Redrick Terry:
It is now time for 4 Your Money. We’re joined by John Nelson of Nelson Corp Wealth Management. John, welcome back.
John Nelson:
Yeah, thanks. Thanks for having me.
Redrick Terry:
Of course. So as we’re close to the end of the year, there’s still some opportunity for people to do some tax planning. What should they be thinking about to get the most bang for their buck?
John Nelson:
Yeah, I think looking at where we’re at right now, still a good month left yet in 2019. So lots of good tax planning strategies that can be utilized. In area focus today will be Roth accounts or Roth IRAs, Roth 401ks, and Roth 403B’s for those in the non-for-profit. But utilizing those accounts, it’s essentially moving money from forever tax accounts to never tax accounts, and how that can benefit clients and people throughout retirement. So it’s different than traditional retirement plans where you get the deduction upfront. Roth accounts, you pay tax today and you get tax free withdrawals in retirement from those accounts.
John Nelson:
So lot of different tools that can be used.
Redrick Terry:
Certainly what makes those accounts so powerful?
John Nelson:
Yeah. What makes them so powerful is, we’ll see a scenario here that shows different tax rates. Not this graph, but another. That if you take a a client or two clients scenarios with income coming in, let’s say 88,000 hours. They’ve got pension, social security and distributions from accounts. The big focus being what types of accounts are they drawing from to make up that other income. And in the scenario it showed distributions from a Roth IRA and a traditional IRA, and of course the Roth IRA distributions is more impactful because there is no tax. But what makes it even more impactful is the fact that social security, how much tax you pay on your social security, is predicated on your income. So having that lower income with the Roth distribution brings down how much tax is paid on a social security benefit. So a very significant saving for people that utilize them.
Redrick Terry:
Yes, and what about in all situations, are those Roth IRAs good in those situations?
John Nelson:
Yes. So we like balance and we like diversification in terms of tax accounts, and how accounts are taxed in retirement. So I think a balance, or some of all makes a lot of sense, Redrick. but running the numbers to see a client’s specific situation, it does take running numbers with an accountant or financial planner. But having that balance is certainly very beneficial for those in retirement.
Redrick Terry:
Certainly. John, thanks so much for the advice. We appreciate it.
John Nelson:
You bet, thanks [inaudible 00:02:41].
Redrick Terry:
And if you missed any of our discussion, we’ll make it available to you on our website, that is ourquadcities.com.