The Best Part of the Tax Code: The Roth IRA

By Dean Barber

July 22, 2021

The Best Part of the Tax Code: The Roth IRA

Key Points – The Best Part of the Tax Code: The Roth IRA:

  • Ed Slott on Roth IRAs
  • Roth Conversions
  • Congress and Tax Proposals
  • Today’s Market and Economy
  • 24 minute read | 37 minutes to listen

What is the best part of the tax code? We say it’s the Roth IRA. And guess what Peter Thiel would agree, he has a $5 billion Roth IRA. Join Dean Barber and Bud Kasper as they break down the Roth IRA and the importance of tax diversification, asset location, and how you can get as much money as possible into a tax-free environment.

Complimentary Consultation

Video: Roth Conversions Before & After Retirement

Podcast: The Guided Retirement Show Episodes

The Best Part of the Tax Code: The Roth IRA

Dean Barber: Thanks so much for joining us here on America’s Wealth Management Show. I’m your host Dean Barber along with Bud Kasper, and today we are going to talk about asset location and Roth IRAs. 

The $5 Billion Roth IRA

It’s been all over the news, but Peter Thiel back in the late ’90s had a $1,700 Roth IRA that he used to purchase PayPal, shares of PayPal, for fractions of a penny. And he did that all inside of his Roth IRA. The $1,700 investment in PayPal turned into $3.8 million within a year and is now worth $5 billion with a capital B.

Bud Kasper: That’s an incredible story.

Dean Barber: I want to know what the next PayPal is so that I can buy some of that in my Roth IRA.

Bud Kasper: If we knew that, let’s go. Let’s share it with everybody in our audience, too, so we can all get rich.

Ed Slott on Roth IRAs

Dean Barber: Well, it’s interesting, Bud, because you and I have been studying with Ed Slott, America’s IRA expert, for years and years and years. He wrote his very first book, The Retirement Savings Time Bomb and How to Defuse It. His new book’s out, The New Retirement Savings Time Bomb and How to Defuse It

He’s on episode 45 of The Guided Retirement Show. And if you have not subscribed to The Guided Retirement Show podcast, you need to do that. You need to go straight to episode 45, where Ed Slott talks about creating a tax-free retirement.

Dean Barber: He also is interviewed on episode 31 of The Guided Retirement Show. It’s fascinating that, for years and years and years, Ed has said that the best tax code was ever written was the Roth IRA portion of the tax code.

Bud Kasper: I agree. He’s a remarkable guy. I’m not making light. I’m talking about this for our listener’s purpose about how much of an expert this guy is. This is not something that was introduced by himself. I mean, these are publications like The Wall Street Journal, Business Week, Bloomberg, et cetera, who recognized his incredible skills explicitly associated with IRA accounts and how to maximize the results for people.

Dean Barber: Well, and he’s done several different PBS television programs. I think he now may be the number one fundraiser for PBS.

Bud Kasper: He is. That’s a correct statement. We’ve been under his tutelage, if you will, for 15 years. Twice a year, Dean and I and others are with him, learning the latest things that are going on. We go through many private letter rulings produced by people trying to get an exception, if you will, to the IRS rules.

Traditional Versus Roth IRA

Dean Barber: Right. Here’s the thing, for somebody coming out of school, starting their job – look for the Roth IRA and look for the Roth 401(k). Now, there’s a big difference between the traditional IRA and the Roth IRA. There’s a big difference between the traditional 401(k) and the Roth 401(k).

Dean Barber: JoAnn Huber, our lead CPA here, and I in episodes one and two of The Guided Retirement Show go into great detail on Roth versus traditional, and we go through when you might want to use traditional versus Roth, and when you might want to use Roth versus traditional.

Understand Tax Consequences

This is key, Bud. Because one of the things that you and I believe is that nobody should ever invest in anything until they know what the rules will be when they get the money out.

Bud Kasper: Right. How’s it going to impact me?

Dean Barber: Right. Right. What are the rules? When are you going to use it? Are there going to be early distribution penalties if you take it out before 59 and a half? Are there adverse tax consequences? 

