The latest episode of the Capitalist Investor podcast delves into crucial financial topics that are currently making waves in the market. Hosted by Derek, Tony, and Luke, the episode covers thought-provoking discussions on Roth IRAs, the future of Social Security, and the unexpected surge in cocoa prices. Here's a breakdown of the five hot topics discussed in the engaging and insightful episode.
1. Roth IRA and Roth Conversions The episode kicks off with a deep dive into the value of Roth IRAs and Roth conversions. The hosts emphasize the potential significance of Roth accounts in the face of a mounting national debt and the likelihood of tax increases in the future. They underscore the importance of careful planning and consulting with financial professionals before executing Roth conversions, emphasizing that a strategic approach is crucial for tax optimization.
2. The Current State of Social Security The discussion then shifts to the uncertainties surrounding Social Security. With the trust fund for Social Security projected to run out of money in the near future, the hosts dissect the potential implications of this impending financial challenge. They shed light on the impact it could have on 66 million Americans who rely on Social Security benefits, emphasizing the lack of concrete plans or proposals from policymakers to address this critical issue.
3. The Chocolate Market Surge Surprisingly, the episode also covers the notable surge in the cocoa market, highlighting its staggering 300% increase since the beginning of the year. The hosts humorously comment on the potential repercussions of this surge, joking about the likelihood of expensive Halloween candy and the possibility of children receiving more gum than chocolate during the upcoming holidays. The cocoa market surge serves as a fascinating addition to the multifaceted financial topics discussed in the episode.
4. Tax Implications and Future Financial Planning Throughout the episode, the hosts stress the importance of understanding the potential tax implications of current financial decisions and the need for sound financial planning. They emphasize that tax laws and their impact on future financial matters should be a key consideration for individuals, especially in light of potential tax hikes and the looming challenges facing programs like Social Security.
5. Engaging Concluding Thoughts The hosts conclude the episode with a call to action, encouraging listeners to reach out with any questions or concerns about the topics discussed. They reiterate the critical importance of seeking advice from qualified professionals for individual financial needs, reinforcing the educational nature of the podcast and its dedication to providing insightful content about the ever-evolving financial landscape.
The latest episode of the Capitalist Investor podcast delivers a wealth of information and thought-provoking insights into the dynamics of Roth IRAs, Social Security, cocoa market surges, and the broader realm of financial planning. With a blend of detailed analysis, real-world implications, and humorous anecdotes, the episode effectively captures the essence of these complex financial topics. Listeners are left with a newfound understanding of the multifaceted elements that shape the financial landscape and the critical need for strategic planning in the face of potential economic challenges.
Hello and welcome to this week's episode of the Capitalist Investor. As always, you have me, diamond hands D, and Tony the Tiger. What's going on, man? What's up, man? It's Luke even part of this team anymore? I don't know, man. He's been on assignment a lot lately. On assignment? Jet setting, man. It's a hard time keeping those alligators down, right? That's for sure. But we'll hold it down again this week. So we'll continue with the planning corner. So we'll talk about Roth and Roth accounts and Roth conversions this week. So always a hot topic there. And then just a little on the current events. We'll talk a little Social Security and Biden's plan for that, or maybe the lack thereof, and then we'll talk a little chocolate. It seems to be pretty hot in the, in the commodities market these days. Chocolate. All right, all right. So Roth accounts. So this part of the financial planning corner, it's like. Yeah, it's hard to. It's hard not to believe that Roth accounts aren't destined to be more valuable in the future. Why? Because we're racking up a bunch of debt. When we talked about taxes last week, you know, the deficit is well over 34 trillion. Taxes are historically low. Yep. And it's hard to sustain everything when taxes are low. So where they got to go, they got to go up is what I'd imagine. Trump's tax laws, they sunset at the end of 2025 on January 1. If no one does anything, we will revert back to the Obama tax laws. I figure something will happen depending on who gets in, because the newest regime always likes to make their own changes. And we already have President Biden already kind of cranking on taxes as we speak. So I imagine that taxes would go up if he were to win the election. And I don't know, I would think that if Donald Trump