Walter Storholt 0:08
Flying high above the metropolis. It’s the Roth guy with holistic wealth advisor. Jude Wilson.

Marc Killian 0:19
Hey everybody. Welcome to the podcast. Thanks for tuning in to the Roth guy with Jude and myself as we talk investing, finance and retirement. Course, Jude is the Roth guy and here to help us, you know, understand more of all this stuff that we got to deal with when we get into retirement. What’s going on? My friend? How you doing? 

Jude Wilson 0:35
Hey, I’m living the dream. As my old friend used to say, there you go.

Marc Killian 0:40
You know, I said in retirement, but honestly we talk, we’re going to be talking a lot more than just retirement. Also state is leading up to it, and stuff for younger folks as well. But I think this week we’re going to spend a little time trying to just talk about and deal with some of the issues of the national debt or deficit, however you want to look at it, however you want to call it, and its impact on savings, basically, I guess you could just say savings in general, whether it’s retirement or building up to retirement, or, you know, whatever the case might be. So it’s a lot to process. Jude, so we’ll try to try to try to highlight, yeah, nuggets a little bit. So I guess let’s jump into a little bit. So national Well, actually, okay, this is interesting. So national deficit versus national debt? Yeah, I just said that myself, right? I just tripped on it myself. So what’s, what’s the difference?

Jude Wilson 1:29
That’s a, that’s a that’s a really good place to start. And what I see when I talk to clients or I’m doing speeches, people get the two confused. And so I want all of the listeners to walk away with some strategy that they can put to use. Yeah, but I want to make sure they understand the foundation of this and what the problem is, because if you don’t understand the problem and some of the terminology, you’re not going to understand some of the strategy. So let me, let me help me pause you

Marc Killian 1:58
for a quick second, because we don’t want to scare people in thinking, Well, I’m not going to pay attention to this. Because attention to this because it’s not going to make any sense. We’re going to try to keep it simple enough, right? Because it is important for us to have a I mean, basically, you can’t. We all know, like we all make jokes. Jude, you can’t run your household the way the government runs its household, right? If we did that at home, we’d be, we’d be on the street, you know, exactly. So anyway, we’re going to keep it high level Exactly. And

Jude Wilson 2:22
the problem is that sometimes people confuse or conflate how they run their household with the way that the government because there’s two key things that we don’t have that the government does have. The government can print more money, and they can raise taxes, and we don’t have that ability. So conceptually, yes, you have income coming into your house, you got bills you’ve got to pay, and the difference is either a surplus or a deficit. So kind of conceptually, you’re you’re right, but let’s go into how our government actually works with that. So you’ve got the national debt and then you have the deficit. They are not the same thing the national debt is how much the country owes. That’s 100% how much the country

Marc Killian 3:07
owes. That’s that 35 trillion debt clock.

Jude Wilson 3:10
You got it. You got it. And we referred to the debt clock a few times in some of our previous episodes, so people can go back to that and look at the debt clock. It may not make them feel good when they look at it, but at least they can see the number. And then the deficit is the difference between the revenue that our country takes in in any one fiscal year versus what we have to pay out. And that continued negative number adds to the national debt. So I don’t want people to get confused with those two, and you and you hit it on the head, that national debt is increasing every year, so it’s got to get to a point where we’ve got to figure out a solution to that. And there’s really only one of three things that can happen, or a combination of things. And I’ve said plenty of times, the show is not political, but we have to talk about policy so people can. Our politicians can. Either, some politicians either want to increase taxes to solve the problem. Some politicians want to totally work on the expense and reduce expenses. And then the third is possibly increasing the economy so there’s more people working and more people paying into the tax base. I really believe it’s gonna be be a combination of all three.

