[00:00:00] Speaker A: You're listening to the Preferred Way, a retirement podcast brought to you by Preferred Trust Company, the preferred custodian for all alternative investments.
[00:00:10] Speaker B: Welcome back to the next edition of the Preferred Way, where we'll continue our conversation with CPA Larry Pendleton about how the younger generation can utilize a self directed ira.
Don't forget to check out part one. Now let's get back to the show.
When it comes to retirement, you're planning for your future. And sometimes we don't start in our 20s or our 30s or our 40s, and then we all have that oh, moment in our 50s and we're like, oh, man, we better get on this and fast.
So let's take it to the older generation here for a second.
I am 50 years old and I'm just starting.
Is it too late?
[00:00:52] Speaker C: Oh, it's never too late.
[00:00:54] Speaker B: All right.
[00:00:55] Speaker C: Never, never too late. So it's just really, once again, like, hey, like what, like what debts are we looking to pay off at that point? I mean, you fit this extra thousand dollar step up and what you contribute to your IRAs at that point, do you have a, if you're 50, probably at this, at this day, at this time, you may have switched jobs. You may have a old retirement sitting dormant from a, from a previous employer. All right, I'm assigning you over to preferred trust and get that rolled into itself.
[00:01:28] Speaker B: Yeah, let's do something with it, the accounting now.
[00:01:32] Speaker C: Okay. Now let's get out there, let's meet some people, let's, let's build some, let's get some, some due diligence done. So you know how to invest those funds.
[00:01:39] Speaker B: Yeah.
[00:01:40] Speaker C: Sitting there doing nothing for you.
[00:01:42] Speaker B: Yeah.
How do you position yourself as a younger person to have a successful retirement account and maintain a solid low debt threshold?
How do you, how do you prepare for that? Like what, what advice would you give to the younger generation.
[00:02:03] Speaker C: From a low debt perspective?
Yeah, I guess, I guess, I guess when we talking about low debt, we're talking about like low, bad debt. Like, okay, yeah, car purchases, obviously, if you, if, if, if your debt is being used to grow your business or you're buying debt using debt to acquire acquired cash flowing assets like that, that's the debt. That's what we really want to use.
We're leveraging that too, for the full tax benefits as well as being able to pull equity out of those, all those assets to acquire more assets per se.
[00:02:34] Speaker B: Yeah. What do you call that? Positive debt? What do you call that?
[00:02:39] Speaker C: I guess it's just the good dead bad debt. Let's just call it good, good that bad debt.
[00:02:43] Speaker B: Okay. Okay.
[00:02:45] Speaker C: Got any fancy terms for that one?
[00:02:47] Speaker B: Yeah. Okay. That's all right. Just I thought I'd ask. You never know.
So there's good.
[00:02:52] Speaker C: I'm sorry.
[00:02:54] Speaker B: So that was good debt.
What's the bad debt that the younger generation should try to stay away from as much as possible?
[00:03:01] Speaker C: Yeah. And excess credit card debt was okay. Like what are you, what are you spending on? Especially in the aspect that that means you're not doing the proper accounting up front because it really tie in. Your first question here is like, hey, if you know where your money's coming in and where it's going, like you know how much you're actually cash flowing from that standpoint in order to live the lifestyle that you, that you're trying to live at that point. But if you're just taking unnecessary debt to live whatever extravagantly, then like I said, you're kind of hurting yourself at that point. Or you're buying a personal home.
That's entirely not, not really what you need at this point. Unless you're going to house hack. And that's a whole nother discussion. You just want a whole bunch of space for yourself. Like you're not really in the right mindset of like position yourself to like have, keep keeping your unnecessary debt, the bad debt down per se. Because those costs could kind of like kind of stack up on you or just unnecessary vehicles. That's.
[00:04:03] Speaker B: Yeah.
[00:04:04] Speaker C: Not, not a business use vehicle per se. Where like I said, unless your vehicle that you, that you need for your business requires to be real fancy. I mean I don't.
[00:04:17] Speaker B: Yeah.
[00:04:17] Speaker C: Who knows right, why you need delays and grades at that point. So which is the interesting about the, the, the, the, the, the OBB with the $10,000 deduction where it's like okay, even if you do get that deduction, once again, do you even need that vehicle?
[00:04:37] Speaker B: Yeah.
[00:04:37] Speaker C: And the premise of what the, what the, the government wants and then, and what the shot in the arm in the American auto industry was like, the individual still has to make the choice of do I even need that vehicle?