won, I think he would leave him alone because he's pro low tax. Because low tax in his mind, and most republican minds, is that it generates growth. You know, if you can keep the money in the business owners pockets, they're going to spend that money on research and development, hiring people, whatever it may be, acquisitions, capital projects. Yep, exactly. So, but if we do, if nothing happens and revert back to the Obama tax laws, taxes are going up 15% to 25% because the marginal brackets will increase. The twelve will go back to 15, and the 22 will go back to 25. So we're looking on an incremental part that taxes are going up 15% to 25%. Yep. So. So what's the solution? You know, it. I would argue that doing contributing to roths and making Roth conversions now makes a lot of sense while taxes are low, because we just can't predict what's going to happen in the future. Yep. And, you know, since we're talking planning. You know, let me, let me. Sorry. No, no. I want you to hit. My disclaimer is like, don't run out and do Roth conversions. Consult with a professional, whether a CPA financial advisor. Ideally, you'd want to talk to both if you're going to execute that. So go ahead. I'm sorry. Yep, yep. For sure. No, that's a very important point because, you know, just getting out and around and talking with, you know, a lot of people about their finances, I kind of feel like people want to feel like they've accomplished something right. So they set their sights on their finances and retirement, and they want to make sure that they get something done. So they kind of hit the Internet, and Roth conversions is always a topic that comes up. So, like, okay, well, I can do some Roth conversions. This makes sense to me. I'm going to do 10,000 conversion this year, pay a little taxes, and I'll have taken a positive step towards my retirement. But just doing something doesn't necessarily mean you're doing it right. And when you get into retirement planning and you kind of see the cause and effect each move has, you begin to understand more that all of these things, all of these different planning solutions need to be done in the right amount, in the right timing, over the right period of time. Right. I mean, doing a Roth conversion, it takes a lot of thought, a lot of tax planning. And, yes, it's a solution to lower taxes in the future, but there is a consequence, and that is to pay taxes now. So you have to be careful on how much you do and when you do it. That's why when we do them for clients, we usually chunk, I'll call it chunking it out, where we'll do little chunks per year to keep taxes low so we just don't create hundreds of thousands of dollars of earning income. And I'll always say that paying tax is a consequence of success, but we owe it. If you have a traditional IRA, they're coming for you, just maybe not right now. They will find you when you turn 73, you know, that that number turns to 75 and, like, 2032 or something like that for required minimum distributions. And we just need to make sure that when. If we're going to do a financial plan, or if we're going to do a Roth conversion, we have a financial plan in place because we want to make sure that the Roth conversion moves the needle. There may be different things going on in different people's financial situations where it might not make sense because you're paying too much conversion tax. So we have to be careful. I even have that argument with people saying, hey, Tony, in my 401K, while I'm working, should I be contributing to a traditional or a roth? Loaded question. How much money do you make? Because if you're in the highest tax brackets, I may actually want that tax deduction now, because when I hit retirement, I might have a bunch of stuff paid off, and my. And my income might actually be lower because I. I paid for cash, my house is paid off. I don't have any credit card debt. Like, how much money do you actually need to spend? Have a fun life. Right? A fun retirement. So sometimes I may say, like, as much as I harp on Roth Iras, you know, you may want to consider contributing to a traditional to get the tax break now, because we know what the tax rules are today, and we might want to take advantage of those now because you might be in a higher bracket today. Absolutely. And that's a classic example, too. So it's, you know, it's that same person out there reading on the Internet, hey, you know, roths are a good idea, so let's do them. So I'm going to take, you know, 25% of what I put in my traditional four hundred, one k, and I'm going to start saving that. To a Roth, you're just that move alone. It may be good, it may actually be bad. It might not even help the situation. I don't want to say it's bad. So saving money is not a bad thing. So what I'm going to call it is that the tax efficiency may not be optimal. That's how I'll rephrase it. Because it's not a mistake to save into a traditional. It's not a mistake to contribute to a Roth. It's about tax optimization and giving it some thought and understanding where you are now and where you project to be in the future on an income basis. Right. So that's how I like to