Retirement Planning Update

So John, good to see you. We're breaking down the headlines what the big beautiful Bill means for your retirement. Washington recently passed what President Trump is calling the big beautiful bill, which could reshape retirement planning for millions of Americans. Let's start big picture here. What do we need to know? Well, it's the one big, beautiful bill, Erin. And while it's big and beautiful or boasted as being what we have to understand is it's bold and layered, and there is a lot of opportunity in this, in the almost 1000 pages of this bill, but there may also be some areas that could quietly affect you in a negative way. So you need to read beyond the headlines and really look into how you know some of the things that we're going to talk on this video today are going to impact you specifically, because this, again, like other laws, has very individual characteristics to each taxpayer.

So speaking of the headlines, really confusing headlines regarding taxes on Social Security, the agency framed the new $6,000 senior tax deduction as eliminating taxes on benefits, experts say it's not that simple. Can you explain?

Yeah. Well, the media love it, yeah, got their headline out there. Ratings, you know, got boosted, and we got flooded with emails and calls from compliance. And you know, viewers hitting us up with emails saying, listen, is Social Security tax free? Should you know we claim now Social Security is not tax free, folks. It will be taxed the way it's always been taxed with the 50% 85% provisional income thresholds, where either 50% or 85% of your Social Security benefit could be subject to taxes. What this does do is it adds a $6,000 senior specific deduction for over 65 so you now could have a lower tax liability because it's deduction. But even that comes with an asterisk, and why? I don't have the numbers memorized, I'm just kind of refer to the sheet here. The $6,000 deduction is mostly going to help low to moderate income retirees. It has phase outs. And that's, that's the key point is, if you're a single or head of household, the phase outs for this deduction are going to range between. Are going to start at 75 to $175,000 and for a married filing joint company, married filing joint couple, the phase outs are going to go from 150 to $250,000 of adjusted gross income. So really, the bottom line there is, if you have a very good pension, or you have a large IRA, or one of the things we always talk about, what you know generates your your tax rate in retirement. If you spend a lot and you have a lot of expenses that puts you into those phase outs, then the standard deduction that is being given out is not going to help you out. So again, very specific to your financial situation, right? But that being said, I know you were fielding some phone calls. So it begs the question, Does this change when people should be claiming Social Security?

Oh, here's the golden answer, ready? Maybe? Maybe, yeah, it depends. Maybe it's again. There is no general answer to this. If you've listened to if you've watched our videos, listen to our podcast, when it comes to claiming Social Security, you security, you know that there's certain things you have to consider, income stream, you know, maximize the income stream, tax efficiency, whether you're healthy, you know, whether you know you really need the money or not, or you can defer all those things, still should dictate your Social Security claiming strategy, right? And understand, if you take it early, you lose now your income stream is going to be reduced from the primary insurance amount your Pia at full retirement age. If you delay it passer it increases. But there's so many things that you know, I'm not going to, you know, beat the bush that we've got videos on that is your claiming strategy. Now, how you should make the decision now is you should either go to your tax professional or your financial advisor and say, Hey, can we rerun the numbers? Does this new bill change our claiming strategy, and you know, then, then you'll get the answer, right? Okay, so now let's talk about the other big takeaway, which was the extension of the 2017 tax cuts, the extension of the brackets we are in right now. So why is now still a good time for a Roth conversion? And why are Roth accounts so powerful?

Well, if you've watched our video, you know why they're powerful, right? Future tax liability, increasing the widow tax, passing a tax free legacy on to your beneficiaries. But what this bill did is you extend it extended the current tax bracket. So we have to understand we are at some of the lowest tax rates in history. Our maximum point of most risk when it comes to taxes is in the future of taxes potentially going higher. The other thing is, we have seven tax brackets. This is huge, because in the 80s, taxes had we had 20 brackets. So taxes, while they were still low, your effective tax rate was higher. So all in all, tax rates are low and Erin, when is the most optimal time to pay taxes? When your taxes are low, which they are, right now, yes, such a student of the game you are, so I pay attention again. We want to take advantage of the low tax rates. What this did was, you know, we were sitting here pounding. We have till December, 31 2025 we have to get this all done. Do not take your foot off the gas pedal. But this extends the runway, right? So it does give a little bit more leeway, you know. And again, going back to Roth conversions and Social Security, if you convert, that could help that could hurt your Social Security, you know, taxation. So another thing to consider when marrying the two together.

So John, what are the other big takeaways that we need to know about?

So the biggest ones are number one, the tax cuts have been extended politicians. There's been some verbiage about the word permanent. And you know, when a politician says permanent, that just essentially means it's permanent until they change their minds, and then it's permanent until it's not so, you know, don't get carried away with the word permanent. They can change the tax laws and they will, number two, for people living in those high tax states, like my lovely California, right, the salt deduction at $10,000 you know, that was pretty painful for a while, that has been increased to $40,000 which is great, but again, let me, let me give you a little asterisk here. There is phase outs for this. So for a single filer, the phase out could drop it at the is 250 to 300,000 of adjusted gross. For married filers, it's 500 to $600,000 of adjusted gross, where that 40,000 is just going to shrink. But again, this could be very beneficial for a lot of people, especially those in New Jersey, like my friend Tommy, California. The other thing I want to talk about is charitable contributions. I have a lot of clients that are very charitable, and we may want to look at 2025 as maybe increasing your charitable contributions, because starting in 2026 there is going to be a half a percent level, much like your medical expense deduction, where you have to exceed seven and a half percent of your AGI, starting in 2026, charitable contributions will have that same feature at a half a percent of your AGI. So you have to understand that that first half percent isn't going to be deductible. So that could, you know, offer some, you know, tax planning strategies in, you know, 2025, versus 2026 right?

Lot of fine print with this. John, yeah, and I'm glad you mentioned that phrase there, Erin, because the one key takeaway for all that have watched this whole video is we saw a big, beautiful headline that was categorically false. So there's a lot of fine print, and there are things in this bill that could be both opportunities and could also pose as a detriment. So now is the time to reach out to your tax professional, your tax advisor, just don't key in on you know, the one headline, 1000 pages added to our you know, you know you have 1000 page bill. You have an 80,000 page Internal Revenue Code. There's opportunities and there's things to be aware of. Get the help, get the advice, and see how you can maximize the opportunities for you, right? So again, just to remind everybody watching, we've done many videos on when to claim Social Security, how to figure out when is the best window for you. It's on your YouTube channel, John. But if somebody wants to talk through these changes in the big, beautiful bill and how it affects them, what's the best way to reach you? Yeah, well, we have plenty of resources on our website, www.gosecurus.com, and while you're on there, you can see those past videos awful. My good friend Tommy and I recently did a podcast. It aired a few weeks back with you know, everybody's favorite, Ira and CPA Ed slot, where we just go into details about 45 minute long podcasts with Ed. So if you want further details on that, visit the retire pod, the retire happy podcast.com and while you're on our website, you can visit the contact us tab, where you can schedule a 20 minute phone call, where we will answer any general questions. Or you can schedule a one hour vision and clarity consultation.

Great John, thank you. Thank you. Erin,