Tax Time

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Welcome to Something More with Chris Boyd.

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Chris Boyd is a certified financial planner, practitioner,

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and senior vice president and financial advisor at

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Wealth Enhancement Group, one of the nation's largest

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registered investment advisors.

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We call it Something More because we'd like

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to talk not only about those important dollar

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and cents issues, but also the quality of

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life issues that make the money matters matter.

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Here he is, your fulfillment facilitator, your partner

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in prosperity, advising clients on Cape Cod and

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across the country.

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Here's your host, Jay Christopher Boyd.

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Thanks for being with us, everybody, for another

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episode of Something More.

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I'm here with Jeff Perry and Russ Ball.

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We're all of the AMR team with the

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Wealth Enhancement Group and glad to have you

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joining us.

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You know, it's getting close to tax time,

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so we figured we'd better talk about this.

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Have you done your taxes yet?

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Have you been planning for it?

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There's some things to remember.

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March 15th is actually a date you need

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to know if you have a business and

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you file a business return, as opposed to

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being self-employed and filing through a Schedule

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C on your own personal tax return.

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That date, of course, is April 15th.

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And this year, it actually is April 15th.

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We've had years where, what is it, Patriot's

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Day?

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Is that what it is?

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Patriot's Day, I think, was last year and

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then a couple of years before.

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It's been on the weekend, so you've had

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a couple of extra days, but this year,

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April 15th is actually tax day.

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So don't delay.

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Don't think you've got extra time padded in

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there if you've gotten used to those extra

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days, but there's still plenty of time.

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I will say, if you're going to hire

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someone and you haven't spoken with them yet,

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you may end up on an extension.

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Remember, if you file an extension, it does

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give you time to get all the details

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together, but it doesn't buy you time to

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provide the money you owe.

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If you ultimately owe money, you have to

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have paid that by tax filing April 15th.

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I think that's something that a lot of

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people don't know.

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And it's also confusing because how am I

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supposed to know what I owe if I

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haven't been able to get all my stuff

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figured out?

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My uncle Sam would be happy to take

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more than you owe.

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So essentially, that's what it is, right?

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You have to make sure you've covered enough.

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Otherwise, you'll be subject to penalties.

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It's maybe not the end of the world,

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some additional costs if you weren't able to

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calculate it properly, but that is a risk

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of underpaying by the April 15th deadline.

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You know what's been happening in the last

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few years is the 1099s have been getting

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later and later.

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So the tax season is compressed because people

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don't sit there in January and say, it's

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time to file my taxes, right?

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They delay.

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You don't have everything like you're saying.

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Your wage stuff, what's that, a W-2?

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That doesn't come in until February, really, right?

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Isn't it?

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It's supposed to be by the end of

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January, but not always.

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So around the end of the month, you

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couldn't do it in January anyway, probably.

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Right.

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I'm just saying most people think by the

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end of January, or it used to be,

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by the end of January, I'll have everything.

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And then I have February, March, and half

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of April.

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But now with the delay in a lot

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of these 1099s from practically every brokerage there

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is, they delay.

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And if you have a K-1, forget

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about it.

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Oh, geez.

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Well, let's come back to that.

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On the 1099s, what used to happen, though,

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is it didn't get delayed.

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They'd issue you a 1099.

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And then some fund would have some foreign

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tax consequence that they'd have to reissue the

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1099.

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And then you'd end up with erroneous submission

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if you've already filed your tax return.

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Right.

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So it could be just as frustrating if

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they got it out in a timely manner,

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but then had to recharacterize it or whatever

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they called that, reissue it.

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Right.

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And you'd end up with having to, if

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you did submit very quickly.

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I think the lesson is, it's one thing

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to get all your ducks in a row,

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but you really should be reluctant to file

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before March until you make sure you have

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all the information in.

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And really, sometimes even later, just to make

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sure that there's no changes that might be

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provided to you before the tax filing deadline,

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because you don't have to do it again.

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Right.

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So that just makes the tax season shorter,

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though.

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Yeah, more compressed when it comes to the

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tax service providers, the tax preparers.

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To your point, if you engage a professional,

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don't walk in on April 10th and say,

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we've got five days to get this done.

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Here's my shoebox.

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Good luck.

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Here's all my receipts.

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I put them all in alphabetical order.

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Yeah.

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Thank you so much.

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Yeah.

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So you mentioned a K-1, though.

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Let's not skip over that.

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What's a K-1, Jeff, and when does

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that come into play?

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Well, it's used for a few things, but

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generally it's used for a partnership.

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Partnerships of some kind, or maybe it's some

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business that you are a participant in, but

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you could have an investment that's like an

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investment partner.

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Yes, a limited partnership.

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And there's various instances like this where you

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have an interest in some entity and they

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don't have to file their taxes until April

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15th.

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So the K-1 doesn't get issued until

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the time around the time you're expected to

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be filing your tax return.

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So oftentimes, if you have any kind of

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an interest where a K-1 is issued,

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you should expect to be going on extension

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because it usually happens that you don't get

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your K-1 until around tax filing date.

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That's right.

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A lot of these realty investment trusts and

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things like that will have a K-1

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sometimes.

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And as you said, they can't issue the

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K-1 until they do their own taxes.

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So it's a flawed process.

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It's not flawed, but it's challenging.

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It's frustrating for people.

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That's really what it is.

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Hey, you know, one other thing, when we

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talk about some of these deadlines, April 15th

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coming up fast, one of the things I

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think can be the most frustrating, particularly for

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small business owners, is not only do they

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have to make sure that they've, hey, let's

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say you had a good year.

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And they say, hey, great, you had profit.

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Guess what?

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You owe more money for taxes.

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Oh, geez, I owe more money for taxes.

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Where'd that money go, right?

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And then you start off and go, well,

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and by the way, we got to file

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your estimated taxes for this year as well.

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So you have like, you double hit with,

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you know, you got to get your tax

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paid for the prior year.

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And you've got that estimated tax due for

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the first quarter, which is really more than

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the first quarter.

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So things to keep in mind.

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If you're on Cape Cod, you know, for

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a lot of our listeners, a lot of

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our clients, it's not the time to come

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up with a big cash payment.

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Very true.

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Very true.

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Well, before going too far down this path,

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I thought maybe it would be worth talking

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a little bit about some of the rules

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and some of the occasions when, you know,

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if you're participating in a retirement plan at

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work, in most instances, you have to have

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contributed during the calendar year for it to

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be relevant for the tax return year.

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But there are a few exceptions to that.

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And where you could contribute to a retirement

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plan and have it be relevant for your

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filing for 2024.

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Maybe we should talk about some of those

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instances.

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Either of you guys want to jump in

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on that?

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Well, specifically on like Roth and traditional IRAs?

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Yeah.

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Let's start with those.

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So, I mean, I'm always telling my friends

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who often forget about their IRA contributions that,

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you know, now's a great time to lock

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in your 2024 and try to max out

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your 2024 contribution for your Roth or for

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your traditional IRA, whatever it may be.

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Because, you know, even though it's 2025, you

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can count it for 2024 and then do

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2025 as well later on in the year.

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Whenever you have that.

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That's right.

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That's right.

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So things to consider when you're thinking about

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doing a traditional IRA, which can give you

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a deduction, essentially reduce your income for the

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year, is that it can be different if

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you have a plan available to you at

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work from whether you are eligible to participate

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if you have no plan at work.

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So if you have no plan at work,

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correct me if I'm wrong, you can do

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a tax deductible contribution to a traditional IRA,

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right?

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If there's no plan whatsoever.

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But if you do have a plan at

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work, you may not be able to take

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that tax deduction if you make certain amounts

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of income.

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And the rules on that are different for

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different, you know, if you're single versus married,

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you know, what are the numbers?

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But essentially, if both spouses are covered by

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an employer plan, if you're married filing jointly

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in 2024, if you made between $123,000

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to $143,000, there's a phase out.

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So really, if you make anything more than

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$123,000, you've got to be mindful of

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this fact that you're not going to be

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able to do the whole amount in a

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way that's deductible.

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And that may not be appealing.

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It may be preferable to think about a

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Roth IRA.

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Right.

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Again, if you have a Roth IRA contribution,

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there's still an income phase out.

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And that starts around $230,000 for a

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married couple.

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By the way, for the traditional IRA, if

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you're participating in a plan, the single person,

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that phase out starts at $77,000, goes

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to $87,000.

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For the Roth IRA for a single person,

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around $146,000 to $161,000.

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These are details.

