SPEAKER 02 : 0:01

Welcome to Retirement Unpacked with Al Smith, owner of Golden Eagle Financial. You want a retirement plan that alleviates your fears about the future so you know your money will last. As a chartered financial consultant, Al Smith will help you find a balance between the risk and reward of the market and the safety of your retirement income. And now, here’s your host, Al Smith.

SPEAKER 01 : 0:25

Welcome to another program of Retirement Unpacked. I want to thank you for tuning in. I’m sure there’s other things you could be doing, especially on a beautiful day like this. And I’m going to have good, good information for you after I give you a little bit of a Essential tax strategies for retirement. We had that at the Belmar Library, which if you’ve not been there, it’s a really nice facility. We had that last Thursday evening. We had just under 40 people there, which was just about capacity. And it was a good evening. We had good weather. And as I mentioned, a good turnout. And quite a few people after the event will be coming into my office. We’re going to have some strategizing conversations and learn some ways that I can be of help. Now, we’ll be having another one May 2nd. That’s going to be at Arapahoe Community College. May 2nd is a Saturday. That will be Saturday in the morning. The precise time will be announced later. It’ll probably start around 10 o’clock, but we’ll firm that up a little later. Again, that’s May 2nd at Arapahoe Community College. If you’d like to get signed up early for that, contact my office at 303-744-1128. This afternoon, I’m going to talk about tax traps. Specifically, I’m going to be talking about what we call the widow tax trap. Now, we could first maybe define what’s a tax trap. Well, that’s… maybe could be defined as a tax that you weren’t thinking about because by the very nature of the word trap, it kind of gets a hold of you and you were not prepared for it. Any kind of trap is something that grabs a hold of someone or something and they weren’t prepared for it. Now, the widow tax trap is not really extremely rare. It’s incredibly common. And the reason for that, 70% of women will ultimately become widows. Only about 30% of men become widowers, and 60% of the men who pre-decease their wives remarry. But only 19% of widows remarry. Therefore, women who become widows will often live alone for some period of time. But the widow tax trap has more to do with how they are taxed than what their life is like without their spouse who has deceased. And I think it’s with anything else. There has to be planning involved, just like when I talk about long-term care. The chances of needing long-term care are coincidentally about the same as the likelihood that a woman may live longer than her husband. And I think the most important thing is not necessarily to have a bunch more money in order to handle this tax trap, but have a better plan. And I’ll give you a little bit of an example. And this example, I will round off the numbers to make it seem like a little bit easier. But let’s say if a married couple were living on $150,000 a year in retirement, and after the male spouse passes on, that $150,000 drops to $130,000. Well, that’s less money to live on. But coincidentally, when we look at the entire tax treatment of the husband and the wife, when they took their respective deductions and so forth, with that, in this case, it was like $147,900 of income, not quite $150,000. But the total tax on that level of income for the couple while they were married is $13,732. Now, $20,000 less income after the husband passes on because Social Security… woman can only collect the larger of the two social security amounts either hers or her husband’s whichever is larger but in any event her income dropped by twenty thousand dollars but her tax went up from thirteen thousand seven hundred thirty two which is what it was when they were married Now that she is single, she is in that single bracket. Even though her income is $20,000 less, she will be paying $22,186 in federal income tax. And this doesn’t even take into consideration state income tax. So besides having $20,000 less income, she has a ballpark $8,454 more in federal income tax So even though her income has only dropped by $20,000, she has $28,454 less spendable income. So this is clearly a tax trap. And like any other kind of circumstance that could possibly increase someone’s taxes, there needs to be planning. And in this case, it’s pretty obvious there needs to be planning because we’re talking about an event that is 70% likely to occur. And it’s coincidental that that’s about the same percentage of someone needing long-term care. And there’s quite a few different things that can be done to help plan for this. But I think the important thing is the earlier the planning is done, the better off the couple will be no matter if they both live for a long time and die within a short time of one another, which often happens even if they die of natural causes. I’m really surprised about that. But the planning needs to take place no matter which person passes on. In other words, let’s look at the different contingencies. Let’s look at whatever kinds of things that we can do in order to um offset this increased tax this widow tax and we could call it a widower tax because it would be similar if uh the spouse died if the woman died and the widower were remaining i just call it a widow tax because women do live longer and it’s more likely that a uh a woman spouse a wife would die before the man but one other thing is that makes long-term care even more important for two reasons one reason is if a husband passes on and leaves his spouse then if she has some minor issues that may not require intense long-term care, but she has no one there in the household to help, it may end up there being long-term care being required sooner for that very reason. Some other things to take into consideration is if someone has, you know, family, just a whole lot of things to take into consideration. But there are some things that can be done in order to plan well. for the survivor to continue and not falling into what we call that widow tax trap. And again, I don’t necessarily am a big fan of the word trap, but clearly that’s kind of what it is. Part of the planning process, we can look at if either the husband or the wife should pass on, what income needs would the survivor have, and we can even, like in a visit in the office, we can even estimate what that survivor’s tax might look like. And if it turns out the survivor, whether it’s the husband or the wife, If he or she needed additional income, let’s take a look where that income might come from. It might be that the nest egg is large enough. We can have more money coming from whatever they’ve accumulated over their lives. On the other hand, if that nest egg is already allocated in other places, a really good way to provide protection for this is through life insurance. And you’re thinking, why would anybody want life insurance in retirement? Well, essentially, life insurance is a financial product that is there to replace income. And in the case of a husband and a wife, they’re both drawing Social Security. One dies, that income is lost. And if that income needs to be replaced, life insurance is an excellent product for that if people are healthy enough. And obviously, this kind of planning works much, much better if people do this kind of planning at age 58 or 62 and not age 75, just because the cost of life insurance becomes quite high in later years. But This also will fill a dual need because I’ve talked many times on my radio show about how life insurance can be used to pay for long-term care. And you’re thinking, well, how does that work? Well, most life insurance now, almost all life insurance, has a provision that part of the death benefit can be advanced in the event there is a need for care. And that’s part of every life insurance contract. It’s even part of term insurance. And I wouldn’t suggest term insurance because at some point in the future, it’s going to end. But that would be better than not to have any at all. And that would be one of the ways to provide a solution to this tax trap. Now, those of you out there who have pensions, if you are young enough that you haven’t made the selection, the survivorship selection on your pension, one way to help alleviate the tax trap for widows or widowers is to select a larger payout for The pension. Now, some pensions even offer a cash settlement. In other words, rather than receiving $4,000 a month for as long as you live, there might be an alternative to receive $700,000 in one lump sum. And depending on someone’s health and the age of a spouse, this can end up being an attractive way to help offset the widow or widower tax trap. We’re going to talk about more taxes that you might not have heard about that can end up being a tax trap after the break.

