Business Innovators Radio - Interview with Danny Favreau Founder of One Less Worry Discussing Taxes in Retirement

Episode Date: November 11, 2024

Danny Favreau is a knowledgeable, detail-oriented leader with nearly 17 years of experience in the dynamic financial industry. As the owner of One Less Worry, Danny has become a trusted authority in pension and retirement planning, providing Federal and State employees with tailored guidance to achieve “Retirement by Design.” His success stems from his strategic approach to business development, his dedication to building strong client relationships, and his clear, practical communication style.Danny’s career spans a range of challenging roles, from field underwriter to account executive, financial advisor, and now business owner. Each position has refined his financial expertise and deepened his industry insights. With a National Social Security Advisor certification, Danny is equipped to address Social Security-related needs, including optimization strategies to maximize benefits.Throughout his career, Danny has demonstrated a commitment to professional growth, expanding his financial acumen through continuous education and leadership roles within top-tier organizations. His clients and colleagues alike value his integrity, his attention to detail, and his ability to consistently deliver exceptional results.Learn More: https://www.onelessworry.co/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-danny-favreau-founder-of-one-less-worry-discussing-taxes-in-retirement

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, Danny Fabro, who's the founder of One Less Worry, and we'll be talking about taxes in retirement. Danny, welcome back to the program. Thank you. Thank you for having me. Hey, so I know that taxes is a big, big, broad subject.

And then a lot of people don't really calculate or estimate how taxes impact their retirement. Where do you start talking with your clients about that in factoring in their plan? Because I feel like sometimes people have this false assumption, you know, oh, way down the road and retirement, I'm going to be in a lower tax bracket or taxes probably going to be lower, but that might not be the case because we know that the deficit is a big number and really the only way to tame it is to raise taxes. So where do you start? Do you feel taxes are going to go up in the next five or ten years and talk a little bit about those tax brackets that you advise your clients on? Well, for sure the taxes are going to go up. The ratings on the wall.

The government's spending still keeps spending. They don't stop spending. And like you said, there's only two ways that the government makes money. It's either to cut spending, so they could save money there or tax us. And then they collect the money there. And obviously with a $35 trillion deficit that we're in, we need to do something. And it keeps getting worse. So they definitely got to start making taxes. It's outrageous how much we actually owe.

But, yeah, so they're going to make it up in taxes, 2026. I think we'll be seeing a first increase of that. Right now, I call it a tax sale. So if you have chances to move money and move it around and pay the taxes on it now, why taxes are low, that's the thing to do. And, you know, the 2026 thing is not even necessarily a tax hike. And I know I didn't even ask you this before, but I know we don't need to get into political views or anything or who's going to raise taxes or not.

But I think this point you just made about 2026, it's not a tax hike. It's like some of these tax breaks that are expiring and that's already in place, right? That is correct. That is correct. So they got to do something. And if it doesn't, if they don't change it, they're definitely going up because things are expiring and it's the way it works. Yeah. But there's definitely going to be something taking place.

No matter what party gets in the office, I'm sure that something's going to take place. Yeah. Exactly, because neither party wants to have their constituents saying, you know, there's less in my back pocket. So money and income and cost of living and whatnot, that's an important factor for anybody. But I think that's a big piece to keep in mind that taxes are going to go up in the next five to 10 years. And it's from a lot of factors. It might be from a political party. It might be from tax breaks that are expiring.

It might be that we're trying to tame that debt. deficit, but we need to be prepared for that as we start planning for retirement. So let's talk a little bit about some of the ways that you are addressing that with your clients. How are taxes on different sources of their income in retirement going to be handled? Because once you check out of the workforce and now you're not getting that paycheck, your employer used to take care of, you know, contributing your, you know, taxes and pulling it out before you got, you know, paid. Well, now in retirement, you, are going to get certain levels of income from wherever you're going to get it from your retirement income, will taxes need to be addressed there? What is your approach that way?

