The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
Ep 59 - Purpose driven financial planning with Justin Krane
What would you do with $25 billion? Join us for an enlightening conversation with Justin Krane, a Certified Financial Planner, as we explore the realms of purposeful finances. We delve into the importance of philanthropy, fostering entrepreneurship, and the personal journeys that led us to embrace entrepreneurial paths over traditional corporate roles. Justin shares invaluable insights on overcoming societal and familial pressures to find a career aligned with one’s strengths and passions, making this episode a must-listen for aspiring entrepreneurs and business owners alike.
In the latter part of our discussion, we tackle strategic tax planning with a focus on Roth conversions and cost segregation studies. Discover how to leverage operating losses and business depreciation for tax savings, and understand the complexities of required minimum distributions (RMDs) and Social Security on retirement income. We provide practical advice on timing Roth conversions to maximize tax-free growth, updating estimated tax payments, and the benefits of the PTE tax election for high-income earners in high-tax states. Tune in for a motivating episode that empowers you to take control of your financial future with actionable strategies and expert guidance from Justin Krane.
To connect with Justin Krane on linkedin go to:https://www.linkedin.com/in/justinkrane/ and to learn more about his services visit https://kranefinancialsolutions.com/
And if you or someone you know is interested in our services, go to https://www.markperlbergcpa.com to learn more
All right, welcome to the show. I always love nerding out with experts in the world of money and finance, and Justin Crane is one of those guys and he's helping with having a holistic look at people's financials. Justin, why don't you introduce yourself in 60 seconds or less to the audience and we'll get into our conversation?
Justin Krane:Sure, what's up everybody? It's good to be here. Thanks for having me, mark. My name is Justin. I'm a CFP Certified Financial Planner and primarily work with business owners, helping them create purpose-driven financial life plans. And working with business owners, I got involved in business money as well. I taught myself how to understand and read financial statements, so I do some limited, fractional CFO work as well. I taught myself how to understand and read financial statements, so I do some limited, fractional CFO work as well. I'm all about growth, you know. Building, growing, kicking ass and all that good stuff.
Mark Perlberg:All right, let's talk about this. You said purpose driven financial. Tell me let's talk, all right Are you ready mark, all right.
Justin Krane:So if you had like 25 billion dollars, what would you be doing?
Mark Perlberg:um, I would be right now, I think I, I mean, I think a lot of us would be doing some, uh, some philanthropy, private family foundations, public charities would be kind of fun. I would probably also have. I probably wouldn't be reviewing as many tax returns.
Justin Krane:Okay, so what charities would you donate to? What's a cause that resonates with you? I?
Mark Perlberg:think I would start my own and start an organization to encourage entrepreneurship for those people who go through the school system and are forced to think like a student but aren't really meant to be students and employees. But I also probably. I have a friend who does and I've donated to an organization for foster children. In fact, whenever our clients are late to meetings or they no-show really whenever clients no-show we charge a $100 fee that's donated to a charity of our choice, which usually goes to him.
Justin Krane:Yeah, so expand a little bit on wanting to help entrepreneurs and business owners. What's driving that?
Mark Perlberg:I think it would be fun, I think it would be fulfilling and rewarding and with the right people, it's work I would do, for free anyways.
Justin Krane:Yeah, did you struggle getting into business for yourself? Was it challenging for you?
Mark Perlberg:Well, you know I think I spent the majority of my early career. I spent the first maybe 10 years of my career trying to fit into the corporate framework and being a good employee, and I was never very good at any job I had, and it took me so long to pick up on the pattern that I just sucked as an employee and never would be good at anything. I don't think like an employee, so I had to learn the hard way, through pain and trial and error, that I could start a business, and I was raised to believe nine out of 10 businesses fail, so why even try? The odds are so stacked against you so it was never a possibility in my mind, because of how I was improperly deceived, to think that you had to get a good job to be valuable in this world.
Justin Krane:Sure, so how old were you when you were working for these first 10 years?
