December 12, 2024 • 39 mins
Questions? Thoughts? Send a Text to The Optometry Money Podcast!
As the year draws to a close, it’s the perfect time to review your finances and ensure you’re ending the year on a strong note. In this episode of The Optometry Money Podcast, Evon Mendrin, CFP®, walks through a comprehensive year-end financial checklist tailored specifically for optometrists. Whether you’re an associate OD or a private practice owner, you’ll find actionable tips to optimize your finances, make tax-smart decisions, and set yourself up for a successful new year.
What You’ll Learn:
- Retirement Planning: How to evaluate and maximize your 401(k), SIMPLE IRA, and profit-sharing contributions before year-end.
- Tax-Saving Opportunities: Key actions to take before December 31, including charitable donations, state tax payments, and practice-related investments.
- Investment Strategy: How to identify tax-loss harvesting and capital gains opportunities in your portfolio.
- Estate & Insurance Review: Why it’s essential to update your beneficiaries, estate plan, and insurance policies.
- Cash Flow Check: Tips to review your spending, savings rate, and liquidity for emergencies and upcoming goals.
Check out www.optometrywealth.com to get to know more about Evon, his financial planning firm Optometry Wealth Advisors, and how he helps optometrists nationwide. From there, you can schedule a short Intro call to share what's on your mind and learn how Evon helps ODs master their cash flow and debt, build their net worth, and plan purposefully around their money and their practices.
Resources mentioned on this episode:
- The Optometry Money Podcast Ep 114: Tax Targets to Aim For Mid-Year
- The Optometry Money Podcast Ep 51: An Optometrist’s Guide to the Qualified Business Income Deduction
- The Optometry Money Podcast Ep 47: An Optometrist’s Guide to How Taxes Work
- The Optometry Money Podcast Ep 37: Tax Planning For Charitable Giving
- The Optometry Money Podcast Ep 34: Five Levers to Control Capital Gains on Your Tax Return
- IRS Withholdings Estimator
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Evon (00:04):
Hey, everybody.
Welcome back to the Optometrymoney podcast, where we're
helping ODS all over thecountry, make better and better
decisions around their money,their careers, and their
practices.
I am your host, Evon Mendrin,Certified Financial Planner
practitioner, and owner ofOptometry Wealth Advisors.
An independent financialplanning firm, just for
optometrists nationwide.
(00:25):
And thank you so much forlistening today.
Today's conversation is going tobe all about a year end
checklist for your finances.
And this is a perfect time as,as the holidays are coming, as
you might have some time withfriends and family and to
yourself to kind of take a lookat uh, the end of the year.
to take inventory of what needsto be done before the end of the
(00:49):
air.
what are some things about justthe health of your finances that
you should review?
a lot of you, if your practiceowners are looking at your
practice and kind of thinkingabout.
planning for the next year, youknow, thinking about your goals
for the next year, for thebusiness, what you want to
accomplish, what, what, well,throughout the year, how has the
financial health of thepractice?
Well, in, in the same way, Ithink this is a great time to
(01:11):
sit down, take inventory of whatneeds to be done by your end.
And what are some things relatedto the health of your finances?
That we should keep tabs on.
And so with that in mind, let'sgo ahead and dive on in.
And of course, any links,resources, articles that I
mentioned here, you can take alook at in the show notes, which
you can find atwww.optometrywealth.Com while
(01:34):
you're there, of course, checkout all the other articles and
podcasts, episodes, resources weput together.
And if you're listening to thisepisode and thinking about, man,
I really need to tackle some ofthese things.
I really need some help workingon some of these things.
And you're interested in whatit's like to work with a
Optometry focused financialadvisor.
Reach out.
while you're on the website, youcan schedule a no commitment
(01:55):
introductory call.
We can talk about whatever's onyour mind financially and how I
help optometrist navigate thosesame issues all over the
country.
So with that in mind, let's diveright in.
So the first set of things, Ithink we should keep an eye on
as we go through December areyear end specific stuff, meaning
this stuff has to be done beforethe end of this tax year.
(02:17):
And first thing that comes up isgoing to be payroll
contributions to differentretirement accounts, and that's
going to be your 401k accountsand SIMPLE IRA accounts.
And if you are receiving a wageand you're making contributions
to your employer, retirementaccount, whether you're an
associate doctor, whether youare self-employed taxed as an S
(02:39):
corporation and paying into asolo 401k, or whether you're the
practice owner, you need to makesure that you are taking a look
at where you are on track for interms of your contributions
towards the maximum.
And if you are on pace alreadymeaning you can look back at how
much you've contributed year todate, and if you're on pace for
(03:00):
where you want to end up, that'sgreat.
If you are below where you wantto end up.
So for example, if you want tohit the maximum.
Then you gotta look at how manypay periods you have left, which
at this point in December,probably one or two.
And you gotta take a look tosee, can you make any
adjustments to get you closer tothat?
So for example, at the 401k.
(03:20):
the employee maximum, if you'reunder 50 is 23,000.
If you are over 50, you get abump, a catch up.
So that makes it 30,500.
If you are in a SIMPLE IRA plan.
you have a$16,000 employeemaximum.
If you're under 50 and 19,500,if you are 50 or older, however,
(03:43):
something I don't know is wellunderstood is that due to the
recent SECURE Act 2.0.
businesses with 25 employees orfewer, which is quite a bit of
you practice owners out there,you get a 10% bump to your
SIMPLE IRA contributions.
Both.
If you are under and over 50.
if you have 26 or moreemployees, then you have to have
(04:06):
a specific, enhanced match.
So if you're eligible for that10% bump, that makes your SIMPLE
IRA employee max 17,600.
Or if you are 50 and older,21,450.
So talk to your SIMPLE IRAprovider to make sure this is in
effect in that you qualify forthis bump in your contribution.
So you have these maximums takea look at what you've put in
(04:30):
year to date.
Take a look at what the gap isbetween that and where you wanna
end up at the end of the yearand then how many pay periods do
you have left?
If you are the owner or if youare an independent contractor?
You have more flexibility here,so you can do, for example, an
increased bonus at the end ofthe year, to try to increase the
wage to get as much as he caninto these plans.
(04:54):
Just keep in mind.
Any addition to wages is goingto increase those social
security, potentially socialsecurity, but certainly Medicare
taxes.
As well as impact other thingslike your potential QBI
deduction, things like that.
So you don't necessarily want tobe forced to increase your wage
substantially when you prefernot to simply from a tax
(05:15):
standpoint.
So you have to kind of balancethat out.
Sometimes it makes more sense tojust fit you know, as much as he
can into the remainingpaychecks.
And very often you can offsetthat with those distributions
that you're taking out of thepractice.
You only have a few more weeksleft to, to look at where you
want to end up by the end of theyear and where you're at now.
And one other comment I'll makeabout SIMPLE IRA plans is that
(05:37):
these have to be for youremployee contributions.
These have to be payrollcontributions.
In a SIMPLE IRA plan, you canonly make payroll deductions as
a contribution as an employee.
Or the employer contributions.
You can't make an individualcontribution to a SIMPLE IRA
account outside of payroll.
(05:57):
Like you would, if you were todo it to like a Traditional IRA
or Roth IRA.
The SIMPLE IRA contributionshave to be done through payroll.
So you have to keep that inmind.
one other thing related to thosecontributions that you want to
start to project out and get afeel for our profit sharing
contributions.
Now the profit sharingcontributions to a 401k plan
(06:20):
specifically.
Do not actually need to be made,meaning that the dollars don't
actually have to go into theplan.
Until the tax filing deadlinefor your business.
Plus extensions.
However, what does need to bedone by the end of the year is
the amount of wages that you'vepaid yourself.
And this is important becausefor profit sharing
(06:42):
contributions, As a whole theamount of profit sharing
contribution you can do into the401k account is going to be
limited by the wages paid by thebusiness for that year.
So employee wages will factorinto that.
But also because as thosecontributions per employee,
including yourself arecalculated.
(07:02):
The amount of that ends up inyour accounts versus all other
employees.
Is going to be determined by thewages that you're paying
yourself.
It's going to be limited orenhanced by your own wages as
the owner.
If you're an S corporationowner.
Or very often it's the owner andyour spouse.
Uh, as I commonly see withspouses that are both involved
(07:23):
in the business or both own thepractice together.
So, if you are trying to targeta certain dollar amount or a
certain skewness towards yourown accounts and as a part of
that profit sharingcontribution.
You need to have a plan for howmuch your wages should be by the
end of the year.
And so hopefully you're able totalk with your third-party
(07:43):
administrator for the plan.
I run a projection to get a feelfor what that should look like
and make end of your adjustmentsto your W2 if needed, whether
it's increasing payroll, whetherit's just an end of year bonus,
whatever that needs to be.
Anything related to wages needsto be acted on by the end of the
tax year, just keep that inmind.
Now let's talk about other taxplanning, specific action items
(08:07):
that need to be handled.
hopefully you are working withyour professional team, your
financial planner, your taxadvisor, to, to put together a
tax projection for you.