How will it play with the rest of the income you’re going to have in the future, especially in retirement? You have to have that overall financial plan completed before you start saying, “Okay, I’m going to invest in this, or I’m going to invest in that.” The Roth IRA, though, for a young person, no question, will be the best place to start putting money.

Why Wouldn’t I Earn on that Money Instead?

Bud Kasper: We’ve mentioned this many times before, but with people with 401(k)s and now most companies, especially with any size, are offering Roth 401(k)s. And of course, people will say, “Well, I’m going to make my contributions pre-tax because that way I’m earning on money that otherwise would go to Uncle Sam.” And while that is an accurate statement, it isn’t the best result when you get to the end of your participation in that 401(k).

Dean Barber: Right. It depends, Bud, on how old that person is and what their tax rate is going to be in retirement. 

A Traditional Example

Let’s say, for example, someone is in their mid-fifties. They’re in their peak earning years, and they are in the 33% tax bracket, and they have no debt. In retirement, they plan to take income in such a way where they’ll only be in the 22% tax bracket.

Well, I would encourage that person to use the traditional 401(k), get the deduction, and then begin conversions after retirement to get that money into the Roth IRA because you’re ahead by 11% immediately.

Bud Kasper: Yeah. That’s mathematically correct when you’re sharing that with our audience. In the same token, I’m saying, “Keep it simple, stupid.” 

I love the phrase; you have a choice. You can either pay the tax on the seed or the tax on the harvest. Well, if you’re a young person, you got a lot of time, that harvest could be quite considerable.

Dean Barber: Yeah, no, no, and I agree. For the young person, it’s almost always better to do the Roth portion of the 401(k).

Roth Conversions

We’re going to start talking about Roth conversions, and we’re going to lead off with a little snippet that Ed Slott did on The Guided Retirement Show talking about a Roth IRA conversion back in the late ’90s when this originally came out. 

Ed Slott Tells a Roth Conversions Story

Ed Slott: I had one client back then who got laughed out of his job based on my advice. Of course, he got the last laugh. Both he and his wife were teachers, and they were close to retirement, and they had in there, I forget, a 403(b) a or 401(k), whatever they had, about $500,000 each.

This guy came to see me, and I said, “You know what? Take that deal.” This was ’98, the first year, and convert everything. And he says, “I can’t. I’m going to make over $100,000.” They had that limit. I said, “Do it. All right. If you can’t, you can’t.”

He came back the following year for his taxes and said, “I did it.” I said, “How’d you do it?” He said, “I believed in what you said so much, I took a six months sabbatical so I would have my income go below $100,000, and all my teacher friends laughed at me. They say, ‘You’re going to give up all this income just so you can pay more tax?'”

And you know what? This guy died recently with an $8 million tax-free Roth IRA.

Dean Barber: Amazing.

Ed Slott: And so did his wife.

Dean Barber: Amazing.

Ed Slott: $8 million, all tax-free. So people look short-sighted. Yes, he paid some tax, but he got that four-year deal, which was nothing to him. So the $500,000 he had eventually grown over many years, and then his wife, he did the same investments in both of them, about $8 million bucks. It was unbelievable, all tax-free.

Dean Barber: All right. That’s Ed Slott. I talk to him on episode 45 of The Guided Retirement Show. If you have not signed up for it, find it on your favorite podcast app, find it, and subscribe. You can also find the podcast on YouTube.

The Original Roth Conversion Deal

Dean Barber: So Bud, you and I had heard that story before because obviously Ed’s told that in training classes before, but what he was talking about was doing a Roth conversion back in 1998, whenever the deal first came out where you could convert from a traditional to a Roth, and then you could spread the tax liability out over a four-year period, which was great.

IRAs and the SECURE Act

I had a few clients that did the same thing at that time, and I tell you, they couldn’t be happier. But we don’t have that deal today, but we don’t have income limitations on when you can convert. And especially today in light of the SECURE Act. The SECURE Act is the act that stands for setting all congressmen up for a secure retirement. No, I’m kidding.

