December 9, 2024 • 24 mins
TODAY our Coaches walk us through important year-end considerations that could help listeners pay less tax and maximize the benefits of their retirement accounts. From 401k’s to ROTH, from highly appreciated assets to charitable giving, you won’t want to miss today’s Game Plan.
Key topics include maximizing contributions to retirement accounts like 401(k), 403(b), 457 plans, and IRAs, understanding contribution limits and catch-up options for those over 50, and the importance of knowing your investment cost basis to avoid unnecessary taxes. The episode also covers the benefits and deadlines for Roth conversions and gain-loss harvesting strategies to minimize tax liabilities. Additionally, considerations for adapting to local tax laws and the ongoing SALT cap are addressed. The coaches emphasize the value of seeking wise counsel to optimize financial outcomes as the year closes.
00:08 Tax Planning Essentials
01:42 Maximizing Retirement Contributions
03:53 Catch-Up Contributions Explained
07:18 Roth Conversions and Deadlines
09:56 Market Insights and Gain-Loss Harvesting
15:19 Understanding Cost Basis
20:50 State and Local Tax Considerations
Have a question for the coach? Send it in to connect@yourretirementcoach.com
Watch on YouTube: https://www.youtube.com/channel/UCOq6-cPoSmotfEToSbA4m1w
Connect with us on Facebook: https://www.facebook.com/search/top?q=yeomans%20consulting%20group,%20inc.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Aaron (00:00):
All right, grab your favorite mug.
It's time for coffee withyour retirement coach.
Welcome back to coffeewith your retirement coach.
For those of you that have completedyour to do list from episode one
of you're in tax planning, we'vegot more stuff you got to do.
Sorry.
Listen, we got to get you optimized.
Nick being serious.
(00:20):
Some things, uh, for people thatare earning income, people that have
assets that are appreciating, we've gotsome things we want them to work on.
Now, like yesterday, yesterday, yesterday,if it's, if, if it's convenient, if you
could schedule that in for yesterday.
Nic (00:37):
Yeah.
Well, in Aaron, I love whatyou said in the last episode.
It's one of my favorite things Ithink I've heard around our office.
Investing is a matter of opinion.
It's true.
Taxes are a matter of fact.
Yeah.
It's a matter of fact.
So, you know, So we're talkingabout real dollars saved in taxes.
(00:57):
And that's the thing that I hope peopletake away is, you know, what can you
do to keep more money in your pocket?
Aaron (01:05):
Listen, that's right.
It's not about what you have.
It's what you get to keep.
And behind the clipboard today, talking tous about what we get to keep, how we might
could keep maybe a little more of it.
Nic (01:15):
Yeah.
Aaron (01:15):
Be mindful of higher tax rates in the future.
Nick Yeomans.
Yeah.
Hey buddy.
I'm your host Aaron.
Today on Coffee With Your RetirementCoach, that's what it comes down
to, is we want to make sure thatwe're as tax efficient as possible.
And so it's the areas of placethat we need to be looking back.
And for some, it's a fresh brush up.
And for some, it's, it's, there'sbeen some changes and it might
be law, it might be habit.
(01:36):
But, um, Nick, let's start offwith those that are earning income.
Yeah.
Nic (01:42):
Well, Aaron, I tell you, if you are a wage earner this year, so, uh, if you
are W 2 income, 1099 income, uh, so ifyou're, we're not talking to the retiree
who's living on pension, uh, retirementaccount distributions and social security.
(02:02):
Okay.
So you're a wage earner.
Or 1099 income this year, you'vegot to know the numbers again.
Yeah.
Okay.
This year, 2024, there have beenseveral increases into the limits that
you can make contributions towardsvarious types of retirement accounts.
So um, Yeah.
In our audience today, if you haveaccess to a 401k, a 403b, a 457 plan,
(02:26):
a simple IRA, a SEP IRA, if you haveaccess to one of these incredible
retirement accounts, you want to makesure you are maximizing the benefit.
And there's two things to consider, Aaron.
Yeah.
Number one, are you contributing atleast enough to get your employers match?
Aaron (02:46):
That's yes, that's huge.
If you if you've got the benefitof an employer match and you are
not figuring out a way to makethat happen, what are you doing?
Yeah, that's
Nic (02:56):
called free money.
Yes.
And that's 100 percent rateof return on your money.
Yes.
Okay.
So you definitely want to takeadvantage of any employer match.
The second thing you should consider isAre you maximizing your contributions?
Yes.
So you can have a Roth 401k, uh, again,lots of different types of retirement
(03:16):
accounts, but because the limits continueto increase, my encouragement to you,
uh, in our audience today is, uh, speakto your HR, speak to your benefits
manager, speak to your office manager,whoever is helping facilitate, uh, that
retirement, plan for your company, talkto them and make sure you're on track
(03:37):
to maximize the contributions to those
Aaron (03:39):
retirement accounts.
So step one, I got to make surethat if there's a match, I'm not
leaving any money on the table.
Am I at least matching?
But then behind that, whatare the contribution limits?
How can I max that out?
But then Nick, am Ieligible for a catch up?
Nic (03:53):
Well, that's a great question, Aaron.
So, uh, here, here's an example.
I mean, if you are.
Uh, over 50, 50 or older yearsold, it's easy for you to say, you
know, Aaron, uh, I don't talk sogood sometimes, but I can do math.
All right.
So as an example, uh, if you are 50 andolder, you could qualify for a catch up.
(04:19):
And so for what does that mean?
If you have, as an example, a401k or a 403b, well, that's an
additional 7, 500 that you couldcontribute towards that work plan.
So that could bring your totalto 30, 500 this year that you
could put away towards retirement.
