaker 1: to how Cody talks about talked about the flexibility that

1161
00:53:25,920 --> 00:53:30,040
Speaker 1: you can have in retirement, and just how it feels

1162
00:53:30,239 --> 00:53:35,080
Speaker 1: like when we're talking making these projections about withdraw rates

1163
00:53:35,120 --> 00:53:37,680
Speaker 1: and stuff like that, often it feels like it's the

1164
00:53:37,760 --> 00:53:39,359
Speaker 1: static thing. Well, I guess I'm going to draw down

1165
00:53:39,400 --> 00:53:41,840
Speaker 1: four percent of my portfolio no matter what. And he

1166
00:53:41,960 --> 00:53:43,960
Speaker 1: was like, I don't know, Like if the stock market's

1167
00:53:44,000 --> 00:53:47,880
Speaker 1: having a tough time, You could reduce your withdrawals for

1168
00:53:47,920 --> 00:53:49,799
Speaker 1: a year. You can change your lifestyle a little bit

1169
00:53:50,080 --> 00:53:52,640
Speaker 1: in order to and then guess what when the getting's good,

1170
00:53:52,680 --> 00:53:56,120
Speaker 1: stock market is at record highs has been crushing, and

1171
00:53:56,280 --> 00:54:00,640
Speaker 1: your balance has exceeded what you know what what you'd

1172
00:54:00,680 --> 00:54:03,520
Speaker 1: assumed it would be. You can draw down more and

1173
00:54:03,600 --> 00:54:06,120
Speaker 1: take that sweet extra vacation that you hadn't planned on.

1174
00:54:06,640 --> 00:54:10,480
Speaker 1: So flexibility, I think is going to be a key

1175
00:54:10,560 --> 00:54:13,560
Speaker 1: tool in the arsenal of anybody who desires to retire

1176
00:54:13,640 --> 00:54:18,000
Speaker 1: early and also be smart when it comes to their taxes.

1177
00:54:18,440 --> 00:54:23,400
Speaker 1: So again, the name of Cody's book is tax planning

1178
00:54:24,040 --> 00:54:26,520
Speaker 1: too and through early retirement, So he wants to help

1179
00:54:26,560 --> 00:54:29,479
Speaker 1: you think about what you're doing now as you're leading

1180
00:54:29,560 --> 00:54:32,560
Speaker 1: up to that. If early retirement is on your mind,

1181
00:54:32,800 --> 00:54:35,719
Speaker 1: and what you need to do in those years of

1182
00:54:35,920 --> 00:54:39,680
Speaker 1: being retired, and it's wonky in a good way, I

1183
00:54:39,719 --> 00:54:42,120
Speaker 1: will say, And there is a lot of supporting evidence

1184
00:54:42,160 --> 00:54:44,239
Speaker 1: and a lot of examples, So it is. It's a

1185
00:54:44,280 --> 00:54:48,439
Speaker 1: fascinating read, even even though I'm talking about a book

1186
00:54:48,480 --> 00:54:48,920
Speaker 1: on taxes.

1187
00:54:49,000 --> 00:54:49,279
Speaker 2: It is.

1188
00:54:49,520 --> 00:54:51,600
Speaker 1: It's really well done. But that's going to do it

1189
00:54:51,719 --> 00:54:55,720
Speaker 1: for this episode. You can find links to Cody's YouTube

1190
00:54:55,800 --> 00:54:58,120
Speaker 1: channel and to that book up on our website at

1191
00:54:58,160 --> 00:55:02,640
Speaker 1: howtomoney dot com. But until next time, best friend out,

1192
00:55:04,400 --> 00:55:04,440
Speaker 1: M