Business Innovators Radio - Interview with James Johnson, President & Owner of All Mark Insurance Services – How Taxes Impact Retirement

Episode Date: February 22, 2024

James has been a business owner, a mentor, and an entrepreneur for over 28 years.As an ex-Marine and black belt in Judo, James does nothing in life he isn’t passionate about. His continual interest in provoking thought and conversation led him to the financial industry. “Being able to help hundreds of individuals, families, and business owners achieve their goals in life not only financially, but spiritually,” James states, “is a very powerful thing.”James has aligned himself with hundreds of his clients who are willing to learn and take control of their future. His core belief is only when we are learning, are we growing.James is consistently top in his field; staying educated and staying on the cutting edge of laws, regulations, and industry news. He is a proud member of Million Dollar Round Table (MDRT), and was a Master Elite Advisor for Ed Slott (America’s IRA Expert) for 9 years.With this vast knowledge of the financial industry, he was chosen as an expert on the “Ask the Expert” program series on AM radio in the Inland Empire.Learn More: https://www.yoursafemoneypeople.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-james-johnson-president-owner-of-all-mark-insurance-services-how-taxes-impact-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 with us James Johnson, who's the president and owner of Allmark Insurance Services, and we'll be talking about how taxes impact retirement. James, welcome to the program. Good morning. How are you today? I'm doing good until I heard taxes and impacting retirement because that's the topic that we don't really like to talk about, but we know we have to because it's something that's coming that we're dealing with.

So I know we need to cover this and I'm excited to learn from you, but before we jump into that, give us a little bit of your story and your background and how did you get into financial services in the first place? How did I get into financial services? Wow, that's a funny question. I used to be a manufacturing of beauty business, and when they asked me how I got in that business, I told them I got real drunk one night. But the reality is that I got really tired of flying 200,000 miles a year, and I've been doing that for 20-plus years,

and I was looking for something that was challenging and were able to help people and something that I had a passion about. And what I learned throughout being in business for a very long period of time is that it's easy to make money, it's not easy to save it. And so I got this interest in the financial services business. And about 2003, I started exploring it heavily.

And January 1st of 2004, I got started. And Mike, I'm kind of an overachiever. You know, I've spent $650,000 on my education. I have a master of lead advisor for Ed Slot for nine years, team leader for lots of things. Master lead advisor for money tracks, all these are the things. And I love this business.

And the reason why I love it is because it's constantly challenging. It's constantly changing. And you've got to constantly be learning. And I believe that when you're green, you grow, when you're ripe, you rot. And so I love this business. I like that explanation. And it reminds me of like the old Jim Rohn. And I'm sure that he stole it from somebody who stole it from someone.

But basically, if you want to succeed in life, start working on yourself. work on personal development, whether it's, you know, be better, you know, spiritually, physically, financially, all of those things. But in your realm, you just rattled off a whole bunch of things and designations and certifications and master this and that of bettering yourself learning financial services. And that's what someone wants to work. They don't want to, you know, have the financial services professional that just got certified 38 years ago and they've done nothing since. We want you to be on the cutting edge and learning things. So I think that is spectacular.

What are the things that you are watching for to better yourself personally and professionally? Well, we run in a concept in our business called Good, Better, Best, Never Let It Rest, so Good Gets Better and Better Gets Best. And, you know, Tony Robbins speaks of a concept called Kani, constant and never-ending improvement. And we don't, it's not like we go, oh, let's get on this subject, let's get on that subject. we just pay attention. I just pay a little bit of attention and you know what you've got to learn. I mean, taxes is a great example.

