DiscoverThoughtful Money with Adam TaggartSave Big With These Smart Year End Planning Steps | Richard Rossa & Danny Ratliff
Save Big With These Smart Year End Planning Steps | Richard Rossa & Danny Ratliff
Update: 2024-11-24
Share
Description
SCHEDULE YOUR FREE YEAR END PORTFOLIO REVIEW with Thoughtful Money's endorsed financial advisors at https://www.thoughtfulmoney.com
At the end of every year, there’s a list of prudent steps to consider that can make a big positive difference to your financial prospects — but only if you take them before January 1st arrives.
If 2024 was a good year to your portfolio, don’t fumble your success right at the goal line by failing to take the right measures.
Or if your wealth goals didn’t go according to plan this year, then do everything you can to increase the odds for a better performance in 2025.
From tax loss harvesting to portfolio rebalancing to maximizing your retirement contributions, there’s a substantial number of smart tactics you should look into taking now — while you still have time.
A top challenge regular investors have with year-end planning is that it sneaks up on them. The winter holidays arrive before you know it and then…a lot of these steps just don’t get taken.
Which is a shame, because a little prudent attention on these today can result in outsized benefits in the future.
Another challenge is that many investors just simply don’t know the right year-end planning steps to take, or how to take them.
In today's video, we sit down with Richard Rosso and Danny Ratliff, the financial planning experts at Real Investment Advice (Lance Roberts' firm) for a deep dive into these end-of-year best practices.
---
Support this podcast: https://podcasters.spotify.com/pod/show/thoughtful-money/support
At the end of every year, there’s a list of prudent steps to consider that can make a big positive difference to your financial prospects — but only if you take them before January 1st arrives.
If 2024 was a good year to your portfolio, don’t fumble your success right at the goal line by failing to take the right measures.
Or if your wealth goals didn’t go according to plan this year, then do everything you can to increase the odds for a better performance in 2025.
From tax loss harvesting to portfolio rebalancing to maximizing your retirement contributions, there’s a substantial number of smart tactics you should look into taking now — while you still have time.
A top challenge regular investors have with year-end planning is that it sneaks up on them. The winter holidays arrive before you know it and then…a lot of these steps just don’t get taken.
Which is a shame, because a little prudent attention on these today can result in outsized benefits in the future.
Another challenge is that many investors just simply don’t know the right year-end planning steps to take, or how to take them.
In today's video, we sit down with Richard Rosso and Danny Ratliff, the financial planning experts at Real Investment Advice (Lance Roberts' firm) for a deep dive into these end-of-year best practices.
---
Support this podcast: https://podcasters.spotify.com/pod/show/thoughtful-money/support
Comments
Top Podcasts
The Best New Comedy Podcast Right Now – June 2024The Best News Podcast Right Now – June 2024The Best New Business Podcast Right Now – June 2024The Best New Sports Podcast Right Now – June 2024The Best New True Crime Podcast Right Now – June 2024The Best New Joe Rogan Experience Podcast Right Now – June 20The Best New Dan Bongino Show Podcast Right Now – June 20The Best New Mark Levin Podcast – June 2024
In Channel
United States
00:00
00:00
1.0x
0.5x
0.8x
1.0x
1.25x
1.5x
2.0x
3.0x
Sleep Timer
Off
End of Episode
5 Minutes
10 Minutes
15 Minutes
30 Minutes
45 Minutes
60 Minutes
120 Minutes
Transcript
00:00:00
You're just giving the government money, you know, just a little bit of work and a little bit of planning.
00:00:06
You can keep a lot more of your money and there's so many strategies to do that.
00:00:15
Welcome to Thoughtful Money.
00:00:16
I'm Thoughtful Money Founder and your host, Adam Taggart.
00:00:20
We're here to talk about a very important and very timely topic, which is end of year financial planning.
00:00:26
It's something that everybody should do and quite honestly, most people don't really ever get around to doing.
00:00:32
So even if you've had a really good year in the markets, like I think many people have had this year in 2024, not doing effective end of your planning is kind of like fumbling the football on the goal line,
00:00:44
right?
00:00:45
It's just such an unnecessary thing when you really want to, you know, end of year strong, right?
00:00:52
Especially if you've done well all year and even if the year didn't go well for you, you want to make sure that you're setting things up as best as possible for, you know, a maximum opportunity in 2025.
00:01:04
So anyways, to talk about exactly what you're in planning is, to demystify it, to share with you the steps that every investor should be considering at this time of year, I've been very fortunate in being able to get two of the great minds at real investment advice to join us.
00:01:21
So investment advice is one of the financial advisory firms endorsed by Thalple Money.
00:01:26
It's Lance Roberts's firm.
00:01:28
So if you watch this channel, you see Lance with me here a week after week, we're joined by two of his colleagues, quite honestly, the smarter and better looking colleagues there at RIA.
00:01:39
And I'm talking specifically about Richard Rosso and Danny Ratliffe.
00:01:42
Richard and Danny, how are you guys?
00:01:46
We're good.
00:01:47
Yeah.
00:01:48
We're good.
00:01:49
We're happy to be with you today, just to help people, you know, look at what RIA is.
00:01:54
And I know we've talked about this before, Adam, but we're very holistic and how we approach things.
00:01:59
Lance is, I think, one of the best investment strategists out there, Michael Liebowitz.
00:02:06
I think it's one of the best Fed analysts out there.
00:02:09
But you know, it's like having, you know, when you just focus on the portfolio, it's like one layer in a multi-layer cake.
00:02:15
So there are a lot of other financial decisions you need to make.
00:02:18
So that's where Danny and I and our team come in to sort of help people look at their money holistically.
00:02:24
And I think that that's very important for our firm overall.
00:02:28
Fantastic.
00:02:29
I agree.
00:02:30
Yeah.
00:02:31
Thanks.
00:02:32
Thank you for that great inch.
00:02:33
I'm going to put that on a loop in the studio every time Lance locks in.
00:02:37
He's going to hear that.
00:02:38
Great.
00:02:39
Much appreciated.
00:02:40
The volume goes up whenever he walks in the room.
00:02:42
Absolutely.
00:02:43
But no, this is such an important part that is so overlooked because we get so caught up in the day-to-day market minutia what's going on that no, it's very easy to overlook these small things that can be done.
00:02:54
And so I think this is extremely timely heading into the year and still have a month and a half just make some of these moves and make sure you're not leaving any benefits on the table.
00:03:04
Some of these you can do if you're a small business owner.
00:03:06
Some are going to be if you're employed by somebody.
00:03:09
But many times they're either overlooked or just not used at all.
00:03:14
And so we really want to bring the light those simple strategies that can help any and everybody.
00:03:19
All right.
00:03:20
Great.
00:03:21
Well, look, let's just roll up our sleeves and start diving in real quickly.
00:03:23
I just want to give viewers a little bit of grounding.
00:03:26
So Lance mentions this quite honestly, quite frequently on the channel.
00:03:31
But he talks about how the team at RIA has been built in his job and Michael Lieberwitz's job is first and foremost to figure out how to manage the portfolios.
00:03:43
That's their strengths, their superpowers.
00:03:47
Danny, you and Richard here, your guy's superpowers is on the financial planning side.
00:03:53
So you're the ones who are actually really talking with clients and saying, okay, let's talk about your personal situation, your goals, your aspirations, your risk tolerance and whatnot.
00:04:02
And then how does that translate into a strategy that then we can direct our portfolio managers to try to help achieve for you?
00:04:09
Did I get that right?
00:04:11
We did, yeah.
00:04:13
We tried to help clients figure out what their personal financial benchmark is.
00:04:18
What kind of return do they meet to hit life goals?
00:04:22
And then we hopefully exceed those over time.
00:04:25
So the goal is not always to be an index.
00:04:28
It's to be your life index or at least at least meet it.