And that's before taxes, or ifyou have a Roth option after
(04:40):
tax, but tax free forever.
Now, the other one is the IRA.
Um, in the IRA contribution, you know,uh, if you are 50 and older, that's
1, 000 increase over the, uh, maximum.
So that's a total of 8, 000that you could put towards a
traditional IRA or a Roth IRA.
Aaron (05:00):
Oh, man.
Now, here's what's important, and thisis why it's one of the things that
we're leading off this episode with.
This contribution type that we're talkingabout right now must be made in 2024.
Nic (05:12):
Right.
Well, with the exception, Aaron, of,you know, those IRA contributions, if
it's not an employer plan and, uh, it'snot like an individual 401k or a SEP
IRA, then you have until tax filingtime to make those contributions.
Um, Here's one other little hiccup.
You know, Aaron, um, just last week, let's
Aaron (05:35):
circle back around.
All right.
All right.
Go ahead I feel like we kind of we put alot of commingled on their contributions
to your work plan end of the yearcontributions to a traditional IRA to
a Roth if you are eligible Um, becausethere are, there are limits and this
is why it's so important all the time.
(05:55):
We tell you, seek wise counsel, raiseyour gaze on these things that those
types of contributions can be madeup until the deadline of next year.
Nic (06:02):
Correct.
Thank you for 2024.
Oh, perfect.
Perfect.
And you know, you actuallyhit exactly where I was going,
um, knowing your numbers.
We always come back to that.
Aaron (06:13):
Well, Nick, it's, it's crucial.
We, we cannot be shootinginto the dark on this.
We're, we're never going to get wherewe need to be guessing, uh, without
being able to add the education.
We want to make an educated guess.
Nic (06:26):
Yeah.
Yeah.
Well, One of those things that I'veseen people kind of make a mistake on,
including last week, I reviewed thelast two or three years, actually it
was three years of tax returns, uh, forthis, uh, gentleman in a consultation
and, um, he had been making, um,fairly large Roth contributions, but
(06:50):
based on his income, um, Ineligible.
He's ineligible.
Yeah.
For, for years, but his CPAhas been helping and I'm not
picking on CPAs or, or anybody.
I'm just making a point likeyou need to know the rules.
You need to know the numbers and youknow, um, what's the carpenter's rule?
Aaron (07:09):
That's right, buddy.
You got to measure twice.
We're going to cut once.
That's right.
Yeah,
Nic (07:12):
that's right.
So anyway, Make sure that youare seeking wise counsel on this.
Aaron (07:16):
Now, listen, here's, what's also great.
If you're excited, but you can'tcontribute, or if you can contribute,
but you want more in that tax freebucket, it's another C word, Nick.
Yeah.
It's called
Nic (07:26):
conversion, conversion, conversion, another great thing.
Again, This has to be done byDecember 31st of this year to
be able to do this for 2024.
So you cannot wait until tax filing date.
However, you have up until the endof year to do a Roth conversion.
This is the process of takingmoney out of a before tax plan.
(07:49):
Or if you're trying to do a backdoorRoth IRA out of a after tax traditional
IRA and converting it into a Roth IRA.
to a Roth IRA.
So that's a powerful strategy.
You should again, talk to your taxadvisor or your financial professional
on this so that you know your numbers,but man, it's such a huge opportunity.
(08:10):
You know, I'm a huge fan of Roth.
I love tax free, but that does haveto take place by the end of year.
Aaron (08:16):
And it is one of those things we wanted you to have it on your list
because if you don't already have a Rothaccount open, you've got to open one.
You cannot do this strictly havinga traditional IRA account open.
So depending on where you're at, thetime of year opening account can be a
simple and a quick process and othertimes it might be more challenging.
So when you're talking about the fact thatyou want to run this by your CPA, you want
(08:36):
to have the account ready to catch it.
There's a few things.
You probably don't want tostart this December 26th.
Uh, facts.
Nic (08:46):
You know, the thing is, uh, people at Schwab, Fidelity, Vanguard,
all these wonderful companies,they happen to take vacation.
They do.
They
Aaron (08:54):
do.
There's a lot of us that have togo see family at the holidays.
We've got vacation time.
Gotta ask.
Gotta be taken.
Fun fact.
Nic (09:00):
Yes.
What is the longest hold time you've everexperienced with one of those companies?
Oh my
Aaron (09:05):
gosh,
Nic (09:06):
I mean,
Aaron (09:07):
I could have watched
Nic (09:10):
one of the Lord of the Rings movies.
Yeah, no, I, I was going to say likemy maximum and it had to do with
urine tax issue with, uh, and alsoa state settlement because, uh, the
client spouse had just passed away.
Yeah.
Two hours.
And it was like 27 minutes I was on hold.
Aaron (09:28):
Yeah.
No, it can happen.
It can happen.
And it's, it's one of those things youdon't want to come to that aha moment.
I need to do this.
It's affordable.
It's a no brainer.
And it's just the logistics of makingit happen at a time of year where
you probably have other things goingon, causing it not to have, what a
pain, what a pain, what a frustration.
Nic (09:47):
Yeah.
So, uh, important if you are concernedRoth conversion, um, Times of the essence.
Yeah.
Um, Nick, we've
Aaron (09:56):
had an incredible year in the market.
I, uh, I, I have had a constantconversation with clients and said, look,
in some ways I know it doesn't make sense.
We're gonna, we're gonna get all thegoodie out of it, as we would say.
Yeah, that's the professionalway to phrase that.
That's the professional phrase.
We're gonna get all the goody outta it.
But there's parts of it that don't,I mean, we would have expected
(10:19):
more volatility in a summer leadingup to a presidential election.
Nic (10:22):
Oh yeah.
Well, I'm still not sure that we're,you know, the coast is clear just yet.
