Business Innovators Radio - Interview with Dan Hill, CFP®, AIF® CEO & Founder Hill Wealth Strategies Discussing Tax-Free Retirement Solutions

Episode Date: March 10, 2025

Dan Hill CFP®, AIF®, is a recognized Financial Educator, Best-Selling Author, Speaker, and Retirement Specialist who appears as a financial expert on CBS-Richmond’s Virginia This Morning and has contributed to USA Today, Wall Street Journal, Forbes, and others.Dan is a Co-Author of the Amazon # 1 bestseller Retire Like a Shark, with Kevin Harrington, the original ‘Shark’ from hit TV show Shark Tank.In his recent book release, Retire Abundantly, Dan explains how to separate facts from fiction in our dramatically changing retirement landscape. He’ll provide answers to some of your biggest questions, and answers to questions most of us do not even know to ask.As President of Hill Wealth Strategies, Dan and his team, using the Predictable Personal Pension Process, have been providing families and businesses with innovative financial strategies, solutions and planning leading to financial clarity and security since 1998.Dan, and his wife, Susan, reside in Williamsburg, VA. Their oldest son, Derek, and younger son, Brett, and his wife, Sarah live in Richmond, VA with their two-year-old daughter, Landon. Dan has been an active member of the community with his involvement in Youth League and American Legion Post 39 baseball as a coach for twenty-seven years.Dan can be reached at (833) DAN HILLLearn more: https://hillwealthstrategies.com/This content is developed from sources believed to be accurate and complete; however, no guarantee can or is given for such accuracy or completeness. Nor is the information in this material intended as tax or legal advice. Please consult your own legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale, or the solicitation of such an offer, of any security, insurance product, or annuity in any jurisdiction in which the persons represented on this site are not appropriate licensed, registered, appointed, or otherwise qualified by law and regulation to make or solicit such purchases and sales. Logos as displayed herein are not intended to imply any endorsement by the owners of such logos of Hill Wealth Strategies. All written content on this site is for information purposes only. Opinions expressed herein are solely those of Hill Wealth Strategies and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser prior to implementation. Fee-based financial planning and investment advisory services are offered by Hill Wealth Strategies a Registered Investment Advisor in the State of Virginia. Insurance products and services are offered through D. R. Hill & Associates, Inc. Hill Wealth Strategies and D. R. Hill & Associates, Inc. are affiliated companies. The presence of this web site shall in no way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any State other than the State of Virginia or where otherwise legally permitted. Hill Wealth Strategies/D. R. Hill & Associates, Inc. and Daniel Hill are not affiliated with or endorsed by the Social Security Administration or any other government agency. This content is for informational purposes only and should not be used to make any financial decisions. Unauthorized use of the material is prohibited.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-dan-hill-cfp-aif-ceo-founder-hill-wealth-strategies-discussing-tax-free-retirement-solutions

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with us Dan Hill, who's the CEO and founder of Hill Wealth Strategies, and we'll be talking about tax-free retirement solutions. Dan, welcome back to the program. Thanks for having me back again, my friend. Hey, so tax-free, we love that.

Retirement solutions, give me the solution to my problem. So this is a great, great-sounding topic that I'm excited to learn about. You always have some very precise and unique perspectives that are eye-opening that initially would make people go, yeah, that makes total sense. Ever thought about it that way? So I'm excited to hear from you. So let's talk a little bit about some tax-free retirement solutions. Where do you start with the client when you're talking to them about making sure that the plans that you are putting into place for them are considering their taxes?

So, yeah, always, always, always considering taxes. So one of the things I always talk to people about is we are tax planners versus tax preparers. Tax preparers, we ask people to bring two years of tax returns in just so we can see if something happened. you sold a house this year, you inherited some money or something which is different from year to year. So we always want to look at two years of tax returns. And a lot of times with our forensic analysis

on those tax returns, we can see opportunities that the tax preparer, one is it trained for or just not their job, right? They just bring in a shoebox and they prepare your taxes. We look at, oh, there was an opportunity for this, that, or the other, okay? So we're always looking at what we call practicing tax avoidance. which is perfectly legal and may save you 20 bucks versus tax evasion, which may get you 20 years. So we're always, always as part of our comprehensive planning looking at taxes.

It's one of my favorite subjects on, like you hear me saying over and over my, I want you to get every penny of your harder money you deserve. And if we can save you a couple bucks on taxes, that's what I love to do. So I've kind of had a shift. You were talking about my perspective. You know, I have this little will of thumb for me of like put as much money away now because you're typically in a higher tax bracket when you're working. And so let's just say you're in the 22% bracket.

