Business Innovators Radio - Interview with Jay Forgione Owner of Summit Retirement Solutions Discussing How Taxes Impact Retirement

Episode Date: September 23, 2024

Founded in 2009, Summit Retirement Solutions is made up of qualified financial professionals who are passionate about helping individuals and families achieve their ideal retirements. Jay is committed to helping clients work toward their retirement dreams by crafting customized, easy-to-understand financial strategies. Beginning as a Senior Regional Manager for a major corporation, Jay decided to follow his passion for helping others and opened Summit Retirement Solutions. As the leader of his firm, he works each day to ensure his clients receive the guidance, support, and resources they need to retire with confidence and joy. That includes protecting nest eggs with tax-efficient strategies. Jay has a Bachelor’s Degree in Business Management from the University of Connecticut. Jay enjoys being outdoors, skiing, hiking, golfing, and spending time with his wife and three kLearn More: https://summit-rs.com/Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser. The commentary reflects the personal opinions, viewpoints and analyses of the author, Jay Forgione, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security, or any security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Foundations deems reliable any statistical data or information obtained from or prepared by third party sources that is included in any commentary, but in no way guarantees its accuracy or completeness. This content may include information and statistical data obtained from and/or prepared by third-party sources that Foundations Investment Advisors, LLC (“Foundations”), deems reliable but in no way does Foundations guarantee its accuracy or completeness. Foundations had no involvement in the creation of the content and did not make any revisions to such content. All such third-party information and statistical data contained herein is subject to change without notice and may not reflect the view or opinions of Foundations. Nothing herein constitutes investment, legal or tax advice or any recommendation that any security, portfolio of securities, or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations, execution of required documentation, and receipt of required disclosures. All investments involve risk and past performance is no guarantee of future resultsInfluential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-jay-forgione-owner-of-summit-retirement-solutions-discussing-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 back with this Jay Forgeone, who's the owner of Summit Retirement Solutions and we'll be talking about how taxes impact retirement. Jay, welcome back to the program. Hey, Mike, how you doing today? Hey, great. And I know this is a hot topic.

We could probably spend a whole, you know, four hours on the one concept of taxes, you know, and that kind of makes people have a sinking, feeling in their gut. But taxes are, you know, like what's the whole saying, you know, there's only two things you're like death and taxes, right? You know, so we know we got to deal with them. And we know we can't eliminate them, but we can mitigate and plan for them. So where do you start with your clients? clients when you have the conversation about taxes because I know that's one of the elements of your trail system. Yeah. Yeah. Yeah. I think this is the area that most people don't really pay attention to or weren't considering. You know, I always get the common question. I say,

how can I help? And they say, when do I take full security? And, you know, or do I have enough money? Or, you know, I don't think that they take into consideration how taxes are going to affect them in retirement. And, you know, retirement itself has gone through several phases that I talk about in our workshops where, you know, in my, in my grandparents' time, there wasn't a lot of inflation because they had the gold standard. So they didn't know that they said to invest in the market. And back in that time, their investment choices were maybe you can invest in the market, maybe they invested in some real estate that pretty much put their money in a bank. In my parents' time, they basically all had pensions, and then they squirled away some other money and some brokerage account or some savings.

In 1978, they came out with a 401k plan, and basically the baby boomers are all part of this 401k generation. So what does that mean? So here's the things that they don't necessarily take into consideration. When they're getting into a 401k, they basically are deferring out the tax. and when you go to take the tax, you're going to take the tax at whatever the day's rate is. And they say, well, what do you mean? I'm going to be in a lower tax bracket. And I always say, why is that?

Yeah, take whatever you're earning now. Yeah, take whatever you're earning now. And you're probably going to need about 80% of that to live on. So if you're making $100,000 a year, you're probably going to eat about $80,000 to just maintain a similar lifestyle. You're not going to want to shrink way back into, you know, sitting on the couch and eating Mac and cheese. So if you need 80%, that probably means you're not going to be in a different tax bracket. But then let's just talk about tax brackets in the country and a little bit of the history. And if you look at taxes, we're a little bit at the mercy of what I call legislative risk,

which means they can change the laws, change the rules when they need. If you look back at the history, pretty much any time we had increase in debt or deficit during World War I, World War II, it's expensive for a war. they basically raise the taxes. And when I talk to people about taxes and what that means to them, they don't really consider or think about it because when you're working, when you're working years, you get your paycheck, you don't have really much control over what that's going to be, and you just fall in where a tax bracket you fall in.

