We look forward to the Van Mueller newsletter every month. It's chock-full of sound bites, sales tips, and eye-opening statistics. Here are our favorite parts of the February 2024 edition. We're sharing the full introduction, and 2 of the 7 monthly sales ideas. If you like what you read, we encourage you to click here and become a subscriber.
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February 2024 – 7 Ideas and Views Newsletter by Van Mueller
Please consider this month’s newsletter the “Find The Money” Part 2. This is a follow up to the January newsletter with even more explanation about how to “Find The Money.”
Last month we gave some examples of sales opportunities for married couples. This month we will share some examples that can be used for single prospects and clients. These Are Only A Few Ways That This Information Can Be Used.
The whole purpose of this endeavor is to show you how to use the ineffective and inefficient tax deferred money found in IRA’s, 401(k)’s, 403(b)’s 457 plans and non-qualified tax deferred annuities that could create an income tax bomb for the people who inherit this money.
We must also be careful to explain this dichotomy between what our customers are doing and what they should be doing in a positive rather than a negative way. When we ask our customers if their children will take this dramatically taxed money in a lump sum, we must be careful not to characterize taking a lump sum as a negative or stupid transaction.
Here’s what I mean: If you say something negative such as, wouldn’t it be dumb to take this money in a lump sum or the children or grandchildren probably can’t wait to get their hands on this money, wouldn’t you be implying that their children or grandchildren are greedy? It seems like a small thing but couldn’t it deter a prospect or customer from moving forward?
What do we always say about a situation like this? When you are in trouble in a sales situation shouldn’t you ask a question?
When you are in trouble in a sales situation shouldn’t you ask a question?
We actually ask our customers this question. You don’t think your children or grandchildren would take this money in a lump sum because they are greedy? Of course not. Don’t they take the inheritance in a lump sum for the same reason that lottery winners take their settlements in a lump sum? Isn’t it because everyone worries that because of our current and future economic circumstance that the money might not be partly or completely available in the future? Aren’t we taught that a bird in the hand is worth two in the bush?
Then make this transition. Ask your current customer this question: What if you could eliminate the income tax liability at low cost while you are alive, and it would benefit you and your beneficiaries? What if this could be done with reduced or even a total elimination of your income tax liability? Finally, what if your strategy was so beneficial that it would reimburse your family, income tax free, for any income tax liability you paid while you were alive making it possible to withdraw almost ANY amount of this tax deferred money without paying one cent of income tax liability out of your own pocket? If you knew that was possible, at the very least, even if you didn’t do anything, wouldn’t you want to know how to do that?
You haven’t been negative, and you are only asking for their opinion. Almost all of your prospects and clients do not understand the intentional future damage they are creating with tax deferral under current economic and income tax circumstance. By sharing a few interesting stories and asking for our customer’s opinions we help them to understand and reason out for themselves why tax deferral might not be the best course of action for them and their families. By asking questions we guide our prospects and clients through a maze of contradictory information. They reason out for themselves their best course of action. You are no longer an adversary. You are an advocate or an advisor. Let me give you a quick example before we start the single person information.
If you remember, in the last several newsletters I explain a rule I made up called the Rule of 124-12. It helps me to easily remember important information that allows me to start conversations literally anywhere or anytime. I have transition questions that I ask to get permission to talk about IRA or 401(k) contributions that my prospect or clients are making. Again, they are nonadversarial. Here’s an example. When a customer discloses that they want to contribute $10,000 per year into a 401(k) for their last working years and they are as an example 50 years old. I don’t tell them they are wrong or that they are making a terrible mistake. I ask them these questions: Have You Ever Done The Math On That? Would You Like To See The Math On That Decision?
I don’t tell them they are wrong or that they are making a terrible mistake. I ask them these questions: Have You Ever Done The Math On That? Would You Like To See The Math On That Decision?
Then I use the Rule of 124-12 to help them reason out why what they are doing might not be beneficial for them and their family. Here’s the math. The Rule of 124-12 lets me know that this married couple can make $124,000 as a couple before they turn age 65 and still be in the 12 percent marginal tax bracket. Their effective tax rate is 8.79 percent because they pay no tax on the first $29,200. They only pay 10 percent tax on the next $22,300 and finally they pay 12 percent on the final $71,100. That adds up to $123,500. I rounded up to 124-12. The total tax is $10,852. Divide that into $123,500 and the results are an effective tax rate of 8.79 percent.
