The information and opinions expressed on the following -- commercial programming are those of the hosts and their guests and do not necessarily reflect those of this station. In around me. When -- Or. Yeah. Yeah there you -- man. Okay. Good morning and welcome to the program my name is Edward. This program is called retirement planning strategies. And we're gonna reprise a few things that we spoke about previously. We want you to consider that. When we are working with people we have to consider three different buckets of money so to speak. One would be your taxable market. The second would be a tax deferred bucket of money. And the third. And hopefully we can -- draw some attention this is the tax free bucket. And if primarily when you're looking at your taxable bucket we're looking at your current in -- We're looking at any CD's that you might have. We're looking in terms of a money market accounts and accounts it generated 1099 for you. The entire time that you hold the account. And what we emphasize. First is that you should definitely. Planned to hold. About six months worth of income or six months in come. In your taxable bucket. Because. Even though you're exposing. Yourself to low interest rates and CDs money markets and bank accounts. And you won't have much growth on the money you have to have the liquidity. In order to offset. The surprises that come up in life when that. Washer and dryer goes out -- the refrigerator needs to be replaced or. Perhaps sure. Air conditioner in the home and so even though the earning level. In a taxable baucus is going to be quite low vehicle liquidity. Cantv. And you have to have that in order to take care of life's concerns. Primarily here though we wanna say usually it's recommended that you're going to have about six months money in this bucket. And -- the big thing that you have in this -- is most the time you're gonna have this money in bank type accounts. And you'll be covered their by the FDIC. You won't be earning a lot of money to boost your spending power. But the money is protected by the FDIC your money safe and liquid. And that's the primary concern there. Third and one thing that comes up a lot is holding a disproportionately. Large amount of money if you're not worth in the taxable market. You can create a tax liability that's growing and confounding with each passing year. And it's tax rates climb the -- deal or the real greater return on CDs begin to fall. So. The last point will make is that. Since we're talking about your pretax investment income that's going into CDs. That can be counted as provisional income when your accountant complete your tax return. And because of that many people or unwittingly. Causing their Social Security benefits to be taxed. Where they are including the interest rates earned in the bank with their current pension. Were IRA in town and when putting out altogether. The total control issue including one half your Social Security. -- taxable bracket were even at the very low returns you've received on your Social Security. Investment through the -- you're actually forced at that time to pay back. Taxes on Social Security. How did that come into -- well. In the origination of Social Security under Roosevelt in 1935. They guarantee that you would not have to pay taxes on your Social Security. But later. When actually Ronald Reagan was president Medicare had gone broke. And in an agreement with Tip O'Neill they agreed to tax. Social Security income if a person's combined income including all sources of provisional -- count. Crossed over certain thresholds we encourage you come in and speak to us about that. It's an automatic entry your account makes on this first page of your tax return. You can contact us at 9137688090. And we'll be happy to give you more details. On what the threshold -- I've always heard it described to us thresholds and when you crossed the threshold. This is the point in time. We're part of your Social Security income becomes taxed. In 83 when it was signed by Reagan they originally allowed that 50% of what you receive from Social Security should be taxed. And then in 93 when Bill Clinton was president. That actually now has been raised were 85%. Under Social Security may be taxed. Depending on your -- How volume of income. So what we wanna talk about his first there's a taxable bucket of money. That's the money where you have to have your liquidity the second bucket we like to talk about it's called a tax deferred bucket. And the tax deferred buckets from my experience over the last 25 years. That this ends up where most people have the -- majority of their funds. It's sounds good when you're working its convenient. You just have a deduction made from your paycheck you actually save some taxes in the year in which. You earned that income. Because if you had a 100000 and income and you put 101000 of that into a qualified account. Probably a 401K. If -- to a teacher maybe a 403 B. When that money hits -- account there for the year you're really only taxed on 90000 -- your deductions. And that 101000 is then tax deferred. But it's not tax free you've just put off the date and which you'll have to share your interest with the government. And when you retire when you access your 