This Tool is A Must in Retirement Tax Planning (Tax Tool Explained)

Рет қаралды 32,076

Күн бұрын

You know tax planning in retirement is important, but are you using the right tools to make the best decisions for your situation? We believe you cannot effectively plan without directly using the tool shown in this video. You can schedule an appointment with one of our Retirement Experts to look at your situation and help you plan for your future. Call us at (920) 544-0576 or go to www.safeguardinvest.com/contact.
Timestamps:
0:00 One of the Most Important Tax Tools in Retirement
1:50 How Most Retirees Think the Tax Tables Look For Their Situation
2:57 How Social Security Changes Your Tax Chart
7:00 Step 1 in Creating this Chart
7:49 How Capital Gains/Dividends Change Your Tax Chart
10:03 Medicare Complexities
10:59 Putting It All Together - The Complexity of Retirement
12:30 Why Not Just Look at Total Tax or Effective Tax Rate?
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Пікірлер: 112

@riversf1 Ай бұрын

Thanks for the video. Great insights! You have the best detailed retirement tax content on KZfaq.

@Antandthegrasshopper Ай бұрын

I use "New Retirement" it has this level of tax detail.

@sirreptitious6645 Ай бұрын

I use New retirement also. Great tool.

@rickstephan6707 Ай бұрын

Me three!

@SafeguardWealthManagement Ай бұрын

Did not know they have the ability to show marginal tax graphs. Great!

@Jl-620 Ай бұрын

NR shows you what income tax bracket you are in and your total tax on that year, but does not show your truly marginal tax bracket for the next dollar of income you add. You would have to see the difference in total tax paid with and without that dollar (or $100, $1000, whichever you choose) and divide that difference by the increased amount.

@Jl-620 Ай бұрын

@@SafeguardWealthManagement it does not. See below.

@whenwasnow6062 Ай бұрын

This should be taught in high school

@tlar1272 Ай бұрын

Just don’t let this guy be the teacher. And the subject needs to takes 1-4 weeks to better explain the material

@shawnbrennan7526 Ай бұрын

This is pretty specific to retirement, but I agree that basic taxes and investing should be taught.

@rbb7344 Ай бұрын

Great video. I’ve been a student of your videos over the last couple years and they have provided a great knowledge base to be confident in retirement. Thank you!

@skyak4493 Ай бұрын

This is exactly what I need. Thank you. I have been doing pot-shot Roth conversions at the end of the year but have been completely missing gain harvesting.

@FirefightersFinancialToolbox 7 күн бұрын

I love this graph for state taxes as I am retiring in AZ. I agree taxes are absolutely the biggest concern I have in retirement. With my pension, I know I will have 85% of my SS benefits taxed , so its not that big of concern. BTW I hate paying it , but it is what it is. So i kn ow that part of (our) deal. Taxes are the biggest expense in retirement, more people need to understand this!!!

@kevinmccumber7489 Ай бұрын

Eric, thank you for your detailed explanation. At 11:52 you mention that some taxpayers need to push through the lower levels. Of course, for many people, they are pushed through whether they want it or not. Many people will always pay 15% tax on their qualified dividends and many people will always have 85% of their Social Security taxable. For those people, the first 11 minutes of the video may be interesting, but it is not relevant to them. It would be great if that context could be added the next time this topic is discussed.

@johnw8938 Ай бұрын

Yes, please ! I agree. Life is too short to have to listen to the majority of this video (first 11 minutes mentioned above) and then have to spend additional time to replay it, and think through it - only to conclude that it is irrelevant to me and likely the vast majority of everyone in the US that has worked a few decades+ and qualifies for SS. (Certainly anyone doing any kind of financial planning.) I appreciate you informing us about marginal tax rates, and the importance of considering them in tax planning, but this video is very confusing. Now, whenever I see these SS tax torpedo graphs I no longer get concerned. I laugh and move on. They're not applicable or very helpful to me....There are 3 types of lies: lies, damn lies, and statistics. IMO, these marginal tax rate "torpedo graphs" kind of fall into that 3rd category-statistics.

@kersting13 18 күн бұрын

Someone who is good at Excel could probably create re-create this for specific situations. The issue at the base is that you have to be good at Excel, AND you have to understand the specifics of not just the Federal taxes, but also specific state and local taxes as well. Lucky for me, I have a pension that blows me through the taxable SS, so it's the higher federal, state, and local taxes I have to pay attention to, making it easier to see where those jumps are, as they are wider apart after you get past the SS max.

