/
RSS Feed
In this episode, Dr. Friday is joined by her long-time friend and colleague, Hank Parrott of Estate and Financial Strategies. Together, they dive deep into the critical importance of the “Team Approach”—ensuring your financial planner and tax professional are working in unison rather than in silos.
As we head into the new year, Hank and Dr. Friday discuss how to maximize your retirement income without triggering unnecessary taxes. They cover complex topics like IRMA surcharges on Medicare, the strategic timing of Roth conversions, and how to turn high medical costs, such as assisted living, into tax-saving opportunities. If you want to ensure you aren’t leaving money on the table or paying the IRS more than your fair share, this is a must-listen episode.
Episode Summary Points
- The Team Approach: Why it is vital for your financial planner and tax preparer to communicate to prevent costly mistakes and amended returns.
- Understanding IRMA: How selling property, stocks, or doing large Roth conversions can spike your Adjusted Gross Income (AGI), triggering higher Medicare Part B and D premiums (Income-Related Monthly Adjustment Amount).
- Roth Conversions: Strategies for converting traditional IRAs to Roths over time to manage tax brackets and avoid “tax shock.”
- Medical Deductions & Assisted Living: How to use the high costs of memory care or assisted living to offset taxes on IRA withdrawals, effectively allowing for tax-free “spend downs” of assets.
- Qualified Charitable Distributions (QCDs): A strategy for those 70½ and older to donate directly from an IRA to a charity (tax-free) rather than withdrawing the cash first.
- Estate Planning: The “10-Year Rule” for inherited IRAs and how to plan for your heirs.
- Workshops & Evaluations: Information on Hank Parrott’s upcoming educational workshops and how to get a comprehensive financial evaluation.
Episode FAQ
Q: What is IRMA and how does it affect my retirement?A: IRMA stands for Income-Related Monthly Adjustment Amount. It is a surcharge added to your Medicare Part B and Part D premiums if your income exceeds certain thresholds (e.g., over $212,000 for a married couple filing jointly). Dr. Friday and Hank warn that one-time events like selling a house or a large Roth conversion can accidentally trigger this extra cost.
Q: Can I deduct assisted living costs on my taxes?A: Yes, in many cases. If a resident is in assisted living or memory care primarily for medical safety and requires assistance with daily living activities (like dressing or medication management), a large portion of the monthly fee may be considered a medical expense. This can create a significant itemized deduction on Schedule A.
Q: What is a QCD?A: A Qualified Charitable Distribution (QCD) allows individuals aged 70½ or older to transfer money directly from their IRA custodian to a qualified charity. This counts toward your Required Minimum Distribution (RMD) but does not count as taxable income, offering a tax advantage over withdrawing the money and then donating it.
Q: Why shouldn’t I just pay off my mortgage with my retirement funds when I retire?A: Hank Parrott advises caution here. Taking a lump sum from a tax-deferred account (like a 401k or IRA) to pay off a mortgage creates a massive taxable event in a single year, potentially pushing you into the highest tax brackets and triggering other costs like IRMA. A staggered distribution strategy is often more tax-efficient.
Transcript
Dr. Friday
Alrighty, we are here on the Doctor Friday show. The Doctor is in the house, and today we have an awesome guest, one of my best friends, Hank Parrott Estate and Financial Strategies. He is one of the best financial planners. If you don’t have one, you need to get him. And if you do have one, you need to come in and get a free evaluation. So that way you know if you actually have the best person because you don’t know. Sometimes you have to have someone check out the number, see if it’s a better deal. Sometimes we kind of get stuck in a a little bit of a a system, okay, I’ve I’ve got my accountant, I’ve got my tax thing, I’ve got this. And we don’t really go back and see are they really giving us the best advice? Are they really looking at the current tax changes? Because wow I think one of the biggest things we’ve known each other for a number of years. We don’t need to count how many numbers. Uh, but one of the things I’ve always learned You had to go there, didn’t you, boss? Um but no, we have known each other a long time and most of what I know of financial planning has come from sitting in on meetings because every year you bring your clients and I bring mine. We all do these conversations and while you’re in the office a lot of times you’re evaluating
Hank Parrott
and and it’s that team approach which we’re big believers in and it it’s a combination of working with uh on on taxes together for uh for our clients as well as Uh estate planning, working with, you know, we’ll bring in an estate planning attorney like uh Russ Cook over in Brentwood, uh board certified estate planning attorney, great guy. Uh Jack McCann in Cool Springs, another great guy, both real estate and uh estate planning. So w when we do that team approach, now you’re you know, they say two heads are better than one, three maybe even better yet. Exactly. Uh bring it all to bear and and this is one of those areas with uh when we get together we got what, about six I think six different days that we Just our clients in tax season. But that that means that whole day we get we’re getting 10, 12 of our clients at least in. And then I can come spend the day with you.