401K. During retirement. Rapture IRA and retirement. That's when the tax bill is due. If we can look back to two shows ago one of the biggest concerns and I'm finding. Is that clients are not considering what could tax rates actually be. If if we talked to the general public now it's commonly said that people feel like taxes are pretty high. Andy and I would agree with the -- mostly because in a lot of ways I don't agree with what the government does with the money I think many if you would agree with that. But what happens is is that the tax rate just went up -- the top tax rate. On this last passage of a new tax bill went up to 39 sex federal. And that's if you're on the top earning brackets. And it went up to that from 35 word had been since the Bush Administration. Now that's a small increase but don't forget you have to add. Back here in 567%. That you're gonna pay to the state as well and you can see were rapidly approaching that 50% level. Earlier in the program before when we were talking about this I mentioned though. That there are several points that need to come out. And we referenced. The former comptroller general of the United States the CPA for America. Who served under George Bush and then. I -- previously with Bill Clinton and his name was David Walker. And mr. walker is crisscrossing the country right now I was fortunate enough to see him. Had a meeting in -- Topeka Kansas. And mr. walker was talking about in terms of the actual spending that goes on by the federal government. In basing that on the changes in our demographics. And as well taking into account the upcoming problems that we all face as the baby boom baby boomer generation to send a full speed retirement. We're seeing such a demographic shift. That. It's just time it's time characterize previously. In our national experience. When Social Security went into force. We had approximately. 42 people paying into Social Security. For each person receiving a benefit from that. Program. Currently. As it stands today the estimate stands about 31. So we currently have three people paying in for every one taking a benefit. You can see the vast change in that number. So what were worried about is this possibility of a gathering storm on the horizon. Which with a combination of these wild spending that takes place in Washington. The debt that has been run up by spending three dollars when they only collect two and taxes and then paying interest on the other dollar. That this could be a big problem as people are. You know as at the same time we're seeing only three people Pena and for every person taking a benefit ended -- that according to mr. walker. That sometime before 2000 when he. That the contributions to Social Security alone. Will potentially drop to two Pena and for every one. Taking out this benefit. So this the roads -- rapidly. The amount of money that's available to pay. The bills. The tab do. From our government so what cadet to what mr. Walker's analysis was is that some time. Approaching the year 2018. To 20/20. We're gonna reach a point of no return. And what he's saying yes the acceleration in spending. The increase in the debt and the service the interest we -- on the debt. Along with a reduction in collection of taxes and less people working. And tied it through and completing the thought with those that are receiving benefits. By ratio that's expanding. -- create a point of no return. And his answer to lose to the problem the only way to be fundamentally sound. But how to pay the bills. And take the taxes. Would be to cut the services. Currently offered by the United States by one half. And to double the taxes at the same time. So. Let's look at this 35%. Tax -- just went to 39%. I may be -- in your case -- 15% tax bracket the new lowest bracket. On the current plan. If mr. Walker's. Some nation comes to be true and your taxes went from nearly 40% to 80%. What would that do to the longevity of your retirement money. For every dollar in income that he used. What would that do to your retirement dollar if instead of having to pay on 39%. In taxes that went to eighty. Let's go to are more modest one for those that are paying taxes currently to the federal government at 15% -- saying they're paying another six to the state. What would happen if their taxes went from fifteen to 30%. They may be even less likely to be able to withstand such a increased burden. On there income that they need in retirement. So this tax deferred bucket returning there this tax deferred bucket. The sections of the tax deferred buckets and Americans commonly have been their familiar with the would be 401K is. Individual retirement -- accounts known -- raised. And perhaps. If a teacher for a three if a firefighter for 57. Self employed people have samples. Sampson CEOs. What would happen if their tax rate. After planning to set money aside and planning to spend that money in retirement. What happens if their tax rates jumped significantly. Well they can't have a positive effect on your retirement I would thank. So what we find in the office is so often. Too many people come and with the vast vast and I mean sometimes the only retirement money they have. It saved in a qualified plain white they have that there was simple