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You might not know these and we're rattling

272
00:10:49,540 --> 00:10:50,020
them off.

273
00:10:50,440 --> 00:10:51,940
Just know, be conceptually.

274
00:10:52,820 --> 00:10:55,020
There are times when there's different rules for

275
00:10:55,020 --> 00:10:55,960
different circumstances.

276
00:10:56,400 --> 00:10:59,080
Participating in a plan is a different kind

277
00:10:59,080 --> 00:11:00,320
of rule than someone who doesn't have a

278
00:11:00,320 --> 00:11:01,200
plan available to them.

279
00:11:02,900 --> 00:11:08,540
So that being said, sometimes, let's maybe before

280
00:11:08,540 --> 00:11:12,780
we go on, Jeff, Roth IRA, traditional IRA,

281
00:11:12,780 --> 00:11:15,220
why one versus another?

282
00:11:15,540 --> 00:11:16,960
Maybe explain how these differ.

283
00:11:17,200 --> 00:11:19,520
Just a little review of some of these

284
00:11:19,520 --> 00:11:20,020
kind of things.

285
00:11:20,420 --> 00:11:20,540
Sure.

286
00:11:20,820 --> 00:11:23,400
So the biggest pro of the traditional IRA,

287
00:11:23,780 --> 00:11:26,040
if you are able to make it under

288
00:11:26,040 --> 00:11:28,420
the income guidelines you mentioned, is you can

289
00:11:28,420 --> 00:11:31,640
deduct your contribution off of your income taxes,

290
00:11:31,780 --> 00:11:32,000
right?

291
00:11:32,060 --> 00:11:34,080
So a lot of people think about, I'm

292
00:11:34,080 --> 00:11:36,900
going to make a contribution through my employer

293
00:11:36,900 --> 00:11:39,160
or through a traditional IRA and it's a

294
00:11:39,160 --> 00:11:40,220
tax break for me.

295
00:11:40,640 --> 00:11:41,820
That's the reason why.

296
00:11:41,820 --> 00:11:43,900
I reduce my income in some form or

297
00:11:43,900 --> 00:11:46,240
fashion, whether it's before or after compensation.

298
00:11:46,340 --> 00:11:46,720
That's correct.

299
00:11:47,180 --> 00:11:49,420
So with a Roth IRA, you have to

300
00:11:49,420 --> 00:11:53,020
use money that's already in tax, the money

301
00:11:53,020 --> 00:11:55,560
that's been through your employer or wherever you

302
00:11:55,560 --> 00:11:56,080
get it from.

303
00:11:56,180 --> 00:11:57,460
And you have to have earned income, by

304
00:11:57,460 --> 00:11:58,360
the way, to make a Roth IRA.

305
00:11:58,360 --> 00:11:59,560
Yeah, it has to be earned income.

306
00:12:00,380 --> 00:12:02,520
However, the big benefit of a Roth IRA

307
00:12:02,520 --> 00:12:06,020
is that when the money comes out, we

308
00:12:06,020 --> 00:12:07,500
can talk about the five-year rule that

309
00:12:07,500 --> 00:12:08,520
we were talking about before.

310
00:12:08,560 --> 00:12:10,200
Yeah, we'll come back to that.

311
00:12:10,840 --> 00:12:13,240
But assuming that it's in there for five

312
00:12:13,240 --> 00:12:15,040
years, when the money comes out in your

313
00:12:15,040 --> 00:12:19,220
retirement, hopefully, it all comes out tax-free.

314
00:12:19,400 --> 00:12:21,540
All the contribution comes out tax-free, all

315
00:12:21,540 --> 00:12:22,000
the earnings.

316
00:12:22,160 --> 00:12:24,800
So if you think about the young person

317
00:12:24,800 --> 00:12:27,000
that we're kind of alluding to here, they're

318
00:12:27,000 --> 00:12:29,400
starting their first job or maybe they got

319
00:12:29,400 --> 00:12:31,260
a job with an employer plan, et cetera,

320
00:12:31,440 --> 00:12:34,240
and they're thinking about a Roth IRA, think

321
00:12:34,240 --> 00:12:38,220
about 30 years of compounding gains and then

322
00:12:38,220 --> 00:12:39,920
it all comes out tax-free at the

323
00:12:39,920 --> 00:12:40,120
end.

324
00:12:40,200 --> 00:12:41,820
So how beautiful is that?

325
00:12:42,380 --> 00:12:46,200
It's a tough thing to think about when

326
00:12:46,200 --> 00:12:47,740
you're, say, 30 years old.

327
00:12:48,180 --> 00:12:51,600
Should I take the tax deduction now and

328
00:12:51,600 --> 00:12:53,800
get some pay less taxes now?

329
00:12:54,260 --> 00:12:57,020
Or should I forego that tax deduction and

330
00:12:57,020 --> 00:12:59,540
put it in a Roth IRA for something

331
00:12:59,540 --> 00:13:01,140
that's down the road a bit?

332
00:13:01,260 --> 00:13:03,200
I mean, not a lot of people want

333
00:13:03,200 --> 00:13:05,620
to give up something now for something that's

334
00:13:05,620 --> 00:13:06,240
down the road.

335
00:13:06,840 --> 00:13:07,880
It's a good thing.

336
00:13:07,880 --> 00:13:10,940
Let's just come back to that in a

337
00:13:10,940 --> 00:13:11,200
second.

338
00:13:11,480 --> 00:13:13,200
I just want to reinforce this.

339
00:13:13,820 --> 00:13:18,480
A traditional IRA is money that essentially is

340
00:13:18,480 --> 00:13:19,940
treated before taxes.

341
00:13:20,260 --> 00:13:21,980
So either I get a deduction if I

342
00:13:21,980 --> 00:13:24,360
got it in my payroll and then I

343
00:13:24,360 --> 00:13:28,740
put it in the IRA or, well, that's

344
00:13:28,740 --> 00:13:29,840
going to be how it happens in this

345
00:13:29,840 --> 00:13:30,040
case.

346
00:13:30,180 --> 00:13:33,420
So I get to deduct it from my

347
00:13:33,420 --> 00:13:39,740
taxable income and therefore what happens thereafter, it

348
00:13:39,740 --> 00:13:43,660
grows in this environment of a tax-deferred

349
00:13:43,660 --> 00:13:44,300
environment.

350
00:13:44,580 --> 00:13:46,540
But later in life, when I go to

351
00:13:46,540 --> 00:13:47,960
take it out, 59 and a half or

352
00:13:47,960 --> 00:13:53,140
later, I will pay income tax on what

353
00:13:53,140 --> 00:13:53,740
comes out.

354
00:13:53,920 --> 00:13:56,160
All of it will be income tax in

355
00:13:56,160 --> 00:13:59,920
that scenario when I get that deduction.

356
00:14:00,820 --> 00:14:03,840
Just to add complexity, sometimes people add money

357
00:14:03,840 --> 00:14:05,740
to an IRA and don't get the deduction,

358
00:14:06,280 --> 00:14:07,860
but it creates complexities.

359
00:14:08,460 --> 00:14:10,120
We're going to ignore that for this discussion.

360
00:14:11,160 --> 00:14:15,920
So now the alternative is to say, I'm

361
00:14:15,920 --> 00:14:18,520
going to pay the tax now, put it

362
00:14:18,520 --> 00:14:21,520
into the Roth IRA, which grows free from

363
00:14:21,520 --> 00:14:24,700
tax as well, deferred in this sense.

364
00:14:24,860 --> 00:14:27,780
But when I take the money out, at

365
00:14:27,780 --> 00:14:29,560
least five years or 59 and a half,

366
00:14:29,680 --> 00:14:32,920
again, this same kind of notion, then I

367
00:14:32,920 --> 00:14:35,180
get to take all that money free from

368
00:14:35,180 --> 00:14:36,480
tax when I take it out.

369
00:14:36,580 --> 00:14:39,960
It's grown compounded without tax consequence.

370
00:14:40,440 --> 00:14:43,700
A really pretty attractive option.

371
00:14:44,420 --> 00:14:47,060
You asked about this notion for guidance.

372
00:14:47,180 --> 00:14:48,440
What should we tell people then?

373
00:14:49,400 --> 00:14:51,200
Should they do a Roth or should they

374
00:14:51,200 --> 00:14:51,840
do a traditional?