And so you've had theseopportunities to talk about end
of year actions that need to betaken before the end of the
year, if not strongly recommendreassessing your professional
team to see if that's somethingthat can be added to your life.
(08:30):
Because there is a world ofdifference between showing up at
tax time and just reacting tothe things that have.
Already been done.
Versus going towards the end ofthe year with an idea of what
you're expecting at tax time.
And what you can do to impactthat one way or another.
And the first thing that you'dwant to think about heading
towards the end of the tax yearis, are your books up to date?
(08:53):
Meaning are you regularlyupdating the categories of the
different transactions in yourpractice?
If you're a practice owner, areyou reconciling all the
different accounts inside ofyour QuickBooks or whatever your
bookkeeping software is?
Are they accurate or preferablyare you using a good bookkeeper
(09:13):
that knows Optometry reallywell.
That is regularly on top ofkeeping clean, accurate timely
books because ultimately nothingelse matters.
If there's not clean data tolook at.
And to project out for taxpurposes.
And to talk about for cashflowand things like that, right.
Everything relies on, on theaccuracy of your bookkeeping.
(09:33):
So number one are your booksup-to-date as we get to the end
of the year.
Number two, withholdings checkwithholdings.
Right?
This is related to those wageissues we talked about earlier
is that.
If you are taking withholdingsthrough a W2 paycheck.
Do you need to make adjustmentsto those withholdings through
the end of the year?
Again, we only have maybe one ortwo paychecks left.
(09:54):
Before the end of the year.
So do you need to make anyadjustments to get you closer to
what your expected taxes at taxtime, or at least under
withholding thresholds to avoidan under withholding penalty.
The IRS gives you certainthresholds in order to get there
certain safe harbors as weusually call them.
So are you on track for yourstate and local taxes and
(10:16):
federal taxes?
Or do adjustments need to bemade before the end of the year?
And then if you own a practice,are there end of your practice
investments that need to happenbefore the end of the year, so
that you can take advantage ofthem for this tax year.
So for example, if you arebuying equipment this year,
because your business needs itand you will have a positive
(10:36):
return on the investment.
Is that equipment going to benot only purchased but delivered
and put in service this taxyear.
So that you can benefit fromthat this tax year.
are you paying for expensesupfront?
So any of the practice orbusiness-related deductions or
actions that need to be taken,what needs to happened before
the end of the year.
(10:57):
the other thing that often comesup for, S corporations or
partnerships is the pass throughentity tax credit.
So if you, for example, have apractice it's taxed as an
S-corporation.
and it made sense for you andpotentially the other owners, if
you have co-owners.
you can pay your state taxesthrough the business.
(11:19):
And those state taxes that arepaid through the business can be
deducted as a federal taxdeduction because it's a, it's a
deduction on the profit andloss.
And then you get a credit onyour state tax return to account
for the fact that you paid thosetaxes through the business.
So essentially for those, forthose of us that are limited on
the amount of state and localtaxes, we can deduct on our
(11:42):
personal tax return as anitemized deduction, which is
10,000 currently.
We can take advantage of thispastor entity tax credit.
Now, every state's different,every situation's different.
Right?
So lean pretty heavily on yourown tax professional to see what
works.
But where that often comes up isthat very often there's a second
(12:03):
or, or final state tax paymentthat needs to be done at the
beginning of the following year.
At the beginning of next year,before you file your business
tax returns.
Well your tax professional andadvisors might, might advise you
to, instead of waiting untilnext year to make that final
payment by the end of this taxyear, so that it shows up on
this year's profit and loss andthis year's tax return.
(12:25):
So talk with your professionalsto see if that makes sense, sort
of timing of payment makessense.
donations to charity.
This is something that alsoneeds to be taken to account and
take an action before the end ofthe tax year.
As you might be familiar withdonations to charity is one of
those itemized deductions thatyou can take on the federal tax
return, meaning that.
every family gets to choosebetween a standard deduction,
(12:48):
which is just a standard dollaramounts each taxpayer gets to
take.
Or itemized deductions, which isa specific list of personal
expenses, personal deductionsthat you can stack up.
And if that list of itemizeddeductions is higher than your
standard deduction.
Then you can take that higherdeduction.
You can take the higher of thetwo.
(13:10):
And so very often what I, I seeadvised and what I'm working
with with clients is that CA dowe have enough of those
deductions, including donationsto charity?
To to benefit from that in thistax year.
And sometimes that meansbunching donations to charity,
meaning we'll rather than donatesmall amounts to a nonprofit or
(13:31):
a church or something that, thateach year.
We'll bunch, those together intoevery other year or every third
year or something like that.
So that we can take advantage ofthose.
And then in those other years,we'll get that higher standard
deduction.
But if that needs to be done,make sure you're doing that
before the end of the tax year.
And that don't, that charity isreceiving it and cashing that
(13:51):
check or however that'shappening.
Right.
So that is something that needsto be done by the end of the tax
year.
And importantly, if you arecontributing to a donor advised
fund, Make sure that thatdonation is happening before the
end of this tax year as well.
importantly, sometimes we'llrecommend if a, if a client has
a large taxable brokerageaccount and we've got all these
(14:13):
ETFs or funds or investmentsthat are really highly
appreciated, meaning if, if yousold it to create cash, There's
a pretty high capital gain toexpect.
What we'll often advise is whatwe'll often advise is rather
than donate cash to the donoradvice fund or to a charity.
You can donate shares that haveappreciated.
So those shares go directly fromyour, taxable brokerage account.
(14:38):
To that donor advised fund or tothat charity, if they'll accept
shares and that donor advisefund and that nonprofit can sell
it and they don't have to dealwith taxes.
And then you can take whatevercash you would have otherwise
donated and just reinvest itback into your investment
account.
And so you've essentially wipedaway the gains on those shares.
But importantly, if you're doingthat to a donor advised fund,
(15:01):
you need to be aware of any yearend deadlines to make sure that
that transfer happens and isaccounted for, for this tax
year.
And just an important note ingeneral is that.
Custodians these financialinstitutions where you are.
you are handling all of thesetransactions are handling your
investments.
They'll often have their owninternal deadlines to do these
(15:24):
things.
Which can often be before theend of the year.
I mean, quite literally, wemight see these deadlines come
up over this next week or so.
and every custodian is going tobe a little different, but you
need to take a look at whataction are you trying to do
within your investment accountsto impact your tax return?
And.
(15:44):
And what is that institution'sdeadline to get that done.
And if there is a certaindeadline, what actions do you
need to take to get creative andget around it?
So a donor advised fundcontributions, transfers into
the donor advised fund.
That's often something I see.
I also see things related toRoth conversions.
So if you want to do a Rothconversion, which is
(16:06):
transferring dollars from apre-tax Traditional IRA, for
example, A pretax retirementaccount into a Roth retirement
account and that transfer thatconversion is taxable income in
the year you do it.
But it continues to growtax-free into that Roth IRA.
And so you can choose to taxthose dollars and to do that
(16:28):
conversion.
In favorable tax years.
Some situations I see that makessense is early on in a cold
start or early on in a, a newbusiness.
Taxable income is lower.
business deductions are higher.
gross revenues, lower.
And, and so these areopportunistic times to do
something like that, where wecan add on additional income
(16:49):
onto the tax return.
at a really favorable tax rate.
or if we're getting intoretirement or early retirement,
we're often going to look atthose early years of retirement.
For opportunities to do thoseRoth conversions.
And so if you're going to dothat, Make sure that that's done
before the end of the year, butalso keep an eye on your
custodians or your institution'sdeadline to make sure that's
(17:11):
accounted for.
I'd also add, if you had donewhat's commonly called the
backdoor Roth IRA contribution,meaning you contributed to a
Traditional IRA.
And then you converted thosedollars into the Roth IRA.
And if you realized, oh shoot, Ihave a bunch of pretax,
Traditional IRA dollars here,and I need to roll those pre-tax
(17:32):
IRA dollars into a 401k plan sothat, that conversion piece
doesn't cause unnecessarytaxation, if that's you that
rollover out of pre-tax dollarsout of the IRA count into the
401k.
Needs to be done before the endof the tax year.
In which you did thatconversion.
(17:54):
So we've got a few weeks leftand these things often happen
with checks.
So very often the IRAdistribution is going to happen
by check they'll mail you or the401k plan, a check made out to
the receiving 401k plan, not toyou, which is very important.
The check would be made out tothe receiving 401k plan for your
(18:15):
benefit.
Sometimes if it's to you, thenyou'll have to take it and mail
it to the 401k plan and thenthey have to receive it and then
process it.
So.
These things can take some timeand whenever mail's involved.
Things can get mixed up or justmissed or lost.
So yeah, time is of the essencehere.
If that has to be done.
You've got a few weeks left tomake sure that that's done.
(18:36):
And if you have any questions onthat, please let me know.
A lot of people get confused onexactly how that all works.
But keep that in mind, as wellas an end of tax year issue to
look at.
