Episode 35: How to Plan for Future Tax Increases and How Elections Effect Your Money
Segment 1 (Show Open):
Good afternoon, everyone! Welcome in. Welcome to Coasting in Retirement! Thank you for joining us today, we’re excited to have you! We have another great show coming your way, we have another great guest host, and once again, we have a super relative and timely topic. Regular co-host Michelle will be back next week, and in her chair, joining us for another go around is Mr. Jay Stubbs, the Director of the Gulf Coast for Providence Partners and Providence Benefits. Jay, how are you doing?
Listeners: Jay and I are here today to discuss financial topics relevant to those of you in or near retirement, living your best life along our part of the gulf coast. Here’s what we’ve got in store for you today: First segment – deep dive on our topic of the day. 2nd segment - at about 25 minutes past the hour - “News of the Week”. Then at roughly 45 minutes past the hour, stick around for our 3rd segment, we call it” Josh’s Crystal Ball and Big Mouth”. Of course, this time we will see if Jay has had any predictions of his own that either hit the bullseye or…maybe he would like a re-do on. So buckle up, we’ve got a lot to get to!
Quick background on me for those new to the show. Again, my name is Josh Null, I am a fee-based financial advisor, I hold my FINRA Series 65 securities license, and I am the owner of Gulf Coast Financial Advisors, we are an independent investment management and financial planning firm with offices in Fairhope, Orange Beach, and Mobile! You can find more information on me and Gulf Coast Financial Advisors by visiting our website gulfcoastfa.com, or feel free to give us a call at 251-327-2124. If you missed that contact info, do not worry, we will repeat our contact info several times throughout the show!
I’m also going to do a quick disclaimer to help the listeners understand the role that Jay and his firm has with my firm, Gulf Coast Financial Advisors, or GCFA for short. Jay serves as a valued strategic consultant to GCFA, which means that through his relationship with his firm, Providence, he provides risk management solutions to many of our clients. What is risk management, you ask? Jay has the esteemed credentials of CLU, which stands for Chartered Life Underwriter, meaning that Jay has high level training in life insurance and how that ties into estate planning. Jay is often our go-to for life insurance, disability income, long term care, and life-time income solutions, and in my opinion, there’s no one better. It should be noted for clarity that Jay is not employed directly for or with GCFA, and that while Providence Partners and Providence Benefits are the sponsor of this show, GCFA is not affiliated with either company.
Alright, back to the show. Jay, you and I have been doing various videos and podcasts for years now, and we both have agreed that anything we do steers clear of political debate, or maybe a better way to put it, our content is intentionally politically agnostic. That said, this is a topical show, and as we sit here in early July, it would be almost impossible to ignore the headlines that are dominating the news discussion. Yes listeners, I’m referring to the recent presidential debate, or debacle in some people’s view. Jay and I decided that we wanted to address this issue head on, for a couple of reasons. One, no matter what side of the aisle you sit on, I would imagine many, if not most, investors walked away from the recent debate at least somewhat concerned about our political leadership and its effect on their finances. And two, while we want to spend some time on the potential effects of this upcoming election, it also gives us the opportunity to discuss the historical effects of presidential elections. Many people are calling this the most consequential election EVER. Is that true? We will discuss. And hopefully through this discussion we provide some type of comfort to your investors out there, or at the very least, some clarity. But first I want to ask you Jay, what was your takeaway from the debate?
Josh & Jay open discussion:
So Jay, let’s first focus on the short term consequences of this election, particularly as it applies to those of you in or near retirement. Let’s put speculation to the side for a moment and discuss something tangible and real – the expiration of the Tax Cuts and Jobs Act of 2017, or as it’s better well known, the Trump Tax Cut. Let’s make a quick note – us bringing up this topic does not mean that we believe that if Trump is re-elected that this tax cut act will be extended, that’s up to Congress. But we can say with some certainty that if Trump is not reelected, it is highly unlikely that this tax act will be extended. That said, let’s focus on 2 primary parts of this act: ordinary income marginal tax rates and estate tax rates.