375
00:14:51,980 --> 00:14:54,300
If they're eligible for both, but they're willing

376
00:14:54,300 --> 00:14:57,060
to make some contribution and they're in a

377
00:14:57,060 --> 00:15:00,160
relatively low tax bracket starting out in their

378
00:15:00,160 --> 00:15:02,700
career, perhaps, which is better?

379
00:15:03,820 --> 00:15:05,540
I mean, you can feel the immediate benefit

380
00:15:05,540 --> 00:15:08,640
of that tax deduction, but I think we're

381
00:15:08,640 --> 00:15:09,440
all in agreement.

382
00:15:09,820 --> 00:15:13,260
If you're in a relatively low bracket, what

383
00:15:13,260 --> 00:15:13,900
would you say, Jeff?

384
00:15:14,340 --> 00:15:15,220
I'm going to go Roth.

385
00:15:15,320 --> 00:15:16,680
And the younger you are, the more I'm

386
00:15:16,680 --> 00:15:18,860
going to pound the table and say, do

387
00:15:18,860 --> 00:15:19,340
the Roth.

388
00:15:20,860 --> 00:15:21,860
Yeah, absolutely.

389
00:15:22,120 --> 00:15:23,580
I think we're all in agreement here.

390
00:15:23,640 --> 00:15:24,820
And why is that in part?

391
00:15:25,160 --> 00:15:28,240
Because one, your tax bracket is low and

392
00:15:28,240 --> 00:15:30,960
you're defining that tax bracket as that lower

393
00:15:30,960 --> 00:15:31,800
tax bracket.

394
00:15:32,400 --> 00:15:35,780
But two, the likelihood is that taxes will

395
00:15:35,780 --> 00:15:37,940
be higher later in life.

396
00:15:38,420 --> 00:15:41,180
One, because your income and your wealth and

397
00:15:41,180 --> 00:15:43,140
all of that will change.

398
00:15:43,480 --> 00:15:47,260
But two, because of this environment we're in,

399
00:15:47,380 --> 00:15:50,360
taxes are historically relatively low right now.

400
00:15:50,880 --> 00:15:53,340
And you're probably better served to pay that

401
00:15:53,340 --> 00:15:57,700
tax at this historically relatively low level than

402
00:15:57,700 --> 00:15:59,340
what you'd have later in life.

403
00:15:59,440 --> 00:16:00,900
Now, if you're in a high tax bracket,

404
00:16:01,620 --> 00:16:04,580
that could be worth further evaluation.

405
00:16:05,240 --> 00:16:07,100
What we find is that it tends to

406
00:16:07,100 --> 00:16:10,500
be that people who are in very high

407
00:16:10,500 --> 00:16:13,880
or very low tax brackets are drawn to

408
00:16:13,880 --> 00:16:14,600
the Roth IRA.

409
00:16:15,560 --> 00:16:17,700
Because if you're in a very low tax

410
00:16:17,700 --> 00:16:19,800
bracket, well, I may grow into higher tax

411
00:16:19,800 --> 00:16:20,080
brackets.

412
00:16:20,140 --> 00:16:21,740
I'll take advantage of it while I'm in

413
00:16:21,740 --> 00:16:22,640
this low bracket.

414
00:16:23,120 --> 00:16:24,540
But if you're in a very high tax

415
00:16:24,540 --> 00:16:27,060
bracket, the notion is you're probably gonna stay

416
00:16:27,060 --> 00:16:28,080
in a high tax bracket.

417
00:16:28,320 --> 00:16:30,800
And will those tax brackets be higher or

418
00:16:30,800 --> 00:16:34,880
lower later on in life because of Congress?

419
00:16:35,720 --> 00:16:37,340
Well, I don't think it's likely to be

420
00:16:37,340 --> 00:16:37,920
lower, right?

421
00:16:37,980 --> 00:16:39,300
But so if you make a lot of

422
00:16:39,300 --> 00:16:42,940
money and you're in a big tax bracket,

423
00:16:42,980 --> 00:16:44,200
you're probably gonna continue to be in a

424
00:16:44,200 --> 00:16:44,860
high tax bracket.

425
00:16:45,440 --> 00:16:47,480
So the idea of Roth is very attractive

426
00:16:47,480 --> 00:16:50,720
sometimes to just have the opportunity for some

427
00:16:50,720 --> 00:16:52,000
of that money to be coming out to

428
00:16:52,000 --> 00:16:53,620
you tax free later on.

429
00:16:53,620 --> 00:16:55,680
And you can pay that while you can

430
00:16:55,680 --> 00:16:56,500
afford it, really.

431
00:16:56,620 --> 00:16:58,660
You've got plenty of income coming in, right?

432
00:16:58,800 --> 00:16:59,480
Anyway, you want to comment?

433
00:16:59,760 --> 00:17:01,580
The other beautiful thing about the Roth is

434
00:17:01,580 --> 00:17:03,380
that you don't have to take RMDs.

435
00:17:03,520 --> 00:17:05,440
So you have access to that money when

436
00:17:05,440 --> 00:17:05,900
you want it.

437
00:17:05,980 --> 00:17:07,660
You don't need to take anything out of

438
00:17:07,660 --> 00:17:07,859
it.

439
00:17:08,200 --> 00:17:08,880
Elaborate again.

440
00:17:10,200 --> 00:17:12,040
Everyone probably knows what an RMD is.

441
00:17:12,119 --> 00:17:14,920
We use the jargon stuff and sometimes don't

442
00:17:14,920 --> 00:17:17,000
think to elaborate, but RMD.

443
00:17:17,339 --> 00:17:20,920
So it's the required minimum distribution where if

444
00:17:20,920 --> 00:17:23,099
you're born after 1960, I believe the age

445
00:17:23,099 --> 00:17:25,200
is 73 that you have to- Before

446
00:17:25,200 --> 00:17:27,540
1960, it's 73.

447
00:17:27,760 --> 00:17:30,220
After 1960, it's 75.

448
00:17:30,360 --> 00:17:30,920
Oh, 75.

449
00:17:31,200 --> 00:17:31,500
That's right.

450
00:17:31,640 --> 00:17:31,820
All right.

451
00:17:31,900 --> 00:17:36,180
So 73, 75, you start taking your RMDs.

452
00:17:36,220 --> 00:17:38,560
It's the percentage of the money that is

453
00:17:38,560 --> 00:17:39,780
in your IRA accounts.

454
00:17:40,240 --> 00:17:43,840
So that's based on the uniform lifetime table

455
00:17:43,840 --> 00:17:45,140
I'm looking at in front of me right

456
00:17:45,140 --> 00:17:45,420
here.

457
00:17:45,580 --> 00:17:45,780
Yeah.

458
00:17:45,940 --> 00:17:48,020
And you have to take a certain percentage

459
00:17:48,020 --> 00:17:50,540
that grows each year from your IRA.

460
00:17:50,540 --> 00:17:52,740
The government's been waiting all this time to

461
00:17:52,740 --> 00:17:56,100
tax and they say, it's fine that you

462
00:17:56,100 --> 00:17:57,560
have it, but come on, you got to

463
00:17:57,560 --> 00:17:58,340
take some out.

464
00:17:58,660 --> 00:18:01,080
So they're required a minimum distribution.

465
00:18:01,080 --> 00:18:02,540
Doesn't mean you can't take out more.

466
00:18:02,760 --> 00:18:04,880
They're always happy to have you take out

467
00:18:04,880 --> 00:18:08,340
more once you get past the 59 and

468
00:18:08,340 --> 00:18:10,240
a half, which is, this is intended as

469
00:18:10,240 --> 00:18:12,220
a retirement savings vehicle.

470
00:18:12,540 --> 00:18:14,980
And thinking long, long time down the road

471
00:18:14,980 --> 00:18:17,720
here, your heirs would love to inherit a

472
00:18:17,720 --> 00:18:18,340
Roth IRA.

473
00:18:19,220 --> 00:18:19,780
Very true.

474
00:18:19,780 --> 00:18:20,580
Very true.

475
00:18:21,720 --> 00:18:25,200
Going back to one of the things we

476
00:18:25,200 --> 00:18:28,960
didn't talk about, which was one of the

477
00:18:28,960 --> 00:18:31,840
other ways you can have some contribution into

478
00:18:31,840 --> 00:18:32,600
your plan.