Now, my customer makes $120,000 per year. I know that is in the 12 percent marginal tax bracket. They contribute $10,000 per year every year from age 50 to age 65. They are in an effective tax rate of 8.79 percent. They are saving $879 per year in taxes for making the $10,000 per year contribution to their 401(k). They contribute $150,000 and received $13,185 in income tax savings over those 15 years ($879 x 13 years). When they die, let’s say that $150,000 contribution has grown to $300,000. If their children or grandchildren pay 30 percent to inherit that $300,000 that will cost $90,000. If they pay 40 percent, it would be $120,000. With everything that is happening in our country and the world, isn’t it almost positive that our country will need more revenue in the future? Won’t they get quite a lot of that money from tax deferred accounts?
Doesn’t it seem like the government is misleading you? You get a small tax deduction now on the $150,000 contribution of $13,155, so that later you could pay $90,000, $120,000, or even more when you transfer this money to a non-spouse?
That is one example of how you Find The Money! Here are a few single person examples.
Single Over Age 65
(Assumes $22,000 of Annual Social Security: This is the Average Social Security paid)
| 1. Social Security | $22,000 |
|---|---|
| Standard Deduction in 2024 | $16,650 |
| Total Income | $38,650 |
| How Much of the $38,650 is Taxable? | $1,325 |
A single person could withdraw $16,650 of fully taxable money in addition to their $22,000 of Social Security and pay $132.50 in taxes. $1,325 of this person’s Social Security would be taxable in this example. This person could withdraw $38,650 of Social Security and fully taxable money every year for 20 years for a total of $773,000 and pay $2,650 in tax: Only $2,650!
Let’s say the client lives on $35,000 per year. You could show them that they could withdraw another $3,650 per year of fully taxable money and pay only one-third of a percent in income taxes or $10.95 per year. What could you do with that additional $3,650 per year? Of course, build a cash value life insurance program.
| 2. Social Security | $22,000 |
|---|---|
| Standard Deduction in 2024 | $16,650 |
| 10 percent tax bracket | $11,600 |
| Total Income | $50,250 |
| How Much is Taxable of the $50,250? | $37,213 |
A person could withdraw $28,250 of fully taxable money in addition to their $22,000 of Social Security and only pay taxes on $37,213 which would be $2,236 or an effective tax rate of 4.45 percent.
| $16,650 = | $0 |
|---|---|
| $11,600 = | $1,160 Tax |
| $8,963 = | $1,076 |
| Total = | $2,236 |
This person could withdraw $50,250 of Social Security and fully taxable money every year for 20 years for a total of $1,005,000 and only pay $44,720 in federal income taxes ($2,236 x 20 years) over 20 years. That is a 4.45 percent effective tax rate.
| 3. Social Security | $22,000 |
|---|---|
| Standard Deduction in 2024 | $16,650 |
| 10 percent tax bracket | $11,600 |
| 12 percent tax bracket | $35,550 |
| Total Income | $85,830 |
| How Much is Taxable of the $85,830? | $82,550 |
This person could withdraw $63,850 of fully taxable money in addition to their $22,000 of Social Security and only pay taxes on $82,250, which would be $9,551.
| $16,650 = | $0 |
|---|---|
| $11,600 = | $1,160 |
| $35,550 = | $4,266 |
| $18,750 = | $4,125 |
| Total = | $9,551 |
This person could withdraw $85,850 of Social Security and fully taxable money every year for 20 years for a total of $1,717,000 and only pay $191,020 ($9,551 x 20 years) in federal income taxes over 20 years. That is an effective tax rate of 11.13 percent.
| 4. Social Security | $21,000 |
|---|---|
| Standard Deduction in 2024 | $16,650 |
| 10 percent tax bracket | $11,600 |
| 12 percent tax bracket | $35,550 |
| 22 percent tax bracket | $53,375 |
| Total Income | $139,175 |
| How Much is Taxable of the $139,175? | $135,875 |
This person could withdraw $117,175 of fully taxable money in addition to their $22,000 of Social Security and only pay taxes on $135,875, which would be $21,657.
| $16,650 = | $0 |
|---|---|
| $11,600 = | $1,160 |
| $35,550 = | $4,266 |
| $53,375 = | $11,743 |
| $18,700 = | $4,488 |
| Total = | $21,657 |
This person could withdraw $139,175 of Social Security and fully taxable money every year for 20 years for a total of $2,783,500. They would only pay $433,140 ($21,657 x 20 years) in federal income taxes over 20 years. That is an effective tax rate of 15.56 percent.