Well, you're right. And I take a look at it as a big picture. We'll sit down with the client and we'll literally start with your social security, okay, because you get taxed on your social security, for one. If you start making too much money, you're going to get taxed. Now, under a single person from 0 to 25,000, there's no tax, but from 25 to 34,000. there's a 50% tax and over 34,000 is 85% tax. Now, a married couple, zero to 32,000 is okay, but 32 to 44,000's 50% tax. And over 44% that's an 85% tax. People don't realize that's from your Social Security.

So we take a look at that as number one because they think what they're going to get from their Social Security statement could be a true number. Well, it may be, but it also could be taxed. Wow. Yeah, because it's kind of like the story when your kids get that first job and they get the first paycheck and they go, hold on, what are all those deductions? And, you know, I got this gross amount, but what's this net amount? There's a big difference there. Well, same way with what you just described.

Maybe that security check, that number that you have in your mind that you're expecting, maybe what you net might not be what you need to fund your retirement. and a lot of that is because you didn't really plan for those taxes. So that's a really good point. Those are pretty staggering numbers. And you remember, there's still 11 states that tax Social Security, too, on top of that. So there's 11 states out there that do additional taxing, you know, state tax, or social security on top of the federal one. So that's another crunch there.

So it needs to be looked at in detail because any time that you retire early or before your full retirement, age, you can be affected by these taxes big time. So what are some other triggers that would make taxes, you know, come, come knocking at your door that people need to be aware of? Your RMDs. I mean, every year, some people get a little hung up on them and they forget about them or they don't think, you know, and that's a thing that's always changing is the age of when just taking them.

So you've got to be on top of that. but RMDs is something that you just can't put aside because the government will tax you heavy on them if you don't take your RMDs. And it's about timing and it's about doing it right. And, you know, so you have a little grace period until April to take them. But, you know, of the following year, but you've got to get them done and they've got to be planned around well or else they can hurt you big time. And for those aren't familiar with RMDs, it's required minimum distribution.

and it's just kind of things that just need to be handled. And sometimes I would venture to say people don't stay up on all of the updates. Like, oh, by age, whatever, you need to start taking this percent or this amount. And it needs to come out of this type of account. Or you would if you have multiple of those kind of accounts. You know, you might assume that you took it out of one account, but oops, you got penalized because you, you know, didn't take it out of all the accounts. I think there's a lot of confusion that way, right?

Oh, there is. It makes it hard if you don't have all of your paperwork organized in it. When you work with an advisor, make sure you bring everything to the table. So therefore, we can see everything because it's important because if we don't have everything, something like that could really hurt you down the road. But putting everything together, we'll be able to look at your whole plan, tell you when things should be taken, show you when things are what things are going to be, like what your social security is actually going to be. what your RMDs down the road are going to be for certain accounts. But we could take that all into consideration. Then when you start needing your money, start pulling your money, the sequence of return is so important that we do it right because you could lose a lot if you don't. And that's so important. So we put a complete plan together.

And my advice is to make sure to bring all of your paperwork. Bring it all. Don't hide nothing. Don't forget nothing. But just bring it all. And we'll go through it in detail. And I think that sometimes people might go, oh, I'm required to take this amount out, but I sold my RV last year. So I got some cash and I don't need to take it out.

I'm good to go. I don't need the cash. But that could be a mistake too, right? Because of penalties. Oh, yeah. You don't want to be hit with that penalty. And it could be his highest 25%. I mean, so you don't want that to happen, you know.

Yeah. Just because you assumed you were fine. But oops. So getting with someone that can look at the. the big picture, make sure that you're doing things the right way, in the right amount, at the right time, huge because one hit like that, like some of those taxes on security or tax because you didn't withdraw the right RMD, that's a big, you know, reduction in that retirement portfolio.

