Episode Transcript
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Speaker 1 (00:03):
Hi, you were listening to Let's Talk Money, brought to
you by Bouchet Financial Group. My name is Vincenzo Testa,
one of the wealth advisors here at Bouchet. I'm a
CPA Certified Public Accountant and a CFP Certified Financial Planner.
We encourage all listeners to call in at eight hundred
Talk WGY. That's eight hundred eight two five five nine
(00:23):
four nine. I'm also joined by my colleague Edward Wilhelm. ED,
why don't you introduce yourself?
Speaker 2 (00:31):
Yep, Hey everyone, I'm analyst and then our head trader
here at Bouchet Financial Group and ready to get into
the show.
Speaker 3 (00:42):
Thanks Ed.
Speaker 1 (00:43):
Our show could be heard at ten am on Saturdays
at eight am on Sundays. I just wanted to say
a happy Easter weekend and happy Passover to everyone out there.
Speaker 3 (00:50):
We're giving a.
Speaker 1 (00:51):
Well deserved break to the one and only Steve Bouchet,
who was actually headed to Rome this weekend. The Vatican
is saying a mask for Steve for him on two Tuesday,
and word on the street is that he's meeting with
the Pope on Wednesday, and you know, Steve's out there
doing holy things on a holy weekend.
Speaker 3 (01:08):
So that's great.
Speaker 1 (01:10):
So I'm gonna let ed so as the investment guy,
So he's going to get into a market check and
kind of break down what we've been seeing this week
and where the markets are headed.
Speaker 2 (01:22):
Yeah, so we'll just kick it off looking at some
index returns.
Speaker 4 (01:26):
Overall, pretty mixed week.
Speaker 2 (01:28):
The S and P five hundred, you know, slipped about
a quarter percent. That Dow lagged that a little bit harder,
down over a full percent, and we can kind of
dip into that a little bit later in the show.
And then we also saw the Nasdaq fall a little
bit more than half a percent, you know. So overall,
definitely continuing some of the recent volatility. It's mostly been
(01:51):
tied to the macro policy and uncertainty. You know, we
got a little bit of economic data last week, you know,
some earnings this week, which we'll dive into. Just looking
at some sectors and factors, looking at what's hot right now.
You know, the story is really the same. You know,
defensive sectors like consumer staples, utilities, and healthcare are outperformed.
(02:16):
You know, right now investors are really just looking for
that stability. So the less cyclical sectors that are you know,
a little bit less sensitive to you know, macro policy.
You know, you're looking for more stable cash flows there,
stronger earnings, a little bit more insulated from that macro environment,
and certainly from tariffs. You know, we've also seen gold
(02:37):
kind of in the same thing, extend its run. And
this is you know, we've just seen persistent demand for
hedges amongst all the uncertainty so far this year.
Speaker 4 (02:48):
Like I said, we got some.
Speaker 2 (02:49):
Earnings this week, so Q one earnings are just starting
to ramp up. And it's also important to know that
these results are reflecting you know, pre tariff positioning, right,
So for Q one, you know there's part of it
where companies knew that tariffs were coming, you know, not
in effect yet, so we're not seeing the effects of teriffs,
(03:09):
but you know companies are certainly doing you know, planning
and positioning, you know, either pre increasing inventory or starting
to adjust supply chains. So this can be some indications there.
Big one this week was Netflix super positive beat on revenue,
maintained its outlook and even raised earning for share guidance
(03:30):
for the end of the year.
Speaker 5 (03:32):
So that was big.
Speaker 2 (03:33):
If we think about Netflix, you know, certainly insulated from
from tariffs. We also had Johnson and Johnson they beat
across the board and also raised revenue targets, so you know,
strong for the healthcare sector. But on the flip side
of that, we had U n H United Health. They
missed on both fronts, and they lowered their full year guidance,
(03:55):
you know, citing some higher medicare costs.
Speaker 4 (03:57):
But that was quite the hit.
Speaker 2 (04:00):
It's one of the highest weighted stocks in the Dow,
so that kind of explained similar performance there. But it's
also just one of those reasons if we think about
you know, the healthcare sector as the example, you know,
Johnson and Johnson crush earnings. U n H on the
other end, you know, tough quarter forum.
Speaker 4 (04:18):
Now, it just.
Speaker 2 (04:19):
Speaks to why it's so important to be diversified, you know,
within the even in the same sector, you know, the
same sector, different industries. You and H is going to
focus more on the insurer side, but just speaks to
the powers of like I said, being diversified.
Speaker 1 (04:33):
Yeah, and you know, I just want you know, I
wanted to talk a little bit about you know, the
Dow Jones and the SP five hundred. So you mentioned
that the you know, United Health is one of those
companies that's really highly weighted in the Dow.
Speaker 3 (04:46):
Right.
Speaker 1 (04:46):
You know, when we talk about you know, indices and
within the market, you know, we think of the Nasdaq,
the SMP, the Dow. You know, what do you feel
is really a great indic to follow in terms of,
you know, if you want to get an overall depiction
of what's going on in the markets. I mean, in
the past, you know, folks might have thought it was
(05:08):
the Dow, right, but I think that might have changed.
What do you think about that?
Speaker 2 (05:14):
Yeah, in today's environment, I think the you know, the
best you're going to do is just the S and
P five hundred. You know, it's definitely been the more
the favored index in the more recent years, but I
think that holds up right. You know, you can't discount
the amount of concentration that we see in markets, that's
for sure. But you know, with S and P five hundred,
(05:34):
that concentration is represented, but you're still getting that breath
of you know, the rest of the large cap space.
So you know, that's what I would focus on. You know,
if you're looking at markets and you're looking to see
how they're doing, look at the S and P five hundred.
You know, I would avoid looking at the Dow. You know,
the Nasdaq can certainly be helpful, but you know, even
the Nasdaq is really going to only represent those those
(05:56):
really large risk on stocks.
Speaker 4 (05:59):
So that's in P. Five hundred is a little bit
more of a fair estimate. It's also worth.
Speaker 2 (06:03):
Worth you know, looking at something even broader, you know,
like a like a broad market.
Speaker 4 (06:07):
So yeah, it's kind of my thoughts in that space.
Speaker 1 (06:11):
Yeah, thanks, Ed, Thanks, Yeah, I mean I think it's
really important to you know, when you look at the industries,
to understand where they're coming from, right, and what each
induscry represents.
Speaker 3 (06:23):
The s and P.
Speaker 1 (06:23):
Five hundred is you know industry that tracks the five
hundred largest US companies, you know, the Dow Jones, And
I'll let you know, touch on that a little bit more.
You know, Dow Jones a little bit different than NASDAC.
You know, it's really tracking technology. And you know, we've
been overweight technology for a long time at Boushet Financial Group,
and you know it has paid dividends, no pun intended.
Speaker 3 (06:42):
So Ed, why don't you go in a.
Speaker 1 (06:43):
Little bit deeper about you know, what the Dow jone
really represents, and the Russell two thousand and the Nasdaq
as well.
Speaker 2 (06:51):
Yeah, no, certainly. So, as you mentioned, the S and
P five hundred is going to cover the the largest
you know, five hundred companies in the US.
Speaker 4 (07:07):
The NASDAK is.
Speaker 2 (07:08):
Going to cover you know, the largest one hundred. Uh So,
you know, within both of those, we're focusing on a
lot of a lot of tech. You know, these are
all considered blue chip companies, and then the the Dow
Jones is going to represent you know, thirty large publicly
traded companies. You know, all of these indices are are
(07:30):
the S and P five hundred and the NASDAC are
both gonna be market cap weighted, whereas the Dow Jones
is price weighted, so it's gonna you know, change the
waiting method within that. And then we also got the
Russell two thousand, which is going to be a little
bit more broad and that's in the small cap uh space.
It's going to overweight you know, some of those smaller companies.
Speaker 1 (07:53):
Yeah, thanks, Ed, So, Yeah, I mean it's really important
to understand each industry and what it's tracking because they
all at track different things and there's different companies within
each one but within some of them, A lot of
the same companies you know lie lie in multiple of
those indices.
Speaker 3 (08:10):
So we're gonna take a quick break.
Speaker 1 (08:11):
You were listening to Let's Talk Money, brought to you
by Bouchet Financial Group, where we help our clients prioritize
their health or we manage their wealth for life.
Speaker 3 (08:19):
Thank you.
Speaker 6 (08:21):
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visit their website Bouche dot com. That's b O U
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phone lines are open eight hundred talk WGY. That's eight
(08:42):
hundred eight two five five nine four nine. Here is
Stephen Bouche.
Speaker 1 (08:49):
All right, this is Vincenzo Testa. You're listening to Let's
Talk Money, brought to you by Bouchet Financial Group, where
we help our clients prioritize their health or we manage
their wealth for life. We encourage all listeners to call
in at eight hundred talk w g Y. That's eight
hundred eight two five five nine four nine. You know
we're talking a little bit, you know, a little bit
(09:10):
before about indices and you know what's happened in the
markets this week, and uh.
Speaker 3 (09:15):
You know, Ed did a really great job.
Speaker 1 (09:16):
You know, Ed's a portfolio analyst at the firm, and
you know he is a member of the investment committee
at the firm, right, and that's led by the CIO,
with the Chief Investment Officer, Ryan Bouchet, Paula La Pietro
who's a wealth wealth advisor, and also portfolio strategists, and
Casey Bird and Ed Wilhelm, who is joining me today.
(09:38):
So Ed, why don't we go a little bit deeper
into market trends and what we're seeing within the markets
and a macroeconomic perspective.
Speaker 2 (09:47):
Yeah, no, thanks, then you know story Ultimately, still the
same markets are wrestling with that uncertainty around you know,
all of Trump's policies, but especially the tariffs. But for
my long term investors listening, you know, don't let the
volatility shake you. At the end of the day, you
make more money in bull markets than you lose in
(10:07):
bear markets. And we've seen this time and time again
throughout history. So let me just repeat that one more time.
You make more money in bull markets than you lose
in bear markets. You know, one of the things that
we preach to all of our clients and probably one
of the most aspects to part one of the most
important aspects about our jobs is encouraging our clients to
(10:30):
not let the volatility get to them. You know, a
lot of people work really hard for their money throughout
their entire life. It means a lot to them, so
when they see selloffs, it can get to them, it
can start to shake them. And that's where it's our
job to encourage them to, you know, avoid making a
decision that's going to harm them in the long run.
(10:50):
And this is probably one of the most important it's
to avoid selling during these drawdowns because you want to
keep that same principle at the same risk level so
you can ride the wave back up, but just to
get back into to macro. You know, like I said,
we've seen some volatility. You know, the story is the same.
Nothing has really changed on that end. You know, as
far as price returns, a lot of eyes are looking
(11:13):
at the next bed meeting, which is going to be
on May seventh. We're not expecting a cut, but the
markets are starting to price in a June cut and
then potentially another later this year, maybe even two. You know,
that's where it's hard as you start to extend out
in time frame when you're trying to make predictions, is
you don't know what data is going to come out
(11:34):
now between then, So you know, it's important to kind
of keep your your targets on the near term and
just remain disciplined. We did get some commentary from Jerome
Powell this week. He's the Federal Reserve chair. He emphasized
the need for caution, signaling that you know they are
going to still be data dependent. He did cite the
(11:57):
caraffs were more aggressive than he expects, and then you
know he expects the impacts of inflationary to be a
little bit more aggressive as well. But it's also important
to keep in mind that he almost has to come
out and say this. You know, he doesn't want to
save the opposite. He doesn't want to stoke consumer demand
(12:18):
because you know that would one hundred percent guarantee bringing
back inflation. Because a lot of people thought these you know,
tariffs are at least the pree tariff impact of consumers
starting to spend because they think there's going to be inflation, right,
inflationary expectations are inflationary themselves. If you think prices are
going up next month, you're going to want to buy today,
(12:41):
you know. So that was kind of a thought around tariffs.