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Al Smith at Golden Eagle Financial says the biggest risk to your retirement isn’t what you know, it’s what you don’t even think to ask. You’ve got a 401k and maybe some investments, but did you plan for inflation quietly shrinking your income? Long-term care? Or your adult children’s problems becoming yours and the real possibility that retirement turns into a full house again? In Al’s decades of retirement planning, he’s seen just about every scenario that could go south. But more importantly, Al will help you get retirement right. He builds a plan around your real life, your goals, your family, even the things you enjoy, like travel or keeping those Broncos season tickets. And then he stress tests it using modeling that runs hundreds of scenarios. So rather than guessing, you’ll know if you’re on track or how to get on track for a fulfilling retirement. Get the retirement answers you deserve with our trusted partner Al Smith of Golden Eagle Financial at klzradio.com advertisers page. Investment advisory services offered through Brookstone Capital Management LLC, a registered investment advisor. BCM and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.

SPEAKER 01 : 14:40

welcome back to the second half of retirement unpacked we’re talking about tax traps specifically the widow tax trap and to provide a very brief summary when one party of a couple the husband or the wife passes on the survivor ends up being in a single tax bracket rather than the double tax bracket and the taxes are a lot higher for a single even though the income is less. And that’s basically what we talked about. And I think the important thing going forward, if this is something that you have a concern about, is that you take into consideration how much will we need in retirement. and also how much will one of us need in retirement after one of us should pass on, because it’s unlikely that both of you will live to be age 88 or 90 or whatever and die at the same time. That’s highly unlikely. It does happen, and I’ve even heard of circumstances where husband and wife die within a very short time of one another, even though the circumstances are not a car accident or something like that. That does happen, but what’s more common is for women to live a reasonable length of time after their husband passes on because we know from mortality tables, women live about three and a half or four years longer than men do. And as far as the planning, that is an important component of retirement planning. One of the big reasons is because if a man and woman live in a household, let’s say they live in a home, If there’s still a mortgage remaining on the home, that doesn’t go down if either the husband or the wife pass on. Neither does the maintenance on the home, the property taxes. None of those things, the homeowner’s insurance, those don’t go down because one person of the couple passes on. Some of those expenses may actually go up. In many households, the man takes care of the maintenance. Maybe mows the lawn, does a few things like that. And maybe his wife never took care of those things. She took care of other things, maybe planning things for the family and everything. making meals, things of that nature. And that’s not a sexist viewpoint. That is just allocation of not just resources, but allocation of people’s capabilities. And that being the case, when one person passes on, The total expenses in the household, they don’t drop in half. They’re probably 80 or 90% of what it was to have two people there. Some of the things that may go down, one person by himself or herself probably won’t need two vehicles. and there’s a little bit of savings at the grocery and things of that nature, and depending on your home, you can close off a room or two from heat. So there’s a few ways to save, but many of those expenses, after a spouse passes on, continue. So I think the plan then should become what income are we going to need in retirement, after the first of the two of us should pass on where will that income come from and how much would we need so that really needs to be an important part of the planning i know we always take inflation into consideration and when we consider life expectancy and longevity one of two people is certainly going to live longer than the first one to pass on. So the planning has to be for the length of time of the second of two people. And that involves some different number crunching to say the very least. So an effective, efficient retirement plan should not only consider how much will we need in retirement, but how much will I need or my spouse need after I pass on? What