00:04:32
So that you're hitting the goals and everybody's, everybody's plan is so very different and how they approach things.
00:04:40
Their money scripts are different, their money personalities.
00:04:44
So yes, it's very important what Lance and Michael do to stay proactive and follow rules and then on our side, we do the same.
00:04:53
We tried to make sure that people understand that we're here for them, not Wall Street.
00:04:59
And some of the dogma that gets promoted out there from the financial planning perspective has been out there since the '90s and never changed.
00:05:07
So we are always sort of cutting edge academically and looking at these things so that clients get a realistic or pragmatic picture of what the expectation should be.
00:05:17
So I would say the first thing we always want to try to understand is you better get your head on straight.
00:05:22
And what I mean by that is I think that's a year round exercise.
00:05:26
You mentioned it earlier with the markets doing it so well as it's done and so complacent as it has been.
00:05:32
People really need to reset their expectations emotionally about what they think next year is going to bring.
00:05:39
So on your checklist is an emotional kind of, where am I?
00:05:43
How do I restructure back to my beacon of what my portfolio should look like versus what I emotionally did to it?
00:05:51
And I mean, oh my gosh, I'm all in tech stocks or I'm overweight stocks and my risk attitude is changing now because of the election and you don't want to do that.
00:06:00
So part of our job psychologists and it's a year, it's a year and thing, but it's also to say expectations, but it's a year round exercise to make sure that you understand that next year may be different than this year.
00:06:13
And that's why you got to focus on whatever your return or benchmark is to hit and not how great you've done this year and most people have.
00:06:21
But they always think that they're going to extrapolate that into next year and Danny and I have to make sure people understand that they got to get their head on straight and may not be the case next year.
00:06:32
And that's what I'm glad you mentioned that because this is something I've been mentioning a lot in my conversations with Lance, which is people have recency bias, right?
00:06:41
So your team wins the Super Bowl.
00:06:43
You're super excited.
00:06:45
They win it next year.
00:06:46
You're very excited.
00:06:48
Now you're expecting them to win it for a third year.
00:06:50
Now, almost no team ever does that and even if they make the playoffs, but don't actually get the Super Bowl ring, you're disappointed because you were all in that they were going to somehow a three-peat, right?
00:07:00
And investors have had two really big years in the market.
00:07:03
So I imagine now a big part of your work is just trying to temper people's expectations, which is, yeah, you've had a great run in the market, but don't necessarily expect that third Super Bowl in a row.
00:07:14
Right.
00:07:15
Be cautious.
00:07:16
Understand that depending up on where you are, are you, we just, we break out between accumulators and decumulators, right?
00:07:24
So most of the financial industry is Danny and I will help you understand is it's always focused on accumulation, saving money, saving taxes, all these wonderful things.
00:07:34
But the other side of it is I also have to take money out of my accounts.
00:07:38
I need right time and income strategies and a lot of advisors, frankly, then I won't care about that.
00:07:42
I care if they, they apply the same accumulation strategies to return in this strategy.
00:07:46
So years ago, these to be show out there called two-time with Tim Allen and Wilson.
00:07:50
And what Danny and I try to say is you're once Tim Allen and you have the kids and, you know, you're looking over at Wilson over the fence and Wilson's looking at over there.
00:07:59
Wilson's goals and your goals could be very different.
00:08:02
So we really look at pre-retires and retirees.
00:08:05
I mean, yeah, or really early accumulators and say, you know, their strategies are going to be different.
00:08:11
So some of this year on checklists is really good for possibly your retirees or about to be retired as well.
00:08:18
So we look at both sides, we look at Wilson, we don't want to ignore Wilson and just focus on Tim Allen is wife and his kids.
00:08:25
We try to be holistic that way and there's a different set of strategies that go along with that.
00:08:29
All right.
00:08:30
Well, look, why don't we just get to the point where the rubber meets the road here?
00:08:35
So somebody comes in or one of the viewers watching this channel says, hey, I want to talk to these guys.
00:08:42
I want to do this year in planning.
00:08:43
They fill out the form there at thoughtfulmoney.com.
00:08:46
You guys reach out to me schedule a time to chat.
00:08:50
Walk me through how you would walk them through the year end planning process.
00:08:53
Why don't you go ahead, Danny?
00:08:57
Well, I think it's a very preachive person because everybody's going to have a different set of rules or guidelines that we can operate by and so it really takes getting to know somebody.
00:09:05
So the more open that a potential prospector client can be, the better because as we do a plan, as we tell people, look, if we get garbage in, garbage is going to come out.
00:09:17
And so it's really a detailed analysis.
00:09:19
We take an inventory of assets.
00:09:21
We get a very good understanding of where they're employed or do they own their own business.
00:09:25
What type of strategies are they already employing?
00:09:28
And then from there, we can begin to dissect and break down exactly what they may be able to do better, what they're doing very well.
00:09:34
And we talked to plenty of people that are doing an excellent job, but we try to find those things that just not everybody's thinking about.
00:09:41
And sometimes it's things that we may be doing already, but we're not taking full advantage of it.
00:09:46
And so there's a hierarchy of savings.
00:09:48
We talk a lot about this as far as where do we put our funds?
00:09:51
How do we fund these different types of investment vehicles?
00:09:54
And what should you be using for the goals and objectives that you have?
00:09:57
And so for everybody, it's a little bit different.
00:09:59
You know, Adam, we've told people with $500,000 they can retire.
00:10:03
I've told people at 50 million that they can't.
00:10:06
So the number is so broad and vast because if you can remember those old fidelity commercials, the volume, I think you used to have one as well.
00:10:13
It's, you know, fidelity's most recent is they have that green line, the arrow that you follow.
00:10:18
And it's going to tell you exactly what you need to reach your retirement goals, but they're always moving.
00:10:22
I can't tell you one specific client that I've been working with that is we built a plan and it's been static or just stagnant.
00:10:30
It's always changing a little bit over time.
00:10:32
There's a fork in the road.
00:10:33
A life event occurs.
00:10:34
They may want to make a change or if they're continuing to accumulate, they switch jobs, they start a business.
00:10:39
So now we're going to have to determine which is the best route to go.
00:10:43
Now that financial plan will help in these tips are things that I think that not everyone's going to pertain to each person.
00:10:49
But I feel like that there's going to be a handful that everybody's going to be able to take away from this.
00:10:54
That's going to be impactful thinking about you're in planning.
00:10:57
And so if somebody calls in at them, we're going to talk through kind of the scenario, what they're currently doing, how they're doing it.
00:11:04
And then we're going to begin to break it down piece by piece.
00:11:07
And Danny brings this up, the financial hierarchy savings.
00:11:11
I met with new clients the other day and they're just in the process of their plan and I'm putting the words goal scooping in their vocabulary.
00:11:20
What I mean by that is they might have goals by a new car, fix the kitchen, all this stuff for 2026, 2027, they've done so well this year.
00:11:32
I'm pulling those goals into the present from the future.
00:11:35
In other words, I'm freeing up money now.
00:11:38
Can you renovate that kitchen next year?
00:11:41
Can we move things up because the markets and your timelines and what you've done has been so good?
00:11:48
So what you have to think about is are there goals and things that you need to fund as you rebalance the portfolio.
00:11:53
Don't write away, maybe put it back into the portfolio.
00:11:56
Had you won, are there goals that you have next year or the year after that you can take advantage of next year and pull them ahead because of how well you've done.
00:12:06
So understanding your goals and then scooping them up and doing them sooner might be something you want to consider because of how well you've done.
00:12:15
And you may not get that chance in two years, but you do now.
00:12:19
So you've got to think about what you're going to do with the clash cash.
00:12:22
The other thing is Danny and I, we always recommend an RA that households maintain an FBC.
00:12:28
That's a financial vulnerability cushion.
00:12:30
So right before the pandemic, a pandemic, Danny and I started talking about this on the radio show.