But what we've actually seen is, you know, some of
the uncertainty, you know, maybe planned or unplanned by Trump,
but the uncertainty has done a lot of demand destruction,
right consumers art spending as much. This was also magnified
by lower energy levels, which we saw in last week's
API print. So that's you know, one of the core
(13:01):
measures of inflation we use here in the US, but
energy prices really drove that down and it came in
blow consensus about two point seven percent, so you know,
just a little bit above where that that FED target
is at two percent. You know, in my opinion, I
do think that they're going to be comfortable with a
little bit higher level of inflation, especially if we look
at long term averages, it's it's above two percent, even
(13:25):
though that's their target. And we also heard in response,
I don't think Trump was too happy with J. Powe's
comments on you know, the the tariffs coming in more aggressive.
So Trump said that, you know, he's going to replace
Jerome as soon as he gets the chance. So you know,
one thing to definitely look for in the next couple
coming weeks is going to be a new FED chair nomination.
(13:49):
I think markets would take this as a bullish catalyst potentially.
What would be really interesting about this dynamic is if
we do get a new FED chair, their commentary is
going to be a new FED share nomination. Their commentary
is going to be just as important as jerown powells.
With all the emphasis we place on forward guidance these days,
(14:10):
what the new FED share nomination would be able to
do is essentially issue a forward guidance that extends farther
in time than Jerome is able to give.
Speaker 1 (14:20):
That's really interesting how Jerome Powell, you know, when he
talks the influence that he has the broad market in
terms of you know, stock price is increasing or stock
price is decreasing.
Speaker 3 (14:32):
It's really amazing that. I mean, in all reality.
Speaker 1 (14:35):
It's not intentional about how much he can manipulate the
market itself just by saying a couple of words, well,
you know, by saying that he's you know, by making
you know, dubvish remarks, or or just saying you know,
they're going to raise interest rates or lower them. It's
really amazing how he could influence the markets in that regard.
Speaker 2 (14:55):
Yeah, no, I mean at the end of the day,
you know, he is really just as important as you know,
the market's eyes as Trump or you know, like the
Treasury Secretary Scott Descent.
Speaker 4 (15:05):
So it is, and that's why you see a lot
of his commentary.
Speaker 2 (15:08):
He has to be careful what he says because he
knows he does have an impact, you know, just on markets,
not just on markets, but also consumers. So, Vin, I'll
throw it back to you. It's kind of my update
on you know, the macro market perspective. But I know
(15:28):
you've got some some tax planning and tax corporation stuff
you want to cover.
Speaker 3 (15:32):
Yeah, thanks Ed Again.
Speaker 1 (15:34):
We encourage all listeners to call in at eight hundred
talk w g Y. If you have any questions, please
call us at eight hundred eight two, five, five, nine
or nine. You know, a lot of what we do
with the firm has changed over the years. You know,
we really incorporated tax into into what we do in
specific tax planning, right, so I'm a CPA, you know,
I really leave the charge of the tax planning sector
(15:57):
for clients at the firm, and we do a lot
of tax planning for clients and it's really valuable. And
you know, really it differs from tax preparation, right. You know,
if you have a simple tax return to anyone you
know who's a CPA or you know, H and R. Block,
they can compare your taxes, right. But the real value
comes from tax planning, right. And the reason being is
that it saves your money. Right when the market goes up,
(16:21):
you know, you're going to make money. But we could
do both of those two things at the same time.
That's really really valuable. And that's what we do for clients, right.
And you know, personally, I will go looking for strategies
that I can implement for right clients that you know
the book I manage and you know, really help out
all clients at the firm, uh, you know, doing proactive strategies, right,
(16:41):
and that's multi year planning. And some of those strategies
consist of things like Wroth conversions, right. And Wroth conversions
for those of you who don't know, is when you
move tax deferred funds out of an IRA or four
oh one K or any tax deferred retirement account you
have and convert them over to.
Speaker 3 (16:59):
A raw IRA.
Speaker 1 (17:01):
So wroth iras have contribution limits. Year after year it's
seven thousand dollars and the year twenty twenty five for
folks forty nine and below and folks fifty and older
can contribute eight thousand. But when it comes to roth conversions,
you can convert as much money as you want from
an IRA to a WROTH. Right, you're not susceptible to
(17:22):
those contribution limits when you convert. The dollar amount that
you're converting is completely taxable as ordinary income.
Speaker 3 (17:30):
Right.
Speaker 1 (17:31):
So the reason why this is really really valuable if
you're doing it in the right way, is because when
you have an IRA, you're subject to something called required
minimum distributions.
Speaker 3 (17:43):
And right now, at.
Speaker 1 (17:44):
Age seventy three, anyone who has a taxed the third
retirement account is subject to required minimum distributions or otherwise
known as rmds. That's the IRS saying, hey, you received
the tax benefit for the contributions you made to your IRA,
and now we want our tax revenue back. So they
force folks basically to take money out of their IRA,
(18:07):
which is usually about four percent of the account balance
at the prior year end, and all of that money
is taxable Why is that difficult? Right, Because if you
have a high balanced IRA, you really don't have control
over your taxable income. And that's an issue because there's
multiple tax brackets that you could find yourself in ten, twelve,
(18:28):
twenty two, twenty four, thirty two, and thirty seven, which
if you don't have control over your taxable income and
you have a large balance IRA, you can get pushed
up unto those tax brackets pretty fast based and the
IRS forcing you to take money out and recognize ordinary income.
So the less amount of money that you have in
tax deferred accounts is very beneficial for that reason. And
(18:52):
the other reason is your Medicare premiums are based on
your income, right, and there's a scale on your Medicare premiums, right.
It could be you could pay a hundre amount a
month between you and your spouse, or you can pay
five hundred dollars a month between you and your spouse,
you know, individually. So when you have no control over
your RMD and your taxable income, it can create tax
(19:15):
issues for you. So when we do roth conversion planning,
we're looking at, you know, where the client is in
their life, right, are they working, what tax bucket are
they in and where are they going to be in retirement? Right,
because they might be working now, right, the expectation is
in retirement they might not have as much taxble income, but.
Speaker 3 (19:33):
That might not always be the case. They might have Social.
Speaker 1 (19:36):
Security income, they might be pulling money out of their
IRA in retirement, so they could be in the same
position from a tax perspective as they are currently in retirement.
So we look at that and you know, if a
client is in their lowest earning years, right, if in
retirement they might have more income. You know, doing rostern
versions is a great idea. Also when the market is down,
(20:00):
doing roth conversions is a great idea. Right, So if
you think about it, if you have an IRA with
one hundred thousand dollars in it, just to make numbers simple,
and the market goes down twenty percent and there's eighty
thousand in there. If you do a dollar amount that
you're planning on doing even when the market was up,
let's say twenty thousand dollars, you're now moving twenty five
(20:20):
percent of your IRA to your WROTH. But if the
market was up, it'd only be twenty percent. And when
it goes to the wroth. The wroth grows tax free,
So that's really beneficial. When the market is done, you're
getting it out of there, right, and you're moving a
larger percentage of the IRA out into the wrath. And
(20:41):
then when the market rebounds, as it always does, as
steep Bouche always says, we always go on to make
all time highs, it's going to rebound tax free. And
so think about how beneficial that is. You know, when
you're managing your tax brackets, when you're planning for roth conversions,
you know, these are the things we're looking at, and
you know, you really want to be successful to in
(21:02):
order to do effective tax planning.
Speaker 3 (21:04):
Right, we can just do willy.
Speaker 1 (21:07):
Nilly roth conversions, but you know what we're doing tax planning.
We're doing tax bracket management, Medicare premium, you know, bracket management,
and we're looking at all of these things comprehensively to
do these ross conversions, and you know, just making sure
that we're taking everything into account, right. And one of
the main thing that's really important with ross conversions as well,
(21:29):
is when it comes to the tax due that's being
generated from the ross conversion, you don't want to withhold
on that distribution, right, you want to pay out a
pocket for the funds that are moving over to your wroth,
because you want as much of the funds from your
IRA that are getting converted to go into that roth, right,
pay out of pocket for the taxes due. So just
(21:51):
being aware of that when we're doing roth conversion planning,
you know, you know, we're really big on that at
the firm, and you know, ways that you could kind
of get ahead of this is if you're working and
you have a four oh one K, a lot of
four oh one ks or four three b's have options
to convert and not not to contribute to a roth
four oh one K or row four or three b.
(22:11):
So you could look at, you know, how your contribution
is being allocated, and you could do half of it
to tax deferred, half of it to wroth and kind
of moving around any which way to kind of get
ahead of it right. That way, you know you don't
have to do roth conversions later in life. And the
earlier you get it into a wroth, the better because
it's growing tax free. If you know about the you
(22:33):
know the game of compounding, you know you much rather
have it be growing in the wroth earlier on in
your life, right, because that number is going to get
bigger and bigger and bigger in a tax deferred account,
and when it's in the wrath, it's just growing tax free.
There's nothing to worry about, you you know, not have
to worry about that compounding, doubling, tripling, quadrupling, and it's
already moved over.
Speaker 3 (22:52):
So it's really beneficial.
Speaker 1 (22:56):
The other things that we do, you know, tax loss
harvesting and ED can get this a little bit more.
Speaker 3 (23:01):
You know, the.
Speaker 1 (23:02):
Investment team and the tax planning team really work you know,
in kind on things like this, right, and it comes
to tax loss harvesting. I know we're going to be
coming to a break pretty soon, but we'll kind of
get into it on an introductory level. ED, what are
the things that we're doing as a firm, and if
you could explain what tax loss harvesting is to kind
(23:23):
of capture this for clients. But we do have one
minute left, so when we come back from the break,
we're going to talk about tax loss harvesting and how
you know, the investment team and the tax planning team
work hand in hand on this and what strategies.
Speaker 3 (23:35):
We're implementing as a firm, So just give us.
Speaker 1 (23:39):
A couple of minutes and when we come back, we'll
get to that. You're listening to Let's Talk Money, brought
to you by Bouchet Financial Group, where we help our
clients prioritize their health while we manage their wealth for life.
And when we come back, we encourage all listeners to
call in at eight hundred Talk WGY. That's eight hundred
A two five five nine four nine. Again, courage all
(24:00):
listeners to call in at eight hundred talk WGY eight
hundred eight two five five nine four nine.
Speaker 3 (24:08):
We'll be right back. Thank you. You were listening to
Let's Talk Money. This is Vincenzo Testa.
Speaker 1 (24:19):
I'm giving a well deserved break to the one and
only Steve Bouchet. I wanted to say happy Easter weekend
again and happy Passover. We encourage all listeners to call
in at eight hundred talk WGY. That's eight hundred eight
two five five nine four nine. Before we took the break,
and again I'm also joined by my colleague Ed Wilhelm.
But before we get into tax loss harvesting and how
(24:40):
we implement that at the firm, we have Jim.
Speaker 4 (24:46):
Hello, Hi, Jim, how are you?
Speaker 5 (24:49):
Oh, Hi, good morning and thanks a nice interesting program
as usual. I've got a As you were talking about
roth ira a versions. If, for example, I converted twenty
thousand dollars from a from a tax taxable account, am
(25:14):
I still able to contribute to a roth ira my
maximum of seven thousand dollars per year?