@TheGOF Ай бұрын

Nice graph showing how marginal tax rates stack at various income levels. If you know the rules, the math is pretty simple.

@dougwahr4086 Ай бұрын

Is there a commercial software available to help track taxable income streams and what/ifs to make decisions from?

@ianollmann9393 Ай бұрын

You can just run your taxes twice through something like TurboTax and calculate the difference. This would be a useful and inexpensive strategy if you are at the level that you feel that running your taxed through Turbo Tax is no big deal. For most of us, however, this is an annual nightmare to be avoided. The good news is that the first run is the hard one. Adding an extra $30k of capital gains income or something to an already prepared tax calculation is no big deal.

@shawnbrennan7526 Ай бұрын

I’m glad you finally published a video attempting to explain the graph, but I think you missed the mark. It ain’t easy, I get that. But geez that graph is unintuitive.

@apeel2008 Ай бұрын

Yeah! Seen this torpedo graph on many of your videos and I think I finally understand it, and why it is needed relative to the easier to simulate Effective Tax Graph. Thanks! Makes me wonder how difficult it would be to create an excel workbook that could simulate these graphs? Anybody ever tried to do this in Excel?

@kcnicely Ай бұрын

See my comment. I made it in google sheets and you are welcome to copy to your own account.

@apeel2008 Ай бұрын

@@kcnicely Thanks for the reply and offer to copy your Google Sheets workbook. In response to your "See my comment", I looked through all of the comments below, but could not find any other one from you or where a link to the Google Sheet is provided. Did I miss something? Is it possible to add a link to these comments? Would love to give your spreadsheet a test drive ;-)

@kcnicely Ай бұрын

Make sure you are logged into your own google account and then choose File / Make a copy and that should create your very own sheet that you can edit. The 2026 rates for non Tax cuts an jobs act are estimates I did based on 2017 tax tables and chained CPI + 3% for future years. Your milage may vary.....as they say.

@larryrobx Ай бұрын

@@kcnicely Same request at Apeel, KC. Your Google Sheets workbook, cited above, somehow has been excised from this Reader Comments thread here. I would also like to take it for a spin. Could you please repost it, and alert us? Many thanks, in advance. (LR)

@apeel2008 Ай бұрын

@kcnicely I am assuming that I need to go to Google Drive in Chrome Browser (I am on a Mac) and make sure I am logged in as me. I do that, and search for Google Sheets and "Owned by Anybody". I see some from other users that I do not believe were specifically share to me, namely 'apeel2008', but none of the Google Sheets that are listed are from a user with a name like 'Ken Nicely' or '@kcnicely' or 'kcnicely'. I even tried putting these usernames in the search field for 'People', but nothing comes up. Am I missing something? Is it possible that the spreadsheet is no longer on your Google Drive? Or am I doing something wrong? Sorry for the Google Drive 'noob' confusions, but I would really appreciate getting to check out the spreadsheet you created. If you are unable to provide a link, are you able to share it with me, using my Google account name of 'apeel2008' ?

@polymath5119 Ай бұрын

Thanks Eric. What causes the IRMAA cliffs to shift downward in these charts? If the 2024 Single cliff is $103,000, why is it illustrated in some of your charts at $60,000?

@captsorghum Ай бұрын

I believe the main reason is that the X axis shows only regular income, and excludes Social Security benefits (since S.S. is fixed). I think he also excludes capital gains income, and probably other fixed income sources as well. The idea is to show the effect on total taxes of incremental changes to regular income that are under your control (i.e. IRA withdrawals). So only regular income shows on the X axis, and resulting tax changes on the Y axis.

@SafeguardWealthManagement Ай бұрын

There is income 'in the background' with Social Security and dividends. So the $60,000-ish figure would be the ordinary income you are adding to these base amounts, thus pushing over those IRMAA bands

@matthew.strout Ай бұрын

Where can I create and mess around with one of those graphs?

@charlesbyrne71 Ай бұрын

You'll have to roll your own unless you have a financial planner

@markwilhelm168 Ай бұрын

The "Capital gain bump zone" example doesn't make sense to me because there is no portion of your income where you are paying 27%. You are going from 0 to 15% for that portion but it averages out to less than 15% based on the other income. What am I missing where you are in a 27% tax bracket?