00:12:35
The first six months of living expenses are an adequate emergency reserve for anything unexpected, right?
00:12:40
I got to fix the air conditioner.
00:12:42
I got to auto repair.
00:12:44
But what about an additional six month to say is in case of a significant life event, extended unemployment or other outliers that have been to put your households in financial jeopardy?
00:12:55
So maybe you haven't done that.
00:13:00
You've been so excited about stocks and variable assets that you have forgotten the basics.
00:13:07
And so we will say, Hey, by the way, your money, money tip for your year end is, how's your financial vulnerability cushion?
00:13:14
Are you replenish that?
00:13:17
So not only are you going to goal scoop to do that, you might sell off some assets and put that money in cash because you do need to replenish that.
00:13:25
You have Marcus, synchrony, ally, all these great, all these great FDIC insured online banks that are there.
00:13:34
And we know Adam, you talk about this a lot, this is not going to rush out in low rates.
00:13:37
There's absolutely no reason to.
00:13:39
So you're still getting decent rates on cash.
00:13:42
It's not zero and it's probably not going to zero.
00:13:45
So I know cash is boring.
00:13:47
I know cash is not Microsoft, but that's not the goal.
00:13:51
The goal is to make sure that your goal is scooping and you replenishing that financial vulnerability cushion.
00:13:58
Not only the six months of savings, but what if something else happens?
00:14:03
So having 12 months of your living expenses and cash reserved is very important for us to establish with people.
00:14:11
All right.
00:14:12
I think those go ahead, Adam, I wanted to elaborate real quick.
00:14:15
I got you a second.
00:14:16
Yeah.
00:14:17
You know, elaborate.
00:14:18
I'll then pay along.
00:14:19
So one thing I do want to bring up, though, for goal scooping, you know, Richard's mentioning is you can move these funds from certain accounts to other accounts.
00:14:26
If you're going to go ahead and liquid a, you know, equities at higher prices, keep in mind, we also want to think about the tax efficiency of that.
00:14:34
So you may not want to add on additional taxes.
00:14:36
You can do that inside of your retirement account.
00:14:38
Go find a money market fund or go find a stable value fund in your 401k at work.
00:14:43
It doesn't mean you necessarily have to pull those funds out now.
00:14:47
That's going to take some additional planning to determine, you know, especially if you are at retirement age or near 65, we have to think about Irma charges for Medicare.
00:14:56
We have to think about additional taxation and potentially, you know, where you live as well, your state income tax.
00:15:02
So this needs to be thoughtful.
00:15:04
What we're really talking about right now, without knowing each and everybody's situation is just going ahead and freeing things up.
00:15:10
And you know what the other thing you could do is, if you know that that goal is not going to come until July, go buy a six month CD, go find something that you can do that gets you a little bit more return.
00:15:20
So there's lots of different avenues and ways to look at this.
00:15:22
I just want to make sure that everybody does understand that doesn't mean you necessarily have to take it out of the, out of the account because we do want to think about the tax burden that comes with that as well.
00:15:30
All right.
00:15:31
Good clarification.
00:15:32
I'm going to ask you about tax selling in just a second.
00:15:35
But I love this concept of goal scooping and, you know, it's really important to keep in mind, and I've been saying this more often on this channel where the goal is not to die atop a big pile of cash,
00:15:47
right?
00:15:48
The goal, the mission for why I created Thoughtful Money was to help improve people's odds of funding their life's goals, right?
00:15:57
What are the things you want to do in life?
00:15:58
Okay.
00:15:59
Great.
00:16:00
How can we help you get there?
00:16:01
And one of the things I know you guys do, you've already alluded to pretty heavily here is you get real specific with people and helping identify their goals and then a plan to get there.
00:16:11
So it's not about, okay, a new year's starting.
00:16:14
I want to beat the S&P this year, right?
00:16:16
That's just an arbitrary, you know, objective you're putting out there and it may cause you to take on way more risk than you need to to hit the goals that you care about.
00:16:26
So your job is basically to help clarify the goals and then to help people find the best path on a risk or ward basis to get there.
00:16:34
And then once they're there, yeah, realize that goal.
00:16:37
If you can afford to remodel that kitchen today without impacting your other goals, great, do it.
00:16:44
That's a boon to you.
00:16:45
You get to enjoy that sooner.
00:16:46
And, you know, if you have something happen two or three years down the road that if you'd waited too long, that goal might have passed you by, right?
00:16:55
So you guys are making it really practical for people.
00:16:59
Right.
00:17:00
And at this point, you just might want to say, hey, it's money's in my IRA.
00:17:04
Now again, we don't know what's going to happen with the tax cuts and jobs act, right?
00:17:07
This is a precarious situation.
00:17:09
Is it going to be extended or not?
00:17:11
We do planning, assuming it is, but we also do all the plans, assuming it's not.
00:17:18
But either way, you go ahead and put that money aside in your IRA and say, this is from, this is money that I'm going to have to do what I need to do because I'm front loading my goals as well,
00:17:29
but we also have people taking money out of IRAs and why the any and I started probably talking about this before it got sexy, but Roth conversions, surgical Roth conversions for pulling money out of IRAs to move into Roth has become the hot thing.
00:17:45
We've been doing it for years before it became a hot thing close to seven years now.
00:17:49
So when you look at this, you have to consider the fact, do you think long term taxes are going higher or lower and you know the spend and anybody at them with where our deficits are right now.
00:18:00
How in hat contacts is the lower unless we really extremely blow out the growth rate, but demographics, right, don't attend to that productivity.
00:18:10
So you got to look at the fact that even when you're retired and you're Wilson, you may not be falling into the lowest tax bracket.
00:18:20
That's another 90s bullcrap story that we've been getting for a long time, right.
00:18:27
So social security, Medicare premium triggers, the 3.98% net investment income surtax.
00:18:36
This they put when people are between say 66, 65 to 75, they're in their active years of retirement.
00:18:44
They're spending money, anything they take money out of their accounts for in their IRAs is taxable income.
00:18:50
So as much as we talk about diversification of assets, you must diversify your accounts.
00:18:56
So in a year and checklist, I think you're going to look at doing surgical rough conversions where you're pulling money out of an IRA and into Roth and we have to run the numbers to make sure or you're going to max out your Roth or one can you work.
00:19:11
You're going to start maybe a Roth IRA because the whole world is always and CPA is nothing against them, but they're always worried about you saving taxes now.
00:19:22
But you have to remember that many times retirees do not fall into the lowest tax bracket anymore.
00:19:29
And that's when Roth conversions pay off.
00:19:31
They pay off also because of how say adding you want to leave your IRA to your child.
00:19:38
That child used to have the ability to take it out over their life expectancy.
00:19:42
They don't have that ability anymore.
00:19:43
They have to do it over a 10 year period.
00:19:46
Thus you're putting them possibly in a precarious tax situation.
00:19:50
So Roths have become a great legacy asset as well.
00:19:53
So some of the advice we will provide is why should I do Roth?
00:19:57
We run the numbers to show you that maybe you should be doing Roth conversion and dating.
00:20:02
How busy are we with Roth conversions now towards the end of the year with clients that have definitely bought it.
00:20:07
You hear both of our voices and it's been a crazy time of year in general.
00:20:12
Yeah.
00:20:13
All right.
00:20:14
And so guys, great point.
00:20:17
Let me just make sure the whole audience is following along.
00:20:19
I think most people understand the difference between a traditional IRA and a Roth.
00:20:23
But very quickly, traditional IRA is tax deferred.
00:20:27
So you put money in it today, pre-tax money in it today, that grows tax deferred.
00:20:33
But when you start making withdrawals in the future, that's taxed as regular income.
00:20:39
The Roth is sort of the other way around where you're putting post tax dollars into it today.
00:20:46
That grows tax-free.
00:20:48
And when you withdraw at some point in the future, those withdraws are tax-free.
