Episode 12: Did We Get a Tax Gift?

ABOUT THIS EPISODE

On this episode of the Build Your Life Podcast with Financial Expert John Browning, we're discussing the tax gift that some of us may have received as a result of this current global crisis.

Listen in to learn all about your government rebate (or stimulus) facts. With the new tax deadline this year, what should you be focused on right now? And, how does this gift affect your taxes and investments?

For more information, visit www.GuardianRockWealth.com to learn more about what John can do for you.

Welcome to the building your life podcast with John Browning. Building your life is a relaxed and unedited conversation with financial expert John Browning. John's the founder of Guardian Rock Wealth in Lake Forest, Illinois. He's also the author of the Book Build Your Life, not a portfolio, a guide to your financial future based on your personal values. Now you can purchase John's book on Amazon, or you can stay around to the end of today show and I'll tell you how to get a free copy milk right to your door. I'm Michael Law on, your host for the next few minutes as we chat with financial expert, business owner and author John Brownie. Well, Hello John, how are you doing? Welcome back to your podcast, sir. It's good to be here. Thanks a lot and we're excited. Excited to talk about tax gift today. Yeah, I hear we're getting one in. How appropriate, because you know, we're recording this on April fourteen, so tomorrow is tax day, when we have to be at the post office by one fifty fifty nine p m or something like that. Right. Well, not this year. That's actually one of the gifts that we've been given this year is we don't have that deadline we have. They have delayed that for a bit. So if you're having trouble and things aren't quite what they normally are, then you can wait a little bit to file your taxes, although I don't recommend that. If you're getting a refunds, yeah, you'd be very careful about that and probably you've already filed if you're getting a refund. But also people should know that the earlier they file their two thousand and nineteen taxes, if they made less money in two thousand and nineteen than two thousand and eighteen, they may be eligible for more rebates from the government. Their government's actually sending people one, two hundred and sometimes more, depending on your situation. And if they're going off of a higher income of two thousand and eighteen in two thousand and nineteen, get that tax return in. But I guess they might not...

...hear this until it's too late. But but that is that is the sort of one of the strategies being used. Maybe I could have then doing a dend them. What do you call that? When you get your taxes and you'd Redo them legally? Yeah, you can, yeah, you can do amendment. It's your taxes. Shah something like that. Obviously my wife does all my finances and taxes. I don't you know what the fright word is, but I know there's a way to do that right. So that's a tax. I get. That's very internet. I did not know we didn't have to be there tomorrow, but that's okay. That's the government is stepping up and doing a lot of things to help people in this time of the pandemic, right in the COVID nineteen pandemic that we're in the middle of, and that's that is encouraging. What other are there? Other, I guess you know tax, tax situations that are coming up with this whole covid nineteen issue. What other things? When it talked, you know, when we think about an investment portfol whail, what other strategies or thoughts do you have around taxes and maybe a tax gift of the government has available forth it? Most of us just don't even know about because we're not, you know, smart like you. Well, I just I am not necessarily smarter than anybody, but I just happen to focus on this area and for a long, long time. But I will tell you this that I think we talked about last time the idea that some people are using the strategy of the deer in the headlights, where they just freeze and they don't do anything. During this market environment. There's actually a lot of things that you can and often should be doing, and one of those is paying attention to the tax implications of what we're going through for and and some of the things that the government is doing. One of the things is your RMB, which is your required minimum minimum distribution if you have to take a distribution from your IRA or for one K or pension. They are suspending that for this year, so you might be able to keep that money in there and keep it growing tax free.

If you were in an instrument and didn't have cash to meet that RMD, you can go ahead and allow that to potentially appreciate a little bit more rather than and liquidating now at this lower price. A lot of advantages to not, if you don't need it, take your required minimum distribution this year. That's one thing. One of the others that we've been working with a few folks on is the conversion of a regular IRA or individual retirement account to a Roth IRA, and this can make sense, but only for certain people. And the difference is that once it's in a Roth, when you withdraw those funds, when you're older and eligible to do that, when you withdraw those funds, their tax free. The downside of it is today you have to pay taxes on what you're rolling out of that individual retirement account. Okay, all right, just that's what down. I'm not the planetial bid word that you are. So you got both of these are our savings vehicles. Ones and traditional IRA, and the other ones are raw. So just keep it really simple. The traditional is the one that I would put money into before taxes. That's right. You're putting money, not necessarily for tag, but you're putting money in there and as you as you withdraw it later on in life, say when you're fifty nine and a half or when you take your require minimum distribution at seventy, you have to pay taxes on that and any games that you have in that portfolio. Okay, with a wrath IRA, you're you've already paid the taxes on those funds. So when you withdraw all that, they allow you to take that out without paying taxes on the Games you've made. Okay, all right. So in my world, in my brain and correct me if that's wrong. That the wrath IRA, when I...

