Is California a low-tax state for Retirees? Looking beyond top marginal state tax rates webinar - April 2022

good morning everyone thanks for joining our webinar we will kick off in about another minute or so as we give folks

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time to login

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then

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uh let's see can you hear us okay let me just shoot that out to larry

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okay looks like we've got some folks in here now all right everyone well welcome to our

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income lab webinar uh this morning um taking a deep dive into state taxes in

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uh retirement excited to have derek dark and justin here to present and uh for

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anyone who this is your first time at one of our webinars we will have the first half uh be presentations and then

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we'll open it up for q a after uh inside the zoom meeting here you'll see a q a

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section where you can uh drop your questions in there see other people's questions like and move them up in our

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queue and then after the presentation we'll just work through the queue this uh webinar is available for cfpce

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credit and so what we'll do is we have a survey that will go out right after the webinar um so that you can uh

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give us your cfp id um and your information so that way we can submit this for cfp approval for you

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outside of that i will uh kick it over to justin and derek to get this started

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okay thanks malcoly and thanks everybody for attending

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um so today's topic is a little bit different from from some of the topics

Overview

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that we've done in past months we often focus much more on on kind of the

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um you know the analytics behind retirement income planning and and uh

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and dynamic planning and so on today we're going to focus on um kind of one of the

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one of the choices that retirees have to make in retirement is certainly like the kind of thing that gets uh you know

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every personal finance site has something on um state taxes in retirement um

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kind of assuming that uh this is just one of the of the inputs to that

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decision on where to where to live in retirement um certainly taxes are not always the top priority here often

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family or uh weather or or things like that would also weigh heavily on this

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on this decision but for today we're going to kind of strip all that away and just take a deep dive into state income

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tax um so again actually there are other taxes to consider of course uh when looking at where to live including sales

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tax property tax and so on but we're going to focus on income tax in part because at income lab we we

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offer detailed tax coverage

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at the state level and it's pretty interesting when you look closely at the the state tax income

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state income tax systems um there's a lot there that is important for retirees

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um so that's what we'll be going over today and sort of provocatively called this is california a low tax state for

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retirees um the answer will be it depends but for some people yes

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in fact there are even better examples than california of states that seem to be high income tax

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but for at least certain retirees would be low or zero income tax states

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um so the outline is this we'll we'll spend a fair amount of this i'm kind of

Outline

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mapping the true state income tax landscape for retirees um i actually have an article coming out

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i'm not exactly sure when maybe in the next month or so that will go through some of this uh as well

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then we'll look at some examples um look at the effective income state income tax rates for a couple of example households

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and find some surprises there and then wrap up with a particular strategy

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around income splitting in order to maximize state tax state income tax savings in

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retirement okay so let's start with the state tax

Top Tax Rates

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landscape so it's pretty common to um to see people kind of judging a

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state's income tax burden by its highest marginal tax rate

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and so here you'll see 2021 top tax rates it's actually a little bit different for 2022

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but close enough and it's pretty obvious to you know if you take a second to think about this

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that that this is not enough information to know whether these would be high tax um states for

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for retirees or frankly for anyone right for for example we would want to know what the rates are below this assuming

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it's a progressive tax state which um all of the ones on the list here are um

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and then we would want to know the thresholds at which these hit right if if it's uh you know zero tax until five

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million dollars and then 13.3 in california that would be worth knowing right um

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and and so we obviously want to take a a closer look at um

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what this what the state income tax experience of an actual retiree would be and in a planning

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situation what the tax experience of the particular household that you are working with would be before providing

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advice on um on state income taxes and you know the possibility of moving and retirement

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being at least in part because of uh of those considerations um so the first

No Income Tax States

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place you'll usually um see a look at state income taxes is just to focus on uh the states that have

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no income tax and this list has actually grown slightly recently so tennessee used to have a small

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income tax new hampshire still has a small one but these for most practical purposes

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new hampshire is basically a zero tax state um and so we might just look at this and say well look these are these

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are places where you could trim your income tax burden right move to florida move to texas

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um but in fact there's there are more options than this for

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for a lot of people if state income taxes are an important consideration um for example