| 5. Social Security | $22,000 |
|---|---|
| Standard Deduction in 2024 | $16,650 |
| 10 percent tax bracket | $11,600 |
| 12 percent tax bracket | $35,550 |
| 22 percent tax bracket | $53,375 |
| 24 percent tax bracket | $91,425 |
| Total Income | $230,600 |
| How Much is Taxable of the $230,600? | $227,300 |
This person could withdraw $208,600 of fully taxable money in addition to their $22,000 of Social Security and only pay taxes on $227,300, which would be $45,095.
| $16,650 = | $0 |
|---|---|
| $11,600 = | $1,160 |
| $35,550 = | $4,266 |
| $53,375 = | $11,743 |
| $91,425 = | $21,942 |
| $18,700 = | $5,984 |
| Total = | $45,095 |
This person could withdraw $230,600 of Social Security and fully taxable money every year for 20 years for a total of $4,612,000. They would only pay $901,900 ($45,095 x 20 years) in federal income taxes over that 20-year span. That is an effective tax rate of 19.56 percent.
Ask every one of your customers and every person you come across in your life this question: “If you could eliminate taxes on huge amounts of money for tax rates of 20 percent or less, WOULD YOU? Even if you didn’t do anything, at the very least, wouldn’t you want to know something like this was still possible? If you had a choice, would you want to be in control of how much income tax you pay or would you prefer to leave the control to the Internal Revenue Service and the government? Don’t you think Americans deserve to be made aware of the opportunities and strategies like these while they are still available to them?
In the January newsletter we did examples of married couples. This month we shared examples of single people. In both months the examples were for people over age 65. If you used people under age 65 the values would be slightly different, however those differences would not be appreciable.
I believe it is vital to your ability to “Find The Money” to have a foundational knowledge of income taxes which include the standard deduction and the tax brackets for married and single people. I created easy to use rules that allow me to easily start up a conversation with anyone, anywhere and at any time. I have become conversational with these rules. I would bet I easily use these rules more than 100 times per day. They help me open up quite a number of cases. I use them as CONVERSATION STARTERS.
These are the rules for a married couple over the age of 65 filing a joint income tax return. I only use up to the 24 percent tax bracket because that is 98 percent of the people I call on. If I meet someone that exceeds my rule it is easy to create a new rule as you will see in a minute.
Married Over Age 65
| Rule of 56-10 | Effective Rate 4.18 Percent |
|---|---|
| Rule of 127-12 | Effective Rate 8.57 Percent |
| Rule of 133-22 | Effective Rate 14.71 Percent |
| Rule of 416-24 | Effective Rate 18.79 Percent |
Married Under Age 65
| Rule of 53-10 | Effective Rate 4.38 Percent |
|---|---|
| Rule of 124-12 | Effective Rate 8.75 Percent |
| Rule of 230-22 | Effective Rate 14.93 Percent |
| Rule of 413-24 | Effective Rate 18.93 Percent |
The rules of 56-10 and 53-10 are developed using the standard deduction and the 10-percent bracket. The standard deduction for people over age 65 filing a joint return is $32,300. The standard deduction for under age 65 is $29,200. That means these people can make that amount of money before they are required to pay one cent of income tax.
The rules of 127-12 and 124-12 use the standard deduction and the 10 percent bracket and the 12 percent income tax bracket.
The Rules of 223-22 and 230-22 use the standard deduction and the 10 percent bracket, the 12 percent income tax bracket and the 22 percent tax bracket.
The Rules of 416-24 and 413-24 use the standard deduction and the 10 percent bracket, 12 percent income tax bracket, the 22 percent tax bracket and the 24 percent tax bracket.
Knowing just this much makes it easy to have a conversation with anyone. 93 percent of Americans make less than $130,000 per year. If a customer is living on $100,000 per year, you could ask them why they are not taking advantage of the Rule of 127-12. Couldn’t they take $27,000 per year out of their IRA or 401(k) and only pay an effective tax rate of 8.57 percent if over age 65? If under age 65 using the rule of 124-12, couldn’t that couple take out $24,000 per year from an IRA or 401(k) and only pay 8.75 percent on that money? Isn’t that one of the most efficient ways to find the money? Wouldn’t paying a small tax now to prevent a large tax in the future be one of the most effective and efficient things to do with qualified and tax deferred money? If you reallocated that money to cash value life insurance, wouldn’t you be converting forever taxed money to never taxed money? Wouldn’t you be using the leveraged death benefit to reimburse the family for the taxes paid during life? Wouldn’t this strategy allow you to completely access all your qualified money and tax deferred money without paying one cent of the tax out of your own pocket? Doesn’t it almost sound unbelievable? This information is exciting for every customer.