00:20:52
Did I get that correct?
00:20:54
You did.
00:20:55
Keep it in mind, President Trump brought this up about no taxes on Social Security.
00:21:00
You know what calls I got from people that don't, that are not clients, I said, I didn't even know I get taxed on Social Security.
00:21:05
Yeah.
00:21:06
You do.
00:21:07
The Roth doesn't.
00:21:09
People don't realize there are these back door taxes, surcharges on Medicare premiums.
00:21:15
Social Security taxes that will take your marginal tax rate and increase it.
00:21:20
And our job is to look at that total tax rate and figure out, is it worth it for you to do Roth conversions over a period of time so that you have multiple accounts to draw money from.
00:21:30
So say Wilson needs to buy a new car and he's been, he's got himself a young girl for money, wants to spend 100 grand on a car, calls Danny and goes, Danny, I would take, you know, get this fence thing.
00:21:39
I've got a Ferrari in a 27 year old girlfriend and Tim Allen is all freaking out.
00:21:43
But guess what, Danny's got to tell him he's got to take $100,000 out of his IRA, taxes, ordinary income, thus possibly increasing with his Medicare premiums next in the next couple of years and increasing his taxation on Social Security.
00:22:00
What if he could take $100,000 by doing $50,000 out of his Roth and $50 out of his IRA and tax, we're looking at it from a tax-efficient manner.
00:22:11
So he's not getting destroyed on taxes, right?
00:22:16
When the 90s, I understand we've had great market, they've had this tax-deferred compounding snowball that has paid off, thus people have put all their money.
00:22:24
And then when I first started in this business, people did fall into the lowest tax bracket.
00:22:29
Social Security wasn't always taxed.
00:22:32
It worked, right?
00:22:34
Now it's so different.
00:22:36
So this diversification of accounts, having some money in Roth, having some money in pre-tax, having some money in a praying vanilla brokerage account allows you to craft a retirement income that's very tax-friendly,
00:22:47
but not just for federal tax, for Social Security tax and Medicare or charges, as we call them.
00:22:52
So surgical Roth conversion towards the end of the year or examining the ability to do some Roth's over time, especially if you want to leave money behind to heirs, non-spouse,
00:23:03
especially today is important.
00:23:04
And it's even, even though tax brackets might change, like say the tax, say the tax-piston jobs act does not sunset, it's still worth it to do Roth conversion.
00:23:15
No matter fact, you have a long period of time because of generous 22 and 24 percent margin rates to do those conversions over longer years, more years.
00:23:24
So it's even more of a reason to look at it and have your accountant and your financial advisor run the numbers to see if it works.
00:23:33
Danny, how many times will you run these analyses and show that over a client's lifetime, they save what, maybe 300,000 in taxes over their lifetime.
00:23:43
They have $500,000 more in assets to leave behind, even though it hurts in the beginning because you have to pay the taxes upfront.
00:23:51
We tried to do the projections out to show you that Roth conversion may work.
00:23:55
At year end, that might be something worth it, but you're running out of time.
00:23:59
So maybe you're looking at tax planning for next year to decide whether or not you're going to even put Roth into your vocabulary.
00:24:07
And that's important.
00:24:08
Well, I think everybody needs to know what their break even point is as far as when it makes sense for them.
00:24:13
And you're going to have to live to a certain amount of time or, you know, your longevity has to be so long this to really make sense.
00:24:18
Now, you alluded to it earlier, the legacy intent, I think is huge, right?
00:24:23
If you wanted to give money to kids, what better way if you are in a lower tax bracket to do so very strategically?
00:24:30
And then when, you know, if you pass, they may be in their 50s or 60s and they may be making the most they've ever made.
00:24:36
Now, these funds, especially with the 10 year rule on inherited IRAs for non-spousal beneficiaries, you have to take those funds out within that 10 year window.
00:24:45
So you may pay quite a bit more in taxes, especially if we, if this government continues to spend money the way that they do, who's going to pay the burden on that?
00:24:53
Well, we all are.
00:24:54
So now we've got to start thinking in that manner.
00:24:55
I know there's a lot of talk right now that Trump is going to get this, President-elect Trump's going to be able to get this permanent tax cuts and job tax.
00:25:03
But what if it's not and what if the pendulum swings the other way and they're going to need money again somewhere, somewhere down the road and we do see higher taxes?
00:25:11
It could be additional means testing on social security or Medicare.
00:25:14
All those things are things we need to think about and there's so many pieces to the puzzle.
00:25:18
I do see, though, and Rich, you see it occasionally, too, where raw conversion just doesn't make sense.
00:25:23
And so it is not for everybody.
00:25:26
In fact, I see that, you know, many times that there's not that legacy intent or they don't intend to, you know, they don't have a long lifespan.
00:25:33
Then yeah, it's not for everybody, but it is something I think that you should pursue and look at.
00:25:38
We typically do like to wait towards the end of the year because with the tax cuts and jobs act that we do a raw conversion, we can no longer recharacterize it and what that means is if you said, okay, I'm ready to do a $50,000 conversion and you may call in January,
00:25:53
say, shoot, hey guys, I did $25,000 too much.
00:25:56
I didn't calculate this additional income.
00:25:58
It put me up into this next bracket or it triggered something else.
00:26:01
Well, we cannot go back and put those funds back into a traditional IRA.
00:26:05
So end of year planning for this type of thing, I think is really important because we don't typically want to do that in say January, February, we want to get a very good idea as far as what's your full year of income looks like.
00:26:16
And then we can more accurately project what that may or may not be.
00:26:20
And so keep in mind that when we're doing so, and you maybe listen to this in January, I would still encourage you to wait, wait towards the end of the year.
00:26:28
Make sure you have a very good idea as far as what that income is because you don't want to mess this up.
00:26:33
Okay, so a couple of important things you just to underscore.
00:26:37
One is we're recording this in mid November.
00:26:41
And so folks don't have a ton of time left, right?
00:26:44
So I just want to underscore for folks, if you're thinking, hey, tax, you're in planning is something I needed to really get cracking on.
00:26:51
Do it soon because hey, Thanksgiving's going to be here next week.
00:26:54
Then you're only going to have a couple of weeks before the winter holidays are on top of us.
00:26:58
The family's going to start arriving.
00:26:59
Obviously work.
00:27:00
There's a lot of wrap up stuff you have to do in those last couple of weeks.
00:27:03
It gets very easy to get overwhelmed.
00:27:05
And then all of a sudden, people are trying to call you, you know, 48 hours before New years.
00:27:11
And there's only so much you guys can do with that limited time.
00:27:14
So again, folks, time is of the essence here.
00:27:17
All right.
00:27:18
Secondly, just to make sure folks are really clear, you guys have sort of mentioned this, but I just want to make sure it's super clear to folks.
00:27:23
When you're doing one of these Roth conversions that you guys have been mentioning, it's you're taking money that's been in a traditional IRA, and then you're moving that into a Roth.
00:27:32
And when you do that, that is a taxable event.
00:27:36
So, you know, if you put a bunch of money in a traditional IRA, you're going to be paying taxes on it today to get it into the Roth.
00:27:43
Now, again, this is why this becomes such an important math exercise.
00:27:47
Given the long-term tax-free withdrawal benefits and tax-free growth benefits, that may very well be the right thing to do, but you really want to make sure you get your numbers right.
00:27:56
So that's why working with a professional like you, getting your accountant involved will be really helpful.
00:28:00
It is.
00:28:01
You've got to keep in mind, like, I have a client that looks at December.
00:28:04
How much income he's having.
00:28:05
And he can't move.
00:28:06
We don't want to move him into a higher bracket.
00:28:09
We want to just fill up his marginal tax rate, right?
00:28:13
And now, because of the Tax Pets and Jobs Act, that's 22 and 24 percent marginal rates are pretty wide.