Social Security Income

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and i apologize on this graph i realized alaska mis missed out on being blue so i'll fix that before we send out the

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before we send out the slides um but if we if we look at one of the core

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sources of retirement income the sources of uh you know

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lifestyle funding um social security is is not taxed at all

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in a lot of states in fact by my account there are only 10 states that lack a blanket exclusion for social security

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income whether that's because there's already no state income tax or in the case of new hampshire this sort of taxes or this

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sort of income wouldn't be taxed or because there's a specific exclusion

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so really it's the gray states in the mainland here that don't specifically exclude social

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security and so if you have a household that is depending um to a high level on

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social security income you know you could easily have you know 40 50 60 000 of social security

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income coming in um that is tax-free income in all of the the blue and uh

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and green states and alaska um and and so that goes a long way to uh to

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lowering the tax burden for for any given household um but even for the states that

State Exclusions

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don't specifically exclude social security there's still hope so um if

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and and this is probably a place where many of the advisors on this call have some have some expertise in your own

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state or in the states where you have a lot of clients um but there are specific exclusions to pension and retirement

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plan income um that in many cases could cover all or most of of social security for a state

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like you know colorado for example where 24 000 per person is excluded

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from social security and pension pensioner retirement plan income new jersey

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which i think excludes social security separately and that's the other nice thing about these exclusions they

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generally apply only to 65 plus sometimes there's a

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slightly lower exclusion below 65 in a few cases it's 59 and a half or

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uh or some other age threshold but these also tend to cover not just social security but all sorts of other

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retirement income whether that's pensions or um or

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withdrawals from retirement accounts and so on so again these can go a really

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long way to reducing the taxability of retirement income for a given household

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as we'll see in some examples uh in some cases where these are really hefty exclusions um this can effectively make

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quite a few well a handful of other states um zero tax

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um i'll point out a few of these uh in the examples uh to come

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um by the way we we will distribute these uh these slides because a lot of this is is

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very uh very in-depth and and some some of these state exclusions can be

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quite um have some have some interesting quirks to them um so

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uh for example in georgia i believe it is uh the definition of retirement

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income is quite broad and can even include you know wage income to a certain extent um in rhode

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island on the other hand um strangely ira distributions are not

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you can't get the exclusion for ira distributions but you could for a 401k for example so some there are some very

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state-specific strategies one would want to know if you work a lot with with clients in those

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states you know for example that particular piece in rhode island makes ira rollovers less attractive

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in that state um there are also as you'll know um in

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in your own states if there are specific exclusions beyond this that many public

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pensions are excluded in particular states i just picked on military pensions here because

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those are those are federal public pensions and again

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many many states exclude this particular type of pension often you'll also see within the state itself

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some public pensions police firefighters teachers

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may benefit from a certain amount of exclusion or a complete exclusion the same goes for federal pension

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programs that are not military will often see full exclusions or partial exclusions

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there so again if you have clients who worked in the public sector

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you'll often um they will often have uh you know much less reason to move to a

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tax-free state a zero-tax state than they might if um if we didn't look more deeply into the

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the specifics of state taxes

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and again it looks like alaska got left out here i think because it was in the in the lower left i just uh wasn't

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seeing it there's an additional piece so this is on top of those retirement and age

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specific exclusions that we saw on the last large table

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their states will often have additional exemptions and deductions

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um and some in some cases credits um that are that only apply to to people 65

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plus um and so just to review what the difference there generally

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deductions and exemptions are essentially the same thing so that's you know reducing the taxable income by

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some amount credits will reduce the tax bill by some amount so uh sort of the value of the credit if

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you wanted to compare it to the deduction is a little bit more complex it depends a bit on your on your tax rate um

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but as you'll see here um some of these you know can be

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reasonably large so for example maine you have a a 4 300 per person exemption right if we have two people over 65 you

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know we're adding that to those other exemptions and so on now we're accumulating ways to remove tax taxable

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income from the equation for someone for someone living in those those states

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some of these exemptions and deductions and actually the same is true for the retirement income specific

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deductions can be subject to phase-outs at particular