Mark Perlberg:So I would say it took me from age 23 or 22, 23 to maybe 32, 33 to realize this is not for me. No matter what career I choose, I'm just not meant to be in a hierarchical organization Having mentors who are appointed to mentor me who I'm not even choosing as mentors, and it just wasn't ever going to work for me.
Justin Krane:That must have been pretty hard for you to be working a nine to five job, feeling not good about yourself, for 10 years. It's like half your life.
Mark Perlberg:Yes, it really sucked. And basically at the end of my last you know towards, when I realized I wasn't going to be happy at my most recent W2 job, I had to come to terms with the fact that I knew entrepreneurship can be a harder road. But I just said, hey, you know, if we continue going down this path, I don't think we're going to ever go anywhere. So that's when I realized, hey, now's the chance to try something new that's a little more exciting and a little riskier, but the data yeah.
Mark Perlberg:I mean I can relate.
Justin Krane:Sorry, I can relate to that. I worked at UBS as a financial advisor and I wasn't happy and I stayed for 13 years because I didn't think I had the skill set to leave. I thought I was supposed to just do the normal stuff and just kind of trot on. Did your parents give you a hard time and say like you need to stay working in a job? Did they encourage you to try and leave on your own? Did they have a role in keeping you to stay?
Mark Perlberg:Well, I would say my mom was. My mom and I are very different and my mom is very risk adverse and so she. You know, when I first told her I was going to be helping people out with reducing their taxes, she said it sounds like a scam. And you know, when I quit she's like no, hold on to your resume just in case. So she, she was. Oh, she always. You know, she's a much more risk adverse, likes to take the safer route. My dad was my, I think. I don't think my dad tried to steer me in any direction, but, um, neither one of them ever encouraged me to consider being a business owner. That's something I had to figure out on my own and I think also our schools and institutions and society growing up would have discouraged me from even considering down that road. I mean, when you're in college, everybody tells you go on Monster or Indeed, or they're trying to groom you into being an employee and taking an entry-level job.
Mark Perlberg:Yeah, so you must have this really inner drive to help business owners get the help that they need to start one, I mean think about the kids you know who are being, who they're trying to groom into future W2 folks and trying to turn them into academic people and some kids are just not meant to be it and they don't realize there's a whole other world out there of entrepreneurship. That may be perfect for them and maybe that's where they're meant to thrive and really realize who they were meant to be as an entrepreneur.
Justin Krane:Yeah, yeah, have you done any of the charitable work for entrepreneurs now, or is it something haven't done it?
Mark Perlberg:There's not a lot of room in the work week to do new things, but with the right processes and systems and as we become a more mature organization. I'm hoping that there will be time for that stuff. Can I challenge?
Justin Krane:you.
Mark Perlberg:By the way, we're creating a purpose-driven I can tell this feels like a therapy session. I'm cool with it. This is what yeah, yeah.
Justin Krane:So I'm sure you know what a donor advice fund is and probably everyone listening yeah, you could literally put a hundred dollars in that or a thousand or whatever, get your deduction I mean, this is your world and then write a check whenever you want to to help kids start businesses or whatever. Very cool. So that whole exercise you know that we went through. In other words, like the thing is is that if you were to get hit by a I asked this other question to clients if you go into the doctor and he says you have three days to live, like what did you not get to do? Who did you not get to be? What did you not become? You know all of that.
Justin Krane:So if something were to happen to you, you want to leave some sort of legacy. Do you have kids? Kids, by the way, no, okay. Cats, okay, yeah, yeah. So so how cool would it be if you could start something where you really could leave a legacy in, something that really means something to you, because I guarantee you there are people out there that don't know what to do about starting businesses and all that. So that whole exercise that I took you through, that's a purpose driven financial life plan. It really really means something to you because you're really really good as a business owner, especially with tax. You can help. Especially with tax, you can help. There's some kid out there who's 18, who doesn't want to go to school, doesn't want to work at a job, has an idea, doesn't know how to make it happen and needs your help you know, I, um, yeah, and I think back when I was 18 I didn't want to go to college.