I think that, uh, there is certainlya lot of evidence that could
point towards more volatility.
But, uh, But this year has been a,it's just been a remarkable market.
And it's been, uh, you know, oneof those years, you're really glad
(10:44):
you weren't hiding under a rock.
Aaron (10:45):
Yeah, no, it's true.
It's true.
And for those that stayed invested,stuck to the plan following 2022.
Some of their non qualifiedaccounts have assets with
significant gains and low basis.
Yeah,
Nic (10:59):
so this is an area where you want to look for opportunity, but you
also want to look out for some danger.
So here's an example.
Um, you know, if you have significantgains in your portfolio, and let's say,
You know, all hell's breaking looseand, you know, all of a sudden there's
massive laws around AI and a companylike NVIDIA gets hurt or, you know,
(11:25):
there's something that, you know, the,there's a new FDA director who comes
out and they say they don't like some ofthe ingredients in certain soft drinks
or, you know, something happens that'smajor in a company that you've had like
tremendous buildup in, in terms of gains.
Well, If you're in a positionwhere you're forced to sell,
that could really, really hurt.
(11:46):
But there is a strategy out therethat you should absolutely consider
by the end of the year if this is you.
And it's called gain loss harvesting.
And that's the action of lookingfor losses in your portfolio.
And gains in your portfolio andselling them so that you're washing
out the gains and the losses.
(12:06):
So long term capital gains can bewashed out by long term capital losses.
Now I'm going to tell you one trick here,Aaron, and this is like this little golden
nugget I'm going to give you because,uh, This happens time and time and time
and time and time again, where we'rereviewing someone's tax return and we
(12:27):
discover they have significant amountsof tax, tax losses that they're carrying
forward because if you do not wash outyour gains, With losses, I think you
can only, uh, raft like, uh, or deduct3, 000 off of your losses per year.
So if you've got 100, 000 of losses,you used up 3, 000, but you didn't
(12:51):
take any gains, then you've got 97,000 that rolls over into next year.
Right.
So, we just had a client who had90, 000 of long term capital gains.
Or excuse me, long term capitallosses that we found in their tax
return and they didn't know it.
Aaron (13:10):
Nick, before you jump into that, yeah, let's, we always
talk about knowing your numbers.
Let's talk about the stakes.
We talked about brackets previouslywhen it comes to income tax,
when we're talking about numberslike 90, 000, a hundred thousand.
Talk about.
Knowing your numbers.
Nic (13:26):
Yeah.
So, I mean, if let's just say that,uh, we did not discover this 90,
000 in this tax return, right?
Okay.
And this gentleman just wantedto sell a piece of the portfolio
and he had 90, 000 of gains.
Just making it up for a second.
Okay.
Well, let's say he's inthe 15 percent bracket.
(13:49):
Okay, well, that's about a 13,000 give or take long term capital
gains tax, not including any statecap gains taxes or income taxes
if you have those in your state.
Um, so, you know, let's call it 15,000 just for even, so if you didn't
know that you had those losses.
Right.
And you went and you took those gains,you're going to pay those gains.
(14:12):
Yeah.
Right.
Unless your CPA or tax professionalis taking a look and they're
going to wash them for you.
Yeah.
Then you know, you might, you mightend up with a cap gains bill that you
Aaron (14:25):
didn't have to have.
And when we're talking about 15, 000.
Sometimes 20 cents on the dollar.
This is worth paying attention to.
Nic (14:32):
Oh, yeah, 100%.
And so our recommendation for most peopleis you should be, you know, if you're
working with an advisor or a financialplanner or some kind of financial guru,
They should be looking to help youoffset your tax bill throughout the year.
This isn't kind of one of thosethings that you do every now and then.
(14:53):
This is, it's called a plan,and you execute a plan.
Right?
So, here we are approaching year end.
One of the things, if you've got nonqualified dollars, dollars that are
not in traditional retirement accounts.
You should be working with yourfinancial guru to determine, do you have
financial or do you have long term gains?
(15:14):
Do you have long term losses?
Can you wash those out in aplace where it would make sense?
Aaron (15:19):
Well, and Nick, in preparation for this, I feel like one of the biggest trip
ups before we ever get to that point.
Is knowing our basis.
Yeah.
I,
Nic (15:28):
well, Aaron, I'm going to put you on the spot.
Talk to me about basis because Iknow you just went through something
like we were working on a case today.
I Nick,
Aaron (15:38):
it is, it is wild to me.
Um, How often we have a clientcome in and we talk about the fact
that there is no basis on an assetthat we've got that big zero.
What is basis?
We want to show how muchwe paid for something.
Okay.
So let's, let's just say I bought HomeDepot stock for instance, and I paid a
(15:59):
hundred dollars for that Home Depot stock.
And today that HomeDepot stocks worth 300.
Well, my favorite uncle, UncleSam wants gains tax on the 200 in
profit that I made while I owned it.
And let's just say that I held itfor more than a year that I'm talking
about long term capital gains.
Well, here's the thing.
(16:20):
If I come over and on my statement, Ipaid a hundred dollars for that Home Depot
stock, but there's a zero on my statement.
If I sell it.
Is Uncle Sam going to be reallyunderstanding and be like, well, I mean,
obviously he didn't pay nothing for it.
Or am I going to be on the linefor 15%, 20 percent on 300, 000 or
Nic (16:39):
300?
Yeah.
So you're going to paythat tax on that 300.
Yeah.
Yeah.
That's so ugly.
And that is such a commonmistake that we find.
Uh, so if you're in our audience todayand you do have non retirement account
dollars in a brokerage account, a trustaccount, you want to make sure when
you're looking at that statement thatthere is Basis recorded on it because
(17:02):
Aaron, we've had clients come in and theyhad someone managing their portfolios,
making all kinds of trades with zerobasis, which means every single time
there was a trade and there was a gain.