Jay, let’s start with estate tax rates, or as the estate tax is commonly called, the “death” tax. I’ll set the stage: for 2024, the inflation adjusted estate tax exemption is $13.61 million for individuals and $27.22 million for married couples. Estimates are that these levels will drop by roughly half when the tax cut act expires, and while that is still a big number, the amount of people affected will increase dramatically. Plus, as you and I have discussed many times in the past, one doesn’t have to look too far in the past when the estate planning exemption was $2 million, or $1 million, or heck, just $650k at the turn of this century. What are your thoughts on how this will impact inheritances and what are some things you think investors should be considering?
Next up is marginal tax rates. This one is a little more complicated because there are multiple tax brackets, so let’s simply focus on the top marginal tax rate. The Trump Tax Act cut that rate from 39.6% to 37%, which in and of itself doesn’t sound like a huge number, but when you combine it with most of the remaining marginal tax rates potentially increasing, high income earners are going to certainly notice a significant effect on their tax return. Especially those of you in or near retirement – let’s say you did a great job of saving for retirement but most of your wealth is tied up in pre-tax accounts – your withdrawals are now going to be hit with higher taxes. Jay, what are your thoughts around the looming higher tax rates and concepts or solutions that investors should be considering now?
Josh – be sure to mention that you have the ability to do tax planning with Will Steih as a strategic consultant. Especially with business owners.
Listeners, if this is an issue weighing on your mind, and you would like to discuss potential solutions, then please feel free to reach out to us, we are very easy to get ahold of. You can start the conversation by calling 251-327-2124, or you can reach us through our website gulfcoastfa.com. One our site, you can choose to send us a direct message, or you can click on the blue button in the upper right-hand corner to set up a 15-minute introductory phone call on my calendar.
Alright folks, coming up next - There’s always a lot going on in the world! Particularly the world of finance, investments and money. Every week we scour the internet for financial articles related to our topic of the day, especially articles that pertain to those in or near retirement. So join us after the break to hear Jay and I discuss this week’s relevant headlines in our “News of the Week” segment. Stay tuned!
Segment 2 - News of the Week:
Josh: “Welcome back to Coasting in Retirement, your host Josh Null here! As we discussed before the break, every week we scour the internet for financial articles related to our topic of the day, especially articles that pertain to those of you in or near retirement. Our job is to help you all understand how these headlines impact you, especially when it comes to your money! Note – if you want to read our referenced articles yourself, we also include the links on our show transcript, which you can find on our website gulfcoastfa.com under the podcast tab. We upload our episodes every Monday after the show airs on Sunday. So Jay, Michelle usually reads the headlines, but I’ll take her place this week. So without further ado, here’s the “News of the Week”
1. Josh: Jay our first 2 articles are going to be pulled from CNBC Business, and I’m bringing both up because they tie together. Our first article is titled “Trump tax breaks are set to expire after 2025. Here’s what advisors are telling their clients” This article goes into more detail around what we talked about in the opening with future marginal tax rates, and presents a couple of solutions. One idea involves retirees considering “accelerating” their current income through increased withdrawals, which typically doesn’t involve much work on the investor’s part, they just let their advisor or custodian know that they want a higher distribution from their pre-tax accounts. It’s the 2nd solution I want to discuss in more detail, it’s something we’ve talked about on this show before, and that is for investors to consider a Roth Conversion now while tax rates are lower. And I must say, if history tells us anything, there’s a chance that this might be the lowest tax rates we see for a while. I’ve done Roth Conversions and I always approach them with a lot of due diligence and caution. What’s been your experience and what’s your opinion on this possible solution?
