Jim Lange, JD/CPA is a nationally-recognized IRA expert and sought-after speaker for the financial services industry. Jim's presentation offers not one, but two themes to advisors. He not only unleashes the best, substantive Roth IRA conversion information, but he also reveals a step-by-step procedure of how to use these proven strategies to dramatically increase production. Whether you are in the business of managing advisors, wholesalers or insurance professionals, hire Jim Lange to explode your business. For ore information, visit http://www.retiresecure.com/speakertour.php or contact Nicole DeMartino, Marketing Director, at 412.521.2732 / 1.800.387.1129 or nicole@paytaxeslater.com.
"America's IRA Expert," Ed Slott joins Jim Lange, JD/CPA to cover Roth IRAs and Second to Die Life Insurance
The country most acclaimed IRA expert, Ed Slott, describes the benefits of Roth IRAs, Roth IRA conversions and Second to Die Life Insurance through a menagerie of entertaining and true stories for the avid investor.
Welcome to The Lange Money Hour: Where Smart Money Talks, hosted by Beth Bershok, with expert advice from Jim Lange Pittsburgh based CPA, attorney, and retirement and estate planning expert. Jim is also the author of Retire Secure Pay Taxes Later. To find out more about his book, his practice, Lange Financial Group and how to secure Jim as a speaker for your next event, visit his website at paytaxeslater.com. Now get ready to talk smart money.
Beth Bershok: We are talking smart money and today, wow, this is going to be an information-packed show. Thank you so much for joining us. I'm Beth Bershok and today we have not one, but two nationally renowned experts. First of all, of course, Jim Lange. Jim is a CPA, attorney, he wrote the bestselling book Retire Secure, Pay Taxes Later and, by the way, the second edition of the book came out last month and a week after it came out, Jim, it was a number 1 best seller in several categories on Amazon.com. So congratulations on that one. And we also have with us Ed Slott, America's IRA expert and you may have seen Ed on PBS because first of all he had the special Stay Rich For Ever and Ever which was the number 1 fundraising public television show throughout the country. He now has a new one, a new PBS special called Stay Rich For Life. There's also, of course, a book and a workbook Stay Rich For Life - Growing and Protecting Your Money in Turbulent Times. And thank you so muc h for taking the time to join us today, Ed.
Ed Slott: I'm glad to be here.
Beth Bershok: I think this is the first time that the two of you, Jim's niche is Roth IRA's, yours is IRA's. I think this is the first time that the two of you have ever been together in a forum like this, am I right?
Jim Lange: Yes it is, that's right.
Ed Slott: It must be like a presidential debate or something.
Jim Lange: I don't want to say debate, but I'd like to add a couple of words of introduction.
Beth Bershok: A summit, I like it
Ed Slott: An IRA summit
Jim Lange: Reading Ed Slott is really essential information. I mean, I've read Natalie Choate, Bob Keebler, Seymour Goldberg, Bruce Steinberg, Steve Leimberg, Gary Lesser, others. But Ed is probably more popular than any of them and he, more than anybody, interweaves great stories, humor and ties it into critical lessons and I just think it is great. His new package Stay Rich For Life at irahelp.com, which is his website, is a tremendous resource. But Ed, getting back to your stories because I think that's such a wonderful way to learn and you do it so well and one story I remember in particular and this goes back 6 years when I read The Retirement Savings Time Bomb. Before I'll ask you to recall this story, I'll mention that Pittsburgh is a great baseball city. In fact, if we lose more than half our games this season we will set a new record for the most consecutive losses of any major sports team ever.
Beth Bershok: I'm looking forward to that, actually, I reckon it's going to happen
Ed Slott: I have no sympathy for you, I'm a Mets fan and they can't have lost as many games because they haven't been around as long, but the way they lose them is so much better!
Beth Bershok: It's dramatic
Jim Lange: Well, I think we're going to get into that in a minute actually. But in Pittsburgh, almost 50 years ago Bill Mazeroski hit a homerun in the 9th inning to win the World Series from the heavily favored New York Yankees' but, and he will be remembered for that homerun, but what a lot of people don't remember is that he was only a .260 ball player and he was really a great fielder and here's my question for you, Ed, because this story just sticks in my mind so clearly. Could you tell us about Bill Buckner and the lessons that our listeners can take from Bill Buckner?
