Let's Talk Money

Episode Transcript

Speaker 1 (00:00):
WGY Programming time is brought to you by the Bouchet
Financial Group. Are you working with a true fiduciary to
manage your wealth? For over thirty five years, Stephen Bouche
and Bouchet Financial Group have been dedicated to putting clients first.
As a fiduciary, our only priority is what's best for you,
providing transparent, fee only asset management with no hidden sales

(00:22):
or commissions, with offices in historic Downtown Troy, Sarahtoga Springs, Boston,
and South Florida. We're here to guide you through life's
financial decisions. Learn more at Bouche dot com. That's bou
cch e y dot com. Catch Ryan Bouchet's expert financial
insights every Wednesday on WGY Mornings with Dave Allen. Have

(00:44):
you recently come into sudden money, whether from life insurance proceeds,
divorce settlement, retirement, lump sum payout, even winning the lottery?
Do you know what to do next? Call in now
with your financial questions at one eight hundred Talk WGY
one AAIA one hundred and eight, two five, five, nine,
four nine. Now Here's WG wise Financial Analyst Steven Bouche

(01:07):
or one of his expert colleagues.

Speaker 2 (01:22):
Hello everyone, and welcome to Let's Talk Money. My name
is Samantha Macy and I will be your host today.
I'm a wealth advisor and certified financial planner with Bouchet
Financial Group. I work closely with clients on their investment
and financial planning needs, making sure their investment decisions go
hand in hand with their financial goals. I'm joined this

(01:42):
morning by my colleague and fellow advisor, Vincenzo Testa. Vinnie,
why don't you introduce yourself?

Speaker 3 (01:49):
Hi?

Speaker 4 (01:49):
Thanks Sam. I'm also one of the wealth advisors here
at the firm. I'm a CFP and a CPA A
specialized in financial planning and tax planning, so please feel
free to call in with any questions, especially regarding tax planning.
Our hotline number is one eight hundred Talk WGY. That's
one eight hundred eight two five five nine four nine.

Speaker 2 (02:09):
Thanks Vinny. We're both very excited to be here with
you for today's show. On this cloudy Saturday morning, hopefully
everyone can get out and enjoy the day before any
rain or thunderstorms hit your area. As Vinnie just shared,
we encourage listeners to call in with questions. You can
reach us again at one eight hundred talk WGY. That's
one eight hundred eight two five, five, nine four nine.

(02:33):
You can also email questions to us at Askbouchet at
Bouche dot com and we will try to address them
during the show as well. So today we've prepared a
great show for you. We're going to review the weekly
market update, jump into some proactive planning strategies for required
minimum distributions, talk about rock conversions, and some other proactive
tax planning tips. So I will be kicking off today's

(02:56):
show talking about the weekly market Update. This week, we
saw the stock market surge higher, driven by mostly good news.
We saw optimism that the conflict in the Middle East
would be less severe than previously expected, in hopes that
a ceasefire agreement would be reached. We had comments from
the White House suggesting current tariff deadlines could be extended again.

(03:16):
On Thursday, this week's initial jobless claims clocked in lower
than expected, adding to the overall optimism in the market.
And of course, yesterday there were even more positive news
and momentum in the market after the White House said
it signed a trade deal with China and that it
expects to sign more deals ahead of the July ninth
tariff pause deadline. However, that probably won't include Canada, as

(03:39):
the trade discussions have ended with their country still The
S and P five hundred and Nasdaq one hundred ended
with new all time highs yesterday, and the Dow was
higher as well, but still about sixteen hundred points below
its previous record. Of course, there was some negative news
this week, including new inflation data that came in slightly
stronger than a expected in new developments and tear of tensions.

(04:03):
The personal consumption Expenditures Price Index PCEE came in hotter
than expected, but only by a hair PCE roseer point
one percent for the month, making the annual inflation rate
two point three percent above the Fed's projected goal of
two percent. Core inflation, which excludes food and energy costs,

(04:24):
jumped point two percent over the month and two point
seven percent year every year, slightly higher than forecasts. In addition,
spending fell point one percent for the month, roughly meeting expectations.
Will Personal income decline point four percent, which was worse
than a projective gain of point three percent, but this
wasn't enough to hold the market down. That this past week,

(04:46):
the S and P five hundred was up three point
four to four percent, NAZEQ one hundred up four point
twenty five percent. Mid caps ended the week with up
two point five to six percent, small caps up three
point one percent. You're to date, the S and P
five hundred is up four point ninety six percent and
the Nasdaq is up four point nine to nine percent. Now,

(05:09):
if we zoom out a little bit, the S and
P five hundred has dropped nearly twenty percent in the
week's following Liberation Day, but has pulled off an incredible comeback,
capped off with yesterday's record breaking clothes and I just
read an interesting statistic that said that a twenty percent
recovery over the course of two months has only happened
five other times since nineteen fifty, and every time it happens,

(05:32):
the S and P five hundred averages a thirty point
eight percent gain in the subsequent twelve months. Now, of course,
past performance may not be indicative of future results, but
this is definitely an interesting statistic. Looking forward, many people
are waiting to hear what the Federal Reserve's next interest
rate announcement on July thirtieth will be and we're also

(05:53):
waiting to see if the One Big Beautiful Bill will
pass with the Senate. Vinnie, I know you've been following this.
Can you share a little bit about the tax implications
if the bill were to pass?