479
00:18:34,760 --> 00:18:39,220
If you're doing tax planning now in 2025

480
00:18:39,220 --> 00:18:42,360
as you're preparing for your 24 tax return,

481
00:18:43,020 --> 00:18:45,400
and that's for sometimes if you're self-employed,

482
00:18:45,400 --> 00:18:49,100
you might have a SEP IRA, a self

483
00:18:49,100 --> 00:18:55,820
-employed pension IRA, essentially is one of these

484
00:18:55,820 --> 00:18:58,240
kind of IRAs that you can contribute a

485
00:18:58,240 --> 00:19:01,920
significant amount to, potentially as much as $69

486
00:19:01,920 --> 00:19:04,580
,000, I think in 2024.

487
00:19:06,460 --> 00:19:09,960
If it's just you as an employer, it's

488
00:19:09,960 --> 00:19:11,220
probably a little less than that.

489
00:19:11,260 --> 00:19:12,400
But anyway, you get the point.

490
00:19:13,000 --> 00:19:16,980
Or no, I think it's 69,000 if

491
00:19:16,980 --> 00:19:19,620
it's 25% of wages, but if you're

492
00:19:19,620 --> 00:19:23,340
sole employee, it's somewhere around 20, 21%.

493
00:19:23,340 --> 00:19:24,820
I forget what the actual number is, but

494
00:19:24,820 --> 00:19:27,200
it's a slightly different formula.

495
00:19:27,780 --> 00:19:30,040
So in any case, the point being, there's

496
00:19:30,040 --> 00:19:32,360
a lot of money you could put into

497
00:19:32,360 --> 00:19:37,440
a retirement plan, get a reduced income for

498
00:19:37,440 --> 00:19:40,980
2024 and have that money deferred for future

499
00:19:40,980 --> 00:19:41,360
years.

500
00:19:41,980 --> 00:19:46,440
The bigger question may be, should I, Jeff?

501
00:19:46,700 --> 00:19:49,460
That question of what's going to happen with

502
00:19:49,460 --> 00:19:49,920
taxes.

503
00:19:50,820 --> 00:19:52,860
There's an article you were talking about where

504
00:19:52,860 --> 00:19:56,280
there was an assumption that, should we assume

505
00:19:56,280 --> 00:19:59,560
that taxes will be lower in our retirement?

506
00:20:00,640 --> 00:20:02,360
Yeah, and I don't think we should assume

507
00:20:02,360 --> 00:20:04,200
that taxes should be lower in our retirement.

508
00:20:04,540 --> 00:20:06,780
It's a Kipling's article that I was referring

509
00:20:06,780 --> 00:20:10,200
to, and it talks about how retirees have

510
00:20:10,200 --> 00:20:14,000
a tendency to underestimate the amount of income

511
00:20:14,000 --> 00:20:16,880
taxes that they're going to have to pay

512
00:20:16,880 --> 00:20:17,540
in retirement.

513
00:20:17,680 --> 00:20:20,700
And that comes from, sometimes it's the extreme

514
00:20:20,700 --> 00:20:21,200
examples.

515
00:20:21,360 --> 00:20:23,040
I'm not saying this is all retirees by

516
00:20:23,040 --> 00:20:26,240
any means, but sometimes people aren't even aware

517
00:20:26,240 --> 00:20:29,060
that they have taxes due when they take

518
00:20:29,060 --> 00:20:30,240
money out of their retirement.

519
00:20:30,860 --> 00:20:33,580
You have to pay these taxes.

520
00:20:34,460 --> 00:20:37,160
If you're taking out $10,000 a month

521
00:20:37,160 --> 00:20:39,740
and you're in the 24% tax bracket,

522
00:20:40,460 --> 00:20:43,040
you're not getting $10,000 in your checking

523
00:20:43,040 --> 00:20:43,520
account.

524
00:20:43,800 --> 00:20:45,960
And if you live in a state that

525
00:20:45,960 --> 00:20:49,800
has income tax, maybe another 5%, round numbers,

526
00:20:49,940 --> 00:20:51,800
you could see 30% off the top

527
00:20:51,800 --> 00:20:56,400
of your withdrawal from your IRA.

528
00:20:56,780 --> 00:20:58,340
So that's where it starts.

529
00:20:59,060 --> 00:21:01,180
And then people don't realize that they're going

530
00:21:01,180 --> 00:21:04,280
to have to build a portfolio of income,

531
00:21:04,400 --> 00:21:04,780
if you will.

532
00:21:04,940 --> 00:21:06,320
Where is the money coming from?

533
00:21:06,600 --> 00:21:08,160
Is social security taxed?

534
00:21:08,160 --> 00:21:08,760
Are you working?

535
00:21:08,760 --> 00:21:11,640
And so all these things, a lot of

536
00:21:11,640 --> 00:21:15,360
retirees don't assume that it's going to rise

537
00:21:15,360 --> 00:21:19,680
to the level of taxes, income taxes.

538
00:21:19,700 --> 00:21:20,880
Yeah, that's a good point.

539
00:21:21,020 --> 00:21:21,940
I mean, I think a lot of times

540
00:21:21,940 --> 00:21:26,160
historically we've said, oh, the reason you deduct

541
00:21:26,160 --> 00:21:28,020
now is because you'll be in a lower

542
00:21:28,020 --> 00:21:28,920
tax bracket later.

543
00:21:31,100 --> 00:21:32,860
And sometimes that's true.

544
00:21:34,940 --> 00:21:38,100
Your social security, depending on the level of

545
00:21:38,100 --> 00:21:41,360
income, is taxed at different rates, right?

546
00:21:41,400 --> 00:21:43,060
Or different amounts of it are taxed.

547
00:21:43,300 --> 00:21:47,300
So let's say, for example, if you make

548
00:21:47,300 --> 00:21:49,460
a certain amount, anyone have those numbers offhand?

549
00:21:51,380 --> 00:21:52,200
Where is it?

550
00:21:52,240 --> 00:21:54,240
Social security in last year, if you're filing

551
00:21:54,240 --> 00:21:58,940
jointly, if you made under $32,000, you

552
00:21:58,940 --> 00:22:00,440
don't get taxed on your social security.

553
00:22:00,600 --> 00:22:01,240
If you made...

554
00:22:01,240 --> 00:22:01,920
Is that last year?

555
00:22:01,980 --> 00:22:02,740
Am I looking at the right year?

556
00:22:03,960 --> 00:22:04,160
Yeah.

557
00:22:04,160 --> 00:22:07,440
And if you made $32,000 to $44

558
00:22:07,440 --> 00:22:10,080
,000, only half of your social security is

559
00:22:10,080 --> 00:22:10,960
subject to tax.

560
00:22:11,860 --> 00:22:13,960
But if you make more than $34,000

561
00:22:13,960 --> 00:22:18,180
as a filing joint couple, 85%, sorry, more

562
00:22:18,180 --> 00:22:21,180
than $44,000, 85% is subject to

563
00:22:21,180 --> 00:22:21,500
tax.

564
00:22:24,800 --> 00:22:27,280
So different thresholds, you can say, oh, well,

565
00:22:27,300 --> 00:22:28,600
maybe I will, maybe I won't, right?

566
00:22:28,620 --> 00:22:29,800
What other income do you have?

567
00:22:29,900 --> 00:22:32,200
Well, distributions from retirement plan.

568
00:22:32,200 --> 00:22:34,120
You mentioned the idea, you want to buy

569
00:22:34,120 --> 00:22:35,440
a car and that's where you're taking it

570
00:22:35,440 --> 00:22:35,780
from.

571
00:22:36,360 --> 00:22:38,520
You're taking $50,000 to buy that car.

572
00:22:38,680 --> 00:22:40,000
Sorry, you don't have $50,000.

573
00:22:40,600 --> 00:22:43,280
You've got $35,000 or whatever after you

574
00:22:43,280 --> 00:22:44,060
pay taxes.

575
00:22:45,620 --> 00:22:46,780
So, you know, whatever.

576
00:22:46,920 --> 00:22:48,860
So you have to take out more if

577
00:22:48,860 --> 00:22:49,260
you're...

578
00:22:49,260 --> 00:22:51,120
Or whatever, you know, depends on how much

579
00:22:51,120 --> 00:22:51,920
you spend on the car.

580
00:22:52,100 --> 00:22:52,480
But you follow...

581
00:22:52,480 --> 00:22:53,200
Oh, buy less.

582
00:22:53,680 --> 00:22:54,540
Yeah, yeah.

583
00:22:54,540 --> 00:22:55,440
Or buy a smaller car.

584
00:22:55,780 --> 00:22:56,960
Yeah, a lesser car.