@markwilhelm168 Ай бұрын

I have replayed this section many times. So you pay capitol gains and ordinary income tax on the same dividend? 12% plus 15% is 27%

@Lolatyou332 Ай бұрын

The graph isn't good.. Essentially it's showing the 'opportunity cost' by going into a higher tax bracket with regular income and capital gains. You wouldn't actually get taxed 27%, it just is trying to demonstrate that because your qualified dividends got 'bumped' into the 15% tax bracket, your basically paying taxes on the ordinary income you collected as well as a new 15% long-term capital gains tax on funds that were effectively pushed into that bracket because of additional ordinary income.. It makes no sense why that is even being discussed to me in these terms and that graph put me in the same position as you and I literally planned my entire retirement strategy around long-term capital gains...

@j10001 Ай бұрын

In short, because you added $1000 of ordinary income at 12% ($120 tax), $1000 of the capital gains you had already received became taxable at 15% ($150 tax). So the net consequence of increasing income by $1000 is $270 of new tax-and that is a marginal rate of 27%.

@ianollmann9393 Ай бұрын

@@j10001 Yes, that is the real answer to the question. Unfortunately, I'm not sure how many tax payers understand that capital gains is stacked on top of ordinary income. So, they might think the first $89,250 of capital gains income is free, but no, that's not how it works. Because your capital gains backet is calculated as the sum of your regular income and capital gains income, your regular income will soak up this allowance, and above the line deductions like std deduction, HSA and 401k will extend it. Once one understands that, then it is easier to see how adding regular income can trigger capital gains to move into a higher bracket and cost you more.

@alk672 7 күн бұрын

@@Lolatyou332 The reason this is discussed in these terms is because this shows you that you may be making a mistake of realizing additional x dollars of income and paying insane tax on that amount. You must either push through that amount and realize more - then you get more income for a better blended tax rate, or stop short of hitting the "bump zone" and avoid the higher rate. It is questionable if these bumps are wide enough to matter for higher income earners, but for many less exciting retirements I imagine this could make a real difference.

@alrifr5786 Ай бұрын

The graph looks like the government is giving the middle finger to retirees.

@johnj4094 Ай бұрын

Hey, do you know why different brokerages pay out the dividend on a different date for example E*TRADE is paying SCHD on June 25 while empower is paying SCD on July 1

@larryjones9773 Ай бұрын

Board of Directors determine dividend pay dates.

@johnj4094 Ай бұрын

@@larryjones9773 except we’re talking about the exact same stock at the border Director approve being paid different date by different brokerage

@ThePurpleSnork Ай бұрын

The next ex-date and record date for SCHD is 6/26/24, and the pay date is 7/1/24. etrade (and everywhere) will pay you on 7/1 (although I hear some places take a day). The best place to find this info is on the website for the investment in question.

@michaelwitmer5388 Ай бұрын

When you say “how can I get a marginal tax graph for my situation?”… other than having a different filing status, isn’t the marginal tax graph the same for every single filer and the same for every MFJ filer? I think the challenge is understanding your own sources of income and WHERE on the graph you are and the ranges you could be within. Create a base case for sources of income, see where you are on the marginal tax graph and determine if making a change to your base case income assumptions could be beneficial.

@michaelwitmer5388 Ай бұрын

My comment is for federal taxes only - I realize state taxes can vary by state

@_-Karl-_ Ай бұрын

No, it's dependent on the sources of income (and deductions, although not sure how many people under the current scheme aren't taking the standard deduction). Ordinary income, social security, long term capital gains are all taxed at different rates. The tax someone pays will be dependent on the mixture of those (as well as potentially some niche carveouts in the tax code). Regardless of being SF or MFJ, 100K of income will be taxed differently if that income came from Pension/401K, Social Security, long term capital gains, or some combination. One could probably find some consistency in a tool specifying those four parameters; filing status, ordinary income (pensions, bond interest, ...), SSA income, Qualified LTCG dividends, but there are other factors in the tax code that may apply to some if, eg, they still have dependents at home, are still part of a business or do gig work, invest in real estate, etc.

