Navigating Your Future Capital Gains Taxes

by Mike Lester

Feb 7, 2022

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Speaker 1 (00:02):

Welcome to the Retirement Wealth Podcast. Our goal is to help those retired or soon to be retired investors make more informed financial decisions and live an enjoyable retirement. Our host Mike Lester is the founder and CEO of Talon Wealth Management. Mike is an investment advisor representative of Retirement Wealth Advisors Inc. An SEC Registered Investment Advisor. Thanks for joining us today, and let’s get started.

Kristen Charles (00:30):

Mike, I don’t remember exactly how many years you’ve been doing this. I do know it’s over two decades, but I know exactly how many kids you have. And I want to talk to you about naming kids.

Mike Lester (00:40):


Kristen Charles (00:41):

According to the social security administration, in 2015 more than 6,000 baby girls in the U.S were named Alexa after Amazon chose Alexa as the wake word of its voice services. Fast forward to 2020, only about 1300 babies were given the name Alexa, and it’s also bad that I keep saying her name over and over.

Mike Lester (01:04):

Less than a quarter of them. I wonder what happened there. Gee-whizz.

Kristen Charles (01:08):

Because you didn’t want to be a wake word.

Mike Lester (01:09):

Or you could call your kid and then your little thing on your counter just goes, “Oh, what do you want?”

Kristen Charles (01:13):


Mike Lester (01:14):

“Alexa, do this.” And then, yeah.

Kristen Charles (01:16):

How did you come up with your kids’ names? Like I said, you’ve got four of them. We’ve got Katie, Peyton, Luke and Finn.

Mike Lester (01:23):

Good job. Golly, I was waiting for you to mess that one up.

Kristen Charles (01:25):

Kristen’s getting old… Dicey, but… How did you guys come up with their names?

Mike Lester (01:31):

So my oldest is Katie. She’s 19, in college now, going on 20. Actually, her name is Katherine. And so we just really like the name Katie, but didn’t want Katie on the birth certificate. So there’s this whole thing with Katherine, but really liked it. And so-

Kristen Charles (01:46):

A little more proper. I like it.

Mike Lester (01:47):

That’s right, yeah. So somehow Katie Lester just sounded nice, rang a bell and then we had Peyton. So Peyton is interesting. My idea. Growing up I had a childhood friend named Peyton but it was a guy. I don’t know why. When I was a kid, first of all, he was a good friend and then also I just thought it was a really cool name. I didn’t know anybody else named Peyton. And it just seemed like a great name for a beautiful little girl.

Kristen Charles (02:14):

I love it.

Mike Lester (02:15):

Yeah, I just really like it, and so that goes well. Now Luke, on the other hand, kind of biblical, also goes well with Lester, right? So it just… Luke Lester…

Kristen Charles (02:23):

Luke Lester. And Star Wars.

Mike Lester (02:25):

And Star Wars, yeah. So I can stand behind a fan and talk into it and say…

Kristen Charles (02:31):

Oh my gosh that’s right. Do it, do it.

Mike Lester (02:33):

I’ve done it before. I don’t have a fan here, otherwise I would do it again. But I do that to him sometimes when he’s sleeping,

Kristen Charles (02:37):

Luke, I am your father.

Mike Lester (02:38):

Yeah. While he’s sleeping, I can do it. Originally, I was going to name him Jack because I had a grandfather Jack. But my sister beat me to the first boy and she took that one away, so thanks Carrie. But anyway, Luke goes very well. Luke is great. And then our little one, our five year old Finn; it was just a unique name. At the time when I did it, I didn’t realize there was a Star Wars character named Finn.

Kristen Charles (03:05):

Oh my gosh.

Mike Lester (03:06):

And now I have two Star Wars kids.

Kristen Charles (03:08):

You didn’t plan that.

Mike Lester (03:09):

The Luke wasn’t because of Star Wars and Finn was not because of Star Wars. I was just looking for… So we’re boat people, we’re water people-

Kristen Charles (03:16):


Mike Lester (03:16):

And we were just looking for what would be a name that not every kid has. Turns out Finn got real popular probably before we named him Finn, I just wasn’t aware. But it seems like now that we’ve named him Finn, there’s all these Finns everywhere. But his actual name is Finnick. Because again, Finn on a-

Kristen Charles (03:35):


Mike Lester (03:35):

Birth certificate-

Kristen Charles (03:36):

Job application.

