Birmingham, Alabama-based financial guru Jeff Roberts, who was recently named one of the top private wealth advisors in the nation by Barron’s®, came on Yellowhammer Radio to lay out the facts so people can decide for themselves.
The full conversation with Mr. Roberts can be heard on the Yellowhammer Radio podcast or in the video above, and a lightly edited transcript of his interview with Yellowhammer’s Andrea Tice and Scott Chambers can be read below.
Subscribe to the Yellowhammer Radio Podcast on iTunes. Learn more about Jeff Roberts’ private wealth advisory practice at JeffRobertsAndAssociates.com.
Andrea Tice:
Hey welcome back to Yellowhammer Radio on the Superstation 101.1 WYDE. Andrea Tice here with Scott Chambers and we have Jeff Roberts on the line as well. This is his time to share his financial expertise with us. He is a local financial guru the founder of Jeff Roberts & Associates. Jeff’s team consists of seven seasoned advisors who share a combined 125 years of financial planning with Ameriprise. He’s also been in Barron’s Magazine six times but we believe he’s headed for a 7th or at least that’s what was the case the last time we talked to him. He’s among the top 1200 financial advising practices in the country according to Barron’s Magazine and he’s a local guy who’s doing big things. His team specializes in working with affluent clients to preserve and grow their wealth and we are glad he’s on the air with us. Hey Jeff.
Jeff Roberts:
Hey guys, how are you all doing?
Scott Chambers:
Doing great today. How are you my man?
Jeff Roberts:
Oh man, just a wonderful. Enjoying this weather.
Scott Chambers:
The weather is fantastic. It’s a little cloudy today but man it’s warm outside. Life is good right now. The markets are doing well. You know lots of people are planning for retirement and stuff and trying to plan their life out, I was thinking about individual retirement accounts and stuff earlier. Jeff what do you know about some IRA’s? Can we talk about those today?
Jeff Roberts:
Absolutely, IRA’s are a common tool that people use for accumulating dollars towards retirement and we see examples day in and day out of things that people may be doing incorrectly with IRA’s. I’ve got a few examples I can give. An easy when we see a lot of his people that are contributing to a Roth IRA. Now when you first hear that you might think, “what’s wrong with contribute to a Roth IRA?” Well the whole point is that they’re contributing to it for the wrong reasons. I want to always encourage if you’re contributing to an IRA that is a Roth IRA make darn certain that you know that the reasons that you’re contributing for valid or make sense. I’ll give you a quick example, there’s a traditional and Roth IRA. A traditional IRA is usually one where somebody is trying to deduct money that they’re putting into a retirement plan and take it off on their taxes and it grows to their future. And down the road when they take it out they pay taxes on the tree not on the see. A Roth IRA is the opposite. You put money in today that you’ve already paid taxes on and then it grows down the road into this big tree and you get the tree tax-free. You think that’s a great idea. I’d rather have a tree tax-free tree than the seed. Well, but think about it if you’re thirty-three percent tax bracket today and in retirement you’re going to be in a 15-percent tax bracket I would rather put the money in and save 33-percent than to end up paying fifteen percent down the road in that particular example. I share that because there’s a lot of people that are doing Roth IRA’s that are in higher tax brackets today that may not be in a high tax bracket at retirement. They’re contributing to the Roth maybe on the wrong reason. I work with people all the day long that have retirement income of say a hundred thousand dollars a year of income in retirement from various sources and are only in a fifteen percent tax bracket. So point being is people think, “Well I’m not going to be a low tax bracket at retirement.” You never know. Again, a hundred thousand dollars it’s a nice retirement income and there’s plenty of people I see in the fifteen percent tax bracket making a hundred thousand dollars a year in retirement. So again, all I’m saying on the Roth is it’s not a bad thing it’s a wonderful tool but just make sure if you’re using it you’re doing it for the right reasons.
Andrea Tice:
Jeff, is there any way someone who’s about to do a Roth IRA or they’re debating between the Roth IRA and the regular is there any way that they can know where they land in the tax bracket? Is there any way to know 15 years from now?
Jeff Roberts:
You know that’s a great question and the unfortunate thing about that is about every time Congress meets they may change the tax law so it’s a moving puck. The answer to your question is for sure no, but we typically do when I’m planning with clients and we were doing this just last night working with someone, we’re saying let’s assume that based on today’s tax law let’s forecast out say 10, 15, 20 years and you’re retired now. But it’s using today’s tax law if you were retired today based on what we’re projecting what tax bracket would you be in? Now that’s the best you can do. Now a lot of times people assume that taxes probably over time are going to go up not down. That’s an easy one for people to say, “Yeah that’s true. Taxes are going to go up over time.” Well that may not be the case in this particular administration because they’re talking about trying to lower taxes substantially. We’ll see but to your point, you can’t with a real clear lens but the best you can do is apply today’s tax law down the road in our forecast for clients when we’re projecting out in the future which we do all the time.
