Episode Transcript
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Speaker 1 (00:00):
Welcome to the hidden world of wealth, where secrets of
the affluent become accessible to you. You are listening to
Your Money Matters, the most provocative financial radio show on
the airwaves. You are about to start your educational journey
here on Your Money Matters with your host, Drew Prescott,
(00:22):
President of Prescott Private Wealth and Chartered Retirement Planning Counselor.
Drew will unlock the complexities of the financial landscape with straightforward,
powerful insights. Whether you're planning for retirement, managing in a state,
or looking to grow your wealth. Consider this your exclusive invitation.
Turn up the volume, lean in closer. Let's navigate the
(00:45):
hidden paths of prosperity together. Your financial enlightenment begins now.
Securities all produce a terror Financial Specialists LLC Member fen
The SIPC reservices offered through Setara Investment Advisors LLC SATERA
firms are under separate ownership from any other named entity.
Speaker 2 (01:06):
Four five to one THO sixth Street, Troy, New York,
one two one eight zero.
Speaker 3 (01:29):
Good morning, everybody, and welcome back to Your Money Matters.
I'm your host, Drew Prescott, Chartered Retirement Planning Counselor and
accredited wealth management advisor and president of Prescott Private Wealth
based right here on Troy, New York. If you're tuning
in for the first time, this is a show where
we break down complex financial topics and we do it
(01:50):
to help you make smarter money decisions. And in today's episode,
it is packed with insights that you will not want
to miss. We'll start off with a market up and
what's been happening year to date and what it means
for you as an investor. Then in the following segment,
we'll dive into the future of taxes under the Trump
(02:12):
administration and how businesses and families should prepare. But first,
let's talk about the markets. Let's begin with the stock market.
The S and P five hundred has been on a
steady climb this year and it's up approximately twenty seven
percent year to date. The Nasdaq is seene some absolutely
beautiful growth, up about thirty percent, and the Dow Industrial
(02:36):
Average is up about seventeen percent. So depending upon which
one you use as your standard benchmark, that gives you
an update as to where the markets are and the
different endices for this year. But they're all on a
steady climb upward and that's a beautiful thing. And while
twenty twenty four it has certainly seen its share of challenges,
(03:00):
and you know, reflecting back right, we can look at
these and say, you know, we have seen some inflationary
pressures all the way through some geopolitical tensions and those
still remain. But the resilience remains. And that's the theme
of this market. And what has really helped us out
in that is that technology has taken the lead here
(03:21):
because the tech sector, it's it's been a standout performer
and it's been driven by advancements not only in artificial intelligence,
but also robust earnings reports from major players. So we're
seeing innovation in automation and data processing and it's continuing
(03:42):
to fuel investors' optimism, which is making technology ETFs and
individual stocks a hot ticket for growth focused investors. Also,
when we piggyback on that, what we're seeing inside of
the healthcare and the consumer saples sector that has provided
stability for investors who are seeking more of a defensive position,
(04:05):
and in particular, pharmaceutical companies focusing on the long term
solutions for chronic diseases has seen an increased demand. Now,
if you want to take a peek at the energy
sector while we're here. They've faced some volatility this year
due to the fluctuation of oil prices. While demands softened
(04:28):
earlier this year, there was concerns about global energy supply
as the winter approaches, and that could give the sector
kind of a late year boost here. And if we
go to the other side of the river here and
we talk about bonds, when we shift to this bond market,
(04:49):
what have we seen. We've really seen some stabilization in yields,
and that's following a series of interest rate hikes by
the Federal Reserve through the year and our treasuries, but
most recently we've seen some cuts, thankfully, and the Treasury
is the tenure treasury yields has really provided a pretty
nice number. And currently those yields sit at about four
(05:12):
and a quarter percent for a ten year and like
I said, it's a very attractive option for risk averse
investor looking to have some steady income. LUs let's take
a peek at another element here. We'll look at some
other bonds, some corporate bonds. We've got some high quality
corporate bonds and they've gained some traction recently, especially as
(05:33):
businesses with the stronger balance sheets, they're offering yields that
really are outpacing inflation, and that's a nice thing for
that bond investor. Now, let's not forget about our friends
that love municipal bonds, and specifically the tax free municipal bonds,
because these municipal bonds, when they have that compelling tax
(05:57):
free income opportunity, that can really be a driving force
for a high income earner. And and even for some
of those that are looking to just have a tax
free income because you had a windfall either through an
inheritance or a lawsuit or something like that, and you
(06:19):
just don't want to take any significant risk with the
money and you just want to know what you have
coming in after tax. These can be a really wonderful
tool out there. So don't don't turn your don't turn
your eye on these bonds at this time. Okay, they
could be a very smart play for some people. And
I always believe that diversification is a very good thing.
(06:42):
So if you are someone that's more of a balanced approach,
kind of weaving in different bonds in addition to some
treasuries with your equities can be a really wonderful thing
for your portfolio. Now, the international markets. Okay, let's camp
out here for a second, because overseas has really been
(07:02):
a mixed bag. Now you've got emerging markets who have
faced challenges from a strong US dollar in addition to
a slowing global growth. However, Southeast Asia is really bucking
the trend here because with companies that are diversifying their
supply chain away from China, nations like Vietnam and Indonesia
(07:24):
are really becoming the hubs of innovation and production here.
And so what does that mean for you? Well, the
big question is when you take everything that I just
shared with you, what does this all mean for your portfolio. Well,
here's three takeaways that you're gonna want to keep in
mind That diversification is a non negotiable, okay, so do
(07:49):
not break away from that mindset. The second thing I
would tell you is that if you're heavily invested in
one sector sector, let's just say that you're heavily invested
in the tech sector right now, it may be time
to rebalance your portfolio with some bonds or defensive sectors
like healthcare. Also, there are opportunities, and I try to
(08:14):
really hammer this home with our investors and our clients,
is that amidst volatility, there are opportunities. Okay, So it's
kind of like you think of that old prospector back
in the gold rush where you would just sit there
in the creek bed and he would dig up some
rock and he would just pan away until he would
(08:34):
find these gold nuggets. Well, similar to that, that's what
we're trying to do for our portfolios at this time
as well, because we see periods of market fluctuations and
we realize that these can create opportunities for our long
term investors. So energy stocks, for example, could be a
(08:55):
bargain right now, and you want to again just go.
Speaker 4 (08:59):
Through the process.
Speaker 3 (09:00):
Make sure that this is something that's applicable to you
and for the risk that you're taking. And as it
relates to risk, that's the fifth bullet point that I
want to share with you here is again check your
risk tolerance. Okay, Now it's okay for that to change.
Now if it changes, you know, make sure that you're
taking the questionnaire and you're not just saying I feel
(09:23):
as though I feel as I feel as all because
I've had a lot of clients that will feel a
certain way, but when they take the risk profile questionnaire,
it turns out that ultimately there really hasn't been a
lot of deviation from where they started. And sometimes it's
just a matter of explaining to them their vision and
(09:43):
how they're currently aligned can help them get to where
they're looking to go. So, and then the last bullet
point that I want to share with you here is
how all of this information is valuable to you, is
that remember this. If the markets ups and downs are
(10:04):
starting to put you in a place where it's keeping
you up at night, then it's time to review your
allocation and a well qualified financial advisor can help you
tailor your portfolio to align with your comfort level. Okay,
never invest according to what your spouse says that you
should invest. Never invest according to what the financial representative
(10:29):
that met you in the lunch room at work says
that you should because you're invested in a four oh
one k and they don't have your entire picture. You
need a financial advisor that will act as a general
contractor and help you across all the different fields of
your financial life. That's Teo, by the way. Last week
(10:52):
I introduced him and as the golfer. Well, you know
what I think he's really got a love for the game.
I don't know if you can hear this ball rolling around,
but he is working away here with this golf ball.
Cute little guy. So I told you last week we
were gonna end up with him again for Thanksgiving. Oh
and by the way, I'd be remiss if I didn't say,
I hope you had a nice Thanksgiving and great time
(11:12):
with your family.
Speaker 4 (11:13):
I know that we did. It was it was nice.
It was really nice.
Speaker 3 (11:20):
One thing, though, is Parker now is twenty one, and
he went down to Maryland to spend Thanksgiving with his
girlfriend and her family. And for those of you that
have beat me to this chapter of life, you appreciate this.
Speaker 4 (11:37):
It's toughly sad, isn't it.
Speaker 3 (11:39):
When you're looking around at the memories and you go
into the room and you know, Stacy got a pretty
sentimental the other day when she went into Parker's room
because he's not living home any longer, and just the
scent of his room and kind of a loneliness. You know,
we're slowly becoming empty nesters. And at one time we
(12:01):
thought we would love it, and now that it's happening,
I can't say it's the greatest thing. But nonetheless I digress.
So that's a beautiful thing about my show. When you
got a guy that always needs to entertain himself, you
(12:21):
won't get bored because I don't know where my mind
is going to go, and I'll always include it in
my word.
Speaker 4 (12:26):
So but let's get back to where we started. Okay.
Speaker 3 (12:29):
So, like I said, just a well diversified portfolio, and
you make sure that it aligns with your goals and
it provides a peace of mind for you personally. No
one else is speaking into your life, but for you personally.
Speaker 4 (12:42):
Now, what I also want to do here is I.
Speaker 3 (12:45):
Want to transition into something that I feel very strongly about.