Mark Perlberg:My parents just kind of forced me into it. Yeah, um, because that's what you do, and I mean, at least I went to a college. That was fun, but certainly the academic element of it was not of interest totally yeah, it sucks.
Justin Krane:It's a bad feeling when you, when you're forced into doing something that doesn't speak to you and your guts like this sucks. But you're young and you don't have the skillset to really figure out what you want to do and you know oh absolutely so.
Mark Perlberg:so, and then there's ways to structure this. You know, you have your donor advised funds, private family foundations, or, and then you can have your.
Mark Perlberg:in addition to that, you can have, you know, set up public charities, and then there, I mean there are some tax strategies also, or tax opportunities with those, or ways to get grants to help finance it and, you know, to put, maybe capital gains assets into your public charities A whole world of strategies around public charities and foundations as well. Some are a little more aggressive than others on what they're doing with their charities. Mm-hmm yeah.
Justin Krane:Mm-hmm.
Mark Perlberg:So, in addition so you're working with clients and you're talking about these purpose-driven ideas what are some other things that you're bringing to the table that you think Now most of our clients hear us talk about real estate investing and tax strategy and maybe some basic financial planning. What are some unique things that you're bringing to the table you think our audience normally aren't considering?
Justin Krane:um, you know I don't, so my short answer is I don't have anything unique. However, because we're looking at our business and some other clients, businesses, and sometimes doing the same thing if it's working is the best thing to do. Like, if you're growing at whatever rate that you want to and you're like, oh, should I do something different? Or whatever it's not working, who knows what, sometimes it's just doing the same thing If the results are good. You know that, like, the definition of insanity is doing the same thing over and over and expecting a different result. Right, but if the result is good, why not just keep doing that? So, um, for us, we're growing. Um, it's it's a slow and steady growth. Um, for a lot of my clients, it's it's it's the same way.
Justin Krane:As far as unique for tax, the only like two that like they're totally out there but like not everyone is doing, are, um, and again, this is general, like everyone listening, you have to work with your own tax person and your own financial advisor. But I believe um in, uh, lots of roth conversions, lots of backdoor roths, all of that, all of that you know, um, I just think that. Um, I just see it when my clients take money out of their pre-tax IRAs and we have to do withholding on them. You've got to take more money out to satisfy the need of whatever it is that you have to spend the money on.
Justin Krane:And also when my clients pass away and then their kids get the money and they have to take out RMDs and there's tax withholding on that and you know tax rates and all that, and there's tax withholding on that and you know tax rates and all that. So we're doing a lot of Roth conversions, working with the CPAs to do the tax planning around that. And then the other thing that we're doing, which, like it's in California, is just the PTE tax, we're encouraging our clients to pay their state taxes through their corporate books and we're getting the CPAs to calculate that books and we're getting the CPAs to calculate that. And then the last thing around taxes is I don't know when you're going to publish this, but everyone listening at some point you will have filed your taxes, At some point you will have already filed your taxes, and then the work for the prior tax year that you filed is done.
Justin Krane:Now, all of a sudden, you're in your current year and a lot of people don't think okay, well, what do I need to be doing this year? And some CPAs that file the taxes, depending on the calendar time month of when they do it, they go on a vacation or they're like off the grid because they need a break. So I like to get in front of that and start working on the current tax year and getting the CPA and the client back involved to see what it is that they want to do. So is any of that unique?
Mark Perlberg:No, but it's rare that most people get to consider these things I think that most people have. Most firms are what I call a 1040 factory, where they're super busy from January to April or maybe October, but they're designed and they price their services in a way so they can only afford the staff to only do compliance work. And when you reach a certain income threshold especially if you're making seven figures of profit or W2, you're going to need a little more proactive guidance than that.
Justin Krane:Yeah, yeah.
