Hello and welcome to How to Retire. I’m Jackie Post coming to you from the brand new Fuchs Financial Studio in Middletown, Connecticut. With me now and for the foreseeable future is Ben Fuchs, Principal at Fuchs Financial and the person you need to talk to about how to retire. Ben, here we are. Honored to be here. Looking good, right? So let’s get straight to it, Ben. If you’re thinking about your financial future, you need to be looking at the recently passed legislation, the so-called One Big Beautiful Act. What’s in there that most people should be thinking about? I think there’s a lot of stuff. I think there’s also a problem. I mean, we get so much stuff. went on vacation with my family, we were at the beach and like, you know, when you’re at the beach and you’re in the ocean and a wave comes and it hits you and you’re like, all right, great, now let me get my bearings. And before you could actually get your bearings, another wave comes and you’re like, all right, I gotta shake this one off. And then another even bigger wave comes and it’s like, oh man, I don’t know what to do. It feels like that’s what’s been happening with legislation, with acts, with things that are just coming fast and furious, so many different pieces of administration. And so it’s easy to not pay attention. This is one of those scenarios where we actually do want to pay attention to what’s going on here. What is happening here actually can affect us in Connecticut and Massachusetts and Rhode Island, areas where we have higher tax states. It’s important to look and see what we can do to put ourselves in the best position, not only for retirement, but just for day -to-day taxes. And listen, I’m not somebody that hates taxes. I’ve lived in Arizona. I like being able to drink tap water. My kids go to public schools. I have no problem with taxes. but I also don’t want to pay more than I have to, and I think that’s fair also. So when it comes to this stuff, I think diving into some of the details will help people. So I love how you describe that just because it probably relates to so many people. It’s overwhelming. You feel like you’re drowning, but we need to know about these things. So what’s the new federal standard deduction for a married couple in 2025? And how does it differ from last year, 2024? Basics. It’s $31,500 for a married couple filing jointly this year, up from $30,000 last year. And that is going to increase with CPI indexes. is just inflation. So it says like all these acronyms that nobody really understands. Including myself. Yeah, which is normal, right? It’s just going up with inflation every year, which is a good thing. We want that. Okay, so Oba added a bonus deduction for some of the older taxpayers. Who are the people that get that and how big is it? It’s for people that are over 65. So each person that is over 65 will get a $6,000 standard deduction, additional deduction as long as certain requirements are met. And that’s on top of the regular senior add-on? That is on top of the regular senior add-on. Okay. And so what income does that senior bonus fade out? Like what level and how long does it last? For so long we were expecting… taxes to just go away on Social Security, right? That was the expectation that was, and I’m not here to get into politics because that’s the last thing that anybody wants me to do. But this was kind of their thing saying, all right, we’re not going to take away taxes on Social Security. Here’s what we’re going to do. And so it will fade out, begins to phase out once you’re MAGI. Another acronym. You’re welcome. I’m sorry. But it’s your modified adjusted gross. It’s your taxable income. Okay. That’s what that is. Once it tops $75,000 for a single person or it goes over $150,000 for a married couple. And so it’s totally gone at $175,000 and $250,000. It’s temporary. It’s available from 2025 to 2028. And it reverts to the old $2,000 add-on in January of 2030. I realize that this is a lot for people. And like, I get that. But I think the other part of it is that at our firm, we hired an accountant so that we can help people understand where this can help. And so you think about phase out taxes and like, OK, well, if I phase out, there’s nothing I can do or I’m not going to worry about or whatever happens, happens. And that’s not actually the case. There are ways, especially in retirement, where you can control your income. We do things called Roth conversions at our firm, where we take money from an IRA, pay the taxes on it, we move it to a Roth, and then it grows tax-free in the Roth. Great. But when we do that with an IRA, you’re adding income. And so if you go over these certain limits, all of a sudden you could phase yourself out of these standard deductions. You could make it so that you’re no longer able to get these additional bonuses. and so it’s one of those scenarios where you really have to be more careful now than we ever were before right and it’s it actually speaks to the fact that it’s great to have a professional doing that because most people have no idea that you can even do that high tax state question obviously we’re in connecticut high tax state