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Highlights from this episode include:

  • Why it seems impossible to get ahead financially no matter how much income you earn (4:04)
  • The business owner’s secret you can use to reduce taxes even if you’re an employee (4:35)
  • Are you just working to pay taxes? How to know if you should retire immediately (7:38)
  • How relocation allows you to retire earlier than you thought possible (10:23)
  • Why paying penalties to the IRS can make you wealthier (13:42)

Ready to stop doing what you hate? Go to RetireNowRetireWow.com and fill out the Game Changer form to secure your financial future.

Read Full Transcript

Do you hate the thought of working past 55 or 60? Do you hate not being able to live the life you deserve today? Do you hate not knowing what your financial future looks like? It's time to stop doing what you hate, here's your host, Mr. Harold Green.

(00:21): Everybody. This is Harold Green and it is time to stop doing what you hate. How is everybody doing today? It man, it's just, it's been a very interesting day for me. It's been an exciting day. Some of it has been up and down. I mean, there's just like so many things going on. So many different, exciting things that I'm working on, especially one big project that I'm engaged in right now. And that is revamping our college funding services for the families we have on board and also the new families that are going to be coming on board in the future. I want to get into today's show and the title of today's show is retire or pay taxes that's right. Retire or pay taxes. And I've been thinking about this show for quite some time and just trying to figure out like how to put my thoughts together on it, how to position the information.

(01:17): And everything just kinda clicked today. When I had a meeting with a new client who has recently come on board, they are quite young. They make really decent income and they hit me with two questions that no one has ever asked me before. And the first question they threw out to me as we were reviewing their financial plan, going over adjustments that need to be made. They said, Harold, you know, this is awesome, but when should I retire? And no one's really ever asked me that before everyone who has come in, they always ask the question. When can I retire? Not when should I retire that those are two different questions. You know, the wind kind of retires like, Hey, you know, am I going to have enough money to make it? Am I going to be okay if I left my job at this time?

(02:22): Whereas the other question is when should I retire as basically, Hey, I love what I do. And you know, is there a point in time when I should, you know, look to move on and do something different? And that just kinda led us down a very, very, very interesting path. And we're going to get into some taxation and talking about tax rates and potential tax rates and where things are probably going to go in the future. And so just to kind of give you guys a heads up taxes, taxes have always been on the rise. And I say that because the amount of taxes has always gone up, whereas the rate of taxes that's based on who's in office and the rules that they choose to put in place. In other words, the type of laws they enact and so on and so forth.

(03:11): And that's going to determine the rate of taxes, but the amount of taxes is always going to go up. Why? Because income goes up and why does income have to go up? Well, because expenses go up. And one of the things in a group that I'm a part of the mastermind group that deals with these types of things and we were kind of throwing back one of the old things that we've looked at, which was Parkinson's law and Parkinson's was a he was an economist, any, any talked about some of the rules he had put in place and some of the observations that he had made, and one of them was this income will always rise. Expenses will always rise to meet the level of, of income. And that's why it just seems like for a lot of people, they can never get ahead because, you know, expenses will go up and so you'll get a pay raise.

(04:05): And the next thing, you know, you're like my God, it just feels like I'm still living paycheck to paycheck. And I'm making twice as much as I used to. Where's all my money gone. Well, it's going to expenses because a lot of times the expenses you have are after tax and that's something that's very hard to get away from. And that's why I always encourage my clients to look at setting up some sort of business on the side or something where they can begin to reduce their tax liability through business ownership. And I think that's a very important thing. So I'm just kind of laying some groundwork here and just moving forward into looking at our tax brackets. And so the 2019 tax bracket, you guys can go grab a tax reference sheet and look these things up. You know, from zero to 19,000 was 10% 19 to 78 was 1278 to one 68 was 22.

(04:52): And then from a one 68 to three 21 was 24. So there's not a lot of difference between, you know, earning 168,000 to, or 78 to a one 68 from one 68 to three 21. And that was like a 2% increase. So I think that group of people right there in the middle class got like the biggest tax break ever because from zero to 19,000 is 10%. I mean, that's, you know, that's the, the amount of taxes is kind of great. And then from 19 to 78 was 12. So that's a 2% increase right there. But the biggest increase game from the people that were paying 321,000 to 408,000 earning 321,000 to 408,000, that rate went from 24% to 32%. That is a very big increase. And then from the four Oh eight to the six, 12, that was a 35% increase. And then at the top over 612,000 was basically 37% of income is going to taxes.

(05:59): Now here's one of the things that we haven't even begun to talk about. We haven't talked about your state tax. If you live in a state that where you have a high tax rate, and we haven't even talked about the Medicare tax and the social security tax that they are also taking out of your paycheck. And so when clients come in and they are a high W2 income earners, which means they're like doctors or, you know, they're nurses and they're just high, high W2 income earning families, they're getting smarter dashed left and right when it comes to, to paying income taxes and also all the taxes that are with help from their paycheck. And so I want to go over the four types of people that I think should just trade up retire and call it a day. All right, person, number one, it's a person with a decent size pension.

(06:59): Let's say, for example, you are earning $200,000 a year and you got up maybe two to $3 million in a 401k, or just say an assets that you have the ability to tap. I suggest you look at retiring ASAP due to the fact that your income now, unless you love what you do, your income probably has stagnated at the top of of where, where it's going to be for awhile. And you're just working to pay taxes at that point. So you're fine funding your 401k, which is great, but with about two to 3 million in there, I mean, you have enough already. So if you're in that situation and you're kind of thinking, Hey man, like I'm there. I, I, you know, I don't know how much I want to keep, you know, how long I want to keep doing this. And I think it's, it's time to really sit down and have a conversation about what are the next steps in life, and maybe sit down and plan out something for the next six months or so.