Mike Lester (03:37):

Job application, whatever, maybe not the greatest, but Mr. Finnick goes by Finn. That’s how we came up with them.

Kristen Charles (03:44):

Love a little bit of Lester family history there about the names. And one day Mike, not today, maybe next week, let’s talk about how you came up with the name Talon Wealth Management, because that’s an interesting story too. But there’s so many important topics we need to get to, so I want to dive into a pessimistic saying that we’ve heard for years. “No good deed goes unpunished.” I think that capital gains taxes are a perfect example of that because it’s certainly the price we pay for making a good investment. Long-term gains currently face a top marginal tax rate of 23.8% at the federal level. Under the most recent Build Back Better framework, the top marginal capital gains tax rate would reach 31.8%. The highest rate since the seventies. Now we all know nothing is final yet, but you are forward thinking as a fiduciary financial advisor, Mike. How are you helping your clients be as efficient as possible with the taxes that they will be paying on their investments?

Mike Lester (04:47):

This is a really big deal, Kristen. Moving forward for individuals who are wondering what could happen when it comes to taxes moving forward. I mean we find out or we hear about Biden wants to raise taxes. So when we hear currently the top tax rate being 23.8%, that means if you’re over a certain amount in capital gains or income, your long term capital gains are going to be taxed at 20%. Now there’s two rates there, just so everybody knows, currently 15% or 20%, depending on the overall income that you’re getting. But if you’re in that 20% bracket or even if you’re in the 15% bracket, there’s also the… Don’t forget about the Obamacare tax, right? That’s another 3.8%. So if you’re riding in your car or sitting at home or listening to this right now wondering, “I thought it was 15%” or “I thought it was 20%, what’s this 23.8% and why is it such a weird number?” Well it’s because of Obamacare. There’s an extra 3.8% on top of it.

Mike Lester (05:40):

So right now, regardless of how much money you made on your long term capital gains. So let’s say that you invested a million dollars and it turned into five million dollars. You have a four million dollar long term capital gain. Expect to pay long term capital gains rates of 23.8%. Now you may also be paying state tax on top of that, everything else, but long term federal 23.8%; that’s where it comes from.

Mike Lester (06:03):

Now Biden is talking about, now I don’t know that this will go through, but what they’re talking about, it’s a good soundbite, is raising that top marginal tax rate from 20% to 28%. So when we talk about… If the top now is 23.8%, but that top marginal topic gains rate could reach 31.8%. Well, you take the same Obama tax of 3.8%, add that to 28% and you get 31.8%. It could go that high.

Mike Lester (06:35):

Now, should you be concerned? Well, yeah. I mean there were a lot of people, Kristen, last year making adjustments to first of all their financial plans, but also taking a look at the amount of capital gains they had in 2021. Going, “Hey listen, maybe I’ll take a portion of that and go ahead and realize those gains in 2021 to keep from getting into a situation where I’m stuck paying a higher tax rate later.” So we were working with a lot of clients last year, walking through that process. And Kristen, obviously we had to be honest with everybody and say, “I don’t know what tax rates are going to be next year.”

Kristen Charles (07:07):


Mike Lester (07:07):

“I know what they are for 2021. So maybe we’ll take a portion of it, lock in the taxes at that point. And then if they’re higher in the future, we’ve protected you from paying a higher tax rate. If they’re not higher in the future, well, it’s kind of a wash.”

Mike Lester (07:22):

When it comes to financial planning, Kristen, it’s not just about talking to an advisor, who’s only going to recommend some kind of a financial product to you or say, “Our portfolios are better than your portfolios” or “Our portfolios are better than their portfolios.” Or, “Look at how big we are, how great we are,” everything else. It’s not just shiny objects. We have to take a look at just fundamentally, if you decide to work with a financial advisor, what is that financial advisor doing for you? Because trust me, they’re not working for you for free, right?

Kristen Charles (07:52):


Mike Lester (07:52):

They’re either selling financial products for a commission or they’re charging you a fee to manage your portfolio. Ask yourself, what are you getting in return for those fees? Now no financial advisor, including Talon Wealth Management and myself, we can’t promise you the market’s going to do well. But people know that. We can’t promise you that if markets crash, we can protect you from 100% of losses. Unless we’re selling you a financial product to get a commission, like we hear about these annuities and stuff.