it was included at work. They paid money and sometimes they were matched by their employer and it's been growing all these shares. Many times with the ups and downs of the stock market it's been a roller coaster for them. But. What happens now with that the whole -- pulled out from under them by a huge new tax bill. And these new tax bills will come into effect. If they do. Long after the current administration has done plying their political trade. What can you do about this well I think you need to take a look at that and you need to have some help to do that. You can call us at 91376889. And for the first five the call today we do have retirement strategy -- that we're gonna bail out. And you can also access this on our website at safe money RX dot com. So let's do this let's talk about it sometimes you wanna move money that's currently in a taxable bucket. A tax deferred -- I should say and move it to something called a tax free bucket. Why would you do that. Because the further growth in that account would then possibly be that something you can access. Without having to pay taxes in the future. I think that would be a positive outlook. And we need to discuss that with you should you find that interesting. We'll be back on the other side thank you. Yes I can suddenly. Yes I can. Gee I'm afraid to go on as turned into. I can see the. Now we're back and we -- -- -- program that we are retirement planning strategies -- Minnesota armed and as always you can reach us at 91376889. DR. Website to save money are Eric -- com. One of the points so we wanna make all were still on the tax deferred bucket does that. It is. Arguably any big advantage to save money and your 401K. Your IRA. That's going to be the tax deferred pocket and when you save money there. You will get in the current year while you're earning the highest points on Syrian town a tax deduction. But that does not mean. You're getting off from paying the taxes on that money what happened services that you defer. The taxes until you access the money. Typically we're not allowed to access that money to -- 59 and a half we may get to a little more on that and a bit. But win the money is paid out to you in the future. That's when all of that is taxed. So who would there be some conversation there with you -- to what we might be able to do to lower. Actually lower. The amount of money in your tax deferred -- We wanna keep your taxable -- at about. Six months income level. And how do we get some of that money out of there and put it into a tax free bucket what -- hullabaloo about anyway I mean why would that be to our advantage. Well what do you really believe about future tax rates. In the past we've had income taxes that went as high as 70%. Through the seventies. After World War II I believe the highest tax rate hit 984%. For any money earned over 200000 dollars. And with our spending are out of control spending. Our debt and deficit rising. And with the function of mathematics telling us that this cannot continue forever. We can't just keep kicking the can down the road. The government at some point we'll come back and with the swoop in my hand and a pin and they're gonna change what the tax rates far. Mr. walker. That we've referred to several times David Walker please look him up on the Internet Google him. The comptroller general of the United States under Clinton and bush. His opinion was is that they're gonna have to double the taxes. And there it will need to cut services significantly. He and he thinks by half. And what's gonna happen if that happens. Is that as -- breach retirement. The funds that you saved our suddenly gonna appear quite a bit short of your goal you may hit the -- you have not considering. This high tax rate. But if the taxes are changed to match just by the sweep of a pin you can find yourself. -- retrieve the way in a bad situation in retirement. So. When you're deciding to contribute to your tax deferred bucket. What happens there really comes down to what you think of current and future tax rates. If you think your tax rates in the future. Are going to be lower than they are today. You should put as much money as you possibly can under the tax deferred investment. Get that tax deduction today. -- two today's higher rates and pay taxes stay on the road. When the rates would be lower. If conversely. Do you believe that the tax rates in the future will be higher. Even by 1%. Maybe 10%. Then mathematically. You are better off limiting your contributions to the -- pocket. Later we'll discuss circumstances were contribution to the tax deferred -- might be Smart. Decisions but we should consider the catch 22. Tax deferred retirement plans and for the assault reference a book I read many years ago in high school and college I don't remember exactly where. And it was written by judge Joseph L worst called catch 22. And the underlying theme of this famous book can shed some light on the true nature of our tax deferred accounts. The main protagonist in the catch 22 book was -- -- And he and his friends were serving in bomber crews in World War II stationed at an airbase. Off of Italy. And one by one when his friends -- in the battle. He lost than they never came back. And soon he -- begins to realize that