https://www.cnbc.com/2024/06/18/plan-for-expiring-trump-tax-breaks.html
2. Josh: Alright, 2nd article, again form CNBC Business. This one is titled “This is the biggest year-end tax issue for high-net-worth- clients” and it goes into more detail about the Estate Tax Exemption. This article presents a couple of solutions for those of you that may be impacted by the lower estate tax exemption amount, such as removing assets from your estate via lifetime gifts to your beneficiaries, which may or may not be realistic for a lot of you in or near retirement. The other solution is the one I want to discuss in more detail, it involves using a trust to help with estate planning. Now, Jay, it must be said that neither you or I are estate planning attorneys, and one must be involved in the formation of valid trusts, however, you and I both work hand in hand with estate planning attorneys and clients to help them plan the best distribution of their assets.
https://www.cnbc.com/2023/12/11/this-is-the-biggest-year-end-tax-issue-for-high-net-worth-clients.html
3. Josh: Next up Jay, let’s continue the conversation around trusts. Again, while you and I are not attorneys and play no role in the drafting of legal documents, as a financial advisor, I am often tasked by attorneys and clients to develop a financial plan that helps determine if a trust is beneficial, and if so, how much of an investor’s assets should be placed in that trust. Along those lines, you have extensive experience in a particular kind of trust called an “Irrevocable Life Trust”, or ILIT for short. An ILIT utilizes life insurance inside a trust in an effort to assist heirs with their future inheritance. Fidelity has an article titled “Can life insurance help your estate plan” that goes into greater detail on ILITs. So Jay would you mind to expand on ILITs, your experience with them, and your role when helping advisors like me with this concept?
https://www.fidelity.com/viewpoints/personal-finance/can-life-insurance-help
4. Josh: Last article for today Jay. So we’ve discussed a lot of tax issues for investors to consider, particularly the use of trusts and strategies to both mitigate the tax burden now, and the potentially higher tax burden if the Trump Tax Cuts act expires after 2025. Let’s now pivot to something coming very soon, and I would wager, something on the mind of many investors, and voters. What does this election, or any election for that matter, mean for our listeners’ investments. Forbes has an article titled “How Do Elections Affect the Stock Market”. My main takeaway from this article, and something I find fascinating, is that both stock AND bonds tend to perform worse in presidential election years than in non-election years! Now, there’s not much an investor can do about this broad macro-economic fact; however, this article gives a couple of solid solutions for investors to navigate this upcoming election, including looking at diversify their portfolio, using dollar cost averaging and looking long term. What was your takeaway?
https://www.forbes.com/advisor/investing/how-do-elections-affect-the-stock-market/
Josh: Jay, great job discussing these headlines, I know I learned a lot and I’m sure our listeners did too. Listeners – if you have questions around the topics in our headlines of the week, or questions related to your investment strategy, financial plan or retirement plan, then why don’t you give us a call at 251-327-2124 to have a conversation or to set up an appointment, or you can reach out to use via our contact page on our website gulfcoastfa.com.
Alright folks, coming up next: Josh’s Crystal Ball and Big Mouth. What have been some of my predictions? Have I been right? Was I ever wrong? How wrong? What’s Jay had to say in the past or what does he have to say about the future? We talk about all of these things and poke a little fun at my big mouth, and maybe we get to pick on Jay a little too. Stay tuned!
Segment 3 – Josh’s Crystal Ball and Big Mouth:
Welcome back! Your host Josh Null here, along side guest co-host Jay Stubbs. So, Jay, I am opinionated, so are you, I have strong opinions at times, so do you, I would say a radio show host that isn’t probably wouldn’t be very interesting to listen to. And we are both paid in our respective professions to offer professional guidance and opinions to our clients, otherwise, I guess we could be replaced with AI? I often express my opinions and predictions publicly, and while I feel I’m usually proved right because I tend to be skeptical, there are times I where swing and I miss. So listeners, want to hear where Jay or I was right, or maybe, an example of when we missed the mark? Then let’s get at with Josh’s Crystal Ball and Big Mouth.