One thing that often comes up,in terms of tax filing deadlines
or tax deadlines is, is costsegregation studies.
If you are a real estateinvestor, keep in mind that does
not actually have to be done,meaning the, the cost
(18:57):
segregation study doesn't haveto be done by the end of the tax
year.
I, it does have to be donebefore the tax filing deadline.
So just keep that in mind.
if you're working on thoseparticular studies with your
advisors.
So, that is sort of a highlevel.
Quick bulleted list of some ofthe things to think about
related to tax planning,obviously.
(19:17):
End of your tax planning is amuch broader topic.
That's, we're, we're not goingto get into too much time into,
in this episode.
We've got some other episodesI'll add into the show notes, so
you can listen to those episodesas well, but just anything tax
specific that needs to be doneby the end of the tax year,
making sure you are talking withyour professionals and keeping
in mind, any institution,internal deadlines to get that
(19:38):
done.
other things that don't need tobe done by the, by the end of
the year or things like HSAcontributions or.
IRA contributions.
so those things you can actuallywait, like a profit sharing
contributions.
You can actually make beforenext April before more, next
March.
before that the tax finallydeadline.
next thing is, is the BOIreporting from the Corporate
(19:59):
Transparency Act and, up until acouple of weeks ago.
this was something that forthose business entities that
existed.
So for those practice businessentities that existed if you're
1099, and you have an LLC andyour taxed as an S corporation.
Or if you own real estate in anLLC, those business entities
that existed before January,2024, there was a hard end of
(20:25):
year deadline to complete thisBOI reporting or face stiff
daily penalties.
So.
So the penalties were no joke.
They were not messing aroundthere.
from what I understand, I I'mone of the slackers that were
waiting until the very lastminute.
this is not something that'svery difficult.
If you have a very simplebusiness entity structure.
doesn't take up too much time,but there was this hard end of
(20:47):
year deadline.
And if you look at the amountsof businesses, That had actually
completed this by this time,this year.
Versus what was expected.
There is a substantial gapbetween the two, meaning there
were far less businesses that.
that had actually done thereporting versus what was
expected to be done by time thisyear.
However, on December 3rd of thisyear, just recently.
(21:11):
A US district court for theEastern district of Texas issued
a preliminary injunction on thereporting requirements, which
essentially blocked enforcementon a national level.
So what does that mean?
Well, for now, temporarilyanyways.
We do not have to worry aboutthis reporting deadline.
the enforcement has been paused.
(21:31):
Now this isn't a permanentruling.
This isn't a permanentinjunction.
This is preliminary as the courtcases unfold.
with this very well can beoverturned in terms of, appeals
and just going through theprocess.
So.
for now, it looks like usslackers don't need to do
anything in terms of a hardrequirement.
However, it probably makes senseto keep a very close eye on this
(21:55):
in case this is reversed.
And just be ready to file ifneeded.
And of course you can also file,voluntarily if you'd like, or if
your, if your attorney advisesyou to that's something you can
do just to be safe, but that'ssomething we've seen put a pause
on.
Right?
So.
in terms of court cases, you canadd this to the student loan
stuff that's going on with theSAVE program in terms of court
(22:15):
cases to keep an eye on.
All right.
So those are some things that.
That we were thinking about interms of a hard deadline by the
end of the year.
contribution and wage andwithholdings related stuff.
Or tax-related, actions thatneed to be done before the end
of the year.
Those were hard deadlinerelated.
Now let's talk about otherfinancial health related stuff
(22:38):
that doesn't necessarily have ahard deadline.
But I think it makes sense to atleast review once throughout the
year.
So these are some things that Iwould review throughout the year
for a client.
But if you haven't, this is agood time to sort of think and
reflect and look back and justkind of review the health of
your finances.
And one of the things at thistime of the year.
So December, one of the thingsI'm reviewing for clients in
(23:00):
December, It's just the amountof liquidity in the life of the,
of the optometrists.
whether it's an associate or, orprivate practice owner.
And what I want to review isnumber one, do you have adequate
liquidity?
And that's things you can getaccess to tomorrow.
Do you have adequate cash?
Do you have adequate taxablebrokerage account?
do you have adequate liquidityin your life for an emergency
(23:23):
fund?
Number one, do we have anadequate emergency fund?
and upcoming purchases.
So things that we areanticipating over the next year
or so.
Are we building up an upliquidity to prepare for that.
And, that might be a homepurchase that might be a
commercial property purchase,which I've got several clients
actually thinking about thatright now.
liquidity for practicepurchases.
(23:44):
So maybe you ha you're, you'replanning on having roughly 10%
of the, the value of thepractice that you are purchasing
in liquid assets so that youcan.
qualify very, very easily forborrowing.
Do you, are you building up anup for that or do we need to
increase that a little bit more?
I have a score that I sort oftrack for clients on an ongoing
(24:05):
basis, but this is a good timeto just take a look.
Okay.
What is your cash savings?
is it in a place that makessense?
Is it a high yield savingsaccount?
If you're in a high state taxstate like California.
Does it make sense to usesomething like a US Treasury
bond or, or bill or a USTreasury money market fund or
(24:26):
ETF equivalent?
So.
Take a look at your liquidity.
Do you have enough is in anappropriate spot for what's for,
or do you need to increase ordecrease potentially the amount
of cash you have on, on hand?
It's very possible.
You have too much, right?
That's also the case as well.
And keeping on your practicecash as well.
Very often.
One of the biggest things thatpractice others are asking me
(24:49):
about is.
What should I do with the cashin my business?
How much can I take out of it?
How much should I pay myself?
And when that uncertaintyhappens, it's very common to
just see cash build up becausethey don't know what else to do
with that.
and you certainly don't want tokeep more than necessary.
Too much cash in the businessbecause you don't want to keep
that cash.
(25:09):
Subject to the liability of thebusiness, but also it's just
unproductive at times.
Take a look at your own cash inthe practice as well.
If you own a practice.
And just to assess, is thatadequate?
rental properties.
If you have several rentalproperties, do you have enough
liquidity for unexpectedexpenses or maintenance within
those rental properties as well?
Another thing you should bereviewing are beneficiaries or
(25:32):
just your estate plan ingeneral.
If you've not reviewed yourestate plan for several years.
This is a great time to pullthat out.
And see what's in it, right?
If something happened to you.
Or your spouse, if you'remarried, you pass away or you
become incapacitated.
What happens?
And does that still make sensebased on your goals and your
(25:53):
family and the changes that havehappened in your life, but
something that should be reallyeasy to check and something I'll
track for clients are thebeneficiaries of all your
different accounts.
If you've not already, I thinkit's super helpful just to build
a ledger, a spreadsheet, someway for you to take a look at
all of the different accountsthat you have, how they're
titled.
(26:14):
And who are the beneficiaries?
Because that will tell you in avery quick, easy to look at way.
Okay, this is where they'regoing.
If something happens to me.
And is that still up to date?
in a normal year, thereshouldn't be much changes.
You're just sort of glancing atit and making sure and
confirming that it's up-to-date.
But if there are changes in yourlife, you're going to be happy
(26:35):
that either some professional'skeeping an eye on that for you
or that you're making changeswhere necessary.
I've seen a lot of cases wherethere's been, children.
where there's been children inthe family and the old
beneficiaries haven't beenupdated where there's been
divorces.
And the ex spouse was still abeneficiary.
That is not a great situation tobe in.
we've seen cases wherebeneficiaries were not named.
(26:57):
And in that, in that case, theestate would have been the
recipient or when there's beentrusts created.
And those trusts should havebeen the beneficiaries rather
than who's currently named.
so those are things you justwant to review and don't forget
your life insurance policies aswell.
One other thing to keep in mindis that there is not only a
primary, but also a contingentbeneficiary, the second line of
(27:21):
beneficiaries, so that ifsomething happens to both you
and that primary, there's a lineof succession.
And, if you have minor kids, itgets much more complicated
because you have to decide howthose minor kids should inherit.
Should trusts be involved.
Should there be a custodiannamed for those kids?
so it definitely gets much morecomplicated when a minor kids
(27:42):
are involved.
if you have grandkids,grandkids, you want to review.
Okay.
If something happens to, to theparents, you're.
You know, to the first line ofbeneficiaries how should it go
through their heirs?
There's certain things you canlook into in terms of how it
would flow down the family line.
So beneficiaries, keep an eye onthat.
Keep tracking that.
(28:02):
And then your estate plan as awhole, if you've not updated it
for awhile, take a look to makesure that things are, as it
should be, that things aretitled appropriately.
If you have taxable brokerageaccounts, are those title
appropriately based on the, theestate plan, if your house is
titled appropriately, thingslike that, and keep an eye on
that.
And similar to that, you do wantto take inventory of your
(28:24):
insurance policies, right?
What are the different insurancepolicies you have?
What do they cover?
What are the coverage amounts?
and that could be life anddisability that can be home and
auto, liability coverage.
umbrella insurance is somethingI commonly see, just sort of as
a gap in the insurancecoverages.