if he continues going on these missions. He's got a great chance of being shot down and never coming back. So he begins to study the air force rules and he comes across a military rule. Which is called in the book -- and often exist really catch 22. Catch 22 says is if you could successfully plead insanity. You can get honorably discharged from the air force and he decides this is what he should do. So he goes to the air force doctor and he asked to be released released from duty on grounds of insanity. But however the physician decides not to release them. It turns out the fact that you -- and is trying to get out of flying these dangerous missions is actually proof that he's perfectly saying. And therefore he must continue on as bombing runs. Well do we still use that phrase catch 22 you -- we do. And it's it's like being stuck between a rock and a hard place you're darned if you do. And darned if you don't and I proved I refer to this story because in investment and a tax deferred bucket. There's a very good example of a modern day catch 22 here's what I mean. The rock is you have to remember the IRS wants to attack shoe on that money so badly. That at a certain point they actually four -- take money out. That's an age seventy and a half -- that's called. A required minimum distribution. And our MD. In if you forget. Or choose not to take about the money the IRS impose is what's called an excise tax in reality it's a penalty. And it's an astounding 50%. Of your RMD. In other words if you were supposed to take out 101000 but didn't you get a bill for five. And that 5000 would be a dead loss to you and that doesn't even include the income tax on the money it took out. Now throw in another 30%. For 25%. Federal role in 5% state. And you're looking at four -- before -- 80% of whatever you were supposed to take out but failed to do. As you can see the IRS is pretty serious about collecting that income tax. So we've talked about our and he is a lot of times. And every every year this time a year I have people that worry about those and and feel like they'd rather not take them. But they're compelled to do so at seven and a half. That was the rock you're so hard place now we understands what happen now we understand what happens if you don't take enough money on your tax deferred investment. What happens if you take out too much. Beyond. Paying increasingly higher amounts of income tax remember because all of its taxable. The IRS says that as much as 85%. And your Social Security becomes taxable. I mean how can that be you may be think you may be thinking that Social Security felt like attacks when it came out of the paycheck. Now they're gonna tax me when I get it back. And that's like a double tax and sadly you read this correctly I mean this -- reading my lines -- -- If you take out more than your R&D -- added to your other sources of income. As a married couple crossing over 44000. Dollars. You may find yourself then paying taxes on 85% in your Social Security. So the bottom line is is that if you take out too little you pay a big penalty the IRS. And if you take out more than required you could pay higher taxes on your Social Security benefits. And that is a catch 22. You should come in and discuss these with us now we're happy to meet with your accountant speak with them on your behalf with your permission. And many times were able to -- -- Read target some of the funds in ways that can help you avoid. Some of these tax burdens. But the bottom line is this -- government is spending. At outrageous amounts under anyone's. Opinion and when they're doing that at a deficit. And when -- were having fewer people available to float the deficit. In taxes. Does that not altogether wind up with the conclusion that seems sound. Backed by mr. walker that we may. Soon see higher tax rates. Now there's a dirty word in all of this and that's called provisional income. In Social Security taxation as a result of a compromise that was stock. In 1983. Between Tip O'Neill and Ronald Reagan. And -- Social Security was teetering on the cusp of insolvency. Under the Reagan O'Neal deal. Up to 50% of Social Security benefits were subject to tax. In at the beginning of Bill Clinton's first term. In 1993. The tax was expanded. So that now that Social Security taxes up to 85%. And here's how that works. The IRS -- take one half your Social Security income any -- distributions from your -- rays are 401K is. Any 1099 interest income. In all employment income. Any rental and -- and all the interest from municipal bonds even though you've been told those are not taxable. And from here though calculate the tax on your Social Security income. It's a pretty tough pill to swallow. Will be back with more a couple of minutes. On retirement planning strategies. This okay. Your notes six and tons quality you get it's. The U. Then it's safe feeder zone economic knows my game goal -- 505 sold to the company's. To. Welcome back. You wanna thank you for staying with us. We're really gonna do delve into this provisional income a bit more and how it relates to the tax deferred -- remember. Provisional income for your accountant. Is one half of your social security and count. Any distributions. The full amount. Every bit of its