Bud Kasper: That is a true statement, folks. He’s as sincere as he can be.

Dean Barber: It’s supposed to be setting everyone up for a better retirement or whatever. But anyway, Ed made it funny; he said, “Any time they say something is secure, you better be worried about it,” because actually, what they’re doing is they’re coming for your money. And what they’re doing in the SECURE Act is they’re coming for your IRA.

It used to be, before the SECURE Act, you could pass your money down to the next generation, and then that next generation if you had set it up correctly. You could do what they call a stretch IRA and stretch the money out over their lifetime. So they would have to make small required minimum distributions based on their inherited life expectancy, but they could keep that money in there essentially for years and years and years and years and years.

Dean Barber: SECURE Act comes out and says, “No, we never intended for this to be something that an IRA could do. So we’re going to change the rules on you. And what’s going to happen is when you pass away, whoever your beneficiary is, if it’s a non-spouse beneficiary.” Some other rules will allow some people to stretch still, but the vast majority of people will have to take that money out of the IRA within ten years.

The Tax Implications for Inherited IRAs Under the SECURE Act

Of course, then what you’re going to do is you’re going to say, “Okay, that money has to come out of the IRA and will be on top of any other income that those beneficiaries have. What in the world is the tax rate going to be on that?” 

So people are now looking at it and saying, “If I know that that tax time bomb is coming, let me look at systematic, slow Roth conversions a little bit at a time. Take me up to the top of the tax bracket I’m in.”

Methodical Roth Conversions Over Time

Dean Barber: You have to do that longer-term forward-looking tax planning though, Bud, to be able to say, how much should I be converting? Should you convert every year, or are there particular circumstances when you should convert more?

Congress Wants Your IRA Money

Bud Kasper: Exactly right. We did more conversions at the end of last year, especially at the end of last year, because that’s the rule. You have to get it done by that particular period. But incredible. Incredible. And it’s so impactful. What do you mean Congress didn’t understand the beauty of it? You’re so short-sighted or stupid that you didn’t see where the benefit was? We should have the benefit.

I’m telling you, and I’m going to be making a political statement here, I’m scared to death if they touch this Roth any more than what they’ve already done by taking the stretch away. Even though we still have ten years to get that payment out, that’s just a frigging money grab by Congress to get some more money out of the IRA system.

Caps on Retirement Accounts?

Dean Barber: Well, the way that they’re spending and giving it away, they’re going to need it, Bud. Here’s something suggested here in the last couple of years, and that is putting caps on the amount of money held inside of retirement accounts. 

So proposals have suggested that caps on Roth IRA balances of somewhere between $3.4 million and $5 million. So what are they saying? that you can’t accumulate more than $3.4 to $5 million inside your Roth IRA? Now, none of that passed. It has not been signed. But it gives you a clue into what people in Congress are thinking.

Bud Kasper: Yeah. You better be thinking, ladies and gentlemen, about who you’re voting for because it could be very well voting against the success that you could have in your retirement because they’re infringing on things. We’re spending money so much, and they’re going to have to make that money up some way. You know what’s going to happen. They’re going to come back to the biggest bucket that’s out there and say, “We’re going to change the rules on this.”

Dean Barber: Well, Bud, what this does is it allows politicians to say, “We’re not raising taxes,” but they’re increasing revenue because they’re changing the rules on our retirement accounts, especially the inherited rules.

Bud Kasper: Right. Yeah, and that’s changed so much. So when you look at the benefits of Roth, you get tax-free withdrawals at retirement, you get tax-free earnings, you can access your money if you need it, tax-free. You can contribute as long as you have earned income. 

There are no obligations about when or how much you can take in a particular period, other than the 59 1/2 rule and the five-year rule. And pass money on to heirs tax-free, even though they have to now take it out within a 10-year timeframe. It’s a beautiful thing. It was more beautiful a year ago.