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income levels and again we'll have a piece coming out in

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the next month or so that'll have a little bit more detail sort of a a way to have a um

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a reference piece on some of these so that if you do have a new client you know in a state you're

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less familiar with you'll be able to kind of quickly understand what the retirement income tax landscape is

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for those for those individuals there are also states that have special

States with Special Treatment

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treatment of investment income so mostly we focus so far on social security

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pensions and retirement plans but even things like long-term capital gains

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can be excluded to a certain extent in a small number of uh of states

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and these there are even some other exclusions in certain states that i left out here just because they're so specific um that they

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wouldn't apply in in uh in a lot of situations for example i think in idaho capital gains on cattle are excluded

State Tax Landscape

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okay so that's kind of the landscape so we have total exclusions of social security in many states uh exclusion of particular

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pensions federal and and state public pensions in a lot of states and then we have a variety of exclusions of

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retirement type income whether that's uh ira and 401k distributions retirement

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plan distributions particular pensions and so on and a set of additional

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exemptions deductions and credits that are age related so the combination of all of those things

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has a large effect on your state tax bill so let's look at them in practice

Highest Marginal Rates

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we might expect to see again that the states with the highest

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marginal rates coming out to have the highest um effective tax rates per for a particular

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household but as i mentioned at the beginning um the highest marginal rate leaves leaves

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a lot of information um you know unstated that would be really important to know

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if you were trying to figure out whether a state was going to be a high-tech state for a particular household

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so these are 2022 rates so you may have noticed a slight difference from that first slide but here for example

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california is still at the top in hawaii which we'll see in these examples uh quite a bit has a

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very high top marginal rate 11 percent new jersey we'll also see in here

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new york uh i think those are those are some of the states to kind of look out for um in

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these examples right so we'll be asking to what extent does the ranking of you know

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the tax bill for these households from an effective tax rate standpoint

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to what extent does it match or not match this list of you know kind of headline

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high income tax states okay so we've got two households

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the first has a total of 75 000 of of income

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um 36 000 in social security and for all of these examples i have split the income

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uh evenly between the couples and you'll see why that is but

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these the outcomes here would potentially differ if there were not an even split of um of

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the income in particular if it was really lopsided right if all of this social security or all of this pension income were from one individual you

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might see you might see some large differences so for this household 75 000 total um

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in in retirement income we have a zero tax bill

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in 25 states and alaska did make it onto the onto the list here um

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and less than a one percent effective rate in 16 more

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so that may not be surprising here because social security is such a large part of the income um

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almost half of the income and we saw that a lot of these sticks are going to exclude that pension and qualified plan

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income some of them to a high extent again colorado 24 000 per person um georgia which we'll

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see an example here uh i forget exactly what their uh

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65 000 per person right so a lot of states um are we're just swamping uh

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this this retirement income with exclusions um and getting down to getting down to zero but even in states

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that where we haven't been able to exclude all of this income there's a um

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a very low tax bill and interestingly as i we sort of list out the states that have a greater than

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one percent effective rate for these folks um utah is appearing to be the the

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highest tax date at 3.1 percent effective massachusetts may be a little less uh

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less surprising because it's uh it's sort of thought of as a high-tax state although that doesn't always

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come out to be true um and you'll also see montana showing up in in some other places here

Household B

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household b we've doubled the income to 150 000 so here uh

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48 000 in social security again split evenly between the spouses

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again some pension and qualified plan income and here i've added an equal amount of investment income all of it

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long-term capital gains that's unlikely to be true right uh probably if we're if

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we're taking some money from a taxable account at least some of that might be return of of uh basis but um kind of

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stacked the deck against this family and made all of it taxable so they have 150 000 of

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of potentially taxable income in this case and

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now we have um only 11 states that have zero

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taxes so we've we've really only added a a couple to our

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to our set of of already tax-free states you'll notice georgia and new jersey

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are green here which is potentially surprising um but there are

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three more that are under one percent um so those are the the blue states here

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north dakota wyoming and south carolina but 13 more between one and two percent

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which are again um you know maybe a little bit less than we might have expected and we see states like hawaii