Dr. Friday
And I get to pick your brain. And and vice versa. But what’s nice about those meetings that I do with you and I I mean I do a lot of different financial people as far as everyone has their own financial planner, but you’re the only one that really ever maximizes that same partnership because How many times does someone have a mistake on a tax form? And I’m like, I can’t this is what it says, Hank. I can’t change it. And you’re like on the phone dealing with that issue right there. So the client is getting such a nice simple relationship versus I’m sending them back to their financial person, then they’re gonna say, well, this is what it you know, and it could take months. It could take a bunch of things. A lot of times you actually get it before we actually leave the office. They’ve got a amended or corrected return so we know we can continue. It just makes that experience and also The um future tax planning. A lot of times people want to know about are we going to do a conversion? How much will my RMD? How’s that going to affect my IRMA? All these kind of questions come up and all those words I just use is because I sit in these meetings and now I know more about I mean, uh even in my tax office we talk a lot more about like Irma because it gets affected a lot faster. Everyone’s making But Irma is a big number. So if you sell a piece of real estate, for example, or you’re coming out of uh working a real job and going into retirement. But most of the time it’s when people do big stock sales or something and then the next thing they know they get a love letter from Social Security saying we’ve reduced your benefits And they think it’s Social Security being reduced, but actually it’s Irma being affected. And since you’ve looked it up, what is the affection of IRMA on a basic?
Hank Parrott
If you are a married couple uh filing jointly and you exceed two hundred and twelve thousand between two twelve and two sixty-six, uh, you’re gonna add about seventy-four dollars to your uh Part B uh premium and an additional 1370 on your Part D prescription coverage.
Dr. Friday
And I think that’s on AGI, which is your adjusted gross income, not modified, which is after your standard deduction. So this would be more like your gross income.
Hank Parrott
Hit with it a lot of time, they sell a property, or maybe they’ve sold off a bunch of stock and they’ve so they’ve bumped up
Dr. Friday
Through any or it could be an IRA distribution or conversion. That’s the one. I’ve had a number of them come in this last year. We’ve been playing the game a little bit. And before I was always just worried about tax brackets.
Hank Parrott
Right.
Dr. Friday
And then the last couple of years we in our meetings with your clients and stuff, it kept coming back with the Irma situation. Irma was being affected and people didn’t, you know, because I’m only I’m a tax person. I won’t keep you in the twenty-two, I want to maximize twenty-two, but if I do I now have affected your other side, possibly, Irma. So you want to have that team effect is all I’m saying, because you go to a tax person and say, how much can I convert? I’m gonna say tax wise this is what you can convert and this is how much, but what no one’s gonna say in that meeting most likely is now I’ve affected your IRMA and you’re gonna be paying $75 more a month for your healthy care for another year. And if you do these for multiple years, that could add up. It needs to be at least in the mathematics.
Hank Parrott
And this is one of the things with Irma that a lot of people, you know, this is by the way, IRMA is a Acronym income related monthly adjustment amounts. And basically this has to do with Medicare.
Dr. Friday
Right.
Hank Parrott
So on your Medicare, if you’re 65 or older, that’s where this can affect you. And and when you’re doing a Roth conversion. You got to think of things not just about the tax on the conversion. That you’re taking out of that. It’s going to be taxable income that year. You’re then going to put it into Roth IRA.
Dr. Friday
Yep.
Hank Parrott
And if you’re over 65, you’ve got to be concerned there may be an additional cost to the tax. This Irma may just if every year that you do it. Now let’s say if it’s just a one-year conversion. You’re going to get tagged with that extra money. And it goes up, by the way. We just, you know, we shared the uh the base part. If you go over two hundred and twelve thousand, but if you go over two sixty-six, that’s 74 goes up to 185. Right.
Dr. Friday
I’ve got some that are like six hundred dollars a month because um and then and then some people are like, well then let’s just convert it all.
Hank Parrott
Right.
Dr. Friday
Because then I only have to worry. But the penalty is so much lower than what the additional tax would be. In in my i scenario, I was working at the off
Hank Parrott
You get a big million-dollar conversion.
Dr. Friday
A million-dollar conversion. And so you only have, you know, so you pay six hundred dollars for a year versus maybe doing it over a period of years on multiple lower numbers. But you’ve now kicked yourself into Well, you’ve got the Medicare tax, there’s an additional. 09, you’ve got the 2. 9 of investment tax, you’ve got um ordinary income tax. It’s just going to be a little bit more than a little bit more.
Hank Parrott
So it’s going to be pretty expensive. And we find that a lot of times it’s better to spread those conversions over time. And Irma is just one of the calculations we look at. And another of course is uh the effect on your t if you’re receiving social security benefits.
Dr. Friday
Taxable amount, right? Yes.