Mike Lester (08:19):

What I find is most people are just looking for a good relationship, a relationship that brings value, where you’re getting guidance in retirement, helping you protect and grow your money. You need things like growth. You need things like income. You need help when it comes to taxes, we’re talking about taxes right now, and inflation and all of that goes into a complete financial plan.

Kristen Charles (08:39):

CNBC recently detailed how hard it is for some investors to figure out how much they’re paying their financial advisors, speaking of fees Mike.

Mike Lester (08:47):

Mm-hmm (affirmative), yeah.

Kristen Charles (08:48):

Because there are several ways that advisors can get paid. Now, I thankfully do know this after working with you eight plus years on your radio show. Explain to our listeners how that works at Talon Wealth Management and how we know if what our advisor is charging us is fair or not.

Mike Lester (09:06):

If you’re an investor and you’re looking to work with a financial advisor, just ask yourself, what would you be most comfortable with? I think this is the easiest way to sort through it. Would you be more comfortable with someone promoting a product to you that you know they’re going to get paid a commission on if you agree to invest in that product. Or would you be more comfortable with paying somebody a fee? So a little bit at a time to help you invest your money over time and the fee is proportionate to how well you do. If you’re doing better, your advisor’s doing better. If you’re doing poorly, your advisor’s doing more poorly. If you decide you don’t want to work with the advisor because they’re not doing a good job for you, then you just stop working with the advisor. You essentially fire them and you’re not paying them a fee anymore. Versus paying someone up front, a commission for returns you haven’t received yet.

Mike Lester (09:57):

If you put it into that context and then you go back and look at how advisors get paid, well, advisors can get paid through commissions. Which means they’re promoting a product to you. This could be… Products could be anything from a mutual fund where they get paid a load to put you in it. It could be an annuity that they get paid on, could be life insurance that they get paid on. Anywhere from that to managing a portfolio where they get paid a fee to manage the portfolio.

Mike Lester (10:20):

Kristen, I’m not really in favor of products and commissions because you’re putting a lot of trust in that person that they chose the right product for you, because you’re probably in that product for a long period of time. Sometimes 10 years or more. I’d rather pay somebody a little bit at a time, make sure they’re doing a good job for me. And if there’s a value add I’ll keep paying them. If there’s not a value add, I’m not going to pay them anymore. I’m just going to go on somewhere else. And that’s what fee-based advice is all about. And that’s primarily what we do at Talon Wealth Management.

Kristen Charles (10:46):

Find out the how’s and when’s of your retirement and if you are receiving the value that you’re paying for already. Find out if there’s value that you could find with Mike and his team at Talon Wealth Management anytime at

Kristen Charles (11:02):

It’s being called the Powell pivot. Many economists and analyst now expect as many as three interest rate hikes in 2022, after Fed chief Jerome Powell’s latest comments on inflation. Powell says he does, however, believe inflation will start to ease in the New Year.

Jerome Powell Fed chief (11:21):

We can’t act as though that’s a certainty and we’re not going to act as though that’s a certainty. There’s a real risk now, we believe, I believe, that inflation may be more persistent. And that may be putting inflation expectations under pressure and that the risk of higher inflation becoming entrenched has increased. It’s certainly increased.

Kristen Charles (11:40):

What are your thoughts, Mike? And how are you thinking interest rates will affect the investments inside our portfolios.

Mike Lester (11:47):

Yeah. Basics of the Fed raising interest rates is the Fed is trying to slow down the economy because they believe if the economy is growing too fast, they have to slow the economy down. An economy growing really, really fast is typically what causes inflation. So demand is very high, supply is low, people have money, things are going really good. But then we have to walk that back a little bit and go, “What’s the reason for it?” Is it because the economy was just amazing and all of these people had jobs and they went into work and then there was all this competition for employers because the jobs were so great. And the answer is no, that’s not what happened. What happened was people were incentivized not to go to work. They were actually getting paid more to stay home and not work than they would’ve gotten paid to go to work because of all the benefits that the government put out during COVID.

Mike Lester (12:36):

We still had this inflationary effect of, “I’ve got money, I’ve got time and I’m going to go out and spend it.” And then we had this effect of this supply chain crisis of there wasn’t as much supply. So, the cost of goods and services are going up because there are fewer… I mean, pick it, big screen TVs or computers or whatever your what is it? Cream cheese, right?