@michaelwitmer5388 Ай бұрын

I agree with all you said. But the marginal tax graph presented in the video has an x-axis of $1k more ordinary income. Once you convert your individual sources of income, deductions and other factors into TAXABLE income as a “base case”, you find where your unique tax situation puts you on the marginal tax graph and you see the impact of an incremental $1k of taxable income. Maybe I’m still oversimplifying something but I think the work is in finding your taxable income, not in altering the graph.

@shawnbrennan7526 Ай бұрын

@@michaelwitmer5388 Simplistically: your sources of income and specific amount if SS alter the calculations significantly.

@michaelwitmer5388 Ай бұрын

Agree if referring to total tax dollars paid or average tax rate. But we’re talking the tax rate on an incremental $1k of ordinary income.

@pauld9653 Ай бұрын

Wish Safeguard would do a one time plan for DIY investors, instead of having to pony up 1% a year for this plan and some index funds. Fortunately there are one time planners out there, may cost a few thousand, but cheaper than 1% a year forever.

@SeattlePaulie Ай бұрын

Yep. I'd pay 0.5% a year...if they took care of all the paperwork. 😂

@SafeguardWealthManagement Ай бұрын

@@_-Karl-_ I disagree with the clickbait comment. I feel my job here on KZfaq is to educate to the best of my ability. We use two tax planning tools with every client in our practice. This is one of them, and the video explains why. This tool is not proprietary to Safeguard. It may not be widely available or free, but does that mean this topic should not be discussed?

@SafeguardWealthManagement Ай бұрын

@pauld9653, we do not charge 1%, and tax planning is just one aspect of a retirement plan. But yes, we do not offer one-time plans for a number of reasons (we used to and stopped because we did not believe it was in the best interests of those retirees. Planning is more important than a plan), but there are advisors who do.

@_-Karl-_ Ай бұрын

@@SafeguardWealthManagement I did not say the topic should not be discussed, all I suggested was a better title might be "This Analysis is A Must in Retirement Tax Planning" or "This Tool is A Must in Our Retirement Tax Planning Practice" since the target audience you are trying to educate (I believe) is retail investors/retirees, not other CFPs. I don't mind if it is promoted as a benefit of being a client, or if it was a paid tool and not a free one. But, since AFAICT you are not hurting for business and turn down a lot of inquiries from lower net worth prospects, it becomes somewhat un-actionable to most of your audience except the excel jockeys who already understand all the calculations around OI, QDs, SSA, IRMAA, NIIT, etc. and only useful to you in landing the one big $10MM HNW prospect who happens upon the video.

@mnewman2319 Ай бұрын

@safeguardwealthmanagement - a past video mentioned your software being available in the future, what is the status?

@Lolatyou332 Ай бұрын

The capital gains bump zone needed to be explained better, it only confused me and I have had my own plan set that uses capital gains for the past 2 years already... Why would a bump zone even be relevant to show in most scenarios, just feel like the graph was demonstrated as a general use graph but it was not and that's where I think it will confuse the people watching.

@Lolatyou332 Ай бұрын

@@_-Karl-_ Because how many people who actively plan for retirement are going to ever have less than 40k in income a year to actually consider the 'capital gains tax bump' as a viable thing to avoid as a single filer? Additionally, in his explanation he shows the rates with a description from a 'married' perspective, but in the graphing it shows it as a single filer, because you still have 0% capital gains up to almost 90k when married. Literally 80% of my portfolio is post-tax in a brokerage account, I would use an 401K for the standard deduction and 10% bracket, then in my brokerage I would do tax harvesting by selling my stocks within the 0% tax bracket and then validate the stock lots I'm selling if I need additional income past that 0% tax bracket and a roth for any expenses after that if necessary.. That graph attempts to explain a less detailed version of what I already have in a retirement plan and it still was confusing. I think it's intended to just shock people (his clients) rather than help them understand what strategy is being used and why. It seems more like a marketing thing than anything.

@Lolatyou332 Ай бұрын

@@_-Karl-_because I'm making a point that I've already learned and utilize the information being taught in this presentation but that the way it's displayed even confused me despite being knowledgeable on the subject matter.

@Aaron-rc9kf Ай бұрын

I think this video (unintentionally) explains perfectly why the US tax system is overly complicated and confusing. The graphs and the attempts to explain them makes my head hurt. It shouldn't be this way.