2020 and the Roth Conversion

Dean Barber: Well, but Bud, there’s always something happening in people’s lives. Things are constantly changing. Last year there was a larger opportunity for Roth conversions because people may have been out of work for some time.

Bud Kasper: Yep, income was down.

Dean Barber: So, the income was a little bit lower.

Bud Kasper: Tax is lower.

Dean Barber: Right. So I mean, there’s always something going on, but you need to be looking at this. Then you should always ask the question, “What’s the tax situation going to look like whenever I retire and start taking income from my traditional IRAs? What’s my tax situation going to look like? Could I pay some taxes now at a lower rate and allow that money to start accumulating tax-free, and then I could get that money out tax-free in retirement? I’d be better off.”

The Roth IRA is Still Untouchable by Uncle Sam

Bud Kasper: Right. And when you look at it from a tax planning perspective, the question is always going to come back to, where do I have money located? And the more money that you have in the tax-favored status of a Roth IRA account means it’s untouchable by Uncle Sam.

Dean Barber: Yeah. Bud, there were so many people back in the day when that first came out, they’re like, “I don’t trust the government. I’m not going to put any money into a Roth IRA because they’re going to come out, and they’re going to change the rules, and they’re going to figure out a way to make that money taxable.” Well, that’s been since 1998. They haven’t done it. I don’t think they can figure out how to make the Roth IRA taxable.

Now, these caps, I don’t think that’ll ever go anywhere, but who knows. The bottom line is this, though. Everybody that’s saving needs to understand the amount of money you have; while that’s important, the tax diversification you have and the asset location you have are even more important.

Dean Barber: So I want to invite you to watch a video that JoAnn Huber, our CPA, and I do, talking about Roth conversions before and after retirement. There are a lot more resources out there as well. I mean, that’s what we’re trying to do, Bud, is provide the education so that people can make informed, intelligent decisions when it comes to their money.

Bud Kasper: Absolutely. I mean, simply stated, wouldn’t you like to have an asset that will never be taxed again? That’s so significant.

Dean Barber: Yeah. We’re working on a video. It’s almost done. Within the next week, it’ll be out, and it’s going to show you what life would look like if you’d saved a million dollars for retirement, kind of the theme song at the opening of the show: If I Had A Million Dollars.

Congress Won’t Stop the Money Grabs

Dean Barber: I think if you ask the question of the government, “So what you want?” They’re going to say, “I want your money.” Right?

Bud Kasper: That is an evergreen situation for the government.

Dean Barber: I want your money, and Bud, it’s true. I mean, look at the SECURE Act and what they did with that. It’s the most significant money grab I’ve seen, and the SECURE Act passed with strong bipartisan support. And so there’s a new piece out called, they’re calling it the Son of the SECURE Act, and there are all kinds of different things that they want to put on. Other rules and stuff for your IRAs and your Roth IRAs.

At the rate Congress is changing the laws and the rules regarding the tax code, especially the tax code surrounding your retirement accounts, the lack of a comprehensive financial plan will cause people to make irreversible financial decisions.

The Lack of a Tax Plan in an Ever-Changing Tax Code

When these laws and these things change, if you’ve got a complete plan done and you can adjust that plan for the new laws, you can see what’s the result to you. If you don’t have that plan in place, then what you’re going to do is you’re going to be left scrambling and saying, “Well, what do I do now? What do I do now? My neighbor did this, my brother-in-law did that, and my coworker did this. I don’t know what to do, but I have to do something because I’m going to be in trouble.”

Well, that’s what people do, Bud. They need a comprehensive plan. But I think it’s just so critical right now, the rate at which things are changing. If people don’t have a plan, they’re going to wind up making bad decisions.

Looking at All of the Factors of Wealth Erosion

Bud Kasper: We have to adjust. Being a CFP®, as long as I have, I’ve seen all the different plans that we’ve created over time. It’s becoming more and more critical that people understand that planning is one of the ways that you mitigate some of the erosion that you’re going to have on your money in retirement.