585
00:22:59,280 --> 00:23:03,680
But so when it comes to taxes, it's

586
00:23:03,680 --> 00:23:07,780
historically, I think, been presumed that people will

587
00:23:07,780 --> 00:23:09,940
be in a lower tax bracket when they

588
00:23:09,940 --> 00:23:14,200
take their retirement money, you know?

589
00:23:14,640 --> 00:23:19,080
And that is often not the case.

590
00:23:19,080 --> 00:23:20,960
It does not say it's never the case,

591
00:23:21,540 --> 00:23:22,880
often not the case.

592
00:23:22,880 --> 00:23:26,000
So the appeal of having some Roth IRA

593
00:23:26,000 --> 00:23:29,700
money in the mix and enhance the opportunity

594
00:23:29,700 --> 00:23:32,060
to have some resources that I can get

595
00:23:32,060 --> 00:23:35,580
out without tax consequence or like an RMD

596
00:23:35,580 --> 00:23:38,400
pushes my income tax up and creates more

597
00:23:38,400 --> 00:23:41,040
tax on my social security as an example.

598
00:23:41,360 --> 00:23:43,040
So if I don't have as much of

599
00:23:43,040 --> 00:23:45,760
that or don't have that, it's a tax

600
00:23:45,760 --> 00:23:47,580
advantage in retirement.

601
00:23:47,580 --> 00:23:53,240
So taxes often are as high or higher

602
00:23:53,240 --> 00:23:57,580
in retirement because those RMDs are pushing more

603
00:23:57,580 --> 00:24:00,540
and more money out over time, more higher

604
00:24:00,540 --> 00:24:01,520
rates over time.

605
00:24:01,600 --> 00:24:03,880
It can push us into higher brackets than

606
00:24:03,880 --> 00:24:06,820
we really might have expected later in retirement.

607
00:24:08,260 --> 00:24:11,480
This is really analogous to our conversation a

608
00:24:11,480 --> 00:24:12,900
week or two ago when we were talking

609
00:24:12,900 --> 00:24:15,840
about income levels and how much you need

610
00:24:15,840 --> 00:24:17,280
in retirement.

611
00:24:17,280 --> 00:24:20,060
I think it all starts with people underestimate

612
00:24:20,060 --> 00:24:23,080
the income level that they're going to need

613
00:24:23,080 --> 00:24:23,680
in retirement.

614
00:24:24,020 --> 00:24:27,680
There was, some advisors suggest that you need

615
00:24:27,680 --> 00:24:30,980
less money in retirement, less income in retirement.

616
00:24:32,660 --> 00:24:36,100
And typically that's not the case that we

617
00:24:36,100 --> 00:24:37,820
find with our clients.

618
00:24:38,700 --> 00:24:39,440
I think that's true.

619
00:24:39,940 --> 00:24:40,940
It's a good point.

620
00:24:41,160 --> 00:24:45,680
Oftentimes people think that they'll need less but

621
00:24:45,680 --> 00:24:47,700
you really want to give thought to that.

622
00:24:48,420 --> 00:24:51,200
What in your lifestyle is going to change?

623
00:24:51,920 --> 00:24:54,700
What in your expenses is materially going to

624
00:24:54,700 --> 00:24:55,000
be different?

625
00:24:55,120 --> 00:24:59,340
And do you want to be planning on

626
00:24:59,340 --> 00:25:00,180
living on less?

627
00:25:00,780 --> 00:25:02,240
Yeah, I think people count.

628
00:25:02,760 --> 00:25:04,340
No, I can go through a few things

629
00:25:04,340 --> 00:25:05,580
that I would say.

630
00:25:05,900 --> 00:25:08,060
How are my expenses going to be less?

631
00:25:08,780 --> 00:25:10,520
I'm not going to drive as much.

632
00:25:10,520 --> 00:25:11,860
I'm not going to do dry cleaning.

633
00:25:11,860 --> 00:25:14,020
I may not have business lunches.

634
00:25:14,080 --> 00:25:16,240
I made some of my expenses were related

635
00:25:16,240 --> 00:25:17,140
to my work.

636
00:25:17,640 --> 00:25:20,200
I may have, et cetera, things that you

637
00:25:20,200 --> 00:25:21,500
think about related to your work.

638
00:25:21,680 --> 00:25:24,320
But then how about, what are you going

639
00:25:24,320 --> 00:25:25,220
to do instead?

640
00:25:25,780 --> 00:25:30,540
Oh, I'm going to have some hobby that

641
00:25:30,540 --> 00:25:31,440
has a cost to it.

642
00:25:31,500 --> 00:25:33,880
I'm going to whatever it is.

643
00:25:34,060 --> 00:25:35,740
It's kind of out of one pocket and

644
00:25:35,740 --> 00:25:37,900
it transitions.

645
00:25:38,180 --> 00:25:41,460
But typically people I see, I think we've

646
00:25:41,460 --> 00:25:42,300
talked about this before.

647
00:25:42,440 --> 00:25:44,980
Typically people spend about the same amount of

648
00:25:44,980 --> 00:25:45,240
money.

649
00:25:45,500 --> 00:25:48,360
And this is maybe in different things, but

650
00:25:48,360 --> 00:25:49,780
it tends to be they have a comfort

651
00:25:49,780 --> 00:25:50,680
zone for spending.

652
00:25:51,220 --> 00:25:52,660
One thing that's been kind of funny, just

653
00:25:52,660 --> 00:25:55,280
a digression lately, we've had some conversations with

654
00:25:55,280 --> 00:25:57,520
clients and they've been like, yeah, this is

655
00:25:57,520 --> 00:25:58,780
the last car I'm ever buying.

656
00:25:59,020 --> 00:26:00,840
It seems like it's come up a lot

657
00:26:00,840 --> 00:26:01,680
this week, hasn't it?

658
00:26:02,920 --> 00:26:06,320
Just people thinking, well, and the notion that

659
00:26:06,320 --> 00:26:08,640
they don't drive as much in retirement as

660
00:26:08,640 --> 00:26:10,700
they might have pre-retirement.

661
00:26:11,060 --> 00:26:13,400
So they expect their cars will last longer

662
00:26:13,400 --> 00:26:14,520
and that sort of thing.

663
00:26:15,260 --> 00:26:17,180
But anyway, it seems like that had come

664
00:26:17,180 --> 00:26:17,920
up a lot lately.

665
00:26:19,420 --> 00:26:21,040
Russ, one of the other things we wanted

666
00:26:21,040 --> 00:26:23,380
to talk about when talking about tax planning

667
00:26:23,380 --> 00:26:27,760
and the idea of using Roth IRAs, perhaps

668
00:26:27,760 --> 00:26:30,800
this time of year is the kind of,

669
00:26:30,860 --> 00:26:33,180
I think when people are most focused on

670
00:26:33,180 --> 00:26:36,540
should they contribute is the clock.

671
00:26:36,540 --> 00:26:39,620
Let's talk about the benefit of getting started

672
00:26:39,620 --> 00:26:40,600
with a Roth IRA.

673
00:26:41,860 --> 00:26:43,800
Russ Becker So let's say you're in your

674
00:26:43,800 --> 00:26:46,720
60s and you've just been contributing to your

675
00:26:46,720 --> 00:26:48,040
401k for years.

676
00:26:48,780 --> 00:26:51,240
Never really thought about a Roth IRA.

677
00:26:52,200 --> 00:26:53,500
That could be a good time to start

678
00:26:53,500 --> 00:26:59,420
creating a more diversified bucket of allocation.

679
00:26:59,680 --> 00:27:00,340
Tax diversification.

680
00:27:00,340 --> 00:27:01,540
Tax diversification, thank you.

681
00:27:02,180 --> 00:27:04,080
Tax diversification with your different accounts.

682
00:27:04,260 --> 00:27:05,740
So you can have your taxable account, your

683
00:27:05,740 --> 00:27:08,640
deferred account, and then your tax free account,

684
00:27:08,760 --> 00:27:10,680
which would be the Roth vehicle.

685
00:27:11,520 --> 00:27:14,060
So if you open up a Roth IRA,

686
00:27:14,260 --> 00:27:16,740
let's say if you're 60 years old, you

687
00:27:16,740 --> 00:27:18,140
do have to wait five years.

688
00:27:18,380 --> 00:27:20,120
That Roth has to be in existence for

689
00:27:20,120 --> 00:27:22,800
five years before you can start dipping into

690
00:27:22,800 --> 00:27:26,100
that Roth to get the earnings on the

691
00:27:26,100 --> 00:27:28,760
growth on those contributions.