Speaker 4 (25:24):
Are you still working?
Speaker 1 (25:25):
Jim? No, okay, So to contribute to a yeah, to
contribute to a roth you have to have earned income, right,
So that's yeah number one.
Speaker 3 (25:35):
Yeah, so you wouldn't be able.
Speaker 5 (25:36):
To okay if you did have earned income. I just
wanted to be uh never was never too sure about
how that works. So you can if you convert, you
can still if you have earned income, can contribute to
a regular wroth not conversion, you would.
Speaker 1 (25:57):
But what I would advise is, if you have the
ability to contribute to a roth ira, if you're working,
I would say the contribution should take priority over the conversion,
right because you're going to be recognizing tax boll income
upon the conversion. But you have the opportunity to contribute
money to the raw that you've already paid taxes on.
So okay, it's just prioritizing that before implementing the conversion.
Speaker 5 (26:22):
Yeah, okay, so I understand that, but you you could
if you could do both right, convert and also contribute
up to the seven thousand limit. If you had earned
income you could do ken you.
Speaker 3 (26:39):
Can and if you're over fifty the limits eight thousand.
Speaker 5 (26:42):
Yes, right, okay, thank you and answers my question. Thanks Alett, Thanks.
Speaker 1 (26:48):
For calling in. Jim, great, great questions. You know, we
love what people calling and ask questions. You know, eight
hundred talk WGY. That's eight hundred and eight two five five,
nine four nine.
Speaker 4 (26:59):
Please call in if you.
Speaker 3 (27:00):
Have any questions.
Speaker 1 (27:02):
Before the break, we were talking about tax loss harvesting
and how important of a tax planning tool it is
for our clients and.
Speaker 3 (27:08):
How we do this firm wide.
Speaker 1 (27:11):
Right, it's not on a case by case basis. Sometimes,
you know, if the situation deems that it needs, you know,
a deeper analysis, we will do tax loss harvesting on
a case by case basis, but we do do it
firm wide across all of our client accounts, and we're
looking when markets are down. This is a great tool. So, ed,
why don't you talk about how tax loss harvesting is
used the firm and what tools we use to implement
(27:31):
those strategies.
Speaker 4 (27:34):
Yep.
Speaker 2 (27:35):
So just kind of go over exactly what tax losce
harvesting is. You know, of course this can only be
done in a taxable account, so you can't do it
in your roth IRA or your IRA. But essentially what
it is is it's you're going to sell a security
that you have at a loss. So you've got a
position with an unrealized loss on it, you sell it
(27:56):
and then you take those proceeds and you buy some
some thing of like kind exposure.
Speaker 4 (28:03):
Now there are rules, it's called a wash sale rule.
Speaker 2 (28:06):
So like, for example, you can't buy the exact same fund.
You know, if you if you have S and P
five hundred and it's down, you know, halfway through a
given year, you can't sell it and buy it right back.
You have to you have to wait thirty days if
you're going to do it with the exact same security.
But what you can do is you can buy a
like kind security. And you know, actually the rules around
(28:27):
this are they're pretty lenient. I think they have to be.
You know, technically it is like overlapping exposure of seven
d percent, so you know, if you had the s
p y ETF and you moved into VO, that probably
wouldn't work because they both tracked S and P five
hundred and there's going to be an overlap of over
(28:47):
seventy percent there.
Speaker 4 (28:50):
But what you could do, for example.
Speaker 2 (28:51):
If you had you know, QQQ, if you know, if
we think back about twenty twenty two, you QQQ is down,
it's a Nasdaq one hundred ETF. You would sell that
and then you could buy something similar like xl K,
which is a technology sector ETF. Right, so it's gonna
hold you know, ultimately very similar exposures. They're going to
(29:13):
track very similarly, but there's enough differentation there that you're
not going to violate that wash sale rule. And of
course this works for individual securities as well. You know,
like so far this year, maybe you've got some Apple
apples down a little bit. Uh, you know, if you
wanted to, of course, i'd encourage investors to, you know,
hang on to some of those mag seven stocks right now.
(29:34):
But you know, if you're in the position where maybe
you've got some other gains coming your way and you
really needed some unrealized losses, you could do something like
sell Apple and uh, you know, buy Microsoft for example,
or another you know light kind security. This also gives
you the opportunity to kind of rotate exposures. We can
get back to that. I know we've got Bob calling in.
Speaker 7 (29:59):
Yeah, Hello, Hi Bob.
Speaker 3 (30:02):
How are you?
Speaker 4 (30:03):
Hey, Bob? Are you doing good?
Speaker 8 (30:06):
My question is is that I have an old four
oh one K from my uh, you know, old employer.
I'm just wondering should I should I roll it over
or should I just keep it in their their own
their stock.
Speaker 1 (30:20):
Yeah, So what I'd say is when it comes to
four oh one k's, it kind of limits you, right,
and especially if it's an old four oh one K.
Speaker 3 (30:27):
Right.
Speaker 1 (30:27):
So four oh one k's have a lot of fees
that are associated with them, Right. There's record keeping fees,
there's third party administrator fees, and the investments within the
four oh one k have high fees as well. Right,
So when you roll it over to IRA, you kind
of eliminate all of those fees. And when you're in
a four oh one K, Bob, you don't have as
much versatility in regards to what you could invest in.
Speaker 3 (30:50):
Right, if you roll it over to.
Speaker 1 (30:51):
An IRA, Right, whether or not you move it to
a money manager or you manage it yourself.
Speaker 3 (30:56):
I'm not sure your situation.
Speaker 1 (30:58):
You have, you know a lot more options in terms
of what you can invest in, right, you know, you.
Speaker 3 (31:04):
Know there's funds within the four oh one K.
Speaker 1 (31:06):
They're very limited, you can only choose from a few,
but you have that versatility when you move.
Speaker 3 (31:10):
It over to the to an IRA and you save
on all those fees.
Speaker 1 (31:13):
So I would always tell, especially our clients, so roll
it over to an IRA and get it out of
that old four okay. And also asset consolidation is important too,
if you already have an IRA or if you have
a four oh one K.
Speaker 3 (31:25):
Now getting it all that on the spot, go ahead.
Speaker 8 (31:28):
Bob, Okay, I got it, so I understand ye all right,
thank you?
Speaker 1 (31:34):
Yeah, thanks for calling in, Bob, YEP. We encourage all
listeners to call in. We love questions. I love answering questions.
So eight hundred talk w G Y. That's eight hundred
and eight two five, five, nine four nine. Thanks for
calling in, Bob and ed once you jump back into
the tax loss harvesting.
Speaker 2 (31:52):
Yeah, so just to recap, you know, tax loss harvesting
is really just selling a security at a loss, and
then you know, replacing it with a similar pure if
it's going to be identical, you got to make sure
you don't violate the wash sale rule or you know,
switch it up at the same time. You know, thinking
about the strategies, you can rotate exposures. You know, maybe
you're seeing something in markets and you want to shift away.
(32:15):
So you know, it's always it can be beneficial to
realize some some unrealized losses because what that lets you
do is it also lets you potentially realize some gains
at the same time. And this is what you know,
kind of allows us to help rebalance the taxable account.
Speaker 1 (32:32):
Yeah, and I just want to touch on that really quick.
So tax loss harvesting is great to offset gains within
a taxable account that you have from stock as well.
But other things that we look at is we'll have
folks that sell real estate. Right, So if you bought
real estate twenty years ago and you use it as
rental property, you took tax appreciation on that real estate
(32:53):
year after year, right, So when you sell it, you
have to recapture that depreciation. Then Oh, also you have
to capture the appreciation on that real estate. And you
could sell stock at a loss to offset that, right,
But it only counts if you do it in the
same year.
Speaker 2 (33:08):
Right.
Speaker 1 (33:08):
If you sold real estate in twenty twenty four and
then took the loss of twenty twenty five, you had
to pay that huge capital gain and what they call
depreciation recapture. You know, you had to pay tax on that.
But if you strategically plan and do it all within
the same year, you could use stock losses to offset those.
But we do have another caller, Steve from Albany.
Speaker 9 (33:28):
Hello, Hello, gentlemen, I have a question regarding Medicare premium calculations.
I'm sixty three. I'm going to be sixty three this
year and twenty five, and I'm going to be sixty
five and twenty seven. So will they be looking at
my income tax return from this year twenty twenty five
to determine my Medicare premiums when I turned sixty five
and twenty seven.
Speaker 1 (33:49):
Yeah, so they look two years ahead, right, So your
twenty twenty five taxes would be used to calculate your
twenty twenty.
Speaker 3 (33:56):
Seven Medicare premiums. They go back two years. Yep, that's right, Steve, you.
Speaker 9 (34:01):
Go back two years. Okay, Now in the future beyond
twenty after I'm sixty five, will they be recalculating that
year by year or is it set in twenty twenty seven.
Speaker 3 (34:13):
That's correct.
Speaker 7 (34:14):
Yep.
Speaker 1 (34:14):
Every year it's a new calculation, Steve. And you know
it's it's funny. Some folks will have a year where
they have a significant amount of income they recognize, just
like I was just talking about, like a sale of
real estate right where there's just one off income number
that's coming in. That's not the norm, right, and that
could bump up someone's Medicare premiums. But there's ways around
it to reach out to your the Medicare administration, so
(34:36):
security administration, and you kind of say that was, you know,
a one off, but yes, they're calculating it on a
year by year basis.
Speaker 9 (34:44):
Year by your basis. All right, thank you, I appreciate it.
Speaker 3 (34:47):
Thanks Steve. And we have one more caller, Gary from
Clifton Park.
Speaker 7 (34:53):
All right, good morning. I've got a quick question related
to I didn't care the very beginning of the show.
I'd like to say first, so I might have just
missed this, but for you guys to really look at
an investment potential and maximizing gains. You would also need
to be doing an individual's taxes, would you not. I mean,
(35:17):
right now, I'm in a situation where I've got an
accountant and then I'm also doing investing in various different
places like you know, Ring and James whatever. But those
two things are not tied together. And what I find
that's the problem is is that they don't really understand
uniquely my circumstances and what would make the most sense
in terms of maximizing the potential for my investments. And
(35:41):
I was just wondering how you guys handle those situations.
Do you do the taxes also or how does that
all work?
Speaker 1 (35:47):
Yeah, I mean there's some clients we do do taxes
for Garry and you know, that's what I'm being biased.
That's what makes our firm so great is that we
have tax professionals on a team like myself, I'm a CPA,
and then we have investors vescials like add on the team, right,
And you know, I'm an advisor at the end of
the day, I'm not just an accountant, so kind of
that hybrid what the advisor. But if you have your
(36:09):
taxes and investments spread out of two different places, those
folks should be talking, right, and that's why, you know,
our firm I feel, you know, we do a great
job because I you know, for me personally, I have
those skills that kind of bring two and two together
that I don't need to call someone's account and I
don't need to call someone's financial advisor.
Speaker 3 (36:26):
I'm able to do that collectively.
Speaker 1 (36:28):
The preparation of the taxes itself, I don't think, you know,
we do do taxes for some clients. I don't think
that necessarily has to be in the same place.
Speaker 3 (36:37):
But when it.
Speaker 1 (36:38):
Comes to the tax planning strategies that are being implemented
and the investment strategies, an advisor and an accountant, if
they're in two different places.
Speaker 3 (36:45):
Should be speaking to each other. Okay, thanks, thanks Gary.
Speaker 1 (36:54):
All right, Ed, let's try and finish our tax loss
harvesting piece and we'll move on.
Speaker 3 (37:01):
Yeah.