Marc Killian 4:27
Yeah, it kind of really, kind of has to be, right, you know? So because, look, I mean, they’re playing the political shell game. I want to be elected, but, you know, I also want to make sure that I don’t say, hey, vote for me, because I’m going to raise your taxes by 12 or 14 or 18% you know, because no one’s going to vote for them, right? So, yeah, they have to walk this line. But the reality is, it’s probably a little combination of all, or, you know, heavier in one carry category, if you don’t change the current tax and cuts and Jobs Act, which we’re currently under, and you let those can. 10, you on past 2025, which is when they’re set to expire, then you’re going to have to reduce spending, right? So they have to play this balancing game exactly

Jude Wilson 5:08
and and no one, not one of those categories, can solve the problems, right? We can’t raise taxes high enough to get ourselves out of the deficit, and we can’t cut enough to get ourselves out of the deficit. So it’s got to be a combination of, possible, some tax increase, yeah, possible, some cuts in spending. And my favorite is really trying to grow the economy enough where more people are working and more people are paying into the tax paying more taxes base.

Marc Killian 5:40
And that’s a great point. You know, again, regardless of your political stance, especially in this ridiculously charged environment, you know, exactly, growing the economy, growing the GDP, grow. You know, having job, bringing more jobs back into the country. You know, not outsourcing, creating things that seems to be like, why not go that route? Because that’s what everybody would like to see. I think more people would like the opportunity to have better jobs, better paying jobs, exactly, so on and so forth. So it’s, again, it’s a fine line. But then again, you have to think about companies. Go, okay, great. I’ll be happy to build a plant here and create more jobs, but I need some tax breaks because I can’t afford to do it. Because, you know, I mean, so, yeah, it’s, it is a very complicated wheel. It’s not just do this one thing and everybody’s happy. It just doesn’t work that way.

Jude Wilson 6:29
And we’re gonna bring, I promise you, audience, we’re gonna bring this back around to some accent steps that you could take. But I just want wanna make sure that we understand the foundation of what the problem is. Because if you look historically, we’ve had both surpluses and deficits for our country’s

Marc Killian 6:46
history. It’s nothing new when you think of, when

Jude Wilson 6:49
you think of World War Two, obviously we ran, we ran deficits there, but there’s also been times of surplus. So when you when you look at it historically, this is nothing new. What really is the problem is the way that we approaching it now, well, I

Marc Killian 7:06
will say, what is new? Jude is the level of spending. Okay, yeah, we’ve gotten kind of out of control. Obviously, covid contributed to that, you know, whatever. Again, your your philosophical feelings are about that $6 trillion and, you know, you know, and spending over the last, you know, I don’t know, five years doesn’t help when you’ve got a $35 trillion deficit. So, you know, we’ve definitely gotten a little out of control in that respect. So some things have changed, and I think that’s where we have got to reel in, you know, some spending to our point a second ago, absolutely.

Jude Wilson 7:39
And here is another part of the biggest problem, because we’ve talked about spending and and some of our politicians have talked about cutting spending. And really, when you look at spending, there’s a lot of different categories that you could look at, but the big three are going to be hard to cut. You’ve got Social Security, you’ve got Medicare and Medicare and Medicaid and military spending. And so as our country gets older, you can see that there’s going to be mandatory increases in Social Security, Medicare and Medicaid, and then you’ve got military spending. I don’t see that being a popular subject that politicians are going to want to touch. No,

Marc Killian 8:19
it’s definitely a hot button issue on those three things, and they do get the attention, because they are the big dogs, but I think we’ve started seeing that, you know, and I think people have known it forever. There’s a lot of places where the government spends money that you go, come on, this is ridiculous, right? So let’s start getting some of that stuff under control. And again, this is where it gets all kind of contested, and we won’t go down that rabbit hole. But I think those three get the attention to your point, because they are the big drains, if you will. So with all that said, Jude, let’s, I guess, let’s just pivot so we don’t get too long here a little bit. So we kind of talked about factors, obviously spending, obviously some of the stuff, without getting, you know, way down in the weeds. So how can we bring this back around to how the deficit affects us and how the debt affects us in our personal, daily life. Obviously, inflation. I’m going to bring this up because at the time we’re taping this, Bud today is the 14th of August, when we’re taping this particular episode, I don’t think we’re dropping it till the first week of September, but still, they announced today that inflation is down at 3% at the lowest. It’s been, you know, for quite a while. And automatically, people are, you know, news media is trying to spin it, because, again, we’re in an election year that, hey, it’s 3% but people are, you know, online, on regular going, um, why does it feel zero different at the grocery store it, you know, and I know it’s just today with the number that it’s announced. But let’s be honest, the 3% when we’re dealing with the CPI and these numbers are things that they don’t take into account going into the groceries and buying food, you know? And so it’s really hard for people to get behind that and go, I don’t care what you claim the number is, I’m broke. Yeah,