692
00:27:30,200 --> 00:27:33,520
So another advantageous thing, if you start, if

693
00:27:33,520 --> 00:27:36,220
you open up a Roth today, for 2024,

694
00:27:36,560 --> 00:27:37,600
you get that year free.

695
00:27:37,820 --> 00:27:39,320
So that's one year down and you're already

696
00:27:39,320 --> 00:27:39,880
in 2025.

697
00:27:40,400 --> 00:27:41,960
So that's one year towards your five-year

698
00:27:41,960 --> 00:27:43,120
limit.

699
00:27:43,440 --> 00:27:45,520
And then after those five years are up,

700
00:27:45,520 --> 00:27:47,560
you can start taking earnings out tax free.

701
00:27:49,280 --> 00:27:51,540
So the sooner you start, the better.

702
00:27:51,960 --> 00:27:53,260
And in this case, if you make a

703
00:27:53,260 --> 00:27:58,620
contribution for a 2024 contribution, January 1st, 2024,

704
00:27:58,860 --> 00:28:00,960
is when that five-year clock has started.

705
00:28:01,860 --> 00:28:03,720
And so again, not just for an older

706
00:28:03,720 --> 00:28:05,480
person, in this case, a younger person may

707
00:28:05,480 --> 00:28:08,920
say, hey, if I had an unexpected need,

708
00:28:09,220 --> 00:28:10,820
we wouldn't encourage you to do this, but

709
00:28:10,820 --> 00:28:14,700
you'd be able potentially to pull principal without

710
00:28:14,700 --> 00:28:15,600
a problem.

711
00:28:15,920 --> 00:28:18,920
But you're, again, starting that clock for the,

712
00:28:20,140 --> 00:28:21,580
I guess it's really more when you get

713
00:28:21,580 --> 00:28:24,240
closer to retirement that it's more relevant, but

714
00:28:24,240 --> 00:28:26,580
you do have access to principal.

715
00:28:26,980 --> 00:28:29,700
Sometimes it's good for all these reasons to

716
00:28:29,700 --> 00:28:32,800
get your Roth IRA moving, get it started.

717
00:28:34,040 --> 00:28:35,580
That's a point of clarification on what you

718
00:28:35,580 --> 00:28:36,320
guys talked about.

719
00:28:36,680 --> 00:28:39,680
You can also make a traditional IRA contribution

720
00:28:39,680 --> 00:28:41,240
for the last year if you haven't filed

721
00:28:41,240 --> 00:28:42,840
your taxes yet for 2024.

722
00:28:43,240 --> 00:28:44,300
Good point, yes.

723
00:28:44,800 --> 00:28:45,900
And take the deduction.

724
00:28:47,980 --> 00:28:50,200
Which could help your tax return this year.

725
00:28:50,480 --> 00:28:50,860
That's right.

726
00:28:52,220 --> 00:28:55,240
Again, given the notion that you have eligibility,

727
00:28:55,520 --> 00:28:57,080
we talked about some of these thresholds.

728
00:28:57,160 --> 00:28:59,080
There is a technique, I'm just gonna make

729
00:28:59,080 --> 00:29:02,020
quick reference to, it's called a backdoor Roth

730
00:29:02,020 --> 00:29:03,000
IRA contribution.

731
00:29:03,000 --> 00:29:06,160
For someone who doesn't have the eligibility to

732
00:29:06,160 --> 00:29:08,220
contribute to a Roth IRA because they make

733
00:29:08,220 --> 00:29:12,660
too much, there's a possibility of putting money

734
00:29:12,660 --> 00:29:16,320
into a non-deductible contribution to an IRA

735
00:29:16,320 --> 00:29:20,600
and subsequently making a conversion of that non

736
00:29:20,600 --> 00:29:24,300
-deductible IRA into the Roth IRA.

737
00:29:24,700 --> 00:29:28,120
Big thing to be focused on is that

738
00:29:28,120 --> 00:29:31,820
if you have an existing IRA, it doesn't

739
00:29:31,820 --> 00:29:33,740
work as well for you because you can't

740
00:29:33,740 --> 00:29:36,700
select, oh, I only want that IRA to

741
00:29:36,700 --> 00:29:37,400
be converted.

742
00:29:37,600 --> 00:29:38,820
It'd be proportionate.

743
00:29:38,960 --> 00:29:43,160
So if you have an existing IRA, the

744
00:29:43,160 --> 00:29:45,420
backdoor Roth IRA doesn't really work too well

745
00:29:45,420 --> 00:29:46,040
for you.

746
00:29:46,800 --> 00:29:49,840
It's ideal for people who don't have an

747
00:29:49,840 --> 00:29:52,640
existing IRA and wanna find a way to

748
00:29:52,640 --> 00:29:54,000
get money into their Roth IRA.

749
00:29:54,720 --> 00:29:56,840
But it's relatively limited in terms of the

750
00:29:56,840 --> 00:29:57,060
scope.

751
00:29:57,540 --> 00:29:59,880
Better served for people who have an option

752
00:29:59,880 --> 00:30:02,760
with a retirement plan at work that you

753
00:30:02,760 --> 00:30:06,220
could do a Roth 401k contribution, you can

754
00:30:06,220 --> 00:30:06,940
do a lot more.

755
00:30:07,180 --> 00:30:08,900
And that leads us to the topic of

756
00:30:08,900 --> 00:30:12,760
contribution limits, which might be worth talking about

757
00:30:12,760 --> 00:30:13,240
for a minute.

758
00:30:14,680 --> 00:30:20,540
In 2024 and 2025, the 401k limits are

759
00:30:20,540 --> 00:30:21,340
slightly different.

760
00:30:21,840 --> 00:30:26,440
So 2024, you could contribute $23,000 to

761
00:30:26,440 --> 00:30:31,360
max out your 401k, 403b, 457, et cetera

762
00:30:31,360 --> 00:30:32,180
type plan.

763
00:30:32,940 --> 00:30:36,620
And this year it's 23,500.

764
00:30:36,840 --> 00:30:40,920
So if you haven't updated your contributions, you

765
00:30:40,920 --> 00:30:41,800
may wanna do that.

766
00:30:41,940 --> 00:30:46,340
If you're over 50 and over, you can

767
00:30:46,340 --> 00:30:50,020
do an additional $7,500 to that number.

768
00:30:50,440 --> 00:30:52,820
For people who don't have a 401k option

769
00:30:52,820 --> 00:30:56,140
or similar, and you are participating in a

770
00:30:56,140 --> 00:30:59,940
simple retirement plan, a simple IRA, here again,

771
00:31:00,060 --> 00:31:02,220
there've been an increase of about 500 bucks.

772
00:31:02,680 --> 00:31:06,040
So last year, 2024, you could do 16

773
00:31:06,040 --> 00:31:09,980
,000 plus $3,500 if you were 50

774
00:31:09,980 --> 00:31:10,400
and over.

775
00:31:11,120 --> 00:31:13,220
Now you can do 16,500 plus the

776
00:31:13,220 --> 00:31:15,960
$3,500 if you're 50 and over.

777
00:31:16,120 --> 00:31:20,500
So just a quick note, remember to update

778
00:31:20,500 --> 00:31:22,620
things if you want to be trying to

779
00:31:22,620 --> 00:31:24,520
max out your contributions.

780
00:31:24,520 --> 00:31:25,860
Not everyone can do that.

781
00:31:25,860 --> 00:31:28,040
We encourage you to do as much as

782
00:31:28,040 --> 00:31:28,660
you can.

783
00:31:29,500 --> 00:31:31,400
Certainly as much as you get a match,

784
00:31:32,420 --> 00:31:35,180
because you're leaving money on the table if

785
00:31:35,180 --> 00:31:35,740
you don't.

786
00:31:37,260 --> 00:31:39,220
But try to do a little bit more

787
00:31:39,220 --> 00:31:41,960
every year when you get pay increases, up

788
00:31:41,960 --> 00:31:42,240
it.

789
00:31:42,640 --> 00:31:43,580
And that'll help.

790
00:31:44,220 --> 00:31:46,280
One additional note that seems to have gone

791
00:31:46,280 --> 00:31:47,480
under the radar a little bit, but I

792
00:31:47,480 --> 00:31:49,480
think it's part of Secure 2.0. There's

793
00:31:49,480 --> 00:31:53,220
this super catch-up for 401k.

794
00:31:53,280 --> 00:31:54,200
Oh, for 60s.

795
00:31:54,200 --> 00:31:58,100
For ages 60 to 63, rather than the

796
00:31:58,100 --> 00:32:00,100
$7,500 catch-up.