tax the comes out of your tax deferred account here IRA or 41 -- Any 1099 income that comes in interest income for example from bank CDs. Money market accounts savings accounts. Any employment income. Rental income. So you know many retired people and I have have rental houses that they depend on for income and any interest from a noticeable bonds. Even though those are commonly referred to as being. On taxable. They do affect your provisional. Income. So when the IRS adds up your provisional income. Based on that total and your marital status it determines what percentage under Social Security benefits. Will become taxed. It will become taxed. That percentage of your Social Security benefit. Is then taxed at your highest. Marginal tax rate. The provisional income thresholds. Are. For a joint. Couple a joint provisional in town is under 32000. Dollars. And remember. When you start their first pull -- your Social Security payments. And you and your wife together add up your Social Security payment you maybe. You know two thirds of the way to that 32000 there. If you cross over 32000. Because you added to that income from rental houses. Withdrawals from an IRA to build a new deck. Perhaps a bit pulling money out here IRA that give your children anything like that if you go over 32000. That's a threshold. You now -- tax. On. 50% of your Social Security income. But. Since 93 and Bill Clinton. If you strive to get over 44000. If you cross that second threshold. You now we'll have 85%. Of your Social Security income. Included. In this provisional taxation. And it's it's. Kind of undermining for anyone who's planning on retirement. Now this is -- this is remarkable. If you compare this to with a single person. A single person. They have -- no tax on Social Security. If their provisional income is under 25000. Dollars. Well one dollar more. Above 25000. Aim our attacks on 50%. Of their Social Security income. And if they go over 34000. Since 93 this has gone up to 85%. The thing that I find amazing in all of that is a single person. Pays tax at starting at the first threshold of 25000. And for a couple. The -- only 7000 dollars more it doesn't double. Now these codes went into effect originally an 83 for the 50%. Taxation and in 93 for the 85% bracket. And win this happened. Incensed those years this has never been adjusted for inflation. Isn't that amazing they've never adjusted. What these thresholds are. Before you're taxed on Social Security income let's think about 1983. In 1983. You could buy a Cadillac the size of Rhode Island for about 6500 dollars. Today. Amid size Cadillac might cost you sixty. Fifty or 60000 dollars. And so there there's a clearer example there that this. Rule that went into effect originally. To just tax those of well off. Is now. In effect taxing people on the low end of the middle class at least perhaps slower. So unfortunately these. Thresholds and -- and they are not indexed for inflation so each year. I find an increasing number of retirees begin pay tax on a portion of their Social Security benefits. And frankly most of them don't know what he just have to look at the front page. Of their tax return. And their accountant will do diligently and are there the amount of Social Security that must be included for this provisional account. So. To better understand. How devastating this task can be let's let's take an example. Bill and Mary. And they have a combined. 30000 dollars or so security income. And they also contribute. But they also distribute that is receive. About 40000 dollars a year in an effort to meet their lifestyle needs in retirement. In order to determine their provisional in -- the IRS takes half of their Social Security income 151000. Half of thirties 151000. And then adds it to the 40000 they distributed from the IRS. So Tom and Mary. Who are accessing through social security and their IRA 70000. They actually see. That they're being taxed. On total provisional income at 55000. Okay. 40000 from the IRA can't get around any of that. And 151000 other Social Security. Now because they've crossed over the second threshold. There in the 44000. Threshold and above. 85%. Of their Social Security is now taxable. At their highest marginal race. Thus 85%. Of their 30000. Social Security. Is 25500. Dollars. This and that this amount now gets piled right on top of their other income. At which point they pay federal tax say 25%. On 25500. Dollars worth of the Social Security for a total. A 63756375. Social Security dollars. Paid back. Because. They have distributions from. Tax deferred pocket. Does that tie together free. Do resent this affected them so greatly. His they had to access money and unfortunately in this case. The best place for them to access perhaps the only place for them to access money for their lifestyle. Came out of their soul. Retirement funding source. This tax deferred bucket. Probably his 401K. May -- she was a teacher and it's a 403 B. Could be a fireman and it's a 457. But when this money comes out it's added the Social Security. 