1. Josh: Alright Jay. This one is a blast from the past for me. I want to provide some context before I go shooting off my mouth first, though. I am, and have always been, what one would consider an independent. I’ve never registered for either party, I’ve never voted a straight party line, and if I’m being totally honest, while I agree with some points on both sides, I’ve always held that until we have Congressional term limits, it’s going to be difficult to produce real change in our government. That being said, way back in 2016, I thought that there was no way Donald Trump would defeat Hillary Clinton, I thought the democratic machine was too entrenched and Trump was too volatile for the swing voters to go his direction. Fast forward to 2020 and I thought there was no way for an incumbent to be defeated. Again, pushing political opinions to the side, or what any of our listeners may think about the last election, my takeaway, and my prediction for 2024, is that I just don’t see how Biden is electable after his recent debate performance. But as I just listed, I have a terrible track record of predicting elections. So let me hot potato this sensitive topic your way – what say you?
2. Josh – Jay your turn – something you predicted that came true, around finance or insurance pls.
Well listeners, I hoped you enjoyed a peak behind the curtain on how Jay and I form our opinions and predictions, and more importantly, that we’re willing to admit when we are wrong. Which isn’t very often, but still. Listeners, if you’ve liked what you’ve heard today, or maybe you just want to have a conversation, we invite you one last time to reach out to us. Call us anytime at 251-327-2124 to make an appointment or shoot us a message our website at gulfcoastfa.com. Remember, you can always put a 15-minute conversation on my calendar, just click the blue link in the upper right corner.
Folks, that is a wrap for this week on Coasting in Retirement! I want to give a huge thank you to my guest co-host, Mr. Jay Stubbs, a thank you to our awesome radio station FM Talk 106.5, a thank you to our awesome show producer, Mr. Chaesare Gray, thank you to Johnny Gwin of Deep Fried Studios for the recording space, many thanks to the provider of our show music, local band Sloth Racer, and as always my sincere appreciation for all of your out there that have been listening and joining us on this journey. We would love to be a part of your journey as well. Until we talk again next Sunday, have a wonderful and productive week. This has been Coasting in Retirement with Josh Null!
GCFA Disclosure:
Gulf Coast Financial Advisors, LLC ("GCFA”) is a registered investment adviser offering advisory services in the State of Alabama and in such other jurisdictions where it is registered, filed the required notices, or is otherwise excluded or exempted from such registration and/or notice filing requirements. Registration does not indicate or imply that GCFA has attained a particular level of skill or ability, nor does it constitute an endorsement of the firm by the Securities and Exchange Commission (SEC) or any state securities regulator.
The Coasting in Retirement radio program serves mainly to disseminate general information including those pertaining to GCFA’s advisory services, together with access to additional investment-related information, publications, materials and links. The publication of this radio show should not be construed by any client and/or prospective client as GCFA’s solicitation to effect, or attempt to effect transactions in securities, nor should it be interpreted as GCFA providing personalized investment advice, or any type of professional advice, for compensation, wherever this program is broadcast. Any subsequent, direct communication by GCFA with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.
Certain information, news stories, headlines, data, charts, graphs, figures or statistics presented on this radio program may have been obtained from third-party sources that are believed to be generally reliable but which GCFA may not have independently verified. GCFA does not and cannot guarantee the timeliness, accuracy, or reliability of any such third-party information and undertakes no obligation to update or correct any information that may become obsolete, unreliable, or inaccurate. The radio program also contains the opinions, views, and perspectives expressed by Josh Null and any other GCFA representatives which are solely their own, and do not necessarily reflect the opinions, views, or perspectives of GCFA as a firm. Such personal views and opinions should not be construed as endorsements or professional advice from GCFA. GCFA makes no representation or warranty regarding the accuracy, completeness, or reliability of any information on this radio program, and disclaims any liability for any direct or indirect loss or damage incurred from using or relying on such information.
GCFA, Aptus, Providence Benefits and Providence Partners are not affiliated, nor are any of their respective representatives.