Now have you ever heard the term armchair quarterback? Well,
if you're into sports at all, you know exactly what
I'm talking about.
Speaker 4 (13:03):
Now.
Speaker 3 (13:04):
We have got a lot of people out there that
play economists, and they not only throw a lot of
bad information out there, but the listeners in turn feel
(13:26):
as though they have enough knowledge after listening to somebody
ramble on about how bad this administration is going to
be for the economy, and they just continue to go
out and share their opinion. I'm getting a bit of
(13:49):
a dry throat. Here, let me just take a quick
sip of water. I don't want to bark into the
microphone at you here, so so.
Speaker 4 (13:58):
Here we go.
Speaker 3 (13:59):
Now, let me just tell you, aren't you the lucky one?
You know why I'm gonna help you out with this.
I'm gonna share some information that is gonna put you
at ease and give you a better understanding of what
exactly does this Trump administration mean? What does it mean
(14:24):
for the economy in different areas. Well, let's start off
with the taxation. I'm not gonna cover the tariffs. Everybody
and their brother has an opinion on this that's regurgitated
from some place. So I don't like to regurgitate stuff.
Speaker 4 (14:42):
So you know what I did for you.
Speaker 3 (14:45):
I put a blog post together and I think that
a lot of people have.
Speaker 4 (14:49):
Enjoyed these, So that's why I do this.
Speaker 3 (14:50):
Okay, I want this to always be something that's valuable
to you. So go to PRESCOTTPW dot com. Up in
the top you'll see the home row says home our team,
credentials matter, our services Media. Go to media if you would,
and then under media click on blog.
Speaker 4 (15:13):
And you'll see two shipping.
Speaker 3 (15:15):
Containers crashing with each other. One's China, one's America. And
I wrote this blog and it's titled Tariffs, Taxes, and
Economic Resilience. Why understanding the Trump tariff strategy matters. And
I think you're gonna like this a lot. So whether
(15:35):
you voted for Trump or Harris, it doesn't matter. I'm
gonna share with you historically a little bit about tariffs
back from eighteen twenty eight, from nineteen thirty post World
War Two, and just talk about the strengthening the US
(15:56):
manufacturing revenue generation and trade negotiation leveraging. Now, all of
this stuff is right there, so I'm not going to
bore you with that now.
Speaker 4 (16:07):
But if you're.
Speaker 3 (16:07):
Somebody that has a bad taste in your mouth about
what you perceive is going to happen with tariffs, I
would like to provide this resource for you. I believe
that it gives you a great jumping off point for
you to do your own research and find out through
(16:33):
your own research how you personally feel about this. After
becoming well educated, don't just take the talking heads out there. Now,
there are a lot of economists out there that feel
one way or another about this administration. Now, some of
(16:56):
the greatest economists out there absolutely hate Trump, but they
also can explain that his bargaining tactics are very impactful
and effective and can be a very good thing for
the US economy. So don't just assume that because somebody
(17:17):
wouldn't vote for him, or that somebody does not like
him as an you know, and they're an economist, that
does not mean that they do not like what he
can and proposes to do with the economy. So don't
be that person. Don't stick your head in the sand
and regurgitate what the talking heads say. Educate yourself, and
(17:41):
this is a great article to act as a cornerstone
for you to build off of for your own wisdom
and knowledge so that you can have a well thought
out and quality conversation with others that may not be
as educated as yourself. So, like I said, it's your
lucky day. I gave you a great place to start,
(18:02):
all right. But where I will camp out today is
on the taxes under the Trump administration.
Speaker 4 (18:11):
Now, the market update.
Speaker 3 (18:14):
That we just went through, it kind of sets the
stage for our next topic, which are the future of taxes.
Speaker 4 (18:23):
Under the Trump administration.
Speaker 3 (18:25):
So there are proposed changes to corporate tax rates in
addition to income brackets and deductions, and business and families,
you need to prepare for.
Speaker 4 (18:37):
What is coming.
Speaker 3 (18:39):
Now. If you're just joining us, you're listening to your
money matters. I'm your host, Drew Prescott, chartered retirement planning
counselor and accredited wealth management advisor and President of Prescott
Private Wealth here in Troy.
Speaker 4 (18:51):
New York.
Speaker 3 (18:52):
So stay tuned here because we're diving into how these
potential tax shifts might affect your wallet. So do not
go away. I want you to stay in the saddle
with me, okay, because we've looked at the markets, as
I said, and now it's time to explore one of
the biggest financial topics on the horizon, which is taxes.
(19:16):
And as the Trump administration explores its agenda for potential
tax changes, businesses and families alike they need to prepare
for what is coming. And these changes could reshape everything
from income tax brackets all the way through to corporate
tax structures. So let's break it down. The first place
(19:38):
that we should pay attention to is going to be
on the corporate tax rate adjustments.
Speaker 4 (19:45):
So if you're paying.
Speaker 3 (19:46):
Attention you're reading, then one of the headline proposals is
a reduction in the corporate tax rate, potentially dropping it
from twenty one percent to twenty percent, with a additional
incentives for US based manufacturers. Now, this would aim to
make the US more competitive globally and it would encourage
(20:10):
companies to reinvest domestically. So for businesses, what this could
mean is higher after tax profits. And if it's and
if you're out there and you're thinking, well, here we go,
this is what happens. The corporations just get richer. Well,
(20:30):
if you know about business structures at all, then you
know that a family owned business could have the same
structure as a monolith.
Speaker 4 (20:42):
So here is what we have.
Speaker 3 (20:46):
Okay, So, like I said, there's additional incentives for US
based manufacturers. Now, there's a lot of family owned businesses
that are US based manufacturers, and this would aim to
make the US more competitive globally, and it's encouraging this
reinvestment domestically. So for businesses, this could mean, like I said,
(21:06):
it could mean higher after tax profits. But it's not
just large corporations that benefit. And this is what I
want you to just get your arms.
Speaker 4 (21:14):
Around this for a second.
Speaker 3 (21:16):
This is small and medium sized business structure or companies
I should say that are structured as C corporations. C isn't, charlie,
So you could they could really see a significant tax
savings as well. So let me see if I can
give you an example to put some paint on this
canvas for you. So consider a manufacturing company. Let's say
(21:40):
they've got about five million in annual taxable income. Now,
just a one percent reduction in the corporate tax would
save that company about fifty thousand dollars, and those funds
could be used towards hiring new employee or employees, new equipment,
(22:05):
or even paying down debt, or a combination of these things.
And the changes to the individual tax brackets that are
coming as well. This administration has signaled a potential change
to individual tax brackets, which includes a simplification.
Speaker 4 (22:25):
Of the structure.
Speaker 3 (22:26):
So while lower income families may see some relief, high
income households could face increased rates or reduced deductions. So
I know that the the thought out there is that
the Republican Party is always for the rich, and this
(22:52):
does not reflect that. So let me tell you again
what I just said is that if there is a
change in individual tax brackets, lower income families may see
some relief. Okay, Now, higher income households could face an
increased rate or reduced deductions, particularly in the capital gains
(23:16):
area and itemized expenses. And that has an impact on
families because these changes will likely affect pass through entities
like s corporations and LLCs, where business income is taxed
at individual rates. So families that are running these types
(23:38):
of businesses should closely monitor how these adjustments might alter
your overall tax burden. So speak to your tax advisor
about that, see if there's an opportunity or if this
necessitates a change in your structure. Additionally, some things that
we've talked about last week and a couple of weeks back,
(24:00):
is that the Trump administration may revisit the lifetime estate
and gift tax exemption. Wait, a little tickle on my
throat here, So it's going to be a show full
of uh trying to keep this little tickle under control here,
So I got to take some water. I apologize. Now, Currently,
(24:24):
as I was saying, the lifetime a state and gift
tax exemption, it currently stands at thirteen point six one
million per individual in twenty twenty four. Now there's a
potential reduction to pre twenty seventeen levels, which is around
(24:45):
five point four to nine million per individual, and that
could significantly increase a state tax exposure for high net
worth families. So here's an actionable tip families. If you're
a family that has a large estate, you should consider
(25:06):
gifting strategies or establishing trust now to lock in the
current high exemption before any changes are enacted. Additionally, proposals
for enhanced capital investment incentives such as expanded immediate expenses
(25:26):
of capital purchases that could benefit businesses looking to grow.
Speaker 4 (25:32):
Now.
Speaker 3 (25:33):
This would allow companies to write off full cost of
equipment or property in the year that it's purchased, rather
than depreciating it over time. So again, let me see
if I can give you another example.
Speaker 4 (25:45):
So imagine this.
Speaker 3 (25:45):
You're a business owner, you're a tech company, and you're
investing a million dollars into a new server. Well, you
would be able to deduct the full amount immediately, which
reduces that te taxable income significantly. Now, this not only
improves cash flow, but it also encourages businesses to invest
(26:08):
in growth driving assets as well. So what that means
for businesses is that it's time to rethink, rethink.
Speaker 4 (26:18):
Your entity structure.