how much salt first of all what is salt but how much salt can connecticut retirees now deduct and what does a real life property tax example look like so salt is state and local taxes so before it was capped at ten thousand dollars previously and now it is capped at forty thousand dollars so it’s a big difference it allows us to take advantage of specifically connecticut massachusetts people in our area that are be paying higher taxes and so they didn’t get those deductions before it didn’t make sense for them to do it’s called itemized deductions i’m sorry It’s okay. Itemized deductions, right? Where you had to like detail every little thing that you did. You just took the standard deduction and you walked away. But now it makes more sense to pay attention and look at the lines and say, okay, where can we actually take and minimize our taxes? A couple, and I just created a random couple. Yep, this is our fake couple. You don’t have to be this couple, by the way, let me be clear. They might be out there, though. Right, right, right. But, you know, a couple making $400,000 with $18,000 in property tax, $21,000 in state income tax, and $12,000 in mortgage interest can now deduct $39,000 in SALT taxes plus the $12,000 in interest, way more money than they could have, and that’s going to get them over $4,500 in actual additional deduction. The basic scenario, without getting tied up in the numbers, is that people can save a lot more money. They can have a lot more money in their pocket, really, is what it comes down to. The things that we weren’t able to deduct for the last couple of years, we now can. And up to certain limits. I mean, if you make over $500,000 as a couple, that fades away. And so, again, controlling your income where you can makes sense. Determining what type of income you actually get, it makes a major difference. Everything is taxed differently. Social Security is taxed differently from money that you take out of your IRA or 401k. And both of those things are also taxed differently than like sales of stock, right? Capital gains are taxed differently from all these different pieces. And the way that you can combine them will determine whether you’re paying a lot or a little bit in taxes. So for us, we want to make sure that we’re within limits. We’re not pushing people over certain standards, but we’re maximizing the things that we can do. So taxes are a big deal. You know, to be fair, we make our money by managing other people’s money. Right. Right. You know, we don’t make our money just on taxes. But if you don’t understand how you’re managing money, you could cause somebody to pay a lot more on taxes than they ever expected to. Right. Which is why it’s such a big part of our practice. And it’s a big deal for people as well. So what happens after 2029 with this situation, this scenario that we just talked about? So then it just reverts back. Okay. I mean, then it reverts back to the old way and we don’t get those deductions. So there are certain scenarios where we might want to front load some of those expenses where you can get the deduction because you can’t do it after that period. And we don’t know. Maybe they’ll extend it again and maybe they won’t. But we know what we have now and we need to take advantage of that. Right. Absolutely. All right. So what is the new 35% limit on the value of deductions for higher? earners so you’ll have to kind of explain that to me so this is we’re like diving deep into this act yes we are first of all i can barely do it like let me be very clear like i so when people talk about taxes being unnecessarily complicated this is one of those things so starting in 2026 if your taxable income was already in the 37 bracket every itemized deduction is reduced by two thirty -sevenths capping the federal benefit at 35 cents per one dollar deducted Oh, my goodness. What does that mean? Right. And this is where I’m going to say, hey, we have an accountant. Yeah, we’re getting into fractions. Let’s have you go talk to them and they’ll be the ones that will determine what you got. Right, right. Absolutely. All right. So we’ll leave that to the accountant. All right. Well, we’re going to get to more in just a minute, of course. Do I have more questions for Ben about the one big, beautiful bill? Of course I do. Lots more after this break. Congratulations, Nancy and Mark. You’ve been chosen to play the retirement game. All right, first question. How long will you live? Too slow. Spin the longevity wheel. Nancy, will inflation eat your savings alive? I hope not. Let’s spin the slot machine and find out which strategy will you pick? At Fuchs Financial, we don’t spin wheels. We build real plans. Personalized, adaptable, and clear. Welcome back to How to Retire with Fuchs Financial. I’m here with Ben Fuchs. He is the owner of Fuchs Financial. And Ben, we’ve been talking about the One Big Beautiful Bill Act. It’s sort of a mouthful, if you will. But there’s a lot in it, too, that we kind of need to get to and to try to make people understand that they can actually save money if they’re working this the right way. So OBA, as they’re calling it, also created