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and california on this list as zero tax states

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again we actually i didn't i didn't call this out for household a but that was also true

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for household a so hawaii and california the top two states with regard to their highest

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marginal tax bracket or rate are actually zero tax states for

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household a and they're between one and two percent for for household b new york also notice zero tax for house

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all day new jersey um still zero tax for household b for new jersey but um between one and two

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percent in new york for household b uh and again if we kind of rank the the

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worst uh for these folks montana utah uh minnesota oregon oregon maybe not as

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surprising because that was on the list of of the higher tax states but um these are

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potentially fairly surprising uh montana and utah and really the culprit here is that those are states

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that although they may not have the highest rates may apply those rates at

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lower income thresholds and also lack some of these specific exclusions that

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we saw earlier those retiree specific exclusions this might be a good time to mention

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that the trend in state legislatures has definitely been toward more tax

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breaks for retirees so for example we saw the military pension exclusion map

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earlier there has been that the states that exclude military

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pensions that list has grown uh recently um and there are states that are that

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are planning on phasing in more retiree specific exclusions so that

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it's definitely kind of a watch this space area we've even seen some states looking

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to to phase out uh income taxes entirely uh over the next several years

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so it's a dynamic area these uh these i would not expect these maps and numbers to remain the same as the years go on

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um but again some some surprises here right the the if if this family were

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looking to kind of keep their state income tax bill low um they really have a lot more options

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than just the uh you know the the well-known zero tax states

Observations

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okay so just some observations regarding these examples um so along with zero tax

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states georgia hawaii illinois i didn't mention them but also thought of as a high tech state new jersey and

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pennsylvania often masquerade as zero income tax states for retirees again

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depends a little bit on the uh on the household specific uh profile but um it's not hard to find a

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profile that would that where these states would be zero tax states um the more a household depends on

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social security and pensions or qualified plans the higher the likelihood they may have to pay zero state income tax

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and this is actually an interesting place where you know having this kind of tax deferred money

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does actually have a slight tax advantage over um over having taxable

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accounts um again you have to look at the exact situation to know whether that's a

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large enough advantage to to make the qualified plans more attractive than a taxable account

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and some states like utah and montana may have a comparatively higher tax burden for retirees than one might think

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from just marginal the top tax bracket

Strategies

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okay so now we'll turn to um some actual strategies um for maximizing um the

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exclusions of retirement income uh in in states right so this is maybe a

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little bit less about you know helping people figure out where to move and a little bit more about um you know

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the tactics in any given year or even the tactics in saving for retirement so

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this this is also a place where your savers you know might start to think a little

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bit about when they have opportunities to save money in one way or another how they should do that

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so we'll focus here on states that have what i'll call a per spouse retirement

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income exclusion um and so these are the the yellow states right so these are states that

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have a state income tax and also have retirement income exclusions um of the

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sort that we saw before whether that's 401ks for 3dbs and so on iras

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pensions even private pensions and so on

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and these are states where those exclusions apply per person meaning uh

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for example look at colorado where i am a 65 year old gets a 24 000 exclusion um

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and so you know the most obvious places well if i'm 65 and my you know my wife is 60 well she would get a 20 000

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exclusion i'd get a 24 but we don't get to combine those and just say well we get 44 000

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excluded from our income we really it's almost like we're doing our taxes separately right so my social security

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my you know retirement plan uh distributions um and then i apply those that 24 thousand

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dollars to my column there right and so it's easy to see

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that you know in georgia for example um we would have the potential of excluding 130 000

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of retirement income which is quite a bit especially given that georgia also excludes social security but if not used

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judiciously this we would we would miss out on some of that exclusion

Example

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so i've used georgia here as as our example we have jack and jill

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let's say they have a hundred and forty thousand dollars of total retirement income

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um but that all of it is essentially in jack's column right so um

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maybe it's all um you know 401k distributions only 65 000 would be excluded from

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taxation leaving 75 000. on the other hand if this were more

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evenly split and 65 000 of that were in jails column they as a family would only have ten

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thousand dollars left net of the exclusion so seventy five thousand versus ten thousand um so a really