You know, do you believe that what's happened in history can happen again? I do believe that and we should learn from it. Well, so let me ask you some interesting questions because I ask all quite. I tend to not tell people things because I find that if you have an opinion and they have opinion, they're not going to listen to it anyway. So I tend to just ask them. question to find out where they are in life. And so I would ask you, do you have any idea what the highest income tax top marginal tax bracket is since the inception of the temporary income tax and the

establishment of the IRS 1913? What do you suppose that is? The top bracket or income level? Top marginal tax bracket ever. I'll give you a clue right now. It's 37%. Okay. Then I will take that clue and I will guess 37%. Yeah, 94% was the top marginal tax bracket since the inception of the temporary income tax and the establishment of the IRS in 1913. We're here from the government. We're here to help you. And the average since that date has been 56.76.76% has been the average top marginal tax bracket and we're sitting at 37%. Now, the interesting thing about that, Mike, is that if that's all you knew, it, we'd be like, well, okay, so I don't know what happened, but that happened once. But let's talk a little bit about where we are as a country. We have a national debt as we speak right now about $33 trillion.

$33 trillion. Now, it's important to understand that if you took a trillion dollars and you stack it here side by side, it would go around the earth twice. Okay, it's a really big number. We talk about it like it's no big deal, but it's a very big number. We have a national. We have a national budget of $4.4 trillion, but we spend over $6.1 trillion just in the last 365 days. So we're going backwards. Yeah, we have an unfunded deficit of $122 trillion. Now, do the math, okay? We're up over $150 trillion upside down with a $4.4 trillion budget. So the question that I like to ask people is I say, look, knowing where taxes have been and knowing where we are and understanding that the government cannot give anything to anyone that it doesn't take from someone else.

Because the government doesn't create money. They create money, but they don't earn money, okay? They get their money through taxes and those types of things. So based on that information, what do you think is going to happen to taxes in the future, Mike? You think they'll go up, down or stay the same? Yeah, you know, I mean, it's obvious that the only way to address, air quotes, the deficit is to reduce spending. Ha ha. That's as funny as I'm from the government. I'm here to help. And then the only other one is to raise taxes. So the answer to the question is, I think taxes are not going to go the direction we would prefer. You know, it only stands to make sense that they have to raise taxes. Now, we have coming up here in 2025,

an absolute guarantee in a raise of taxes. What's going to happen is our recent tax cuts that were put in place when Trump was president are going to sunset. So in 2006, we're the average person. And I think the important thing to understand about when you're listening to a podcast or you're listening to a webinar or whatever the case may be, we're talking in generalized information, all right? And it's important to understand that there is nothing general about.

you. Okay. You are an individual and you need to be looking at all of this stuff individually, but you can generalize the information as to how it might apply to you. Does that make a little bit of sense? Yeah. Yeah. Kind of like a template. If this has happened, then it might happen to me. That's correct. And I think it's important, as cliche as it is, it's important to understand that people don't plan to fail, they fail to plan. And so life has a very funny way of getting in the way. It's constantly there. And I could tell you about the Parkinson's Law. And I can tell you about all these other things that happen out there. But if you don't pay attention, it has a tendency to just pass you by. And then suddenly you go, what happened? And I think that this is probably one of the biggest

problems that people have when it comes to retirement and estate planning, and that is that they're very reactive. People as a whole are reactive. And they have this belief that everyone's taken care of them. My accountant's got me under control. My financial planners got me under control when in reality, no one really cares about you. That's a terrible statement, but it really is true. The only person that really cares about you is you. And so, you have to get your education up to a point and understand how this generalized information applies to you and then how you can use that information to become proactive going forward. And one of those examples would be taxes.

And proactive reminds me, as you were describing, you know, the past in taxes and where taxes could go, probably will go. Reminds me of that quote, and I know you're going to know this from Wayne Gretzky, I skate where the puck is headed. Because if you focused on where the puck is now, all of a sudden you get there and, oh, it's a couple steps ahead of me. So now I'm behind. So we have to look at what's coming and do our best to work with people that can guide us

into what is coming based on history, based on facts, based on trends and all of that. Well, if we see that taxes are going to be increasing or the brackets adjusting, we have to prepare for that. So what are some of those kind of preparations that we can do? to make sure that taxes on different retirement accounts, you know, can be mitigated as much as possible. We know we can never, ever, ever eliminate, but what can we do to mitigate those? So let's talk about that. But before we talk about that, let me just give you just a little example of why you're where you're at. Okay. Now, this is going to be fun because I rarely,

I do this with just one person, all right? But I want to try this with you, Mike. And give me a favor, Mike. Fill in this sentence as fast as you possibly can. You're ready? Two all these patties. Made your way? Now, special sauce, lettuce, cheese, onions, pickles on a sesame seed bun.