Speaker 2 (37:02):
So, just you know, last aspect I wanted to touch
on is uh, you know, I've spoke about it on
the show before, but it's called direct indexing. I mean
it basically takes the concept of tax sauce harvesting and
it overlays you know, recent advancements in technology to create
a really powerful tool. So basically what it does is
that lets you track an index or a you know,
(37:23):
custom built portfolio and you can really tailor what's inside
of it. But instead of owning buckets, whether it's ETFs
or mutual funds, you're going to own a pool, you know,
between two hundred and three hundred individual stocks, and it
has a software that looks at all of the stocks
on a daily basis and looks for any losses to
(37:44):
realize an offset with a like kind exposure. So you know,
if you think about a year like we've seen so far,
you know, if you had a fresh pool of cash
to you know, start an account at the start of
this year, during every dip, you would be you know,
essentially able to take losses. And when you're dealing with
individual stocks, you have so many opportunities for like kind exposure.
(38:09):
So I mean during times of volatility, you really see
strategies like this uh excel, so you're able to you know,
take some losses, neither bank up those losses or offset
any gains. You're also realizing in the account you're able
to still track whatever index or portfolio you're looking to track,
but at the same time you're you're getting these these
(38:30):
losses built up, you know, which contributes to something called
tax alpha and how that's calculated. It's essentially taking those
amount of unrealized gains and as long as you have
something to use them against, you multiply that by your
tax rate, and that compete can be considered, you know,
an additional return on your investment. Right You're you're you're
saving yourself some money on taxes.
Speaker 4 (38:50):
Because you have those losses to utilize.
Speaker 2 (38:52):
So, you know, times of volatility like these is really
when you know we've seen success, uh in these strategies,
and you know it really just takes the kind of
accept of tax soos harvesting to the next level.
Speaker 1 (39:04):
Thanks Ed, Yeah, I want to take a quick break
before we move on. You're listening to Let's Talk Money.
Courage all listeners to call in at eight hundred Talk WGY.
That's eight hundred eight two five five nine four nine.
Speaker 6 (39:16):
If you want to learn more about Bouchet Financial Group,
visit their website Bouche dot com. That's b O U
c h e y dot com. Sign up for their blog,
which is updated every week Stephenbooche dot com. Follow them
on Twitter at Bouchet group like them on Facebook. The
phone lines are open eight hundred talk WGY. That's eight
(39:37):
hundred eight two five five nine four nine. Here is
Stephen Bouche.
Speaker 1 (39:43):
You're listening to Let's talk money. This is Vincenzo Testa,
one of the wealth advisors here at Bouchet Financial Group,
and I'm joined by my colleague at Wilhelm. Before the break,
we were talking about tax planning strategies that we implement
as a firm. We talked about roth conversions, we talked
talked about tax loss harvesting, and one of the other
things I wanted to get into that I think differs
the firm from a lot of you know, other folks,
(40:06):
is ten thirty one exchanges, right, and those of you
who don't know at ten thirty one like kind of exchanges.
When an investor of real estate owns real estate, they
plan to sell it or they do sell it as
a gain and they defer the gain by purchasing another
form of real estate. So that's really beneficial, right, because
(40:27):
you know, if you've owned property for a long time,
you could see some big numbers when it comes to
the gains that you're going to recognize in your tax return.
Speaker 3 (40:33):
After sale, and if.
Speaker 1 (40:36):
You're able to defer those gains and move them into
another property without having to recognize them, that's really beneficial, right.
And same thing when it comes to taxable accounts. So
if you have a taxable brokerage investment account, if you
have appreciated assets within that account and you pass away
and your beneficiary inherits them, they the account gets what's
(40:57):
called a step up and basis the gains are completely
wiped away. So if the beneficiary were to sell those
positions that very day, they would recognize no tax liability whatsoever.
The same holds true for real estate, so ten thirty
one exchanges, right, Being a landlord could be tough sometimes
if you do it for so many years, you might
be fed up with it. Right, And I think anyone
(41:20):
could understand that it's, you know, fixing toilets at two
am on a Tuesday is not everything. You know, something
that everyone wants to do.
Speaker 3 (41:26):
So there's way to do.
Speaker 1 (41:28):
There's a way to do ten thirty one exchanges. But
you can stop being a landlord. So if you have
a real estate portfolio that you know and you're nearing retirement,
agent you're thinking to yourself, hey, I want to get
out of this thing, but I don't want to have
to pay taxes and these years of gains that I've accumulated,
you know, on appreciation and you know, recasturing that depreciation
(41:48):
that I captured on my taxi turn for so many years. Right,
those numbers can get really big. You could pay thirty
forty percent on gains from the sale of real estate.
So you know what we do for clients is we
do ten thirty one exchanges, but through something called a
Delaware statutory trust right. So it's basically an investment vehicle
that you could take proceeds from the sale of real
(42:09):
estate and put into the investment vehicle. It's sort of
like an ETF or a mutual fund, and it sits
in a taxable account and it grows and then the
beneficiary gets a step of a basis really great way
to stop being a landlord and kind of get rid
of that responsibility.
Speaker 3 (42:23):
We do have Bonnie on hold.
Speaker 4 (42:27):
Hello, Hi Bonnie, how are you Hi?
Speaker 9 (42:31):
Hi?
Speaker 10 (42:32):
Happy Easter.
Speaker 1 (42:33):
I have a quick question.
Speaker 10 (42:34):
I love that you're doing a tax conversation today. If
I were to do I've been looking at this rollover
for the roth trying to learn about it and understand it.
What I'm concerned about. It shouldn't in any way affect
my Medicare premium, should it? That's what I'm trying to
keep lower if I can. I'm retired. I have not
(42:58):
taken my Social Security yet, trying to hold out until seventy.
But I also want to keep that down. And I
know as these incomes start to come my way, that
Medicare premium is going to go up.
Speaker 9 (43:11):
Yeah.
Speaker 3 (43:12):
What I would say is God, Bonnie good.
Speaker 10 (43:15):
Yeah, just rolling it over or doing the back door
or whatever you call it, the Wroth conversion. If I
can somehow find the money to pay the tax on
that outside of the account, will that be considered income
on my tax returns that year and then my Medicare
premium go up for a little while.
Speaker 3 (43:36):
Yeah, I mean it requires a comprehensive analysis.
Speaker 1 (43:40):
Right, So when you do a Roth conversion, you have
to recognize income on your tax return.
Speaker 3 (43:44):
Right, There's no way around that.
Speaker 1 (43:46):
Right, but right, right, And when it comes to tax
bracket management, I would have to look at your situation,
right or another advisor.
Speaker 10 (43:53):
Was if I went I understand if I went up
to another tax bracket because of that and nothing else included,
just the conversion itself. It could potentially put me into
higher Medicare premiums.
Speaker 1 (44:07):
Yeah, And what I'd say is it would probably cost
you another roughly one hundred if you moved up a
Medicare premium bracket by doing a Roth conversion. If I'm
just trying to gather from speaking to you, like what
the situation is. Let's say you did thirty thousand, right,
it probably only movee up if it even did like
one hundred dollars a month roughly in Medicare premiums.
Speaker 7 (44:28):
Yeah.
Speaker 10 (44:29):
Right, I'm right now, I'm within two thousand of the
next jump in the Yeah.
Speaker 1 (44:35):
Yes, So so when I do tax play, I look,
I look at that as an extra tax, right, so
you know that isn't it is a tax? So yeah,
I mean if that's the case, I mean, it's really
up to you, right, Have you comfortable doing that? I
think it's beneficial either way, right, depending on the size.
Speaker 3 (44:50):
Of your IRA.
Speaker 10 (44:51):
But I'll look at it. I'm just not it would
just be for a short term that you know, that
one year that I did conversion, or would that kind
of stay there?
Speaker 3 (45:02):
Correct? Correct?
Speaker 1 (45:03):
It would be for that one year, and it would
actually be two years from now. So I you did
it this year, it would affect their twenty twenty seven
Medicare premiums, but only for that year.
Speaker 10 (45:12):
Okay, yeah, and then that would solve right into when
I start having to take Social Security too. So I
get it. There's a lot to look at, but it
is a potential issue for me to consider. So I
appreciate that information.
Speaker 4 (45:24):
Thank you very much, any anytime.
Speaker 3 (45:26):
Thanks for calling in, Bonnie.
Speaker 1 (45:30):
Ye before bonding called in, I was talking about ten
thirty one exchanges in how we help real estate investors
to further capital gains by putting it into something called
Delaware statutory trusts.
Speaker 3 (45:40):
Really beneficial, great tool to.
Speaker 1 (45:42):
Kind of eliminate gains, right, because if you hold the
Delaware statutory trust, which is an investment vehicle that you
could take proceeds from the sale of real estate and
invest them into Delaware statutory trusts, defer your gains. Upon
your passing, it gets up a step up and basis
so your beneficiary could sell that Delaware statutory trust and
(46:04):
recognize no tax upon.
Speaker 3 (46:06):
The date of your death right.
Speaker 1 (46:07):
And over the years, there's so much income to capture
between appreciation and depreciation recapture and guess what, with a
Delaware statutory trust, you're able to do that ten thirty
one exchange and relieve yourself of landlord duties, which I
think after so many years many real estate investors would
love to do that. So, Ed, we're getting to the
(46:30):
end of the show. You know, there's a lot of
things that I wanted to talk about that we didn't
get to. So, I know, we're doing a lot on
the investment team and you know, on the investment side
of the portfolio and the strategies we're implementing. You know,
what we meet Ed and I really always talk about
is direct indexing and how that you know, kind of
ties into tax loss harvesting. Can you move a little
(46:52):
bit add into direct indexing and what we're doing at
the FIRMA and what that is.
Speaker 2 (46:58):
Yeah, to go over you know, we utilize a program
it's called Canvas. It's through you know, our close friends
over at Franklin Templeton and O'Shaughnessey Capital Management.
Speaker 5 (47:12):
Uh.
Speaker 2 (47:12):
You know, so much overhead and technology goes into you know,
a strategy like this, so it's really important to have
you know, strong partners in the space. But you know
what we basically do is you know, we get an
account set up on the platform, and what we do
is we had their team build out. They took our
you know, our taxible models, and they recreated it using uh,
(47:36):
you know, a blend of a target amount of individual stocks.
And then you know, as I mentioned, as time goes
on and some of those stocks will be at a gain,
some of them will be at a loss. And what
the software is going to do is it's going to
look daily, uh, you know, for losses and it's going
to you know, either try and bank those or use
gains to offset. Now, it is somewhat of a balancing
(47:57):
act because you can't just keep realizing loss after loss
after loss, because eventually the portfolio would deviate from your
target portfolio. So there is something involved called tracking air,
which you know, is another function that the software uses
as a measurement to you know, help determine what we're
selling and what we're buying. So you can see how
a strategy like this would be so complicated, and it
(48:20):
really is the baseline. It is just the advancements in
technology we've seen. But once we get that portfolio set up,
you know, we get it going live and then you know,
we monitor it here and we have check in conversations.
Speaker 3 (48:34):
Yeah. Thanks Ed.
Speaker 1 (48:35):
You know, we're doing a lot of great things at
the firm. The investment management, the tax planning, all these
things come together and that's really comprehensive financial planning for you.
Speaker 3 (48:42):
We're at the end of the show.
Speaker 1 (48:43):
I thank everyone for calling in and listening. I mean,
it's Vincenzo tests I have Ed Wilhelm joining me. You're
listening to Let's Talk Money, brought to you by Bouchet
Financial Group, where we help our clients prioritize their health
while we manage their wealth for life.
Speaker 3 (48:57):
Thank you.