a half percent AGI floor. You’ll have to explain that to me for charity. quotable deductions. How does that work exactly? So AGI is adjusted gross income. We talked about MAGI. There’s no quiz on this. I don’t think like, let those terms fly away. Like you don’t, it’s your income and it’s your taxable income, your adjusted gross income. But I think most people are like, stop using all these acronyms, Ben. I hate them. I would agree. I’m sorry. I’m sorry. But you know, we’re talking about an act, so I got to use the rules. The AGI floor, the half percent AGI floor. So if you’re making $100,000, your AGI floor is $500. So the first $500 that you give to charity doesn’t count as any kind of itemized deduction. It’s the amount that you give over and above that. So if you make half a million dollars, the first $2,500 that you give does not get itemized. So it’s just a new rule, basically indexing income. So that doesn’t make as big of a deal. When you’re making more money, you have to give even more for it to be a deduction. Okay. So that means that that isn’t counted, if you will, in the tax situation. You got it. Absolutely. Okay. I think a lot of people are wondering this because there’s a lot of confusion about the bill. So did the bill finally stop taxes on Social Security benefits? No. No. I mean, this was like the big promise, right? We’re going to get rid of Social Security. Right. It didn’t. And so what they did was we talked about an additional standard deduction earlier for people making over $6,000 per couple for people over 65. And they’re like, oh, no, this will take away that Social Security tax. It does not. So to be fair, I’ve been running a webinar for like five years that has talked about how Social Security is taxed. And I thought, oh, man, this bill is going to take away that whole webinar and I’m going to have to redo the whole thing. and i didn’t right nothing changed right there’s a whole formula called the provisional income formula not my name not my rules but it talks about how much of your social security actually gets taxed and none of that changed and all those numbers were made in like 1982 give or take and they have never been indexed for inflation So they haven’t gone up as people’s income has gone up. So people have been paying more and more taxes on Social Security. Okay, so what about the required minimum distributions? Is that still at age 73 as it was before? Yeah, so they talked about moving that up to 74, 75. And so when I first got in the business, there’s precedent for that. So it used to be 70 and a half, and then it was 72. Now it’s 73. In 2033, it’ll be 75. And they say, Ben, you know, Why do they keep changing it? Why do they keep moving that up? And I would say, because I’m not skeptical or critical in any way, I would say, well, now the people that are making the laws are the ones being affected by these things. And so they don’t want to pay those taxes. And so they keep on bumping it up. So it was talked about that they would raise it. They didn’t actually raise it. It’s still 73 right now. And so how much can retirees send directly from an IRA to a charity this year in 2025? All right. So this is another. annoying acronym. It’s called a QCD. It’s called Qualified Charitable Distribution. Again, there’s no quiz. But what that means is that you can now take money directly from your IRA and move it into a charity and not pay any taxes on that money. And that is typically, for the majority of people, more beneficial than just giving money out of their bank account. Why is that more beneficial? What’s the difference of moving it from the IRA versus your bank account? First, we have to talk about something called required distributions so again so at 73 what that means is that you have to take a certain amount of money out of your retirement accounts that you’ve never paid taxes on and pay taxes on them and every year you have to take a higher and higher percentage so let’s say you had to take ten thousand dollars out you pay the taxes if you made another ten thousand dollars this year well if that money goes directly to a charity you’re not adding that income And so it doesn’t put you into a new bracket. It doesn’t raise your taxable income. It doesn’t affect that formula for Social Security that we talked about. It might not phase you out of that $6,000 deduction that we talked about. So what it does is it allows you to move that money directly to a charity, and it will satisfy that distribution, that required distribution. So there are certain circumstances where it makes a lot of sense, certain where it doesn’t. If you don’t care about the charity, I’m not telling people that you have to give money. I think… don’t know anybody that wants to give $108,000 every year out of their IRA. But if you do wonderful, you’re a better person than me. That’s great. And that’s okay. But there are definitely circumstances where we’ve seen people that just give $25 a month or $50 a month to charity. Okay. And instead of doing what they’re doing from their bank account, if we have it come directly from their IRA, we can save them a whole lot of money. Okay. See, that’s