A TAX FREE LIFE ON SOUND RETIREMENT PLANNING PODCAST

Jason: So, you have this book, Secrets of a Tax Free Life. Before our meeting, you mentioned that there’s a way … Is this the book that our listeners have the ability to get a copy of?

Craig: Actually, no. That one, I co-authored that was an Amazon bestseller. My recent book, which has actually been updated for the new tax law changes, is The 10 Most Expensive Tax Mistakes That Cost Business Owners Thousands. We’ll give you a link. It’ll be on our site, craigcodyandcompany.com/dentists/srp for Sound Retirement Planning, and they can actually get a paper copy of that book.

Jason: Oh, okay. Cool. So, craigcodyandcompany.com/dentists/srp f or our listeners if they’d like to get a copy of this new book that you have out.

Craig: Great.

Jason: That’s awesome.

Craig: That would be wonderful.

Jason: So, what are some of the secrets of a tax free life?

Craig: Mostly, they deal with business owners because business owners have the most opportunities out there. There are some opportunities for a regular W2 earner, but the tax code really rewards people who take the risk and go into business for themselves. So, some of the ideas are planning, choosing the right entity type. Are you taking advantage of the right retirement plan? We go into Section 199, the qualified business income, hiring your kids, having a medical expense reimbursement plan to pay for these medical expenses that are out of pocket. Sometimes they could be quite hefty if we’re talking about braces or cosmetic dentistry. So, those are a couple things that we talk about in my latest book.

Jason: Okay. As we look out into the economy, one of the concerns a lot of people have today is that our national debt has recently surpassed $21 trillion and the Congressional Budget Office says that we will be increasing our debt by, I believe it was one and a half trillion dollars as a result of these tax cuts that have gone into effect. Should people be expecting that tax rates will be going up? Do you think this current tax law will sunset in 10 years or do you think that Congress will keep them enacted and we’ll just keep growing this debt forever?

Craig: That’s a really good question. I wish I had that crystal ball. I say plan for what we know and leave as much flexibility as you can.

Jason: Okay. I want to ask you a personal question because I think we learn the best from real people that have had real life experiences. So, as you think about your own financial life, Craig, what has been your greatest victory, in terms of what you’ve done right with your finances, and what’s been the biggest mistake you’ve personally made?

Craig: I think the biggest victory is starting, pretty much from day one when I was in the police department, putting something away. Right? It could be 1%, but over time, 1% adds up. That goes to 2%. Whatever. So, that’s probably my biggest victory. I’d say my biggest catastrophe was probably the crisis in ’07 to ’09 when business was probably not diversified enough and we took a huge hit.

Jason: Okay. Yeah. That was a tough time for a lot of people. What did you learn going through that?

Craig: I learned diversification is key. We also learned we need to constantly be bringing in new clients and providing real value for those clients. Also, cash flow is very important.

Jason: Yeah. Yeah. Cash flow is something that we talk about all the time when it comes to retirement. I sound like a broken record, but I’m always saying retirement is all about cash flow. It’s your income that will determine your lifestyle and retirement, not your net worth. You’ve probably had the opportunity to meet with people that have made this transition into retirement, and it can be really scary for them to the walking away from an income at a time in their life when they’re at some of the highest income levels and then switching into this area of life where they’re having to depend on their resources to provide for them for the rest of their life. What are some of the things you’ve learned helping people make that transition into retirement?

Craig: I think being really more, not actual, but knowing what the numbers really are going to be, not thinking that you’re going to be able to live on a third what you were making and do the things you were still doing.

Jason: Oh, man. I’m so glad you said that. So, you’re talking about what your spending is, what your budget it, how much you actually spend.

Craig: Right. Exactly.

Jason: What I’m hearing you say is that’s probably one of the most important things that people need to know as they’re making that transition.

Craig: Exactly.

Jason: See? Now, there was no promoting. Craig and I didn’t talk about this beforehand. I don’t even know if Craig knows this, but we developed, Craig, what we call the retirement budget calculator. It’s software as a service. It’s to help people develop that retirement spending plan. There’s a one-time fee to have access to it.

 But it’s really probably, in my opinion, the reason I created it was because we wanted to have the most comprehensive budgeting tool, spending tool for people getting ready to make that transition so they really understand what their spending is because what I’ve found is you can’t create a good plan for people to help answer the question of have you saved enough unless you really understand that spending piece. It’s really the most important part.

 The other thing I wanted to ask you, now I know you’re a tax guy. I don’t know if you follow the market closely. But we’ve been experiencing a lot of volatility in the stock market here the first part of 2018. Do you have any thoughts about the volatility and the risks that people are taking within their investment portfolio as they’re preparing for retirement?

Craig: I don’t really follow the market. I just say if you’re going to be in the market, be prepared to be in for the long haul. Don’t lose sleep over downturns and don’t get too excited over upturns because they all even out.

Jason: They do even out. Yep. Time is the cure to the volatility of the stock market is something that we’re always trying to teach.

Craig: Exactly.

Jason: What about medical expenses, because this is a big one, can be a big one for retirees? When it comes to their medical expenses, are they going to be better off under the new tax law than they were under the old tax law, in terms of being able to capture those medical expenses, or how did that change?

Craig: They basically just lowered it to … It used to be seven and a half. It used to be 10% of your adjusted gross income and for people over a certain age, it was seven and a half percent. Now they just lowered it all to seven and a half percent. So, if you make $100,000, the first $7,500 out of pocket is not deductible. So, HSAs are important. If you’re in business, a medical expense reimbursement plan is important. If you’re totally retired, you just have to really do the best you can. Hopefully, you don’t get swamped with large medical costs because if you’re making a hundred grand, the first $7,500’s not going to be deductible.

Jason: Yeah. So, and then, you still have this high itemized deduction level. So, for retirees, I want to say it’s $26,000 because they get a little boost. Is it 65 that they get that extra boost on the standard deduction?

Craig: Yeah. It’s not a huge number.

YOU SHOULD REVIEW THE THE NEW TAX LAW CHANGES WITH YOUR CPA BEFORE IMPLEMENTING ANY TAX PLANNING STRATEGIES.

Get your copy of my book the 10 Biggest Tax Mistakes That Cost Business Owners Thousands HERE!

Listen to the full podcast here.