Hank Parrott
Most of my clients are receiving social security benefits. So Now 85% of the Social Security is going to get taxed as well. So you get all these little kind of hidden costs that we don’t think about necessarily, or at least the the consumer probably doesn’t think of. Uh but it’s our job to make sure they’re fully aware of of all the uh implications and costs associated with the show.
Dr. Friday
Which is probably one of the big reasons I I wanted you on the show, partly because I think a lot of times I’ve had a number of clients that are hitting retirement and they’re actually retiring at sixty-six, sixty-seven, um, making the determination they don’t necessarily need to take social security, they may take it. Um, and that’s when you need to have that conversation about conversions. Cause if you’re not n mandated to have to take your social security and you have a window of time, I’ve seen you do some magic there where you’re converting and doing and being able to keep social security non-taxed, keeping them in a lower tax bracket, converting more. Um and again, it would still you just have to have in your mind there is other taxes than ordinary income tax. We keep saying the word Irma or your Medicare adjustment ’cause it’s based on your adjusted gross income. It’s not uh a set fee. But that’s one of the things I think that you bring to the table often is, well what about if this? Or you you don’t just have this like one path, you kind of
Hank Parrott
Don’t be paying more in taxes than you’re legally required to pay. And as common sense and no-brainer kind of statement as that seems to be. We see it every year that people are in fact paying more in tax than they’re legally required to pay simply because they don’t understand the rules, don’t know how to take advantage of some of these things, or make poor choices like Oh, I’m gonna go ahead and do it.
Dr. Friday
Pay off my mortgage so I pull it all off because I’m gonna hit retirement and instead of just taking a larger distribution which keeps you in a lower tax bracket, you know, I know a lot of people are getting s Kind of I wanna say fed up, but they’re at a point where they’re basically like, I just don’t want the IRS in my money. I don’t want the IRS. And of course all of us have it because Well, self-employed people. We’ve had them in our business since the day one, but also in our retirements, SEPs, IRAs, four three Bs or whatever. All of them are deferred. So there but there’s gotta be uh a path or a a a system versus I’ve got two million dollars. I’m gonna take it all out and give it, but then you’ve just given a third of fifty percent almost if you really think about all the things. Probably double. uh versus just taking a ten year window and saying, I’m gonna do this much per a year and do it over this period. So I think that’s what I want people that are listening kinda to walk away with on this. It there isn’t a set thing. All of you are different, just like in taxes, when you come in There may be a 1040 form, but how it’s filled out and what numbers go where is not always the same for each person. You have two people come in with almost the same numbers and have different numbers theoretically because of where and how it came in. So I want you to think One, Hank’s gonna give you a free evaluation. Okay. He’s not gonna charge anything. He’s gonna do the whole workup, not just like one of these little sit-down. It could take one or two meetings He’s still going to put the time in to see if he can do and explain where your money is, how much it is, why it is making money, why it’s not. And he may come back and say, this is an awesome plan. Just like I do with taxes sometimes. But other times you may come back and say, hey, this looks good, but do you know you’ve left this big door open or this window of of money that’s just turning and not not really making you money Um because in the right.
Hank Parrott
So there there’s like I’d like to retire and they’re asking me Uh I’m saying, you know, when do you want to retire? And they’re saying, well, how soon can I retire?
Dr. Friday
All you do is save, right? You’re just supposed to continuously save. And we never really knew how much we should save, but we needed to save because, you know, and Having those numbers and you being able to say, you know what, we can take this much out, we can move some money over here, you do this, you’ll be in this tax bracket. I think it gives them the peace of mind to say, you know what, I can put in my notice and quit when I’m ready. H Or, you know what, I can work another two years ’cause I love what I do. But maybe I don’t need to do this. Maybe I can do sh less hours, less overtime, whatever. All right, we’re gonna take our first break. But if you want to call Hank’s office, there is a phone number. That’s always good. 615-376-5325. Tell them Dr. Friday sent you 615-376-5325 is the phone number. Um and then they will is that an answering service they’ll answer probably most likely on a Saturday and Sunday
Hank Parrott
If it’s on the weekend they’re gonna get uh we do have a service.
Dr. Friday
Okay. The service will answer and then they will get back with you and just tell ’em you’re looking for that free evaluation. And then he’ll send you a checkoff list and you’ll need to bring a bunch of stuff in because he can’t do nothing unless you provide the numbers. All right, we’re gonna take our first break. We’ll be right back with the Doctor Friday show. Alrighty, we are back here live Well, recorded live, I guess I should say on this show, just so we have it covered, with Hank Parrot, Estate and Financial Strategies out of Brentwood, Tennessee. one of my best mates. And w during the break we brought up something I thought was great. And um let’s talk a little bit about how another way you help clients save money, but also using the right I’m only using one of his terms, buckets um to to take money out. So if I have a parent that is in a um assisted living or a memory care facility Maybe explain a little bit how that might work in your side and then I can jump into mine.