...take it out, it's that money is tax free because I've already paid the taxes before I ever put it in there. That's that's correct. Okay, now what you're saying is there's a strategy that if I have money in the traditional IRA, that that's going to be tax there's a way, there's a methodology or strategy to move it into a Roth IRA. Help me understand that. And why would I want to do that if I'm on these right people? Right? So you can convert a regular IRA into a wrath IRA. You just have to pay the taxes, and a lot of people are one can't afford to pay the taxes right now. And you don't have to convert the whole thing, you can convert just part of it. Oh so that that can help you if you're having trouble affording to pay those taxes. But what's happened since the market has dropped? You are potentially paying less taxes than you would have a month or so ago on a higher amount. M and next, if you believe is I tend to believe that in the future, with all the stimulus that we're having now, our taxes are likely to increase. You're paying taxes now at what is potentially a lower tax rate and on a lower amount. If we have a recovery, which we believe we will, you see how that works through. Yeah, you're paying less on less of an amount, and then later on, when you would draw it, you don't have to pay taxes when taxes are potentially higher than they are today. Right, okay. So that that that makes sense, and I would agree with you, and I think most people do, that you know the the direction that taxes are going to take in the next decade. Probably they're going to go up. That's whatever anybody I talk to that's typically the okay. So then the question of the strategy is okay, so how do you mitigate that? I guess the way I would say, well, you can move your money now at a and pay less, pay less in taxes today, then you will in a decade, let's say. Right, right, that's the idea. Okay, and then in a decade you pull that money out of your wrath. I write this tax free because you've already paid the...

...taxes on it previously. Okay, that's great. Yep, okay, absolute. That's that's a really interesting technique that'll a lot of people are very interested in doing and we're working on some of those. And the other thing that is, you know, something that's obvious to me, but again this is because this is what I do every day, is the idea of tax loss harvesting. And what does that mean? Well, that means that, given given where the market just went, you know, we just had a major correction to the downside. Right, you may have in your portfolios some long term gains with or long term gains that are no longer gains their losses. Right, you can sell those and generate a tax loss, as long as you've held that position for more than twelve months, okay, and and you can. Then, potentially you can either reinvest it or keep it in cash, whichever is appropriate for you. But a lot of times it's fairly easy to find really good replacements for that at very attractive prices of good, solid businesses. You can actually reinvest that, as long as it's not the same security or the same instrument that you use before. So you get to write that off on your taxes. If you've got a taxabill account on next year's tax return. HMM, now, that's interesting. That that that's what I would call a high level strategy down that's why people need to work with you, because I would never think to do something like that. But that makes it. That makes a ton of sense. Yep, YEP, that we've we have. We have done that with every client that we could. We've instituted that strategy. Sure. And so if somebody's listening to this and they're not a client of yours and they're sitting here scratching to hair gone, will I might be able to do that. Can they just like reach out to you at your website, Guardian rock wealth and schedule and appointment, or I mean just to have a conversation, because howls. Yeah, absolutely, we...

...love to talk to him. We love to help people and that's why we're in this business. We're guardian rock, but on our email we also are advocacy investing, and that's because deep within our core about who were about is that we are we're advocates. We're not really sales people. Were advocates for for our clients and for anybody who needs our help. So reaching out to us through the website, there's a contact US section, there is super easy to find. Just Guardian Rock wealthcom to contact us for him and we will come right back to you. And of course you can always contact us. Just give us a call. Three one, two, three, seven, two five thousand. Easy to remember. That is we should put a jingle to that. I remember. I remember growing up there was a carpeting blaze in Chicago. I think it was empire. Yeah, I think it to you now. Yeah, and so I'm jingles just really drive it in there. But the other thing they do on your website is if as the requesting that appointment, is that you can request the copy of John's book, because John's an author of a book called the what build a life, not not just a portfolio? HMM, and that's available. John's happy to put a copy that in your hand. So you can always request that on his website as well. So let's talk a little bit about how does this crisis affect portfolios in general? Is that a fair question, or is that to to nitty gritty? Well, it's a fair question, I think. What what people have to realize and what tends to exact orbate? That's a big word that really just use that word. Make it worse. There you go is is the idea that over the past many, many years it's become quite the quite the thing to do to just invest in and index, just close your...