When you're in retirement, you have much more control over it because you're determining where the money comes from and you're determining where the money sits and you're determining when you get to pay those taxes. If you go with what I call the government plan, which is you put all that money in a 401K is deferred and you just wait and you just have to start paying it as you go, you're at risk where, again, I think everybody watches the news and can see we are in some of the highest debt we've ever been in ever in the history of the country by far. Yeah. A little over $33 trillion. And the tax percentage is. Oh, wait, it just went up to $35 trillion in those two seconds.

And again, it doesn't matter, Republican Democrat, whatever. It is where we are. Numbers and numbers. And the tax percentages in this country are at some of the lowest they've ever been at. And they have been for a long time. The problem is the politicians, as they're running for office, aren't going to get up there and say we're raising the taxes. But just to give you an example, the highest tax percentage in this country right now is 37%, you know, for high-income earners.

But back in 1944, it was 92%. Middle income tax bracket right now might be around 20. Back then it was around 50. So could it go back there? Could. Why not? I mean, we're in debt up for our eyeballs. So they need to.

And we know the only way to tackle that deficit is to cut spending, which will never happen, or raise taxes. So that kind of coincides with what you said about, do we feel taxes will go up in the next five to 10 years? You'd have to check the box, yes, but what amount and what bracket and what percent. We don't know that, but they're heading in the wrong direction. Yeah. But again, if you, you know, when I tell people the history of where it has been, that their jaw drops, because I'm like, not to say that it's going to go back there,

you know, one year, two year, three year, but over a period of time, could it get there? For our kids, is that going to be a problem? And all of the money that you've been saving in 401Ks and IRAs is you, you, you, you, goes back to what I said. You pay the day's rate. What is the day's rate? You know, depending on the rest of your situation, too, whether you need to touch that money makes a big difference. So, you know, when we talk to our clients about it, I usually bring it up and most of them kind of look at me blankly, like, I don't know, I wasn't really thinking about that. And I say to them that everything is on how you take the money from the different accounts. So like, for instance, a Roth would

be non-taxed, an IRA or 401k, be taxes, ordinary tax. And a traditional like brokerage account would be taxed at a capital gains. So you've got different taxing going on within when do you take from which accounts and how is that going to affect you long run. So when we look at it again, I give them the history of taxes and where things could go. It's probably going to get uglier. But then I look at their scenario. Say, well, how are you set up for this?

You know, where does your money mostly sit? Does it mostly sit in, you know, what we call qualified money or 401K of the IRA, all the deferred money? If it's sitting there, what's the plan? I got to just as I pull it out, little by little, pay it. Because, again, the way I look at paying taxes in retirement, you can do one or two ways. You can do the government's plan, which is to just pay it down. And if taxes should continuously go up, you're just going to keep paying more and more. The thing is you've built this deferred pile and hopefully you've done a nice job to make the pile significantly large enough that you can just live off of.

But as you're pulling from it, every time you pull off the top, hopefully the next year it grows back. So you've got this never-ending chain of taxes I have to keep paying. So the way I look at that, it's one of the examples I give. It's sort of like if I was to buy a house, I could buy the house cash. If I paid $300,000 for the house, it would hurt because I got to pull the money out in my pocket. Now it's not in the account. But I paid for it. It's done.

It's mine. 20 years later, the house appreciates. I sell it for 600. I'm using crazy examples of things in plate. And I made $300,000. But what most people do is they buy the house, take out a 30-year mortgage, pay principal and interest over the 30 years because, God forbid, I pay it down quicker. And at the end, they pay $620,000. $25,000 for a $300,000 house.

And then when they sell it for $600, they think they made a profit. I'm like, so we're going to say, where is he going with this? If you just continuously pay out either from a perspective of like every time I make a withdrawal or if, you know, or if you didn't need the money and you're going to pay RMDs out, the amount that you're going to pay out is if you had, if you had half a million dollars in an account that you didn't necessarily need to touch and it was deferred money and you were just going to pay RMDs on it as you go. and you lived from, you know, until, say, age 90, probably pay about 400,000 in taxes all

pulled once it was done between paying out the tax, then that money gets reinvested, and you have to pay capital gains. So the amount that you're going to pay out is a ridiculous amount. Some of the solutions that we look at for our clients is, can we do what's called a Roth conversion, which is one way, which is basically... You know, we don't know what a raw office. It's basically money that's after tax. So you can take your 401k or your IRA money and move it over in increments.

