March 2024 Lange Report
How To Increase Your Income Without Raising Your Taxes James Lange

Sounds like an ad for a high commission annuity, doesn’t it?

But this is a different idea. It works really well for clients who are “IRA or retirement plan heavy.” That is, you have more money in your IRA or retirement plan than you have outside your IRA or retirement plan. I made recommendations regarding this idea to several clients who took my advice and just recently received some wonderful feedback on how well that advice worked out. Are you curious yet?

Would you ever consider getting a Home Equity Line of Credit (HELOC) or a reverse mortgage at this stage in your life?

I can hear the resounding “NO” from my desk in Tucson…

But take a moment to hear me out. Even if you never seriously considered it, I recommend you read on. Just knowing there is the possibility of getting funds from your house in the future could have a lot of value.

A number of years ago a client with a substantial IRA was helping one of his children who was struggling financially. When I met him, he was withdrawing enough from his IRA to both pay for his and his wife’s expenses and his child’s. His tax bill was enormous, and he was rapidly depleting his portfolio. He owned his house and had no mortgage.

I suggested that he take a Home Equity Line of Credit (HELOC) on his house and use that money to help his child when his child needed money. He could take nontaxable distributions on the HELOC whenever he wanted.

Even if he never pays off the line of credit, so what? If he doesn’t move and dies in the house, the house will eventually be sold. The HELOC balance will be paid back to the bank, and the remaining proceeds will go to his estate.

The key was he got non-taxable “income” for years when he and his family wanted the money.

In another situation, clients used a reverse mortgage to pay additional expenses and make gifts to their children. They wanted to help their adult children when they could really use the support.

But you may be in a position where neither you nor your children need extra income. So how could this concept be beneficial to you?

Consider that you could use the non-taxable proceeds from the HELOC to pay the taxes on a Roth IRA conversion. An article I wrote for titledLet Your House Pay for your 2020 Roth IRA Conversion” received several hundred thousand hits. If you would like a copy of that article, please call 412-521-2732 and ask for a copy.

Here’s another idea. Maybe you just want to feel comfortable knowing you can afford to spend more or that you are not overspending.

I was cited in Jonathan Clements’ column published in The Wall Street Journal that essentially said you could increase your safe withdrawal rate by 60% of the equity of your home multiplied by the percentage you are using for a safe withdrawal rate.

Example:  Your portfolio is $2 million, you are using a 4% (30-year life expectancy) safe withdrawal rate, and you arrive at $80,000 per year plus Social Security. Let’s assume your house is paid up and worth $1 million. Using our formula, you would multiply that $1,000,000 times 60% to arrive at $600,000 and 4% of $600,000 is $24,000. Using that formula, you could safely increase your spending by $24,000…or know that you could if you wanted to.

There is an argument with today’s higher interest rates and bankers’ greater reluctance to make loans, you should consider 50% instead of 60% but the idea is the same.

In general, I only recommend these techniques where there is virtually no chance of losing the house because you can’t make the payments. The waters for reverse mortgages might be even murkier because they are not easily undone. It should be noted that a mortgage broker may make a commission on one of these transactions. I, however, do not, and I would not take a referral fee from a mortgage broker either.

Let me be totally clear: none of these decisions should be made without serious analysis.

We always recommend consulting with a trusted advisor who has the ability to fully analyze your financial position and “run the numbers” to help you with your decisions.

Save These Dates Tatyana McFadden

Specific Steps That You Should Implement Now:

FREE Educational Webinars for Married IRA and Retirement Plan Owners with Large Retirement Plans and/or IRAs

Thursday, April 18, 2024

Register to attend one, two or all three sessions at:

Session #1: 10 am – Noon Eastern

Wealth Preserving Roth Conversion Strategies That You May Have Missed

This workshop will address critical fundamentals like “pay-taxes-later except for Roth plans” but, as a consequence of the SECURE Act, we introduce new exceptions to consider during the accumulation, distribution, and estate planning stages of your life. The SECURE Act restricts the time that beneficiaries can hold onto inherited tax-advantaged retirement/IRA plans. That means massive income tax acceleration for your children unless you and your heirs take protective action. We will also cover how to take advantage of the even more recent legislation SECURE Act 2.0 and introduce new cutting-edge Roth conversion strategies.