Hi, you were listening to Let's Talk Money, brought to
you by Bouchet Financial Group. My name is Vincenzo Testa,
one of the wealth advisors here at Bouchet. I'm a
CPA Certified Public Accountant and a CFP Certified Financial Planner.
We encourage all listeners to call in at eight hundred
Talk WGY. That's eight hundred eight two five five nine
(00:23):
four nine. I'm also joined by my colleague Edward Wilhelm. ED,
why don't you introduce yourself?
Speaker 2 (00:31):
Yep, Hey everyone, I'm analyst and then our head trader
here at Bouchet Financial Group and ready to get into
the show.
Speaker 3 (00:42):
Thanks Ed.
Speaker 1 (00:43):
Our show could be heard at ten am on Saturdays
at eight am on Sundays. I just wanted to say
a happy Easter weekend and happy Passover to everyone out there.
Speaker 3 (00:50):
We're giving a.
Speaker 1 (00:51):
Well deserved break to the one and only Steve Bouchet,
who was actually headed to Rome this weekend. The Vatican
is saying a mask for Steve for him on two Tuesday,
and word on the street is that he's meeting with
the Pope on Wednesday, and you know, Steve's out there
doing holy things on a holy weekend.
Speaker 3 (01:08):
So that's great.
Speaker 1 (01:10):
So I'm gonna let ed so as the investment guy,
So he's going to get into a market check and
kind of break down what we've been seeing this week
and where the markets are headed.
Speaker 2 (01:22):
Yeah, so we'll just kick it off looking at some
index returns.
Speaker 4 (01:26):
Overall, pretty mixed week.
Speaker 2 (01:28):
The S and P five hundred, you know, slipped about
a quarter percent. That Dow lagged that a little bit harder,
down over a full percent, and we can kind of
dip into that a little bit later in the show.
And then we also saw the Nasdaq fall a little
bit more than half a percent, you know. So overall,
definitely continuing some of the recent volatility. It's mostly been
(01:51):
tied to the macro policy and uncertainty. You know, we
got a little bit of economic data last week, you know,
some earnings this week, which we'll dive into. Just looking
at some sectors and factors, looking at what's hot right now.
You know, the story is really the same. You know,
defensive sectors like consumer staples, utilities, and healthcare are outperformed.
(02:16):
You know, right now investors are really just looking for
that stability. So the less cyclical sectors that are you know,
a little bit less sensitive to you know, macro policy.
You know, you're looking for more stable cash flows there,
stronger earnings, a little bit more insulated from that macro environment,
and certainly from tariffs. You know, we've also seen gold
(02:37):
kind of in the same thing, extend its run. And
this is you know, we've just seen persistent demand for
hedges amongst all the uncertainty so far this year.
Speaker 4 (02:48):
Like I said, we got some.
Speaker 2 (02:49):
Earnings this week, so Q one earnings are just starting
to ramp up. And it's also important to know that
these results are reflecting you know, pre tariff positioning, right,
So for Q one, you know there's part of it
where companies knew that tariffs were coming, you know, not
in effect yet, so we're not seeing the effects of teriffs,
(03:09):
but you know companies are certainly doing you know, planning
and positioning, you know, either pre increasing inventory or starting
to adjust supply chains. So this can be some indications there.
Big one this week was Netflix super positive beat on revenue,
maintained its outlook and even raised earning for share guidance
(03:30):
for the end of the year.
Speaker 5 (03:32):
So that was big.
Speaker 2 (03:33):
If we think about Netflix, you know, certainly insulated from
from tariffs. We also had Johnson and Johnson they beat
across the board and also raised revenue targets, so you know,
strong for the healthcare sector. But on the flip side
of that, we had U n H United Health. They
missed on both fronts, and they lowered their full year guidance,
(03:55):
you know, citing some higher medicare costs.
Speaker 4 (03:57):
But that was quite the hit.
Speaker 2 (04:00):
It's one of the highest weighted stocks in the Dow,
so that kind of explained similar performance there. But it's
also just one of those reasons if we think about
you know, the healthcare sector as the example, you know,
Johnson and Johnson crush earnings. U n H on the
other end, you know, tough quarter forum.
Speaker 4 (04:18):
Now, it just.
Speaker 2 (04:19):
Speaks to why it's so important to be diversified, you know,
within the even in the same sector, you know, the
same sector, different industries. You and H is going to
focus more on the insurer side, but just speaks to
the powers of like I said, being diversified.
Speaker 1 (04:33):
Yeah, and you know, I just want you know, I
wanted to talk a little bit about you know, the
Dow Jones and the SP five hundred. So you mentioned
that the you know, United Health is one of those
companies that's really highly weighted in the Dow.
Speaker 3 (04:46):
Right.
Speaker 1 (04:46):
You know, when we talk about you know, indices and
within the market, you know, we think of the Nasdaq,
the SMP, the Dow. You know, what do you feel
is really a great indic to follow in terms of,
you know, if you want to get an overall depiction
of what's going on in the markets. I mean, in
the past, you know, folks might have thought it was
(05:08):
the Dow, right, but I think that might have changed.
What do you think about that?
Speaker 2 (05:14):
Yeah, in today's environment, I think the you know, the
best you're going to do is just the S and
P five hundred. You know, it's definitely been the more
the favored index in the more recent years, but I
think that holds up right. You know, you can't discount
the amount of concentration that we see in markets, that's
for sure. But you know, with S and P five hundred,
(05:34):
that concentration is represented, but you're still getting that breath
of you know, the rest of the large cap space.
So you know, that's what I would focus on. You know,
if you're looking at markets and you're looking to see
how they're doing, look at the S and P five hundred.
You know, I would avoid looking at the Dow. You know,
the Nasdaq can certainly be helpful, but you know, even
the Nasdaq is really going to only represent those those
(05:56):
really large risk on stocks.
Speaker 4 (05:59):
So that's in P. Five hundred is a little bit
more of a fair estimate. It's also worth.
Speaker 2 (06:03):
Worth you know, looking at something even broader, you know,
like a like a broad market.
Speaker 4 (06:07):
So yeah, it's kind of my thoughts in that space.
Speaker 1 (06:11):
Yeah, thanks, Ed, Thanks, Yeah, I mean I think it's
really important to you know, when you look at the industries,
to understand where they're coming from, right, and what each
induscry represents.
Speaker 3 (06:23):
The s and P.
Speaker 1 (06:23):
Five hundred is you know industry that tracks the five
hundred largest US companies, you know, the Dow Jones, And
I'll let you know, touch on that a little bit more.
You know, Dow Jones a little bit different than NASDAC.
You know, it's really tracking technology. And you know, we've
been overweight technology for a long time at Boushet Financial Group,
and you know it has paid dividends, no pun intended.
Speaker 3 (06:42):
So Ed, why don't you go in a.
Speaker 1 (06:43):
Little bit deeper about you know, what the Dow jone
really represents, and the Russell two thousand and the Nasdaq
as well.
Speaker 2 (06:51):
Yeah, no, certainly. So, as you mentioned, the S and
P five hundred is going to cover the the largest
you know, five hundred companies in the US.
Speaker 4 (07:07):
The NASDAK is.
Speaker 2 (07:08):
Going to cover you know, the largest one hundred. Uh So,
you know, within both of those, we're focusing on a
lot of a lot of tech. You know, these are
all considered blue chip companies, and then the the Dow
Jones is going to represent you know, thirty large publicly
traded companies. You know, all of these indices are are
(07:30):
the S and P five hundred and the NASDAC are
both gonna be market cap weighted, whereas the Dow Jones
is price weighted, so it's gonna you know, change the
waiting method within that. And then we also got the
Russell two thousand, which is going to be a little
bit more broad and that's in the small cap uh space.
It's going to overweight you know, some of those smaller companies.
Speaker 1 (07:53):
Yeah, thanks, Ed, So, Yeah, I mean it's really important
to understand each industry and what it's tracking because they
all at track different things and there's different companies within
each one but within some of them, A lot of
the same companies you know lie lie in multiple of
those indices.
Speaker 3 (08:10):
So we're gonna take a quick break.
Speaker 1 (08:11):
You were listening to Let's Talk Money, brought to you
by Bouchet Financial Group, where we help our clients prioritize
their health or we manage their wealth for life.
Speaker 3 (08:19):
Thank you.
Speaker 6 (08:21):
If you want to learn more about Bouchet Financial Group,
visit their website Bouche dot com. That's b O U
C h E Y dot com. Sign up for their blog,
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(08:42):
hundred eight two five five nine four nine. Here is
Stephen Bouche.
Speaker 1 (08:49):
All right, this is Vincenzo Testa. You're listening to Let's
Talk Money, brought to you by Bouchet Financial Group, where
we help our clients prioritize their health or we manage
their wealth for life. We encourage all listeners to call
in at eight hundred talk w g Y. That's eight
hundred eight two five five nine four nine. You know
we're talking a little bit, you know, a little bit
(09:10):
before about indices and you know what's happened in the
markets this week, and uh.
Speaker 3 (09:15):
You know, Ed did a really great job.
Speaker 1 (09:16):
You know, Ed's a portfolio analyst at the firm, and
you know he is a member of the investment committee
at the firm, right, and that's led by the CIO,
with the Chief Investment Officer, Ryan Bouchet, Paula La Pietro
who's a wealth wealth advisor, and also portfolio strategists, and
Casey Bird and Ed Wilhelm, who is joining me today.
(09:38):
So Ed, why don't we go a little bit deeper
into market trends and what we're seeing within the markets
and a macroeconomic perspective.
Speaker 2 (09:47):
Yeah, no, thanks, then you know story Ultimately, still the
same markets are wrestling with that uncertainty around you know,
all of Trump's policies, but especially the tariffs. But for
my long term investors listening, you know, don't let the
volatility shake you. At the end of the day, you
make more money in bull markets than you lose in
(10:07):
bear markets. And we've seen this time and time again
throughout history. So let me just repeat that one more time.
You make more money in bull markets than you lose
in bear markets. You know, one of the things that
we preach to all of our clients and probably one
of the most aspects to part one of the most
important aspects about our jobs is encouraging our clients to
(10:30):
not let the volatility get to them. You know, a
lot of people work really hard for their money throughout
their entire life. It means a lot to them, so
when they see selloffs, it can get to them, it
can start to shake them. And that's where it's our
job to encourage them to, you know, avoid making a
decision that's going to harm them in the long run.
(10:50):
And this is probably one of the most important it's
to avoid selling during these drawdowns because you want to
keep that same principle at the same risk level so
you can ride the wave back up, but just to
get back into to macro. You know, like I said,
we've seen some volatility. You know, the story is the same.
Nothing has really changed on that end. You know, as
far as price returns, a lot of eyes are looking
(11:13):
at the next bed meeting, which is going to be
on May seventh. We're not expecting a cut, but the
markets are starting to price in a June cut and
then potentially another later this year, maybe even two. You know,
that's where it's hard as you start to extend out
in time frame when you're trying to make predictions, is
you don't know what data is going to come out
(11:34):
now between then, So you know, it's important to kind
of keep your your targets on the near term and
just remain disciplined. We did get some commentary from Jerome
Powell this week. He's the Federal Reserve chair. He emphasized
the need for caution, signaling that you know they are
going to still be data dependent. He did cite the
(11:57):
caraffs were more aggressive than he expects, and then you
know he expects the impacts of inflationary to be a
little bit more aggressive as well. But it's also important
to keep in mind that he almost has to come
out and say this. You know, he doesn't want to
save the opposite. He doesn't want to stoke consumer demand
(12:18):
because you know that would one hundred percent guarantee bringing
back inflation. Because a lot of people thought these you know,
tariffs are at least the pree tariff impact of consumers
starting to spend because they think there's going to be inflation, right,
inflationary expectations are inflationary themselves. If you think prices are
going up next month, you're going to want to buy today,
(12:41):
you know. So that was kind of a thought around tariffs.
