Business Innovators Radio - Kim Magdalein w/Magdalein Financial -How Social Security Planners of America Helps Advisors Mitigate Taxes in Retirement for their clients

Episode Date: December 3, 2023

Kim Magdalein entered the insurance industry in 1985. Opening a private practice in 2001, Kim marketed to retirees by means of seminars. He presented to over 800 audiences in the next seven years, producing $150,000,000 in annuity premiums. Kim left his practice to his two sons in 2008, continuing with a seminar marketing company, that he still owns producing over 17,000 seminars across the nation for financial advisors.Learn More: https://www.linkedin.com/in/kim-magdalein-6ab03817/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/kim-magdalein-w-magdalein-financial-how-social-security-planners-of-america-helps-advisors-mitigate-taxes-in-retirement-for-their-clients

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, Kim Magdalene, who's the president of Magdalene Financial, and we're to be talking about how Social Security Planners of America help, advisors mitigate taxes in retirement for their clients. Kim, welcome back to the program.

Well, thank you. I'm glad to be here. It's been fun. Yeah, you know, I think that your service to helping advisors getting clients and using some unique ways to attract attention and really make an impact is huge. And then, of course, mitigating taxes. Now, I'm glad you use that word mitigate because I know we cannot eliminate 100% all the time, but mitigating as much as possible as just so huge. So talk a little bit about as a marketing mentor and your service to advisors, how do you guide advisors and identifying these tax saving strategies that might be unique? Because I think that there's some of the vanilla, plain ones that you hear all the time. But if you can talk a little bit about a unique one, that might get a client to go,

ooh, now tell me more. Well, yeah, what, here's, here's a common issue. Common issue is people do not get ahead of this. They start trying to fix things from, behind like the Saturday, like the Monday morning quarterback who can't win the game from Monday. You know, the game's over. You know, you, it's already screwed up and shoulda, woulda, coulda, doesn't help. Okay. So we want to get ahead of this. Now, how do we get ahead of it?

Well, what do are rich people do? They pay attention to these things. Why? Because it's a lot of money. Well, as far as per cent by percentage is concerned, taxation doesn't affect rich people nearly as as much as it affects, you know, Joe Lunchbucket or just middle class America. Taxes affect them even much more because that could be 20% of their income. And when you're talking about, you know, 80 or 90 or $100,000 of income a year and you're wiping out 20% or 25% of that income and taxation, that's a serious issue.

If we can jump ahead of it and say, okay, let's, we do, we do essentially, have a crystal ball because the rules have already been written. Now, some of those rules are going to be modified a little bit from time to time with new legislation coming down and adjusted here and adjusted there. But for the most part, the rules, the basics of the rules stay the same. Like, we know that IRAs are going to be taxed. Like, if I were to ask you that question, Mike, in your opinion, is there any time in the future when you would not have to pay a tax on an IRA. Well, in our previous discussion,

you thought, well, there's no way to get out of paying that tax. Well, actually, there is. So when we're doing seminars with people who, and we're just talking about taxes, we'll be able to integrate Social Security into that later on as well. But if we're talking to clients just about taxation and how to take income that keeps them from having to be taxis, at higher levels, then that's a significant savings for them. What it does is it keeps us out of, it puts us in a position to not have to be worried about performance as much with money as if we're saving the money, then performance isn't as critical.

So we can be competent in performance by saving money in various areas and taxation is one of them. Yeah, I love it. Can you think of an example of how that looks where you've helped an event? advisor get some innovative strategies put together for a client? Well, what if we were able to show a client how they in the future can keep themselves in a tax bracket that is not egregious and keep it down? We have to be able to do that with real data, with real numbers to the dollar and how that could work for them.

So we can project based on current legislation, like for instance, this coming year, the tax brackets are changing, and we'll be getting that into the software before January 15th. But we also have a sunset bill. The Trump administration's tax changes are going to reverse in 2025. So that's already in the software. And we can project that. So there's an average of a 2% difference in the bracket even there. So knowing a little bit about the future helps, but taking steps right now to take care of future taxation, there's a great deal of wisdom in that.

Yeah. You know, I think one thing that's constant is change. You know, I think that's one of the cliches we hear about. And, you know, things are constantly changing in tax landscape, in, you know, all the opportunities that we're hearing about. What are some of the things that advisors need to keep in mind when they're talking to their client? regarding trends or changes that they need to be aware of to do what you just said, which is staying ahead of that curve and not reacting in a backward glance. Okay.

So one of the elements of my coaching is to not tell, but ask. What do you want to do? If you were my client, Mike, as a financial advisor, I would ask you, Mike, what do you want to do? Where do you want to go? Where do you see yourself in two years, and five years, and 10 years? I need to know this. Are you going to be retired? Are you going to still be working? In what profession? What kind of money will you be making? All those things are issues. And when we deal with that, we also have to deal with taxation because I'm going to ask you, how much are you saving? And how are you saving it? Are you saving it tax deferred? Are you saving it

tax paid? How are you doing that? And if you have a large amount of money already saved up, is there some wisdom in washing or getting rid of the sum of the taxation in the future on that money because it could be egregious? So, yeah, that's the way we go through the planning process. And then we, so we, we allow the client to tell us, it's sort of like, I would have loved to have called this the Sulu program. And our captain Kirk is the captain of the, of the enterprise. He does not steer the enterprise. Sulu does. So all Captain Kirk has to do is say, I want to go, you know, that first star on the right. They used to have it on Star Trek. And Sulu makes it happen, right?