call it, more of optimization. Because it's never a mistake to save. Yep, for sure. All right, so again, Roth Iras, good idea. Just, we got to optimize them. So, with that being said, let's move into something else that's optimized. Right now, or lack thereof, is Social Security. I believe Janet Yellen, the treasury secretary, came out and said that Biden doesn't really have a plan for Social Security and its insolvency coming up here. In maybe the next eight to ten years, the trust fund is going to run out of money. But he's got an idea in principle, whatever that means. Here's the thing. All right, so the trust fund, just to give some people some insight, because we did a whole podcast on Social Security maybe a couple months ago, but the way Social Security is paid out to the recipients is that 75% comes from payroll tax. So everyone working is paying into the system. The other 25% comes from this trust fund that the government created. Well, it's running out of money, and it's supposed to run out of money sometime around 2033. When it does, nobody knows what's going to happen. If it just plays out the way and no one does anything, Social Security recipients will probably take a 25% haircut. I don't think that would really happen. They'd probably just be more taxed. There's a lot of different ideas going around on how they're going to solve Social Security. Again, we did a podcast on it. They could raise taxes, raise the payroll tax. I think payroll tax turns off at around $190,000. So once you make over 190 grand, you don't pay into Social Security. They're thinking of turning that back on. Having a donut hole is what they referring to, and they turn the taxation of Social Security for the working person back on at 400 grand, and they get to pay back into the program again. Long story short, though, is that if the trust fund runs out of money and nothing's done, it'll affect nearly 66 million Americans on Social Security. That's a lot of people. Yet the Biden's new tax proposal, where they're planning on taxing people or income earners making over 400 grand so that they, quote, unquote, pay their fair share in that new tax proposal, none of the new taxes are dedicated to help Social Security. Isn't that my. I mean, they're my head written down, too. They're staring down the barrel of a failing system, and they still don't want to do anything about it. Nothing at all. So, yeah, you know, it's the. You really have to start to wonder, the board that you talk about this stuff, read about it, there seems to be no one interested whatsoever, Republican, Democrat, anybody at all, in talking about this, into having some debate. Obviously, the system is going to break, like, there's no debate there. There's gonna run out of money. I mean, but, I mean, think about any politician that obviously, they don't want to bring it up because it could hurt their reelection. Right. Why would they want to bring up something that could affect 66 million people? That sounds like a lot of votes. Right? I mean, they're not gonna. Not my problem. I'm moving on. Right. And, you know, maybe some of these, some of these, you know, you see all those stories about how all these politicians are multimillionaires because of, quote, unquote, insider trading. They don't care about Social Security because they don't have to, or they're on a government program, a government pension that they don't have to worry about Social Security. So. Yep. So no plan right now and no plan coming. Right. Right. Taxes are going up. None of its allocated Social Security. Long story short. So after we get, you know, tax increase, after tax increase, and then 2032 rolls around, they'll be wanting another giant tax increase to try to solve for some of that. I know. That's crazy. So still no solution for Social Security. Nope, but. All right. And then moving on to coco. So, actually, pretty, pretty crazy. Coco is up parabolically this year. Since the beginning of the year, it's up 300%, and it's all kind of surging from, I guess, like, the crops in West Africa, there's some kind. Some type of disease preventing the growth of this. And now they're saying that you should expect your chocolate to maybe double. I thought. I thought Halloween candy was already expensive. I mean, man, kids just gonna get a bunch of gum. Who's gonna buy the chocolate to give these kids next? Uh, uh, October? Yeah, man, this one came out of nowhere. I wasn't. I was not paying attention to this. To this market. But, yeah, it's, um. If you see the. If you see the chart on it, it's. It's. It's even more impressive than the video stock. Yep. So, not. I mean, not nothing crazy. There's nothing we can really do about it. But I just thought it was interesting, interesting take on a short. On a short week that we have for the podcast. And, uh, just expect your chocolate prices. To be going up just like everything else. Exactly. Exactly. So. All right, well, excellent show this week. Thanks all for listening. If you guys have any questions or comments, concerns, hit us up at info connect.com, and we'll talk to you next week. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.