797
00:32:00,240 --> 00:32:01,420
And that's just sort of this year, right?

798
00:32:01,420 --> 00:32:02,900
That's just for starting 2025.

799
00:32:03,720 --> 00:32:06,080
So that doesn't apply to last year.

800
00:32:06,200 --> 00:32:08,700
But for this year, if you fall into

801
00:32:08,700 --> 00:32:11,560
those ages at year end, that you will

802
00:32:11,560 --> 00:32:13,420
be 60, what was it again?

803
00:32:13,620 --> 00:32:14,480
60 to 63.

804
00:32:14,760 --> 00:32:15,860
60 to 63.

805
00:32:16,360 --> 00:32:19,720
So it's at year end, if you're in

806
00:32:19,720 --> 00:32:23,080
those age ranges, then these limits give you

807
00:32:23,080 --> 00:32:25,200
a super catch-up option.

808
00:32:26,360 --> 00:32:29,340
For 2025, it's $11,250.

809
00:32:30,580 --> 00:32:33,180
And that's going to be changing each year,

810
00:32:33,580 --> 00:32:36,800
depending on, I guess, similar to- Inflation

811
00:32:36,800 --> 00:32:38,300
adjustment, that kind of thing.

812
00:32:39,180 --> 00:32:41,080
So how much was that number again?

813
00:32:41,620 --> 00:32:42,780
$11,250.

814
00:32:43,320 --> 00:32:45,580
So instead of the $3,500 that we

815
00:32:45,580 --> 00:32:47,160
were just talking about, you could do this

816
00:32:47,160 --> 00:32:49,960
much more contribution.

817
00:32:49,960 --> 00:32:50,600
That's great.

818
00:32:50,760 --> 00:32:51,140
That's great.

819
00:32:51,280 --> 00:32:53,160
But it only applies to those three years.

820
00:32:53,420 --> 00:32:53,520
Yeah.

821
00:32:53,680 --> 00:32:54,340
Really weird.

822
00:32:54,620 --> 00:32:57,800
After it goes back to the typical catch

823
00:32:57,800 --> 00:32:58,760
-up of 50 plus.

824
00:32:58,980 --> 00:33:00,120
So it would be $7,500.

825
00:33:00,760 --> 00:33:01,000
Okay.

826
00:33:01,040 --> 00:33:02,940
After that three-year window, it goes back

827
00:33:02,940 --> 00:33:03,240
down.

828
00:33:03,760 --> 00:33:03,960
Okay.

829
00:33:05,040 --> 00:33:07,480
So just an interesting note to add.

830
00:33:07,740 --> 00:33:08,380
Did I say the wrong number?

831
00:33:08,500 --> 00:33:08,660
Yeah.

832
00:33:08,960 --> 00:33:09,220
Yes.

833
00:33:09,640 --> 00:33:11,420
Oh, it depends on if it's Simple IRA

834
00:33:11,420 --> 00:33:12,660
or the 401k.

835
00:33:13,000 --> 00:33:13,180
Sorry.

836
00:33:13,420 --> 00:33:13,580
Yeah.

837
00:33:13,800 --> 00:33:14,040
Okay.

838
00:33:15,280 --> 00:33:16,580
So very good.

839
00:33:16,900 --> 00:33:17,920
That's a good catch.

840
00:33:18,020 --> 00:33:18,560
Good comment.

841
00:33:18,560 --> 00:33:20,940
This year, that's a new one for people

842
00:33:20,940 --> 00:33:25,260
to remember as a consequence of the Secure

843
00:33:25,260 --> 00:33:28,480
Act 2.0. Our listeners might be wishing

844
00:33:28,480 --> 00:33:30,180
they had a scorecard for all this.

845
00:33:30,800 --> 00:33:31,100
Yeah.

846
00:33:31,460 --> 00:33:32,440
There's a lot here.

847
00:33:32,640 --> 00:33:33,040
What was that?

848
00:33:33,100 --> 00:33:33,940
What were we going to say, Jeff?

849
00:33:34,160 --> 00:33:35,320
I was going to say, if you want

850
00:33:35,320 --> 00:33:36,600
a scorecard, we have one.

851
00:33:37,000 --> 00:33:37,340
Yeah.

852
00:33:37,860 --> 00:33:39,300
Well, it would be free to give it.

853
00:33:39,760 --> 00:33:41,440
Be happy to give it to you, right?

854
00:33:41,640 --> 00:33:42,980
It's a great resource.

855
00:33:43,080 --> 00:33:44,160
I call it the cheat sheet.

856
00:33:45,280 --> 00:33:46,820
It's got so much on it.

857
00:33:48,860 --> 00:33:52,420
But there's a 2025 personal finance fact sheet.

858
00:33:52,860 --> 00:33:56,320
If you're interested in getting that, happy to

859
00:33:56,320 --> 00:33:56,760
share it.

860
00:33:56,980 --> 00:33:58,980
I give it out at client meetings all

861
00:33:58,980 --> 00:33:59,360
the time.

862
00:33:59,480 --> 00:34:00,480
I think clients love this.

863
00:34:01,080 --> 00:34:01,400
Very useful.

864
00:34:01,620 --> 00:34:03,100
It's just, I mean, it's packed full of

865
00:34:03,100 --> 00:34:03,640
insights.

866
00:34:04,140 --> 00:34:06,620
Not everything applies to everyone, but a good

867
00:34:06,620 --> 00:34:08,139
tool to have available.

868
00:34:09,880 --> 00:34:10,100
Yeah.

869
00:34:10,300 --> 00:34:12,219
And how should people reach out if they

870
00:34:12,219 --> 00:34:13,199
want to get that, Jeff?

871
00:34:13,840 --> 00:34:15,179
I think the best way is just to

872
00:34:15,179 --> 00:34:16,480
send us an email, and we'll send it

873
00:34:16,480 --> 00:34:17,420
right back to you.

874
00:34:18,540 --> 00:34:22,260
So you can email us at amr-info

875
00:34:22,260 --> 00:34:24,360
at wealthenhancement.com.

876
00:34:25,860 --> 00:34:28,639
amr-info, or hyphen if you prefer, info

877
00:34:28,639 --> 00:34:30,980
at wealthenhancement.com.

878
00:34:32,120 --> 00:34:34,360
Did we also have an interesting fact sheet,

879
00:34:34,500 --> 00:34:37,060
a tax preparation guide at one point?

880
00:34:37,179 --> 00:34:38,260
There's something else we had.

881
00:34:38,520 --> 00:34:40,300
Yeah, we have a checklist to help with

882
00:34:40,300 --> 00:34:41,340
your tax preparation.

883
00:34:41,620 --> 00:34:43,139
And if you want that one, just send

884
00:34:43,139 --> 00:34:43,639
us an email.

885
00:34:43,639 --> 00:34:46,040
Just a couple of tidbits to be like,

886
00:34:46,139 --> 00:34:47,980
hey, don't forget about some of these things.

887
00:34:49,360 --> 00:34:51,679
So feel free to reach out for that

888
00:34:51,679 --> 00:34:52,199
as well.

889
00:34:53,020 --> 00:34:55,300
One last thing before we wrap up, Jeff,

890
00:34:55,320 --> 00:34:56,620
and I wanted to talk about this because

891
00:34:56,620 --> 00:35:00,380
it came up recently with clients who had

892
00:35:00,380 --> 00:35:03,920
done a qualified charitable distribution last year, a

893
00:35:03,920 --> 00:35:04,460
QCD.

894
00:35:05,140 --> 00:35:06,980
If you are age 70 and a half

895
00:35:06,980 --> 00:35:12,460
or older, you're eligible to, because remember, once

896
00:35:12,460 --> 00:35:14,260
upon a time, that was the start date

897
00:35:14,260 --> 00:35:15,640
for RMDs.

898
00:35:16,120 --> 00:35:17,700
And they've changed it over the years to

899
00:35:17,700 --> 00:35:20,460
72, then to 73, eventually 75.

900
00:35:20,860 --> 00:35:26,360
But they've kept this threshold for, if you

901
00:35:26,360 --> 00:35:29,660
want to give money to charity, using pre

902
00:35:29,660 --> 00:35:33,360
-tax money, not yet taxed money, IRA money,

903
00:35:34,400 --> 00:35:37,700
through a qualified charitable distribution is a great

904
00:35:37,700 --> 00:35:40,020
way to give money that's not been taxed

905
00:35:40,020 --> 00:35:41,660
to a charity that doesn't pay tax.