Here’s a case in point, Social Security. When they visit with us, many people don’t realize that Social Security can become taxable. Now it’s by a formula, but remember, part of what we’re talking about on the show today is asset location. If you have a considerable amount of money located in Roth IRA accounts, it doesn’t go into the formula on Social Security. So, therefore, there’s more money you keep in your pocket there. Are you starting to understand this, folks?

Bud Kasper: I mean, these are opportunities that you’re missing out on if you don’t understand what comprehensive financial planning is, and by the way, working with a firm that concentrates in that area.

Dean Barber: Well, Bud, you’re a hundred percent spot on there. And we always say that it’s not about how much you make. It’s how much you get to keep. So that whole discussion, I think, started around the idea of investments. So if you get a good return, you make a hundred percent, and then you lose 50%, you’re back to ground zero.

Bud Kasper: You’re right. You’re basically at even.

Dean Barber: The interesting thing is that if you made a hundred percent one year and lost 50% the following year, what’s your average annual return? 25%. But you still have the same amount of money.

Bud Kasper: Exactly.

It’s Not What You Make; It’s What You Keep

Dean Barber: So that whole thing was out there. It’s not what you make; it’s what you keep. Now, that’s true in the investments, but it’s even more true in taxes. Because if you give yourself enough time, you can recover from a bad investment. You make a bad decision when it comes to taxes, and there is no do-over. The IRS isn’t going to give you a Mulligan. You’ve made your mistake, and you’re done.

We’re talking so much about the Roth IRA, the traditional IRA, and overall taxes today because of our deficits and the outlook for increased taxes. As well as what Congress is saying they want to do, what Biden’s saying he wants to do as far as raising taxes, it’s coming.

So have a plan to make sure that you’ve got the proper tax diversification. Get as much money as you can into Roth IRAs. Understand what you’re going to spend when and how in retirement.

Tax Diversification Compared to All in One Bucket

Dean Barber: Imagine someone who has all their money in a traditional IRA and claimed Social Security when they initially retired. Compared to a person who has created a diversified tax situation where they’ve got some money in Roth, they’ve got some money in traditional, they’ve got some money in a taxable account. The difference in the amount of income they can spend could be 20% to 30% more than the person who has saved all their money into the traditional. With that shortsightedness, I get my tax break for putting it in this year.

Bud Kasper: You’re getting penalized. Like I said before, you can pay the tax on the seed in a 401(k) contribution, or you can pay it on the harvest. That harvest is going to be what, hopefully, 20, 30, 40 times greater than what the seed was when you put the money in. But it’s an obligation that you have to yourself.

Looking at Peter Thiel’s Situation if He’d Gone Traditional

Dean Barber: Think about Peter Thiel, where we led off the program today. Had he purchased the shares of PayPal with his traditional IRA, as opposed to his Roth IRA, Peter Thiel would be sitting there with a $5 billion IRA, and the government’s going, hey, look at this. Then he has to start making required minimum distributions at age 72. When he passes on that money, whoever his beneficiaries, it’s going to go to them. They’re going to take it out over ten years, thanks to the SECURE Act.

Dean Barber: But now with the Roth, there’s no required minimum distribution for him, and when his beneficiaries take the money out over ten years, guess what? It’s tax-free.

Bud Kasper: And so what would the statement be? The rich keep getting richer. No, let me rephrase that. Smart people are getting smarter, but you sometimes need some help to realize the impact this can have on the quality of your retirement. 

Bud Kasper: One of my favorite presidents without a doubt is Ronald Reagan, but Ronald Reagan was the first one to put a tax on Social Security. And then Bill Clinton, of course, put another cap on top of that. So we have to deal with the rules associated with it. And that’s what we’re trying to explain. The rules are there. We understand the rules. How do we maximize the net results that you’re going to have in retirement?

The Tax Code is Complicated

Dean Barber: And that’s the real key. Look, we always say this about the tax code, and that is that it’s complicated. It’s over 76,000 pages long, but those 76,000 pages are your rule book. And if you don’t understand the rules that the IRS is playing by, how can you possibly win the game? That’s why we have CERTIFIED FINANCIAL PLANNER® Professionals working in the same office, in the same room with our clients of CPAs.