Mark Perlberg:Roth conversions or whatever. I think this is another area where people try to do their own tax planning. So maybe they'll do a cost segregation study and eliminate their taxes and they think the job is done. But with a Roth conversion or other strategies, or even if you're let's say you're operating at a loss, your business has depreciation in it. Or let's say you're operating at a loss, your business has depreciation in it. Or let's just say your business isn't profitable. Some people forget that even when there's no profit, there's so many opportunities for tax planning here and that 401k and IRA is going to grow and compound and accumulate and eventually it's not taxed at your long-term cap gains rate, it's taxed at your marginal rate. It's taxed higher than those stocks would have been outside of the retirement account when you take it out. So by converting it at the right time, instead of having a ticking tax time bomb, now you have something growing completely tax-free, and there's just so much.
Justin Krane:Absolutely yeah, when I show the clients like okay, all right, so you got a million dollars in an IRA and then it grows and let's just pretend it's a 2 million or two and a half million. Then we do a required minimum distribution calculation, a ballpark, whatever call it. 75,000 bucks You're going to have to take out, or a hundred, whatever the number is. Then we model out social security at age 70. This is so funny. So let's say that the husband and the wife each have 50,000 a year of social security at age 70. They have a required minimum distribution.
Justin Krane:By the way, for those of you listening, an RMD basically is required minimum distribution. It's when you have to take money out of your 401k, ira, whatever you want to call it, at age between 72 and 75. It'll depend on the year and all that. But at some point you have to take the money out. The government wants it, you have to pay some tax on it. So you have these RMDs. Let's say they're 100 grand and you've got Social Security at 100 grand and the next thing you know you're making $200,000, $250,000 of taxable income and you're not even doing anything, you're not even working. So people think, oh, I'll be in a low bracket Like I, don't, I just the wealthier people. It generally doesn't happen.
Mark Perlberg:Yeah, the so and then there. So if you're strategic about it, there are ways you can time this thing when you take it out, and I mean now some of our clients are even looking into investment vehicles where the investment inside of these tax deferred accounts when there's a conversion to the Roth will create losses or, because of the reduced value of the asset at the time of the conversion, will offset it anywhere from 20 to 40 percent of taxes on that transaction. Mm-hmm.
Justin Krane:Yeah, yeah. I think the big thing with tax Mark is that most people they don't know what to do with taxes. It's just not their wheelhouse. It's up to people like us to give them ideas and to just communicate with them. I mean, people really are just looking for, like, what should I do? What are my options? I have no idea what to do. What do you think I should be doing?
Justin Krane:They're looking for proactive advice and they're not looking for reactive, like oh, you should have done this or you owe that, you know actually another another thing is is this is a really important thing for business owners is if your business is growing and killing it, what most of the CPAs will do is they'll give you the penalty-free estimated tax payment plan on the prior year's tax return. When you file your return, you get the letter right and you say the easier estimated tax payments. But then if your business is killing it and you make an extra half a million, $5 million, whatever, you're going to owe more money in tax, whatever you're going to owe more money in tax. But if you don't tell the CPA that you're making more money and he or she doesn't give you the estimated tax payment increase, you're going to have a big ass surprise in April and then it's like thanks for nothing.
Mark Perlberg:No. Another thing you mentioned here was the past 30 tax election, which a lot of if you're working with an older CPA or someone who's towards retirement, basically what a? This thing is often missed because it's relatively new this opportunity. Basically, what happened is around the time of the tax cut in jobs. With the Tax Cut in Jobs Act you were capped at $10,000 state and local tax to offset your federal, that $10,000 state and local tax to offset your federal. So a lot of folks were infuriated in California and New York and other states because they're paying all the state and local taxes and now they can't even write it off against their federal. They're paying taxes on it again. So the workaround is if you have a partnership or S-Corp usually we do it with S-Corps you're going to be able to pay the taxes through your entity and now it's tax deductible against your federal in excess of that 10,000. And with a high income earner we've seen this create savings anywhere from 20 to $85,000 for our typical high income earner under certain circumstances.
Justin Krane:Yeah, I had a client that didn't do it and he thought his controller did it. Literally it's like taking 50 grand and literally throwing it in the trash. Oh yeah, insane.
Mark Perlberg:Yeah.