Jude Wilson 9:57
it’s, it’s, it’s tough. For people to understand how inflation really works. And so at its worst during covid, we were at around 9% inflation. Yeah, yeah, those prices have affected everything. So inflation, even though the rate of inflation has come down dramatically, right? It doesn’t mean that prices have come down. And what it means is that the increase in prices are slowing to its norm, and it’s 3% on

Marc Killian 10:27
top of what it just was, right? So that’s where people get lost too. So if it went up 9% a year ago for a month, and then 8% the next, and then seven and then six, you’re stacking right? So people kind of tend to forget that a little bit. So now it’s only 3% higher than it was last month. That’s what that number means

Jude Wilson 10:45
exactly, and that’s where I think some people have some heartburn over because they see these, they see these, the highlights and the news, and they’re like, I’m not feeling that in my pocket. So what can we do? And if we’re saving for our future, particularly if we’re getting close to retirement, or really, no matter where you are on the spectrum, you’re putting away money in some vehicles to be able to pull that money out at a future date for your retirement. And there’s a there’s a couple of different vehicles that most people are using. They’re using either a 401 K or an IRA, or they’re using my favorite title, the Roth guy. They’re using Roth. And so the question then becomes, where should I be putting my money for the most benefit? If I’m putting money in a 401 K or an IRA, yes, I’m getting a tax deduction for that, and particularly if you’re if you have high tax liability every year, you want to, you want to get some relief for that. So it makes sense to contribute to a 401, k or IRA and but then if you’re looking toward the future, and we’ve said this before, we highly believe that tax rates are going to go up dramatically in the future because of everything we just talked about with the definite deficit. So now is there, is there a sweet spot? Is there a great mix of what you should be doing? And yes, there is. Now it’s different for every individual based on their income and what they want to do in the future. But all too often, I hear people saying, Yep, Jude, I agree with you. Taxes are going to go way up. I’m going to put 100% of my contributions on the Roth side. Well, they’re missing out on the tax deduction today. And so there’s a sweet spot of how much money should I be putting in things that give me a tax deduction today, the traditional 401, K, a traditional IRA, because remember, when you do retire, you’re going to have some tax deductions to offset the money that you’re pulling out in those in those vehicles that are taxable in the future, you got a tax deduction. Today, it’s tax sheltered while you’re contributing and saving. But then when you do retire and pull some of that money out, it’s taxable at whatever the current tax rates are, and the fear for most people is those rates are going to be dramatically higher. So, but what they forget, because we don’t talk about this much, you’re going to be pulling money out and you have some deductions in the future to offset it, so there’s a calculation that we do at the firm looking at individual clients and saying, Okay, I think you should be contributing x because you’re going to get a tax deduction for that. You’re going to lower your taxable liability. But then on the opposite side, we should be contributing y to your Roth so that you have tax free income in the future, yeah? And it’s, it’s not a simple answer. I wish I can say yeah, 10% in your 401, K and nine, 90% in your Roth. It’s not that simple. You really have to do the math,

Marc Killian 13:54
yeah, for sure. Well, we’ve got a flow chart we’ll share with people, so why don’t we pull that up and let them take a look while you’re talking about that a little bit, right? Yeah. So you know, if you’re kind of looking at this, I like this start here. Yeah,

Jude Wilson 14:05
exactly, exactly. I need things that are dummy proof. So I like

Marc Killian 14:09
flow charts. That’s okay. So kind of break this up for us a little bit. So when

Jude Wilson 14:13
you when you look at the flow chart, it’s going to ask you various questions about where you’re at currently, and then it’s just going to lead you down a natural progression of yesno answers, and when you follow that, it will really tell you what might be the most beneficial for you. And this is not a solution in and of itself, but it’s more of a guide, because once you’ve taken this flowchart, you should really speak to your financial advisor or tax professional and say, Look, I have more of an idea now where I should be directing my dollars. Help me confirm that I’m right through this process, and how much exactly are the dollars that I should be contributing to either side of the fence. So the reason why we want to give this flowchart to our listeners is. Is we want to start the conversation. We want you to start to see that there is a potential good mix for you. It’s not one or the other.