Speaker 3 (26:20):
So with potential changes to the corporate tax rates and
pass through taxation, businesses should really evaluate whether their current
entity structure is still the most tax efficient. For example,
some LLCs and escorps may benefit from converting to C
corporations to take advantage of a lower corporate tax rate. Now,
(26:43):
let me give you a story about one of my
clients who has a family owned retail business. They transition
from an LLC to a C corporation after analyzing the
tax savings under a lower corporate rate. Now, while this
decision involved careful planning with professionals and their entire team,
(27:03):
the long term benefits really made it a clear choice,
and we were looking at the timing and the income
and the deductions. Here, businesses really should strategize the timing
of income in addition to the deductions to align with
favorable tax rates. Because accelerating income into the current year
(27:29):
or deferring expenses it can help optimize the tax burden
during transitional periods. So if a lower corporate tax rate
is expected next year, a business may delay large purchases
until then to maximize deductions against the lower rate. Additionally,
tax credits are another area of opportunity, particularly for industries
(27:53):
like renewable energy and technology and research and development. Credits
remain a powerful tool for offsetting tax liabilities. So if
you're not already leveraging these credits, now would be a
good time to start. And we've been talking a lot
about corporations, but what about what does this mean for families? Well, families,
(28:18):
you may want to consider and you should consider how
the potential tax changes impact your retirement saving strategies such
as contributing to tax advantage accounts like a four toh
one k wroth iras or hsas, and how they can
help mitigate tax income while building long term wealth. So
(28:40):
if you're a high earner, you might explore a backdoor
wroth IRA to maximize tax free growth potential, especially if
changes to contribution limits are anticipated. And then if you're
looking at gifting and estate planning, as I mentioned earlier,
potential reduction in the lifetime estate tax exemption make twenty
(29:03):
twenty four on ideal time to review your state plan
and strategies like gifting assets or funding an irrevocable trust
can help reduce your taxable estate and lock in current exemptions.
And you want to also, I would say dovetail in
there managing your investment portfolio because changes to the capital
(29:27):
gains taxes that could alter how families manage their investment portfolios.
So if by chance, tax rates increase for high earners,
strategies like tax loss harvesting, selling underperforming investment stuffset gains
that will become even more important. So let's say a
(29:49):
client has a two million dollar portfolio and reduce their
their taxable gains by twenty five thousand last year using
tax loss harvesting. This strategy allowed them to keep more
of their profits while rebalancing their portfolio.
Speaker 4 (30:07):
So how do we prepare for the future?
Speaker 3 (30:11):
What are some tips that you personally can implement well?
Number one, I would say stay informed okay, and piggyback
on that that tax policies can change quickly, so stay
updated on proposed legislations and work closely with your financial
advisor and your tax professional to adapt your strategies.
Speaker 4 (30:33):
You want to.
Speaker 3 (30:34):
Run scenarios of the two different I should say time
periods right and using financial models to understand how these
different tax scenarios might impact your family or business. And
this can help you identify opportunities and to really avoid surprises,
(30:56):
also engage in advocacy. Not enough of us get involved
in making phone calls to our senators and to our
local representatives, and get involved in, you know, supporting our
lobbying firms for our individual.
Speaker 4 (31:21):
Professions.
Speaker 3 (31:22):
Because small business owners and families, we can work in
industry groups or with local representatives and provide feedback on
these proposed tax changes. And this advocacy really ensures that
your voice is being heard in the legislative process. And
that's important because a lot of us, unfortunately we hear
(31:48):
of something we don't agree with it, and we bellyate
with friends and family, but really we have the opportunity
to make our voice be heard, and I would encourage
you to do that. So while tax changes they always
feel daunting, but they also bring opportunity for those who
plan ahead. So whether you're rethinking your business structure, adjusting
(32:13):
your state plan, or maximizing retirement contributions, proactive strategies can
help you stay ahead of the curve. And that's very
important if you are a planner and you want to
get yourself to a place that you have a heads
(32:34):
up and you feel like you've got more control of
your financial picture. This would be the right time to
start doing those things. Okay, so let's wrap up the
tax piece. It's really clear that reparation and adaptability are
really key here, and I want to explore with you
how businesses and families can create financial plans and not
(32:56):
only address these changes, but they also so ensure long
term stability. Now, if you're just tuning in here, you're
listening to your money matters, I'm your host, Drew Prescott.
I'm here to help you navigate the ever changing financial landscape,
So don't go any place. I'm going to give you
some more actionable insights for your financial future. And now
(33:20):
that we've explored the potential tax changes under the Trump administration,
let's shift gears and focus on actionable financial planning strategies. So,
whether you're managing your family's finances or running a business,
a solid plan can help you navigate uncertainty and build
a secure future. So, if you're putting together financial plan
(33:47):
for your family, what are some things that you want
to make sure that you pay attention to. So at
the foundational level, it's going to be build, strengthen your
emergency fund. You know, in the past few years. It
has really taught us that it's the importance of having
(34:13):
a financial cushion. So I always tell clients, you want
to aim to have three to six months worth of
living expenses in an accessible liquid account like a high
yield savings account or a money market fund, and want
to meet your savings by setting up to direct deposits
(34:34):
into your emergency fund. Even small, consistent contributions can add
up over time. So I had a client that I
worked with years ago who started saving two hundred dollars
a month after realizing that they didn't have enough to
cover unexpected medical bills, and within two years, outside of
(34:56):
all of their other savings, they had built up about
five thousand in emergency funds. It just gave them a
little extra piece of mind. Now, they always said, well,
we've got we're saving all this money into retirement're saving
all this and that, and we've got a chunk of
money over here. But I really like to see people
(35:17):
save consistently because it's just that habit. It's like working out,
it's just that habit of perpetually doing the right thing
over a long period of time. Now, yeah, they could
have just carved off the five thousand dollars. We already
knew they had the money, but I wanted to get
them into the habit of saving a little bit more money.
(35:38):
And two hundred dollars is like finding lint in their pocket.
But nonetheless, it was a discipline, and they did that
and it was good for them. They actually said it
felt very rewarding to know that they were being disciplined
in another area of their finances. Now, the second piece
(35:58):
that I want to make sure that you pay a
TENI two is maximizing those retirement contributions and retirement planning.
Really it still remains one of the cornerstones of financial stability,
So ensuring that you're contributing enough to take full advantage
of any employer matching your four oh one K, your
simple planned whatever. If you're if you've maxed out your
(36:21):
four oh one K, consider contributing to an IRA that
is non deductible and using a backdoor roth IRA contribution. Now,
there are catchup contributions for those of you that are
fifty and older, because people over fifty can make additional
(36:43):
contributions to the retirement accounts. So for twenty twenty four,
the four toh one K catch up limit is seventy
five hundred dollars and for iras it's one thousand. So
these extra savings can make a significant difference over time.
So one couple that I worked with both were in
(37:05):
the early fifties. They increase their catchup contributions by fifteen
thousand dollars annually, and in just five years they added
nearly ninety thousand dollars to their retirement savings and that
was not including the growth, and that's a nice thing. Also,
don't forget about college planning with five to nine. So
(37:28):
if you're a family with young children, a five to
nine college savings plan is an excellent way to prepare
for future education expenses. Now, these contributions they grow tax free,
and withdrawals for qualified expenses like tuitions and books, those
are also tax free. Now in many states, including New York,
(37:50):
they offer state deductions or credits for five to nine
plan contributions, and this adds an extra layer of savings.
For example, a client saving for their child's education contributed
five thousand annually to a five to ninth plan, and
by the time that their child reached college, the plan
(38:10):
had grown to one hundred and twenty five thousand dollars
thanks to the consistency of contributions and investment growth.
Speaker 4 (38:19):
So take this.
Speaker 3 (38:22):
Any time that you have an arrow in your quiver,
try to use it, and this would be one of those. Additionally,
let's look at insurance protecting for your family's future. Now,
this sometimes is overlooked, and the role of insurance in
your financial plan is something that is incredibly valuable and
(38:43):
very needed. Now, life insurance, disability insurance, and long term
care insurance that protects your family's financial future in the
event of an unforeseen circumstance. With life insurance, if you're
the primary breadwinner, consider term and insurance to replace your
income during your working years. Now, a policy with coverage
(39:06):
of ten to twelve times your annual income is a
good starting point. And with long term care insurance, planning
for long term care expenses as critical as healthcare costs
continue to rise and policies purchased earlier in life are
generally more affordable and offer a better coverage. Now, let
(39:28):
me camp out here for one second. There's nobody out
there that looks forward to buying life insurance, with the
exception of me.
Speaker 4 (39:40):
When I was younger.
Speaker 3 (39:41):
I did because when you work in the insurance industry.
Speaker 4 (39:47):
It's almost like a.
Speaker 3 (39:49):
Way to brag if you would that you purchase so
much life insurance or whatever. Additionally, I remember buying my
first policy when I was eighteen years old, and the
reason that I bought it was, well, I thought, with
(40:10):
six kids in the family, if I were to pass away,
it would be really nice to be able to leave
my siblings some money. I thought it could be a
nice thing to give them a little leg up to
get started. And by the grace of God, that policy
never got cashed in on, So now that goes over
(40:34):
to my family. And the one thing I'll tell you
about insurances is that underwriting is it can be challenging.
When I say that, don't misread this. I'm not saying
that to scare you. I'm not saying that to steer
(40:55):
you away from applying for it. Because the reality is this.
And I used to not want to go to the
doctor because I didn't want to lose my opportunity to
be ensurable. Well, that's not a good way to live.
That's kind of a fear based mindset. And if you're
(41:16):
flirting with the idea of getting insurance, buy it today.
Speaker 4 (41:21):
You know why.