In this session, we will cover both foundational as well as little known advanced Roth conversion techniques…

  • The peer-reviewed math and optimal timing for Roth IRA conversions.
  • The back-door Roth IRA.
  • How individuals born between 1951 and 1959 can profit from SECURE Act 2.0.
  • How to move a portion of your taxable investments (IRAs and other retirement plans) to the tax-free investing environment (529 plans, your children’s Roth IRAs, and more). This shift could potentially be more valuable to your children than making Roth IRA conversions in your own accounts.
  • Capitalizing on Roth IRA conversions through 2025 while favorable income tax rates remain and before the 2017 Tax Cut and Jobs Act’s Sunset Provisions take effect in 2026 and tax rates go up substantially.
  • How you could benefit from the new rules allowing employers to contribute to an employee’s Roth retirement plan. (Previously, employers were only allowed to contribute to tax-exempt traditional plans.)
  • We will also examine the timing synergy between when you begin taking Social Security and making Roth conversions.

And we’ll also cover advanced concepts for Roth IRA conversions including…

  • How to transition after-tax dollars in retirement plans to a Roth IRA at no cost—potentially saving hundreds of thousands of dollars in taxes down the road.
  • How to convert an inherited retirement plan to a Roth at your beneficiary’s tax rate, not your own, after you die. (This is a little-known strategy with big tax savings for those who qualify.)
Wealth Preserving Roth Conversion Strategies That You May Have Missed - James Lange

Session #2: 12:30 – 2:30 PM Eastern

Outsmarting the SECURE Act: The Best and Most Flexible Estate Plan for Married IRA Owners, Combined with Optimal Trust Planning for IRAs and Retirement Plans

Successful retirement planning is critical, but if you don’t get your estate planning right, your family could lose hundreds of thousands in taxes. That can be prevented.

The SECURE Act is no friend to many IRA and retirement plan owners with $1 million or more in retirement plans. Unless you take aggressive action, it is likely that your loved ones will take a massive income tax hit upon inheriting any money from those plans. We will provide strategies to avoid massive taxation and explain how our disclaimer-based estate planning system fits into the picture. We believe it is the best estate plan for most married IRA and retirement plan owners.

We will combine our newest thinking with some of our classic strategies for protecting your children or grandchildren from themselves, but also creditors, possibly including their spouse.

Getting trusts right, particularly when the underlying asset is an IRA or retirement plan is crucial. In our reviews of trusts of this type, more than half the trusts we examine are not done right. This common estate planning mistake can be devastating for families with a large IRA and who prefer leaving money to one or more beneficiaries in a trust rather than leaving it to them outright. This could be a minor’s trust, a spendthrift trust, or an asset protection trust. This workshop shines a light on this common sloppy and costly estate planning errors and how you can avoid them.

In this session, you’ll discover… 

  • How Required Minimum Distributions (RMDs) of inherited IRAs and retirement plans were so advantageous under the old law in sharp contrast to the onerous rules in the SECURE Act.
  • How the SECURE Act and the SECURE Act 2.0 changes could impact your family and your legacy.
  • How to ensure financial security for the surviving spouse, and potentially save hundreds of thousands to pass on to your heirs after the SECURE Act.
  • The details of the best (and most flexible) estate plan for married couples known as Lange’s Cascading Beneficiary Plan™.