So let's just take inventory onwhat's covered both in the
business and personally.
(28:46):
Just to make sure that you haveadequate types of policies,
adequate coverage.
Or if there's new, additionalrisks that have popped up in
your life that are.
that are, needs to be adjusted.
Sometimes we see families grow.
Sometimes we see new businesses.
Sometimes we see, additionalpolicies, additional vehicles,
new drivers, things like that.
So just make sure that yourinsurance policies meet the
risks that are, that areoccurring in your life.
(29:07):
student loans.
one thing that you want to keeptrack of is your student loan,
recertification date, and manyborrowers that I've come across
or that I've, I've adviseddirectly have seen their
recertification dates, the datesthat they need to re show.
their income and family size andthen recalculate their payments
for the next 12 months.
We've seen that push back intonext year.
(29:29):
And so you want to keep an eyeon when that date is going to
be.
And then starts a plan for thatnext payment to be built into
your finances.
for many of you, especially ifyou've recently graduated.
You might still be on a very lowpayment due to low income while
you were students or low incomewhile you just got out of
optometry school.
And so you might be surprised bythe higher payment coming up
(29:52):
over the next year or so if yourpayments or if your incomes come
up.
A portfolio check.
This is something that youshould do at least once
throughout the year.
If you've not done it already,this is a great time to do it.
number one are a couple of taxplanning opportunities related
to the investments.
So if you have a taxablebrokerage account, see if
there's any opportunities toharvest losses in that account,
(30:14):
meaning that.
for tax purposes.
Sell outs of the, the investmentthat's at a loss and then
immediately buy anotherinvestment that is not
substantially identical.
And there are some rules too, tomake sure that you're following
to make sure that that's donecorrectly.
I'll include, again, a link toan episode I did on that in the
show notes, but are there anyopportunities to take advantage
(30:36):
of those capital losses beforethe end of the year?
or at the same time, if yourincome is low enough, are there
opportunities to harvest gainsat a really favorable tax rate?
If your income's low enough,it's quite possible that, you
can sell things at a 0% capitalgains tax rate.
So if your income is low, maybeyou have a unusually low income
(30:56):
year, or maybe you've justrecently retired or whatever,
whatever it may be.
See if there's opportunities onboth sides of that to sell
something, to take advantage ofthose losses or at a favorable
tax rate.
The other thing I want to keepan eye on are dividends and
capital gains distributions.
And December is usually a reallyheavy month for distributions in
funds.
Especially mutual funds, notquite as much, most often in
(31:19):
ETFs.
but you're going to see bothdividends distributed as well as
capital gains distributions.
From those funds that do end upon your tax return.
So if that's the case, keepingon what you should expect with
your investments.
Are your investments going to bekicking off a substantial amount
of dividends, especiallynon-qualified dividends, which
(31:41):
are a particular type ofdividend taxed at ordinary yucky
tax rates, just like all yourother income.
Qualified dividends andlong-term capital gains have
more favorable tax rates.
So are they kicking off a lot ofinterest or, or non-qualified
dividends?
Or is there a lot of capitalgains activity it's going to
(32:02):
make, which is what you're.
And are you expecting a verylarge capital gain distribution?
That's something you want tokeep an eye on.
If you are doing very specifictax planning, you want to know
what is expected to end up onyour tax return.
And that's also a great place tojust take a look at is your
taxable investment account.
invested in a way that's taxefficient.
(32:23):
So when I'm working with aclient, I'm looking at all of
the different accounts goingtowards the same goal.
As one big portfolio, one bigmix.
So, you know, one big pie andeach account.
It's just a separate mix, aseparate piece of that pie.
And knowing they all havedifferent tax characteristics,
you might have.
(32:43):
for example, if we're saving forretirement for longterm
financial independence, youmight have a 401k.
You might have a Roth IRA.
you might have a taxablebrokerage account.
Each one of them has differenttax characteristics.
Some dollars are pretax, somedollars, a Roth after tax.
Some dollars are taxable.
And so.
You want to make sure that themost appropriate investment
(33:05):
option.
Is in the most appropriateaccounts.
Keeping in mind taxes and futuregrowth.
So, if you have a taxablebrokerage account, you want to
take a look to say, okay, isthis invested in a way that is
tax efficient?
Meaning.
Number one, do you have a reallyactive.
actively trading mutual fund inthat account.
And is it kicking off a lot ofcapital gains income?
(33:29):
That is a really high hurdle toget over for that active
manager.
so that's, that's something youwant to keep in mind.
What kind of trading activity ishappening in that mutual fund?
in order to create those capitalgains.
Is it a mutual fund or an ETF?
Generally speaking.
This isn't, this isn'tguaranteed across the board, but
generally speaking ETFs, justdue to the way they function,
(33:50):
the way they work are expectedto be more tax efficient than
mutual funds sometimessubstantially so.
very often you'll see no capitalgains distribution in ETFs,
where with an equivalent mutualfund, you will.
so that's something I'd take alook at.
do you have things like taxablebonds or REITs inside of that
taxable brokerage account?
(34:10):
which is kicking off the type ofincome that's taxed that.
Less favorable tax rates.
So take a look at what's inthese accounts and try to
situate your investments to beas tax efficient as possible.
So those bonds, for example,might be better situated in a
pretax retirement account.
you want, you want to takeinventory of that?
is your portfolio in balance,based on the mixes of different
(34:33):
categories of investments you'vewanted to target.
Stocks versus bonds, US versusinternational.
Large versus small growth versusvalue, all different
characteristics.
Based on the overall percentagesyou're targeting.
Is it still in balance or is onecategory much higher than the
other?
and if so, does that make senseto trim back to those targeted
(34:56):
levels?
Meaning trimming what's high andbuying into what's low to bring
that back into balance.
we'll call that rebalancing,right?
Just sort of keeping your, yourinvestments within the risk and
reward characteristics thatyou're originally agreeing to
originally targeting.
And then lastly, does youroverall mix of those categories
of those characteristics.
(35:16):
Does the overall mix ofinvestments make sense for your
investment goal?
if you're investing towardslongterm retirement and does
that mix of stocks versus bonds?
And different categories ofstocks and bonds.
Does that make sense for yourlong-term investment goals?
Or are you invested?
Maybe you have a shorter terminvestment going you're, you're
invested too heavily aggressive,invested too aggressively.
(35:37):
Maybe you're taking on more andcertainly than you should, or
maybe you're taking on toolittle risk for the long-term
investment goal.
that's something you'll want toreview and just kind of keep an
eye on over time.
Last two things we'll talk aboutour cashflow and progress
towards goals.
And number one is that's a goodtime to take inventory of your
cashflow, right?
We've gone through the year.
(35:58):
What's come into the household,what's gone out of the household
and where's it gone to, andwhat's left.
Does that align with your, whatyou were planning?
Does it align with what'svaluable to you?
Are there any surprises, right?
Are you spending much more ormuch less than you planned?
you know, if there's a vacationtarget, did you take the
vacation this year?
(36:18):
Are you spending dollars onthings that are valuable to you?
So it's a good time to takeinventory of your cashflow
throughout the year.
And then what I like to look atare measures of cashflow health.
So how is your savings rate.
You know, based on the incomethat's coming into the
household, what percentage ofthat are you saving towards
longterm financial independence?
Is that savings rate healthy?
Is it adequate for yourretirement goals?
(36:40):
What is your debt rate?
How much of your cashflow isgoing towards debt payments?
Is it too high?
Do you have a lot more room touse debt prudently?
What does that look like?
Right.
So you can, you can take a lookat these percentages.
And say, okay.
Are these adequate for the goalsthat you are aiming towards?
And then lastly, are you makingprogress towards your goals?
And, and sometimes again,there's very specific things
(37:02):
we're saving towards either inthe short term or the longterm.
Not always, sometimes we don'thave goals.
We just want to make the nextbest decision that we, that we
can financially, but sometimesyou do and it could be a savings
goal for a particular goal.
Are you on track for thatsavings goal?
Kind of what we talked aboutearlier in terms of liquidity.
And then, in terms of financialindependence or are you making
(37:22):
progress?
How much progress?
Is that progress you're you'refeeling good about?
has your net worth grown?
How has it grown?
How has it changed?
Is it due to assets growing?
Is it due to you paying downdebt?
How has your net worth changed?
So, this is a really good timeto just take inventory of your
own goals, both in terms of thefamily, in terms of financial
goals.
In terms of how you want tospend dollars proactively.
(37:47):
In terms of the business, whatdo you want to accomplish over
the next year and beyond?
And how can you put yourself inthe best position possible to
get there?
And so as we get to the end ofthe year, can't believe we're
already in December.
These are some things to thinkabout sort of a checklist to
take a look at and takeinventory of.
To make sure that you're takingactions on things that needed to
(38:07):
be done before the end of theyear.
But also just assessing your ownfamily's financial health and
your own businesses practices,financial health.