...eyes and just invest in the index where, which is which is fine for for some investors, but the problem is you're getting both good businesses and not so good business as. When you do that, you're just, you know, the shotgun approach. Let's just buy everything, and then the problem is when something like this happens is everybody sells everything, including the good businesses that are still likely to be good throughout this issue and beyond. So stay being away from for most people. Again, I don't know your personal situation. So this, this is not personal investment advice for but for many, many people, staying away from the indexes and selecting those businesses. And I you notice I don't use the word stocks or equities because when we do our analysis we're looking for and at businesses and not stocks and securities. It's just a nuance that we may we're looking for good management, good businesses that are going to do well in most, if not all, economic environments, including this one. And since everybody's getting out of the index, is all at once and these businesses are being penalized as well as the ones who aren't going to do as well. It's a great time to pick some of those individual businesses up. Yeah, it's kind and I think you've said it earlier in another podcast, is they're on they're on sale right now. They're on sale. That's right, and I thought that. So when you say that, what runs through my mind, and I'm going to have to go to stock but let's say I'm going to buy, you know, shares in some company and two months ago those shares were, I don't know, three hundred dollars a share, I don't know, and today, because of the correction, those shares may I may be able to buy those shares for a hundred twenty dollars. Is that what you mean by on sale? Same Company, same management saying there. It's just that we've had a correct and so the the perceived value has gone down. Is that? Is that right? That's that's basically...

...right. That's right. So so you know, when you go to one of those stories where everything seems like it's always on sale, they just rotate it like colds, is comes to mind. Yeah, so I go in there in my wife is Oh look how much money I saved. I'm like, yeah, but how much did you spend? The right but there's always something twenty percent off or fifty percent off and that makes us feel really good. Well, we don't necessarily say that about the stock market, but the same thing is true today. You just have to understand and know what you what it is that you're buying and make sure it's a good business. Yeah, and that's that's a that's a great point down. We probably should spend more time on that, because I've always thought about investing and things as yeah, you're buying stocks, but what you're putting bring to the tables like well, yes, you're buying stocks, that you're buying stocks in a company or companies, and you do the research on the companies around their management, philosophhy and different things like that. The really all of that impacts the stock value and stock price and at some level, because great companies have solid stock prices. Right, right, that's true. And and there are, you know, frankly, there are some businesses now that is, as horrible as it is to really think about the reality of it, they're probably going to actually do better because of what has happened because of the business that they're in and the way that they run their business. And those are the types of deep analysis that John and his team does that most people like me and others, many of our listeners, probably probably don't do right. I can't get that kind of information looking online at stock prices and things. You've got to dig deeper and you really have to understand what you're looking for and what is a good management team, management philosophy, track record, things of that nature.

How have they endured other types of, you know, events like this, maybe in their industry or whatever, to be able to know? How are you going to protect your clients money at the end of the day the best you can and provide for them so that when the cycles happen, because we've talked, they happen at a regular pace and cycle? How is it that your clients aren't destay? How can we make sure that the next time this happens we're not going Oh, we're saying, you know on, yeah, bomber, but at the same time John's got me protected. Right? That's the idea. That's the idea. Is Not meaning that that you won't experience losses. It just means that those losses will be controlled. There will be some offsetting things in the portfolio and they're again ways to do that. Consistence, consistently. Yeah, and that that that takes a lot of the steam out of the loss, especially when you have the long term perspective. In what came to me. When you're talking about buying at a discount or buying on sale in the coals analogy, and my wife does the same thing, she comes so much she's excited because she saved money today. But I assume when you're buying, buying a stock or a business stock today at a discount, I'm probably not going to get super excited about that. I might be well good, I bought it teep. where I'm really going to get excited is three years, five years and six years down the road when that thing has really grown, because the market is going to come back. You've positioned me well and I bought it a discount. My joy might come to day, but it's really going to come later as I see that portfolio grow. And then you've got all kinds of strategies that you you helped your clients with to make sure that your repositioning and making sure that they're protected. That's right, Yep, that's very cool. That's why, John, you you bring so much to the table. It's not just, and I love it's just not buying stocks, because you know we can just go online to do that. It's so much deeper. It's looking at the companies, their management, their philosophies, and it's understanding all these strategies, many of which, I...

...know I've never heard of and they just come well, I won't say naturally to you've studied this for years. That's why you're in expert but it really helps to understand that, however the markets go, there's always opportunity and it's great that that's what that's what we really want. So let me just encourage our listeners, John, reach out to you. Guardian Rock wealthcom and there's your website. There's a contact US button there, there's a phone number there. You can reach out to John, and he is a working remotely, like most of us are, but you can reach out to them and through emails, through phone calls, and just have a conversation with him and let him talk talk with you about your situation and how he can help provide safety and security for you, your family, and help you build a life, not just a portfolio, which is the title of John's book, which you can get a copy of as well at his website. So, John, thanks, thanks for being with US and helping US understand a little bit about the tax gifts that the government is providing for us under certain certain circumstances, and wish you a Great Happy Tax Day tomorrow as we record this, and hope you enjoy your time in a Wahoo. All right, thanks a lot. We'll see you next week. All right, buddy, take care right. So, thanks for listening to the building your life podcast with John Browning. Be Sure to subscribe to this podcast so each new episode will be sent to you automatically when it is released. Have a terrific day.

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