Mark Perlberg:Yeah so and that's state by state specific. So it takes research and that's one of the reasons why it's worth investing into a more premium concierge service If you're at a certain income level, because someone who's charging you grand for your partnership and like a grand for maybe two, three grand a year, they're just not going to have the staff and availability to look into these things. That could save you tens and hundreds of thousands of dollars in taxes. So I are some. So I'm just curious what are some other interesting things that you are, exciting things you got going on that you're doing with your clients right now how, how are things going?
Justin Krane:I'm telling you there's literally there is nothing exciting. It's just, it's just like it's so boring, meaning not not that I'm bored, but it's just boring Like it's not. There's nothing. Like, oh, you know. Like you know, I believe in on the investment side, like I believe in the efficient market theory, like I believe that the markets are efficient, I'm a big believer in index funds.
Justin Krane:I'm not into stock picking, it's not something that I do with most of my clients, and so the way to build wealth is really slowly, and I've listened to a lot of thought leaders in this space. They all pretty much agree. I mean, you always hear of the overnight successes, but really the way that people build wealth is slowly. Like they kill it in their business. They invest money, they compound the money, they do their thing. You know, maybe you have this great big idea and you sell it for a lot of money or something like that, but, like, most people build wealth slowly. So is there? I just like there's nothing, there's nothing really exciting, and like there's no, like oh, you need to do this, or like just not.
Mark Perlberg:We've been having similar conversations with our clients and I noticed this in business owners, where, for some of the less seasoned business owners and investors, there's this idea that newer is better, right, neophilia, I heard someone call it. So they hear about these crypto investing schemes or they hear about not like I'm against crypto, but they hear about Amazon dropshipping multimillionaires and you can make a million dollars a week if you and only work 20 hours if you take my course and then they're investing in real estate and now they have a drop shipping company and both are failing because they don't have the time instead of the slow and steady and just being consistent and just getting really good at a thing that you do and relying on foundational strategies. So it's something that I've noticed that a lot of our clients in fact, I think a hundred percent of our clients that have ever done Amazon draft shipping have have all lost all their money.
Justin Krane:Yeah, I mean if, if you think of, like, how do you lose 50 pounds? How do you run a? How do you train for a marathon? How is the world set up Like? How do you grow as a person? How do you get good at something? The whole world is. I'll get a little spiritual here. God created the world to be this way, where you not everyone gets rich quick overnight. Not everyone loses 30 pounds in two days. You don't just wake up and run a marathon in four days. The world doesn't work like that. You got to work at it, you got to build at it. So that's my own two cents.
Mark Perlberg:Here's where I disagree, because I think that converting funds into Roths and being strategic and having those year-end conversations is interesting and exciting. I think that the stuff you do is really cool. Yes, starting foundations and charities that stuff, I mean really have an impact. Yes, considering the tax strategies, I think what you do is pretty exciting and there's just so much opportunity with these things that we can do.
Justin Krane:Mm-hmm, mm-hmm, thank you, mm-hmm can do. Thank you.
Mark Perlberg:Yeah.
Justin Krane:Thank you.
Mark Perlberg:Well, so so, justin, you know I really enjoy our conversation. This is a bit of a shorter podcast, but I you know it's, it's, and I really appreciate your time. Is there a call to action or anything you want the audience to listen to? To know a little more about you and your background?
Justin Krane:Um, no, you can connect with me on LinkedIn and you know we have a website and all that stuff, but let's just end with this. Like for those of you listening, I believe in you, that you can create the financial life that you want. I believe that you have the skills and the tools and the mindset to do it, as long as you marry it with action and belief. So if you're looking for a kick in the pants oh, I don't know what to do I you've always been thinking about doing something. You have the freedom to choose what you want to do and how you want to think.
Mark Perlberg:So go for it and don't marry the wrong woman because, that'll also hurt your faith. That will Thanks for having me, justin. Thank you so much and if you want to find him, it's Justin Crane with a K, and I'm friends with him on LinkedIn, so you can find my connections as well, and I'll put his website and that information in the show notes if you want to learn more, especially about some of these amazing opportunities with purpose-driven financial planning. Lots of cool stuff going on here, awesome. Thanks very much.