Yeah, and then inheritance tax, too. That's another thing that you get to be careful of, you know, so it's passing money down to your kids and stuff like that. There's taxes there that you have to be aware of if they don't take, the funds within the 10-year period. Well, let's go into a little bit more detail there because I think a lot of times people think in their mind, I need to work hard, strive hard to get enough money to be able to retire, right?

And their mindset is right at that line of retirement. But then they don't give as much thought to how many years are you going to live in retirement before you die? Well, that's different for everybody. There's no way to know for sure. but we have to factor that in and have enough money to live. But then for those that are blessed with having a nice amount of money, what about then the money that's left that you want to pass along to your

heirs and your family and your kids? How should that be passed the right way so that they don't have to pay as much in taxes? And that becomes some extra planning, but it really is a nice gift to them because when they receive that money the right way and if it's positioned the right way, and it eliminates or reduces their taxes as much as possible. So what are some considerations that way? Well, you get the Roth IRA products that you could use that are easy to pass on, cheap beneficiaries. But for your kids, you know, life insurance also too works really well, you know,

permanent product life insurance. You know, that's one of the best ways I totally feel. but you have to Roth IRA products. You're estate planning. You know, you have to look at that also. But overall, when you put them into them products, you know, as well as a beneficiary, and it goes to your kids. But for inheritance, you got to be careful because after 10 years,

they don't take that money and use it, then they're going to get taxed on it. So we've got to make sure that that's done properly and set in different types of money in different accounts that works out best for them. You know, if you want your kids not to worry about paying taxes, you know. Somebody's paying them either you're paying them up front or they're going to pay them in the back end of it, you know. It all depends on how you want to work it.

But you can take advantage of the Ross products, Ross IRAs. I mean, that would be Roth 401ks, you know, things like that in the early ages. Start them early while you're young. Then down the road, that makes it a little bit easier. But you get the 10-year distribution rule with the Roth products that you have to follow. And it's different things you've got to be prepared for. Plan ahead and always meet with your advisors early. Don't wait until retirement time comes.

And I had a gentleman walk in and goes, I'm retiring this week and what do I need to do? Oh, my. I'm not even in the business. And I would say that's not a good idea. It's true. It happens every year. You get somebody walks in, like, I'm ready to retire now. What do I need to do?

You know, and the thing is, if you plan ahead, if you're young, that's when to start. There's no age that's too early to start your retirement planning because that's important. If you do it right, over the years, this could all work out to be really good for you. And the retirement funds can be great for you, where you've got money set aside and ready to go when it does come that time to retire. I see more and more people, they spend more time planning for a vacation than they do for their retirement. it makes it rough. And Social Security is one great thing that we have to take advantage of, but 95% of the people don't take advantage of it to its max.

I mean, there's only like 4% or 5% that max it out. And things like that that's important. So you've mentioned some ways to be more tax efficient with your savings. What are some other ways? And I know that there's probably a list 32 bullet points long that you can do, but what are some of the other top ways that people could consider to sit down with a professional and say, okay, well, how can I be more tax efficient with my savings to make sure that I'm not getting hit in the highest levels?

Well, gifts. You could do gifts, charity. That's another big one, actually. People don't realize it, but your annual gift, you put 17,000, I believe it is this year. They put away for, you know, so you don't get to hit in touch. taxes. You give a lifetime gift or a state exemption gift. That's, you know, them numbers are up there to millions, but that's available too. And them are both really good to use if you have extra funds and you want to give to a charity or you want to give it as a gift to your family because you

can plan ahead and give it to your kids. $17,000 every year is a gift. There's no taxes worry about that. You know, so you got to just plan ahead. And that's what we do for you. Make sure everything is planned ahead for that. The matter of two big ones that most people forget about. Yeah, that is a really good point because you want to take care of supporting your kids from time to time as well. But if you can get a tax break on that, of course, sit down and talk with the tax professional.