906
00:35:42,180 --> 00:35:44,340
You get to give money that avoids the

907
00:35:44,340 --> 00:35:45,540
whole tax scheme, right?

908
00:35:45,940 --> 00:35:47,560
So sounds good, right?

909
00:35:47,740 --> 00:35:50,000
But so if you're 70 and a half

910
00:35:50,000 --> 00:35:53,480
or older, you have the opportunity to take

911
00:35:53,480 --> 00:35:55,340
IRA money to give to charitable intentions.

912
00:35:55,740 --> 00:35:58,360
This process is called a qualified charitable distribution.

913
00:35:58,860 --> 00:36:02,500
When you are subject to distribution requirements, the

914
00:36:02,500 --> 00:36:05,820
RMD that we were talking about earlier, it

915
00:36:05,820 --> 00:36:08,540
will reduce if you said, oh, I'm going

916
00:36:08,540 --> 00:36:09,860
to give $1,000 to charity.

917
00:36:10,040 --> 00:36:12,680
It'll reduce your RMD by $1,000.

918
00:36:13,060 --> 00:36:14,320
You want to make sure you do this

919
00:36:14,320 --> 00:36:16,480
stuff earlier in the year before you take

920
00:36:16,480 --> 00:36:17,020
your RMD.

921
00:36:17,140 --> 00:36:19,180
So you have the opportunity not to take

922
00:36:19,180 --> 00:36:19,780
out as much.

923
00:36:20,500 --> 00:36:25,220
But in any case, it turns out that

924
00:36:25,220 --> 00:36:30,460
when investment companies or brokerage firms, uh, they,

925
00:36:30,580 --> 00:36:33,140
they will send the money through this qualified

926
00:36:33,140 --> 00:36:36,480
charitable distribution process to the charity of choice,

927
00:36:36,480 --> 00:36:40,340
but they don't make a special notation on

928
00:36:40,340 --> 00:36:44,200
the 1099 that this was, um, not a

929
00:36:44,200 --> 00:36:45,460
taxable distribution.

930
00:36:45,460 --> 00:36:46,960
It's a tax-free distribution.

931
00:36:47,580 --> 00:36:49,640
And the, the reason I'm sure is they

932
00:36:49,640 --> 00:36:50,880
don't want to be bothered trying to figure

933
00:36:50,880 --> 00:36:54,160
out, is this a qualified recipient for the,

934
00:36:54,480 --> 00:36:56,700
it's up to you and the IRS to

935
00:36:56,700 --> 00:36:57,820
figure that out, right?

936
00:36:57,820 --> 00:37:01,020
So they don't have a special notation on

937
00:37:01,020 --> 00:37:01,660
the 1099.

938
00:37:02,400 --> 00:37:03,600
So I had a client call me and

939
00:37:03,600 --> 00:37:04,320
said, Hey, wait a second.

940
00:37:04,440 --> 00:37:07,420
I made that, you know, uh, qualified charitable

941
00:37:07,420 --> 00:37:10,180
distribution, but it looks like it's taxable on

942
00:37:10,180 --> 00:37:11,400
my, my 1099.

943
00:37:11,860 --> 00:37:13,440
It will come to you that way.

944
00:37:13,640 --> 00:37:15,560
You're going to have to, uh, file as

945
00:37:15,560 --> 00:37:16,660
part of your tax return.

946
00:37:16,960 --> 00:37:18,780
Talk to your taxpayers for the specifics.

947
00:37:18,880 --> 00:37:21,380
I'm not sure exactly, but essentially you have

948
00:37:21,380 --> 00:37:24,020
to make notation in your tax return that

949
00:37:24,020 --> 00:37:25,960
these funds, I'm sure you have to include,

950
00:37:26,040 --> 00:37:28,020
you know, the, the letter that comes with

951
00:37:28,020 --> 00:37:30,980
it to say these funds came from this

952
00:37:30,980 --> 00:37:34,780
qualified charitable distribution and should not be subject

953
00:37:34,780 --> 00:37:35,780
to tax kind of thing.

954
00:37:36,280 --> 00:37:37,760
Uh, there's probably a form.

955
00:37:37,900 --> 00:37:40,000
I don't know it offhand, but just want

956
00:37:40,000 --> 00:37:42,360
people to be mindful, something to be aware

957
00:37:42,360 --> 00:37:42,860
of.

958
00:37:43,520 --> 00:37:45,260
You want to make sure you get credit.

959
00:37:45,480 --> 00:37:47,680
You're not paying tax on that as the

960
00:37:47,680 --> 00:37:49,780
way you had planned not to get taxed

961
00:37:49,780 --> 00:37:50,140
on that.

962
00:37:51,460 --> 00:37:51,980
All right.

963
00:37:52,000 --> 00:37:52,320
I don't know.

964
00:37:52,360 --> 00:37:52,700
What do you think?

965
00:37:52,720 --> 00:37:53,460
Could we cover enough?

966
00:37:54,040 --> 00:37:54,800
I think so.

967
00:37:54,820 --> 00:37:55,600
I think so too.

968
00:37:55,600 --> 00:37:57,460
It seems like we covered a lot there.

969
00:37:57,640 --> 00:37:58,780
I hope that was helpful to everybody.

970
00:37:58,960 --> 00:38:01,060
Listen, if you want that tax sheet, the

971
00:38:01,060 --> 00:38:03,920
cheat sheet might, as I call it the

972
00:38:03,920 --> 00:38:07,360
2025, or if you need the 2024 personal

973
00:38:07,360 --> 00:38:10,380
finance facts, we've got them for you.

974
00:38:10,420 --> 00:38:11,340
Happy to share them.

975
00:38:11,860 --> 00:38:12,760
I'll just reach out.

976
00:38:13,640 --> 00:38:16,840
You can call us at 508-771-8900

977
00:38:16,840 --> 00:38:23,340
or amr-info at wealthenhancement.com.

978
00:38:23,400 --> 00:38:24,180
Okay, everybody.

979
00:38:24,180 --> 00:38:25,800
Thanks for both of you guys.

980
00:38:26,180 --> 00:38:28,660
Until next time, everybody keeps driving for something

981
00:38:28,660 --> 00:38:29,000
more.

982
00:38:30,480 --> 00:38:32,420
Thank you for listening to Something More with

983
00:38:32,420 --> 00:38:33,100
Chris Boyd.

984
00:38:33,420 --> 00:38:35,580
Call us for help, whether it's for financial

985
00:38:35,580 --> 00:38:39,520
planning or portfolio management, insurance concerns, or those

986
00:38:39,520 --> 00:38:41,560
quality of life issues that make the money

987
00:38:41,560 --> 00:38:42,640
matters matter.

988
00:38:43,000 --> 00:38:46,300
Whatever's on your mind, visit us at somethingmorewithchrisboyd

989
00:38:46,300 --> 00:38:49,480
.com or call us toll-free at 866

990
00:38:49,480 --> 00:38:55,020
-771-8901 or send us your questions to

991
00:38:55,020 --> 00:38:58,980
amr-info at wealthenhancement.com.

992
00:38:59,160 --> 00:39:01,080
You're listening to Something More with Chris Boyd

993
00:39:01,080 --> 00:39:01,940
Financial Talk Show.

994
00:39:02,060 --> 00:39:04,540
Wealth Enhancement Advisory Services and Jay Christopher Boyd

995
00:39:04,540 --> 00:39:06,860
provide investment advice on an individual basis to

996
00:39:06,860 --> 00:39:07,400
clients only.

997
00:39:07,580 --> 00:39:09,560
Proper advice depends on a complete analysis of

998
00:39:09,560 --> 00:39:10,740
all facts and circumstances.

999
00:39:10,980 --> 00:39:12,820
The information given on this program is general

1000
00:39:12,820 --> 00:39:14,880
financial comments and cannot be relied upon as

1001
00:39:14,880 --> 00:39:16,460
pertaining to your specific situation.

1002
00:39:16,460 --> 00:39:18,620
Wealth Enhancement Group cannot guarantee that using the

1003
00:39:18,620 --> 00:39:20,620
information from this show will generate profits or

1004
00:39:20,620 --> 00:39:21,740
ensure freedom from loss.

1005
00:39:21,960 --> 00:39:24,120
Listeners should consult their own financial advisors or

1006
00:39:24,120 --> 00:39:26,200
conduct their own due diligence before making any

1007
00:39:26,200 --> 00:39:27,040
financial decisions.