something people probably don’t even realize that someone like you would be able to help them with, right? Is that a question you get a lot? That must be. I think the thing is that this is one of those scenarios where most people just don’t know what they don’t know. I can’t tell you every tendon in the body. I have no idea how they all work, but I didn’t go to medical school. This is all I do, and I’ve got a very narrow lane, but a very deep dive. This is how we can help people. Right. You’ve got the details, that’s for sure. So the One Big Beautiful Bill Act. Oba as we’re calling it. increases the federal estate tax exemption. What is that new number? And how does it mesh with Connecticut’s own estate tax? And if you break that question down for me as well, that would be great. So one of the things that a lot of people worry about is how much money are they going to be taxed on the money they pass to the next generation? Right. So in this case, I would say the vast majority of Americans don’t have to worry about it because that federal exemption is $15 million per person. So if you’re a married couple. You’ve got $30 million that you can pass on to the next generation without any taxation. Okay. Wonderful. Connecticut itself matches that at $15 million, but there’s something called portability that they don’t have, which means that it doesn’t pass from spouse to spouse automatically. So if you have a married couple and you’ve got $20 million, you need to do some estate tax work to make sure that you’re not paying taxes on that extra $5 million in Connecticut. so that you can do certain things. So you can make sure that you’re not actually paying that excess tax. Some people might go to a new estate. I’m not saying to do that. But there are certain things that you can do to mitigate some of those taxes. Can you give me some examples of that? Yeah, I mean, if you’ve got a business, like let’s say that there’s a wonderful business called The Scoop in Glastonbury that everybody should check out. So let’s say that that business was valued at $20 million. And let’s say that something happened to the owner of that business. somebody else because the current owner sold it and a whole other story. But let’s say something happened to that business. Well, now there’s no federal tax on that $20 million inheritance. Okay. But there is state tax on the excess of $5 million because that’s over that $15 million limit because it didn’t pass from spouse to spouse. So what might happen is the children may have to sell the business in order to pay the taxes on the $5 million. Okay. So there are certain things that can theoretically be done. from an estate planning standpoint to mitigate those taxes or from a life insurance standpoint to say all right here’s what the taxes are going to be on the inheritance let’s cover that through life insurance to make sure that you know somebody doesn’t have to sell a business just because they inherited it right and these are all things they’re just all the steps you can take to protect yourself essentially right in the end protect yourself protect your family all that kind of stuff now if i were to go into a skeptic mode which i of course never do You look at that and you say, all right, well, if you have a couple that has a $30 million estate, you know, and everything is in real estate and individual taxes outside of a retirement plan, that can all pass completely tax-free. We can move $30 million from one family down the generation with no taxes whatsoever. What a deal. But the vast majority of Americans save their money in retirement plans and 401ks and IRAs, and those all have to be taken out over a 10-year period upon inheritance. Okay. So if I’ve got a million dollars in a 401k and I pass to my kids, and let’s just say I had one, I’ve got three, but let’s say I’ve got one, they have to take out $100,000 every year to take out that entire 401k, add that $100,000 to their income so it’s taxed at the federal and the state level. And so much less of that inheritance is being kept and much more of it is going to taxes. So why can somebody pass $30 million of real estate and not be taxed, but have all of it come from the 401k and be taxed? That would be something where we say, hey, Why is that? But I’m not a politician. These are the, these are, you know what, this is interesting about this. So it’s, it’s kind of for the, like the regular everyday person who just has the 401k or the Roth IRA or whatever they have. they need to know about these things so that they can protect themselves on that level. So their kids would be taxed, is what you’re saying? Absolutely. So if it’s important to you to have them not be taxed, then you do things ahead of time. That’s when we look at converting someone’s money to a place where it’s not going to be taxed again, where we look at other options, other things that we can do to mitigate those taxes. And if it’s not important to you, that’s okay. Like, listen, I love my kids. I think they’re wonderful. I’m not going to pay extra taxes so they can inherit more of my money tax-free. You can earn it themselves. Right. Right. But