That's where a lot of people fall when both spouses are working. So that means every dollar you put into your 401K before taxes, you're saving 22% in taxes. So it's like the Internal Revenue Service giving you a 22% match. So if you put away $10,000, you save $2,200 in taxes. taxes. But as tax rates have come down here recently in the last, actually 2017, I kind of changed my perspective and look at, okay, so these are some pretty attractive tax rates that we have, starting at 10%, 12%, and then jumping up to 22 and 24. There's some of the lowest that we've had in history. So we've kind of changed our perspective on, let's not max out our before tax contributions.

let's just put in to our 401K whatever they're going to match us, okay, and then look at doing some tax-free, some Roth contributions now, whether in the 401K or in an individual wealth account, if you're eligible to do that. It's income-driven, so not everybody can do that. So that's how we're kind of shifting our perspective here with the current tax laws, which should be in effect for a couple more years, about let's take advantage of these opportunities now

to go ahead and pay tax. taxes today versus maybe 10 years from now or when we turn 73, we have to take money out of our IRA or require minimum distributions where who knows what the tax rate might be then. Yeah. Yeah, that's a really good point that you bring up there because why contribute more than what it matches, whether it's from the government or your employer, you know, and make sure that you're maximizing every dollar to get every benefit out of it. And like you said about taxes, you know, if there's a tax strategy or a break that you can take advantage of and it's all legal and above board, I mean, guess what? I've heard tell that the IRS tax code is many, many, many pages in the thousands and thousands of pages.

So how in the world is anyone supposed to understand that? So if you can latch on to some opportunities that way to really increase that cash flow a little bit, that allows you to put some more money into some good, safe planning for retirement. So that really is a huge piece. You mentioned Roth and Roth contributions. So there's different, you know, restrictions and limits and all of that. Talk a little bit about something I've heard of, which is a Roth conversion versus a rough contribution. Yeah, very good question. So conversions are a lot different, actually, because as you said, there's an income threshold.

It's somewhere around 200,000. The numbers change every year. I don't know what the 2025 numbers are. So if you're adjusted gross income, a married couple is over like 200, you can't do a raw, but you can do a conversion, okay? So we're always looking at those opportunities.

I tell this story all the time about Lisa. So Lisa's a retirement, Canada of ours, came in at 65 years of age, like a normal retirement for many people in the baby boom generation. She has no debt. She's got $2,500.

a month in Social Security. It's $30,000 a year. It covers her living expenses. Okay? Living expenses are everything that's not debt. So she has no house payment, excuse me, no car payment, no motorbike, no boat. And she spends for gas and groceries and cell phones and gifts and whatever,

$2,500 covers that. And she also has a $300,000 IRA. So I always post the classes when we're teaching our tax classes. what is Lisa's federal tax liability? All she has is $30,000 for the Social Security. And people, like I said, because they don't speak the language or it's not their area of expertise, it's zero. Because if all you have is Social Security income,

you count half of that toward your income and you don't have to claim it if it's below $25,000 if you're single like Lisa is. So Lisa has no federal tax liability. But what she does have, is an opportunity and a coupon. She's not using her standard deduction, which is somewhere around $14,000. So what we're doing with Lisa to cut this story short a little bit is we're taking, and she's 65, right? So she doesn't have to take requirement of distribution on our $300,000

IRA for seven years, eight years, eight years. So if we're, we got a good asset allocation portfolio going on, it's going to be a lot more than $300,000 in eight year. So the requirement of distribution is going to be larger and the tax is going to be probably be greater. So now we have an opportunity since she's not using her standard deduction to take about $10,000 a year over the next eight years out of her IRA tax free. And we're putting that in a Roth. So we're taking her IRA converting to a Roth. And in her case, we're keeping her in a tax-free bracket.

That's her pain point, I like to say. Yeah. Phil, another client of ours, has a $2 million IRA. He's okay paying up to 24%. So the bracket goes 10, 12, 22, 24. Phil says, hey, I'm going to go ahead and pay 24% today because I think it's going to be a lot more by the time I turn to 73. So we get on our little calculator, we calculate, okay, Phil, you can move X amount of dollars,

and here's the tax ramifications. And that's his pain point. So I always tell people, we're going to do the math for you, and you can tell us, you know, how much you want to do. if it hurts too much or not enough. Yeah. Exactly. Well, with that conversion strategy, as we've said before, there's never one size fits all. It doesn't is not the best decision for every single person. So definitely check the numbers. But with that strategy, you need to make sure that there's enough runway ahead of retirement that then the Roth can grow tax free,

right? Because if you convert it now and pay taxes now, Okay, that's a hit. But then you put the money into a Roth. Well, you need a minute or two or a X number of years for it to grow to kind of recoup that and then to have that tax-free growth. Yeah, it's definitely, definitely a critical part of the math. Had some lady come in. She goes, I want to convert my whole IRA to a Roth.

I said, okay. And I went, do, do, do, do, do it's going to cost you $20,000 in taxes. Yeah. She said, oh, I don't want to do that. Yeah, I didn't think you did. Yeah. Yep. Yeah, because they heard something on Google or they heard their friend do something and they go, oh, that sounds good.

But let's see how it applies to you. Let's run the numbers. Yeah. So 20,000, like you said, okay, 20,000 in taxes, how long it will take me to recoup that? Yeah. You know, how much tax-free growth? And she's 60-some years old. Okay.

So not a good, not good math in her case. Mm-hmm. Yep. But in some cases, it makes sense. So be aware. run the numbers and see if that helps. So I think that what you just described as a word that comes to my mind like misconception. Some people have misconceptions about many things.