00:28:19
So this year, we can only convert, like, $12,000.
00:28:23
And Richard, sorry, let me just ask this to make sure it's clear.
00:28:27
It's not an all-or-nothing.
00:28:28
Like, I get to take everything that's in this tradition all right, Roth.
00:28:31
I can just take a select amount and I can keep doing that year after year, right?
00:28:34
Yeah, we don't call it the machete Roth conversion, right?
00:28:39
We're not shopping at your account.
00:28:41
We're calling it surgical, right?
00:28:42
Okay.
00:28:43
Yeah.
00:28:44
I have clients that only move $56,000 a year because that's all they can do.
00:28:48
But they're building up slowly that Roth, and a lot of times it's for legacy intent.
00:28:52
Now also, you want to make sure you're paying your taxes from an outside source.
00:28:56
So I have a client that will pay $10,000 and move $10,000 from his IRA to his Roth.
00:29:02
But he's got the taxes outside to pay for it.
00:29:05
So the entire $10,000 move into that Roth.
00:29:09
Got it.
00:29:10
All right.
00:29:11
Makes sense.
00:29:12
Okay.
00:29:13
So, yeah.
00:29:14
And so, folks, this is like the vision I have in my mind here during this whole process is, it's like a conductor.
00:29:20
That's what Danny and Richard are where you have all these different potential options, all these different instruments.
00:29:26
You want to recruit them so that you're using the right instrument at the right time to do the right thing for your wealth goals.
00:29:32
So you might say, yeah, we need a little more flute right now, right?
00:29:34
We're going to take a little bit of money from that traditional IRA, we're going to put it over here.
00:29:38
But you're making it all work together in concert.
00:29:40
All right.
00:29:41
So you guys talked about earlier about, you know, having to take into account the tax implications of selling.
00:29:46
Obviously, that applies here with the Roth conversions, but that applies on a larger basis with just, hey, it's 2024, markets had a great year,
00:29:56
you know, do I want to start realizing some of these gains, right?
00:30:01
Or do I have some dogs in my portfolio that I might just want to sell now before they end of the year so I can apply those losses to reducing my taxable gains?
00:30:10
This is a big part of the year in planning, right?
00:30:13
It is.
00:30:14
Tax harvesting.
00:30:15
The problem is, what are you harvesting?
00:30:18
It's like, it's been very hard for us.
00:30:20
Well, but you might have losses that you can offset against gains.
00:30:24
That's a point.
00:30:25
Yes.
00:30:26
But perhaps you were, you know, you're more comfortable with a 40% allocation to equities, especially in your retirement account.
00:30:32
Now you're, you let it ride and you're at 67.
00:30:37
So you're, it's a good time now to get it back into balance.
00:30:41
To rebalance which Lance talks about time, yeah.
00:30:43
Why not?
00:30:44
I mean, that's.
00:30:45
And that's the challenge is that rebalance, but you know, another thing that we've done in the past at and when you have a year or maybe things aren't as good, you may have a high conviction in a specific investment,
00:30:57
but you could go ahead and sell it, wait that 30 days to avoid a wash rule and then you can get back in or you could buy something similar.
00:31:04
And so sometimes we'll look at that because we need that for a carry forward loss.
00:31:09
So a big question that we often ask people, especially if it's a new client coming on, is, hey, do you have any carry forward losses?
00:31:15
Ask your CPA what you've been using because I find oftentimes everybody that many people I talk to and really, really smart people will tell me, hey, I can only use $3,000 of that every year.
00:31:28
I'm like, no, no, no, no, no, no.
00:31:29
We can use that to offset your gains and then you can apply an additional $3,000 on top of that to decrease your overall tax burden.
00:31:37
And then anything in addition to that, you carry forward to the following year.
00:31:41
And so there is a strategy around that.
00:31:43
That's a great point, Adam.
00:31:44
Hey, I just want to define for folks, the term you used there, which was wash sale, which is, so I think in the case you were talking about it, Danny, let's say I've got a stock that had a bad year,
00:31:55
but I believe in it, right?
00:31:58
I like this stock.
00:31:59
I want it my portfolio for the long haul.
00:32:02
You can sell it at the end of the year, clock the loss to use to offset other gains.
00:32:09
And then as long as you wait 30 days, you can then buy that stock back, right?
00:32:14
So it's back in your portfolio, but you also got to deduct the losses.
00:32:18
If you don't wait the 30 days, it's what's the authorities call a wash sale where they basically say, you know what, you're kind of in and out of this thing too quickly.
00:32:28
It's almost as if they treated as if you didn't sell it.
00:32:30
And therefore you wouldn't be able to get those, you wouldn't be able to deduct those gains or those losses.
00:32:36
And so if folks, if you haven't heard of the loss sale before a one and make sure you knew what it was, but also just know that there are all these things out there that if you know the rules of the game,
00:32:47
you can use all this to your advantage to, in some cases, almost kind of get your cake and eat it too.
00:32:52
Now, of course, the risk of the wash sale is the stock moves like crazy in the 30 days that you're not not owning it, but that happens relatively rarely, right?
00:33:00
So again, working with the experts like these guys, they can give you all these options.
00:33:04
So like that conductor, you can make them all work together to kind of get the best possible concert out of it.
00:33:12
All right.
00:33:13
Right.
00:33:14
You have another with, you know, you also want to just look at your accounts, right?
00:33:17
You have a flexible spending account, you got to make sure you're spending it down.
00:33:21
You know, make sure you can move those are assets that you're using for healthcare expenses, right?
00:33:26
So what you want to try to do if you're using a pre-tax account to pay your healthcare expense, like a flexible spending account, how much did you have in healthcare expense?
00:33:34
Do you have over it?
00:33:35
What is it going to look like next year, right?
00:33:37
How you going to engage maybe what kind of annual healthcare expenses you have, you know, every year, I go to the eye doc, every year, I do this.
00:33:45
Okay.
00:33:46
Well, then make sure you're not overfunding it, but you may have my flexible spending account.
00:33:50
You've got to use it or lose it.
00:33:52
You might get a few more months to lose it, but you will lose it.
00:33:55
So you want to make sure you're using that money that's in these pre-tax accounts that you're saving, that are called spending accounts, not health savings accounts, but flexible spending accounts.
00:34:06
You want to make sure you're getting that in, and a lot of people will do that.
00:34:10
I talked to them.
00:34:11
They probably does do it.
00:34:12
Clients who are doctors like, oh my gosh, everybody's using their flexible spending dollars right now.
00:34:17
Yeah.
00:34:18
They're bunching it up and trying to do it, but it's important because you don't want to lose it.
00:34:21
Well, it's important.
00:34:22
You don't want to lose it.
00:34:23
And again, I think it's a great example of flexible spending account.
00:34:26
A lot of people know what they are.
00:34:28
You know, a lot of people will use it if it's made available, perhaps, through say work, but they don't realize that they can just go out and get one on their own if they want.
00:34:36
And again, this is some of the planning for the next year that you help people do, right?
00:34:40
A lot of what you do is, hey, what can we get done before the end of the year?
00:34:43
But let's say you're talking to somebody and they don't have a flexible spending account.
00:34:47
And you can say, okay, great.
00:34:48
Well, how much do you normally spend on the health-related costs during the year?
00:34:51
Well, maybe you should put X amount of your pre-tax dollars into one of these accounts, and then you'll actually be better off next year.
00:34:58
Yeah.
00:34:59
I mean, there are a lot of accounts that you want to look at.
00:35:01
There's nothing wrong with tax deferred accounts.
00:35:03
If they're not all where you put your money, we work with a lot of clients that are really healthy at how much they're putting into their 401(k)s and so forth, and they're in their pre-tax retirement accounts.
00:35:15
So maybe you haven't done enough this year.
00:35:17
Maybe you're going to be getting a bonus.
00:35:18
Maybe you can amp that up a little bit, depending on what your taxes are going to be.