The increments can be as large as you want or as small as you want. So again, when I said when you're in retirement, you want to control the tax. When you stop working and you don't have income coming in, I can control. Maybe I'll have three or four or five years where I pay a lot of tax. But I said the tax percentages right now are lower. in history and probably going to go higher. So if you were to pay, say, not that you do it this way, but let's just say for crazy example, you converted everything in three or four years and you were in the 37% tax

bracket for four years, but now you're done. You don't have any more taxes. You've converted it all to Roth, which is now tax-free. From a legacy standpoint, then the money, that money would also move to your airs tax-free, where as if it's still in the 401k of the IRA, it's 100% taxable to them. So again, how you do this, again, to me, so paying it up quicker is like buying the house cash.

You did it. It's a little painful in those few years. You know, I get a lot of people who roll their eyes and, you know, you can see their stomach is turning because they don't want to pay that much. I'm like, the alternative is this. You can pay, you know, 300,000 or 400,000. 400,000 or whatever, 200,000 in taxes over a period of three or four years, or you can pay five or 600,000 over a period of 20.

Well, I'd rather pay less. Okay. So we can just rip the Band-Aid off as opposed to pulling it off slowly. Another option that we give our clients is there's really two options for tax-free. One is Roth. Again, it comes with some pros and cons. The other would be some kind of a cash value life insurance. And usually when I bring that up, people kind of roll their eyes and say, why are you talking

me about life insurance? I have to die to get that. Basically, the way cash value, so we're not talking about term insurance. We're talking about cash value. And there's several types. But basically somebody went to an insurance company many years ago and said, how much is a death benefit? And they said, it's a dollar. I said, what if I give you $10?

I said, well, we'll put $9 over here in a side and a bucket and we'll pay you interest on it. And you have access to that. and then the dollar goes to buy death benefit. So when you're planning out and you have monies that maybe you're not going to need that you plan on passing on to your children and it's in IRAs or 401Ks, you can just, the one plan is, just let it sit there, build to a big pile. And when they get it, maybe at that time the tax bracket is 50, 60%, they inherit the money and half it's going to go to the government.

or we can convert some to Roth, and when they inherit it, it would go to them in Roth, and they'd pay no tax, or you can look at leveraging cash-fed life insurance, the death benefit is tax-free, the build-up of cash that builds up in the policy is tax-free. In essence, if you had, say, $300,000 you wanted to leave to your three kids, you could put it into a life insurance policy structured properly over a period of time. And basically, you would almost have access to pulling the $300,000 back while you're alive, and they would probably get close to $300,000 tax rates and death benefits. So again, it's all about how it's leveraged.

I know everything I just said, it probably sounds confusing, and it's a lot. And you're like, what is he talking about? some of these concepts are they're complex and you really have to talk to somebody who knows it's not something I would definitely not something I would Google the same way yeah I was just thinking that yeah like okay I heard this thing so let me just jump online and click click click set it up and you find out too late that it was set up wrong yeah and I also mentioned there's several products there's several types of cash value Some work better than others.

Some people just think it's a devil or whatever because mostly when they say that, I say why and they can't explain why because they just simply don't understand it. So it's a complex strategy. The wealthy have been using this strategy for decades. And there's a reason for it because it's a good way of transferring wealth. It's tax-free. There's a lot of pros to it. Again, there's some cons to it from a perspective of its life insurance, if to qualify. So again, we try to look at all the different strategies that are out there and see what's going to fit.

Well, I think if someone hears some newfangled way to do something, they kind of go, oh, my red flag just raised and my radar is up. But like you said, this has been around for quite a long time. In fact, I've heard that even Walt Disney used his cash value life insurance policy to build Disneyland. So that's been around for a minute or two. And isn't it true that, you know, many large corporations use this strategy and even banks? banks put our money that we put in savings into these kind of things. So it's proven. It's been around for a long time and some of the biggest institutions out there are using it. Absolutely. And like I said, it really comes down to talking to somebody who understands it,

understands how all the different products work, how the tools work. I'll be honest, sometimes I sit with a client, I look and I'm like, no, that's not the strategy for you because because it's not going to work properly. It's not going to do what we want it to do. So it isn't about like, you know, buy life insurance or buy this or buy this. It's about what tools do you need? I'm always a big fan of like, I'm going to be climbing Mount Everest. This is dangerous.

A lot of things can go wrong. What am I going to need for the journey? So, you know, I've got to climb up. I'm going to have this and that going on. Same thing climbing down. So oxygen and what kind of, yeah, I need a guide. I need someone that's been there, done that. and can show me the way.

