Today's topic is a weird one, a good one, a timely one, a needed one, and it is called Stop Living Your Life by the Tax Code. Now, disclaimer, I'm not a CPA. I'm not a tax lawyer. I do not give tax advice, and no advisor or agent should give you any tax advice unless they are a CPA or a tax lawyer or in some cases, CFPs have that certification, as well. My point is, that they have to be certified.
I'm getting tired of people that are living their lives around taxes. They're living their lives around the tax code. They're living their lives hoping to beat the tax man, hoping to strategize so that in the future they're not going to pay as much in taxes. Listen, we all need to pay taxes. We all need the military, we need roads and social services for specific people that need them. I'm all for it, okay? But as we all know, it gets a little predatory and the politicians play games with it, and they know better. They're just speaking to the voters. They know down deep what they're saying is garbage. You can't tax your way into prosperity, but you also can't live your life by the tax code with retirement planning.
Now, I'm not against Roth IRA conversions. I couldn’t care less, either way. Do what you want to do. Personally, I'm not a fan of it, and here's the reason why, I know I'm wrong, so let's just put that out on the table. When you do a Roth conversion, you are fully trusting the United States government and the politicians who make the laws to not change the laws. But here's the thing. Social security, a long time ago, used to be tax-free. I just don't trust the politicians to not come back and say, "Yeah, it's tax-free, but you can only use it for solar panels, electric cars, and college tuition to specific private schools." They'll put some kind of, "Well, you got to be lefthanded and have one leg, and then it's tax-free." I don't trust them. Do you trust them? I mean, you might, and if you do, great. But none of us know where tax laws are going to go.
You cannot cavalierly say, "Well, in the future, taxes will probably be lower for me because of X, Y, and Z." Or "Taxes will be higher because of X, Y, and Z." Or "It'll be a flat tax down the road because of X, Y, and Z." None of us know. None of us know what's going to happen with tax policy in the future. So why are you planning around it? This has confounded me since I've gotten into the business. I was with Dean Witter, which then turned into Morgan Stanley, then I went to PaineWebber, which then turned into UBS, and then I went, "Okay, I'm done. I have enough business cards and I want to become Stan The Annuity Man, that mythical figure licensed in all 50 states." But even back then, they're like, "Well, talk about taxes, talk about blah, blah, blah." I understand. Municipal bonds, tax-free income. I got it. I did all of that back in the day. But what I'm seeing now with the demographic tidal wave of baby boomers and the calls that I get and the calls that my team gets, and we have meetings with, I say "What are people talking about?" Well, they're scared of taxes, I understand that, but they don't know where that bogie's going to go.
There's no way to get ahead of the play with the IRS. At this time, we just had the Inflation Reduction Act that's not going to do anything with inflation. Now, there are arguments that the IRS is undermanned and understaffed, and underfunded. I get all that, but I believe they're hiring about 85,000 new agents. And the news, you got to filter everything coming at you. But just the fact that there are 85,000 new agents coming means that you're not going to beat the IRS. You're not going to out-maneuver them. You are not going to outsmart them. And with 85,000 new agents, added to the ones they already have, that's a pretty strong lobbying group up there on the Hill of which they're going to probably change the rules anyway. And we don't know what rules they want to change.
This leads me back to my original point. Stop living your life by the tax code. Stop doing financial planning by the tax code. Stop it. Go live your life. It's like when people say, "I'm really concerned about inflation, Stan." And the person has a million dollars. I'm like, "You can afford eggs and you can afford bread and you can afford going out and you can afford to get on a plane and you can afford to fill up your gas." Yes, it's higher. It is. But there are some people out there, the vast majority of Americans, who are struggling with inflation. If you're one of those people that has some money, stop talking about inflation. It's the most self-centered BS of all time. You sound arrogant. Think about it. If you have millions of dollars, and you're talking about inflation, then you're just parroting what the media's saying. Stop watching it.
The tax situation? You're going to have to pay the taxes. I had a call today, this was one of those calls that you just kind of want to punch yourself in the head and go, "Oh my gosh." He was a smart guy. He had won the game. Always say, "If you won the game, why are you still playing?" Meaning that you can just take your money, peel off the interest, never touch the principal and live off the interest as income. He was one of those people. He was fortunate enough that he had gotten there. I mean, he had scrimped and saved, and I called him a 20-year overnight sensation. He had worked hard and he had gotten there. I said, "Okay, so how much income do you need?" And we reverse-engineered the whole thing. "Okay, you're going to get this for Social security and RMDs as a forced annuity, you're going to have to take income from that, and that's income source. Your wife's got a pension and you're going to peel off the interest from your portfolio and a combination of whatever it is, MYGAs, CDs, corporates, whatever you're doing from protecting the principle and just peeling off the interest." And he was like, I'd say 30 to $40,000 north of what the income goal was every single month.
Do you know what he said? Here's what he said. "Yeah, but we got real estate taxes." I was like, "You can't be serious, right? Are you seriously going to throw a wrench in the most simplistic solution ever because of real estate taxes or taxes in general?" The tax man was living in his head for free. My question to you is, "Is the tax man living in your head for free? Is it always there? Are you always looping that?" I write quarterly tax checks that are ridiculous. I'm proud of that. And I hate it as well. But it is what it is.
I don't stop business. I don't stop being Stan The Annuity Man because I don't want to pay the quarterly tax bill. I guess I could if the tax man was living in my head for free. What I'm asking you is don't let that happen. Don't do your retirement planning around the tax bill. Stop living your life around the current tax code and what you think it might be in the future and what your master of the universe financial advisor is telling you it's going to be, they don't know. The next time your financial advisor says, "Well, we need to do some tax planning in the future." Just stop that sentence right there and go, "What's it going to be?" They're going to say, "Well, I think it's going to be... I mean, it's just logical that it's going to..." No! It's not logical. Nothing's logical in DC. Nothing's logical with the tax code. Nothing's logical with IRS. And nothing's logical when you have 10 to 30 trillion in debt that we have to service. That's not logical. Is the tax code going to be logical to address that? No. It's not.
I think I'm going to pimp out, and I say that in a good way, a hearse, I'm going to put all kinds of speakers in it. I'm going to paint it and I'm going to put a U-haul behind it and I'm going to drive across the country with it and it's going to have The Annuity Man logos across it. And it's going to say on the U-Haul, "You can't take it with you.” And people are going to stop me and say, "What do you mean?" It's obvious. If you're in a hearse, you can't take it with you. This isn't Egypt, they're not going to bury you with your fricking television. Live your life. Don't live it around the tax code, please. And of course, I love my friends at the IRS. Let them do their thing. You do your thing, but don't let your thing be influenced by their thing. Got it? Good.
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