Help your clients take
steps toward financial
and retirement success
Iknow I said last issue that your prospects and clients do not need to know and understand all of the detailed information
that is discussed in these columns. But you do!
To be the best insurance and financial professional possible, you need access to accurate
and dependable information.
In this negative election season, you will hear
various opinions, but you must find a way to inspire your prospects and clients to take action,
no matter their views. First, you should not use
the information to try to prove them wrong —
because your prospects and clients are never
wrong. Second, do not tell them anything —
because people have emotional attachments
to their opinions, especially about money and
especially during this political season.
Instead, use the information to ask powerful and important questions. A series of questions can help people to reason out why they
should take action. The next few columns will
include examples of resources I use to develop
powerful questions that inspire Americans to
take steps to achieve the financial and retirement success they dream of.
IRS.gov. This is your most important
resource. Our products use and provide
tax-deferred and tax-free benefits. A basic
understanding of the tax code is required to
articulate that value.
Everyone in this profession should be required to read the 1040 instructions every year.
Go to IRS.gov and get the instructions. They
will help you do a better job for your clients.
• Page 30 shows how much Social Security
will be taxable.
• Page 40 shows the standard deduction for
individuals and couples filing over age 65.
• Page 41 shows the personal exemption for
each person filing on the return.
• Page 101 shows tax allocation.
• Page 102 shows progressive tax brackets
for singles and joint filers.
For couples filing a joint return over age
65, the standard deduction is $15,500. Each
receives a $4,050 personal exemption, for a
total of $23,600. If they are only taking a re-
quired minimum distribution of $10,000, ask
if they have someone they love passionately at
the Internal Revenue Service that they want
to leave a lot of money.
If you know the rules, you know that they
could withdraw another $13,600 of fully taxable income from IRAs, 401(k)s, or deferred
annuity gains, and pay no taxes. Over 20
years, they could eliminate taxes on $272,000
of fully taxable income! Ask why they aren’t
If you know the rules, you know that 10
percent is the first tax bracket. So a married
couple will pay 10 percent of the next $18,550
of taxable income after the standard deduction and personal exemption. I also ask my clients to withdraw another $18,550 from their
IRA, 401(k)s or deferred annuity gains. This
causes some of their Social Security income to
become taxable, so why do it?
Here is the math:
• My client draws the entire standard
deduction and exemptions that total
$23,600, they withdraw the $18,550
discussed above, and their Social Security
income is $25,000. Combined, they have a
gross income of $67,150, and $15,052 of
their Social Security becomes taxable.
• Add that $15,052 to the fully taxable
withdrawal of $42,150 and this couple has
taxable income of $57,102.
• Now, the first $23,600 is not taxable, the
next $18,550 is taxed at 10 percent, and
the remaining $14,952.50 is taxed at 15
percent. That totals $4,098, or only 6. 1
percent of their gross income of $67,150.
Over 20 years, that 65-year-old couple can
withdraw $843,000 of fully taxable money
and only pay $51,423 of federal income taxes,
even with some Social Security being taxable.
Isn’t that better than paying 40, 50 or even 60
percent at death? Ask them.
Stay tuned for part two.