Speaker 3 (41:22):
The reality is this, You're not going to be younger,
and likely you will not be any healthier in the
future either, because whatever it is that you're dealing with physically,
that is already in your records, okay, and just apply.
Apply for the coverage, get the right type, get the
(41:47):
right amount, and make sure that it's owned properly, and
not just on the personal side, but also on the
business side. So if you have a buy sell agreement,
we'll talk a little bit about that later on.
Speaker 4 (42:01):
Get that thing funded.
Speaker 3 (42:03):
Don't just rely on the company's value and the cash
on the balance sheet. Use insurance because insurance is like
buying discounted dollars. I always say, why would you pay
a dollar for something when you can pay a dime okay,
or you could pay a quarter.
Speaker 4 (42:23):
Whatever it is.
Speaker 3 (42:25):
It's a barn burner of a sale, and sometimes there's
opportunities for your company to deduct that as an expense.
So don't forget about your life insurance, your disability insurance,
and disability insurance. That's definitely something that gets overlooked tremendously.
(42:47):
Let me just tell you a quick story. As I
told you, I started in the insurance industry back in
two thousand and five with Mother Mutual.
Speaker 4 (43:00):
And it was always.
Speaker 3 (43:03):
An interesting thing because it was always just selling insurance,
selling insurance, selling insurance. It was not really financial planning
at all. And I will say this, I did learn
the tremendous value of insurance while I worked there, that's
for sure. I've also seen in action the value that
(43:26):
insurance brings to families, to businesses, and to professionals alike.
I became friends with a fella. One was an orthopedic
surgeon who got into my industry. Another was a dentist
that got into my industry. The two of them had
(43:49):
one thing in common, which was signs of early onset
Parkinson's disease, and this brought them into this business of
selling disability insurance. So here's why each one of them
(44:15):
had disability insurance. And they didn't just have disability insurance
that they brought through their employer. They had individual policies
with a very specific rider, this rioter. If you're a
profession that is, I would say, if you're a financial advisor,
(44:37):
if you're a dentist, if you're an attorney, if you're
a doctor, if you have if you highly specialized career,
you want to have disability income protection with the right company,
and there's only a couple out there that do this.
(45:00):
And there's only a couple out there that offer it
for the entire length of the payment. Okay, a couple
of them say they offer it, but it's only good
for two years or a short period of time. And
this rioter is called own occupation. Now, the difference between
(45:21):
having this policy and a generic policy is pretty much
the difference of having coverage versus not having coverage. In
these specific situations, as I told you, one was a dentist,
one was an orthopedic surgeon. Both of them got shaky hands.
They were no longer able to perform their specific duties
(45:45):
in their profession. Now, does that mean that they cannot
work now? Can they do what they once did and
that they were highly specialized in Yes, that means they
cannot do that because they have a shaky hand. Well,
in both situations, these individuals collected about twenty five thousand
(46:09):
and thirty five thousand, respectively of tax free income monthly
and then came to work in my industry. One of
them is a dentist that still teaches as a professor
but also works in the industry and is doing very
well in addition to receiving his disability payment. The other
(46:36):
is a financial representative and is making a nice income
and is also continuing to claim this disability coverage. Now,
there's nothing illegal going on here. It's because of the
way that this policy is written. So if you are
in the medical profession on any level, call me.
Speaker 4 (47:01):
I'm very well.
Speaker 3 (47:03):
Educated and versed on these specific policies and designing them
the right way. This is not something you can flirt with.
This must be done this specific way.
Speaker 4 (47:16):
And currently.
Speaker 3 (47:19):
There's only three sometimes four companies out there that you
can get these policies through. Not all coverages created equally, okay,
so make sure you have the right policy. Now, that
was important that I share that with you. It did
take me off a little bit, but I wanted to
(47:40):
share that with you and with conviction, and I hope
that that came through that way because it's incredibly important,
incredibly important. Now, where I left off before we went
down that path was inside of planning and we were
talking about life insurance, long term care and so on. Now,
(48:01):
what I would say is on the savings piece, review
your sep IRA, review your simple IRA, your solo for
one k. Make sure that you are feeding as much
as you possibly can to reduce your overall taxable burden.
If you are a let's say a small law firm,
(48:25):
where you're a entrepreneur that does not have a retirement
plan set up for yourself. Maybe you're you own a
hair salon, you have an electrical company, and you need
to offer retirement benefits for these individuals.
Speaker 4 (48:42):
Call me up.
Speaker 3 (48:44):
I will be more than happy to get you started
and share with you the options available to you and
which ones could be of most value to you, your company,
and your employees. Okay, now, as we talked earlier, I
had mentioned about succession planning and life insurance for your
(49:09):
buysell agreement. Well, let's not forget about this, the succession
planning of your business. If you do not have a
family member involved in your business that you want to
take the business over, then succession planning can still be
bred inside of the inside of your business and for
(49:30):
business owners nearing retirement, succession planning is critical. So whether
you plan to sell your business, transfer your ownership to
a family member, or establish an employee stock ownership plan
which is an ESOP, just having a plan ensures a
smooth transition. And there's key steps in succession planning that
(49:53):
I would like to cover with you. First, I would say,
you want to identify a success or a buyer early on,
and then value your business accurately.
Speaker 4 (50:07):
Those two steps are.
Speaker 3 (50:11):
Really the lifeblood of having good planning here. Then from
there establish a buy sell agreement to manage the transfer
of ownership. Now, I worked with a family owned construction
business that was local, and we created a succession plan
and what we did was we transition ownership to their
(50:32):
adult children, and we established a trust and they minimize
a taxation that they would face in addition to ensuring
that the business would remain in the family. Now, this
is unfortunately, there's a common theme that I found with
(50:56):
business owners and it's not just locally, it's across the country.
And what it is is it's this mindset. There's a
mindset out there that these family businesses that are going
to the second, third, and sometimes fourth generation, which is
very rare, by the way, but I cannot tell you
(51:19):
how many family owned businesses. When I meet with the president,
you know, the father of the family, they always say,
I don't want my child to do what.
Speaker 4 (51:30):
I do it's it's very stressful.
Speaker 3 (51:34):
It's this, it's that, it's you know, they've got one
hundred and one reasons of why they do not want
their child in that business. But think of this. This
business has created such a fantastic lifestyle for your family
and your children, and for them to have the ability
(51:54):
to go out and accomplish something that even remotly casts
a shadow similar to this business. The numbers are against them.
So if your child has been raised up in the
business and shows any type of.
Speaker 4 (52:19):
I guess you know, has any type of.
Speaker 3 (52:22):
A shine towards this business or any type of interest,
I would say, go right ahead and embrace that and
cultivate that so that you can create the ability for
this business to continue on into your children. Because unfortunately,
(52:42):
what happens is with these businesses, we see this and
then we see them the business owner send their child
off to college to get educated on something that really
brings absolutely no value to this business whatsoever. Especially now
you can pretty much study anything. It's really unbelievable, and
it's just a way to get a piece of paper.
(53:04):
But how much money would you save and how much
better and more valuable would the education be if it
came from you into the business. You could really create
something absolutely beautiful for them and take this business even
potentially further than you've been able to. So embrace that,
(53:28):
cultivate that, raise that, encourage that, so that you don't
have to worry about later on, you know, with you know,
ten to five years left of working years and saying, well,
you know this new guy, he seems pretty sharp.
Speaker 4 (53:43):
Maybe he could be the one.
Speaker 3 (53:45):
Raise your children to be the one put the trusts
in place, put the insurances in place. If you don't
have a child that has the mindset for it or
the ability to take over your business, well then go
down the other way.
Speaker 4 (54:01):
But if you do.
Speaker 3 (54:04):
Find that key person, I can help you put what
we call golden handcuffs on that person and give them
some tremendous benefits that would make it incredibly difficult for
them to walk away. And if they do walk away,
well then you don't get hurt either. There's a lot
that we can do to help you in this area.
Speaker 4 (54:27):
So let's get moving. Let's help you get to.
Speaker 3 (54:31):
The place that you want to be with your business.
And we've really covered a lot. There was actually, believe
it or not, there was another piece that I wanted
to share with you here, and we're going to have
to delay on that one.
Speaker 4 (54:47):
And it was about your.
Speaker 3 (54:50):
Pension maximization as a state employee, a federal employee, maybe
a teacher, municipality, whatever, And I wanted to share with
you really how to beat down the weeds and see
what's going on when you meet with somebody or you
(55:11):
sit in on a seminar about pension maximization and are
they really holding this seminar for your best interest or
are they holding it as a way to try to
sell you an insurance policy. Well we'll cover that another day,
but nonetheless, it has been great spending this time with
you today. Again you're listening to your money matters. I'm
(55:33):
your host, Drew Prescott, chartered Retirement Planning counselor, accredited Wealth
Management Advisor and President and financial advisor here at Prescott
Private Wealth, located at four fifty one. Who's extreet and Troy,
New York. Feel free to call us or text us
five point eight two zero three one ninety eight three
five one eight two zero three one nine eight three,
And again, thank you so much for listening today. I
(55:55):
hope you had a wonderful Thanksgiving and let's dive into
uh college football playoffs here. Alabama is still alive. I
don't know how I feel about that, to be honest
with you. They could just be wasted space if they
make it in, but I'll still root for them. Roll tide,
and until next week, I'll see you and God bless
and be safe. Thank you for listening.