But what we've actually seen is, you know, some of
the uncertainty, you know, maybe planned or unplanned by Trump,
but the uncertainty has done a lot of demand destruction,
right consumers art spending as much. This was also magnified
by lower energy levels, which we saw in last week's
API print. So that's you know, one of the core
(13:01):
measures of inflation we use here in the US, but
energy prices really drove that down and it came in
blow consensus about two point seven percent, so you know,
just a little bit above where that that FED target
is at two percent. You know, in my opinion, I
do think that they're going to be comfortable with a
little bit higher level of inflation, especially if we look
at long term averages, it's it's above two percent, even
(13:25):
though that's their target. And we also heard in response,
I don't think Trump was too happy with J. Powe's
comments on you know, the the tariffs coming in more aggressive.
So Trump said that, you know, he's going to replace
Jerome as soon as he gets the chance. So you know,
one thing to definitely look for in the next couple
coming weeks is going to be a new FED chair nomination.
(13:49):
I think markets would take this as a bullish catalyst potentially.
What would be really interesting about this dynamic is if
we do get a new FED chair, their commentary is
going to be a new FED share nomination. Their commentary
is going to be just as important as jerown powells.
With all the emphasis we place on forward guidance these days,
(14:10):
what the new FED share nomination would be able to
do is essentially issue a forward guidance that extends farther
in time than Jerome is able to give.
Speaker 1 (14:20):
That's really interesting how Jerome Powell, you know, when he
talks the influence that he has the broad market in
terms of you know, stock price is increasing or stock
price is decreasing.
Speaker 3 (14:32):
It's really amazing that. I mean, in all reality.
Speaker 1 (14:35):
It's not intentional about how much he can manipulate the
market itself just by saying a couple of words, well,
you know, by saying that he's you know, by making
you know, dubvish remarks, or or just saying you know,
they're going to raise interest rates or lower them. It's
really amazing how he could influence the markets in that regard.
Speaker 2 (14:55):
Yeah, no, I mean at the end of the day,
you know, he is really just as important as you know,
the market's eyes as Trump or you know, like the
Treasury Secretary Scott Descent.
Speaker 4 (15:05):
So it is, and that's why you see a lot
of his commentary.
Speaker 2 (15:08):
He has to be careful what he says because he
knows he does have an impact, you know, just on markets,
not just on markets, but also consumers. So, Vin, I'll
throw it back to you. It's kind of my update
on you know, the macro market perspective. But I know
(15:28):
you've got some some tax planning and tax corporation stuff
you want to cover.
Speaker 3 (15:32):
Yeah, thanks Ed Again.
Speaker 1 (15:34):
We encourage all listeners to call in at eight hundred
talk w g Y. If you have any questions, please
call us at eight hundred eight two, five, five, nine
or nine. You know, a lot of what we do
with the firm has changed over the years. You know,
we really incorporated tax into into what we do in
specific tax planning, right, so I'm a CPA, you know,
I really leave the charge of the tax planning sector
(15:57):
for clients at the firm, and we do a lot
of tax planning for clients and it's really valuable. And
you know, really it differs from tax preparation, right. You know,
if you have a simple tax return to anyone you
know who's a CPA or you know, H and R. Block,
they can compare your taxes, right. But the real value
comes from tax planning, right. And the reason being is
that it saves your money. Right when the market goes up,
(16:21):
you know, you're going to make money. But we could
do both of those two things at the same time.
That's really really valuable. And that's what we do for clients, right.
And you know, personally, I will go looking for strategies
that I can implement for right clients that you know
the book I manage and you know, really help out
all clients at the firm, uh, you know, doing proactive strategies, right,
(16:41):
and that's multi year planning. And some of those strategies
consist of things like Wroth conversions, right. And Wroth conversions
for those of you who don't know, is when you
move tax deferred funds out of an IRA or four
oh one K or any tax deferred retirement account you
have and convert them over to.
Speaker 3 (16:59):
A raw IRA.
Speaker 1 (17:01):
So wroth iras have contribution limits. Year after year it's
seven thousand dollars and the year twenty twenty five for
folks forty nine and below and folks fifty and older
can contribute eight thousand. But when it comes to roth conversions,
you can convert as much money as you want from
an IRA to a WROTH. Right, you're not susceptible to
(17:22):
those contribution limits when you convert. The dollar amount that
you're converting is completely taxable as ordinary income.
Speaker 3 (17:30):
Right.
Speaker 1 (17:31):
So the reason why this is really really valuable if
you're doing it in the right way, is because when
you have an IRA, you're subject to something called required
minimum distributions.
Speaker 3 (17:43):
And right now, at.
Speaker 1 (17:44):
Age seventy three, anyone who has a taxed the third
retirement account is subject to required minimum distributions or otherwise
known as rmds. That's the IRS saying, hey, you received
the tax benefit for the contributions you made to your IRA,
and now we want our tax revenue back. So they
force folks basically to take money out of their IRA,
(18:07):
which is usually about four percent of the account balance
at the prior year end, and all of that money
is taxable Why is that difficult? Right, Because if you
have a high balanced IRA, you really don't have control
over your taxable income. And that's an issue because there's
multiple tax brackets that you could find yourself in ten, twelve,
(18:28):
twenty two, twenty four, thirty two, and thirty seven, which
if you don't have control over your taxable income and
you have a large balance IRA, you can get pushed
up unto those tax brackets pretty fast based and the
IRS forcing you to take money out and recognize ordinary income.
So the less amount of money that you have in
tax deferred accounts is very beneficial for that reason. And
(18:52):
the other reason is your Medicare premiums are based on
your income, right, and there's a scale on your Medicare premiums, right.
It could be you could pay a hundre amount a
month between you and your spouse, or you can pay
five hundred dollars a month between you and your spouse,
you know, individually. So when you have no control over
your RMD and your taxable income, it can create tax
(19:15):
issues for you. So when we do roth conversion planning,
we're looking at, you know, where the client is in
their life, right, are they working, what tax bucket are
they in and where are they going to be in retirement? Right,
because they might be working now, right, the expectation is
in retirement they might not have as much taxble income, but.
Speaker 3 (19:33):
That might not always be the case. They might have Social.
Speaker 1 (19:36):
Security income, they might be pulling money out of their
IRA in retirement, so they could be in the same
position from a tax perspective as they are currently in retirement.
So we look at that and you know, if a
client is in their lowest earning years, right, if in
retirement they might have more income. You know, doing rostern
versions is a great idea. Also when the market is down,
(20:00):
doing roth conversions is a great idea. Right, So if
you think about it, if you have an IRA with
one hundred thousand dollars in it, just to make numbers simple,
and the market goes down twenty percent and there's eighty
thousand in there. If you do a dollar amount that
you're planning on doing even when the market was up,
let's say twenty thousand dollars, you're now moving twenty five
(20:20):
percent of your IRA to your WROTH. But if the
market was up, it'd only be twenty percent. And when
it goes to the wroth. The wroth grows tax free,
So that's really beneficial. When the market is done, you're
getting it out of there, right, and you're moving a
larger percentage of the IRA out into the wrath. And
(20:41):
then when the market rebounds, as it always does, as
steep Bouche always says, we always go on to make
all time highs, it's going to rebound tax free. And
so think about how beneficial that is. You know, when
you're managing your tax brackets, when you're planning for roth conversions,
you know, these are the things we're looking at, and
you know, you really want to be successful to in
(21:02):
order to do effective tax planning.
Speaker 3 (21:04):
Right, we can just do willy.
Speaker 1 (21:07):
Nilly roth conversions, but you know what we're doing tax planning.
We're doing tax bracket management, Medicare premium, you know, bracket management,
and we're looking at all of these things comprehensively to
do these ross conversions, and you know, just making sure
that we're taking everything into account, right. And one of
the main thing that's really important with ross conversions as well,
(21:29):
is when it comes to the tax due that's being
generated from the ross conversion, you don't want to withhold
on that distribution, right, you want to pay out a
pocket for the funds that are moving over to your wroth,
because you want as much of the funds from your
IRA that are getting converted to go into that roth, right,
pay out of pocket for the taxes due. So just
(21:51):
being aware of that when we're doing roth conversion planning,
you know, you know, we're really big on that at
the firm, and you know, ways that you could kind
of get ahead of this is if you're working and
you have a four oh one K, a lot of
four oh one ks or four three b's have options
to convert and not not to contribute to a roth
four oh one K or row four or three b.
(22:11):
So you could look at, you know, how your contribution
is being allocated, and you could do half of it
to tax deferred, half of it to wroth and kind
of moving around any which way to kind of get
ahead of it right. That way, you know you don't
have to do roth conversions later in life. And the
earlier you get it into a wroth, the better because
it's growing tax free. If you know about the you
(22:33):
know the game of compounding, you know you much rather
have it be growing in the wroth earlier on in
your life, right, because that number is going to get
bigger and bigger and bigger in a tax deferred account,
and when it's in the wrath, it's just growing tax free.
There's nothing to worry about, you you know, not have
to worry about that compounding, doubling, tripling, quadrupling, and it's
already moved over.
Speaker 3 (22:52):
So it's really beneficial.
Speaker 1 (22:56):
The other things that we do, you know, tax loss
harvesting and ED can get this a little bit more.
Speaker 3 (23:01):
You know, the.
Speaker 1 (23:02):
Investment team and the tax planning team really work you know,
in kind on things like this, right, and it comes
to tax loss harvesting. I know we're going to be
coming to a break pretty soon, but we'll kind of
get into it on an introductory level. ED, what are
the things that we're doing as a firm, and if
you could explain what tax loss harvesting is to kind
(23:23):
of capture this for clients. But we do have one
minute left, so when we come back from the break,
we're going to talk about tax loss harvesting and how
you know, the investment team and the tax planning team
work hand in hand on this and what strategies.
Speaker 3 (23:35):
We're implementing as a firm, So just give us.
Speaker 1 (23:39):
A couple of minutes and when we come back, we'll
get to that. You're listening to Let's Talk Money, brought
to you by Bouchet Financial Group, where we help our
clients prioritize their health while we manage their wealth for life.
And when we come back, we encourage all listeners to
call in at eight hundred Talk WGY. That's eight hundred
A two five five nine four nine. Again, courage all
(24:00):
listeners to call in at eight hundred talk WGY eight
hundred eight two five five nine four nine.
Speaker 3 (24:08):
We'll be right back. Thank you. You were listening to
Let's Talk Money. This is Vincenzo Testa.
Speaker 1 (24:19):
I'm giving a well deserved break to the one and
only Steve Bouchet. I wanted to say happy Easter weekend
again and happy Passover. We encourage all listeners to call
in at eight hundred talk WGY. That's eight hundred eight
two five five nine four nine. Before we took the break,
and again I'm also joined by my colleague Ed Wilhelm.
But before we get into tax loss harvesting and how
(24:40):
we implement that at the firm, we have Jim.
Speaker 4 (24:46):
Hello, Hi, Jim, how are you?
Speaker 5 (24:49):
Oh, Hi, good morning and thanks a nice interesting program
as usual. I've got a As you were talking about
roth ira a versions. If, for example, I converted twenty
thousand dollars from a from a tax taxable account, am
(25:14):
I still able to contribute to a roth ira my
maximum of seven thousand dollars per year?