[00:04:48] Speaker B: Well, they had to offer the $10,000 because I read this morning the average car price now is 48,000 for a car.
[00:04:56] Speaker C: Yeah.
[00:04:58] Speaker B: I mean how else you gonna buy it without a tax benefit? Right?
[00:05:02] Speaker C: I mean in the country have some tax benefit.
[00:05:07] Speaker B: I mean I, I was like 48, 000.
I obviously haven't bought a car in a while, but still I was like, dang, that's, that's where we're at now because I've been to the car lots and it's like $80,000 for like a family vehicle. It is insane, absolutely insane. So I think what I'm hearing you say is on the bad debt side, it's maybe not time to take on the bad debt because you're going to have time for that. Your parents are going to age. You may need to help them out. You may have children. You. Obviously, those creatures of habit are not cheap if you have a few. And I'm sure most of our listeners do. You know exactly what we're saying. What, what does it, Larry, what does it cost to raise a kid? What's the average cost to raise a kid from birth to, like, get out of my house. What do you think it is?
[00:05:59] Speaker C: I seen that number and I was like, wow, I feel like it was like close to half a million. I feel like it was a crazy number from birth to 18.
[00:06:11] Speaker B: Yeah, that's exactly what I read. I think it was like $650,000. And I'm like, holy. But you know what, to be honest, you and I are probably spreadsheet people if we added it all up.
I mean, think about it. I'm like, okay, well, some parents are getting off cheap because I know what those expensive hobbies and these college costs and all this. I'm like, seriously, I'm going to blow through that in the next four years just trying to keep up with, you know, the expenses that are, that are coming on. So there will be time to spend, I guess is what you're trying to say. There, there will, there will come a time where, you know, you know, but when you're younger, if you can put that money away, you know, and, and save for retirement, at least that'll be there for you if your expenses become a lot. Right? And sometimes, you know, the unknown happens and, and we're put into positions where we're become caretakers or we're put into positions where, you know, we end up with triplets or we're put into those positions where now all of a sudden that, that nice cash flow is, is gone. And, but it doesn't mean your retirement is gone, right? Because if you, if you plan properly and you don't overspend is what I think I'm hearing from you, you can have that nest egg growing at the same time that you're dealing with life and what's happening there?
[00:07:34] Speaker C: Exactly.
[00:07:35] Speaker B: Yep, that's exactly it. What do you think the percentage of traditional investing stocks, bonds and mutual funds versus alternative investments is going to look like for the younger generation, let's say in the next five years. Give, give me what you think that is going to look like. Larry's crystal ball.
[00:07:55] Speaker C: Oh, good.
I think, I think the stocks and bonds, I think that's, if I had to like rank it, those stocks and bonds, 20% and then I'll split the 80. Real estate, crypto, we're going 60. 60 crypto, 40 real estate. I think so. Yeah, I think the young generation has definitely embraced the crypto and it's going to take it, take it to places that we have yet to see yet.
[00:08:34] Speaker B: Yeah, I'm going to use my crystal ball. I'm going to crystal ball you back. You know, it's interesting that we're trying to put all these, these legislation in say, you know, employers have to offer a retirement plan and they have to do this and they have to do that. And there are so many small employers out there. What, 99% of all businesses are small businesses. Right. And so when we put that into perspective, offering a retirement plan that's palatable to, to offer is likely going to be a simple IRA that, that give. Because I mean, I know what it costs us to run a 401k plan here. It's not cheap.
And so you're going to be looking for the most cost effective option to check the box.
And in order to check that box, I think you're right, it's going to give the opportunity for the, the next generation to have a lot more options and an alternative options. And I do think that it's going to sway pretty heavily to the other side.
I think the younger generation, they don't like to be told that they are going to, you know, contribute to a 401k plan or have to be part of a 401k plan. They want to, they want to glide through their own destiny, which is amazing. Like I, I, I do, I actually do appreciate that as long as they're doing it.
And that's, and that's the one thing that's very difficult. You know, when you offer employer a 401k plan, you know, naturally, you know, we've kind of been groomed, I guessing about your age, we've kind of been groomed that hey, you got a 401k plan, you contribute to the 401k plan, right? And you max that out if you can and then your stuff's locked up in there and then you're like, why did I do that? I should have, you know, set aside this for My alternatives where the younger generation has already decided how they're going to operate and what they're going to do. So they, they definitely take a different approach to it for sure. Which is, I think it's kind of cool. I mean it definitely has, has swung the alternative space quite drastically for, for no matter how much money you make. It is definitely swung it because you can invest as, for as little as $500 in these crowdfunding platforms.