Because we understand that a big part of financial planning is the long-term, forward-looking tax plan because those CPAs understand the rule book. And once they understand what our clients are trying to do, working with our certified financial planners, now all of a sudden, we can start to make a long-term tax plan that sits on top of that financial plan.

Bud Kasper: There are layers of complexity that are inside the tax system. And in past years, I think they’ve tried to simplify it in some particular areas, but they complicated it again. So you’re going to have to get the experts on your side to get the best net result for yourself and your family.

Dean Barber: Also, more resources out there. The podcast that Ed Slott joined me on is episode 45, creating a tax-free retirement. That’s part of The Guided Retirement Show. There’s also a video Roth conversions before and after retirement.

Switching Gears: The Market and Economy

Today’s Inflation

Dean Barber: We’re going to switch gears here in the final segment, and we’re going to talk about what’s going on in the economy and the markets. We have heard so many different contradicting stories, “Oh my gosh, inflation is going to kill us. We’re going to have hyperinflation. And then, well, maybe we’re not going to have that much inflation.” 

Inflation is going to be here for a little bit, but by the end of the summer, inflation should be done. It should be transitory, short-lived. 

Stock markets are at all-time highs. They’re overvalued. The next bear market is just around the corner. I mean, Bud, if people spend as much time looking at the headlines in the financial world as you and I do, you would be confused.

Bud Kasper: Right. It’s so complicated, and there’s so much detail out there. And of course, from our perspective as professional planners and everything, we want to understand as much as we can about it because this could impact the results that we can produce inside the plan. 

Interest Rates

Now, just to get to the crux of what we probably should discuss briefly is what’s happening with interest rates.

Bud Kasper: Now, I’m talking about the treasuries. Because it comes down, folks, simply stated is to valuations and where is the best place to place your money at any particular period. But sometimes, the market skews itself in such a crazy direction that what you typically would use as an asset allocation for both safety and growth becomes somewhat dislocated. What I mean by that is, are you willing to put money inside treasuries and only earn 1.5%?

Bud Kasper: Well, you might say, “Well, maybe. Because if my equities, my stocks, if they were to go down, at least I know where I got one and a half percent.” But is that the smart money play at this particular time?

Dean Barber: Well, look, Bud, let’s back up for a second because your treasury is your risk-free rate of return.

Bud Kasper: Correct.

Dean Barber: Okay. The 10-year fell below 1.3% again this week.

Bud Kasper: 1.251%.

Dean Barber: Signaling that the bond market doesn’t believe that inflation is a real threat at this time.

Bud Kasper: Exactly right.

The Bond Market

Dean Barber: That’s what the bond market is signaling. But when you say you have a 10-year treasury at – let’s just it’s 1.3%, and we say that that’s the risk-free rate of return. What that means is that if you put money into a 10-year treasury today, you’re going to get 1.3% every year for ten years. And at the end of 10 years, you’re going to get your money back. Okay? That’s the risk-free return.

Now, on the other side of that though, Bud, if you put your money in a 10-year Treasury today at 1.3%, and all of a sudden you find yourself three years down the road and a new 10-year Treasury is paying 5%, and you want to sell your 10-year treasury that’s yielding 1.3% with seven years remaining, you’re not going to get what you paid for it.

Bud Kasper: No, you’re not.

Dean Barber: You’re going to get a very steep discount of probably 25%.

Bud Kasper: Realize, what intelligent person would pay you $10,000 for that bond paying less than what we have in the current market?

Dean Barber: Correct. Correct. That’s when you get into the bartering state. Here’s what I’ll give you for that, right? That’s the way all bonds are traded. That risk-free return, Bud, turns out in an environment like we’re in, if we have rising interest rates in the near future, or even in the next three or four years, the risk-free return on that 10-year treasury, if you want to sell it and do something else different with it, you can’t.

Inflation Erodes Wealth

Bud Kasper: Right. When we look at this and then the inflation factor, inflation is an eroder of wealth. Therefore, we have to pay attention to it. 