Yep. So what I want to know is what do you want to do and where do you want to go? And we'll see what we can do about making that happen because it may be we need to do something right now for the next five years, seven years, 10 years to mitigate the problem of taxation and the problem of excessive income that that causes taxation, and we'll be able to do that now instead of waiting until later. Procrastination, I used to do a seminar with procrastination as the seventh bullet point. And it was the most important bullet point because that's what people do. They put off till tomorrow. And taxation, that's not a good idea.

And we don't need to get into the weeds of this and we can't predict, but I'll ask you a question. do you think that taxes will go up and the tax brackets will be higher in 10 years and 20 years than today? And obviously the answer is, who knows? But the tendency would be yes, because we know that the deficit is huge. And the only way to close the deficit is for the government to reduce spending, which will never happen. And or to increase taxes. So we know taxes have a tendency to trend and head on up. If that's the case, then what you're saying right now is exactly right.

Let's find out ways to take it on the chin and mitigate as much as possible, but let's get it into today's taxes where we know what the rate is. Exactly. Okay, so you answered the question that I ask in a seminar or you asked me the same question. What do you believe? Do you believe taxes are going to go down? They all say no. Do you believe tax are going to go up? Everybody in the room says, yes, I don't even have to tell them that.

I don't even have to give them my opinion. They all believe that. So when you're an advisor and you add taxes as part of your practice, then you change the whole dynamic of what your practice is all about and you put yourself in a unique category, which is what they need. Now, somebody the other day said, and I need to bring this up here because there are advisors out there who think, wait a minute, I'm not supposed to give tax advice. You already do. Okay. There's nothing wrong with giving tax advice. there's only something wrong with giving bad tax advice.

Okay? So you can give good tax advice all day long and nobody's going to complain. It's only going to happen when you give bad tax advice. So, and you're only going to do that is if you show them how to pay a tax in the wrong way. Or if you don't tell them the truth about something like a Roth IRA conversion, you say a Roth IRA conversion is good in every case. what if your client finds out in five years that they should not have converted that to the Roth, and you're the guy who told them to do it? That's bad advice.

Okay. So that's why they ought to add this to their practice. It just makes it hugely unique in their area. And all it is is a $59 a month software that makes it so. So why not use it? Yeah. Wow. Yeah.

Yeah. So I think that what we've talked about many times is the complexity of things. You know, there's so many choices. And the tax code is, you know, 50,000 pages or whatever the case is. So a lot of people, advisors struggle with communicating tax strategies or complex tax strategies, right? Even just the basic ones. But what do you do to help advisors understand how to really clearly articulate these benefits and guide? their clients on the next steps. What are some of the thoughts around that process? Well, the first thing you're going to do is you're going to get a 1040. And you're going to know all kinds of things. Years ago, Mike, it's not as popular today, but for many years, advisors were taught and brought into the idea of starting a tax practice

just so as you can get your hands on a 1040. Because you tell so much about a client, right? Well, can you imagine having to create and build an entire tax practice and tax and tax preparation practice in order to just your ultimate goal is to be able to see their tax form? Well, we have that here because we're talking about taxation in the way we are, taxation and income, taxation and how it affects social security benefits or pension plans or any of those things. Okay. So it is for that environment and it makes it easy to do. And it's not complicated. All we're doing is taking some data off a tax form. We're not actually creating an entire tax return. It's much simpler than that. And I think that that's a key point is you got to know where to look to get the right data to then produce the right numbers that illustrate a point. And you let that speak volumes. You know, you're not speaking. And like you've said, many times, don't just take my word for it. Look, here's the numbers.

So are there any other specific resources that help to make that point, bridge that communication gap? You mentioned a $59 software. Is that the main point where you get that data, put it in there? And then you now are able to articulate some of those benefits. Well, yeah. Well, you do need to know more about some other issues. One of them is Social Security. Half of Social Security knowledge has to do with things that we'll never deal with in retirement.

We're talking about SSI benefits for disabled people. We're talking about divorced, former spouses and what kind of benefits that they would get. Children, benefits for children for a deceased spouse or for divorce. You know, those things we never get into. The other half that we do get into, as far so, simpler and easier to understand. And the SSA.gov, Social Security Administration, actually gives you the data. You can look your Social Security number up and you can look at your full retirement age up and you're going to know exactly what you're going to get in full retirement age. So you can calculate when you want to retire or what you can do with Social Security money in order to supplement what you're going to do with your IRA or whatever else you got saved up.

it also can the software also tells us, you know, what's happening with other incomes, such as rental income or other types of investments, whether they're tax-free investments or their, you know, capital gains. All of that will be in the software, and they're in drop-down boxes. You just plug them in off the 1040. So all of that is done for the advisor, and it's and it just drops down to the bottom line as here's your after-tax tax. disposable cash flow, and you'll know that as soon as you, you know, click on the next button. So let me give you a couple of ideas here on what we do in a seminar to get their attention because, Mike, all of this is going to happen at the conference table. The purpose of the seminar is to get the appointment. So all we want to do is get them, as to help them understand that they don't need, they don't know all they need to know

to make an intelligent decision with their finances going forward. And they need to come to us to get that information. So I'll give you a few bullet points here real quick. Would that be okay? Oh, that would be great. Thank you. Okay. All right.