(07:53): So to look at walking out that door, but, but that's gonna require you to look at your financial plan to make sure you have all your ducks in a row and make sure your, your, your three pillars of a successful retirement planner in place. And that's probably going to be my next show. And now I'll talk to you guys a little bit later about the three pillars of a successful retirement plan. You want to make sure those things are in place before you walk out the door, but if you're getting a pension and that pension ends a substantial pension, and let's just say, maybe it's a third or even a quarter or a third of your income. And then we can replace the rest with interest in dividends from your investment accounts. That's that's, that can be a phenomenal thing. The only caveat to that is if you retire and you don't have excellent medical plan in place, that can be pretty costly, but with a few million dollars, we can figure out how to cover a healthcare plan that will get you until we will take you until you're 65 years of age, which then you would, you would qualify for Medicare.

(08:48): Okay. The next person that should look at walking out the door is a person that has enough income from their assets alone and not looking at pension or anything like that. But you just have enough money that would generate enough income that will last you the rest of your entire life. Maybe it's time for you to hang it up and do something different. And that's the person. Number two person. Number three is someone who has the ability to maybe set up a business to provide some sort of good, some sort of service to them, humanity. And with that being said, you have enough income coming in from other sources and your business is just a tax show for you to help you minimize some of the taxes that you're probably going to be paying on your IRA assets in retirement. And the fourth person is a person who can probably relocate to a area that has a lower cost of living.

(09:39): I meet a lot of people here in Hawaii that aren't born and raised here. They've built their lives here. They enjoy it here. And some of them quite frankly, have moved back to places like Florida or California. Yeah. Certain parts of it. Anyway, just because of the cost of living is so much cheaper and their money will last them such a long, long time. I've even had clients move to foreign countries because the cost, so living is so cheap there and there's just so much more to do, and it creates a better lifestyle for them. And those are the type of, of, of people that should look at, Hey, am I just working to pay taxes? Or, you know, is there something more to this? And if you're out there and you're thinking about this, I want you to go to my website, retire now our wild.com and download that game changer form and get in contact with me either through the website or via phone (808) 521-4401.

(10:33): And let me see if there's something I can help you with, or let me see if I can help you with a situation. Another thing I wanted to kind of bring up was part of the conversation I was having with someone in regards to having taxes withheld from their paycheck. And I want to attack the notion of having so much money withheld from your paycheck that you feel like you're just like, you're, you're struggling and, and life is just not going the way you want, because you're having so much withheld from your paycheck because you don't want to pay taxes up into the year. You know, I hear that so much. I don't want to pay taxes at the end there. And I think it was one year I owed, I think it was almost a hundred thousand dollars in federal taxes.

(11:18): And I knew I was going to hold that much because I had a, a pretty, a pretty decent year. I can't remember what year it was, but it was the year that I think I went home and cried because of the amount of taxes that I had to pay. And some people would be like, yeah, I just shut up and stop complaining. You made the money. And then, you know, just pay the tax. But here's the thing, you know, making that money was not easy. You know, it wasn't like I woke up every day and came to work and then people just came in and just gave me tons of cash. I had to, I had to study, I had to work hard. I had to get up early and go home late, you know, have late meetings, early meetings. And it was just the year where I felt like, I didn't know if I was coming or going and didn't even know my own name, but it was a very productive year, but I just didn't get to enjoy those funds coming in because I was too busy doing the work.

(12:03): I was too busy providing for my clients and making sure that they were okay. And of course I was rewarded in the end with the revenue, but when I just looked at what I put into it and what I had to handle with, to the IRS, I literally just, I went into like a brief depression and I thought to myself, is this even worth it? And so I had to get smart about it. And so what I did is I called my tax pro and I said, Hey, look, and just to let you guys know, I'm not a tax professional, am not giving you tax advice. I'm just simply saying that by putting together a long-term plan, you could have some substantial benefits and your tax situation, but these things are going to have to be vetted out. Okay. But I called them up and I said, look, the IRS is saying, you know, I owed them X number of dollars.

(12:48): And you know that because you've done my taxes and this is what we're going to owe. And I have two choices. I can either pay them the taxes as I earned the money. Okay. Or I can invest the money and put it to use and to something different. And then next year, when the taxes are due, I can just take that money out and then pay the taxes. And he said, yeah, but you're going to be penalized. And I said, yes, I understand that about the penalties as about what, what's the penalty, what am I looking at here? I had to tell you guys, it was like four or five, $600 or something like that, the penalty. And I just, I just like, are you kidding me? I understand the rules and things like that, but if I can get a benefit and if it's okay for me to eat that penalty, and if the IRS is, if they say yes, yeah, you don't need to pay the taxes, just pay the penalty.

(13:34): That's what I'm going to do. I'm going to pay that penalty all day long, because if I can put my money to good use and put it in a place where it's going to generate me a decent amount of return, then guess what I'm going to do. I'm going to do that. And then I'm going to pay the taxes when I owe the taxes at the end of the day. And by the way, we do save for taxes. We do put money aside for taxes. I just don't hand the moment to the IRS because I can put them in a place where it makes sense for me. And so if you're out there and you're having so much money withheld from your paycheck, and because you don't want to pay taxes and you know, we can calculate what you're going to owe and what the penalty is going to be. And if you can put that money to better use throughout the year, why not be diligent and do that. And that's the most important thing is being diligent enough to do that. So thank you guys for allowing me to share it with you guys, retire, pay taxes. If you have questions for me, give him a call. (808) 521-4401, or go to the website, download the game changer form and get in contact with me. And so again, thanks for allowing me to share. And until next time everybody, one, two, three, Let's get it.

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