You know, the days are gone where it was like you have to be an accredited investor that, that ship has sailed a long time ago.
And not to say there's not still reg D offerings out there. Not saying that whatsoever and that there's a purpose for them bearing the risk associated. But there's also a lot of things out there. I mean all things have risk, right? Coming to LAR has a risk. He make machet, you throw some little dies. Okay, you can't have this. We're going to do that. But from a tax perspective, I think we want you to have your machetes out. We're ready for you to slash and, and, and get us, get us the best possible option for us legally, obviously.
Because I'm, I'm certain you know all the rules. I wish I knew, I wish I knew more questions to ask you about all the rules. But I'm gonna leave, leave you with this. What is the most exciting thing that you get to do in your profession? What like makes you go, wow, I am making a difference in people's lives?
[00:11:56] Speaker C: I think actually to go into middle schools and high schools and kind of plant the seed of actually working with this group who like, they know how to like present stuff to kids to.
[00:12:13] Speaker B: Yeah.
[00:12:14] Speaker C: Get them engaged. And so it's like, okay, great, like.
And you really see those, those generations start to change. Was like, hey, you have to plant those seeds early. Like very, very.
[00:12:23] Speaker B: Yeah, you do.
[00:12:25] Speaker C: Aspect of being able to go in there and I don't gotta put anything together. I just gotta show up. And there's PowerPoint presentation because kids that age don't really want to see that. So it was like games and stuff and like how do you like. And like do a good job of making like tax games and all that fun? So they have a general idea of how the tax code works and, and then kind of hearing from their parents of like, like man, I never really seen like heard it explained that way before that. That's the part that that brings me, brings me joy in it because like, like, man, I'm actually like changing a Family's like economic mobility tax piece of it situated for them.
[00:13:09] Speaker B: Absolutely, that's, that's cool.
And next time you come on, we're going to play a tax game because I think there are a lot of people that could benefit from just breaking it down to layman's terms, you know what I'm saying? Before, you know, before we enter the next year, we have to bring you back and say, all right, before the end of the year, what are some things I should be planning for from a tax perspective so that when they call you to help them out, they're prepared. Right. You don't have to wait a whole nother year to prepare for something like that.
So leave me with three things that we should expect the next time we talk if we're looking to prepare to have a conversation with you so that you can help us out in the future. What are three things that, that we should all be doing before we call.
[00:14:07] Speaker C: Proper once.
First and foremost. Okay, are the financials in order? Like do we, do we have a clear picture of what the financials are looking like or are we just going to be scrambling after the year?
Like it may not be perfect month to month, but like, hey, do we have a general idea what the numbers work?
And then with the aspect of, if you are running a business, hey, well, what's your entity structure running? Okay, could be maintenance.
The entity structure is good to get that done before the end of the year.
[00:14:42] Speaker B: Okay.
[00:14:43] Speaker C: To get that, to get that out the way, get that part offset and get that out the way to help save on self employment, taxes, stuff like that.
And then aspect. Okay, if there's, and it goes in different, I can go with different angles but like I'll just pick this one. If you got kids, okay. Or how are your kids involved? I only care the age of the kids. Yeah, I didn't know how can you. Like we like, do you have kids and like do you want to get them involved with your business? Because we can and no matter what the age is, we can find the appropriate job, responsibility for the kids.
So one, we're shifting income from your higher tax bracket to them and them may not even pay any taxes at all depending on how much you're, how much you're paying them from, from there. So like those kind of be the big three things at that point because even now I know it's, it's August. So. Okay, people being able to actually like buy a property now, let's say if they haven't already done so, like, yeah, okay, we'd be doing this, this and this. Like, what type of property is what you're involved with it, if you haven't already, are you close to any closings that can be done before the end of the year to get property in service or rented out before. Before the end of the year. So we can start to kind of leverage additional strategies there. So, okay, that's four. But like I said, that's the thing. Like, those are things we want to make sure that we're kind of like taking into account because we can then create that family business and.
[00:16:18] Speaker B: Yeah.
[00:16:18] Speaker C: The unity within that and create that private in the family of that business.
And then that leads into. Okay, the tax. This tax savings are given the family involved.
Yeah, well, so, so those, like I said, those would be kind of top things when they kind of get in order. Okay. Financials, number one is like, okay, like I'm, I'm expecting certain things to see on the financial.