And to make sure that therearen't any clear opportunities
for improvement, that things aremoving along as expected and
that you are seeing progressbecause ultimately what we're
looking for is making that nextbest financial decision.
(38:28):
And just watching and monitoringprogress as we go.
Hopefully that was helpful.
Please reach out.
If you have any questions, youcan email me at
podcast@optometrywealth.Com.
there's also a link in the shownotes.
If you just want to send a textto my podcast here.
I cannot reply, but if you justhave, thoughts, questions,
feedback, things you want me totalk about or answer in a future
(38:48):
episode, I've been sortacompiling questions for.
Q A episodes that I might do inthe near future.
If you're enjoying the podcast,please leave a review.
It's super helpful for me to seethat feedback to see what's what
you like, what you don't like,what can be improved.
And to get this education intothe hands of more and more
optometrists.
Ultimately the goal here is totry to make this as valuable as
(39:08):
possible to you and your peersand to the Optometry profession.
I appreciate your time.
Thank you for listening.
Have a great rest of your year.
and we will catch you on thenext episode, in the meantime,
take care.
Hey, everybody.
Welcome back to the Optometrymoney podcast, where we're
helping ODS all over thecountry, make better and better
decisions around their money,their careers, and their
practices.
I am your host, Evon Mendrin,Certified Financial Planner
practitioner, and owner ofOptometry Wealth Advisors.
An independent financialplanning firm, just for
optometrists nationwide.
(00:25):
And thank you so much forlistening today.
Today's conversation is going tobe all about a year end
checklist for your finances.
And this is a perfect time as,as the holidays are coming, as
you might have some time withfriends and family and to
yourself to kind of take a lookat uh, the end of the year.
to take inventory of what needsto be done before the end of the
(00:49):
air.
what are some things about justthe health of your finances that
you should review?
a lot of you, if your practiceowners are looking at your
practice and kind of thinkingabout.
planning for the next year, youknow, thinking about your goals
for the next year, for thebusiness, what you want to
accomplish, what, what, well,throughout the year, how has the
financial health of thepractice?
Well, in, in the same way, Ithink this is a great time to
(01:11):
sit down, take inventory of whatneeds to be done by your end.
And what are some things relatedto the health of your finances?
That we should keep tabs on.
And so with that in mind, let'sgo ahead and dive on in.
And of course, any links,resources, articles that I
mentioned here, you can take alook at in the show notes, which
you can find atwww.optometrywealth.Com while
(01:34):
you're there, of course, checkout all the other articles and
podcasts, episodes, resources weput together.
And if you're listening to thisepisode and thinking about, man,
I really need to tackle some ofthese things.
I really need some help workingon some of these things.
And you're interested in whatit's like to work with a
Optometry focused financialadvisor.
Reach out.
while you're on the website, youcan schedule a no commitment
(01:55):
introductory call.
We can talk about whatever's onyour mind financially and how I
help optometrist navigate thosesame issues all over the
country.
So with that in mind, let's diveright in.
So the first set of things, Ithink we should keep an eye on
as we go through December areyear end specific stuff, meaning
this stuff has to be done beforethe end of this tax year.
(02:17):
And first thing that comes up isgoing to be payroll
contributions to differentretirement accounts, and that's
going to be your 401k accountsand SIMPLE IRA accounts.
And if you are receiving a wageand you're making contributions
to your employer, retirementaccount, whether you're an
associate doctor, whether youare self-employed taxed as an S
(02:39):
corporation and paying into asolo 401k, or whether you're the
practice owner, you need to makesure that you are taking a look
at where you are on track for interms of your contributions
towards the maximum.
And if you are on pace alreadymeaning you can look back at how
much you've contributed year todate, and if you're on pace for
(03:00):
where you want to end up, that'sgreat.
If you are below where you wantto end up.
So for example, if you want tohit the maximum.
Then you gotta look at how manypay periods you have left, which
at this point in December,probably one or two.
And you gotta take a look tosee, can you make any
adjustments to get you closer tothat?
So for example, at the 401k.
(03:20):
the employee maximum, if you'reunder 50 is 23,000.
If you are over 50, you get abump, a catch up.
So that makes it 30,500.
If you are in a SIMPLE IRA plan.
you have a$16,000 employeemaximum.
If you're under 50 and 19,500,if you are 50 or older, however,
(03:43):
something I don't know is wellunderstood is that due to the
recent SECURE Act 2.0.
businesses with 25 employees orfewer, which is quite a bit of
you practice owners out there,you get a 10% bump to your
SIMPLE IRA contributions.
Both.
If you are under and over 50.
if you have 26 or moreemployees, then you have to have
(04:06):
a specific, enhanced match.
So if you're eligible for that10% bump, that makes your SIMPLE
IRA employee max 17,600.
Or if you are 50 and older,21,450.
So talk to your SIMPLE IRAprovider to make sure this is in
effect in that you qualify forthis bump in your contribution.
So you have these maximums takea look at what you've put in
(04:30):
year to date.
Take a look at what the gap isbetween that and where you wanna
end up at the end of the yearand then how many pay periods do
you have left?
If you are the owner or if youare an independent contractor?
You have more flexibility here,so you can do, for example, an
increased bonus at the end ofthe year, to try to increase the
wage to get as much as he caninto these plans.
(04:54):
Just keep in mind.
Any addition to wages is goingto increase those social
security, potentially socialsecurity, but certainly Medicare
taxes.
As well as impact other thingslike your potential QBI
deduction, things like that.
So you don't necessarily want tobe forced to increase your wage
substantially when you prefernot to simply from a tax
(05:15):
standpoint.
So you have to kind of balancethat out.
Sometimes it makes more sense tojust fit you know, as much as he
can into the remainingpaychecks.
And very often you can offsetthat with those distributions
that you're taking out of thepractice.
You only have a few more weeksleft to, to look at where you
want to end up by the end of theyear and where you're at now.
And one other comment I'll makeabout SIMPLE IRA plans is that
(05:37):
these have to be for youremployee contributions.
These have to be payrollcontributions.
In a SIMPLE IRA plan, you canonly make payroll deductions as
a contribution as an employee.
Or the employer contributions.
You can't make an individualcontribution to a SIMPLE IRA
account outside of payroll.
(05:57):
Like you would, if you were todo it to like a Traditional IRA
or Roth IRA.
The SIMPLE IRA contributionshave to be done through payroll.
So you have to keep that inmind.
one other thing related to thosecontributions that you want to
start to project out and get afeel for our profit sharing
contributions.
Now the profit sharingcontributions to a 401k plan
(06:20):
specifically.
Do not actually need to be made,meaning that the dollars don't
actually have to go into theplan.
Until the tax filing deadlinefor your business.
Plus extensions.
However, what does need to bedone by the end of the year is
the amount of wages that you'vepaid yourself.
And this is important becausefor profit sharing
(06:42):
contributions, As a whole theamount of profit sharing
contribution you can do into the401k account is going to be
limited by the wages paid by thebusiness for that year.
So employee wages will factorinto that.
But also because as thosecontributions per employee,
including yourself arecalculated.
(07:02):
The amount of that ends up inyour accounts versus all other
employees.
Is going to be determined by thewages that you're paying
yourself.
It's going to be limited orenhanced by your own wages as
the owner.
If you're an S corporationowner.
Or very often it's the owner andyour spouse.
Uh, as I commonly see withspouses that are both involved
(07:23):
in the business or both own thepractice together.
So, if you are trying to targeta certain dollar amount or a
certain skewness towards yourown accounts and as a part of
that profit sharingcontribution.
You need to have a plan for howmuch your wages should be by the
end of the year.
And so hopefully you're able totalk with your third-party
(07:43):
administrator for the plan.
I run a projection to get a feelfor what that should look like
and make end of your adjustmentsto your W2 if needed, whether
it's increasing payroll, whetherit's just an end of year bonus,
whatever that needs to be.
Anything related to wages needsto be acted on by the end of the
tax year, just keep that inmind.
Now let's talk about other taxplanning, specific action items
(08:07):
that need to be handled.
hopefully you are working withyour professional team, your
financial planner, your taxadvisor, to, to put together a
tax projection for you.
And so you've had theseopportunities to talk about end
of year actions that need to betaken before the end of the
year, if not strongly recommendreassessing your professional
team to see if that's somethingthat can be added to your life.
(08:30):
Because there is a world ofdifference between showing up at
tax time and just reacting tothe things that have.
Already been done.
Versus going towards the end ofthe year with an idea of what
you're expecting at tax time.
And what you can do to impactthat one way or another.
And the first thing that you'dwant to think about heading
towards the end of the tax yearis, are your books up to date?
(08:53):
Meaning are you regularlyupdating the categories of the
different transactions in yourpractice?
If you're a practice owner, areyou reconciling all the
different accounts inside ofyour QuickBooks or whatever your
bookkeeping software is?
Are they accurate or preferablyare you using a good bookkeeper
(09:13):
that knows Optometry reallywell.
That is regularly on top ofkeeping clean, accurate timely
books because ultimately nothingelse matters.
If there's not clean data tolook at.