would that look like? And with the tools that we have, we can sit down and make those predictions. And in addition to this tax trap of the widow tax trap, there are some taxes and some tax breaks that you may not be aware of that I think I would like to share. One of those is called IRMA. Now, IRMA isn’t really a tax, but it’s like a surcharge. IRMA stands for Income Related Monthly Adjustment Amount. And basically what it is, it’s a surcharge on your Medicare premiums based on your income. For a single person, once a single person’s income exceeds $109,000, then that person will pay $82 a month more for their Medicare. And that doesn’t even include Part D. Part D, it will go up possibly $14.50 a month. Now, for a couple, instead of $109, it’s $218. It’s twice that amount. And if a couple’s income exceeds $218,000, each of them will pay $82 a month more for Medicare under what we call IRMA. $82 a month doesn’t sound like a lot, but that’s nearly $2,000 for a couple. And this isn’t a tax, it is a surcharge. And this doesn’t occur until the year after the income goes up to that amount. And a lot of people are really blindsided by this. Now, what if someone is so unlucky that they’re successful and their income goes even higher? Well, if a single person’s income goes above $137,000, or if a couple’s income goes above $274,000, which is exactly double that amount, then that individual or that couple will pay $202 more per month for their Medicare. Now, for the couple, $202, that’s $2,400 a year times two, that is $4,800 a year that they are penalized with their Medicare if their income exceeds $274,000 for a single person whose income goes above $137,000. will go up by about $2,400. Now, if someone is so unfortunate that the couple’s income goes above $342,000, that couple will pay $325 a month more for each of their Medicare. And that looks to me like it’s about $7,400 a year, ballpark more to pay for Medicare for a couple And for a single, it’s about $3,800 a year more. The threshold for a single, if someone earns more than $205,000. Now, the irony about this, because I did a little checking on this, people who have higher incomes are often healthier. And if they are healthier, they will probably have fewer Medicare claims. Now with a lot of insurance, if you are a good driver, you have better rates for your automobile insurance. If you are a homeowner and you have never had a homeowner’s claim, you will probably be in a position to get better rates for a homeowner’s insurance. On the other hand, Medicare, there’s no relationship about that. It’s just if you make more money, you have to pay more for Medicare even if you are less likely to have a claim. Now, something that’s more on the good news is the extra standard deduction for people over age 65. And essentially what that is, is for single people, the standard deduction is increased by $2,000 a year, and that’s per person. So for a couple, the standard deduction for those over age 65 is $4,000 a year. And that’s what it was in 2025 and 26 that they boosted that slightly from $2,000 to $2,050. Now, in addition to that, the big beautiful bill, which I believe was passed in the, no, it was July 4th of 2025, there is what’s called a bonus standard deduction. And this one, as you get this, even if you itemize your deductions, and essentially for each person, the standard deduction is boosted by $6,000 a year. And that can be extremely helpful for people once they’re in retirement. Because, for example, for single people, The base standard deduction is $15,000. And if you add the $2,000 extra, that’s $17,000. You add $6,000 to that, that’s $23,000. So singles don’t pay any tax on the first $23,000 of their income. However, this is phased out over time for incomes above $75,000 a year. I want to thank everyone for tuning in. God bless you. If you have any questions about any of the things I’ve talked about, about the tax trap for widows or about any of these bonuses for folks over age 65, or if you’d just like to see if you’re on track for retirement, call my office at 303-744-1128. We’ll arrange to have a conversation. In the meantime, God bless you. Thank you for tuning in. Let’s continue. to pray for our country and our troops bye now

SPEAKER 02 : 26:32

Thank you for listening to Retirement Unpacked with your host, Al Smith of Golden Eagle Financial. Set up a free consultation with Al today at klzradio.com slash money. Find your purpose in retirement with Golden Eagle Financial. Investment advisory services offered through Brookstone Capital Management LLC, a registered investment advisor. BCM and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed investors.