00:35:22
So this is a good time to top off a lot of those more tax favorable accounts that you haven't done.
00:35:30
But you also want to look at tax planning for the new year, because interestingly enough, if you are going to be, now generally speaking, when you're 50 or 59,
00:35:41
you get, you know, you get your say your 401(k)
00:35:44
limits, you get enhanced what we call catch-up contributions, right?
00:35:48
So I could do the 20, 20, 20, 25, 50 to 59 or 64 and older, I could do 23,500, that's my annual deferral.
00:35:58
Then I get a 7,500 buck catch-up contribution.
00:36:02
So my total 2025 annual contribution is 31,000, but don't ask me why.
00:36:08
I have no idea, but do the Secure Act, the age is 60, 61, 62, 63, have a special catch-up contribution next year,
00:36:20
of 11,250, thus your total 2025 annual contribution is 34,750.
00:36:28
So you may not realize that you can bolster your catch-up contributions for a period of time, and if that's what you want to do,
00:36:38
right, they could do it.
00:36:39
And once participants turn 64, they revert back to the standard age 50 plus catch-up contribution moment, but for a period of time, age 60, 66, 63,
00:36:50
61, 62, 63, I can bolster what I'm putting away in my pre-tax accounts if I chose to do so.
00:36:58
And just, you may want to prepare for that next year to say, "Oh, I could put morning."
00:37:03
Maybe I need to read it on my budget, look at my spending next year.
00:37:06
So it's a good time to budget for next year already.
00:37:10
One thing that I'm concerned about and that we've seen in the past is that these 401(k)
00:37:13
providers are not...
00:37:15
there may be a little antiquated technology having caught up to it.
00:37:18
So you may have to physically call in because you may not see that on your screen.
00:37:22
It may show just the regular catch-up provision, like here's how much you funded, here's how much additional you have.
00:37:28
So if you are between those ages, I would reach out to them if it doesn't automatically show that from what you can contribute when you log into your 401(k), because they may have to turn something on for you, they may have just not caught up to the new legislation.
00:37:40
And then we see that from time to time.
00:37:42
Well, okay, that's great to know.
00:37:44
So yes, so much of this is just like even just in this conversation, you guys have reminded me of a couple of things where I'm like, "I'm not even sure I'm utilizing that as best I should."
00:37:54
There's just so many both options, but so many sort of special cases here and stuff like that.
00:38:01
You kind of need somebody like you, who's an expert and swims in this stuff all the time, to be able to see what you're not doing.
00:38:07
Yeah, the Secure Act's strange, it drops, it's like drops things that you go where that come from.
00:38:14
And you have to be aware of those because it just doesn't make any kind of common sense.
00:38:18
Okay, is there something magical between 16 and 63 that happens is some magic pixie dust that you're giving me?
00:38:25
Why can't I just continue to do this extended catch-up?
00:38:28
But no, only from here to here.
00:38:30
So yes, we have to keep track of these changes over time.
00:38:34
So that we can communicate to our clients and people that ask questions to us through the radio show and the website.
00:38:42
All right.
00:38:43
Hey, since we're talking about retirement stuff here mostly, two questions.
00:38:50
One is beneficiary updating.
00:38:55
That's something that I think a lot of people just kind of forget about, right?
00:38:59
They open their retirement account, they set their benefits, and this isn't unique to just retirement accounts, I guess.
00:39:05
And then, you know, over the years, you just focus on putting money in it, but you don't really go ever go back and revisit, oh, did I end up having more kids that I want to add as dependents or did I get divorced or whatever,
00:39:17
right?
00:39:18
And we hear the stories about people who get divorced but don't change their beneficiaries and all of a sudden they're expoused, you know, inherits their money versus their kids and, you know, had they been alive and cognizant of this, they obviously would have made a different decision.
00:39:30
They're nodding pretty vigorously as I'm saying this Richard, but it's into the years a good time to revisit your beneficiaries, correct?
00:39:36
They need to see it all the time, right?
00:39:39
Beneficiary designations on life insurance, contingent beneficiaries, making sure that everything is updated and the way you want it to be is very important.
00:39:53
You see people, like you said, they become complacent.
00:39:56
And then when the estate period time comes, we have clients that both parents passed away and they still have the first parent who passed away as beneficiary, you know, so especially when spouses or older spouses pass away,
00:40:11
the one spouse is get stymied.
00:40:15
And we have to tell the heirs, like listen, you got to check his beneficiary designations and make sure they're updated and that is a big issue.
00:40:22
So you should just go into your retirement account, check out your life insurance, just go through and do a beneficiary check, make sure it's the way you want it to be absolutely important.
00:40:34
And there's a lot of times I visit with people that think they've updated their beneficiaries and they say, oh, I'm going to go online, I'm going to get it taken care of then.
00:40:41
Let's just get in the count open.
00:40:43
And then we have to go back through and we find that, hey, that's why you still don't have a beneficiary.
00:40:47
In fact, about an hour ago, I had one of my good buddies, he said me a note saying, hey, you have five minutes, I just need five minutes.
00:40:53
Stepfather passed away.
00:40:54
He had told him he had gone over everything with them, said, hey, do you have everything set up beneficiaries?
00:40:59
Oh, yeah.
00:41:00
It's all done.
00:41:01
Well, guess what?
00:41:02
They find out there were no beneficiaries on everything.
00:41:04
Now they've got to go get a probate attorney.
00:41:05
They've got to spend all the time and energy and Adam, we talked about this a couple years ago.
00:41:10
In depth, you know, we're talking about the estate planning aspect of things.
00:41:14
And this is, these are just easy, low hanging fruit things to do to make sure that your legacy intent is exactly what you want.
00:41:22
And we hate to talk about our mortality.
00:41:24
We hate to think about life insurance, about dying, but beneficiaries are just one of those easy things.
00:41:29
Put it down.
00:41:30
If you're doing all this hard work, you're accumulating these funds and you're being approved at good steward of assets, but yet, we neglect that so often.
00:41:37
So that's something easy that each and every person should be able to go to.
00:41:41
Well, it's so crazy.
00:41:42
I mean, most people watching this, I know from the data of the recent survey, I just asked a bunch of folks here to allow our parents or people who have either minor or adult children and a big reason why they're watching this channel is to be good stewards of their wealth so that they can provide for these folks.
00:42:04
And it's such a like totally unnecessary own goal.
00:42:07
If you end up being good about putting all the money away, but you screw up the beneficiary part of it, right?
00:42:14
It's warm fuzzy season.
00:42:20
It's warm fuzzy season.
00:42:21
In other words, if you're going to have it a state planning conversation or want to bring it up, this is the time to do it, right?
00:42:27
Parents sometimes are standoffish about providing data and they let the estate documents talk for them.
00:42:33
And cold debt documents do not speak well.
00:42:37
So you've got to make sure that, you know, now is the warm fuzzies.
00:42:41
Had a little bit more agnog than they probably should have.
00:42:45
You can, as a child, even have these conversations with your parents, like tell me a little about your state plan.
00:42:51
I'm just, I just want to understand, you know, the, you just, there's just more conversations that happen around holiday time and that's part of your year in checklist.
00:43:02
Maybe it's the wine.
00:43:03
Maybe it's, you know, memories, whatever it is, use it because you do need to know.
00:43:09
The state plan is mostly communication.
00:43:11
The documents are a state planning attorneys and working with a financial advisor that can help you understand them.
00:43:15
But for the most part, it's communication.
00:43:18
And around holiday time is the, it's a conversation star.
00:43:22
And, you know, that's good sort of a strategy, you know, from the state.
00:43:29
Well, the, well, the vibes are good and the people are there, see it's act while they iron's hot, totally, totally good advice.
00:43:34
Hey, so I want to ask now about gifting, which is, you know, somewhat related, right, which is, okay, you know, end of the year is when you can, if you haven't made any gifts that you want to make this year,
00:43:46
you can still get them in before the, the January 1st deadline.