Yeah, yeah. So that's why we always say, you know, I use, we use the word trail in, uh, when we, when we're talking to our client because we've kind of broken down tax, retirement, income, asset management, insurance and legacy. So T-R-A-I-L is sort of the core areas we look at. And we always say, let us be your trail guide, help you get through that. Because again, you know, there's certain things you want to hire people for. no one wants to spend money no one likes to pay for things but you know if you have a complex tax

situation you hire an accountant why because they're going to know all the rules and the rules keep changing you know if you have a health issue you go to a doctor you could google it but you don't want to take the risk of you know i got a pain in my foot and it says oh you got to get your foot cut off like you know you don't want bad advice like that because yep who knows where who knows who knows who knows who's telling you on the other side? There's always a skepticism. But again, for something as complex as this, why wouldn't you want to use somebody who's a professional

who specifically does this type of planning? You know, I think it's really powerful what we've been talking about here about how to plan for taxes in retirement. And I want to just kind of end with this question or thought. the L in your trail is legacy. So planning for taxes in your retirement, that gets you to the finish line. But in reality, when you factor in legacy, that's thinking past retirement into transferring

your wealth to your heirs, your family. And if you can make plans to mitigate as much taxes as possible up to retirement that benefits you, but then putting some of these things into place, benefits. your family, your heirs, and that takes on a whole new level. And that's like the ultimate gift is, hey, you know, X number of dollars is coming to you, but I've put some plans in place so that you're not hit with a huge tax burden. Absolutely. I mean, you know, again, it's another piece that they don't necessarily think about.

They think about the fact that I'd like to, you know, I always say, what's your thoughts for legacy? What would you like to do? I'd like to leave something for the kids. Okay, let's talk about that. How would you like to leave it? What would you like to leave? And again, and then I say, if we can do the same thing and have them collect it all tax-free,

or would you rather have them collect, you know, a portion of it and give the rest of Uncle Sam? And they're like, of course I don't. Of course I don't. Yeah. Nope. So, you know, you know, so when you're getting into it, too, is the only way to do that is to use some of these tools that are out there, whether it's for off or life insurance. Because there's not a lot of other loopholes that you can use. Yeah. And they have pros and cons in different ways that they're used. Like I said, it's a tool.

and what do I want the thing to do would determine which tool I'm going to use. And again, it's more of sitting down and trying to find out what's your goal. What are we trying to do? Tell me your dream. Tell me this is the absolute, you know, the thing I have to have

and then tell me the thing I'd really love to have. And then we can talk about it? Can we do it? Can we not? Is it possible? So, yeah, I definitely think that actually plays a huge part in in the legacy aspect of it, and I don't think people take that any consideration, and they don't really know the tools that are out there. So from a fear perspective, they'll pull back.

Maybe they'll talk to an attorney or something, and the attorney will say, oh, yeah, just put it in a trust. And I'm like, does it belong in a trust? Do you know how trusts are taxed? They're taxed at the highest percentage of there is. So, you know, again, not understanding who you're talking to, and if they really understand that aspect of it, and they're all going to have a different version.

Well, I'll tell you, Jay, this has been real eye-opening and helpful just to really clearly articulate some of these things to consider for mitigating and addressing taxes for retirement and beyond. So if someone is interested in learning more and then reaching out and connecting with you, what's the best way that they can do that? So the easiest way is probably go on our website, which is www.summit, sum, M-I-T-Hifen, R like Richard, S-L-L-S-Lac-S-Lac-M-R-S-S-Let.com. And one of the interesting things on there when you're looking at tax is we have a like a radio button or a toggle button that says retirement tax bill calculator. And if you click on that, it'll let you plug in. And again, the information is not going to go anywhere else that comes to us. that I know if you want to talk more about it. But basically you can plug in there all of your qualified dollars, your IRA money,

your 401K money, and it'll tell you if you go down the plan of systematically paying it out over the slow road, you know, either paying RMDs or just slowly withdrawing from it, what kind of taxes you're going to pay in retirement if they stay at today's prices. And then it'll give you, if you were to convert to one of these other types of tools, how much can you save 100,000, 200,000, 300,000. I've seen people save 600,000 in just doing it quicker. And having it's not even a matter of necessarily buying anything. It's just a matter of, you know, click on that button and it'll spell it out for you really quick.

But so, yeah, if you go on SummitRS.com, or you can simply give us a call at 860-269-0909, and we'll be happy to help you. We also do a lot of live events, and I do tons of live events on tax. So if you look on our website, it says attend an event. It'll tell you what our next upcoming events are and what the topic is. And again, they're strictly educational and informational. We don't have any, I never have a product in mind. Love it.

Well, Jay, thank you so much for coming back on. It's been a real pleasure talking with you. Great. I appreciate it, Mike. You've been listening to Influential Entrepreneurals. with Mike Saunders. To learn more about the resources mentioned on today's show

or listen to past episodes, visit www. www. influential entrepreneurs radio.com.