Marc Killian 15:09
Gotcha, okay? And so what we can do for this week, folks, if you want us want to check this out, of course, we had that up on the screen for you. But if you want all you got to do, we’ll put a link in the in the show descriptions there. So if you’d like to get a copy of it, then you can just click the link and the link and the team will get you hooked up with that. But that’s a great way to get started, right? So at the end of the day, I mean, you know, we tune stuff out Jude because we go because it’s numbers we can’t fathom. $35 trillion is not something we can fathom, right? But break that down into something when you’re thinking about how it affects your household, right? Or whatever the case might be, and realize that if we’re not being efficient now, it’s going to cost somebody that 35 trillion is costing somebody somewhere, whether it’s you know me and you Jude, or our kids, you know my daughter’s 27 or at some point my grandkids, somebody is paying for it,

Jude Wilson 16:01
yeah? And, and what I want to happen for the listeners and for my clients is that the tax bomb isn’t destroying your particular your your potential retirement, yeah, so just be savvy about how you’re putting your money away and in what vehicles you’re putting them in, yeah? So again, I got to emphasize, this is a great start using the flow chart, okay, but you really want to, after you’ve used the flow chart to talk to a professional, or if it’s us, great if it’s someone that you’re currently working with, that’s fine too.

Marc Killian 16:35
Yeah, exactly, definitely. You know, as like, anything there, you know, everybody’s doing lots of different things out there on social media nowadays. You know, you’ve got, you know, influencers of all kinds. And nowadays they’re talking about, you know, financial stuff too, even though they’re technically not licensed to do so, it’s kind of the Wild West. They’re starting to try to rein some of that in. But always, you know, to Jude’s point, you know, no matter what you hear on our podcast or any others, check with a qualified person like Jude. I mean, he is a professional. He’s been doing this for many, many years. So he’s licensed and all that good jazz the things that you need to be in order to do these things. And so if you need some help, again, we’ll have links in the show descriptions for you. Go to the tax bomb.com We’ll have that pop up on the screen there. Go to thetaxbomb.com and take the calculator as well, right? Go through the little calculator piece and see how that helps you out a little bit. Grab the flow chart. Grab some of these resources. Don’t forget to subscribe to us on Apple or Spotify and now YouTube. Click the like button, the or the subscribe button, and then the little notification button so you catch new episodes when they come out. So lots of good stuff for you guys to grab a hold of as we continue to grow this process. And hopefully this helps you out a little bit. We’re going to kind of wrap this up here because we didn’t want we didn’t want to get super in the weeds and confuse people. Jude, but any final thoughts before we go?

Jude Wilson 17:48
No, I love that suggestion of going to the taxbomb.com because there’s the tax calculator there and plenty of other resources that I would say, you know, between the flow chart and tax calculator, it’s really going to put you and point you in the right direction.

Marc Killian 18:02
All right. So if you need some help the tax bomb.com, or reach out to Jude and his team at 800-779-4592 and don’t forget to tune in to future episodes of the Roth guy with Jude Wilson from centrus financial strategies, we’ll see you next time.

Walter Storholt 18:20
Financial Planning and advisory services are offered through prosperity Capital Advisors, PCA and sec, registered investment advisor with its principal place of business in the state of Ohio, centrist financial strategies and PCA are separate, non affiliated entities. PCA does not provide tax or legal advice. Insurance and tax services offered through centrist financial strategies are not affiliated with PCA. Information received from this podcast should not be viewed as individual investment advice. Product discussions and illustrations are hypothetical in nature and will vary based on many factors, including, but not limited to age, health product insurance carrier and product design. You should consult the insurance carrier website and policy for detailed information, for information pertaining to the registration status of PCA, please contact the firm or refer to the Investment Advisor public disclosure website, www.advisorinfo.sec.gov, for additional information about PCA, including fees and services, Send for our disclosure statement as set forth on form, ADV from PCA, using the contact information herein, please read the disclosure statement carefully before you invest or send money you.

Transcribed by https://otter.ai