@ABruckner8 Ай бұрын

Looking at this man’s fees, even though his team brags about how cheap the fees are, someone over $3M in investments would be paying nearly $20,000 PER YEAR IN FEES! I don’t see that in the graph, lol.

@ABruckner8 Ай бұрын

@@_-Karl-_ Maybe a complete financial illiterate who inherited it, but if the goal (as presented here) is to save $1000 by "recognizing" that going $50 over a certain threshold, you're much better off saving your $20,000 and paying the $1000, lol. Anyone with a high school education (free), a few tax tables (free), and any spreadsheet software (free!) can project all of this stuff. That reminds me...I turned 60 this year...I need to start thinkin' about some ROTH conversions and RMDs, lol.

@Lolatyou332 Ай бұрын

@@_-Karl-_ 20k is not a bargain when this is like a week of planning at most, and most of that is just waiting for the person to give all relevant information. 3m is like 120k a year using a 4% rule as a reference.. a person is not going to save 20k in taxes a year versus if they literally just withdrawal the full 120k from an IRA.

@Lolatyou332 Ай бұрын

@@_-Karl-_ Don't need the money, but I'd be more likely to develop software people could use to rather than manually going through things.. Maybe something like make a LLM using chatGPT's API to help collect all relevant data and format it then provide them with the best tax effective strategy with some kind of algorithm. The biggest thing with this is just making sure you have all the relevant information to provide an accurate plan and I hate dealing with people or doing any manual labor which is why I built my career around automation 😂

@Helen-tg4tr Ай бұрын

I think investors should always put their cash to work, especially In 2024, we'll start to see more market diversification. I'm hoping to invest about $350k of my savings in stocks against next year. Hope to make millions in 2024

@2ndSprings Ай бұрын

Look at that giant middle finger to the U.S. citizen.... 😞

@2ndSprings Ай бұрын

@@_-Karl-_ , there’s no one more “mid” than me. Haha!

@MrAerialsound Ай бұрын

Click bait on a tool we cant gain access to --- Good info tho. Guess we need to get on board w your service.

@shawnbrennan7526 Ай бұрын

They use this tool in a lot of their other videos, so I appreciate that they attempted to explain it better. I just think they failed.

@SafeguardWealthManagement Ай бұрын

You can gain access to it without hiring us. It's not our tool. But just because something isn't free, easily accessible, simple enough for everyone to use, etc. does not mean a video explaining it is clickbait.

@tlar1272 Ай бұрын

Video needs to be twice as long to explain everything. I would gladly trade the 15 minutes that I just lost for 30 minutes to actually understand these concepts. ADD. Serious question: what caused the big purple tax bump?

@edsteadham4085 Ай бұрын

My guess is social security. It does not get taxed until your overall income reaches certain levels

@rdawson64 Ай бұрын

The purple is the social security tax. He starts explaining the calculation at 3:58. He has several more videos on the social security tax torpedo.

@tlar1272 Ай бұрын

@@rdawson64 i follow him up to that point but get MAJORLY lost at 4:24. I’m good at math, but NONE of the numbers jive. And he doesn’t show where the numbers are calculated from ADD: I know that 50% of SS CAN be taxed, so I know that it can apply, but still unclear at what threshold that occurs

@michaelwitmer5388 Ай бұрын

At 4:24 it shows if married filing jointly provisional income is over $32k, 50% of SS is taxable and becomes 85% taxable when provisional income is over $44k.

@GeezerDude Ай бұрын

It's called the tax torpedo.

@octonoozle Ай бұрын

Would you recommend taking all your money out at once and moving to North Korea so you don't have to worry about the IRS?

@larryjones9773 Ай бұрын

Please try it and report back.

@johnurban7333 Ай бұрын

This is why you don’t want a million dollars to retire on like they always tell you that you need to retire

@_-Karl-_ Ай бұрын

This has little to do with the size of a retirement portfolio. It has to do with annual income in retirment and the sources it is coming from.

@shawnbrennan7526 Ай бұрын

So, you’d rather retire with just SS so you can minimize your taxes? Okay,….

@johnurban7333 Ай бұрын

@@shawnbrennan7526 already have for a long time now. Live a simple happy life

@SeattlePaulie Ай бұрын

A million isn't enough anymore. More like 3 million, with at least 2 million of it in a Roth.