Okay? Remember that statement? Okay? Yeah. That tells me you're not as old as maybe I thought you were. Okay. Now, if we had a crowd of 100 people. I can tell you right now that easily 10, 20 people in the room would fill in that sentence immediately.

But try this one. When Eiff Hutton speaks, people listen. How about that? Okay. Now, I could go on and give you a whole bunch of other. Or how do you spell relief? Exactly. I could give you a whole bunch of other ones.

Now, these are what are called linguistic marketing. Okay. And what linguistic marketing says, if I tell you the same thing over and over again, you're going to believe it whether it's true or whether it's not, correct? Yeah. Okay. So tell me, did you ever hear this one? You should put your money inside of a tax deferred account because you're going to grow on money you would have otherwise paid in taxes. And in the end, you're going to have more money because you're going to be in a lower tax bracket. Yep. I've heard that. Decs. That's right. That's exactly what they've been telling you for decades about your 401k, your IRA, et cetera, et cetera. Now, it's important to understand that if you have an ERISA plan, which is a 401K, 403B, a 457, any one of these types of plan that's a company plan that has company matching,

it is important that you put in up to the match. It would be very foolish not to do so. But so that's just the prefix of what I'm about to talk about because what I'm here to tell you is that what most people are incredibly surprised about is that when they arrive in retirement, because you see you're playing a game and the game is a two-part game, most people are over playing what's called the accumulation game. They're trying to accumulate as much money as they possibly can so that when they retire, they don't run out of money. And their real goal, although very few people could actually describe it, their real goal is they want to live the lifestyle

they've become accustomed to, adjusted for taxes and inflation, out beyond their and their spouse's life expectancy, and then pass their money on in the most tax favor in way possible to their children. And that's their real goal, all right? With birds chirping and rainbows in the sky. All that good stuff, all right? And so what they're trying to do is they're trying to accumulate enough money so that when they get to retirement, they don't run out of money, all right? Well, the interesting thing about that is they're being told these generalized statements,

such as you're going to be in a lower tax bracket. And they're often very surprised to find out that that's simply not true. Most of them will end up in the same or possibly even a higher tax bracket than when they were putting money away for retirement. And they always go, no way, that's never going to happen. Yet, when they actually see the numbers, they're quite surprised to find out that's true. And then here's what happens. Okay. They get out to retirement.

Let's say they're 60, 65, whatever age they retire at. And they're cruising along and, hey, hey, look, I got to a lower tax bracket. Yeah, well, we're not done yet. And the reason why we're not done yet is because, one, you're going to hit a required minimum distribution age, and now suddenly you're going to be required to take money out of these qualified plans, which immediately, in most people's cases, jumps or tax. Triggers taxes, yep, right. And then here's the one they never think about.

One of them dies. And when one of them dies, now they have to file single rather than filing joint married and suddenly their tax bracket jumps again. So the question I ask, and remember I ask a lot of questions, my question is, is do you have a relationship with someone in the government where you're dying to give them your money rather than keep it for yourself or your family? And they always look at me like, of course not. Well, then why?