But some of those things aren't the obvious ones that you would think of. So I think that you hear some of the stories about, you know, the top, you know, huge companies that pay zero taxes or the super elite rich that pay, you know, so little in taxes. And some of those are because they're, you know, multi-trillion dollar corporations and they've got all those other business breaks. But what about just some of the more affluent people that just pay so little in taxes? How can they pay so little? And are there some ways that, you know, the little guy can take advantage of some of those

same things? And that comes right down to, you know, we have a tax attorney. on our team, and they help us with a lot of people, especially if we have a small business or even individuals, where you could take advantage of some of the tax laws. I mean, that's a huge part, especially if we have a small business, is to take advantage of them. And we have the people and the resources for that. So we have our tax attorneys, our CPAs, CFAs, helping us sit down with our clients, and we go through everything to make sure that everything is done right. and figure out what's best for you.

I mean, there's hundreds of different tax right off they can, but the tax attorneys, they help us with that. And they just analyze your whole business and see what you got going on or if it's, you know, high-end person. They also help with that too, and they figure out exactly what's best

and what you can write off and can't write off because that's important, but we have tax attorneys for that, and they make a big difference when it comes down for taxes. So having the right team behind you, working with you, working for you, looking over, you know, all of the opportunities, bringing things to you, that's so critical because there's no way that we as just the little guys out there can know it all and keep up with it all. And Google is not our friend in these areas because we've got to sit down with professionals, legal, tax, financial retirement professionals that can bring some of these together. I think that's a huge thing and kind of having that, you know, team in place.

Oh, definitely. When you mentioned Google, and that's kind of funny, I've had people Google, like, wanted to take their Social Security or when to take this or that. Well, the thing with Google, Google doesn't know your history. Google doesn't know your finances. Google doesn't know, you know, what you've got physically for assets, you know, when you go, Google doesn't know your goals, you know. So Google is not the answer.

And I get that every down and then. Like I Google, Google so I could do this. Well, you can, but now you've got this and this problem to worry about. And I'm sure doctors and nurses have the same frustration. Like the person comes in and goes, well, I Googled my condition. So obviously I have X and it's like, no, no, no, no. We have to look at your history. We have to apply it to what you're dealing with.

Same as what you're talking about there. And I think that's Google is wonderful or chat GPT or any source or guess what else. your neighbor. You know, I mean, we tend to get information from a lot of people, but you need to sit down with that financial professional that has a full knowledge of everything you have currently and where you want to be.

And then let's put it into place. And then when they make that recommendation, it's not like you must do this. There's no other choice. It's, hey, here's something to consider. And let's talk through that.

Exactly. There's so many different things you could do. and everybody's case is different because everybody's needs their difference and everybody's wants our difference. Everybody's financials are different. So it's best off to come in, you sit down or we could do it over a Zoom call and we take all the information. We put it all down and we actually give you a report of everything that you have.

So we make sure that everything is clean, cut and drive, knowing exactly what you have. And then we put our recommendations up, you know, give them to you. And then if you want to take advantage of it, you can. If you don't, no biggie. Yeah. We help you with all that. You know, either with Social Security maximization, we actually take your statements,

and we maximize it with all your other stuff. So therefore it gives you the month and year of when you start taking your Social Security to maximize your report to get the most of your money for everything that you're doing. I love it. Well, Danny, that's the bottom line is, you know, you look at each area and you maximize it

to make sure that you're not paying, more taxes than what you should be, because I'm sure that if you were told a strategy to take a certain amount of money and put it into this place, non-profit or a charity or a cause or something like that, that would give you a tax break. It's like I would rather that place get it than Uncle Sam. And I think that those are the kind of things that people need to understand. So that's just so great. If someone is interested in reaching out and connecting with you and having you take a look at their full picture, what's the best way they can connect with you, Danny? They can give me a call.

It's 475-257-1-8-07. Excellent. Well, thank you so much for coming back on. It's been a real pleasure talking with you. Thank you. I appreciate it, Mike. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show

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