50% of your Social Security in town. And then they attain which are total provisional income miss this gets a lot worse when I talk about people who have. Maybe a half a dozen rental houses. And all of that -- -- Saturn out. And an added to their tax return. And you know they feel like clams taken of the slaughterhouse after a year -- taking care -- runners and in rental facilities. In all this. 6375. The tax on Social Security is simply because they took so much money out of their direct. And every year they continue to take this level of distribution from their IRA. And -- year after year they pay tax on their Social Security to to fund their retirement. How to make matters worse Tom and Mary now have to compensate. They're no longer getting. The same amount from their Social Security not in effect to spend. And to do so the next step the client Austin takes this to access additional money from the IRA. Creating yet another taxable event. If Tom and Mary is marginal tax rate is 30%. Meaning 25 federal. And 5% state. They have to take out 9107. Dollars from their IRA. Just to replace. The 6375. Dollars they've lost in the Social Security taxation. Wouldn't it be much simpler. If Tom could get their Social Security tax free. And and we'll come back to how we're gonna do that how we get money tax free. But there's a lot to be said for people really taking a moment. And doing what Maria Bartiromo says every day do you know where your money yes. Mean -- we talked about it a lot of ways that you might be in a much and mutual fund you don't understand that's that's a good thing to find out what you have there. Well what bucket dissident who sit in the taxable bucket. Do you just feel safe with maybe a false sense of security that's in the tax deferred bucket. Or do you have any money that you can access without paying taxes. This could be a great benefit to you and is there are steps someone might be able today to improve that. So what we wanna say is you need an ideal balance here. And the people that come in and seeming who have everything in the tax deferred market. Usually have a worse experience. During their retirement years. And people that have a taxable bucket -- tax deferred bucket and hopefully. They take steps to learn how to build. A tax free -- Now we're gonna need to take a break my name is set our -- You can reach us at 9137688990. 89 ED. And we'll be back on the other side with a couple of ideas Rory thanks for staying with us on Q -- -- -- Thank you for staying with this my names that are doing you can reach me at 91376889. Game. -- we'd like to come stay with this tax deferred bucket just to talk about what could be a ideal balance -- Am so after going to great links. To talk about this tax deferred bucket even spewing invention numbers -- we would like to have you talked about you know maybe using other accounts. So. First off if you have a 401K. No one on this show is suggesting. That you'd failed use it. The first whenever you're employer is offering you free money. It's always a wise to accept it free is good and so for example if you make a 100000 dollars a year in your employer -- a dollar for dollar match. Up to 3% of your income. Go ahead and contribute that 3000. Two year 401K. Because the employer will add 3002. That so. You go ahead and take that a course. You just can't beat a 100% return on your money in one year cuts. That's not an argument well made. But as a rule of thumb. You should always put money in your 401K. Up to the employer match. But then consider other alternatives. -- what you might do. It to save the money above. This amount -- your putting if this gentleman for example 100000 examples putting. 101000 a year ended his moral one okay. And he's only getting a 3000 dollar match. As happy as at 3000 dollar matches. It might be wise to consider another option. Some people worry that stopping contributions to a 401K. That they'll lose tax deductions and that's true. But you have to remember the purpose but retirement account is not to give you a tax deduction. The purpose really is to maximize your retirement distributions. So in plain English the money you need the -- bond. Your income that you supplement. At the point in life when you can we -- when you can least afford to pay the taxes and retirement. Remember that during your working years are generally have more deductions. Or surplus cash. With which to pay the tax. And at least in the near term we really do have historically. Low tax rates. -- even 39 point six and at the lower bracket at 15% now instead of ten. These are very low tax rates if you consider what was in effect during the 1970s. We're back -- you gave an example Ronald Reagan after World War II where the tax rates hit 94%. If you made over 200000. It's very important understand. That if the average public is is surveyed about the current tax rates. I think common when you hear people say -- they're awfully tough -- But historically. My argument is is these tax rates are on sale right now. They really are on sale. Now. There's a couple of things that you get you need to know and this is where we work with your accountant of course. Not giving you tax advice we're giving you retirement planning. We're giving you strategies were talked about prudent. Successful ways to make sure you have the income one in retirement. It's important to know that there are legal ways to get money out of -- case. In IRAs in retirement without