for a lot of people, this is really, really important. And it’s something that if it’s important to you, then it’s important to us. And that’s what we’ll focus on. So. All right. So that takes care of the federal estate tax exemption, if you will. Do we have any change to Medicare? IRMA? Surcharges? Another acronym? IRMAA. And I will tell you that as long as I’ve been doing this, I’ve looked up that definition like 30 times. Couldn’t tell you what it stands for. Don’t care. It means you’ve made too much money. Now you have to pay taxes on your Medicare. And so if you’re a married couple, it could be like an additional $2,000 a year. It could be an additional like $11,000 a year. depending on your income, will impact how much you pay in Medicare for Part B and D. And so the answer to your question is no, none. There was no change to that tax. Again, they were floating things around. We’ll raise the limit. We’ll have people be taxed less. Didn’t happen. Didn’t happen. So is there anything people need to know about that immediately? Well, they need to plan around it. Again, when we’re talking about income, I’ve been using this. Terrible analogy a while. But did you ever have like Windows 95 and play the games on that? Yes. There was a game called Minesweeper where you clicked on the button and it was like a number and it would tell you how many mines were touching that number. Right. But you couldn’t see them. You just had to guess and hope that you weren’t hitting them. And then if you did, the whole thing exploded. Right. That’s taxes to make. Wow. The whole board is covered. You have no idea what you hit. And then all of a sudden, it’s like, oh, I’ve got to pay. Oh, I have to pay all this money. Exactly. Yeah. That’s Irma. That’s these new exemptions. That’s everything. So, you know, for us, our job is to clear the board. Like, let’s not guess and hope that we’re doing things right. Let’s make sure that we’re not putting ourselves in a position where we have to pay a whole lot more. Right, okay. Because the senior deduction ends after 2028, what should retirees do right now? Yeah, so this is a scenario where we look at front-loading Roth conversions. So can we get up to certain limits, still maximize the benefits, and then move as much money? Like, there are scenarios where we want to have higher income now than we want to have later. So we might pay more taxes on something now to move it to a place that won’t be taxed again. And, you know, for you, for the kids, don’t care. You know, it just makes sense when you can manipulate the income a little bit as you can in retirement. The SALT cap, the let me get this right, the state and local tax cap. You got it. I got it. All right. So that drops back to $10,000. in the year 2030 about five years away so how can connecticut retirees maximize that larger cap while it’s still available so you could actually prepay your 2029 taxes in 2028 but let’s say that your state and local taxes are 15 000 in 2028. You can prepay 2029 and get $30,000, so you can maximize that full piece. And so you’re getting that front-loading benefit, so they’ve already paid, and you get the deduction in the year that you did it. All right, so beyond the senior break, what other temporary bonus deductions can retirees tap into? One of the things that they did was that you can deduct up to $25,000 of tip income and up to $12,500 of overtime pay. You can’t do it if you’re an owner, so it doesn’t impact me. But let’s say that hypothetically… I had a conversation with some of my employees and I said, listen, here’s your current hourly pay. I’m going to pay you less per hour. Oh, you jerk. Why would you do that? Great question. Thank you for asking. So we’re going to pay you less per hour so that you can actually have more overtime pay. And if you have up to $12,000 of $12,500 of overtime pay that isn’t taxed, then all of a sudden we’re changing that. So in real dollars, let’s say that you’re a single person making $80,000 a year. and we’ll say ten thousand of that is now overtime pay so we have ten thousand dollars that is not being taxed so that means you’re not paying two thousand two hundred dollars in federal taxes another five percent or five hundred dollars is not taxed at the state level so now that ten thousand dollars you just saved two thousand seven hundred dollars that year just by changing the way that you were paid okay It’s just moving the numbers. Yeah. Right. I mean, if that was something that I would do, of course, I would never try to manipulate the tax law. That would be crazy. But I think it would make sense for some people to look at that and say, again, how can we get paid the exact same amount? Utilize these rules that we have to put ourselves in a better position. Right. Right. It’s just it’s just a better way to do it so that you have the advantage at some point. Right. Look, it’s like it’s knowing the rule. Right. Listen, I have an eight year old, an 11 year old and a four year old. My 18 year old, my 11 year old will play a monopoly with me. until they get bored and throw the board but when they were first sending the rules like you can’t do