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major difference in and how things are um are apportioned there

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so the first piece is to know here is just to be aware of you know are the states

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that you're planning in income splitting states and if they are how

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important are these exclusions to the family that you're planning for um if

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it's both an incomplete state and that exclusion would be important and having meaningful effect

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all else being equal we would want to plan to fill up these exclusion buckets for each spouse now if there's plenty of

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assets for bo in both spouses name let's say there's you know a lot of 401k assets in any given year we'd want to

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make sure that we're at least filling up those exclusion buckets you know all else being equal

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if we're still in a savings period crafting a retirement savings plan that could

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produce retirement plan funds for both spouses if you're if they're retiring in an

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income splitting state is something that to think about now right so this might be a situation even if the spouses have

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very different um you know wage levels for example you might do very large exclusions um

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for you know even the lower income spouse in order to make sure to to have those assets available for income

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splitting later as i mentioned earlier it is also important to watch out for specific

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rules like exclusion of ira distributions and the impact of excluded social

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security income so there are some states where these exclusions can kind of be eaten up by social security colorado is

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one of those states where that twenty four thousand dollars really first applies to social security

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so if this family would have high enough social security that that would be eaten

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up um you know the income splitting is is a little bit less less important assuming that the social

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security is is evenly split right um this is also a place where

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um there's some impact related to social security timing um and you know even

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thinking about rmds and roth conversions um right so

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that the splitting of these things you know if let's for say for example one spouse had

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a very very large retirement plan balance you know there may be a reason that we want to you know bring that

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balance down more quickly in certain situations

Summary

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okay so kind of to summarize this uh we've seen that top

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tax brackets in a state are really a poor measure of the state's income tax burden for a retiree

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this is a common theme in a lot of our webinars is that rules of thumb

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are are not particularly useful when it comes to uh planning for a specific case a

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specific example a specific household right the idiosyncrasies of a particular plan can really have a large effect and

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make those you know rules of thumb uh even completely wrong in certain situations so we have to look beyond um

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kind of the the easy numbers um only 10 states lack a blanket exclusion

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of social security so that already has a large effect on state income taxes there are numerous age-based or

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source-based exclusions to help retirees so these would be the you know over 65

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exclusions deductions and credits and also the

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exclusions of of income that is retirement uh type income so it's uh

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pensions ira and 401k distributions and so on and because of these the

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effective rates for a particular household in a particular states could be quite low even if the state has

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an income tax and even if that's that income tax could potentially be very high for certain people you know especially people who are um

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are in their working years you know so states like california and hawaii can even be zero tax states for

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for certain people the specifics of the household has a significant effect on their tax their

31:41

state tax situation so this is why one of the reasons why at income lab we've

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we've focused on providing in-depth coverage of state taxes so that

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um you're able to give a household a feel for well you know maybe you are

31:57

considering a move to some state maybe it's even a state that you think might be high tax um here's a way that we can

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provide some estimates of what your actual tax situation would look like and

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in general we've seen that often the news is better than someone might think if if they're just thinking about kind

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of top marginal rates or kind of you know just the

32:22

more superficial look at a state's income tax system

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so with that i think uh i think we can open it up to questions

Comments from Derek

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or uh or derek oh yeah you derek you are here i i think uh if you have some some

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comments first on kind of how you plan i know you have clients in several states so um

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tax planning yeah i mean i think for me kind of a big whatever tool i'm using right it's

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helpful that it is giving me something accurate that i can kind of rely on to guide my clients and give them advice

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and so that's a big big deal for me i don't want to recommend you know a particular strategy

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or a move or whatever that already talk to the tax implications of the move without really understanding you know

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what's truly there and there is so many layers of complexity at the state level particularly when you have clients that

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are looking outside of the state that you're most familiar with or multiple states so for me uh that's

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useful i think another practical tool is right there or consideration is that

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like the planning software getting the broad strategy right like to me i realized that there's so many

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complexities for every single situation a lot of times it's not going to be a hundred percent there

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and there are times when i'm going to move something over to you know another software program like a whole list of

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plans sometimes i'm trying to get like really into the weeds of like a single year if we're