Welcome to the hidden world of wealth, where secrets of
the affluent become accessible to you. You are listening to
Your Money Matters, the most provocative financial radio show on
the airwaves. You are about to start your educational journey
here on Your Money Matters with your host, Drew Prescott,
(00:22):
President of Prescott Private Wealth and Chartered Retirement Planning Counselor.
Drew will unlock the complexities of the financial landscape with straightforward,
powerful insights. Whether you're planning for retirement, managing in a state,
or looking to grow your wealth. Consider this your exclusive invitation.
Turn up the volume, lean in closer. Let's navigate the
(00:45):
hidden paths of prosperity together. Your financial enlightenment begins now.
Securities all produce a terror Financial Specialists LLC Member fen
The SIPC reservices offered through Setara Investment Advisors LLC SATERA
firms are under separate ownership from any other named entity.
Speaker 2 (01:06):
Four five to one THO sixth Street, Troy, New York,
one two one eight zero.
Speaker 3 (01:29):
Good morning, everybody, and welcome back to Your Money Matters.
I'm your host, Drew Prescott, Chartered Retirement Planning Counselor and
accredited wealth management advisor and president of Prescott Private Wealth
based right here on Troy, New York. If you're tuning
in for the first time, this is a show where
we break down complex financial topics and we do it
(01:50):
to help you make smarter money decisions. And in today's episode,
it is packed with insights that you will not want
to miss. We'll start off with a market up and
what's been happening year to date and what it means
for you as an investor. Then in the following segment,
we'll dive into the future of taxes under the Trump
(02:12):
administration and how businesses and families should prepare. But first,
let's talk about the markets. Let's begin with the stock market.
The S and P five hundred has been on a
steady climb this year and it's up approximately twenty seven
percent year to date. The Nasdaq is seene some absolutely
beautiful growth, up about thirty percent, and the Dow Industrial
(02:36):
Average is up about seventeen percent. So depending upon which
one you use as your standard benchmark, that gives you
an update as to where the markets are and the
different endices for this year. But they're all on a
steady climb upward and that's a beautiful thing. And while
twenty twenty four it has certainly seen its share of challenges,
(03:00):
and you know, reflecting back right, we can look at
these and say, you know, we have seen some inflationary
pressures all the way through some geopolitical tensions and those
still remain. But the resilience remains. And that's the theme
of this market. And what has really helped us out
in that is that technology has taken the lead here
(03:21):
because the tech sector, it's it's been a standout performer
and it's been driven by advancements not only in artificial intelligence,
but also robust earnings reports from major players. So we're
seeing innovation in automation and data processing and it's continuing
(03:42):
to fuel investors' optimism, which is making technology ETFs and
individual stocks a hot ticket for growth focused investors. Also,
when we piggyback on that, what we're seeing inside of
the healthcare and the consumer saples sector that has provided
stability for investors who are seeking more of a defensive position,
(04:05):
and in particular, pharmaceutical companies focusing on the long term
solutions for chronic diseases has seen an increased demand. Now,
if you want to take a peek at the energy
sector while we're here. They've faced some volatility this year
due to the fluctuation of oil prices. While demands softened
(04:28):
earlier this year, there was concerns about global energy supply
as the winter approaches, and that could give the sector
kind of a late year boost here. And if we
go to the other side of the river here and
we talk about bonds, when we shift to this bond market,
(04:49):
what have we seen. We've really seen some stabilization in yields,
and that's following a series of interest rate hikes by
the Federal Reserve through the year and our treasuries, but
most recently we've seen some cuts, thankfully, and the Treasury
is the tenure treasury yields has really provided a pretty
nice number. And currently those yields sit at about four
(05:12):
and a quarter percent for a ten year and like
I said, it's a very attractive option for risk averse
investor looking to have some steady income. LUs let's take
a peek at another element here. We'll look at some
other bonds, some corporate bonds. We've got some high quality
corporate bonds and they've gained some traction recently, especially as
(05:33):
businesses with the stronger balance sheets, they're offering yields that
really are outpacing inflation, and that's a nice thing for
that bond investor. Now, let's not forget about our friends
that love municipal bonds, and specifically the tax free municipal bonds,
because these municipal bonds, when they have that compelling tax
(05:57):
free income opportunity, that can really be a driving force
for a high income earner. And and even for some
of those that are looking to just have a tax
free income because you had a windfall either through an
inheritance or a lawsuit or something like that, and you
(06:19):
just don't want to take any significant risk with the
money and you just want to know what you have
coming in after tax. These can be a really wonderful
tool out there. So don't don't turn your don't turn
your eye on these bonds at this time. Okay, they
could be a very smart play for some people. And
I always believe that diversification is a very good thing.
(06:42):
So if you are someone that's more of a balanced approach,
kind of weaving in different bonds in addition to some
treasuries with your equities can be a really wonderful thing
for your portfolio. Now, the international markets. Okay, let's camp
out here for a second, because overseas has really been
(07:02):
a mixed bag. Now you've got emerging markets who have
faced challenges from a strong US dollar in addition to
a slowing global growth. However, Southeast Asia is really bucking
the trend here because with companies that are diversifying their
supply chain away from China, nations like Vietnam and Indonesia
(07:24):
are really becoming the hubs of innovation and production here.
And so what does that mean for you? Well, the
big question is when you take everything that I just
shared with you, what does this all mean for your portfolio. Well,
here's three takeaways that you're gonna want to keep in
mind That diversification is a non negotiable, okay, so do
(07:49):
not break away from that mindset. The second thing I
would tell you is that if you're heavily invested in
one sector sector, let's just say that you're heavily invested
in the tech sector right now, it may be time
to rebalance your portfolio with some bonds or defensive sectors
like healthcare. Also, there are opportunities, and I try to
(08:14):
really hammer this home with our investors and our clients,
is that amidst volatility, there are opportunities. Okay, So it's
kind of like you think of that old prospector back
in the gold rush where you would just sit there
in the creek bed and he would dig up some
rock and he would just pan away until he would
(08:34):
find these gold nuggets. Well, similar to that, that's what
we're trying to do for our portfolios at this time
as well, because we see periods of market fluctuations and
we realize that these can create opportunities for our long
term investors. So energy stocks, for example, could be a
(08:55):
bargain right now, and you want to again just go.
Speaker 4 (08:59):
Through the process.
Speaker 3 (09:00):
Make sure that this is something that's applicable to you
and for the risk that you're taking. And as it
relates to risk, that's the fifth bullet point that I
want to share with you here is again check your
risk tolerance. Okay, Now it's okay for that to change.
Now if it changes, you know, make sure that you're
taking the questionnaire and you're not just saying I feel
(09:23):
as though I feel as I feel as all because
I've had a lot of clients that will feel a
certain way, but when they take the risk profile questionnaire,
it turns out that ultimately there really hasn't been a
lot of deviation from where they started. And sometimes it's
just a matter of explaining to them their vision and
(09:43):
how they're currently aligned can help them get to where
they're looking to go. So, and then the last bullet
point that I want to share with you here is
how all of this information is valuable to you, is
that remember this. If the markets ups and downs are
(10:04):
starting to put you in a place where it's keeping
you up at night, then it's time to review your
allocation and a well qualified financial advisor can help you
tailor your portfolio to align with your comfort level. Okay,
never invest according to what your spouse says that you
should invest. Never invest according to what the financial representative
(10:29):
that met you in the lunch room at work says
that you should because you're invested in a four oh
one k and they don't have your entire picture. You
need a financial advisor that will act as a general
contractor and help you across all the different fields of
your financial life. That's Teo, by the way. Last week
(10:52):
I introduced him and as the golfer. Well, you know
what I think he's really got a love for the game.
I don't know if you can hear this ball rolling around,
but he is working away here with this golf ball.
Cute little guy. So I told you last week we
were gonna end up with him again for Thanksgiving. Oh
and by the way, I'd be remiss if I didn't say,
I hope you had a nice Thanksgiving and great time
(11:12):
with your family.
Speaker 4 (11:13):
I know that we did. It was it was nice.
It was really nice.
Speaker 3 (11:20):
One thing, though, is Parker now is twenty one, and
he went down to Maryland to spend Thanksgiving with his
girlfriend and her family. And for those of you that
have beat me to this chapter of life, you appreciate this.
Speaker 4 (11:37):
It's toughly sad, isn't it.
Speaker 3 (11:39):
When you're looking around at the memories and you go
into the room and you know, Stacy got a pretty
sentimental the other day when she went into Parker's room
because he's not living home any longer, and just the
scent of his room and kind of a loneliness. You know,
we're slowly becoming empty nesters. And at one time we
(12:01):
thought we would love it, and now that it's happening,
I can't say it's the greatest thing. But nonetheless I digress.
So that's a beautiful thing about my show. When you
got a guy that always needs to entertain himself, you
(12:21):
won't get bored because I don't know where my mind
is going to go, and I'll always include it in
my word.
Speaker 4 (12:26):
So but let's get back to where we started. Okay.
Speaker 3 (12:29):
So, like I said, just a well diversified portfolio, and
you make sure that it aligns with your goals and
it provides a peace of mind for you personally. No
one else is speaking into your life, but for you personally.
Speaker 4 (12:42):
Now, what I also want to do here is I.
Speaker 3 (12:45):
Want to transition into something that I feel very strongly about.