But you do. Yeah. Why are you deferring taxes out to a point in time where you told me the rates are going to be higher? And see, the thing is, is you're not. really deferring taxes. What you're doing is you're deferring taxes and you're deferring the calculation out to a point in time where most people, given the facts, will always agree that the rates will be higher. And a time when you actually need the money because you've retired, you don't have the incoming income. And now when the taxes are, you know,

hitting you actually need that to live. You're exactly. Correct. And so suddenly you get to a point where you don't have a choice. So you remember that thing about being proactive and the question you asked about, how do I mitigate this? Well, I mitigate it by first becoming proactive. And so for most people, and I think it's really important to understand that if you are listening to this right now, do not leave this and go out and start doing things because you need a plan. Remember, I told you, people don't plan to fail. They fail the plan. And so they hear generalized information and then they suddenly start doing things without any kind of plan whatsoever. But the average person should probably be maximizing their tax bracket every single year that they're currently in by doing

what's called a Roth conversion. So you have the ability. You only can grow your money three ways. You can grow your money taxes you go. tax deferred and tax free. Now, Mike, the worst way to grow your money is tax as you go. At the end of the year, you get a 1099. Which is the best way? I would say tax free. And so would everybody else. Yet the answer is, is it depends. And what it depends on is it depends on your exit strategy. Exit strategy, meaning when I go to take the money out, will I be in a lower tax bracket than when I put it in. Understand that?

Yeah. So. Begin with the ended mind. Back when they put ERISA plans in place, the top tax brackets for 70%. Now we're at 37. So for those people that got into this and the top tax brackets back then, that's very true. And there's some people listening to this guy.

This guy doesn't know what he's talking about. Well, I'll tell you, it's not my first rodeo. Okay. So when I sit down and I show people, they're very frequently surprised to find out that I am correct on the subject. Okay. And do you want to take the chance? That's the million dollar question here, is do you want to take the chance and just keep waiting and waiting and waiting to pay those taxes? You know, people believe frequently that they have a million dollars in their 401k. And I always ask, well, let me ask a question. Have they ever sent you the after? tax statement? And they're like, what after tax statement? What are you talking about? See, the reality is, is they don't have a million dollars in their 401k.

At best, they might have 700,000, even though their statement reads a million dollars. Got it? Then they turn around. And so they'll say things like this. They'll say, well, I know, I'm not going to need this money. I'm going to pass it on to my kids. Oh, well, what tax bracket are they in? Oh, well, higher in mind.

And what's going to happen when they inherit this money from you? Well, with the new Secure Act, it's going to mean that you can no longer stretch it out over your lifetime. So now it has to be 100% distributed within the next 10 years. So what's that going to do to their tax bracket? And I go back and I ask one more time, are you planning your retirement or the governments? Do you have a relationship with someone in the government where you're dying to give them your money rather than keep it for yourself or your family? Now, if the answer is you want to keep it for yourself and your family, then you have to get proactive. You have to start eating your elephant.

And you know how you eat an elephant, don't you, Mike? Yep. One bite at a time. And so each and every year for most people, and I stress again, do not run out and do this until we have a discussion. We look at the numbers and figure out if this is true for you. but most people should be capitalizing on their tax bracket. So let me just give you an example of what that says. Let's say for the sake of argument that currently your taxable income is that right now

you're at, let me pin a number in here real quick. Let's say your taxable income is at $120,000 and you're married filing jointly. the bottom of your tax bracket is $89,000 and the top of your tax bracket is $190,000. Well, that means you got about $70,000 to get to the top of that bracket. Now, in the year, 2006, when the tax law sunset, that tax bracket, if they follow suit to what they've done, that tax bracket will go to 25%. I understand that? Yeah.

So do you want to pay it today at 22 or you want to wait until 25? or whatever it might be after them. Yeah. Yeah. I mean, obviously you want to pay it on the lower amount. All right. So that means that this year you could convert $70,000 over to a Roth IRA. Now, there's a lot to talk about how to make that conversion, and this is why you need to have a plan to do so.

But you could start paying those taxes. And they always say the same thing. Well, I don't want to pay those taxes. Well, see, you don't understand. It's not your money. And you need to understand that the government looks at it. it's your IRA and your 401K, not as your money, but as their money. Because they've given you a loan and that's in taxes and they will get paid back.