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looking at roth conversion or something else like that um but you know that to me is kind of how the two two tools like that work

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together where income lab helps me set the broad strategy make sure i'm making a good general

34:05

recommendation long term right you can't really in tax proper tax planning type software you really can't do a lot of

34:12

those long term projections to say there's a raw conversion you know does that add value over time

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um so getting the strategy right there and then doing a deeper dive you know if i if i need to into the nuance of

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somebody's situation especially with their stock options or other sorts of complexities that might come up so that's

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just in practice um how i how i personally use those two tools in tandem but uh yeah definitely

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accurately accounting for the state level information at least the big stuff um is very important

34:44

yeah i think that's a an interesting point about kind of looking long-term so like at an income lab in the tax center

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we have a way to rank different strategies looking at the projected taxes out over time and

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and i i've thought a lot about um how hard it is to actually come up with

35:02

rules of thumb or sort of an easy flow chart on okay well if this then this because each

35:08

moving piece affects the other thing so social security claiming can affect state taxes which

35:14

and also your roth conversion strategy um you know even medicare um claiming right

35:20

so when you're retiring maybe retiring later pushes medicare out which might get you over some some irma

35:26

years right so it's it everything is so interrelated that it's it's important to have

35:34

tools like that that you can kind of look out at a broader um picture of each kind of uh

35:40

situation so you can do a b testing on on those ideas

35:47

mouthly um do we have uh um

35:53

we have one in the chat but for everyone else uh on the webinar please drop your

35:58

questions in our q a section and we'll start uh working through them um the one question

36:04

that came in the chat is how did these states compare when you factor in state tax and

36:09

property tax yeah it's a it's a good question um

36:16

there are some i you know sounded like i was kind of um uh

36:22

saying some of these more you know personal finance websites uh might be a little superficial on some of these but

36:27

actually i i did find some that were quite good on kind of covering a little bit of the broader tax picture so not

36:34

just income tax but state taxes and property taxes so um depending on the situation right again

36:41

uh that could also be uh an important consideration for for the

36:47

couple but yeah yeah i mean not a uh i'm not have not done a deep dive on

36:53

on those um on those issues there are some states you know

36:59

that do have higher taxes on an income level but for example lack of lack of sales

37:05

tax so oregon is a is a well-known example of that um in fact

37:11

i know there are a lot of people who live in uh you know portland or just across the the columbia who will uh you know

37:18

strategically uh live and buy in different states right

37:23

yeah i would just add to that i mean there that that's definitely when you want to be doing a deep dive to what what is

37:29

your client actually looking at um and taking that into consideration because the um there are some uh you know found

37:36

organizations and stuff to do like the general tax burden overall and try and blend numbers uh in terms of total tax

37:44

burden in the state but it often i've never seen one personally that accounts for all the retirement

37:50

specific considerations that justin's talking about here uh the the measures i've seen have just been general so

37:57

you're gonna get the um you know the typical earner type uh somebody

38:02

who's in their accumulation years tax burden uh would be interesting to see somebody kind of update that holistic

38:08

view but i i don't personally know that they need to to point somebody to

38:14

now let's see here i have a questions coming in um

38:19

uh and last in the chat uh someone did comment that um also multi-state tax credit for resident states should be

38:26

considered

38:41

so on a different subject uh can you walk through some talking points for the historical analysis page in the

38:47

household plan it seems to be helpful in these down markets um what is the best way to explain this page

38:56

sure um

Historical Analysis Page

39:02

um as we're here so the historical analysis page

39:10

is really saying well you know we we don't know the future right and that's all that is uh

39:15

you know one of the things that makes retirement income planning so uh so interesting so difficult you know

39:21

so it's it's one of the reasons that we really need experts here um

39:26

but we do know the past and so the past cannot allow us to paint a picture of um

39:32

how things have been for particular individuals uh over time and so the historical analysis page is really

39:39

saying well what if instead of you know april 2022

39:45

you this exact household with with you know we're about to embark on on your

39:50

plan and we actually knew the future we knew exactly what you were going to experience um well