Now have you ever heard the term armchair quarterback? Well,
if you're into sports at all, you know exactly what
I'm talking about.
Speaker 4 (13:03):
Now.
Speaker 3 (13:04):
We have got a lot of people out there that
play economists, and they not only throw a lot of
bad information out there, but the listeners in turn feel
(13:26):
as though they have enough knowledge after listening to somebody
ramble on about how bad this administration is going to
be for the economy, and they just continue to go
out and share their opinion. I'm getting a bit of
(13:49):
a dry throat. Here, let me just take a quick
sip of water. I don't want to bark into the
microphone at you here, so so.
Speaker 4 (13:58):
Here we go.
Speaker 3 (13:59):
Now, let me just tell you, aren't you the lucky one?
You know why I'm gonna help you out with this.
I'm gonna share some information that is gonna put you
at ease and give you a better understanding of what
exactly does this Trump administration mean? What does it mean
(14:24):
for the economy in different areas. Well, let's start off
with the taxation. I'm not gonna cover the tariffs. Everybody
and their brother has an opinion on this that's regurgitated
from some place. So I don't like to regurgitate stuff.
Speaker 4 (14:42):
So you know what I did for you.
Speaker 3 (14:45):
I put a blog post together and I think that
a lot of people have.
Speaker 4 (14:49):
Enjoyed these, So that's why I do this.
Speaker 3 (14:50):
Okay, I want this to always be something that's valuable
to you. So go to PRESCOTTPW dot com. Up in
the top you'll see the home row says home our team,
credentials matter, our services Media. Go to media if you would,
and then under media click on blog.
Speaker 4 (15:13):
And you'll see two shipping.
Speaker 3 (15:15):
Containers crashing with each other. One's China, one's America. And
I wrote this blog and it's titled Tariffs, Taxes, and
Economic Resilience. Why understanding the Trump tariff strategy matters. And
I think you're gonna like this a lot. So whether
(15:35):
you voted for Trump or Harris, it doesn't matter. I'm
gonna share with you historically a little bit about tariffs
back from eighteen twenty eight, from nineteen thirty post World
War Two, and just talk about the strengthening the US
(15:56):
manufacturing revenue generation and trade negotiation leveraging. Now, all of
this stuff is right there, so I'm not going to
bore you with that now.
Speaker 4 (16:07):
But if you're.
Speaker 3 (16:07):
Somebody that has a bad taste in your mouth about
what you perceive is going to happen with tariffs, I
would like to provide this resource for you. I believe
that it gives you a great jumping off point for
you to do your own research and find out through
(16:33):
your own research how you personally feel about this. After
becoming well educated, don't just take the talking heads out there. Now,
there are a lot of economists out there that feel
one way or another about this administration. Now, some of
(16:56):
the greatest economists out there absolutely hate Trump, but they
also can explain that his bargaining tactics are very impactful
and effective and can be a very good thing for
the US economy. So don't just assume that because somebody
(17:17):
wouldn't vote for him, or that somebody does not like
him as an you know, and they're an economist, that
does not mean that they do not like what he
can and proposes to do with the economy. So don't
be that person. Don't stick your head in the sand
and regurgitate what the talking heads say. Educate yourself, and
(17:41):
this is a great article to act as a cornerstone
for you to build off of for your own wisdom
and knowledge so that you can have a well thought
out and quality conversation with others that may not be
as educated as yourself. So, like I said, it's your
lucky day. I gave you a great place to start,
(18:02):
all right. But where I will camp out today is
on the taxes under the Trump administration.
Speaker 4 (18:11):
Now, the market update.
Speaker 3 (18:14):
That we just went through, it kind of sets the
stage for our next topic, which are the future of taxes.
Speaker 4 (18:23):
Under the Trump administration.
Speaker 3 (18:25):
So there are proposed changes to corporate tax rates in
addition to income brackets and deductions, and business and families,
you need to prepare for.
Speaker 4 (18:37):
What is coming.
Speaker 3 (18:39):
Now. If you're just joining us, you're listening to your
money matters. I'm your host, Drew Prescott, chartered retirement planning
counselor and accredited wealth management advisor and President of Prescott
Private Wealth here in Troy.
Speaker 4 (18:51):
New York.
Speaker 3 (18:52):
So stay tuned here because we're diving into how these
potential tax shifts might affect your wallet. So do not
go away. I want you to stay in the saddle
with me, okay, because we've looked at the markets, as
I said, and now it's time to explore one of
the biggest financial topics on the horizon, which is taxes.
(19:16):
And as the Trump administration explores its agenda for potential
tax changes, businesses and families alike they need to prepare
for what is coming. And these changes could reshape everything
from income tax brackets all the way through to corporate
tax structures. So let's break it down. The first place
(19:38):
that we should pay attention to is going to be
on the corporate tax rate adjustments.
Speaker 4 (19:45):
So if you're paying.
Speaker 3 (19:46):
Attention you're reading, then one of the headline proposals is
a reduction in the corporate tax rate, potentially dropping it
from twenty one percent to twenty percent, with a additional
incentives for US based manufacturers. Now, this would aim to
make the US more competitive globally and it would encourage
(20:10):
companies to reinvest domestically. So for businesses, what this could
mean is higher after tax profits. And if it's and
if you're out there and you're thinking, well, here we go,
this is what happens. The corporations just get richer. Well,
(20:30):
if you know about business structures at all, then you
know that a family owned business could have the same
structure as a monolith.
Speaker 4 (20:42):
So here is what we have.
Speaker 3 (20:46):
Okay, So, like I said, there's additional incentives for US
based manufacturers. Now, there's a lot of family owned businesses
that are US based manufacturers, and this would aim to
make the US more competitive globally, and it's encouraging this
reinvestment domestically. So for businesses, this could mean, like I said,
(21:06):
it could mean higher after tax profits. But it's not
just large corporations that benefit. And this is what I
want you to just get your arms.
Speaker 4 (21:14):
Around this for a second.
Speaker 3 (21:16):
This is small and medium sized business structure or companies
I should say that are structured as C corporations. C isn't, charlie,
So you could they could really see a significant tax
savings as well. So let me see if I can
give you an example to put some paint on this
canvas for you. So consider a manufacturing company. Let's say
(21:40):
they've got about five million in annual taxable income. Now,
just a one percent reduction in the corporate tax would
save that company about fifty thousand dollars, and those funds
could be used towards hiring new employee or employees, new equipment,
(22:05):
or even paying down debt, or a combination of these things.
And the changes to the individual tax brackets that are
coming as well. This administration has signaled a potential change
to individual tax brackets, which includes a simplification.
Speaker 4 (22:25):
Of the structure.
Speaker 3 (22:26):
So while lower income families may see some relief, high
income households could face increased rates or reduced deductions. So
I know that the the thought out there is that
the Republican Party is always for the rich, and this
(22:52):
does not reflect that. So let me tell you again
what I just said is that if there is a
change in individual tax brackets, lower income families may see
some relief. Okay, Now, higher income households could face an
increased rate or reduced deductions, particularly in the capital gains
(23:16):
area and itemized expenses. And that has an impact on
families because these changes will likely affect pass through entities
like s corporations and LLCs, where business income is taxed
at individual rates. So families that are running these types
(23:38):
of businesses should closely monitor how these adjustments might alter
your overall tax burden. So speak to your tax advisor
about that, see if there's an opportunity or if this
necessitates a change in your structure. Additionally, some things that
we've talked about last week and a couple of weeks back,
(24:00):
is that the Trump administration may revisit the lifetime estate
and gift tax exemption. Wait, a little tickle on my
throat here, So it's going to be a show full
of uh trying to keep this little tickle under control here,
So I got to take some water. I apologize. Now, Currently,
(24:24):
as I was saying, the lifetime a state and gift
tax exemption, it currently stands at thirteen point six one
million per individual in twenty twenty four. Now there's a
potential reduction to pre twenty seventeen levels, which is around
(24:45):
five point four to nine million per individual, and that
could significantly increase a state tax exposure for high net
worth families. So here's an actionable tip families. If you're
a family that has a large estate, you should consider
(25:06):
gifting strategies or establishing trust now to lock in the
current high exemption before any changes are enacted. Additionally, proposals
for enhanced capital investment incentives such as expanded immediate expenses
(25:26):
of capital purchases that could benefit businesses looking to grow.
Speaker 4 (25:32):
Now.
Speaker 3 (25:33):
This would allow companies to write off full cost of
equipment or property in the year that it's purchased, rather
than depreciating it over time. So again, let me see
if I can give you another example.
Speaker 4 (25:45):
So imagine this.
Speaker 3 (25:45):
You're a business owner, you're a tech company, and you're
investing a million dollars into a new server. Well, you
would be able to deduct the full amount immediately, which
reduces that te taxable income significantly. Now, this not only
improves cash flow, but it also encourages businesses to invest
(26:08):
in growth driving assets as well. So what that means
for businesses is that it's time to rethink, rethink.
Speaker 4 (26:18):
Your entity structure.