And to project out for taxpurposes.
And to talk about for cashflowand things like that, right.
Everything relies on, on theaccuracy of your bookkeeping.
(09:33):
So number one are your booksup-to-date as we get to the end
of the year.
Number two, withholdings checkwithholdings.
Right?
This is related to those wageissues we talked about earlier
is that.
If you are taking withholdingsthrough a W2 paycheck.
Do you need to make adjustmentsto those withholdings through
the end of the year?
Again, we only have maybe one ortwo paychecks left.
(09:54):
Before the end of the year.
So do you need to make anyadjustments to get you closer to
what your expected taxes at taxtime, or at least under
withholding thresholds to avoidan under withholding penalty.
The IRS gives you certainthresholds in order to get there
certain safe harbors as weusually call them.
So are you on track for yourstate and local taxes and
(10:16):
federal taxes?
Or do adjustments need to bemade before the end of the year?
And then if you own a practice,are there end of your practice
investments that need to happenbefore the end of the year, so
that you can take advantage ofthem for this tax year.
So for example, if you arebuying equipment this year,
because your business needs itand you will have a positive
(10:36):
return on the investment.
Is that equipment going to benot only purchased but delivered
and put in service this taxyear.
So that you can benefit fromthat this tax year.
are you paying for expensesupfront?
So any of the practice orbusiness-related deductions or
actions that need to be taken,what needs to happened before
the end of the year.
(10:57):
the other thing that often comesup for, S corporations or
partnerships is the pass throughentity tax credit.
So if you, for example, have apractice it's taxed as an
S-corporation.
and it made sense for you andpotentially the other owners, if
you have co-owners.
you can pay your state taxesthrough the business.
(11:19):
And those state taxes that arepaid through the business can be
deducted as a federal taxdeduction because it's a, it's a
deduction on the profit andloss.
And then you get a credit onyour state tax return to account
for the fact that you paid thosetaxes through the business.
So essentially for those, forthose of us that are limited on
the amount of state and localtaxes, we can deduct on our
(11:42):
personal tax return as anitemized deduction, which is
10,000 currently.
We can take advantage of thispastor entity tax credit.
Now, every state's different,every situation's different.
Right?
So lean pretty heavily on yourown tax professional to see what
works.
But where that often comes up isthat very often there's a second
(12:03):
or, or final state tax paymentthat needs to be done at the
beginning of the following year.
At the beginning of next year,before you file your business
tax returns.
Well your tax professional andadvisors might, might advise you
to, instead of waiting untilnext year to make that final
payment by the end of this taxyear, so that it shows up on
this year's profit and loss andthis year's tax return.
(12:25):
So talk with your professionalsto see if that makes sense, sort
of timing of payment makessense.
donations to charity.
This is something that alsoneeds to be taken to account and
take an action before the end ofthe tax year.
As you might be familiar withdonations to charity is one of
those itemized deductions thatyou can take on the federal tax
return, meaning that.
every family gets to choosebetween a standard deduction,
(12:48):
which is just a standard dollaramounts each taxpayer gets to
take.
Or itemized deductions, which isa specific list of personal
expenses, personal deductionsthat you can stack up.
And if that list of itemizeddeductions is higher than your
standard deduction.
Then you can take that higherdeduction.
You can take the higher of thetwo.
(13:10):
And so very often what I, I seeadvised and what I'm working
with with clients is that CA dowe have enough of those
deductions, including donationsto charity?
To to benefit from that in thistax year.
And sometimes that meansbunching donations to charity,
meaning we'll rather than donatesmall amounts to a nonprofit or
(13:31):
a church or something that, thateach year.
We'll bunch, those together intoevery other year or every third
year or something like that.
So that we can take advantage ofthose.
And then in those other years,we'll get that higher standard
deduction.
But if that needs to be done,make sure you're doing that
before the end of the tax year.
And that don't, that charity isreceiving it and cashing that
(13:51):
check or however that'shappening.
Right.
So that is something that needsto be done by the end of the tax
year.
And importantly, if you arecontributing to a donor advised
fund, Make sure that thatdonation is happening before the
end of this tax year as well.
importantly, sometimes we'llrecommend if a, if a client has
a large taxable brokerageaccount and we've got all these
(14:13):
ETFs or funds or investmentsthat are really highly
appreciated, meaning if, if yousold it to create cash, There's
a pretty high capital gain toexpect.
What we'll often advise is whatwe'll often advise is rather
than donate cash to the donoradvice fund or to a charity.
You can donate shares that haveappreciated.
So those shares go directly fromyour, taxable brokerage account.
(14:38):
To that donor advised fund or tothat charity, if they'll accept
shares and that donor advisefund and that nonprofit can sell
it and they don't have to dealwith taxes.
And then you can take whatevercash you would have otherwise
donated and just reinvest itback into your investment
account.
And so you've essentially wipedaway the gains on those shares.
But importantly, if you're doingthat to a donor advised fund,
(15:01):
you need to be aware of any yearend deadlines to make sure that
that transfer happens and isaccounted for, for this tax
year.
And just an important note ingeneral is that.
Custodians these financialinstitutions where you are.
you are handling all of thesetransactions are handling your
investments.
They'll often have their owninternal deadlines to do these
(15:24):
things.
Which can often be before theend of the year.
I mean, quite literally, wemight see these deadlines come
up over this next week or so.
and every custodian is going tobe a little different, but you
need to take a look at whataction are you trying to do
within your investment accountsto impact your tax return?
And.
(15:44):
And what is that institution'sdeadline to get that done.
And if there is a certaindeadline, what actions do you
need to take to get creative andget around it?
So a donor advised fundcontributions, transfers into
the donor advised fund.
That's often something I see.
I also see things related toRoth conversions.
So if you want to do a Rothconversion, which is
(16:06):
transferring dollars from apre-tax Traditional IRA, for
example, A pretax retirementaccount into a Roth retirement
account and that transfer thatconversion is taxable income in
the year you do it.
But it continues to growtax-free into that Roth IRA.
And so you can choose to taxthose dollars and to do that
(16:28):
conversion.
In favorable tax years.
Some situations I see that makessense is early on in a cold
start or early on in a, a newbusiness.
Taxable income is lower.
business deductions are higher.
gross revenues, lower.
And, and so these areopportunistic times to do
something like that, where wecan add on additional income
(16:49):
onto the tax return.
at a really favorable tax rate.
or if we're getting intoretirement or early retirement,
we're often going to look atthose early years of retirement.
For opportunities to do thoseRoth conversions.
And so if you're going to dothat, Make sure that that's done
before the end of the year, butalso keep an eye on your
custodians or your institution'sdeadline to make sure that's
(17:11):
accounted for.
I'd also add, if you had donewhat's commonly called the
backdoor Roth IRA contribution,meaning you contributed to a
Traditional IRA.
And then you converted thosedollars into the Roth IRA.
And if you realized, oh shoot, Ihave a bunch of pretax,
Traditional IRA dollars here,and I need to roll those pre-tax
(17:32):
IRA dollars into a 401k plan sothat, that conversion piece
doesn't cause unnecessarytaxation, if that's you that
rollover out of pre-tax dollarsout of the IRA count into the
401k.
Needs to be done before the endof the tax year.
In which you did thatconversion.
(17:54):
So we've got a few weeks leftand these things often happen
with checks.
So very often the IRAdistribution is going to happen
by check they'll mail you or the401k plan, a check made out to
the receiving 401k plan, not toyou, which is very important.
The check would be made out tothe receiving 401k plan for your
(18:15):
benefit.
Sometimes if it's to you, thenyou'll have to take it and mail
it to the 401k plan and thenthey have to receive it and then
process it.
So.
These things can take some timeand whenever mail's involved.
Things can get mixed up or justmissed or lost.
So yeah, time is of the essencehere.
If that has to be done.
You've got a few weeks left tomake sure that that's done.
(18:36):
And if you have any questions onthat, please let me know.
A lot of people get confused onexactly how that all works.
But keep that in mind, as wellas an end of tax year issue to
look at.
One thing that often comes up,in terms of tax filing deadlines
or tax deadlines is, is costsegregation studies.
If you are a real estateinvestor, keep in mind that does
not actually have to be done,meaning the, the cost
(18:57):
segregation study doesn't haveto be done by the end of the tax
year.
I, it does have to be donebefore the tax filing deadline.
So just keep that in mind.
if you're working on thoseparticular studies with your
advisors.
So, that is sort of a highlevel.
Quick bulleted list of some ofthe things to think about
related to tax planning,obviously.
(19:17):
End of your tax planning is amuch broader topic.
That's, we're, we're not goingto get into too much time into,
in this episode.
We've got some other episodesI'll add into the show notes, so
you can listen to those episodesas well, but just anything tax
specific that needs to be doneby the end of the tax year,
making sure you are talking withyour professionals and keeping
in mind, any institution,internal deadlines to get that
(19:38):
done.
other things that don't need tobe done by the, by the end of
the year or things like HSAcontributions or.