The entire amount was a gain.
Yeah.
Right?
The entire sell, the entire transaction.
(17:23):
For how many years werethey overpaying their taxes?
Yeah.
Because no one was paying attentionthat there was no cost basis
Aaron (17:29):
recorded.
And not equating the two.
Yeah.
Well, fantastic that we hadfantastic asset management.
But if the taxes are running buckwild because nobody is, you know,
Hey, but we're sleeping on the factthat we have undocumented basis.
I mean, what a tremendous lossthat didn't have to happen.
Nic (17:46):
That's right.
That's right.
So, uh, know your numbers,know your numbers and make
sure that basis is recorded.
Aaron (17:52):
No, it's so, so true.
Um, now.
As we are doing, realizing of gains,we're, we're paying the taxes,
we're being, we have to be reallycareful about the wash world, Nick.
So let's say you've taken that step.
I know how much I paid for things.
I'm aware of when it might be goodto get in, to get out or, or to, to
work with a professional, like, likedonating in kind to a donor advised fund.
(18:14):
Um, but while you're doing thesethings, you're going to have the
opportunity to buy new things.
And we want to do it the right way.
So we don't raise a flag and
Nic (18:23):
that's right.
That's right.
So, uh, you know, a common mistake.
So with the wash rule, um, if let's sayI own the S and P 500 index and it was
just a S and P 500 ETF issued by I shares.
Okay.
Or it doesn't matter who it is.
This is not an endorsement forany fund company or any share
(18:43):
class or anything like that.
Okay.
Educational purposes, justeducational purposes only.
Okay.
Uh, but let's just say I,uh, wanted to take a loss and
sell that S and P 500 fund.
Okay, uh, or ETF and then Iimmediately turn around and I buy
Vanguard's, you know, S& P 500 ETF.
(19:05):
Okay.
Is it the same company?
No.
However, they are both theS& P 500 ETF and that is very
frowned upon with the IRS.
And that means you would haveviolated the wash sale rule.
And what the wash sale rule is, youcan't buy the same asset or a very, very
similar asset within 30 days of that cell.
(19:28):
So I can't sell andthen go buy an S& P 500.
Now, could I go buy, um, youknow, a different index fund?
You know, like the, uh, could I buy a Dow?
Could I buy Nasdaq?
Could I buy, you know, probablycould I buy a real estate ETF?
Could I go buy a small cap ETF?
Yes, absolutely.
(19:48):
So it's not that you can'tturn around and reinvest.
It just can't be reinvestedin the same or similar.
Aaron (19:55):
Yeah.
For how long, Nick?
30 days.
30 days.
So either wait a month or findsomething that's dissimilar
enough that you can invest inimmediately and not cause an issue.
Exactly.
Oh, I love that.
No,
Nic (20:07):
no.
I did ask, uh, have somebody askedme, um, could I sell my Coke stock
and turn around and buy Pepsi?
Yes.
Well.
Nope.
Hold on.
He started laughing andsaid, I'd never do that.
I retired from Coke.
Even if it's
Aaron (20:26):
an option, according to the IRS, it's not an option with my soul.
Nic (20:29):
No, no, no.
I tell you what, Coca Cola peopleare about the most loyal people
to a brand that you've ever met.
They are.
Love our Coke folks.
Love that.
Love that.
Love that.
Aaron (20:39):
Um, Nick, kind of wrapping this up, um, anything else that you
feel like is, is notable, um, For usto make sure that in this segment of
the of the tax planning for year end.
Nic (20:50):
Yeah, there is one more thing that, you know, I know, um, our
audience members that are tuning infrom some of our higher taxed states.
They've been wondering this.
I know that, you know, many of them havebeen following the tax plans of both
Kamala Harris and Donald Trump and tryingto find out where they're going to land.
(21:11):
If you're in a higher tax state,New York, uh, you know, New Jersey.
California.
I mean, there's a lot of states out there.
You know, one of the things that's reallymessed you up about the tax cuts and jobs
at is this thing called the salt cap.
Oh, right.
And the salt cap stands for state andlocal taxes under, you know, even though
(21:31):
there's so many, uh, good things aboutthe tax cuts and jobs at one thing that
did absolutely hurt a lot of peopleis the inability to deduct all All
of your state and local taxes, right?
So you are capped at 10, 000 of state.
So if you have property taxes,you have state taxes, you're at,
(21:52):
you know, 25, 30, 000 in some ofthese states, you are limited.
Or capped at 10, 000.
That's still in effect right now today.
I know a lot of people were kind ofhoping that would be changed, adjusted.
It's not so that 10, 000salt cap is still here.
Aaron (22:12):
Awesome.
Nick, that's so good to know.
And I thank you for sharing it.
Um, it is, it is areality that we, we can't.
have any control over the taxlaws, but we can be knowledgeable
about them and know how to adapt.
That's right.
And for those of you who had to haveadapted more generously, email us.
We love hearing those stories.
We believe that you becomemore of what you are.
If you are generously minded, if you havecompassion for your neighbor, we know
(22:34):
that when you have more, More opportunity.
Uh, we see more of those things.
So continue to email us atconnect at your retirement coach.
com.
We want to hear those stories.
Want to hear what came out of this,um, over our last, uh, couple episodes
that have been about urine planning.
There's more.
So for those of you that have listed andbeen proactive, the list is going to grow.
But right now I want tothank you for listing.
(22:55):
I want to thank you for listening and Iwant to thank you for remaining coachable.
We hope you enjoyed today's show.
But you may have questions for ourcoaches and they can be emailed at
connect at your retirement coach.
com.