What are some misconceptions that people have about some of these tax-free retirement strategies and then how do you address those? Well, I think the one we just touched on is that one. Like you said, that's a good one. Roth conversion, Roth conversion, Roth conversion. Like the lunchroom financial advisor, you know, at the plants. said, hey, my advisor told me to do a Roth conversion. And in that case, it may have been appropriate.

But it's not, like you said, you got to know the numbers, you know. It's not right for everybody. And like I said, we look at all those opportunities and go, hey, there's an opportunity for you to hear it to do. And the tax tree is a no-brainer for me if you're in that zero percent tax bracket, which very few people are. but and I think 10 and 12% are pretty attractive rates. Yeah. I pay 10% a day, 12% today. That's palatable for Roth conversion.

When you jump up from 12 to 22, that's another 10%. That's a pretty good jump. Yeah. And so it's not for everybody. So it's just kind of just having those conversations and dispelling the myths. Yeah. It's just not always roses. And like you said,

regarding tax brackets and 10% and 12 and 20 and all of those things. That's what we know today. Well, as we know, no matter who's in office and what government or Democrat or Republican doesn't matter, things can change. So taxes can change. Nobody knows what and how and when and how much. But talk a little bit about what you do to work with your clients to make sure that whatever changes come is going to be dealt with and maybe kind of putting some plans into

place. Yeah, great question. So exactly, we tell people, hey, we're going to work with what we know exists today. I don't have a crystal ball that works. I don't know what the tax rates are going to be five years from now, 10 years now, whatever. But our process that we just talked about in one of our early episodes is making sure that we have two different buckets of money, one for income that's guaranteed, okay, over on the annuity side of the equation, if it's right from you. And then we have the growth side of the portfolio over there to add some flexibility. So there's enough flexibility built into the plan to, like you said,

if there's a considerable change in taxes, it could be a considerable change in your standard of living. We want to make sure we've designed a plan to take the impact that might have on you down the road. To have that buffer. And then if it didn't have that big of an impact, then you've got the buffer. great. But what if the taxes did, you know, make the move that you predicted? Well, now you're ready and it didn't impact your lifestyle because you plan for it. Yep. That's where the Roth conversion can be key because now we've taken advantage of the tax rates, converted some money over here. So now we have access to it tax free. Maybe to add in, you know, that cover that gap

with an increased tax payment. You know, yeah, I know we've been talking about tax-free retirement solutions and that tends to be like me, myself and I, you know, your back pocket. I need to get to retirement. I need to get through retirement. But there are some people out there that have enough funds that they're like, look, I got enough money to get to and through retirement. Let's make sure we make the right tax moves, all of that. But then we're going to have a bucket of money left over that we're going to transfer to our heirs for like legacy planning. So talk a little bit about some of the tax considerations as it relates to legacy planning. because one of the gifts that you can give your family is knowing that funds get transferred to them

where they don't have to take a big tax hit. Very good. Very good. Yeah. So one of the solutions, I won't say it's the best one, but it's a very good solution for legacy planning and for those individuals that you just described is life insurance. Okay. So they can fund life insurance, which is what I'm doing for my family, is funding a life insurance policy. which will pass income tax free and under current estate tax exemptions.

It will pass estate tax free to my two sons and my grandchildren. So life insurance is a great solution. It's another one of those things like we talk about when people hear annuity. It's going to have this negative reaction to it and they never sit down and get educated on it. The same thing with life insurance. There's all kinds of different life insurance and it can be a great duel for legacy planning and tax-free. transfer of wealth to the next generation. Because certain types of life insurance, and again, like you said, let's not get into the

weeds, but certain types can have living benefits as well. So cash value growth or, ooh, I need a long-term care and I didn't get a long-term care policy, but there's some of these types of things that give you some benefits even before you pass. But then to your point, if it's the right kind of policy set up the right way, it can pass funds to your heirs and benefit them. So I think, like you've said before, oh, this word makes people think red flag. This word makes not all the time. Let's look at it. And on the other side of the spectrum, oh, this strategy is the best one for me. And because, no, it needs to be looked at like

what you've said over and over from a holistic approach. Let's see if this particular move benefits you. Let's take everything into consideration and make the right decisions. Exactly. Yeah. I couldn't have said it better myself. Well, with that thought in mine then, if someone is interested in hearing, okay, tax-free, mitigate taxes, lower taxes, make some of these moves ahead of time, how would that impact me? What's the best way that they can learn a little bit more and reach out and connect with you and see what some of their options would be? Yeah, yeah.

So to learn all the things possible for you to avoid taxation or minimize taxation, call 833 Dan Hill, It's a toll-free number, 833-D-A-N-H-I-L, or go to hillwell Strategies.com, and either one of those, you'll have the ability to sign up for a complementary consultation, and we look forward to talking to you and helping you avoid or minimize your taxes. Excellent, Dan. Well, as always, it's been a real pleasure chatting with you. Thank you so much for coming back on. Always great to talk with you, my friend.

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