BRT S03 EP03 (102) 1-16-2022 – BRT - Retirement & Income Planning from SEP IRA, 401K, to Roth IRA + Tax Brackets to Buckets

Business Roundtable

Jan 17 2022 • 48 mins

BRT S03 EP03 (102) 1-16-2022 –

Topic:  BRT - Retirement & Income Planning from SEP IRA, 401K, to Roth IRA + Tax Brackets to Buckets

What We Learned This Week

  • Retirement & Income Planning
  • Qualified Plans: ie - 401K & Roth IRA
  • SEP IRA for business owners, can defer 25% of income if setup correctly
  • Tax Brackets - tiered system of 10%, then 12%, 22% up to 35% - with more income, pushed into higher bracket and you pay more
  • Tax Buckets (3) - Taxed (W2 income), Tax Deferred (401K, IRA), Tax Free (Roth IRA, Life Insurance)

Guest: Denver Nowicz, President - Wealth For Life

Denver is an advisor with nearly 20 years experience working with clients in investments and insurance, designing retirement plans with a combo of both. He takes us through different strategies for clients to get the best allocations for their money over the long term. It is the Combo Strategy of both Offense and Defense, the synergy of the mix, not ‘All or Nothing’.


Tax deferral with 401 K, not tax savings

Advisor suggests 401 K, get immediate benefit

Vs. ROTH IRA (put 6.5 K) after tax at 59 ½ get money tax free

Tax Brackets – 10%, 12%, 22, 24,35

$430 K and above, taxed at 35%

If you move money to a 401K, save percentage on taxes, then pay taxes later in retirement.

Cap Gains 15-20% on investment income

Save 15-20K / year on taxes over 25 years = 400 – 500K or more

Retirement – expenses will be 80% of pre-retirement income, unless you make more $, maybe 90%.

If you earn $100K a year or more, taxes are biggest expense in retirement.

Build Tax Free Income – start now, have an Exit Strategy

Tax Buckets –

  1. Taxed – income, W2
  2. Tax Deferred – 401K, IRA pay taxes later
  3. Tax Free – ROTH IRA, insurance, Muni Free Bonds

Balance funds in each bucket – 20% Taxed, 30% Tax Deferred, 50% Tax Free

Combine tax buckets with income mapping  - where money comes from in retirement

Business Owners – SEP IRA has high limits, put up to $61K / year.

Qualified Plan – owner has to balance with salary – 25%

Earn 240K – put 61K tax deferred in SEP IRA

Qualified Plans – has rules

High income, big SEP IRA, then pay 35% tax on all money, withdrawals and gains.

Tax brackets are broad and dropping a bracket not as easy.

RMD  - Required Minimum Distribution

Sell Business – use installment sales trust to lessen tax blow

Layer money to lessen taxes

ROTH Conversions and 401 K Roth could pay huge amount in taxes.

Pay taxes, down 25%

When people do 401K plan, rarely do Long Term math.

Under insurance umbrella, have tax advantages, grows tax free

Take money out of policy as loans at 5% interest vs. 20-30% taxes

3 to 1 Tax Free Matching has similar setup to a mortgage with a house – you put in $250K and bank puts in $750K = 1 million dollar home. Earn more on $1 million vs. just your $250K.

Earn more interest on larger asset over time.

Conservative, banks like insurance. No loan docs, no personal guaranty.

Most advisers talk stocks, stocks are good asset, but have risk and may be slow.

Create income streams, diversification.


2022 Fed Income Tax Brackets (for taxes due in April 2023)

Single filers

Tax Rate          Taxable Income Bracket           Tax Owed

10%                  $0 to $10,275                            10% of taxable income

12%                  $10,276 to $41,775                    $1,027.50 plus 12% of the amount over $10,275

22%                  $41,776 to $89,075                    $4,807.50 plus 22% of the amount over $41,775

24%                  $89,076 to $170,050                  $15,213.50 plus 24% of the amount over $89,075

32%                  $170,051 to $215,950                 $34,647.50 plus 32% of the amount over $170,050

35%                  $215,951 to $539,900                 $49,335.50 plus 35% of the amount over $215,950

37%                  $539,901 or more                      $162,718 plus 37% of the amount over $539,900



61% of Americans paid no federal income taxes in 2020, Tax Policy Center says

The top 20% of taxpayers paid 78% of federal income taxes in 2020, according to the Tax Policy Center, up from 68% in 2019. The top 1% of taxpayers paid 28% of taxes in 2020, up from 25% in 2019.

https://www.taxpolicycenter.org/ - tax stats and articles

Link to Taxes Show on 10/31/2021 w/ Denver: Here

Link to Offense / Defense Show on 6/6/2021 w/ Denver: Here

Link to Shows, Denver was a Guest: Here

‘Best Of’ Topic: https://brt-show.libsyn.com/category/Best+of+BRT

Investing Topic: https://brt-show.libsyn.com/category/Investing-Stocks-Bonds-Retirement

More 'Best of Investing': Here

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