@johnurban7333 Ай бұрын

@@SeattlePaulie I know a lot of retirees who don’t even have half a million and are doing just fine.

@annscott900 Ай бұрын

This is so SAD ! Barely living but by gosh they’re gonna punish you to your DEATH for such minimal Values. Pitiful !

@larryjones9773 Ай бұрын

Roth conversions is a way to fight back.

@sirreptitious6645 Ай бұрын

No one is setting out to “punish” you. You just have to be aware of the situation and take advantage of whatever opportunities there are to save money.

@michaell6580 Ай бұрын

Understanding the tax structures of developed countries around the world, especially our European Allies you may feel quite differently. The USA has very low taxes and expensive Healthcare. Just saying no anti USA sentiment.

@johnurban7333 Ай бұрын

@@sirreptitious6645the problem is they know most people won’t do that because taxes are so complicated and a lot of people just don’t have the time nor the resources to have someone do it for them

@Riversauklabs Ай бұрын

understand but disagree. What is sad to me is that income from actual work is taxed at a much higher rate than capital gains. How many poverty level citizens / minimum wage workers will never once benefit from that giant capital gains tax break which is baked in on a sliding scale for the wealthy to benefit from

@momhouser Ай бұрын

You really need to stress that fact that you are talking about *effective tax rates* not marginal tax rates. A definition of the difference at the beginning (and why anyone should care about effective tax rates) up front might help remove some of the confusion.

@davidk6498 Ай бұрын

You have a great way to confuse us you should work on trying to make things less complicated I could never use you for this reason kiss method

@j10001 Ай бұрын

It sounds like that comment was intended for Congress! They made the messy tax laws 😂

@ianollmann9393 Ай бұрын

I don't think "make things less complicated" / KISS and a discussion about US tax code belong in the same sentence. The complication is a feature, bought and paid for.

@termita358 Ай бұрын

I did not like video. Kind of fear porn. lack of examples of what decisions can be made based on the plot. Too fast and too short, sounded like just want to sell something

@SafeguardWealthManagement Ай бұрын

Odd definition of fear porn. I don't think I said anything like, "OMG look at this super scary rate you are going to be paying thats going to cause you to pay all your income in taxes!!! Ahhhh!!!!" I think the tone of this video is very matter of fact. I didn't create the tax system, just explaining how it works for retirees. You're right, there was a lack of examples of what to do in a given situation. That is because the answer varies incredibly widely based on one situation.

@ianollmann9393 Ай бұрын

@@SafeguardWealthManagement It was a good video. The current state of inexpensive consumer level tax tools is deplorable, but that is not SWM's fault. If it comes that it make sense for SWM to move from bespoke financial planning to mass market financial planning tools, I would be thrilled, but programming consumer software is another trade to learn.

@carywinn3391 Ай бұрын

This is nonsense. You always have a minimum of a 15% discount on taxes for the Social Security benefit you receive.

@chrisporter9757 27 күн бұрын

In his example, total taxable social security is $14,700 of $32,000. Rounding, that's ~46% of the social security is taxed, or 54% discount if you will. Make sure you are using $32,000, and not $16,000. $16,000 is what is used in the provisional income calculation, where you only use 50% of social security that is received.

@carywinn3391 27 күн бұрын

@@chrisporter9757 it is not taxed at 46%, as his chart would imply. Rather that 46% is likely to be taxed at 10 or 12%.

@chrisporter9757 26 күн бұрын

@@carywinn3391 Correct. I didn't say it was taxed at 46%, I said 46% of the social security income will be added to the total income to be taxed at whatever tax bracket the individual lands in. I was referring to your 15% discount comment. By that I thought you were referring to 85% is the highest percentage of social security income that could be considered taxable income. True, and in this example, only 46% ends up as taxable income - so it's much less than 85%.

@SafeguardWealthManagement 24 күн бұрын

I'm sorry, which part of the math didn't you understand? Would be happy to try to help with alternate explanations. S.S. is a sliding scale. At the maximum taxability point, 85% of your benefit is taxed which I think you are noting in your 15% discount comment. But in your follow on comment, you seem to be thinking the chart is equating the amount of taxable S.S. with the marginal tax rate, which is not correct. You can be in a given bracket, like 12%, and have a higher marginal rate than 12% as this video shows.