If you know someone thatneeds to hear this episode,
we encourage you to share it.
As a reminder, the content of thispodcast is for educational and
entertainment purposes only andshould not be construed as advice.
(23:16):
On behalf of our coaches, we want to thankyou for listening and for being coachable.
Devin (23:20):
Yeoman's Consulting Group, a registered investment advisor, YouTube
channel based in Marietta, Georgia.
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All right, grab your favorite mug.
It's time for coffee withyour retirement coach.
Welcome back to coffeewith your retirement coach.
For those of you that have completedyour to do list from episode one
of you're in tax planning, we'vegot more stuff you got to do.
Sorry.
Listen, we got to get you optimized.
Nick being serious.
(00:20):
Some things, uh, for people thatare earning income, people that have
assets that are appreciating, we've gotsome things we want them to work on.
Now, like yesterday, yesterday, yesterday,if it's, if, if it's convenient, if you
could schedule that in for yesterday.
Nic (00:37):
Yeah.
Well, in Aaron, I love whatyou said in the last episode.
It's one of my favorite things Ithink I've heard around our office.
Investing is a matter of opinion.
It's true.
Taxes are a matter of fact.
Yeah.
It's a matter of fact.
So, you know, So we're talkingabout real dollars saved in taxes.
(00:57):
And that's the thing that I hope peopletake away is, you know, what can you
do to keep more money in your pocket?
Aaron (01:05):
Listen, that's right.
It's not about what you have.
It's what you get to keep.
And behind the clipboard today, talking tous about what we get to keep, how we might
could keep maybe a little more of it.
Nic (01:15):
Yeah.
Aaron (01:15):
Be mindful of higher tax rates in the future.
Nick Yeomans.
Yeah.
Hey buddy.
I'm your host Aaron.
Today on Coffee With Your RetirementCoach, that's what it comes down
to, is we want to make sure thatwe're as tax efficient as possible.
And so it's the areas of placethat we need to be looking back.
And for some, it's a fresh brush up.
And for some, it's, it's, there'sbeen some changes and it might
be law, it might be habit.
(01:36):
But, um, Nick, let's start offwith those that are earning income.
Yeah.
Nic (01:42):
Well, Aaron, I tell you, if you are a wage earner this year, so, uh, if you
are W 2 income, 1099 income, uh, so ifyou're, we're not talking to the retiree
who's living on pension, uh, retirementaccount distributions and social security.
(02:02):
Okay.
So you're a wage earner.
Or 1099 income this year, you'vegot to know the numbers again.
Yeah.
Okay.
This year, 2024, there have beenseveral increases into the limits that
you can make contributions towardsvarious types of retirement accounts.
So um, Yeah.
In our audience today, if you haveaccess to a 401k, a 403b, a 457 plan,
(02:26):
a simple IRA, a SEP IRA, if you haveaccess to one of these incredible
retirement accounts, you want to makesure you are maximizing the benefit.
And there's two things to consider, Aaron.
Yeah.
Number one, are you contributing atleast enough to get your employers match?
Aaron (02:46):
That's yes, that's huge.
If you if you've got the benefitof an employer match and you are
not figuring out a way to makethat happen, what are you doing?
Yeah, that's
Nic (02:56):
called free money.
Yes.
And that's 100 percent rateof return on your money.
Yes.
Okay.
So you definitely want to takeadvantage of any employer match.
The second thing you should consider isAre you maximizing your contributions?
Yes.
So you can have a Roth 401k, uh, again,lots of different types of retirement
(03:16):
accounts, but because the limits continueto increase, my encouragement to you,
uh, in our audience today is, uh, speakto your HR, speak to your benefits
manager, speak to your office manager,whoever is helping facilitate, uh, that
retirement, plan for your company, talkto them and make sure you're on track
(03:37):
to maximize the contributions to those
Aaron (03:39):
retirement accounts.
So step one, I got to make surethat if there's a match, I'm not
leaving any money on the table.
Am I at least matching?
But then behind that, whatare the contribution limits?
How can I max that out?
But then Nick, am Ieligible for a catch up?
Nic (03:53):
Well, that's a great question, Aaron.
So, uh, here, here's an example.
I mean, if you are.
Uh, over 50, 50 or older yearsold, it's easy for you to say, you
know, Aaron, uh, I don't talk sogood sometimes, but I can do math.
All right.
So as an example, uh, if you are 50 andolder, you could qualify for a catch up.
(04:19):
And so for what does that mean?
If you have, as an example, a401k or a 403b, well, that's an
additional 7, 500 that you couldcontribute towards that work plan.
So that could bring your totalto 30, 500 this year that you
could put away towards retirement.
And that's before taxes, or ifyou have a Roth option after
(04:40):
tax, but tax free forever.
Now, the other one is the IRA.
Um, in the IRA contribution, you know,uh, if you are 50 and older, that's
1, 000 increase over the, uh, maximum.
So that's a total of 8, 000that you could put towards a
traditional IRA or a Roth IRA.
Aaron (05:00):
Oh, man.
Now, here's what's important, and thisis why it's one of the things that
we're leading off this episode with.
This contribution type that we're talkingabout right now must be made in 2024.
Nic (05:12):
Right.
Well, with the exception, Aaron, of,you know, those IRA contributions, if
it's not an employer plan and, uh, it'snot like an individual 401k or a SEP
IRA, then you have until tax filingtime to make those contributions.
Um, Here's one other little hiccup.
You know, Aaron, um, just last week, let's
Aaron (05:35):
circle back around.
All right.
All right.
Go ahead I feel like we kind of we put alot of commingled on their contributions
to your work plan end of the yearcontributions to a traditional IRA to
a Roth if you are eligible Um, becausethere are, there are limits and this
is why it's so important all the time.