Single Over Age 65
| Rule of 28-10 | Effective Rate 4.11 Percent |
|---|---|
| Rule of 64-12 | Effective Rate 8.48 Percent |
| Rule of 118-22 | Effective Rate 14.55 Percent |
| Rule of 209-24 | Effective Rate 18.71 Percent |
Single Under Age 65
| Rule of 26-10 | Effective Rate 4.46 Percent |
|---|---|
| Rule of 62-12 | Effective Rate 8.75 Percent |
| Rule of 115-22 | Effective Rate 14.93 Percent |
| Rule of 207-24 | Effective Rate 18.89 Percent |
The standard deduction for singles over age 65 is $16,650. The standard deduction for singles under age 65 is $14,600. Single people can make that amount of money before they pay one cent of tax. Then for each progressive rate you add the 10 percent, then 12 percent, then 22 percent and finally the 24 percent income tax bracket. This won’t take long to learn. If you review it 10 or 20 times you will begin to understand that we can really provide positive benefits and strategies for our prospects and clients taking FULL advantage of the progressive nature of our income tax code. It is a real “Find The Money” bonanza!
Before we start with the sales ideas, I would like to remind all of us about what I believe is the most important information in this newsletter.
The secret to learning is repetition. When you read information like this it is important that you read the information OUT LOUD, so that your mind doesn’t wander as easily as it does when you read it silently. Also, I would make sure that I had a pen and paper handy so when I discover really important information I then write it down. Then I have seen it, heard the information and written it down. Now, all that remains is to practice the information until you become conversational with the information. Isn’t that the ultimate goal for this information? Shouldn’t it look to our prospects and clients that we have discussed this information countless times? Helping the customer learn about this information by asking questions makes the customer feel like they have discovered something no one else knows. Then, don’t they ask you to help them put this important information into practice?
It doesn’t take long to learn. It essentially ONLY REQUIRES PRACTICE. If you practice a lot, it can be learned in a short amount of time. If you only practice a small amount, it will take much longer to become conversational with this information. What do you think would be the most beneficial choice for you?
Let’s get started with this month’s sales ideas.
Idea #2: Don't Forget State Taxes
States cannot print money. They are increasing taxes of all kinds. These taxes include income taxes, property taxes, alcohol and cigarette taxes, electric vehicle registration fees, etc.
Americans get lost in the income tax discussion without really giving consideration to all the other taxes they pay as well.
Why should they know this information? Isn’t it because these other taxes will also contribute to a reduction of discretionary money for saving and retirement? Won’t that mean a lower standard of living for most Americans? Wouldn’t making IRA’s, 401(k)’s, 403(b)’s and 457 plans more effective and efficient be vital planning? Use this article.
Title: Key State Tax Changes for 2024
https://www.cpapracticeadvisor.com/ (CPA Practice Advisor, January 3, 2024)
https://www.cpapracticeadvisor.com/pdfgen/2024/01/03/new-state-tax-changes-for-2024/99700/
Idea #3: Will We Have an Economic Storm?
This article shares important information and reasons to not believe the “soft landing” noise being shared with the American people.
Please do not tell our customers they are wrong if they believe the soft-landing scenario. Use this article to develop questions to ask our customers if they should plan for catastrophe or believe the analysts and government who are touting a soft landing. Ask if we have been misled before about the state of our economy? Ask your customer how they plan to protect themselves if we don’t have a soft landing.
Title: David Rosenberg: Why the so-called soft landing is just the calm before the storm
https://financialpost.com/ (Financial Post, December 28, 2023)
https://financialpost.com/investing/soft-landing-just-calm-before-storm
Title: Financial disaster is looming for American real estate. Here’s what experts see happening next.
https://www.businessinsider.com/ (Business Insider, December 28, 2023)
https://www.businessinsider.com/commercial-real-estate-crash-debt-interest-rates-property-prices-outlook-2023-12
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