John McGonagle Jr.

Retirement, Investing, Small Business
“With over 30 years of experience in the financial world, John R. McGonagle Jr. helps clients design a smart, secure, simple solution for their retirement income needs.”

Asset Architects LLC

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John R. McGonagle Jr. CFP®,CRPC®, is the owner of Asset Architects LLC located in Northville, MI.

John was born and raised in Plymouth Michigan a small Midwest town. He has six brothers and sisters, he's right in the middle. Both his parents worked hard and instilled a work ethic in him that is still drives him today.

After high school John attended, Eastern Michigan University business school, but the pull to own his own business was strong and at the age of 21 his parents remortgaged their home to allow him to buy into a local business. John worked long hard hours and was able to pay off that note in eleven months.

Owning his own business introduced John to the realities of running a business (not just theory you learn in school). One of those realities was paying taxes, it quickly became apparent that earning money was only part of the game. He needed to learn how to hang on to it. This led him to learning what people with money did with their money and how to make it grow.

Keeping a long term perspective. Some of the best things John has done in his life have been long term commitments. He has been married to his wife for 36 years and have a commercial property they've owned for 37 years, both were good decisions.

John and his wife have two children, his son graduated from University of Michigan and his daughter graduated from Indiana University.  They are very proud of them both.

John made a decision to make investing and Investment Advisory a full time avocation in 1983.

Along the way, John has acquired his CFP® and CRPC®, Series 7, Series 63, Series 24, Series 65, Life and Health and 31 years of experience (another long term commitment).

Over the years John and his wife have invested in annuities, life insurance, more real estate, managed money, stocks and bonds. He truly practice what he preaches to his clients.

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    Retirement Savings, IRAs, Taxes
How should I factor in the current tax rate when deciding which retirement account I'd like to open?
100% of people found this answer helpful

When giving Financial Planning advice to a client, it is based on several assumptions. A lot of those assumptions in your question are missing.

Here are a few off the top of my head. Do you quality to participate in a 401(k), does it have a match, does your employer’s plan have a 401(k) Roth option, your age, tax bracket, anticipated future tax brackets, expected retirement age, retirement income goal, life expectancy, sources of income in retirement, rate of return now and in retirement, do you think taxes are going up in the future, and inflation rate?

A simple way to approach your decision is purely mathematical.

I’ll use the following assumptions.

Age 45, rate of return 5%, current tax bracket 25%, and retirement tax bracket 15%

Traditional IRA Deposit = $1,000

Roth IRA Deposit (after tax) = $750

If both accounts grow at 5%, the values at full retirement age (67) would be $3,071.52 (traditional IRA) and $2,303.64 (Roth IRA). If you withdraw the entire traditional IRA and pay 15% tax rate, the net would be $2,610.80. The net balance will always be more from the traditional IRA with the above assumptions.

So, let me give some advice based on my experience in planning for my client’s income stream in retirement.

Taxes will be one of the largest expenses in retirement. The more options you have the better. You stated in your question that contributions to a traditional IRA are tax-free. They are tax deferred and you pay those taxes in retirement.

Unlike income taxes prior to retirement, the calculation is far more complex. In addition to the regular tax brackets, you have thresholds for when your Social Security becomes taxable. RMDs, if not properly planned for, can push you into the bracket, and Medicare premiums are now based on reported income two years prior.

In most cases, I’m able to design a withdrawal strategy that includes a recommendation for the client to systematically convert a portion of their qualified accounts to a Roth IRA. This is done to maximize their tax capacity within each tax bracket to give them the ability to control the taxable amount of future income. The goal is to reduce the overall tax liability over the retirement timeline and possibly their Medicare premium.

If done properly, this will result in a lower overall tax liability in retirement and make your retirement assets last longer.

Now would be a great time to start a partnership with a qualified financial planner to help you with this question. They can tailor a plan to match your assumptions and expectations of the future.

March 2017
    Investing, Real Estate
I've come into a large amount of money. Should I invest it or pay off my mortgage?
50% of people found this answer helpful
March 2017
    Financial Planning, Small Business Financing
How can I draw up a financial plan for my business?
0% of people found this answer helpful
May 2017
    International / Global
What is the correlation between exchange rates and costs of living?
May 2017
    Retirement Savings, IRAs
Are most IRAs FDIC insured?
May 2017