(05:55):
We tell you, seek wise counsel, raiseyour gaze on these things that those
types of contributions can be madeup until the deadline of next year.
Nic (06:02):
Correct.
Thank you for 2024.
Oh, perfect.
Perfect.
And you know, you actuallyhit exactly where I was going,
um, knowing your numbers.
We always come back to that.
Aaron (06:13):
Well, Nick, it's, it's crucial.
We, we cannot be shootinginto the dark on this.
We're, we're never going to get wherewe need to be guessing, uh, without
being able to add the education.
We want to make an educated guess.
Nic (06:26):
Yeah.
Yeah.
Well, One of those things that I'veseen people kind of make a mistake on,
including last week, I reviewed thelast two or three years, actually it
was three years of tax returns, uh, forthis, uh, gentleman in a consultation
and, um, he had been making, um,fairly large Roth contributions, but
(06:50):
based on his income, um, Ineligible.
He's ineligible.
Yeah.
For, for years, but his CPAhas been helping and I'm not
picking on CPAs or, or anybody.
I'm just making a point likeyou need to know the rules.
You need to know the numbers and youknow, um, what's the carpenter's rule?
Aaron (07:09):
That's right, buddy.
You got to measure twice.
We're going to cut once.
That's right.
Yeah,
Nic (07:12):
that's right.
So anyway, Make sure that youare seeking wise counsel on this.
Aaron (07:16):
Now, listen, here's, what's also great.
If you're excited, but you can'tcontribute, or if you can contribute,
but you want more in that tax freebucket, it's another C word, Nick.
Yeah.
It's called
Nic (07:26):
conversion, conversion, conversion, another great thing.
Again, This has to be done byDecember 31st of this year to
be able to do this for 2024.
So you cannot wait until tax filing date.
However, you have up until the endof year to do a Roth conversion.
This is the process of takingmoney out of a before tax plan.
(07:49):
Or if you're trying to do a backdoorRoth IRA out of a after tax traditional
IRA and converting it into a Roth IRA.
to a Roth IRA.
So that's a powerful strategy.
You should again, talk to your taxadvisor or your financial professional
on this so that you know your numbers,but man, it's such a huge opportunity.
(08:10):
You know, I'm a huge fan of Roth.
I love tax free, but that does haveto take place by the end of year.
Aaron (08:16):
And it is one of those things we wanted you to have it on your list
because if you don't already have a Rothaccount open, you've got to open one.
You cannot do this strictly havinga traditional IRA account open.
So depending on where you're at, thetime of year opening account can be a
simple and a quick process and othertimes it might be more challenging.
So when you're talking about the fact thatyou want to run this by your CPA, you want
(08:36):
to have the account ready to catch it.
There's a few things.
You probably don't want tostart this December 26th.
Uh, facts.
Nic (08:46):
You know, the thing is, uh, people at Schwab, Fidelity, Vanguard,
all these wonderful companies,they happen to take vacation.
They do.
They
Aaron (08:54):
do.
There's a lot of us that have togo see family at the holidays.
We've got vacation time.
Gotta ask.
Gotta be taken.
Fun fact.
Nic (09:00):
Yes.
What is the longest hold time you've everexperienced with one of those companies?
Oh my
Aaron (09:05):
gosh,
Nic (09:06):
I mean,
Aaron (09:07):
I could have watched
Nic (09:10):
one of the Lord of the Rings movies.
Yeah, no, I, I was going to say likemy maximum and it had to do with
urine tax issue with, uh, and alsoa state settlement because, uh, the
client spouse had just passed away.
Yeah.
Two hours.
And it was like 27 minutes I was on hold.
Aaron (09:28):
Yeah.
No, it can happen.
It can happen.
And it's, it's one of those things youdon't want to come to that aha moment.
I need to do this.
It's affordable.
It's a no brainer.
And it's just the logistics of makingit happen at a time of year where
you probably have other things goingon, causing it not to have, what a
pain, what a pain, what a frustration.
Nic (09:47):
Yeah.
So, uh, important if you are concernedRoth conversion, um, Times of the essence.
Yeah.
Um, Nick, we've
Aaron (09:56):
had an incredible year in the market.
I, uh, I, I have had a constantconversation with clients and said, look,
in some ways I know it doesn't make sense.
We're gonna, we're gonna get all thegoodie out of it, as we would say.
Yeah, that's the professionalway to phrase that.
That's the professional phrase.
We're gonna get all the goody outta it.
But there's parts of it that don't,I mean, we would have expected
(10:19):
more volatility in a summer leadingup to a presidential election.
Nic (10:22):
Oh yeah.
Well, I'm still not sure that we're,you know, the coast is clear just yet.
I think that, uh, there is certainlya lot of evidence that could
point towards more volatility.
But, uh, But this year has been a,it's just been a remarkable market.
And it's been, uh, you know, oneof those years, you're really glad
(10:44):
you weren't hiding under a rock.
Aaron (10:45):
Yeah, no, it's true.
It's true.
And for those that stayed invested,stuck to the plan following 2022.
Some of their non qualifiedaccounts have assets with
significant gains and low basis.
Yeah,
Nic (10:59):
so this is an area where you want to look for opportunity, but you
also want to look out for some danger.
So here's an example.
Um, you know, if you have significantgains in your portfolio, and let's say,
You know, all hell's breaking looseand, you know, all of a sudden there's
massive laws around AI and a companylike NVIDIA gets hurt or, you know,
(11:25):
there's something that, you know, the,there's a new FDA director who comes
out and they say they don't like some ofthe ingredients in certain soft drinks
or, you know, something happens that'smajor in a company that you've had like
tremendous buildup in, in terms of gains.