So I'm going to give you some what, some did you know's, okay? Did you know, for instance, that Social Security income can be taxed a second time after paying it out of wages? Did you know that, Mike? No. So you send in your FICA, right? if you're self-employed, you're going to send it all in. If you're employed, then you're going to send half of it in.

Your employer's going to send half of it in. You pay a tax on that money that you're sending in, right? Up to 15% of your income, that money is going to be taxed before you send it in. Now, when you get your social security check, why would that be taxed again? But it is if you make the wrong decision in social security. If you don't see, the assumption is you're not going to have any more money than that. Well, no, you're not going to have to pay a tax on your Social Security income if you don't have any supplemental income. But if you have enough supplemental income, it affects the amount of the Social Security check that will be taxed.

It can be up to 85% of it. So you're literally being taxed twice on the same money. And I asked them in a seminar, how does that make you feel? Well, now they're mad. Okay. So, yeah, it's a great question to ask. Now, did you know that you may be able to reimagine your Social Security benefits to eliminate ever having to pay taxes on your IRA? Well, we discussed that earlier.

They don't know that. Okay. Did you know that you can suspend a Social Security benefit even after you started taking them and take advantage of a better plan? At FRA, they can actually, full retirement age and above, they can suspend their benefit and there's a roll-up. It's an 8% per year roll-up. that they get a larger benefit if they suspend that plan. And there may be wisdom and actually doing that. Okay.

Did you know that you may be able to not pay taxes on your required minimum distributions? Well, that's a big one. Yeah. Did you know that we mentioned it earlier? Did you know the Roth IRA conversion may be a bad idea. Have you ever heard, Mike, have you ever heard of Irma? I heard the acronym and I don't know what it stands for. Okay.

I'm not going to tell you what it stands for. It's a long name, but we call it Irma. Okay, we call it Irma. And what it causes is taxation on your Part B premiums for Medicare. If your income is high enough, it could trigger Irma calculations that will make you pay larger premiums. So typically a premium this coming year is going to be $174 a month on Part B premium for Medicare. that could go up to close to $500 a month if you have too much income. Wow.

So if you mitigate the income properly and you engineer it properly, you may never see that arm a problem come about. And also, you know, I mentioned it earlier. Tax brackets are changing. So how does that kind of affect your income in the future? Those are the bullet points I bring up in the seminar and I teach them to bring up in the seminar. And guess what?

We don't answer the question. We just give them the problem. You let them simmer on it. Right. Right. Where are you going to find the answer? My conference table at the office. Yep.

Yep. Wow. You know, one of the things that I just enjoy about what you presented here is you made a point about, you know, we'll grab that 1040 because that can, you know, illustrate so much to put in the software so that you can then present. that's a holistic approach. And if a CPA only did taxes, then that's a silo. But if they integrate in some of the things that we're talking about, they're giving more service.

If a financial advisor only did financial advice, that's a silo. So if they can bring in these tax considerations, it becomes that holistic approach so that their client goes, you really are like a one-stop shop and we've integrated so much of this. So I think that's such a powerful approach that you're helping your financial advisor clients activate. Sure, absolutely. Becoming an advisor on taxation is something that they're already doing. They just don't know they're doing it. If you bring up the word IRA, you're giving tax advice. If you're bringing up the words IRA Roth conversion, you're giving tax advice. So if you're saying buy an annuity because the taxes are deferred, that's giving tax advice. They're all.

already giving tax advice. It's just on an elementary level. So what we're doing is we're not saying go all the way up to the major league where you're teaching them, where you're doing tax returns. All you have to do is get your undergraduate degree and stay right here. And you'll be able to help them with these things. And you'll set yourself apart from everybody else. I love it. Well, as always, it's, it's always neat just to hear your perspectives from your vast experience in the industry. And I really appreciate your. coming back on. Let's wrap up with what's the best way that people can reach out and connect with you. Well, they can find me at Seminarsforless.com. My phone number, my email address, everything is there.

Or they can go in LinkedIn, look up Kim Magdalene, Kim, K-I-M-A-L-S-N. They can Google my name. They'll find me on the Internet. If you put my name in there, I'm the only Kim Magdalene in the whole wide world. So, yep, my name pops up at the very top, and then they can find me there very easily. Excellent. Well, Kim, thank you so much for coming back on. It's been a real pleasure talking with you again today. My pleasure, too. Thank you very much for having me on. 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. com.