Kristen Charles (12:56):

Oh gosh, yes.

Mike Lester (12:57):

Not enough cream cheese. Well, those are supply chain issues, right? If a truck driver is going to get paid more to stay at home than he or she is to get in their truck and deliver the cream cheese, then that’s what they’re going to do. And you’re not going to get your cream cheese. That’s all there is to it.

Kristen Charles (13:11):

By the way, it was crazy, I forget if it was Philadelphia Cream Cheese or whatever, who said they would pay people twenty dollars to make another baked good for the Christmas season because they were running so low. It’s a very interesting marketing plan because of supply and demand issues.

Mike Lester (13:24):

Well, that’s just a good point. These are just nutty situations. But the hard thing that we’re dealing with right now is if you try to apply that to just standard economics of inflation; it was a great economy and things were going really well, people were doing well and then the goods and services just couldn’t keep up with an amazing economy. So the prices of those goods and services were going up and up and up, that would be a more typical definition. That is not what happened. This is completely artificially created. The question is, now that that’s gone, now the stimulus is gone. Now that people aren’t going to get paid more to stay home. When the benefits run out than they were to go back to work, what actually happens this year, it’s now 2022. What happens in 2022 when all of that supply starts to hit the shelves, is the demand still going to be there?

Mike Lester (14:12):

I suspect that’s going to be a component of what the Fed is looking at because if you go back to the basics of economics, we don’t want tons of inflation.

Kristen Charles (14:21):


Mike Lester (14:21):

And the Fed controls the money supply. So the way they control it is to raise rates so that money is harder to get. Harder to get just means it costs more to get, and that would slow the economy down. But at this point, if the Fed comes in and raises interest rates and slows an economy that’s artificially stimulated, we have yet to see what that would actually cause. It actually scares me quite a bit, Kristen, because I don’t believe the economy is fundamentally doing well. I think it’s doing well artificially. We haven’t seen the impact of people not going back to work, which they don’t appear to be doing. So right now they’re talking about raising interest rates which would not be great for markets. A bad economy also would not be great for markets.

Mike Lester (15:02):

As we ease into 2022 here, we’re looking at a lot of things. Certainly the Fed comments and then potentially raising interest rates. I don’t know if we’ll see that if the economy starts doing poorly. But be very, very cautious as we get into, January, February, March, and corporations start reporting numbers from the fourth quarter. If those numbers aren’t good and not good doesn’t mean companies were losing money necessarily. It could just mean they weren’t growing at the same rate they were growing in the third quarter. The market potentially doesn’t like that.

Mike Lester (15:35):

And so what we’ve been preparing our clients for, for a long time now, is what potentially was a slow down in the fourth quarter. I don’t know yet, but there could have been, I’ve talked to a lot of people in a lot of industries where they saw their businesses slowing. If that starts getting reported, you want a plan for your investments that are in the market because if it’s perceived that the economy is slowing down, then potentially markets do poorly. And if markets are doing poorly and you’re invested heavily in stocks, potentially, your 401(k), your IRA, your joint account, your trust account, your investments that are in the market, potentially aren’t doing well. You’re going to need a plan for that.

Mike Lester (16:11):

And for us, Kristen, it just starts with an analysis of how you’re invested currently, how your current investments are likely to react to a slow down in the economy and coming up with a plan for that before it happens. Because we want to be proactive, not reactive and financial planning and our complete financial plan can help a lot of people do that.

Speaker 1 (16:32):

If you would like to have a comprehensive financial plan and an analysis of your current portfolio, go ahead and visit our website at And we can do that for you complementary.

Speaker 1 (16:48):

Thanks so much for joining us on today’s show. Be sure to subscribe to our podcast. Visit our website at for more free retirement planning and investment resources.

Speaker 1 (17:00):

Thanks for tuning in to today’s show. And we’ll see you next time on the Retirement Wealth podcast. Exposure to ideas and financial vehicles discussed should not be considered investment advice or recommendation to buy or sell any financial vehicle. This information should not be considered tax or legal advice. Individuals should consult with professionals specializing in the fields of tax, legal, accounting or investments regarding the applicability of this information to their situation. Past performance is not a guarantee of future results. Investments may fluctuate and when redeemed may be worth more or less than originally invest.


Mike Lester

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Navigating Your Future Capital Gains Taxes