Scott Chambers:
What are some of the other common mistakes people might make when choosing the right IRA to go with?
Jeff Roberts:
Another one, for example there’s a lot of people that want to contribute to a Roth IRA that can’t and there’s some there’s some mistakes on that as well. For example, you might not be able to contribute to a Roth IRA because your household income is too high. There’s a rule that basically says if you’re married filing jointly and your household incomes over a hundred and ninety six thousand dollars a year you don’t have the ability to contribute to a Roth IRA.
Scott Chambers:
In radio that will never happen to me Jeff. That’s not going to happen to me.
Jeff Roberts:
You guys are making those big bucks. I know you guys are killing. So then people say “Well, I make too much money so I can contribute or my employers 401k plan doesn’t have a Roth provision in it.” Some do where you can contribute money the pre-tax or some allow you to do a Roth inside the 401k but I have for example we worked with the client just this week that has a half-a-million-dollar income this year in 2017 and we just showed them how to put 22 thousand dollars into a Roth IRA. Now in certain examples it works. It can’t necessarily work for everyone but in this particular case we showed them how to do a non-deductible IRA contribution into a traditional IRA. Meaning a normal IRA account that you normally deduct the money when you put it in, we’re talking putting the money into that account but not deducting it because their income is too high. And the moment we put the money in the very next day we convert that traditional IRA into a Roth IRA via a conversion rather than a contribution. We did it to each of them $5,500 for last year so it was $11,000 and we did it again immediately for this year. We’re going to do 11,000 this year so the two combined is about $22,000 that we were able to get into Roth for them. Now I just said that real fast but here’s the thing there’s a unique set of circumstances that have to apply in that situation, they don’t already have a traditional IRA account so in certain situations if can happen. If people don’t have a 401k option where a Roth is available we can work with somebody’s employer to add that in as a feature. So the point is there are ways to get into Roth if you want to. Don’t always give up hope.
Andrea Tice:
That is fascinating. I had no idea that a conversion process was in place in which you could do that.
Jeff Roberts:
It’s true. You used to not be able to do that also based on an income cap. Meaning if you made over a hundred thousand dollars as a household income you couldn’t convert money from a traditional to a Roth but they’ve done away with that provision that allows anybody in any income level to convert a traditional IRA to a Roth. Normally in doing that you have to pay the income taxes on the money when you convert it from a traditional to a Roth but if you made an after-tax contribution to the IRA then you can convert it and not have to pay the taxes. But again I gotta say don’t just take that strategy as I just described. There’s more to it than that because if you already have an existing traditional IRA that complicates things just a bit. But again a unique strategy in some situations can work. And of course you always have to say relating to any tax decision we always recommend our clients talk to their CPA and tax professional before making any tax decisions. But I’ll tell you another good one that’s important and this is probably the most common we see, people having dormant assets in an IRA laying around. It drives me crazy and that’s where for example somebody has an old retirement plan that they rolled over from some old employer years ago or maybe they contributed to an IRA one time or something. For many years it doesn’t matter but they’ve got this money in an IRA account and it’s laying around somewhere. You haven’t paid attention to it and they’re not following it. Here’s the litmus test. If I can walk up to you on the street just randomly and you have an IRA and if I ask you questions like, “How’s it invested?” or “What’s the rate of return of performance of your account?” or “Can you tell me the appointments that you regularly have with an advisor to review this account?” You cannot do any of those things related to an IRA account that you have, you need to pick up the phone call us. It’s not good to have money sitting in a retirement account that you’re not managing extremely well.
Andrea Tice:
I was gonna say, if someone’s listening to us right now and going, “You know I think I have an IRA. What do I do next? I need to find out what’s happening with it.” What would be your advice to them?
Jeff Roberts:
Well the easiest way is call us at 205-313-9150. We would either talk on the phone, or schedule an appointment to find out what it is that you have. The first step is understanding what you got and how is it working for you relative to your goals? It may be perfectly fine but we recommend that clients regardless of what bucket of money we’re talking about that they have assign a goal to each bucket. So if it’s an IRA that maybe retirement. If it’s a mutual fund that’s outside of an IRA that may be for kids education. But whatever the asset is the bucket of money that’s a goal to it and once the goals attached then we figure out is the investment itself performing well related to that goal.
Andrea Tice:
That’s a great way of putting it Jeff. Buckets of money designated with certain goals.
Scott Chambers:
I need buckets of money Jeff. I need to go talk to Jeff today and you can do the same thing its 205-313-9150 to get in touch with Jeff Roberts at Jeff Roberts & Associates. My man it’s been great having you on today and I look forward to next Wednesday when we will get some more info from you.
Jeff Roberts:
Thank you both.
Scott Chambers:
Alright have a great day. Jeff Roberts of Jeff Roberts & Associates we will return to right after this on the Yellowhammer Radio.
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