Speaker 3 (26:20):
So with potential changes to the corporate tax rates and
pass through taxation, businesses should really evaluate whether their current
entity structure is still the most tax efficient. For example,
some LLCs and escorps may benefit from converting to C
corporations to take advantage of a lower corporate tax rate. Now,
(26:43):
let me give you a story about one of my
clients who has a family owned retail business. They transition
from an LLC to a C corporation after analyzing the
tax savings under a lower corporate rate. Now, while this
decision involved careful planning with professionals and their entire team,
(27:03):
the long term benefits really made it a clear choice,
and we were looking at the timing and the income
and the deductions. Here, businesses really should strategize the timing
of income in addition to the deductions to align with
favorable tax rates. Because accelerating income into the current year
(27:29):
or deferring expenses it can help optimize the tax burden
during transitional periods. So if a lower corporate tax rate
is expected next year, a business may delay large purchases
until then to maximize deductions against the lower rate. Additionally,
tax credits are another area of opportunity, particularly for industries
(27:53):
like renewable energy and technology and research and development. Credits
remain a powerful tool for offsetting tax liabilities. So if
you're not already leveraging these credits, now would be a
good time to start. And we've been talking a lot
about corporations, but what about what does this mean for families? Well, families,
(28:18):
you may want to consider and you should consider how
the potential tax changes impact your retirement saving strategies such
as contributing to tax advantage accounts like a four toh
one k wroth iras or hsas, and how they can
help mitigate tax income while building long term wealth. So
(28:40):
if you're a high earner, you might explore a backdoor
wroth IRA to maximize tax free growth potential, especially if
changes to contribution limits are anticipated. And then if you're
looking at gifting and estate planning, as I mentioned earlier,
potential reduction in the lifetime estate tax exemption make twenty
(29:03):
twenty four on ideal time to review your state plan
and strategies like gifting assets or funding an irrevocable trust
can help reduce your taxable estate and lock in current exemptions.
And you want to also, I would say dovetail in
there managing your investment portfolio because changes to the capital
(29:27):
gains taxes that could alter how families manage their investment portfolios.
So if by chance, tax rates increase for high earners,
strategies like tax loss harvesting, selling underperforming investment stuffset gains
that will become even more important. So let's say a
(29:49):
client has a two million dollar portfolio and reduce their
their taxable gains by twenty five thousand last year using
tax loss harvesting. This strategy allowed them to keep more
of their profits while rebalancing their portfolio.
Speaker 4 (30:07):
So how do we prepare for the future?
Speaker 3 (30:11):
What are some tips that you personally can implement well?
Number one, I would say stay informed okay, and piggyback
on that that tax policies can change quickly, so stay
updated on proposed legislations and work closely with your financial
advisor and your tax professional to adapt your strategies.
Speaker 4 (30:33):
You want to.
Speaker 3 (30:34):
Run scenarios of the two different I should say time
periods right and using financial models to understand how these
different tax scenarios might impact your family or business. And
this can help you identify opportunities and to really avoid surprises,
(30:56):
also engage in advocacy. Not enough of us get involved
in making phone calls to our senators and to our
local representatives, and get involved in, you know, supporting our
lobbying firms for our individual.
Speaker 4 (31:21):
Professions.
Speaker 3 (31:22):
Because small business owners and families, we can work in
industry groups or with local representatives and provide feedback on
these proposed tax changes. And this advocacy really ensures that
your voice is being heard in the legislative process. And
that's important because a lot of us, unfortunately we hear
(31:48):
of something we don't agree with it, and we bellyate
with friends and family, but really we have the opportunity
to make our voice be heard, and I would encourage
you to do that. So while tax changes they always
feel daunting, but they also bring opportunity for those who
plan ahead. So whether you're rethinking your business structure, adjusting
(32:13):
your state plan, or maximizing retirement contributions, proactive strategies can
help you stay ahead of the curve. And that's very
important if you are a planner and you want to
get yourself to a place that you have a heads
(32:34):
up and you feel like you've got more control of
your financial picture. This would be the right time to
start doing those things. Okay, so let's wrap up the
tax piece. It's really clear that reparation and adaptability are
really key here, and I want to explore with you
how businesses and families can create financial plans and not
(32:56):
only address these changes, but they also so ensure long
term stability. Now, if you're just tuning in here, you're
listening to your money matters, I'm your host, Drew Prescott.
I'm here to help you navigate the ever changing financial landscape,
So don't go any place. I'm going to give you
some more actionable insights for your financial future. And now
(33:20):
that we've explored the potential tax changes under the Trump administration,
let's shift gears and focus on actionable financial planning strategies. So,
whether you're managing your family's finances or running a business,
a solid plan can help you navigate uncertainty and build
a secure future. So, if you're putting together financial plan
(33:47):
for your family, what are some things that you want
to make sure that you pay attention to. So at
the foundational level, it's going to be build, strengthen your
emergency fund. You know, in the past few years. It
has really taught us that it's the importance of having
(34:13):
a financial cushion. So I always tell clients, you want
to aim to have three to six months worth of
living expenses in an accessible liquid account like a high
yield savings account or a money market fund, and want
to meet your savings by setting up to direct deposits
(34:34):
into your emergency fund. Even small, consistent contributions can add
up over time. So I had a client that I
worked with years ago who started saving two hundred dollars
a month after realizing that they didn't have enough to
cover unexpected medical bills, and within two years, outside of
(34:56):
all of their other savings, they had built up about
five thousand in emergency funds. It just gave them a
little extra piece of mind. Now, they always said, well,
we've got we're saving all this money into retirement're saving
all this and that, and we've got a chunk of
money over here. But I really like to see people
(35:17):
save consistently because it's just that habit. It's like working out,
it's just that habit of perpetually doing the right thing
over a long period of time. Now, yeah, they could
have just carved off the five thousand dollars. We already
knew they had the money, but I wanted to get
them into the habit of saving a little bit more money.
(35:38):
And two hundred dollars is like finding lint in their pocket.
But nonetheless, it was a discipline, and they did that
and it was good for them. They actually said it
felt very rewarding to know that they were being disciplined
in another area of their finances. Now, the second piece
(35:58):
that I want to make sure that you pay a
TENI two is maximizing those retirement contributions and retirement planning.
Really it still remains one of the cornerstones of financial stability,
So ensuring that you're contributing enough to take full advantage
of any employer matching your four oh one K, your
simple planned whatever. If you're if you've maxed out your
(36:21):
four oh one K, consider contributing to an IRA that
is non deductible and using a backdoor roth IRA contribution. Now,
there are catchup contributions for those of you that are
fifty and older, because people over fifty can make additional
(36:43):
contributions to the retirement accounts. So for twenty twenty four,
the four toh one K catch up limit is seventy
five hundred dollars and for iras it's one thousand. So
these extra savings can make a significant difference over time.
So one couple that I worked with both were in
(37:05):
the early fifties. They increase their catchup contributions by fifteen
thousand dollars annually, and in just five years they added
nearly ninety thousand dollars to their retirement savings and that
was not including the growth, and that's a nice thing. Also,
don't forget about college planning with five to nine. So
(37:28):
if you're a family with young children, a five to
nine college savings plan is an excellent way to prepare
for future education expenses. Now, these contributions they grow tax free,
and withdrawals for qualified expenses like tuitions and books, those
are also tax free. Now in many states, including New York,
(37:50):
they offer state deductions or credits for five to nine
plan contributions, and this adds an extra layer of savings.
For example, a client saving for their child's education contributed
five thousand annually to a five to ninth plan, and
by the time that their child reached college, the plan
(38:10):
had grown to one hundred and twenty five thousand dollars
thanks to the consistency of contributions and investment growth.
Speaker 4 (38:19):
So take this.
Speaker 3 (38:22):
Any time that you have an arrow in your quiver,
try to use it, and this would be one of those. Additionally,
let's look at insurance protecting for your family's future. Now,
this sometimes is overlooked, and the role of insurance in
your financial plan is something that is incredibly valuable and
(38:43):
very needed. Now, life insurance, disability insurance, and long term
care insurance that protects your family's financial future in the
event of an unforeseen circumstance. With life insurance, if you're
the primary breadwinner, consider term and insurance to replace your
income during your working years. Now, a policy with coverage
(39:06):
of ten to twelve times your annual income is a
good starting point. And with long term care insurance, planning
for long term care expenses as critical as healthcare costs
continue to rise and policies purchased earlier in life are
generally more affordable and offer a better coverage. Now, let
(39:28):
me camp out here for one second. There's nobody out
there that looks forward to buying life insurance, with the
exception of me.
Speaker 4 (39:40):
When I was younger.
Speaker 3 (39:41):
I did because when you work in the insurance industry.
Speaker 4 (39:47):
It's almost like a.
Speaker 3 (39:49):
Way to brag if you would that you purchase so
much life insurance or whatever. Additionally, I remember buying my
first policy when I was eighteen years old, and the
reason that I bought it was, well, I thought, with
(40:10):
six kids in the family, if I were to pass away,
it would be really nice to be able to leave
my siblings some money. I thought it could be a
nice thing to give them a little leg up to
get started. And by the grace of God, that policy
never got cashed in on, So now that goes over
(40:34):
to my family. And the one thing I'll tell you
about insurances is that underwriting is it can be challenging.
When I say that, don't misread this. I'm not saying
that to scare you. I'm not saying that to steer
(40:55):
you away from applying for it. Because the reality is this.
And I used to not want to go to the
doctor because I didn't want to lose my opportunity to
be ensurable. Well, that's not a good way to live.
That's kind of a fear based mindset. And if you're
(41:16):
flirting with the idea of getting insurance, buy it today.
Speaker 4 (41:21):
You know why.