Hank Parrott
Yeah, first thing we want to do is uh and we’ve of course over the years I’ve been doing this 35 years now. So and going back 30 plus years of those uh 35 years was doing estate planning. Yes. And so I had clients in, you know, 70s and 80s back then. Obviously they’ve of course passed on, gone h gone home. Uh and what I have found with that is that there are opportunities you look for as well. So when sometimes when something bad happens, I’ve got to go and assist a living, for instance. The good news is, well, we’ve got now a bunch of medical we can write off. Exactly. So I’m first thing I’m going to start looking at is IRAs, uh if there’s if they have maybe annuities with deferred interest buildup in them. uh we’re gonna start looking at ways that we can spin down those dollars. Right. Uh if you think about it you say with estate planning, we’re looking at not just you and your lifetime, but now on to your children and grandchildren and on on down generations. So when we’re looking at the in a situation such as that How can I get rid of the taxable dollars so that what’s left to your family? uh when I’m gone. It’s one way at least we’re gonna make uh lemonade out of lemons, right?
Dr. Friday
And we’d love that. I mean and that’s the way that I mean what I a lot of people come in my office and the first thing they didn’t realize Because everyone always hears about the seven point five of medical and you know, I’m not gonna be able to itemize. But when you start going into assisted care And if you don’t have the ability to fully take care of yourself that you need help dressing, taking medication, cooking, clothing yourself, these things are now impossible to do unless you have assistance, then you now have turned that into a medical deduction. Um at least a large chunk of it can be considered a deduction. And most of the time the uh facilities will actually give us a percentage that they have worked up of what is considered medical, what is considered just basic housing. Um and so Those numbers and when you’ve got ten thousand dollars a month going out for a memory care facility for one of my clients and I think they came back and said it’s basically eight thousand for medical purposes. So you got eighty, ninety thousand dollars a year coming off. You’re itemizing, big time itemizing. So what you’re saying is then you’re looking at where can I get that money that I can also
Hank Parrott
And this is where when we get together and do like with this particular client I’m thinking of that uh is in uh memory care unit currently One of the things that we’re going to be doing when we sit down and do their taxes, just as we did last year, is we’re going to look at, okay, how much Can I cash out here to maximize the value of this write-off and not miss out on it? Imagine that’s
Dr. Friday
I have amended more than one tax return when someone’s come in and said, well, my wife’s been in a facility. Right. And you know, we’re we’re low, low, so I have to take all this money out, but then I look on the schedule A and I don’t see any medical deduction. And you’re like, well I didn’t know I could itemize. You know, I’m like and and and and I get it. Itemizing can be confusing. Especially a lot of times they just go to, you know, um a regular AARP place and they just basically say, here’s my forms. You know, they’re not really going into asking those questions. So if you don’t ask where’s your wife And you’re like, oh yeah, she ended up in a nursing home and then that would have triggered possibly something, but we always have all of those conversations. So um as you can see, I have no problem in talking But it’s a great way and then of course you maximize charity, you you charitable deductions, and then your say your property tax and sales tax. All of that will also add to my Schedule A. So not only do we have potentially 70,000, 80,000 after meeting the IR uh the IRS exclusion, we now have the ability to take out $100,000 out of a taxable account and basically pay almost zero tax.
Hank Parrott
and we’re going over with my clients. But one of the things I love is the fact that we get there a thirty minute meeting and in that thirty minutes and it’s one I one of the reasons, you know, for a lot of my clients that they really appreciate go uh going to have you do their taxes is that they leave with their taxes done. Right. You know, in 30 minutes, it’s not like I’m sending it off to my CPA and and hoping uh that they’re going to get it back to me in time. Right. Or that I and typically right I’m calling them a month after I’ve sent them everything. Hey, remember me. Yeah, I can’t see. Uh as opposed to going in and not only they get in that thirty-minute meeting are they getting their taxes completely done and and they walk out one th less thing to worry about. Right
Dr. Friday
But we’re doing a mini review of I am with them at the same time. But also I have that person there. Convert or how much can I cash out because of the medical.
Hank Parrott
How do we max What’s the maximum amount?
Dr. Friday
That’s the sad thing with most people that don’t have these kind of relationships, in my opinion, is because I have, I mean, I will have a number of financial planners that might call and say, hey, my my person said I should call you because they want to do a conversion. Well, that’s never happened in this relationship. I will tell you that. He’s always calling me saying, hey, I’m looking at this one. It looks like their income’s come down a little bit. Maybe we can do more on a conversion. Can you run the numbers? And that’s the way it works because I don’t think of conversions. I mean it’s not in my wheelhouse as far as it doesn’t save tax dollars. It does save estate dollars, and don’t get me wrong, but I don’t know why more financial planners aren’t talking more to the tax person because what’s worse is you do this conversion or you do a rebalancing. They come into my office. I now tell you you owe $25,000. They were never prepared for that number, and then they’re having a freaking heart attack as if I did it because the numbers came out of my computer. And I get that. I mean, but it would be such a better relationship even with even when that happens in our office and and uh something done. We converted, we did something You’re always there saying, Nope, we accounted for that, the money’s sitting here, we just held on to it, we weren’t sure how much. You always have a way of saying, Hey, don’t worry about it, we’ve got and that just takes that immediate shock instead of going home, having to Call the person, wait for them to call back, come back into the situation. They’ve already got a stressful day. They’ve lost all that wonderful day that they had. Because now they’re not sure or they ought to take it out. C How much more should I be taking out? What’s the percentages? Why didn’t you tell me I should take taxes? Hey guy took three hundred thousand out the other day. No taxes.