When you tell me type of business you're running, if I'm not seeing that. Okay, is it Ms. Cagara somewhere or yeah. Aren't you like, like, how are you not paying this expense? Like you flip houses, how are you not paying contractors? Like, you must not be reporting something. Like, yeah, same example. I just want to give one that perspective there. Like why there isn't you. Like how, like, why are you not marketing? Like, okay. Like, okay, can you reinvest into some marketing? Are you reinvesting back into yourself?
[00:17:10] Speaker B: Yeah.
[00:17:11] Speaker C: Training yet that you can improve yourself within your business? Like all that, all those different things can get deduct that. That you're. That you're looking for there.
Plus it helps, kind of helps it. It gives you the deductions, but it also helps you grow your business.
[00:17:27] Speaker B: Yeah.
[00:17:27] Speaker C: Which is important thing that you're growing something that can leave a legacy for yourself. And then we can start to kind of put the tax strategies in place there.
[00:17:36] Speaker B: Will you come back before the end of the year?
[00:17:38] Speaker C: Yeah, if you. If y'. All. If y' all want me, y' all get.
[00:17:41] Speaker B: All right, here's what I heard. We're going to talk about finances.
We're going to talk about your business structure. We're going to talk about how you can structure your children's involvement in the business to maybe save some taxes for them. Maybe you too.
We're going to talk about buying property and how to leverage those strategies from a tax perspective. When to do it, when to implement certain, certain things. And I love this last one, family business and the legacy of it.
We have A lot. We have a lot more to talk about. It sounds like.
Hey, so, so Noah's. No one's gonna reach out to you again. And we're going to schedule something towards the end of the year. We're not going to Talk Self directed IRAs, we're just going to talk. We're going to talk what happens when you go see Larry.
Because I think it's really important. I don't think there's a lot of people maybe that have even considered the fact that they might need somebody like you, you know, in their life to, to just show, show them a different, different path, different way, different options that are available to them. There's so much changing and always changing from a tax perspective. As you know, every year I'm sure you're on top of every little nitpicking thing that's changing out there that we're just not, we're not aware of. And if we're not using a tax professional, likely maybe we should be and maybe you could teach some things to some individuals to educate us as to why we should be instead of going online. You know the famous let's just, let's just file our taxes online and fill out the boxes. There is so much more than that and I think Larry can help teach us some of that. So we appreciate you coming on today. Yeah, for sure, for sure. Any last minute comments on your side? I'm sorry?
[00:19:29] Speaker C: Well, no, I think that'd be the aspect of what you're saying because I think that, I think what people realize, don't realize or they got disappointed that they may have worked with the CP or they hear all these things. I tell people, CPAs, enrolled agents, accountants, like we're not all built the same. Like we're not.
Just because I got these three loves behind my name doesn't mean I'm a tax advisor.
Like I passed that test almost 20 years ago.
[00:19:54] Speaker B: Yeah.
[00:19:54] Speaker C: How I reinvest into myself and buy business and my training and that's what makes me an advisor. So at that point I train other CPAs about what I know.
It's important to actually have that. That the same way you do the due diligence on an investment before you put your money got the due diligence on whoever is going claim to be your tax advisor. And can they actually understand where you're coming from? Are they, are they, can they lead you in the right or partner with you and kind of help guide you.
[00:20:21] Speaker B: In the right direction?
Absolutely. We all need guidance.
And this is one area that I think we need more guidance in than maybe ever before.
We need to make sure we're prepared. And there's no better way to prepare than to start.
You have to start.
So we will definitely be talking before the end of the year. I think it would be a great segment to cover some of those topics. I don't know if we'll have time for all of them, but we definitely need to hone in on a couple of those topics. They're important enough that I think our listeners need to hear about it and we need to get out there on the social side, which we will.
And you know, maybe they'll tune in, give you a shout out, give your company a shout. How do we get a hold of you?
[00:21:04] Speaker C: Yeah, you can reach me at my, my landing page, the investor cpa.com I'm also on LinkedIn, Facebook, social media, Larry Pelleton, CPA or investor CPA as well. So yeah, looking forward to adding value where I can and, and help help serve along the way.
[00:21:24] Speaker B: All right, we appreciate it. Thank you so much.
[00:21:26] Speaker C: Thank you.
[00:21:27] Speaker B: Is our episode of the Preferred Way like how the younger generation should look at self direct and tax strategies. Thank you so much, Larry for joining us and we'll see you next time.
[00:21:39] Speaker A: Thanks for joining us for another episode where retirement savers meet alternative investments. Can't wait for the next episode. To learn more visit our
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