Ed Slott: Well Bill Buckner, for baseball fans, is infamous with, you know, failure at the critical moment. But without going through all his statistics, turns out he was one of the greatest baseball players that has ever played. But, when it counted at the end of the game and that's why I use the analogy with planning for your retirement savings, it's what you keep that counts, the score at the end of the game not the score at half time, not if your doing baseball in the 7th inning or the 8th inning � it's how you complete the game. So where Bill Mazeroski was nowhere near probably the player Bill Bucker was, Bill Mazeroski is in the Hall of Fame because at the end of the game, he came up with the big hit and as everybody in Pittsburgh knows, but I got to tell you, a lot of people around the country when I use Bill Mazeroski's story don't know that he's the only one that's ever hit a 7th game World Series winning walk off homerun. When I say that around the country people, t he real baseball fans say Oh no, that's not true. Joe Carter did it. Joe Carter didn't do it, just a little baseball trivia, he did it in the 6th game. Bill Mazeroski is still the only one to walk off the World Series in the 7th game. So, poor Bill Buckner had a fantastic career, over 2,000 hits. Actually had 500 more hits than Joe DiMaggio. Had more hits than people like Mickey Mantle and Ernie Banks and on and on and won fielding titles, won the National League Batting Title. But when it counted and that error against the Mets' in the 86 World Series, you know they practically ran him out of Boston. Actually last year they brought him back for the first time in over 20 years to throw out the first ball and I guess they forgave him, because they won a World Series since then. Bill Bucker will probably never be in the Hall of Fame even though he had a Hall of Fame career. You look at the stats of the people, he's got more hits than 70% of the players already in the hall of f ame.
Beth Bershok: Actually this is the first time I've ever heard of Bill Bucker � right here on this show.
Ed Slott: The point is that he had a great career and the analogy to retirement savings. You could have a great career saving, building and investing and having more and more. But if you strike out or drop the ball like Bill Buckner did at the end of the game, the distribution strategies, the planning, your family will remember the same thing about you that they remember about Bill Bucker � that you dropped the ball, you blew it when it counted, even though for 30 years you did everything right and that's the big problem with retirement planning. People only plan for, what I call, the first half of the game accumulating money, and you know you really don't have much control over that half the game. You might think you do with investing but there's bigger, as we found out, bigger forces at work that you can't control like Wall Street and all that. But the only thing you can control is putting the money in and hoping for the best. Even with a great investment advisor your findi ng out that you don't really have much control over how much it grows but you can put it in and you can control the backend of the game, which is to me, the winning half of the game, that's what I call the winning half of the game in my new book Stay Rich for Life. You can control that because it's all about the taxes and that's what people have to focus on now, what you can control. You can't control the stock market, the greed, the fraud and all of that. But you can control mining the tax code and doing great tax planning for the end of the game when it counts like when Bill Mazeroski hit that home run.
Beth Bershok: Well I think a lot of people are worried about that now. I have to jump in here with this because I saw on your last newsletter Ed that you have a catchphrase for today's economy which I love. You call it the Yo-Yo Economy.
Ed Slott: Yeah, we're in a Yo-Yo Economy I call it. A Y.O-Y.O. stands for You're on Your Own. Never before have people felt so helpless even with financial advisors who now they find out were really just salesmen, brokers selling them stocks and bonds. I think Warren Buffet said it best. He had a saying, When the tide goes out, you quickly find out who's wearing a bathing suit. And that's what's happening now, we're finding the curtain's coming off. A lot of these people that call themselves financial wizards or gurus, these brokers and banks and a lot of them really didn't know what they were doing. They just sold what their company told them to sell. You lost your money, they got bonuses so that's got to stop and that's one of the things that I talk about in my book. How to find competent, true financial advisors that actually do the tax planning, the distribution planning where the score matters at the end of the game. Things you can control.
Beth Bershok: You know, knowing you were going to be on today Ed, we had some listeners who sent us questions and we're going to be getting to those in just a minute, but I know there was something Jim wanted to ask you first.
Jim Lange: Well I was actually attending a professional seminar and I met a guy named Bill Nelson who sang your praises.
Ed Slott: Oh yeah, Bill
Jim Lange: And he told me that the secret to one of the most important things about IRA planning was in The Retirement Savings Timebomb and he gave me the page, it's the old edition which I still have the old edition because it's all marked up and I have the new edition too. But I use the old edition because again it's highlighted and marked up, etc. If you remember, there was the case study of Ralph and Sadie who had $1,000,000 in an IRA and they had a 40 year old daughter named Ruby and you had made some recommendations to Ralph and Sadie and I was wondering if you could tell our listeners what you would recommend to Ralph and Sadie who have $1,000,000 in an IRA and a 40 year old daughter named Ruby.