Hank Parrott
Yep.
Dr. Friday
And that was crazy as far as I’m concerned. Who gets a no tax unless you have a three hundred thousand dollar loss? Um again, so we are here with Hank Parrot with Estate and Financial Strategies. He’s 30 plus years of doing this, so he has heard and probably seen most everything. But more importantly, he’s always up on top of the changes. Because just like my world, which I love about taxes, and I’m frustrated with taxes is the changes, right? We always have something that’s kind of changing or quirking. And when we come back from this break, we’re gonna talk a little bit about QCDs and a couple things like that because I still think it’s not out there popular enough for a lot of people, so maybe we can get a few more. If you want to reach Hank’s office, 615-376-5325-615. 376-5325. Tell them Dr. Friday sent you and you want a free appointment to do uh an evaluation, and that way you can find out where you’re putting your money and if it’s actually really making you as much or if you can be making more money on your money. All right, we’re going to take our next break. When we get back, we’ll be continuing this conversation with Mr. Perrett Alrighty, we are back again here with Dr. Friday and Mr. Hank Parrott. He is a financial advisor, you know, and I realized I didn’t really have him tell his credentials. So really quick, tell them what a wonderful guy you are.
Hank Parrott
Well, we’re doing uh first off, it’s the company, by the way, is Estate and financial strategies. We’re over in Brentwood, as as Dr. Friday said. I’ve been in business now for thirty-five years. Uh we also, by the way, a little cross promotion here, we we do a I do a TV show and Dr. Friday’s a a regular guest on called the Retirement Report. That’s on uh News Channel 5 Plus. That’s the uh cable outlet for the local CBS affiliate. Uh news channel 5 plus uh check your local listings for it. We’re on Friday mornings from 8 to 9. It’s live. Uh repeats again at 3 o’clock Friday afternoon, at uh 1 o’clock on Saturday, uh let’s see, 10 and 5 on Sunday, Monday evening. And I think I miss oh, there’s Saturday at eight A. M. I think we’ve got another one. So it’s it’s uh plenty of opportunity to catch it and we it’s an hour long uh program and we get into much of these same kind of conversations about planning. So we do comprehensive financial planning. It’s not just about your investments, not just about insurance and offsetting risk. It’s comprehensive. So we look at at everything. We look at your income, your expenses, your assets, liabilities, we factor in for taxes. for uh inflation, uh rates of return on your money, how well are you doing, what’s the needed rate of return to accomplish your goals. So all of that is part of the comprehensive planning that we do. And As Dr. Friday said, we’ll offer it up to you if you’d like to take advantage of that. It’s going to be two to three visits. You’re going to have to invest some time in it, but we’ll do it at no cost. It’s a great way for us to get to know you, see if we can be of value to you. Uh you’re welcome. You know, this is how we get a lot of new clients, of course, but there’s no no cost or obligation. And you’ll have something of real value because you will answer questions like, we’ve been talking about tax questions. Of course we get into that to tax planning. But we also get into things like Social Security and Medicare, the other uh complex areas that you’re going to have to deal with, health care costs and retirement. You know, that’s 250,000 to 300,000. out of pocket for the average sixty five year old couple that they can expect over their lifetime. So having a plan for that and how to minimize that is a big part of it. Just like with taxes, as we’ve been talking about QCD, you mentioned this is probably one of the most favorite tools that we have for our clients that are 70 and a half. uh and older. This allows them to give money to the charity that could be their church if they’re tithing to their church rather than If they if they take the money out of the IRA and then gift it over to that church, you know, or charity then uh they’re likely not gonna get any write off.
Dr. Friday
I mean especially when you’re looking at forty thousand, forty four thousand for a married couple is
Hank Parrott
Forty forty for a standard yeah age age sixty five and older so forty six thousand seven hundred zero tax but standard
Dr. Friday
So you have to be giving fifty grand or more to give. And then now with some of the new changes, and that’s the big thing. This would also reduce your income right off the top. So if if you were doing Irma, for example, um and you gave the money out of your bank, let’s just say you gave fifty thousand dollars and you put on your schedule A. That is not going to give you the same deduction as if they came out of a QCD, because QCD is right off the top. So if you took $100,000 and you gave $50 to your church, it’s only going to show $50,000 taxable. Now we’ll show the hundred that you receive, but the other fifty or half of other fifty thousand will go to that charity and reduce. So
Hank Parrott
It’s basically a hundred where you’d get zero write-off or maybe very little write-off, a small percentage, you can get a hundred percent write-off. So if you give them You know, in your example, fifty thousand, uh, zero you pay zero tax on it. Right. Uh that’s huge. I mean imagine re being able to uh do that each year. And we have I have one client I think they set the record, they were like I think it was either fourteen or I think it was fourteen charities that they were.