00:43:49
So if you can talk about that process, but also related to it, I want to bring in one more retirement thing where there's something out there called a child Roth IRA, right,
00:44:00
where you can, you can set up IRAs for your kids, your grandkids are, I mean, really any kid that you care about, right, and this is a custodial account where money can be put in it while the kids are young and the beauty of a Roth,
00:44:13
right, is the fact that everything grows tax-free and was withdrawn, tax-free.
00:44:16
So the sooner you can start that, the more you're letting that kid enjoy the magic of compounding over their lives.
00:44:24
So if you could talk about that as well, that'd be great.
00:44:27
Yeah, Mona, we could certainly address that, I think, you know, we're having a ton of conversations around gifting and it can be with people that are just looking at, hey, do I want to gift this when I pass or is there a better utilization of the funds to my heirs,
00:44:39
would, if they take the funds earlier?
00:44:41
And so this is something that we're seeing more commonly, you know, there's a handful of ways to do it.
00:44:45
You can give directly to, to them, if you did gift splitting, so you could do, if you're married, if you're single, you could do $18,000 per person each year.
00:44:53
If you are married, you could do $36,000, so $18 a piece and that's a way that you could actually utilize a little bit more each and every year.
00:45:01
There's other ways.
00:45:02
There's donor advice funds.
00:45:04
There are also private charitable foundations that create a little bit more legwork.
00:45:08
Donor advice funds are really easy.
00:45:09
You could go to fidelity, set that up, you know, then they guarantee and check that it's a 501(c)(3).
00:45:15
You're not having to go get tax forms from multiple places and you can look at it up to specific limits on what the impact from a savings on taxes would be.
00:45:24
We see those used quite often.
00:45:25
If somebody has a really big tax bill, they have a big liquidity event, a large bonus.
00:45:30
They're charitable and climb.
00:45:32
And next year maybe doesn't look like it's going to make nearly as much money.
00:45:35
They go ahead and kind of pre-fund that or bundle those contributions that they're going to do.
00:45:40
And that's a great advantage to them from a tax perspective.
00:45:43
They don't have to gift it in a donor advice fund or private charitable foundation each year.
00:45:48
They say, "Okay, over five years I'm going to give X amount, but I'm going to put all that money in today to get that tax burden down some."
00:45:54
Hey, damn sorry.
00:45:55
This is a donor advice fund.
00:45:58
What's the word there?
00:45:59
Donor advice fund.
00:46:00
Donor advice fund, so you may hear or see it as D-A-F, but donor advice fund is probably the more commonly used and it's easy to set up.
00:46:10
Private charitable foundation, you're going to need some legwork with an attorney.
00:46:13
You're going to need to create, you know, a different, you're going to have some taxation, you know, issues and not issues.
00:46:17
It's going to create an additional tax return.
00:46:20
Small things like that that you have to be mindful of.
00:46:24
The other thing we're seeing too, Adam, and I'm sure Danny is overwhelmed with him this year, is qualified charitable distributions from IRAs.
00:46:32
So if you're age 70 and a half and an older and you want to make tax fee donations from an IRA to qualified charity, that can satisfy either your entire RMD or part of it.
00:46:45
So we have up to 100,000 a year, but they're indexed for inflation, so 20, 24, it's 105,000, but we all have clients that have, they come in with their list of charities that are going to come directly out of their IRAs directly to the charities and those qualified charitable distributions,
00:47:03
they don't count as income.
00:47:04
I mean, you can't deduct it, but it reduces your RMD.
00:47:08
Right.
00:47:09
But it reduces your RMD.
00:47:10
So yeah, exactly.
00:47:11
You're not getting paid.
00:47:12
Yeah, so we have a lot of clients.
00:47:13
We have a lot more that have been doing these, especially when the market's so good this year and their way above and they're like, gosh, you know, I have so many great charities.
00:47:23
Well, let's talk about it.
00:47:24
You know, it's got to be done very specifically through the custodian.
00:47:27
You can't just do it yourself.
00:47:29
It had your sort of hands off.
00:47:31
You put the instructions, the checks go out from your IRA.
00:47:34
There's a way to do it through your custodian, but they're easy to do.
00:47:38
And you might decide that going forward that, you know, I don't have to do my all of it, but maybe there are some that I want to do to charity and reduce my required minimum distribution, my ability.
00:47:49
There's a really great way to do it and it's become very popular.
00:47:52
Wow.
00:47:53
Okay.
00:47:54
Yeah.
00:47:55
That's great.
00:47:56
All right.
00:47:57
So, hey, real quick, the idea of that child Roth, just curious aid, you guys, I mean, to me, that seems like a really good idea.
00:48:04
Does it to you?
00:48:05
Are there better views than that?
00:48:07
That's a great.
00:48:08
I mean, when she was started at, there's a supermarket chain out here called HEB, and she started as a cashier.
00:48:15
Everywhere in Texas.
00:48:16
Even I know that in California.
00:48:17
Right.
00:48:18
And a packer, right?
00:48:19
And we set up a custodial Roth with all the Gen Zs and all the young ones.
00:48:24
There are other brokers tell them to set up tax deferred accounts.
00:48:28
We're telling them to do Roth 401K Roth IRA.
00:48:32
So I started her early with a custodial Roth.
00:48:37
So yes, if you have a child that maybe works in your home office, you know, and makes earned income up to the limits, absolutely can do the custodial IRA,
00:48:48
right, Danny?
00:48:49
It's a great way to do it.
00:48:51
Yeah.
00:48:52
No, I think it is a great way.
00:48:53
So we do see people who have younger children as well who utilize these.
00:48:56
They bring them into the business.
00:48:58
They have them do marketing or different, different small jobs.
00:49:01
They may sleep before, but as long as you can, you know, you're under the IRS guideline, it's a great tool to utilize that.
00:49:07
You know, one other way we're seeing people kind of get around this a little bit is potentially over funding a 529 account, but secure act 2.0 allows for now $35,000 can actually be moved from that 529 to a Roth IRA.
00:49:21
There are a couple stipulations.
00:49:22
The account has to be open within for at least 15 years and those contributions need to have been deposited, you know, five years or more.
00:49:30
So there are stipulations you can only convert up to 35,000 of it.
00:49:34
If you are somebody who is prefunding many different areas, you're thinking about a good utilization of funds.
00:49:39
If you overfunded that a tad bit, that may be a really nice way to actually go ahead and put more money into a Roth further down the road.
00:49:46
I do have concerns that that's a long way the way, like I have young children.
00:49:50
It could take a while before they could actually physically see that and obviously code tax codes can change, but currently that could be a really nice tool.
00:49:59
Yeah, I mean, to give a kid, and a Roth with 35,000 in it by the time they're 15, you know, start in life.
00:50:06
Real nice example.
00:50:08
My daughter started her Roth when she was, she just got her social security number in 1998.
00:50:13
I literally set up the Roth that the her 529 that time and had funded it for $600 a month for 13 years, 15 years.
00:50:25
She got a full ride to Emory.
00:50:27
And now she needed some, but we're every year, we're moving money from that 529 into her now adult Roth that's growing with the custodial Roth.
00:50:40
So not everybody can use it, but it's definitely fine.
00:50:44
And while you're talking about kids, you're a grandparent, you can go ahead and gift into your grandchild's 529 plan for 2024, $18,000 a person, 36,000 can marry couples,
00:50:55
right?
00:50:55
So you want to go ahead and you want to do something nice for your grandkids, but you don't want to buy them the latest GI Joe, I'm aging myself with Kung Fu grip.
00:51:03
You go ahead and you can, you know, what is this grand pod?
00:51:07
This is like, sacks, yeah, but you'll thank me later, right?
00:51:10
You can go ahead and gift into a 529 for your grandchild.
