00:00:00 Start
00:00:26 Income Tax Return – 1040
00:01:30 1040 has 3 sections – Income (Blue), Deductions (Green), Tax Credits (Purple)
00:03:04 Purpose of Tax Return – determine taxes owed to help finance the federal government
00:03:30 Purpose of company income statement – inform investors of operating efficiency for a specific period
00:03:50 Accural vs cash accounting
00:06:02 Net Income meaningful metric when based on accural accounting
00:06:40 Tax code incentivizes taxpayers to consume
00:08:35 Turbo Tax application – used to validate spreadsheet
00:09:05 Wealth Distribution includes dividends and capital gains
00:09:46 Turbo Tax worksheet Qualified Dividends and Capital Gains shows how Turbo Tax calculates tax
00:10:25 Turbo Tax worksheet Social Security Benefits shows how Turbo Tax determines Provisional Income
00:11:15 How spreadsheet computes tax
00:12:33 Provisional Income
00:15:01 Taxable Income stated as single number but includes tax on ordinary income and capital gains
00:15:42 Taxable Income Stack – dividends and capital gains stacked on top of other income
00:18:31 Net Investment Income Tax (NIIT) – helps pay for Affordable Health Act
00:19:54 Pension and Social Security columns
00:20:05 Dividends and Capital Gains columns
00:20:26 Roth 401K/IRA Distribution column
00:20:30 Wealth Distribution column
00:21:05 Medicare Income Related Monthly Adjusted Amount (IRMAA) column
00:21:41 Filing Status – Joint or Single
00:22:00 Tax tables at bottom of worksheet
00:23:40 Use of Individual Income Tax worksheet – Retirement Financial Planning
00:26:00 Financial Goals – live desired lifestyle (targeted cash flow), generate cash flows efficiently (minimize tax), continue to grow wealth (minimize wealth subsidizes to generate cash flow)
00:29:30 Cash flow from after tax (Roth) account reduces targeted cash flow in worksheet
00:30:36 Present Value calculations used to account for time value of money
00:32:37 Retirement Contributions and Distributions – compare employee before and after tax
00:33:36 401K/IRA Contributions
00:34:40 Employer contributions are after tax in both Traditional and Roth 401K/IRA’s
00:34:59 Traditional and Roth 401K/IRA’s are same if contribution tax rate equal to distribution tax rate
00:35:26 Math showing equivalency
00:36:38 Money Illusion – growth of tax liability parasitic in nature
00:38:01 Tax favored – no capital gains on distributions, cost basis stepped up
00:39:10 Alternate way to frame tax liability – altruistic, invested on behalf of federal government with little burden
00:39:45 Main advantages of both Traditional and Roth 401K/IRA’s – employer match, no capital gains (stepped up cost basis), tax exposure hedge, curtail spending
00:41:10 To maximize tax exposure hedge split contributions evenly between Traditional and Roth 401K/IRA’s
00:42:15 Significant advantage of Roth 401K – can accrue more wealth by paying taxes upfront AND making the maximum contribution. Pull contributions tax free for large puchases.
00:44:03 Genesis of Roth 401K/IRA. Only 20% of retirement accounts are Roth
00:44:47 Keep in mind regarding the Traditional 401K/IRA is Taxes withheld from a distribution are considered paid throughout the year. Can be used to avoid under payment penalty when a large gain is realized late in the year.
00:45:07 John Smith contributions – postponing contributions is unfortunately all to common
00:46:57 Tax liability accural
00:47:48 401K/IRA Distributions
00:48:54 John Smith distributions – postponed until mandatory at age 73
00:49:53 Tax liability accural
00:52:33 Inheritance – heirs have 10 years to take distributions
00:51:28 Traditional and Roth 401K/IRA’s equivalent if contribution tax rate equals distribution tax rate
00:51:49 Impact of distribution tax rate being different from contribution tax rate
00:53:25 Once distributions made they are no longer in a tax favored account. Cost basis established at time of distribution.
00:53:38 Spreadsheet assumes distributions are immediately reinvested and held to death. At death, cost basis stepped up.
00:53:53 Immediate reinvestment of distributions and stepped up cost basis make the timing and amount of distributions irrelevant
00:54:01 If distributions are not reinvested or not held to death then the optimal tax strategy is to postpone distributions to maximize their cost basis
00:54:11 Interesting strategy – Roth conversion to reduce Required Mimimum Distributions
00:54:22 Summary
00:54:40 Interesting Tidbits – 401K created staggering opportunities for poor financial decisions. Most people lack abililty or are unwilling to make disciplined financial decisions.
00:55:29 Results from common bad financial decisions – average 401K balance is $100K, haphazard generation of retirement income streams
00:56:05 How to download spreadsheet used in video
00:57:28 Wrapup…(read more)

LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA

Personal Tax Planning: Tips and Strategies for Financial Success

Tax planning is a crucial aspect of personal finance that often gets overlooked. Many people wait until the last minute to prepare their taxes, resulting in missed opportunities for savings and potential financial headaches. However, with careful planning and strategic decision-making, individuals can effectively minimize their tax liabilities and maximize their financial well-being.

Here are some tips and strategies for personal tax planning that can help you stay ahead of the game and take control of your finances.

1. Keep thorough records: One of the most important aspects of successful tax planning is keeping thorough and organized financial records. Having a system in place to track your income, expenses, investments, and other financial transactions throughout the year will make it much easier to accurately report and deduct the right information come tax time.

2. Maximize tax-deferred accounts: Take advantage of tax-advantaged retirement accounts such as 401(k)s, IRAs, and health savings accounts (HSAs) to reduce your taxable income and increase your savings. Contributing to these accounts not only helps you plan for retirement but also offers immediate tax benefits.

3. Consider tax-efficient investments: When building your investment portfolio, consider the tax consequences of each investment. For example, investing in tax-exempt municipal bonds or holding onto investments for more than a year to qualify for lower long-term capital gains tax rates can help minimize your tax burden.

4. Take advantage of tax deductions and credits: Familiarize yourself with the various tax deductions and credits available to you, such as those for charitable donations, mortgage interest, and education expenses. These deductions and credits can significantly reduce your taxable income and overall tax bill.

5. Plan for major life events: Major life events such as marriage, having children, buying a home, or changing jobs can have significant tax implications. It’s important to consider the tax consequences of these events and plan accordingly to minimize your tax liabilities.

6. Seek professional guidance: Tax laws and regulations are complex and can be overwhelming for the average taxpayer. Working with a qualified tax professional, such as a certified public accountant (CPA) or tax advisor, can provide valuable insights and personalized tax planning strategies tailored to your financial situation.

7. Monitor changes in tax laws: Tax laws and regulations are constantly changing, and staying informed about these changes can help you adapt your tax planning strategies accordingly. Keep an eye on new tax legislation and seek professional advice if necessary to ensure that you are maximizing your tax-saving opportunities.

By implementing these tips and strategies, individuals can take a proactive approach to their personal tax planning and achieve greater financial stability and success. Remember that tax planning is not a one-time event but an ongoing process that requires attention and diligence throughout the year. With careful planning and strategic decision-making, you can effectively minimize your tax liabilities and maximize your financial well-being.