Dr. Friday
Check with the custodial on what they I’m sure there’s rules and how often they work with the code.
Hank Parrott
This doesn’t mean that you take money out of your IRA and give it and put it in your bank and then write a check to the charity, you don’t get to write off
Dr. Friday
No.
Hank Parrott
It’s got to go direct from the custodian, the person that holds your money. It’s got to go direct from them to the charity. Now that’s Sometimes it’ll go it’ll mail it to them, other times they’ll mail it to you. Right. To give to the charity, but the check is never going to get deposited into your account. It’s not in your name, it’s in the name of the charity.
Dr. Friday
And that’s the that’s the that’s the tax loophole, right? That’s what we want to happen. So And that’s the biggest thing. You could take $100,000, put the money in your checking account, write checks for 10 different charities for $50,000 total. That is a possibility. But if you’re 70 and a half and you’re taking that out of an IRA You just paid tax on money that you’re waiting for a tax deduction on that you might not get a hundred percent of. This is a one hundred percent deduction. And if your financial planner is not talking about this all the time, because again, I don’t think ten, fifteen years ago you started talking about this. Um I thought he was crazy at first, but it he wasn’t. He just Thought he was. Uh but anyways, that being said, it is something if you don’t have him talking, you need to call Hank because this can save you. tens, if not hundreds of thousands over your lifetime because think it’s seventy and a half and you live to be ninety and you’re taking money out and giving to charity anyways Th I mean a lot of our clients give a lot of money to charity. So it’s not like, you know, uh it you’re gonna give. And it’s not because you’re giving because of a tax deduction, but you’re giving anyway. So why not give and give more with a tax advantage versus the other. You can even give a little bit more because you don’t have to have the taxes come out. Um so it’s a game. And that’s what I love about these shows in in our life and we get to be to your point.
Hank Parrott
You give fifty thousand and if you if that’s taxable income to you and you had to pay fifteen thousand tax on it then Does that mean are you absorbing it? Is it net thirty-five to the charity? You know, how’s that gonna work? Or absolutely where I can give fifty and it’s hundred percent
Dr. Friday
Yep.
Hank Parrott
Win-win.
Dr. Friday
Win-win. That’s what I consider too, yes. Because the only person that really loses on that is the IRS. And are any of us going to really cry if the IRS does not have to get their money? I’m pretty sure if we can find a lot of those little loopholes, we will. I jump in there real quick. In 2026, under the OBBB, we do have the $1,000 per person, $2,000 for a married above the line charitable uh deduction available as long as they’re under the thirty seven percent tax bracket. So um just something to put on the table So if you are going to give money, um, and maybe you’re not 70 and a half, or maybe you’ve you’ve done your big ones through that, but you’re still a couple little ones that you just wrote checks because the Girl Scouts came to the door or whatever Keep make sure though you have to have receipts. And this doesn’t have to be cash, which is what we had back in twenty eighteen or nineteen when they had the above the line. This can be um any type, but you have to have a documentation proving that it either cleared the bank or that you, you know, have a cash receipt or you went to Goodwill and you have a physical receipt that does need to list exactly what you gave and they usually just give you a blank your seat. So you have to have that completely filled out um with the address of where you went and everything. So it’s it’s acceptable because I have a feeling that might be an area They might look at. Who knows? It’ll be three years from now after that because they’ll wait. Uh but just so you if you’re a person that likes to do brunching or bunching, excuse me, I like to do brunching too. But uh bunching, we used to talk a lot about that, Hank, where we have people save all of their sales tax and then um obviously double up on their uh property taxes. uh every other year because now you have forty thousand dollars. Um if married filing separately it’d be twenty twenty. This is also where there’s a penalty for married couples. Sorry guys Uh us single folks make out better on tax code. We get forty or you get forty. That’s just the way it is. Um so if you are a person though, that’s a big number because if I pay twice my social I mean S I get to itemize because of mortgage interest and things, but let’s say you don’t normally get to itemize. If again, if you’re hitting forty four forty-six you said thousand dollars and you have no mortgage. The only way you’re hitting that is going to be potentially sales tax, property tax, maybe doubling up on some of that, and charity.
Hank Parrott
Uh and maybe some hefty uh medical.