00:51:17
And I think that's a great idea for the holidays, and that may be part of your gifting strategy.
00:51:21
All right.
00:51:22
I completely agree.
00:51:24
All right, gentlemen, so we are beginning to come up on the hour here.
00:51:30
Is there anything else important that I haven't asked you about yet that you think is a material part of the year end planning process?
00:51:39
You know, I think there's a couple things.
00:51:41
The main thing that we have an outside and probably that really low hanging fruit is the HSA.
00:51:46
If you have a help saving to count, make sure that you're maxing that out.
00:51:49
You can put 4,150 for an individual for 2024.
00:51:53
You can do 80, 300 for a family.
00:51:55
You know, this is one of the best accounts that's out there.
00:51:58
And as a triple tax benefit, funds go in tax-free, grow tax-free, assuming you use those for medical expenditures later in life, or even now, you're going to pull that out tax-free.
00:52:08
The one mistake people make with these is a confuse it with a flexible spending account.
00:52:14
We want to make sure that if you're going to put those funds in it, you have the ability.
00:52:18
Many medical expenses out of pocket.
00:52:20
Go ahead and put those funds aside, invest those for the long term, and think about what you will use later in life.
00:52:26
Healthy-view services, fidelity, they all do very in-depth studies.
00:52:31
And they say that the average 65-year-old couple will spend between $350 and $400,000 just on medical expenses.
00:52:38
So premiums, deductibles, out-of-pocket expenses, all that adds up.
00:52:43
And so if you could have a tool that's just more tax-efficient than anything else out there, utilize it.
00:52:50
Now, here's the problem.
00:52:51
Not everybody has access to it.
00:52:52
You have to be on a high deductible health plan.
00:52:54
And if you are gearing up towards retirement, you're close to Medicare age or you're over it, you have to stop six months prior to starting on Medicare, or they could disqualify those contributions that you've made.
00:53:07
But in general, a great tool.
00:53:09
OK, so personal interest here had very high deductible health care plan.
00:53:18
If I want to be able to use the full 80-300 for my family next year, is this pre-tax income that I'm putting towards this by January 1st the year before?
00:53:31
If it depends on how you have it set up with payroll, if you're running it through payroll, if you're employed by someone, most plans are beginning to offer these health savings accounts, you may be able to choose one or the other,
00:53:42
the flexible spending or health savings.
00:53:45
But that flexible spending as Richard was mentioning, you're going to have to spend where the health savings are going to roll that over.
00:53:52
So Adam, if you don't have that set up personally to come through payroll, what you can do is you can go set up one on the side.
00:53:59
You make sure you note that as you're filing your taxes, and that way you get the deduction at that point in time.
00:54:04
All right.
00:54:06
Awesome.
00:54:07
Well, I'm going to go double check with my account right now to see if we've got this in place.
00:54:11
I do not think we do have a high deductible plan for the IRS public patient 969.
00:54:17
So there's a definition of what a high deductible plan is.
00:54:19
But these are great accounts because their retirement 401Ks is, as Danny, I always pre-sure of when don't use it, put the money in and hold it for retirement.
00:54:31
Just get another retirement savings account if you don't, you know, flexible spending.
00:54:36
That's fine.
00:54:37
But there's a reason why it's called health savings, not help spending account, right?
00:54:42
It's for you to allocate it, you usually have a choice of mutual funds, and you can then look at it in retirement and pay your Medicare upon B premiums.
00:54:51
Some of your long-term care insurance costs.
00:54:54
There's a formula to figure that out, but there's ways to pull money out of that completely tax-free in retirement when you're probably really going to need it.
00:55:03
So let that money in possible accumulate over time.
00:55:08
And today's point, if you haven't matched it out by this year and you can do more, do more by the end of the year into your health savings account.
00:55:15
All right.
00:55:16
I just like that general point of do more by the end of the year.
00:55:19
So gentlemen, we'll start wrapping it up here.
00:55:22
If there's anything else you want to give you a chance before we wrap, if there's anything else you want to put out there to put out there.
00:55:27
But first off, thank you for doing this.
00:55:30
Such an important topic.
00:55:31
I think such an overlooked one, and as we talked about at the beginning, there's no good reason not to do this stuff, right?
00:55:39
And as you've just reiterated for me during this conversation, there's so many of these things that I'm familiar with, but that I realize that they kind of fall off my radar during the year, right?
00:55:48
So most people watching, I think, would absolutely benefit from a conversation with a good financial planner like you guys who understands all this stuff.
00:55:58
If folks, if you'd like to talk with the folks there at RIA, easy to do that.
00:56:04
Just go fill out the short form at thoughtfulmoney.com.
00:56:07
You'll be matched with them.
00:56:09
Only takes you a couple of seconds to fill out the form.
00:56:11
They'll reach out.
00:56:12
They'll schedule one of these consultations with you.
00:56:14
They're totally free.
00:56:16
And if you decide you like the guys who want to work further with them, going forward, fantastic.
00:56:21
That's your own decision.
00:56:22
But that's certainly possible if that's what you decide you want to do.
00:56:25
But most importantly, just get the information and make smart decisions here.
00:56:30
All right.
00:56:31
Danny, Richard, thank you so much.
00:56:33
Any parting bits of advice for folks watching here?
00:56:36
No, I'll just remember retirement is very overwhelming.
00:56:40
I would take a bunch at a time.
00:56:42
You know, it's all about the small behaviors that you're creating.
00:56:46
And you know, start small, you'll see it start to get bigger and bigger and bigger over time.
00:56:51
Don't get discouraged.
00:56:52
If you feel like you haven't done enough, it's never too late.
00:56:55
All right.
00:56:56
And there's some retirement real quick.
00:56:58
We have on our calendar coming up relatively soon, guys, to do another one of these discussions.
00:57:04
But to do a real deep dive into retirement planning, I know you guys have a fantastic presentation that you've honed over the years that really gives folks a really good overview of everything that should be considering.
00:57:16
So I just wanted to flag for users that that is coming at some point in the future.
00:57:19
And we have a date actually locked folks.
00:57:21
I'll let you know on this channel.
00:57:23
Richard, any concluding points here?
00:57:24
You know, financial health and wellness are connected, right?
00:57:29
And the future of financial planning is every financial planner like us will have a nutritionist in our office because they're so linked as far as health and wealth, right?
00:57:39
Look at the new, you know, we want to make America healthy, right?
00:57:43
Think about what your financial wellness means to you, right?
00:57:46
Low debt ratios, higher savings, diversification of accounts.
00:57:51
If you go to our wedge-site real investment advice, advice, type-in financial guardrails, we have all kinds of rules that we've learned from the wealthiest clients over the last 30 years that can help you understand rules of getting a mortgage,
00:58:04
getting personal debt.
00:58:05
They're tough rules, but we create them so that you can generate wealth in commander situation.
00:58:11
And that creates wellness and security for you and your family.
00:58:16
So take a look at that.
00:58:18
All right.
00:58:19
Very well said.
00:58:20
Well, gentlemen, thanks so much.
00:58:21
Thanks for watching.
00:58:22
If you would like to show your appreciation for Richard and Danny coming on and giving us so much valuable advice, please do that by hitting the like button and then clicking on the red subscribe button below as well as that little bell icon right next to it.
00:58:34
And again, if you'd like to schedule a consultation to go through your urine planning with one of the financial advisors endorsed by Thalple Money, just go to thoughtfulmoney.com.
00:58:44
Richard and Danny can't thank you enough boys.
00:58:47
I look forward to seeing you again here doing this hopefully quite soon on a retirement planning side of things.
00:58:52
I really appreciate you joining me.
00:58:54
Thanks, Adam.
00:58:55
I cried out of that.
00:58:56
All right.
00:58:57
And everybody else.
00:58:58
Thanks so much for watching.
00:58:59
[BLANK_AUDIO]
00:59:09