Speaker 4 (25:24):
Are you still working?
Speaker 1 (25:25):
Jim? No, okay, So to contribute to a yeah, to
contribute to a roth you have to have earned income, right,
So that's yeah number one.
Speaker 3 (25:35):
Yeah, so you wouldn't be able.
Speaker 5 (25:36):
To okay if you did have earned income. I just
wanted to be uh never was never too sure about
how that works. So you can if you convert, you
can still if you have earned income, can contribute to
a regular wroth not conversion, you would.
Speaker 1 (25:57):
But what I would advise is, if you have the
ability to contribute to a roth ira, if you're working,
I would say the contribution should take priority over the conversion,
right because you're going to be recognizing tax boll income
upon the conversion. But you have the opportunity to contribute
money to the raw that you've already paid taxes on.
So okay, it's just prioritizing that before implementing the conversion.
Speaker 5 (26:22):
Yeah, okay, so I understand that, but you you could
if you could do both right, convert and also contribute
up to the seven thousand limit. If you had earned
income you could do ken you.
Speaker 3 (26:39):
Can and if you're over fifty the limits eight thousand.
Speaker 5 (26:42):
Yes, right, okay, thank you and answers my question. Thanks Alett, Thanks.
Speaker 1 (26:48):
For calling in. Jim, great, great questions. You know, we
love what people calling and ask questions. You know, eight
hundred talk WGY. That's eight hundred and eight two five five,
nine four nine.
Speaker 4 (26:59):
Please call in if you.
Speaker 3 (27:00):
Have any questions.
Speaker 1 (27:02):
Before the break, we were talking about tax loss harvesting
and how important of a tax planning tool it is
for our clients and.
Speaker 3 (27:08):
How we do this firm wide.
Speaker 1 (27:11):
Right, it's not on a case by case basis. Sometimes,
you know, if the situation deems that it needs, you know,
a deeper analysis, we will do tax loss harvesting on
a case by case basis, but we do do it
firm wide across all of our client accounts, and we're
looking when markets are down. This is a great tool. So, ed,
why don't you talk about how tax loss harvesting is
used the firm and what tools we use to implement
(27:31):
those strategies.
Speaker 4 (27:34):
Yep.
Speaker 2 (27:35):
So just kind of go over exactly what tax losce
harvesting is. You know, of course this can only be
done in a taxable account, so you can't do it
in your roth IRA or your IRA. But essentially what
it is is it's you're going to sell a security
that you have at a loss. So you've got a
position with an unrealized loss on it, you sell it
(27:56):
and then you take those proceeds and you buy some
some thing of like kind exposure.
Speaker 4 (28:03):
Now there are rules, it's called a wash sale rule.
Speaker 2 (28:06):
So like, for example, you can't buy the exact same fund.
You know, if you if you have S and P
five hundred and it's down, you know, halfway through a
given year, you can't sell it and buy it right back.
You have to you have to wait thirty days if
you're going to do it with the exact same security.
But what you can do is you can buy a
like kind security. And you know, actually the rules around
(28:27):
this are they're pretty lenient. I think they have to be.
You know, technically it is like overlapping exposure of seven
d percent, so you know, if you had the s
p y ETF and you moved into VO, that probably
wouldn't work because they both tracked S and P five
hundred and there's going to be an overlap of over
(28:47):
seventy percent there.
Speaker 4 (28:50):
But what you could do, for example.
Speaker 2 (28:51):
If you had you know, QQQ, if you know, if
we think back about twenty twenty two, you QQQ is down,
it's a Nasdaq one hundred ETF. You would sell that
and then you could buy something similar like xl K,
which is a technology sector ETF. Right, so it's gonna
hold you know, ultimately very similar exposures. They're going to
(29:13):
track very similarly, but there's enough differentation there that you're
not going to violate that wash sale rule. And of
course this works for individual securities as well. You know,
like so far this year, maybe you've got some Apple
apples down a little bit. Uh, you know, if you
wanted to, of course, i'd encourage investors to, you know,
hang on to some of those mag seven stocks right now.
(29:34):
But you know, if you're in the position where maybe
you've got some other gains coming your way and you
really needed some unrealized losses, you could do something like
sell Apple and uh, you know, buy Microsoft for example,
or another you know light kind security. This also gives
you the opportunity to kind of rotate exposures. We can
get back to that. I know we've got Bob calling in.
Speaker 7 (29:59):
Yeah, Hello, Hi Bob.
Speaker 3 (30:02):
How are you?
Speaker 4 (30:03):
Hey, Bob? Are you doing good?
Speaker 8 (30:06):
My question is is that I have an old four
oh one K from my uh, you know, old employer.
I'm just wondering should I should I roll it over
or should I just keep it in their their own
their stock.
Speaker 1 (30:20):
Yeah, So what I'd say is when it comes to
four oh one k's, it kind of limits you, right,
and especially if it's an old four oh one K.
Speaker 3 (30:27):
Right.
Speaker 1 (30:27):
So four oh one k's have a lot of fees
that are associated with them, Right. There's record keeping fees,
there's third party administrator fees, and the investments within the
four oh one k have high fees as well. Right,
So when you roll it over to IRA, you kind
of eliminate all of those fees. And when you're in
a four oh one K, Bob, you don't have as
much versatility in regards to what you could invest in.
Speaker 3 (30:50):
Right, if you roll it over to.
Speaker 1 (30:51):
An IRA, Right, whether or not you move it to
a money manager or you manage it yourself.
Speaker 3 (30:56):
I'm not sure your situation.
Speaker 1 (30:58):
You have, you know a lot more options in terms
of what you can invest in, right, you know, you.
Speaker 3 (31:04):
Know there's funds within the four oh one K.
Speaker 1 (31:06):
They're very limited, you can only choose from a few,
but you have that versatility when you move.
Speaker 3 (31:10):
It over to the to an IRA and you save
on all those fees.
Speaker 1 (31:13):
So I would always tell, especially our clients, so roll
it over to an IRA and get it out of
that old four okay. And also asset consolidation is important too,
if you already have an IRA or if you have
a four oh one K.
Speaker 3 (31:25):
Now getting it all that on the spot, go ahead.
Speaker 8 (31:28):
Bob, Okay, I got it, so I understand ye all right,
thank you?
Speaker 1 (31:34):
Yeah, thanks for calling in, Bob, YEP. We encourage all
listeners to call in. We love questions. I love answering questions.
So eight hundred talk w G Y. That's eight hundred
and eight two five, five, nine four nine. Thanks for
calling in, Bob and ed once you jump back into
the tax loss harvesting.
Speaker 2 (31:52):
Yeah, so just to recap, you know, tax loss harvesting
is really just selling a security at a loss, and
then you know, replacing it with a similar pure if
it's going to be identical, you got to make sure
you don't violate the wash sale rule or you know,
switch it up at the same time. You know, thinking
about the strategies, you can rotate exposures. You know, maybe
you're seeing something in markets and you want to shift away.
(32:15):
So you know, it's always it can be beneficial to
realize some some unrealized losses because what that lets you
do is it also lets you potentially realize some gains
at the same time. And this is what you know,
kind of allows us to help rebalance the taxable account.
Speaker 1 (32:32):
Yeah, and I just want to touch on that really quick.
So tax loss harvesting is great to offset gains within
a taxable account that you have from stock as well.
But other things that we look at is we'll have
folks that sell real estate. Right, So if you bought
real estate twenty years ago and you use it as
rental property, you took tax appreciation on that real estate
(32:53):
year after year, right, So when you sell it, you
have to recapture that depreciation. Then Oh, also you have
to capture the appreciation on that real estate. And you
could sell stock at a loss to offset that, right,
But it only counts if you do it in the
same year.
Speaker 2 (33:08):
Right.
Speaker 1 (33:08):
If you sold real estate in twenty twenty four and
then took the loss of twenty twenty five, you had
to pay that huge capital gain and what they call
depreciation recapture. You know, you had to pay tax on that.
But if you strategically plan and do it all within
the same year, you could use stock losses to offset those.
But we do have another caller, Steve from Albany.
Speaker 9 (33:28):
Hello, Hello, gentlemen, I have a question regarding Medicare premium calculations.
I'm sixty three. I'm going to be sixty three this
year and twenty five, and I'm going to be sixty
five and twenty seven. So will they be looking at
my income tax return from this year twenty twenty five
to determine my Medicare premiums when I turned sixty five
and twenty seven.
Speaker 1 (33:49):
Yeah, so they look two years ahead, right, So your
twenty twenty five taxes would be used to calculate your
twenty twenty.
Speaker 3 (33:56):
Seven Medicare premiums. They go back two years. Yep, that's right, Steve, you.
Speaker 9 (34:01):
Go back two years. Okay, Now in the future beyond
twenty after I'm sixty five, will they be recalculating that
year by year or is it set in twenty twenty seven.
Speaker 3 (34:13):
That's correct.
Speaker 7 (34:14):
Yep.
Speaker 1 (34:14):
Every year it's a new calculation, Steve. And you know
it's it's funny. Some folks will have a year where
they have a significant amount of income they recognize, just
like I was just talking about, like a sale of
real estate right where there's just one off income number
that's coming in. That's not the norm, right, and that
could bump up someone's Medicare premiums. But there's ways around
it to reach out to your the Medicare administration, so
(34:36):
security administration, and you kind of say that was, you know,
a one off, but yes, they're calculating it on a
year by year basis.
Speaker 9 (34:44):
Year by your basis. All right, thank you, I appreciate it.
Speaker 3 (34:47):
Thanks Steve. And we have one more caller, Gary from
Clifton Park.
Speaker 7 (34:53):
All right, good morning. I've got a quick question related
to I didn't care the very beginning of the show.
I'd like to say first, so I might have just
missed this, but for you guys to really look at
an investment potential and maximizing gains. You would also need
to be doing an individual's taxes, would you not. I mean,
(35:17):
right now, I'm in a situation where I've got an
accountant and then I'm also doing investing in various different
places like you know, Ring and James whatever. But those
two things are not tied together. And what I find
that's the problem is is that they don't really understand
uniquely my circumstances and what would make the most sense
in terms of maximizing the potential for my investments. And
(35:41):
I was just wondering how you guys handle those situations.
Do you do the taxes also or how does that
all work?
Speaker 1 (35:47):
Yeah, I mean there's some clients we do do taxes
for Garry and you know, that's what I'm being biased.
That's what makes our firm so great is that we
have tax professionals on a team like myself, I'm a CPA,
and then we have investors vescials like add on the team, right,
And you know, I'm an advisor at the end of
the day, I'm not just an accountant, so kind of
that hybrid what the advisor. But if you have your
(36:09):
taxes and investments spread out of two different places, those
folks should be talking, right, and that's why, you know,
our firm I feel, you know, we do a great
job because I you know, for me personally, I have
those skills that kind of bring two and two together
that I don't need to call someone's account and I
don't need to call someone's financial advisor.
Speaker 3 (36:26):
I'm able to do that collectively.
Speaker 1 (36:28):
The preparation of the taxes itself, I don't think, you know,
we do do taxes for some clients. I don't think
that necessarily has to be in the same place.
Speaker 3 (36:37):
But when it.
Speaker 1 (36:38):
Comes to the tax planning strategies that are being implemented
and the investment strategies, an advisor and an accountant, if
they're in two different places.
Speaker 3 (36:45):
Should be speaking to each other. Okay, thanks, thanks Gary.
Speaker 1 (36:54):
All right, Ed, let's try and finish our tax loss
harvesting piece and we'll move on.
Speaker 3 (37:01):
Yeah.