Dr. Friday
And yes, yes, we talked about yes. A medical may get you so maybe having those numbers. I used to tell people last couple years you didn’t need to save all your receipts, you didn’t need to track your sales tax. Well, as of January 1st, I’m saying let’s get back to the game. Because we probably will start doing every other year for some of my clients. So they can itemize those years because they can double up on that property tax, which kicks them over. Now I don’t know. If it’s single, it’ll be easier Married forty some thousand, that’s gonna be hard for most people to really get over, even if you saved every receipt and every property tax you have. Um But you need to make sure you’re not leaving money on the table. That’s what this this is all about. That’s what I I live for. And that’s the reason I have Hank out here. Now Hank, you also have a radio show.
Hank Parrott
Yeah, we do. I think we’re on 12 to 1. And then uh W-L-A-C. And then simulcast actually, it’s on an FM and then 1510 A. M. And then also, by the way, uh we’ve talked about the workshop uh we didn’t talk about the workshops, but we got a workshop coming up. Uh we do one uh most months uh in the year. January thirteenth is the next one. It’s a Tuesday from eleven to one. There’s no charge for the event. We’re going to do these are educational workshops. Our goal is to help you become better stewards of all the resources God has blessed you with. And one of the ways to do that is become better educated, uh better informed, more knowledgeable about all the rules we talk about and and understanding how these things work. So If you’d like to attend, just call the office, 615-376-5325. You’re welcome to bring guests as well. We just need to know how many to expect. Again, no charge for the event. Uh one other thing, by the way, we talked about the comprehensive financial plan. If you’d like to take advantage of that, uh we’ll get your information, send you out a checklist of things to bring to your appointment with me. Uh and when you come in to see me, I’ll also give you a free copy of my book, Seven Steps to Financial Freedom in Retirement. So again, 615-376-5325.
Dr. Friday
Great. And that’s those are important because I know um I I every once in a while I’ll do a workshop with him, but I’ve had clients that’s went to his workshop and that’s how they’ve kind of come circling towards me and towards you. I mean again, anytime you can get um knowledge and see how it applies to you. I mean that’s the the game, right? Because we talk a lot of times, but it’s generic to a point. You know, I I don’t know who’s listening, so I can’t target this conversation directly. But when you’re in our offices, we can. It’s one on one. We know what we’re doing, we know how to do it, and we make it work for us. All right, we’re gonna take another break here. So if you want, you can call Hank’s office 615-376-5325. 615-376-5325. Ask him for the free consultation or just Sign up for the free workshop and that way you might not even like the guy before you actually have to go in for it. You know, come on, it’s a win-win situation. Um sign And then we’ll take this break and then we’ll be going into the last part of our show and I’ll give you my contact information and all that good stuff at the end of that one. We’ll be right back with the Doctor Friday show. Alrighty, we are back. This is the final time. So if you’ve been listening, thank you. But we’re here with Hank Parrot with Estate and Financial Strategies. We’re both out of Brentwood, Tennessee. And uh just for anyone that just tuned in, I am Dr. Friday, an enrolled agent with the Internal Revenue Service, licensed by the Internal Revenue Service. to do taxes and representation. That’s kind of all I do, guys. For the last 30 years, that’s all I’ve done. So that’s why Hank’s here, because I can only absorb so much information. And I do not want to be a financial planner. So a disclaimer, I am not. Hank is the financial planner. I am the tax person. Um Uh I I will help and lead people mainly when you convert and you need to know how much taxes or if you’ve taken money out, I will tell you how much, but I will never tell you it’s a great idea to cash all your money out to go pay off your mortgage That’s because Hank says that’s a bad idea. For most people, I guess there’s always an exception to an exception, so don’t lock me into those because someone’s gonna call up and says, I did it and I didn’t, you know, whatever. Um but I also love the ones where People are um in the lower income bracket. Say they’ve done a great job savings. They haven’t really done anything, and I’ve actually been a part of where you’ve done conversions for zero. Every year you just take out 10, 15 grand, whatever it is that keeps them and even though they don’t need it, but you just say, hey, we’re i you don’t need to file, right? You you’re not a filer, you don’t need to file. But now if you have an IRA, that’s kind of silly not to file. Because tell them a little bit.
Hank Parrott
Sure, if you’ve got somebody with modest means maybe they’re able they’re living on, say, Social Security and a small amount of income from their investments. And they’ve got the the IRA and now they’re they’re hitting that required minimum distribution age is coming up. Right. We say, well before we hit that where you have to start taking money out We can, you know, sometimes it’s only $8,000 or $10,000 that we can convert and turn those taxable dollars into tax-free dollars and and pay zero tax in the process. So We’re always looking for opportunity to help uh improve our clients uh uh tax and well taxes is a big example. We’ll I help with tax planning. I know kind of the things to, you know, look for and then get with someone like yourself, well mainly in your situation Friday, it is you. Because we’ve been working together now for, as you said, over thirty years and and one of the things that uh I have found to be so uh advantageous is that team approach that, you know, I can sit down with you and I can say, okay, I’ve got this client, you’re doing their taxes, here’s what their situation is. Uh we want to do some conversions and can I do forty? How about forty-five? It’s like an auction. Fifty.