We’ll also dive into trust planning strategies, including…

  • The pros and cons of having your heirs inherit your IRA and other retirement assets directly versus through a trust.
  • Why, under certain circumstances, naming a charitable trust as the beneficiary of IRAs and retirement assets might be an excellent strategy.
  • The growing popularity of the “I don’t want my no-good son-in-law to inherit one red cent of my money” trust.
  • A rarely discussed strategy―Who Gets What?—evaluates the tax advantages of leaving differing types of assets to children depending on their tax brackets. We will cover a similar strategy for charitable giving. By optimizing your strategies using our Who Gets What? analysis, you could save hundreds of thousands of dollars in taxes.
The Best and Most Flexible Estate Plan for Married IRA Owners, Combined with Optimal Trust Planning for IRAs and Retirement Plans - James Lange

Session #3: 3 – 5 PM Eastern

A Live Q&A with Jim Lange, CPA/Attorney: Your Questions Answered on Roth IRAs, Minimizing Taxes, and Estate Planning

This is your opportunity to have your financial questions answered by Jim Lange. Questions can be submitted in advance of this webinar, but Jim will also be answering questions live from the audience.

Your Questions Answered on Roth IRAs, Minimizing Taxes, and Estate PlanningYour Questions Answered on Roth IRAs, Minimizing Taxes, and Estate Planning - James Lange
Specific Steps That You Should Implement Now - James Lange

Thursday, April 18, 2024

Register to attend one, two or all three sessions at:

6 Valuable Bonus Gifts: Yours FREE When You Attend Any Session!


Bonus 1: Register today and we will mail you a free hardcover copy of Jim’s magnum opus, Retire Secure for Professors and TIAA Participants, the best book Jim and his team have ever written.

Bonus 2: Your next gift is a digital copy of Jim’s best-selling book, Retirement Plan Owner’s Guide to Beating the New Death Tax, detailing how to respond to the SECURE Act.

Bonus 3: You will receive a digital copy of Jim’s 276-page best-seller, The Roth Revolution: Pay Taxes Once and Never Again. Jim shows how to use a series of Roth IRA conversions to grow income from your IRAs tax-free.

Bonus 4: You will receive a digital copy of Jim’s book on Social Security, The $214,000 Mistake: How to Double Your Social Security & Maximize Your IRAs.

Bonus 5: Attendees will also receive a digital copy of Jim’s brand-new book, Retire Secure for Parents of a Child with a Disability.

Bonus 6: Qualified attendees are eligible for a FREE Retire Secure Initial Consultation with Jim Lange and one of his number-crunching CPAs.

Disclaimer: Lange Accounting Group, LLC offers guidance on retirement plan distribution strategies, tax reduction, Roth IRA conversions, saving and spending strategies, optimized Social Security strategies, and gifting plans. Although we bring our knowledge and expertise in estate planning to our recommendations, all recommendations are offered in our capacity as CPAs. We will, however, potentially make recommendations that clients could have a licensed estate attorney implement.

Asset location, asset allocation, and low-cost enhanced index funds are provided by the investment firms with whom Lange Financial Group, LLC is affiliated. This would be offered in our role as an investment advisor representative and not as an attorney.

Lange Financial Group, LLC, is a registered investment advisory firm registered with the Commonwealth of Pennsylvania Department of Banking, Harrisburg, PA. In addition, the firm is registered as a registered investment advisory firm in the states of AZ, FL, NY, OH, and VA. Lange Financial Group, LLC may not provide investment advisory services to any residents of states in which the firm does not maintain an investment advisory registration. Past performance is no guarantee of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any strategy will be successful. Indexes are not available for direct investment. If you qualify for a free consultation with Jim and attend a meeting, there are two services he and his firms have the potential to offer you. Lange Accounting Group, LLC could offer a one-time fee-for-service Financial Masterplan. Under the auspices of Lange Financial Group, LLC, you could potentially enter into an assets-under-management arrangement with one of Lange’s joint venture partners.

Please note that if you engage Lange Accounting Group, LLC and/or Lange Financial Group, LLC for either our Financial Masterplan service or our assets-under-management arrangement, there is no attorney/client relationship in this advisory context.

Although Jim will bring his knowledge and expertise in estate planning to this workshop and to the meetings, it will be conducted in his capacity as a financial planning professional and not as an attorney. This is not a solicitation for legal services.