IRA contributions.
so those things you can actuallywait, like a profit sharing
contributions.
You can actually make beforenext April before more, next
March.
before that the tax finallydeadline.
next thing is, is the BOIreporting from the Corporate
(19:59):
Transparency Act and, up until acouple of weeks ago.
this was something that forthose business entities that
existed.
So for those practice businessentities that existed if you're
1099, and you have an LLC andyour taxed as an S corporation.
Or if you own real estate in anLLC, those business entities
that existed before January,2024, there was a hard end of
(20:25):
year deadline to complete thisBOI reporting or face stiff
daily penalties.
So.
So the penalties were no joke.
They were not messing aroundthere.
from what I understand, I I'mone of the slackers that were
waiting until the very lastminute.
this is not something that'svery difficult.
If you have a very simplebusiness entity structure.
doesn't take up too much time,but there was this hard end of
(20:47):
year deadline.
And if you look at the amountsof businesses, That had actually
completed this by this time,this year.
Versus what was expected.
There is a substantial gapbetween the two, meaning there
were far less businesses that.
that had actually done thereporting versus what was
expected to be done by time thisyear.
However, on December 3rd of thisyear, just recently.
(21:11):
A US district court for theEastern district of Texas issued
a preliminary injunction on thereporting requirements, which
essentially blocked enforcementon a national level.
So what does that mean?
Well, for now, temporarilyanyways.
We do not have to worry aboutthis reporting deadline.
the enforcement has been paused.
(21:31):
Now this isn't a permanentruling.
This isn't a permanentinjunction.
This is preliminary as the courtcases unfold.
with this very well can beoverturned in terms of, appeals
and just going through theprocess.
So.
for now, it looks like usslackers don't need to do
anything in terms of a hardrequirement.
However, it probably makes senseto keep a very close eye on this
(21:55):
in case this is reversed.
And just be ready to file ifneeded.
And of course you can also file,voluntarily if you'd like, or if
your, if your attorney advisesyou to that's something you can
do just to be safe, but that'ssomething we've seen put a pause
on.
Right?
So.
in terms of court cases, you canadd this to the student loan
stuff that's going on with theSAVE program in terms of court
(22:15):
cases to keep an eye on.
All right.
So those are some things that.
That we were thinking about interms of a hard deadline by the
end of the year.
contribution and wage andwithholdings related stuff.
Or tax-related, actions thatneed to be done before the end
of the year.
Those were hard deadlinerelated.
Now let's talk about otherfinancial health related stuff
(22:38):
that doesn't necessarily have ahard deadline.
But I think it makes sense to atleast review once throughout the
year.
So these are some things that Iwould review throughout the year
for a client.
But if you haven't, this is agood time to sort of think and
reflect and look back and justkind of review the health of
your finances.
And one of the things at thistime of the year.
So December, one of the thingsI'm reviewing for clients in
(23:00):
December, It's just the amountof liquidity in the life of the,
of the optometrists.
whether it's an associate or, orprivate practice owner.
And what I want to review isnumber one, do you have adequate
liquidity?
And that's things you can getaccess to tomorrow.
Do you have adequate cash?
Do you have adequate taxablebrokerage account?
do you have adequate liquidityin your life for an emergency
(23:23):
fund?
Number one, do we have anadequate emergency fund?
and upcoming purchases.
So things that we areanticipating over the next year
or so.
Are we building up an upliquidity to prepare for that.
And, that might be a homepurchase that might be a
commercial property purchase,which I've got several clients
actually thinking about thatright now.
liquidity for practicepurchases.
(23:44):
So maybe you ha you're, you'replanning on having roughly 10%
of the, the value of thepractice that you are purchasing
in liquid assets so that youcan.
qualify very, very easily forborrowing.
Do you, are you building up anup for that or do we need to
increase that a little bit more?
I have a score that I sort oftrack for clients on an ongoing
(24:05):
basis, but this is a good timeto just take a look.
Okay.
What is your cash savings?
is it in a place that makessense?
Is it a high yield savingsaccount?
If you're in a high state taxstate like California.
Does it make sense to usesomething like a US Treasury
bond or, or bill or a USTreasury money market fund or
(24:26):
ETF equivalent?
So.
Take a look at your liquidity.
Do you have enough is in anappropriate spot for what's for,
or do you need to increase ordecrease potentially the amount
of cash you have on, on hand?
It's very possible.
You have too much, right?
That's also the case as well.
And keeping on your practicecash as well.
Very often.
One of the biggest things thatpractice others are asking me
(24:49):
about is.
What should I do with the cashin my business?
How much can I take out of it?
How much should I pay myself?
And when that uncertaintyhappens, it's very common to
just see cash build up becausethey don't know what else to do
with that.
and you certainly don't want tokeep more than necessary.
Too much cash in the businessbecause you don't want to keep
that cash.
(25:09):
Subject to the liability of thebusiness, but also it's just
unproductive at times.
Take a look at your own cash inthe practice as well.
If you own a practice.
And just to assess, is thatadequate?
rental properties.
If you have several rentalproperties, do you have enough
liquidity for unexpectedexpenses or maintenance within
those rental properties as well?
Another thing you should bereviewing are beneficiaries or
(25:32):
just your estate plan ingeneral.
If you've not reviewed yourestate plan for several years.
This is a great time to pullthat out.
And see what's in it, right?
If something happened to you.
Or your spouse, if you'remarried, you pass away or you
become incapacitated.
What happens?
And does that still make sensebased on your goals and your
(25:53):
family and the changes that havehappened in your life, but
something that should be reallyeasy to check and something I'll
track for clients are thebeneficiaries of all your
different accounts.
If you've not already, I thinkit's super helpful just to build
a ledger, a spreadsheet, someway for you to take a look at
all of the different accountsthat you have, how they're
titled.
(26:14):
And who are the beneficiaries?
Because that will tell you in avery quick, easy to look at way.
Okay, this is where they'regoing.
If something happens to me.
And is that still up to date?
in a normal year, thereshouldn't be much changes.
You're just sort of glancing atit and making sure and
confirming that it's up-to-date.
But if there are changes in yourlife, you're going to be happy
(26:35):
that either some professional'skeeping an eye on that for you
or that you're making changeswhere necessary.
I've seen a lot of cases wherethere's been, children.
where there's been children inthe family and the old
beneficiaries haven't beenupdated where there's been
divorces.
And the ex spouse was still abeneficiary.
That is not a great situation tobe in.
we've seen cases wherebeneficiaries were not named.
(26:57):
And in that, in that case, theestate would have been the
recipient or when there's beentrusts created.
And those trusts should havebeen the beneficiaries rather
than who's currently named.
so those are things you justwant to review and don't forget
your life insurance policies aswell.
One other thing to keep in mindis that there is not only a
primary, but also a contingentbeneficiary, the second line of
(27:21):
beneficiaries, so that ifsomething happens to both you
and that primary, there's a lineof succession.
And, if you have minor kids, itgets much more complicated
because you have to decide howthose minor kids should inherit.
Should trusts be involved.
Should there be a custodiannamed for those kids?
so it definitely gets much morecomplicated when a minor kids
(27:42):
are involved.
if you have grandkids,grandkids, you want to review.
Okay.
If something happens to, to theparents, you're.
You know, to the first line ofbeneficiaries how should it go
through their heirs?
There's certain things you canlook into in terms of how it
would flow down the family line.
So beneficiaries, keep an eye onthat.
Keep tracking that.
(28:02):
And then your estate plan as awhole, if you've not updated it
for awhile, take a look to makesure that things are, as it
should be, that things aretitled appropriately.
If you have taxable brokerageaccounts, are those title
appropriately based on the, theestate plan, if your house is
titled appropriately, thingslike that, and keep an eye on
that.
And similar to that, you do wantto take inventory of your
(28:24):
insurance policies, right?
What are the different insurancepolicies you have?
What do they cover?
What are the coverage amounts?
and that could be life anddisability that can be home and
auto, liability coverage.
umbrella insurance is somethingI commonly see, just sort of as
a gap in the insurancecoverages.
So let's just take inventory onwhat's covered both in the
business and personally.
(28:46):
Just to make sure that you haveadequate types of policies,
adequate coverage.
Or if there's new, additionalrisks that have popped up in
your life that are.
that are, needs to be adjusted.
Sometimes we see families grow.
Sometimes we see new businesses.
Sometimes we see, additionalpolicies, additional vehicles,
new drivers, things like that.
So just make sure that yourinsurance policies meet the
risks that are, that areoccurring in your life.
(29:07):
student loans.
one thing that you want to keeptrack of is your student loan,
recertification date, and manyborrowers that I've come across
or that I've, I've adviseddirectly have seen their
recertification dates, the datesthat they need to re show.
their income and family size andthen recalculate their payments
for the next 12 months.
We've seen that push back intonext year.
(29:29):
And so you want to keep an eyeon when that date is going to
be.
And then starts a plan for thatnext payment to be built into
your finances.
for many of you, especially ifyou've recently graduated.