Dr. Friday
Can I get can I hear sixty?
Hank Parrott
Can I get sixty, please?
Dr. Friday
Yeah. How close can we get? And then we leave a little wiggle room. But yeah, cause I know um there’s a a number of clients and a lot of times I realize a lot of financial planners There’s not a huge advantage to doing conversions for you. I mean it’s the managing of funds. Everyone has to make a living. That’s not but if you’re listening, and maybe you are a person that only has Social Security or maybe a small pension in social Even your RMD, maybe it’s a thousand dollars a year you have to take out ’cause like you said, maybe there’s only ten, fifteen thousand dollars in there and you don’t need to take it out, but you’re mandated to be taking it out. Maybe you should make that phone call and at least talk. It may or may not be something necessarily for for Hank’s office or something, but talk to someone and find out if you were to convert that, put it into a Roth, let it sit for the next 10 years, or let your children inherit, because you really didn’t need the money Now, talk a little bit about what I was just thinking about. Everyone, I mean, um, you don’t want to convert if you really need the money in a period of time, right?
Hank Parrott
Well that’s like on the spending down uh when you were looking at retirement accounts, or is it a conversion or are we just going to spend it down? And one of the things we’re looking at is the value during your lifetime. Okay, so for the client, this is and f and if they’re married, of course, for their spouse, first and foremost, how do we make sure you’re gonna be okay? That you’re going to be able to attain and maintain your standard living, quality of life, you know, no matter how long you live. So that’s first and foremost. We do that. And that’s one of the reasons for doing the comprehensive planning. The next piece then that comes in, once we’ve made sure of that, we start thinking, okay, now when you’re gone, what do we want to have happen? And do you want uh one of the things for most people, uh when you when you ask them, do you think you, you know, pay too little in taxes? Exactly. That’s the response. No, I don’t think that. If anything too much. Even though we’re at historically low rates. But this is one of those areas do you want to have the IRS as one of the beneficiaries, or maybe even the biggest beneficiary of your estate? Because that comes into conversions and stuff. And keep in mind since the Secure Act uh back in 2019, we’ve got the now the 10-year rule.
Dr. Friday
Yes.
Hank Parrott
So this is one of those areas. Exactly. So when you uh leave money in an IRA or any kind of retirement account to a non-spousal beneficiary, in other words, to your children. They’ve only got 10 years, they’ve got to cash that out within 10 years. They don’t they no longer can spread those distributions out over their lifetime and and basically minimize taxes. it’s gonna probably increase the amount of tax that gets paid. So if we can convert that, maybe over to a Roth The benefit is now you still have the ten-year rule, but it’s here it’s a different strategy.
Dr. Friday
Roth would be great. I’ll wait to the day before I have to take it out, let it ride the entire time it can cashy because there’s no tax improvation. Exactly.
Hank Parrott
I would grow it tax-free for ten years to push it out.
Dr. Friday
Exactly. Where the IRA and that’s the kind of thing, because I know sometimes people think about they keep hearing I need to do conversion but it really is a an individual again I know on taxes I think it’s very individual because The advice I may give you may be completely different than I give someone else that’s in the same industry because of just different life expectancies and different things. And that’s the same way with IRA conversions and all these conversations, one of the reasons you do this free evaluation is to find out more about that. You need to know that person to know what kind of advice to give them, I’m assuming.
Hank Parrott
Oh yeah. This is one of the areas and imagine going to a doctor. and you walk in the door, say hello, and he writes a prescription before i ever examining you. I mean, how are you how does he even know what you not you you might need? Well Financially, it’s basically the same thing. I’m not sure what I would recommend for an investment plan before I know more about your entire situation, including what those income needs in retirement are going to be.
Dr. Friday
Alrighty, we are winding down the show. So again, if you want to reach Hank Parrot, Estate and Financial Strategies 615 376-5325. Again, free consultation as well as a free workshop. Come on, how much more free can you get? It’s almost like a Christmas present after Christmas. 615-376-5325. You can also reach me, Dr. Friday, at 615-367-0819. 615-367. You can also check us out on the web at drfriday. com or email Friday at drfriday. com And um this way if you have any questions or if you need help with taxes or maybe you have a friend that’s received love letters and they don’t know what to do with them or you just put them in a drawer because you think that’s the best place to hide them. Not really the best idea. Just to let you know that, but you can give us a call as an enrolled agent. I can deal kind of like a superwoman between you and the IRS. I can shield you, but I also need to have that same information.
Hank Parrott
So Hank, thank you for joining me. Absolutely.
Dr. Friday
All right. We’re gonna take a um final out, so this is the Doctor Friday show, cop you later. Ab