39:57

the historical analysis page shows what you could have done right um and so i'm almost there

40:05

zoom uh definitely likes to take up some of my

40:12

computer cycles here

40:25

so it's basically instead of you know talking about probability of success and failure it's it's trying to

40:32

provide context that someone can actually understand

40:37

for for the advice that you're giving them right so here's an example

40:44

where the black line is is the proposed income the green line is you know the

40:50

the total income in their budget or the total spending that they want in their budget grossed up for taxes in this case

40:56

uh and the kind of magenta line is their essential income right this is going out the door every every month no matter

41:02

what um so it looks like for these folks the advisor would be able to say well

41:07

actually i think you can afford a little bit more than your um than your uh then your budget right

41:14

they that would either allow them to you know spend more if they'd like to or just allow them to say wow we're

41:20

actually we're doing great right because uh on the green line for example it looks like never in history even you

41:27

know back in the early 20th century which is you know longer ago than any of us can remember

41:33

but also in the in the 60s and 70s which are kind of the most recent uh bad time

41:39

for for retirement so to speak um no one would have failed uh to uh to be

41:45

able to spend at their their total budgeted level right so whatever the probability of success or

41:52

failure would be if you did this plan in kind of a more static platform

41:58

this provides context saying we don't know the future but in the past

42:04

this particular spending level was fine there were no problems whatsoever even the proposed spending

42:11

level in this case would have survived um

42:17

through the 60s and 70s which were a period when when the available income because of

42:23

sequence of returns and inflation and so on was fairly low it would have survived even the worst

42:29

point in the great depression right survived meaning if they had been spending at this level

42:34

they would not have had to reduce uh their income and the only time that it would have

42:39

required a reduction would have been in the in the early 20th century

42:45

so you can dive into particular historical periods for example

42:51

you know world war ii and the great depression and say well look

42:57

could the future be worse than the past of course it could but let's look at some periods we know

43:02

were you know pretty bad pretty scary in the past and say and compare what i'm

43:07

recommending to you to those periods so again it looks like in this case even the proposed income is actually slightly

43:13

lower than the worst period in the great depression

43:20

also on this chart you have the ability to say well look for this household what could have been achieved

43:26

historically varied hugely right i mean in june of 1980 here they could have spent

43:32

almost 28 thousand dollars a month but back in uh you know july of

43:38

1968 it was only 17 000. huge variation which of these should i

43:44

kind of take more seriously right do we feel like we're in one of these top periods or or in one of these lower

43:50

periods so the blue shading is shading periods that were more like

43:57

today in economic terms so we're talking about um

44:02

stock valuations interest rates

44:07

you know inflation um and and so on and so this

44:12

you can see the blue is generally shading periods with slightly lower income than the gray the gray includes

44:18

some of these big peaks uh in income that were only available um

44:24

you know in periods very different from today i might just quick add to that too when

High Level Takeaway

44:30

i'm when i'm showing this to a client the thing that i'm really

44:36

most of the time the high level takeaway i'm trying to get at is actually how conservative of a plan

44:41

where we're projecting for them and trying to give some confidence just around you know

44:46

here we can look back to some of these tough times in history we can see you know even in those cases

44:52

you know the client may not have need to cut back much or maybe just would have had to cut back a little um and really

44:58

have a conversation around that and of course it's not always that way if you set a more aggressive set of guardrails

45:04

um you would see that there would be substantial periods of time where you might need to cut back and so

45:09

but a lot of times i'm not just personally getting much farther into the weeds

45:14

other than you know maybe highlighting like justin's done here a few particular time periods and that but really really just trying to

45:20

focus on relative to history is this a conservative or an aggressive type of plan and

45:26

at least in most cases the plans i'm running they do tend to be fairly conservative and then talk about that upside then comes with that

45:35

yep yeah i think um this is uh one of those places where people

The Great Depression

45:41

you know just knowing that okay this would have this you would have been able to live through the great depression uh you know

45:48

1929 on 1929 was a pretty bad time here because you had 29 and then i think it was also 34 there was another big crash

45:54

so um you know that's a pretty dire period which is also when people say well you know what if the future is