that oh yes you can yes you can yeah and so if you don’t know the rules you’re not going to win the game this is a scenario you you have to understand what the rules are that’s a perfect example I love that all right so we’re gonna play a little game coming up but that’s gonna be after the break so it’s gonna be a lot of fun. Sounds good. Maybe you know about it, maybe you don’t, but we’ll see. We’ll be back right after this. We know the market is going to get worse from here. This is the biggest monthly decline in 10 years for people’s 401ks today. My investments are tanking. My retirement isn’t going as planned. I can’t believe I let my kid talk me into buying crypto. I mean, what is that anyway? This was the fourth worst contraction in history. So how are you two doing? Your financial future doesn’t have to be uncertain. Plan your retirement right. Call now for your own complimentary portfolio review and tax analysis. Okay, Ben, before we go, we’re going to play a little game. It’s called retire or rewire. Sounds fun, right? I’m in. I know. You look like you’re in. All right. I’m going to throw out some common retirement strategies and you tell me retire it, it’s outdated, no longer works, or Oba killed it, one big, beautiful bill act, or rewire it. Okay, the strategy still works, but OBA changed the rules and we have to tweak the approach. Are you ready? Oh, yeah. Okay, good. I love your excitement. All right, first up, taking the standard deduction in retirement no matter what. All right, so that we’re going to rewire. You can still do it, right? You can still take the standard deduction, that’s okay, but no matter what is a little difficult. There are definitely going to be circumstances where we want to do the itemized deductions, where we want to pay a little bit more detail and attention to it, but rewire. Final answer. Knowing the rules, right? Okay. All right. Claiming your senior bonus deduction no matter your income. Rewire it. I mean, it’s a great benefit, but if your income is too high, then you start to lose it. So again, you got to plan accordingly. You can’t just assume that you’re going to get it because all of a sudden you could take. a higher distribution, take more money at the end. Your kids need something, right? We’ve got to rewire that. We have to pay attention. I like that. I like that a lot. Okay. Delaying the charitable giving until your estate plan kicks in. Yeah, retire that. I mean, you’ve got a new minimum, like that half percent thing that we talked about where it’s a half percent of your adjusted gross income. And so we’ve got to retool that, retire that. We will need a whole new plan. Right. And this is about knowing exactly how to work that. to your advantage, right? So if we’re going to give, like, you know, if we’re making $100 ,000 and we give $500 a year every year, maybe we don’t do that, right? Maybe we bunched them into different years at different times so that we get more of that deduction and, you know, the charities can get mad at you. Right, absolutely. It’s different for everyone, so Ben can help you do that. All right. Assuming taxes on Social Security are going away, which is what everyone thought with the new bill, but… retire that. Not happening. Nothing changed. It stays the way it is. Wonderful. But yeah, nothing changes. Retire it. You have to plan for taxes on Social Security. Okay. Waiting until after 2028 to do Roth conversions. This would be an emphasized retire that. Okay. Because we are going to see a period where we can change. Again, this is like manipulating your taxes, manipulating your income a little bit. You want to be able to do that before 2028 and really making sure you’re taking advantage of all of the options available to you. You don’t want to just wait until after 2028 to do it. Okay. All right. Ignoring SALT deductions because they’re capped anyway. SALT meaning… and local tax. We’ve got so much going on here. I feel like a proud teacher. I know you should be. Yeah, rewire that. The cap jumped. It went from $10,000 a year to $40,000 a year. You can do things. You can deduct. There are options for you that you can take more advantage and get more deductions and pay less in taxes. So you have to retool that. Okay. All right. Assuming your estate is too small to worry about federal estate tax. Yeah, I would rewire that. I think that for the majority of people, that still holds. It’s true, right? I don’t think most people have an estate over $15 million. If they did, a lot of things would change. But I think that we can keep that as fact. All right. Well, that was fun. You made it through Retire or Rewire It, OBA edition. I’m honored. Thank you so much. And I passed. You did great. You might get a prize. We’ll see. Can’t wait. All right. That is it for this episode of How to Retire, recorded right here in the Fuchs Financial Studio in Middletown, Connecticut. We’ll see you next time. And until then… that retirement shouldn’t be overcomplicated. You should feel like the advice you’re getting fits your life, not someone else’s agenda. That’s straight talk and solid strategy. That’s what you get from Fuchs Financial.
