Cumulative Lifetime Tax

Cumulative lifetime tax. Have you ever been able to figure out what you might potentially, from today until the rest of your life, pay in cumulative taxes? Well, I brought some visuals along. Right. And so this is from my classroom, Klunder cash. And you know, if you’re sitting down there, you’re saying, I wonder of all of my hard earned money that you’ve saved that might still make some money?

You know, how much of this do I get to keep? All right. Well, there’s codes, and there are rules to that. And even though I have never signed a tax return, I work with people that have signed thousands of tax returns. I get to work with people and coordinate with CPAs, local, you know, enrolled agents in all of our offices do this.

And that’s one of the big value ads that we get to help people with their long term tax plan. So what I did is I went down, I said, what was the first, you know, what kind of rough what was the first tax return look like? 1913 big spaces. It took about three pages, few questions. And then there was one page of instructions.

So this is what the first tax return looked like. Fast forward to today. They’ve made the font in the spots a little bit more condensed. They have condensed it to two pages. But look at how many pages the instructions are. 126 pages of instructions to fill this out across multiple different schedules. And so what I did is I grabbed a client, a typical client here.

They’re in their mid 60s. And I said, what would it look like to do kind of a case study. How do we approach big picture taxes and then narrow all the way down to what your options are and teach to the point of a decision? So as we look in this, I just want to say one other thing.

You know, we work with people that have multiple thousands, and we work with people that have multiple millions and everything in between. We get to teach and educate. And across all of our offices in Northern Michigan. And so if you’re sitting there thinking, oh, they won’t work with me or they can’t help me. Well, you should come for a no obligation free opportunity to, at least learn about your lifetime possible cumulative taxes.

Okay. So this very first chart client, like I said, in the mid 60s, and we mapped it out from today until they would live a long time. And if you look on this sheet, hope you’re sitting down. Okay. Their cumulative projected tax is $1,603,158. Now, obviously, when we’re doing projections, we’re going to have some different rate of returns in there.

But look at that. A $1.6 million projected tax bill. You can see the federal tax alone, 1.2 million. Social Security, estate tax, rather 340,000. And then some entity tax of 55,000. And I didn’t even get to put in there the potential Irma tax. Okay. So the very next chart, you get to see a visual of what a long term tax plan looks like.

You’re going to see that maybe over the next six years their marginal bracket might be in the 10% bracket. Then they’re going to jump again maybe to the 12% bracket. And then in 2038, it’s projecting that they’ve jumped up to the 22% bracket going along there for a while. And then in 2049 up to the 24% bracket and eventually potentially the 32% bracket.

So if you look at that visual, what you want to happen is you want to push the bracket jumps further down your life cycle. So what’s another chart we can look at? Well, look at the annual tax. You can see right now the annual tax isn’t too much okay. But it progressively gets bigger and bigger. And bigger and more taxes are introduced.

That’s the curve that you want to flatten. So how do you do it. Well we can look at what is your taxation for Social Security. What does that strategy look like? Or you can and you can go to this tabular data? This is where I think it’s the most helpful. So if you look at their tabular data they there might be some options for them to either convert or spend 24,800 and do that in the 10% bracket if they want to entertain the 12% bracket.

There might be another 76,000, potentially, that they can convert or spend. And then you can see what the tabular data looks like across each bracket. So if you’re sitting there and you do not have a long term tax plan, my suggestion would be to call one of our offices, sit down. This is free to everybody, and we can build out your potential cumulative lifetime tax bill and then help teach you strategies to optimize and minimize.

Thank you so much for watching.