Speaker 3 (41:22):
The reality is this, You're not going to be younger,
and likely you will not be any healthier in the
future either, because whatever it is that you're dealing with physically,
that is already in your records, okay, and just apply.
Apply for the coverage, get the right type, get the
(41:47):
right amount, and make sure that it's owned properly, and
not just on the personal side, but also on the
business side. So if you have a buy sell agreement,
we'll talk a little bit about that later on.
Speaker 4 (42:01):
Get that thing funded.
Speaker 3 (42:03):
Don't just rely on the company's value and the cash
on the balance sheet. Use insurance because insurance is like
buying discounted dollars. I always say, why would you pay
a dollar for something when you can pay a dime okay,
or you could pay a quarter.
Speaker 4 (42:23):
Whatever it is.
Speaker 3 (42:25):
It's a barn burner of a sale, and sometimes there's
opportunities for your company to deduct that as an expense.
So don't forget about your life insurance, your disability insurance,
and disability insurance. That's definitely something that gets overlooked tremendously.
(42:47):
Let me just tell you a quick story. As I
told you, I started in the insurance industry back in
two thousand and five with Mother Mutual.
Speaker 4 (43:00):
And it was always.
Speaker 3 (43:03):
An interesting thing because it was always just selling insurance,
selling insurance, selling insurance. It was not really financial planning
at all. And I will say this, I did learn
the tremendous value of insurance while I worked there, that's
for sure. I've also seen in action the value that
(43:26):
insurance brings to families, to businesses, and to professionals alike.
I became friends with a fella. One was an orthopedic
surgeon who got into my industry. Another was a dentist
that got into my industry. The two of them had
(43:49):
one thing in common, which was signs of early onset
Parkinson's disease, and this brought them into this business of
selling disability insurance. So here's why each one of them
(44:15):
had disability insurance. And they didn't just have disability insurance
that they brought through their employer. They had individual policies
with a very specific rider, this rioter. If you're a
profession that is, I would say, if you're a financial advisor,
(44:37):
if you're a dentist, if you're an attorney, if you're
a doctor, if you have if you highly specialized career,
you want to have disability income protection with the right company,
and there's only a couple out there that do this.
(45:00):
And there's only a couple out there that offer it
for the entire length of the payment. Okay, a couple
of them say they offer it, but it's only good
for two years or a short period of time. And
this rioter is called own occupation. Now, the difference between
(45:21):
having this policy and a generic policy is pretty much
the difference of having coverage versus not having coverage. In
these specific situations, as I told you, one was a dentist,
one was an orthopedic surgeon. Both of them got shaky hands.
They were no longer able to perform their specific duties
(45:45):
in their profession. Now, does that mean that they cannot
work now? Can they do what they once did and
that they were highly specialized in Yes, that means they
cannot do that because they have a shaky hand. Well,
in both situations, these individuals collected about twenty five thousand
(46:09):
and thirty five thousand, respectively of tax free income monthly
and then came to work in my industry. One of
them is a dentist that still teaches as a professor
but also works in the industry and is doing very
well in addition to receiving his disability payment. The other
(46:36):
is a financial representative and is making a nice income
and is also continuing to claim this disability coverage. Now,
there's nothing illegal going on here. It's because of the
way that this policy is written. So if you are
in the medical profession on any level, call me.
Speaker 4 (47:01):
I'm very well.
Speaker 3 (47:03):
Educated and versed on these specific policies and designing them
the right way. This is not something you can flirt with.
This must be done this specific way.
Speaker 4 (47:16):
And currently.
Speaker 3 (47:19):
There's only three sometimes four companies out there that you
can get these policies through. Not all coverages created equally, okay,
so make sure you have the right policy. Now, that
was important that I share that with you. It did
take me off a little bit, but I wanted to
(47:40):
share that with you and with conviction, and I hope
that that came through that way because it's incredibly important,
incredibly important. Now, where I left off before we went
down that path was inside of planning and we were
talking about life insurance, long term care and so on. Now,
(48:01):
what I would say is on the savings piece, review
your sep IRA, review your simple IRA, your solo for
one k. Make sure that you are feeding as much
as you possibly can to reduce your overall taxable burden.
If you are a let's say a small law firm,
(48:25):
where you're a entrepreneur that does not have a retirement
plan set up for yourself. Maybe you're you own a
hair salon, you have an electrical company, and you need
to offer retirement benefits for these individuals.
Speaker 4 (48:42):
Call me up.
Speaker 3 (48:44):
I will be more than happy to get you started
and share with you the options available to you and
which ones could be of most value to you, your company,
and your employees. Okay, now, as we talked earlier, I
had mentioned about succession planning and life insurance for your
(49:09):
buysell agreement. Well, let's not forget about this, the succession
planning of your business. If you do not have a
family member involved in your business that you want to
take the business over, then succession planning can still be
bred inside of the inside of your business and for
(49:30):
business owners nearing retirement, succession planning is critical. So whether
you plan to sell your business, transfer your ownership to
a family member, or establish an employee stock ownership plan
which is an ESOP, just having a plan ensures a
smooth transition. And there's key steps in succession planning that
(49:53):
I would like to cover with you. First, I would say,
you want to identify a success or a buyer early on,
and then value your business accurately.
Speaker 4 (50:07):
Those two steps are.
Speaker 3 (50:11):
Really the lifeblood of having good planning here. Then from
there establish a buy sell agreement to manage the transfer
of ownership. Now, I worked with a family owned construction
business that was local, and we created a succession plan
and what we did was we transition ownership to their
(50:32):
adult children, and we established a trust and they minimize
a taxation that they would face in addition to ensuring
that the business would remain in the family. Now, this
is unfortunately, there's a common theme that I found with
(50:56):
business owners and it's not just locally, it's across the country.
And what it is is it's this mindset. There's a
mindset out there that these family businesses that are going
to the second, third, and sometimes fourth generation, which is
very rare, by the way, but I cannot tell you
(51:19):
how many family owned businesses. When I meet with the president,
you know, the father of the family, they always say,
I don't want my child to do what.
Speaker 4 (51:30):
I do it's it's very stressful.
Speaker 3 (51:34):
It's this, it's that, it's you know, they've got one
hundred and one reasons of why they do not want
their child in that business. But think of this. This
business has created such a fantastic lifestyle for your family
and your children, and for them to have the ability
(51:54):
to go out and accomplish something that even remotly casts
a shadow similar to this business. The numbers are against them.
So if your child has been raised up in the
business and shows any type of.
Speaker 4 (52:19):
I guess you know, has any type of.
Speaker 3 (52:22):
A shine towards this business or any type of interest,
I would say, go right ahead and embrace that and
cultivate that so that you can create the ability for
this business to continue on into your children. Because unfortunately,
(52:42):
what happens is with these businesses, we see this and
then we see them the business owner send their child
off to college to get educated on something that really
brings absolutely no value to this business whatsoever. Especially now
you can pretty much study anything. It's really unbelievable, and
it's just a way to get a piece of paper.
(53:04):
But how much money would you save and how much
better and more valuable would the education be if it
came from you into the business. You could really create
something absolutely beautiful for them and take this business even
potentially further than you've been able to. So embrace that,
(53:28):
cultivate that, raise that, encourage that, so that you don't
have to worry about later on, you know, with you know,
ten to five years left of working years and saying, well,
you know this new guy, he seems pretty sharp.
Speaker 4 (53:43):
Maybe he could be the one.
Speaker 3 (53:45):
Raise your children to be the one put the trusts
in place, put the insurances in place. If you don't
have a child that has the mindset for it or
the ability to take over your business, well then go
down the other way.
Speaker 4 (54:01):
But if you do.
Speaker 3 (54:04):
Find that key person, I can help you put what
we call golden handcuffs on that person and give them
some tremendous benefits that would make it incredibly difficult for
them to walk away. And if they do walk away,
well then you don't get hurt either. There's a lot
that we can do to help you in this area.
Speaker 4 (54:27):
So let's get moving. Let's help you get to.
Speaker 3 (54:31):
The place that you want to be with your business.
And we've really covered a lot. There was actually, believe
it or not, there was another piece that I wanted
to share with you here, and we're going to have
to delay on that one.
Speaker 4 (54:47):
And it was about your.
Speaker 3 (54:50):
Pension maximization as a state employee, a federal employee, maybe
a teacher, municipality, whatever, And I wanted to share with
you really how to beat down the weeds and see
what's going on when you meet with somebody or you
(55:11):
sit in on a seminar about pension maximization and are
they really holding this seminar for your best interest or
are they holding it as a way to try to
sell you an insurance policy. Well we'll cover that another day,
but nonetheless, it has been great spending this time with
you today. Again you're listening to your money matters. I'm
(55:33):
your host, Drew Prescott, chartered Retirement Planning counselor, accredited Wealth
Management Advisor and President and financial advisor here at Prescott
Private Wealth, located at four fifty one. Who's extreet and Troy,
New York. Feel free to call us or text us
five point eight two zero three one ninety eight three
five one eight two zero three one nine eight three,
And again, thank you so much for listening today. I
(55:55):
hope you had a wonderful Thanksgiving and let's dive into
uh college football playoffs here. Alabama is still alive. I
don't know how I feel about that, to be honest
with you. They could just be wasted space if they
make it in, but I'll still root for them. Roll tide,
and until next week, I'll see you and God bless
and be safe. Thank you for listening.
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