paying taxes at all. Let's illustrate -- example with a fifteen year old married couple planning to retire at 65. Absent any other tax deductions. And and they could claim some deductions. But in this example apps apps and have any other tax deductions for example how many retired folks on the house paid off so they don't have the mortgage deduction. How many people have paid off our student loans etc. they don't have deductions that they had in the past. If a couple. Takes a standard deduction. They would get 121200. Dollars for a standard deduction plus. A personal exemption of 3900. For each of them for a total 20000 dollars. Because they IRS indexes this 20000 dollars to keep up with inflation. And historically. It's been at about 3% these deductions would actually be closer to 30000. By the time this couple retired in fifteen years at age 65. This means that they should receive income. From any number of taxable sources up to 30000 dollars without paying taxes. Now that's my idea of a perfect investment. Get the deduction at the onset. Don't pay the tax says it gross and then take out tax free is simply can't beat that. So how much can you having your text -- for -- without -- your own attempts. To reach a lower or even zero tax bracket. Your tax deferred balances need to be low enough that by the time you reach the the age of seven and a half. That the distribution you're required to take will be equal to or less than your standard deductions. Plus sure personal exemptions. Remember those are 20000 now and 2013. And I am speculating that the continued to. And cost of living inflation on that and raise it to 30015. Years. Let's give me an example. Let's say John and Susan both turned seven and a half -- -- 500000. In their IRA saw it as a total. If all their deductions have been phased out which could be likely that seven and a half. They can receive from their IRA and -- an amount equal to their standard deductions. Plus the personal exemptions without paying tax. Again. We go through this with your accountant. Your accountant verifies what we're coming up with here and were doing us backwards were back in engineering it from what the accounts teach us. If on the other hand. If in fact let me add to that point if at age seventy and a half they start there -- -- -- Currently the RMD's are about three point 65%. And of 500000 dollars they would have to take 181250. Dollars out of the IRA. And because -- -- their deductions or 20000 or greater -- distribution of 181250. They would know any tax on their -- days. On the other hand if they had a million dollars in their IRA in their distribution requirement was three point 65. They would be required to pull out at least 36500. Dollars. Which is far greater. Then their deductions of 20000. And in this case it would be possible. In this case it would be totally impossible for them to get down into a -- bracket for taxes. What's worse is that 36500. Is all provisional income and when added to one half their Social Security. They would exceed the 44000. Threshold. Net result. I guess they win the game. They get to pay taxes on 85% of their social security and that could be taxed at the highest marginal tax bracket. On the other hand if they only had a 100000 and their IRA no I'm not saying they don't save the money and just saying they don't save it and the ire okay. There are MD on a 100000 would be closer to 3650. Dollars. And with a 20000 dollar claim mobile production. They all they would have almost 161350. Go unused. And while it takes a little bit of math to figure this out. Is there is generally a perfect amount to have been a tax deferred bucket by the time you retire. In short you want RMD's and age seven and half. To be equal to or less than whatever your doctor abductions happen to be in that year. 20000 in today's dollars. And we expect to continue. To rise with the inflation. Factor indexing. In most cases if you. Contribute only up to your employer's match during the working here. Here for a -- your 401K balance will be at or below this ideal amount by the time to retire. To determine if your tax deferred balances are already too big you must calculate the number of years until retirement. Your contributions and employee match. Employer match I should say and the rate of growth you anticipate on your investments. Now if your balances are too big and many people on this show there will be people have balances two bit. If that is too big at this point you need to get up now and take steps. To. Access this money even if you're under 59 and a half there are codes that allow this. Working in conjunction with your trusted accountant. There are. Approaches and strategies that can be used. To withdraw some of the IRA money. And get it in a tax free. Market. So. In conclusion. A summary of the tax deferred -- has a number of different pitfalls that can hinder your efforts to get down in a lower tax bracket. But when the right amounts and right circumstances are placed. You can transform this into a stream of taxes that at least. Could come in at a lower rate and let's not forget our tax rates can stay where they are worthy on the sale right now. Thanks for being with those stem cells that are doing -- around me. When you. It's.