Ed Slott: Actually it's funny you mention that because I brought that story back and updated it for my new public television special Stay Rich For Life � same name as the book and I understand from what you've both told me that it's been running in Pittsburgh.
Beth Bershok: Yes, WQED.
Ed Slott: So, in the second act of that show I tell that story, I may have changed the names . I don't think I used names. But the point I was trying to make again, managing the taxes, doing planning, taking advantage of what I call those golden nuggets in the tax code, which most people don't. Most people are going to lose their retirement savings. When I say retirement savings, I mean your 401 (k), your 403 (b), your company plan, your IRA because that money has not yet been taxed. So now you have to do something about it to do pro-active planning ahead of time before, what I believe, is huge tax increases come along. Look at the economy, bailout after bailout � Who's going to bail out America? It's going to be the very people who did everything right � put money in 401 (k)'s and IRA's but whose everybody to do this kind of planning like you just referred to and I call it using the biggest benefits in the tax code, and just so you know I do not sell insurance, stocks, bonds , funds, annuities, but I believe in leveraging the tax code � I'm a tax advisor. The reason I said that is because the single biggest benefit by far is the life insurance, the tax exemption for life insurance. The reason I said that is because as soon as I say life insurance people must think I must be selling it or something, I'm not! I'm telling you to use that to leverage your money when you can use the tax code to turn $1 of taxable money into $10 tax-free, that's a good deal. I would do it all day long.
Beth Bershok: You know actually, let us get back to this in one second. We have to take a quick break, it's The Lange Money Hour: Where Smart Money Talks. Jim Lange and our very special guest today Ed Slott. The Lange Money Hour: Where Smart Money Talks.
Beth Bershok: The Lange Money Hour: Where Smart Money Talks. I'm Beth Bershok and we have two, we have a great guest today, Ed Slott who is America's IRA expert, and Jim Lange of course. We were just in the middle of an insurance story that Ed was talking about and Jim if you want to continue on with Ed's idea there.
Jim Lange: Well, we were talking about Ralph and Sadie who have $1,000,000 in an IRA and a 40 year old daughter named Ruby and Ed was mentioning a little bit about some of the benefits of the tax code because he's very concerned with future taxation and was talking about life insurance.
Ed Slott: I'm excessively concerned about future taxation! I think we're all going to hit much higher taxes, so we have to do something to move our money now to tax-free accounts and the point to the story was, a spouse is usually better off getting free and clear money � totally tax-free money. Which is, nothing better than life insurance. There are no required distributions and children and grandchildren are generally better off with the IRA's because they can stretch or extend distributions over their lifetime. So, that was the point to the story instead of what most people would think, Well, I want my wife or husband to have the IRA, you're better off having life insurance which will never be taxed � the state or income tax, and getting the IRA's out to your kids, estate tax free, which you can do now even more so since the exemption for estate tax has been increased to $3,500,000. That opens it up for a lot more money if you have the much. You know the less you have the more important it is to protect what you have, even if you have a lot more you can give up to $3,500,000 or leave should I say, $3,500,000 of IRA to kids and grandkids now estate tax-free.
Jim Lange: Ed, let me ask you this. So basically you are saying if the husband is the one with the $1,000,000 in the IRA, you're saying to consider a life insurance for the husband.
Ed Slott: Well, in the example I said the husband had a $1,000,000 IRA and normally when somebody comes in, probably the same thing with your clients if somebody came in with that scenario, the wife would be the beneficiary because that's what everybody is told on the IRA. I'm saying to change that, to make the daughter the beneficiary but then the wife is going to say "Well, what am I going to live on?" and that's where the life insurance comes in. But generally what I end up doing is changing the IRA beneficiary back to the wife anyway, but adding the daughter as contingent beneficiary so this way the wife is in complete control. What the wife really wants, not so much the IRA, she wants financial security. She looks at the IRA as financial security, but that's not really a secure future when you don't know how much of that is going to be taxed when you'll need it most. When she reaches her hand in there when she's the most vulnerable and needs it the most, taxes could eat up 50% to 60% of it, depending on future tax rates and estate tax rates. You're better off with the life insurance which is a sure thing � you have it free and clear and she can also get the IRA if she wants, but by naming the daughter contingent she has the ability to refuse that inheritance, another benefit in the tax code, called a Disclaimer, where it could go right back to the daughter after death anyway. I know that was a mouthful.
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