Well, If you're in a positionwhere you're forced to sell,
that could really, really hurt.
(11:46):
But there is a strategy out therethat you should absolutely consider
by the end of the year if this is you.
And it's called gain loss harvesting.
And that's the action of lookingfor losses in your portfolio.
And gains in your portfolio andselling them so that you're washing
out the gains and the losses.
(12:06):
So long term capital gains can bewashed out by long term capital losses.
Now I'm going to tell you one trick here,Aaron, and this is like this little golden
nugget I'm going to give you because,uh, This happens time and time and time
and time and time again, where we'rereviewing someone's tax return and we
(12:27):
discover they have significant amountsof tax, tax losses that they're carrying
forward because if you do not wash outyour gains, With losses, I think you
can only, uh, raft like, uh, or deduct3, 000 off of your losses per year.
So if you've got 100, 000 of losses,you used up 3, 000, but you didn't
(12:51):
take any gains, then you've got 97,000 that rolls over into next year.
Right.
So, we just had a client who had90, 000 of long term capital gains.
Or excuse me, long term capitallosses that we found in their tax
return and they didn't know it.
Aaron (13:10):
Nick, before you jump into that, yeah, let's, we always
talk about knowing your numbers.
Let's talk about the stakes.
We talked about brackets previouslywhen it comes to income tax,
when we're talking about numberslike 90, 000, a hundred thousand.
Talk about.
Knowing your numbers.
Nic (13:26):
Yeah.
So, I mean, if let's just say that,uh, we did not discover this 90,
000 in this tax return, right?
Okay.
And this gentleman just wantedto sell a piece of the portfolio
and he had 90, 000 of gains.
Just making it up for a second.
Okay.
Well, let's say he's inthe 15 percent bracket.
(13:49):
Okay, well, that's about a 13,000 give or take long term capital
gains tax, not including any statecap gains taxes or income taxes
if you have those in your state.
Um, so, you know, let's call it 15,000 just for even, so if you didn't
know that you had those losses.
Right.
And you went and you took those gains,you're going to pay those gains.
(14:12):
Yeah.
Right.
Unless your CPA or tax professionalis taking a look and they're
going to wash them for you.
Yeah.
Then you know, you might, you mightend up with a cap gains bill that you
Aaron (14:25):
didn't have to have.
And when we're talking about 15, 000.
Sometimes 20 cents on the dollar.
This is worth paying attention to.
Nic (14:32):
Oh, yeah, 100%.
And so our recommendation for most peopleis you should be, you know, if you're
working with an advisor or a financialplanner or some kind of financial guru,
They should be looking to help youoffset your tax bill throughout the year.
This isn't kind of one of thosethings that you do every now and then.
(14:53):
This is, it's called a plan,and you execute a plan.
Right?
So, here we are approaching year end.
One of the things, if you've got nonqualified dollars, dollars that are
not in traditional retirement accounts.
You should be working with yourfinancial guru to determine, do you have
financial or do you have long term gains?
(15:14):
Do you have long term losses?
Can you wash those out in aplace where it would make sense?
Aaron (15:19):
Well, and Nick, in preparation for this, I feel like one of the biggest trip
ups before we ever get to that point.
Is knowing our basis.
Yeah.
I,
Nic (15:28):
well, Aaron, I'm going to put you on the spot.
Talk to me about basis because Iknow you just went through something
like we were working on a case today.
I Nick,
Aaron (15:38):
it is, it is wild to me.
Um, How often we have a clientcome in and we talk about the fact
that there is no basis on an assetthat we've got that big zero.
What is basis?
We want to show how muchwe paid for something.
Okay.
So let's, let's just say I bought HomeDepot stock for instance, and I paid a
(15:59):
hundred dollars for that Home Depot stock.
And today that HomeDepot stocks worth 300.
Well, my favorite uncle, UncleSam wants gains tax on the 200 in
profit that I made while I owned it.
And let's just say that I held itfor more than a year that I'm talking
about long term capital gains.
Well, here's the thing.
(16:20):
If I come over and on my statement, Ipaid a hundred dollars for that Home Depot
stock, but there's a zero on my statement.
If I sell it.
Is Uncle Sam going to be reallyunderstanding and be like, well, I mean,
obviously he didn't pay nothing for it.
Or am I going to be on the linefor 15%, 20 percent on 300, 000 or
Nic (16:39):
300?
Yeah.
So you're going to paythat tax on that 300.
Yeah.
Yeah.
That's so ugly.
And that is such a commonmistake that we find.
Uh, so if you're in our audience todayand you do have non retirement account
dollars in a brokerage account, a trustaccount, you want to make sure when
you're looking at that statement thatthere is Basis recorded on it because
(17:02):
Aaron, we've had clients come in and theyhad someone managing their portfolios,
making all kinds of trades with zerobasis, which means every single time
there was a trade and there was a gain.
The entire amount was a gain.
Yeah.
Right?
The entire sell, the entire transaction.
(17:23):
For how many years werethey overpaying their taxes?
Yeah.
Because no one was paying attentionthat there was no cost basis
Aaron (17:29):
recorded.
And not equating the two.
Yeah.
Well, fantastic that we hadfantastic asset management.
But if the taxes are running buckwild because nobody is, you know,
Hey, but we're sleeping on the factthat we have undocumented basis.
I mean, what a tremendous lossthat didn't have to happen.
Nic (17:46):
That's right.
That's right.
So, uh, know your numbers,know your numbers and make
sure that basis is recorded.
Aaron (17:52):
No, it's so, so true.
Um, now.
As we are doing, realizing of gains,we're, we're paying the taxes,
we're being, we have to be reallycareful about the wash world, Nick.
So let's say you've taken that step.