Speaker 2 (37:02):
So, just you know, last aspect I wanted to touch
on is uh, you know, I've spoke about it on
the show before, but it's called direct indexing. I mean
it basically takes the concept of tax sauce harvesting and
it overlays you know, recent advancements in technology to create
a really powerful tool. So basically what it does is
that lets you track an index or a you know,
(37:23):
custom built portfolio and you can really tailor what's inside
of it. But instead of owning buckets, whether it's ETFs
or mutual funds, you're going to own a pool, you know,
between two hundred and three hundred individual stocks, and it
has a software that looks at all of the stocks
on a daily basis and looks for any losses to
(37:44):
realize an offset with a like kind exposure. So you know,
if you think about a year like we've seen so far,
you know, if you had a fresh pool of cash
to you know, start an account at the start of
this year, during every dip, you would be you know,
essentially able to take losses. And when you're dealing with
individual stocks, you have so many opportunities for like kind exposure.
(38:09):
So I mean during times of volatility, you really see
strategies like this uh excel, so you're able to you know,
take some losses, neither bank up those losses or offset
any gains. You're also realizing in the account you're able
to still track whatever index or portfolio you're looking to track,
but at the same time you're you're getting these these
(38:30):
losses built up, you know, which contributes to something called
tax alpha and how that's calculated. It's essentially taking those
amount of unrealized gains and as long as you have
something to use them against, you multiply that by your
tax rate, and that compete can be considered, you know,
an additional return on your investment. Right You're you're you're
saving yourself some money on taxes.
Speaker 4 (38:50):
Because you have those losses to utilize.
Speaker 2 (38:52):
So, you know, times of volatility like these is really
when you know we've seen success, uh in these strategies,
and you know it really just takes the kind of
accept of tax soos harvesting to the next level.
Speaker 1 (39:04):
Thanks Ed, Yeah, I want to take a quick break
before we move on. You're listening to Let's Talk Money.
Courage all listeners to call in at eight hundred Talk WGY.
That's eight hundred eight two five five nine four nine.
Speaker 6 (39:16):
If you want to learn more about Bouchet Financial Group,
visit their website Bouche dot com. That's b O U
c h e y dot com. Sign up for their blog,
which is updated every week Stephenbooche dot com. Follow them
on Twitter at Bouchet group like them on Facebook. The
phone lines are open eight hundred talk WGY. That's eight
(39:37):
hundred eight two five five nine four nine. Here is
Stephen Bouche.
Speaker 1 (39:43):
You're listening to Let's talk money. This is Vincenzo Testa,
one of the wealth advisors here at Bouchet Financial Group,
and I'm joined by my colleague at Wilhelm. Before the break,
we were talking about tax planning strategies that we implement
as a firm. We talked about roth conversions, we talked
talked about tax loss harvesting, and one of the other
things I wanted to get into that I think differs
the firm from a lot of you know, other folks,
(40:06):
is ten thirty one exchanges, right, and those of you
who don't know at ten thirty one like kind of exchanges.
When an investor of real estate owns real estate, they
plan to sell it or they do sell it as
a gain and they defer the gain by purchasing another
form of real estate. So that's really beneficial, right, because
(40:27):
you know, if you've owned property for a long time,
you could see some big numbers when it comes to
the gains that you're going to recognize in your tax return.
Speaker 3 (40:33):
After sale, and if.
Speaker 1 (40:36):
You're able to defer those gains and move them into
another property without having to recognize them, that's really beneficial, right.
And same thing when it comes to taxable accounts. So
if you have a taxable brokerage investment account, if you
have appreciated assets within that account and you pass away
and your beneficiary inherits them, they the account gets what's
(40:57):
called a step up and basis the gains are completely
wiped away. So if the beneficiary were to sell those
positions that very day, they would recognize no tax liability whatsoever.
The same holds true for real estate, so ten thirty
one exchanges, right, Being a landlord could be tough sometimes
if you do it for so many years, you might
be fed up with it. Right, And I think anyone
(41:20):
could understand that it's, you know, fixing toilets at two
am on a Tuesday is not everything. You know, something
that everyone wants to do.
Speaker 3 (41:26):
So there's way to do.
Speaker 1 (41:28):
There's a way to do ten thirty one exchanges. But
you can stop being a landlord. So if you have
a real estate portfolio that you know and you're nearing retirement,
agent you're thinking to yourself, hey, I want to get
out of this thing, but I don't want to have
to pay taxes and these years of gains that I've accumulated,
you know, on appreciation and you know, recasturing that depreciation
(41:48):
that I captured on my taxi turn for so many years. Right,
those numbers can get really big. You could pay thirty
forty percent on gains from the sale of real estate.
So you know what we do for clients is we
do ten thirty one exchanges, but through something called a
Delaware statutory trust right. So it's basically an investment vehicle
that you could take proceeds from the sale of real
(42:09):
estate and put into the investment vehicle. It's sort of
like an ETF or a mutual fund, and it sits
in a taxable account and it grows and then the
beneficiary gets a step of a basis really great way
to stop being a landlord and kind of get rid
of that responsibility.
Speaker 3 (42:23):
We do have Bonnie on hold.
Speaker 4 (42:27):
Hello, Hi Bonnie, how are you Hi?
Speaker 9 (42:31):
Hi?
Speaker 10 (42:32):
Happy Easter.
Speaker 1 (42:33):
I have a quick question.
Speaker 10 (42:34):
I love that you're doing a tax conversation today. If
I were to do I've been looking at this rollover
for the roth trying to learn about it and understand it.
What I'm concerned about. It shouldn't in any way affect
my Medicare premium, should it? That's what I'm trying to
keep lower if I can. I'm retired. I have not
(42:58):
taken my Social Security yet, trying to hold out until seventy.
But I also want to keep that down. And I
know as these incomes start to come my way, that
Medicare premium is going to go up.
Speaker 9 (43:11):
Yeah.
Speaker 3 (43:12):
What I would say is God, Bonnie good.
Speaker 10 (43:15):
Yeah, just rolling it over or doing the back door
or whatever you call it, the Wroth conversion. If I
can somehow find the money to pay the tax on
that outside of the account, will that be considered income
on my tax returns that year and then my Medicare
premium go up for a little while.
Speaker 3 (43:36):
Yeah, I mean it requires a comprehensive analysis.
Speaker 1 (43:40):
Right, So when you do a Roth conversion, you have
to recognize income on your tax return.
Speaker 3 (43:44):
Right, There's no way around that.
Speaker 1 (43:46):
Right, but right, right, And when it comes to tax
bracket management, I would have to look at your situation,
right or another advisor.
Speaker 10 (43:53):
Was if I went I understand if I went up
to another tax bracket because of that and nothing else included,
just the conversion itself. It could potentially put me into
higher Medicare premiums.
Speaker 1 (44:07):
Yeah, And what I'd say is it would probably cost
you another roughly one hundred if you moved up a
Medicare premium bracket by doing a Roth conversion. If I'm
just trying to gather from speaking to you, like what
the situation is. Let's say you did thirty thousand, right,
it probably only movee up if it even did like
one hundred dollars a month roughly in Medicare premiums.
Speaker 7 (44:28):
Yeah.
Speaker 10 (44:29):
Right, I'm right now, I'm within two thousand of the
next jump in the Yeah.
Speaker 1 (44:35):
Yes, So so when I do tax play, I look,
I look at that as an extra tax, right, so
you know that isn't it is a tax? So yeah,
I mean if that's the case, I mean, it's really
up to you, right, Have you comfortable doing that? I
think it's beneficial either way, right, depending on the size.
Speaker 3 (44:50):
Of your IRA.
Speaker 10 (44:51):
But I'll look at it. I'm just not it would
just be for a short term that you know, that
one year that I did conversion, or would that kind
of stay there?
Speaker 3 (45:02):
Correct? Correct?
Speaker 1 (45:03):
It would be for that one year, and it would
actually be two years from now. So I you did
it this year, it would affect their twenty twenty seven
Medicare premiums, but only for that year.
Speaker 10 (45:12):
Okay, yeah, and then that would solve right into when
I start having to take Social Security too. So I
get it. There's a lot to look at, but it
is a potential issue for me to consider. So I
appreciate that information.
Speaker 4 (45:24):
Thank you very much, any anytime.
Speaker 3 (45:26):
Thanks for calling in, Bonnie.
Speaker 1 (45:30):
Ye before bonding called in, I was talking about ten
thirty one exchanges in how we help real estate investors
to further capital gains by putting it into something called
Delaware statutory trusts.
Speaker 3 (45:40):
Really beneficial, great tool to.
Speaker 1 (45:42):
Kind of eliminate gains, right, because if you hold the
Delaware statutory trust, which is an investment vehicle that you
could take proceeds from the sale of real estate and
invest them into Delaware statutory trusts, defer your gains. Upon
your passing, it gets up a step up and basis
so your beneficiary could sell that Delaware statutory trust and
(46:04):
recognize no tax upon.
Speaker 3 (46:06):
The date of your death right.
Speaker 1 (46:07):
And over the years, there's so much income to capture
between appreciation and depreciation recapture and guess what, with a
Delaware statutory trust, you're able to do that ten thirty
one exchange and relieve yourself of landlord duties, which I
think after so many years many real estate investors would
love to do that. So, Ed, we're getting to the
(46:30):
end of the show. You know, there's a lot of
things that I wanted to talk about that we didn't
get to. So, I know, we're doing a lot on
the investment team and you know, on the investment side
of the portfolio and the strategies we're implementing. You know,
what we meet Ed and I really always talk about
is direct indexing and how that you know, kind of
ties into tax loss harvesting. Can you move a little
(46:52):
bit add into direct indexing and what we're doing at
the FIRMA and what that is.
Speaker 2 (46:58):
Yeah, to go over you know, we utilize a program
it's called Canvas. It's through you know, our close friends
over at Franklin Templeton and O'Shaughnessey Capital Management.
Speaker 5 (47:12):
Uh.
Speaker 2 (47:12):
You know, so much overhead and technology goes into you know,
a strategy like this, so it's really important to have
you know, strong partners in the space. But you know
what we basically do is you know, we get an
account set up on the platform, and what we do
is we had their team build out. They took our
you know, our taxible models, and they recreated it using uh,
(47:36):
you know, a blend of a target amount of individual stocks.
And then you know, as I mentioned, as time goes
on and some of those stocks will be at a gain,
some of them will be at a loss. And what
the software is going to do is it's going to
look daily, uh, you know, for losses and it's going
to you know, either try and bank those or use
gains to offset. Now, it is somewhat of a balancing
(47:57):
act because you can't just keep realizing loss after loss
after loss, because eventually the portfolio would deviate from your
target portfolio. So there is something involved called tracking air,
which you know, is another function that the software uses
as a measurement to you know, help determine what we're
selling and what we're buying. So you can see how
a strategy like this would be so complicated, and it
(48:20):
really is the baseline. It is just the advancements in
technology we've seen. But once we get that portfolio set up,
you know, we get it going live and then you know,
we monitor it here and we have check in conversations.
Speaker 3 (48:34):
Yeah. Thanks Ed.
Speaker 1 (48:35):
You know, we're doing a lot of great things at
the firm. The investment management, the tax planning, all these
things come together and that's really comprehensive financial planning for you.
Speaker 3 (48:42):
We're at the end of the show.
Speaker 1 (48:43):
I thank everyone for calling in and listening. I mean,
it's Vincenzo tests I have Ed Wilhelm joining me. You're
listening to Let's Talk Money, brought to you by Bouchet
Financial Group, where we help our clients prioritize their health
while we manage their wealth for life.
Speaker 3 (48:57):
Thank you.
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