46:00

worse than the past um that's a perfectly good question and it certainly could be but let's remember

46:05

there actually are some pretty bad times in the past right so it'd have to be worse than those times right not just

46:11

worse than recently recently uh you know certainly things have uh you know since the since the

46:16

financial crisis uh stock markets have done great but um this is this is kind of

46:23

you know uh a way to provide context that is based on something someone can grasp right

46:29

rather than just um sort of um you know hypothetical abstract

46:36

statistics right so this is i think this is part of painting a more concrete

46:41

picture for someone around what what the retirement plan that you're outlining for them uh really is like

46:48

it looks like there might be one more oh no malcolm just answered it i was gonna say we can answer that question but

46:54

looks like they're updated every month yeah yeah these are updated every month

46:59

and the other thing to keep in mind here is this chart is specific to the plan you're looking

47:05

at um so if this is a 10-year plan or a 40-year plan it's different if it's you

47:10

know 80 stock or 20 stock it's different if it has the smile or doesn't have a

47:15

smile it's different so um this is not like a static you know everybody sees

47:21

the same uh mountains um often you will see you know higher

47:26

periods in the 80s higher periods in the in the early 20s but not always depending on on

47:31

you know what what the particular plan looks like um next question uh

More functionality for advisors

47:39

back to the tax topic is um would there be more functionality for an

47:45

advisor to do more a b testing other than just changing you know copying a plan and changing the state of residence

47:50

um if the advisor wanted to project out you know for a client who let's say is moving from new jersey to florida

47:56

certainly in the future can you speak towards kind of the functionality there to help advisors um do that type of

48:02

scenario yeah that's a it is a really good idea it's not currently possible in the

48:08

software like you said what you can do is a b test one state versus another um i i like the idea because especially if

48:15

you're planning kind of pre-retirement okay well we'll have some taxes for a few years in new jersey and then and

48:20

then in florida and so on um so um i think it's definitely something we

48:25

could uh we could consider adding that functionality and then um

48:31

next question more more two comments but uh brett wanted to point out that he

48:36

really likes uh really thinks you guys are on the right path so thanks red love that feedback and it said he said it

48:42

sounds like you guys read uh j painting with numbers by randall bolton

48:54

i'm not familiar with the specific uh but i do uh i'll definitely look into it sounds interesting

49:02

and then uh let's see any other uh questions here for the folks on the webinar

49:09

or comments

Questions

49:16

give them another minute and while we're waiting on uh another question to come in um just a reminder that after this

49:22

webinar um as soon as we close this webinar zoom should take you to a browser where you can quickly submit

49:27

your name cfp information so that way we can uh uh submit your information to cfp

49:32

for your credit um you'll also get a follow-up email from zoom after the email to be able to uh submit that

49:39

information as well um if you didn't get either of those we will send a follow-up with the recording link in the slides so

49:44

you can always reply back to that email um from us directly um with that information

49:51

and outside of that oh yeah one one question that might be helpful just for discussion on the topic but um

49:58

like if somebody wants to go and see that state specific tax um

50:03

do you have a way to easily show us where where they would do that um so i'm working on an article

50:11

for for kitsis i think it should be out in the next month or so uh where some of that will be i think we may we we have a

50:18

um you know all of that glorious complicated stuff in kind of a

50:23

a table form and we may sort of create a a pdf of that might have to be bigger than a

50:30

letter size uh piece of paper but uh that kind of people could could keep on their on their computer understanding

50:36

that as the years go on that'll that'll might may not age well um but i think we'll we'll um

50:42

put that out there for people perfect well thank you justin as always thank you both so much for taking the time to

50:51

run the webinars bring up cool content for our advisors um and help with any questions for our users thank you for

50:57

joining us stay in touch for our next webinars coming up next month and again please respond back with your

51:05

information with your cfp information so that way we can make sure we submit that for you as well um

51:10

and oh last thing just to be clear oh perfect you got that justin awesome all right guys well thank you so much and

51:16

then we will send out the recording link in the slides um uh if not later today then tomorrow

51:22

all right well thanks so much everyone have a good day bye