When we do our planning, right now, we’re using approximately 3.8% for the inflation rate. That’s not what the inflation rate is. Why are we using that? Because we’re looking at a 10-year average, so 20-year average. It doesn’t matter. All I want to do is have a higher factor in the plan than in the current environment.

Why? Because if it’s anything better than that, it only improves the results for our clients inside the plan. We take, what, 6.8% on healthcare. Social Security is still measured at 1.5%. These are all variables associated with how we design the plans.

Pay Attention to the Factors

Dean Barber: I think the important thing is to look at what’s happening in the economy and the markets. We started talking about the bond market because the bond market is generally a good predictor of future economic activity. I.E., inflation, right? 

The bond market early this year – we’ll say first of the year, January 1, the 10-year Treasury yield was at 1%, jumped up in March to 1.75%, and now back down to around 1.25% to 1.3%.

That high inflationary scare, they’re now starting to say, “Well, maybe this new Delta variant of COVID is going to start causing more shutdowns again in the future. Who knows?” Nobody knows where that’s going to go, but that’s what the markets are worried about right now. 

That’s why we saw this last week, the almost thousand point intraday drop on the Dow. We saw the small caps dropped by over 2% in a single day. And of course, the next day, they turned around and were up 3%. There’s no question right now that markets are scary.

Understand that Risk is Real

We talked about this last week, Bud. The thing you have to do is you have to understand that risk is ever-present, and risk is real in just about every asset class out there. 

When you’re thinking about investing, what you need to do is you need to understand first what your money needs to do for you to accomplish your objectives. Second, the kind of return you need to do what you want to do in the future.

Whether that’s retiring five years or ten years or staying retired and generating X amount of dollars in income, the first thing you have to discover is what your money needs to do. Then you design a portfolio that can do that or gives you the highest probability of doing that with the very least amount of risk possible. 

That’s part of comprehensive planning, but that doesn’t attack the tax issues discussed earlier in the show. It doesn’t attack Social Security issues. But it’s part of it. It’s how you get to the investment decision.

Understand it’s Not All About Return

Bud Kasper: Yes. I think many times, and I’m going to be a little harsh with this, people are not thinking correctly in terms of anticipation of where returns are going to be. 

We don’t know either, by the way. All we’re doing is tilting, if you will, to where we think favorability is from time to time and trying to work out in the plan how we’re going to average this out over time to get the results that we want.

Dean Barber: There is mania out there right now in the investing world, Bud, that you and I haven’t seen since the late ’90s. There are many similarities in what we see happening in the investing world today that you and I experienced in the late ’90s, and we know what followed that was the dot com bubble.

Bud Kasper: Exactly.

Dean Barber: Anyway, the bottom line is this, look, you need a plan. And to understand what a plan can do for you.  

Keep Learning

Remember the Roth Conversions Before and After Retirement video with myself and JoAnn Huber, our lead CPA. I also want to invite you to sign up for The Guided Retirement Show. Find The Guided Retirement Show on your favorite podcast app or YouTube and subscribe to it. And specifically go to episode 45, where I interview Ed Slott, America’s IRA expert, and the title of that one is Creating A Tax-Free Retirement. It’s excellent. There are so many good shows out there that have so much good information.

The wiser you get, the harder it’s going to be for somebody to take advantage of you financially, and you’re just going to be able to have so much more confidence in what you’re doing.

Bud Kasper: How many times have I said it’s all about education. Self-educate. We’ve given you all the resources necessary to become very bright about this.

Dean Barber: And that’s what you need to do. Our industry has created some amazing salespeople. Don’t fall prey to financial salespeople. Get the education you need.

Thanks for joining us on America’s Wealth Management Show. I’m Dean Barber, along with Bud Kasper. We’ll be back with you next week. Same time, same place.

And as always, we invite you to schedule a complimentary consultation with a CFP® to discuss your retirement situation.

Schedule Complimentary Consultation

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Investment advisory services offered through Modern Wealth Management, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.