So the question is, what rate do you want to pay them back at? And then once you get it into that Roth IRA, then from that moment on, it's growing tax-free. That's correct. And so I asked you how you eat an elephant. Do you know what the best way is to eat an elephant? No. Stop feeding it. Okay. So with the new Secure Act laws, what's happened now is most, not all, but most 401K plans allow you to make contributions into a Roth IRA.

And with the new changes, you can actually put the company match into the Roth IRA. So have you explored these possibilities? And this is about not playing the game, but it's about knowing the rules. of the game so that you can play the game correctly. That's huge. And so this is why I love this business. I mean, it's always changing. It's always knowing, figuring out what's next. And the trick here is to actually be a planner and not just a salesman.

All right. I hate the word financial planner because most financial planners are nothing more than glorified stockbrokers. But that doesn't make them bad people, by the way. It just makes it what it is. And so you really got to sit down and you've really got to get a good look at where you're at, okay, as far as financially, and then make a plan to where you're going. And once you do that, I think that for most people, what you're going to find is that getting to tax free is going to be one of your top priorities.

So one way to do that is to do Roth conversions. The other way is just to do contributions into that. But when you're doing contributions into a, Roth IRA, whether it be a 401k or whether it be a regular 40K, or regular Roth IRA, you have limitations on how much money you can actually put there. That being said, there are other ways to grow your money tax free. Now, I could give you a two-hour class just on this subject, but for fun, I always ask people, I say, do you own any life insurance? How about you, Mike, you got any life insurance? I do.

When do you get paid? When do I get paid? Well, we are when you die. Well, then I thought you said you had life insurance. It sounds to me like death insurance, right. Okay. So here's the thing, Mike, what most people do, and most people, by the way, why don't they just call it what it is? And the answer is nobody would buy it.

Okay, it's too negative, right? So what most people do, Mike, is they buy the most insurance using the least amount of money for the purpose of dying. And that rule was set by the insurance company. Did you know that you could grow your money tax-free? You could access up to 85% at any time tax-free. You could put it back if you want. You could get most of the gains of the market, never participate in the losses. And when you died, it passed on about two to three times that amount tax-free.

Is that something you'd actually like to do? You know, that fits in one of those buckets. You were saying, would you rather pay taxes? now later tax-free, you know, taxes now as you go, it's just unbelievable to see that the picture in my mind is the bucket with water in it and holes coming out. And what you're describing is

you first have to recognize you have holes in the bucket and then you have to figure out where can I strategically start plugging them up as much as possible. And I think that when you've really illustrated the import of taxes, impacting retirement. And it's not just some pie in the sky, maybe a meteor, meteor hits the earth. We know taxes are going to impact retirement. It's just how can we work now to mitigate them as much as possible. I think that is just spectacular. This wraps up that whole thought process. And I like what you said also is don't go running out and try to do

this because it's got to be done sequentially and with a properly structured way, whether it's setting up that Roth conversion or whether it's setting up different financial tools. So I think this has been so helpful for us, James. And what I would ask is if someone is hearing a few of these points on how to, you know, mitigate and navigate taxes for retirement, what's the best way they can learn a little bit more and also reach out and connect with you? Well, there are numerous ways to connect with me by email, phone, et cetera. But probably the best way, it's just the simplest way it would be to go to our website,

which is www. your safe money people.com. That's Y-O-U-R, S-A-F-E-M-O-N-E-Y, P-E-O-P-L-E-O-P-L-E. There you can connect to our YouTube page, LinkedIn, Calendee, and set up a ton. The greatest thing about us is that when you set up a time with us, it's no cost, no obligation, and no sales. So leave your checkbook at home. We're going to sit down and help you get clarity about where you are and where you're going and understand what your next step is to become good, better, best, and never let it rest so good gets better and better gets best. James, I love your approach.

You're easy to listen to, and I just really appreciate you coming on today and talking with this. Thank you for your time, Mike. You've been listening to influential entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, Visit www. www. www. influential entrepreneurs

radio.com.