I know how much I paid for things.
I'm aware of when it might be goodto get in, to get out or, or to, to
work with a professional, like, likedonating in kind to a donor advised fund.
(18:14):
Um, but while you're doing thesethings, you're going to have the
opportunity to buy new things.
And we want to do it the right way.
So we don't raise a flag and
Nic (18:23):
that's right.
That's right.
So, uh, you know, a common mistake.
So with the wash rule, um, if let's sayI own the S and P 500 index and it was
just a S and P 500 ETF issued by I shares.
Okay.
Or it doesn't matter who it is.
This is not an endorsement forany fund company or any share
(18:43):
class or anything like that.
Okay.
Educational purposes, justeducational purposes only.
Okay.
Uh, but let's just say I,uh, wanted to take a loss and
sell that S and P 500 fund.
Okay, uh, or ETF and then Iimmediately turn around and I buy
Vanguard's, you know, S& P 500 ETF.
(19:05):
Okay.
Is it the same company?
No.
However, they are both theS& P 500 ETF and that is very
frowned upon with the IRS.
And that means you would haveviolated the wash sale rule.
And what the wash sale rule is, youcan't buy the same asset or a very, very
similar asset within 30 days of that cell.
(19:28):
So I can't sell andthen go buy an S& P 500.
Now, could I go buy, um, youknow, a different index fund?
You know, like the, uh, could I buy a Dow?
Could I buy Nasdaq?
Could I buy, you know, probablycould I buy a real estate ETF?
Could I go buy a small cap ETF?
Yes, absolutely.
(19:48):
So it's not that you can'tturn around and reinvest.
It just can't be reinvestedin the same or similar.
Aaron (19:55):
Yeah.
For how long, Nick?
30 days.
30 days.
So either wait a month or findsomething that's dissimilar
enough that you can invest inimmediately and not cause an issue.
Exactly.
Oh, I love that.
No,
Nic (20:07):
no.
I did ask, uh, have somebody askedme, um, could I sell my Coke stock
and turn around and buy Pepsi?
Yes.
Well.
Nope.
Hold on.
He started laughing andsaid, I'd never do that.
I retired from Coke.
Even if it's
Aaron (20:26):
an option, according to the IRS, it's not an option with my soul.
Nic (20:29):
No, no, no.
I tell you what, Coca Cola peopleare about the most loyal people
to a brand that you've ever met.
They are.
Love our Coke folks.
Love that.
Love that.
Love that.
Aaron (20:39):
Um, Nick, kind of wrapping this up, um, anything else that you
feel like is, is notable, um, For usto make sure that in this segment of
the of the tax planning for year end.
Nic (20:50):
Yeah, there is one more thing that, you know, I know, um, our
audience members that are tuning infrom some of our higher taxed states.
They've been wondering this.
I know that, you know, many of them havebeen following the tax plans of both
Kamala Harris and Donald Trump and tryingto find out where they're going to land.
(21:11):
If you're in a higher tax state,New York, uh, you know, New Jersey.
California.
I mean, there's a lot of states out there.
You know, one of the things that's reallymessed you up about the tax cuts and jobs
at is this thing called the salt cap.
Oh, right.
And the salt cap stands for state andlocal taxes under, you know, even though
(21:31):
there's so many, uh, good things aboutthe tax cuts and jobs at one thing that
did absolutely hurt a lot of peopleis the inability to deduct all All
of your state and local taxes, right?
So you are capped at 10, 000 of state.
So if you have property taxes,you have state taxes, you're at,
(21:52):
you know, 25, 30, 000 in some ofthese states, you are limited.
Or capped at 10, 000.
That's still in effect right now today.
I know a lot of people were kind ofhoping that would be changed, adjusted.
It's not so that 10, 000salt cap is still here.
Aaron (22:12):
Awesome.
Nick, that's so good to know.
And I thank you for sharing it.
Um, it is, it is areality that we, we can't.
have any control over the taxlaws, but we can be knowledgeable
about them and know how to adapt.
That's right.
And for those of you who had to haveadapted more generously, email us.
We love hearing those stories.
We believe that you becomemore of what you are.
If you are generously minded, if you havecompassion for your neighbor, we know
(22:34):
that when you have more, More opportunity.
Uh, we see more of those things.
So continue to email us atconnect at your retirement coach.
com.
We want to hear those stories.
Want to hear what came out of this,um, over our last, uh, couple episodes
that have been about urine planning.
There's more.
So for those of you that have listed andbeen proactive, the list is going to grow.
But right now I want tothank you for listing.
(22:55):
I want to thank you for listening and Iwant to thank you for remaining coachable.
We hope you enjoyed today's show.
But you may have questions for ourcoaches and they can be emailed at
connect at your retirement coach.
com.
If you know someone thatneeds to hear this episode,
we encourage you to share it.
As a reminder, the content of thispodcast is for educational and
entertainment purposes only andshould not be construed as advice.
(23:16):
On behalf of our coaches, we want to thankyou for listening and for being coachable.
Devin (23:20):
Yeoman's Consulting Group, a registered investment advisor, YouTube
channel based in Marietta, Georgia.
We strive to provide comprehensivewealth management services for
every stage of the journey.
This platform is solely for informationalpurposes, and it's not offering advisory
services or sales of securities.
Investing involves risk andpossible loss of principal capital.
Comments by viewers or recognitionsare no guarantee of future investment
outcomes and do not ensure thata viewer will experience a higher
(23:43):
level of performance or results.
Public comments posted on thissite are not selected, amended,
deleted, or sorted in any way.
If applicable, certain editing ofpersonal identifiable information
and misinformation may be deleted.
The opinions expressed herein are asof the date of publication and are
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and may not necessarily come to pass.
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