You might still be on a very lowpayment due to low income while
you were students or low incomewhile you just got out of
optometry school.
And so you might be surprised bythe higher payment coming up
(29:52):
over the next year or so if yourpayments or if your incomes come
up.
A portfolio check.
This is something that youshould do at least once
throughout the year.
If you've not done it already,this is a great time to do it.
number one are a couple of taxplanning opportunities related
to the investments.
So if you have a taxablebrokerage account, see if
there's any opportunities toharvest losses in that account,
(30:14):
meaning that.
for tax purposes.
Sell outs of the, the investmentthat's at a loss and then
immediately buy anotherinvestment that is not
substantially identical.
And there are some rules too, tomake sure that you're following
to make sure that that's donecorrectly.
I'll include, again, a link toan episode I did on that in the
show notes, but are there anyopportunities to take advantage
(30:36):
of those capital losses beforethe end of the year?
or at the same time, if yourincome is low enough, are there
opportunities to harvest gainsat a really favorable tax rate?
If your income's low enough,it's quite possible that, you
can sell things at a 0% capitalgains tax rate.
So if your income is low, maybeyou have a unusually low income
(30:56):
year, or maybe you've justrecently retired or whatever,
whatever it may be.
See if there's opportunities onboth sides of that to sell
something, to take advantage ofthose losses or at a favorable
tax rate.
The other thing I want to keepan eye on are dividends and
capital gains distributions.
And December is usually a reallyheavy month for distributions in
funds.
Especially mutual funds, notquite as much, most often in
(31:19):
ETFs.
but you're going to see bothdividends distributed as well as
capital gains distributions.
From those funds that do end upon your tax return.
So if that's the case, keepingon what you should expect with
your investments.
Are your investments going to bekicking off a substantial amount
of dividends, especiallynon-qualified dividends, which
(31:41):
are a particular type ofdividend taxed at ordinary yucky
tax rates, just like all yourother income.
Qualified dividends andlong-term capital gains have
more favorable tax rates.
So are they kicking off a lot ofinterest or, or non-qualified
dividends?
Or is there a lot of capitalgains activity it's going to
(32:02):
make, which is what you're.
And are you expecting a verylarge capital gain distribution?
That's something you want tokeep an eye on.
If you are doing very specifictax planning, you want to know
what is expected to end up onyour tax return.
And that's also a great place tojust take a look at is your
taxable investment account.
invested in a way that's taxefficient.
(32:23):
So when I'm working with aclient, I'm looking at all of
the different accounts goingtowards the same goal.
As one big portfolio, one bigmix.
So, you know, one big pie andeach account.
It's just a separate mix, aseparate piece of that pie.
And knowing they all havedifferent tax characteristics,
you might have.
(32:43):
for example, if we're saving forretirement for longterm
financial independence, youmight have a 401k.
You might have a Roth IRA.
you might have a taxablebrokerage account.
Each one of them has differenttax characteristics.
Some dollars are pretax, somedollars, a Roth after tax.
Some dollars are taxable.
And so.
You want to make sure that themost appropriate investment
(33:05):
option.
Is in the most appropriateaccounts.
Keeping in mind taxes and futuregrowth.
So, if you have a taxablebrokerage account, you want to
take a look to say, okay, isthis invested in a way that is
tax efficient?
Meaning.
Number one, do you have a reallyactive.
actively trading mutual fund inthat account.
And is it kicking off a lot ofcapital gains income?
(33:29):
That is a really high hurdle toget over for that active
manager.
so that's, that's something youwant to keep in mind.
What kind of trading activity ishappening in that mutual fund?
in order to create those capitalgains.
Is it a mutual fund or an ETF?
Generally speaking.
This isn't, this isn'tguaranteed across the board, but
generally speaking ETFs, justdue to the way they function,
(33:50):
the way they work are expectedto be more tax efficient than
mutual funds sometimessubstantially so.
very often you'll see no capitalgains distribution in ETFs,
where with an equivalent mutualfund, you will.
so that's something I'd take alook at.
do you have things like taxablebonds or REITs inside of that
taxable brokerage account?
(34:10):
which is kicking off the type ofincome that's taxed that.
Less favorable tax rates.
So take a look at what's inthese accounts and try to
situate your investments to beas tax efficient as possible.
So those bonds, for example,might be better situated in a
pretax retirement account.
you want, you want to takeinventory of that?
is your portfolio in balance,based on the mixes of different
(34:33):
categories of investments you'vewanted to target.
Stocks versus bonds, US versusinternational.
Large versus small growth versusvalue, all different
characteristics.
Based on the overall percentagesyou're targeting.
Is it still in balance or is onecategory much higher than the
other?
and if so, does that make senseto trim back to those targeted
(34:56):
levels?
Meaning trimming what's high andbuying into what's low to bring
that back into balance.
we'll call that rebalancing,right?
Just sort of keeping your, yourinvestments within the risk and
reward characteristics thatyou're originally agreeing to
originally targeting.
And then lastly, does youroverall mix of those categories
of those characteristics.
(35:16):
Does the overall mix ofinvestments make sense for your
investment goal?
if you're investing towardslongterm retirement and does
that mix of stocks versus bonds?
And different categories ofstocks and bonds.
Does that make sense for yourlong-term investment goals?
Or are you invested?
Maybe you have a shorter terminvestment going you're, you're
invested too heavily aggressive,invested too aggressively.
(35:37):
Maybe you're taking on more andcertainly than you should, or
maybe you're taking on toolittle risk for the long-term
investment goal.
that's something you'll want toreview and just kind of keep an
eye on over time.
Last two things we'll talk aboutour cashflow and progress
towards goals.
And number one is that's a goodtime to take inventory of your
cashflow, right?
We've gone through the year.
(35:58):
What's come into the household,what's gone out of the household
and where's it gone to, andwhat's left.
Does that align with your, whatyou were planning?
Does it align with what'svaluable to you?
Are there any surprises, right?
Are you spending much more ormuch less than you planned?
you know, if there's a vacationtarget, did you take the
vacation this year?
(36:18):
Are you spending dollars onthings that are valuable to you?
So it's a good time to takeinventory of your cashflow
throughout the year.
And then what I like to look atare measures of cashflow health.
So how is your savings rate.
You know, based on the incomethat's coming into the
household, what percentage ofthat are you saving towards
longterm financial independence?
Is that savings rate healthy?
Is it adequate for yourretirement goals?
(36:40):
What is your debt rate?
How much of your cashflow isgoing towards debt payments?
Is it too high?
Do you have a lot more room touse debt prudently?
What does that look like?
Right.
So you can, you can take a lookat these percentages.
And say, okay.
Are these adequate for the goalsthat you are aiming towards?
And then lastly, are you makingprogress towards your goals?
And, and sometimes again,there's very specific things
(37:02):
we're saving towards either inthe short term or the longterm.
Not always, sometimes we don'thave goals.
We just want to make the nextbest decision that we, that we
can financially, but sometimesyou do and it could be a savings
goal for a particular goal.
Are you on track for thatsavings goal?
Kind of what we talked aboutearlier in terms of liquidity.
And then, in terms of financialindependence or are you making
(37:22):
progress?
How much progress?
Is that progress you're you'refeeling good about?
has your net worth grown?
How has it grown?
How has it changed?
Is it due to assets growing?
Is it due to you paying downdebt?
How has your net worth changed?
So, this is a really good timeto just take inventory of your
own goals, both in terms of thefamily, in terms of financial
goals.
In terms of how you want tospend dollars proactively.
(37:47):
In terms of the business, whatdo you want to accomplish over
the next year and beyond?
And how can you put yourself inthe best position possible to
get there?
And so as we get to the end ofthe year, can't believe we're
already in December.
These are some things to thinkabout sort of a checklist to
take a look at and takeinventory of.
To make sure that you're takingactions on things that needed to
(38:07):
be done before the end of theyear.
But also just assessing your ownfamily's financial health and
your own businesses practices,financial health.
And to make sure that therearen't any clear opportunities
for improvement, that things aremoving along as expected and
that you are seeing progressbecause ultimately what we're
looking for is making that nextbest financial decision.
(38:28):
And just watching and monitoringprogress as we go.
Hopefully that was helpful.
Please reach out.
If you have any questions, youcan email me at
podcast@optometrywealth.Com.
there's also a link in the shownotes.
If you just want to send a textto my podcast here.
I cannot reply, but if you justhave, thoughts, questions,
feedback, things you want me totalk about or answer in a future
(38:48):
episode, I've been sortacompiling questions for.
Q A episodes that I might do inthe near future.
If you're enjoying the podcast,please leave a review.
It's super helpful for me to seethat feedback to see what's what
you like, what you don't like,what can be improved.
And to get this education intothe hands of more and more
optometrists.
Ultimately the goal here is totry to make this as valuable as
(39:08):
possible to you and your peersand to the Optometry profession.
I appreciate your time.
Thank you for listening.
Have a great rest of your year.
and we will catch you on thenext episode, in the meantime,
take care.
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