Speaker 4 (06:03):
Yeah. Absolutely, So for those of you who don't know,
there is a budget reconciliation bill that has passed in
the House of Representatives and has been passed off to
the Senate, and then if that gets passed in the Senate,
it will move out of the President to sign off.
So basically it's called the One Big Beautiful Bill Act.
And there is a lot of tax legislation within the bill,
but just a few key highlights I wanted to highlight

(06:25):
that I think would apply to most of our listeners
and a lot of folks that live in New York
and you know, have high real estate taxes, pay state
income taxes. So the first thing I wanted to touch
on was in twenty seventeen, during Trump's first term, he
passed tax reform and basically, you know, lowered tax brackets

(06:46):
for most folks, individuals in particular. So basically with this bill,
the rates that were lowered, and you know, with the
tax reform, those are going to continue continue on because
that Tax Cuts in Jobs Act is what the bill
was named when Trump was in office for his first term.
That was set to expire in twenty twenty six. So

(07:06):
basically all of the laws that were placed in the
Tax Cuts and Jobs Act are were temporary for legislation purposes,
so you know the way the law is written. Now
that tax all will go back to what it was
pre twenty seventeen. So basically they're extending all of the
tax law that was issued with the Tax Cuts and

(07:27):
Jobs Act, so those tax brackets will stay the same
and continue on permanently. And the other thing to make
no of was with the Tax custom Jobs Act, a
lot of folks in New York pay high real estate
taxes and itemizer deductions, right, So there's the salt deduction
on Schedule A for itemized deductions that was capped at
ten thousand dollars and they're going to hire that threshold

(07:49):
to forty thousand dollars. So that's really beneficial for folks
living in New York. We all live in New York,
you know, most of our listeners do, and we know
how higher real estate taxes can be. So this is
the combination of your state income tax in real estate taxes.
So having that cat that ten thousand dollars really cost
a lot of folks a lot of tax liability. So
raising that cat to forty thousand is going to really

(08:10):
create some tax savings for a lot of folks in
New York, Connecticut, all these states with high real estate taxes.
Another interesting thing that they're at that they added to
the One Big, one Big beautiful bill is they're temporarily
making auto loan intrasductible, which is really interesting. But the
auto loans that you have have to be tied to

(08:31):
vehicles that were manufactured in the US, So that's going
to be available from twenty twenty five until twenty twenty eight. Obviously,
if you think about that on the surface, they're trying
to basically incentivize companies to manufacturer their vehicles in the
United States. So that's another great deduction that that's never

(08:51):
been available to individual tax payers and I think could
create some tax savings and beneficial to all of us.

Speaker 2 (08:57):
So thanks for sharing, Minni. Yeah, it's a lot of
great content and something to keep an eye on moving forward.
As you know, it seems like you know, there is
a lot of conversations about it being passed, but of course,
you know, we'll see what happens. So we are coming
up on our first commercial break. Please stay with us

(09:19):
as we will be shifting gears into some interesting planning topics.

Speaker 4 (09:22):
Next.

Speaker 1 (09:30):
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
Stephenbouche 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 hundred eight two five five

(09:52):
nine four nine. Here is Stephen Bouche.

Speaker 2 (10:01):
Welcome back. My name is Samantha Macy, obviously not Stephen Bouchet.
He is getting a well deserve break this morning, but
I will be your host on Let's Talk Money. I'm
also joined by my colleague Vincenzo Testa. As we said earlier,
we do encourage listeners to call in with questions. You
can reach us at one eight hundred talk WGY. That's

(10:21):
one eight hundred eight two five five nine four nine.
So we're going to be shifting gears a little bit
and talking about proactive planning for your future required minimum
distributions also called rm ds, and whether you're approaching or
at R and D age or managing distributions for a

(10:41):
loved one. Hopefully today's information will help you navigate the
rules and nuances with confidence moving forward. Most people are
very familiar with what an R and D is, but
for those that you know maybe aren't as familiar. It
is a minimum amount you must withdraw from your retirement
account each year once you reach a certain age. Now

(11:03):
this has changed as of the Secure Act two point zero,
which is maybe something that people aren't aware of. So
for those born in the years nineteen fifty one to
nineteen fifty nine, your RMD age is now seventy three
years old, and for those born in nineteen sixty or
later it is age seventy five. So just important for

(11:24):
you to understand when your arm D is going to
be in the future. So when they begin, how does
it work? Well, In the first year that you turn
arm D age, your arm D begins, your requirement begins,
but there is a grace period for that very first
arm D that allows you to take that first one

(11:46):
by April first of the following year. However, all subsequent
rm ds must be taken by twelve thirty one of
each year, which means if you choose to use this
grace period and delay that first rm D until the
next year, you still have to take your second arm
D that year as well, which means that you're doubling
up on that taxable income and something that most people

(12:09):
try to avoid. Now, there might be certain circumstances where
that can make sense, so definitely a conversation to have
with your advisor, but in most circumstances, most people take
their rm D in the year they first turn that age,
and then all those years moving forward. One interesting nuance
to rm ds is if you are someone that is

(12:31):
still working, which most people are retired by the time
they're seventy three or seventy five, but there are those
individuals that love to work and will continue to work,
maybe for the rest of their lives as long as
I can. So if you are one of those individuals
and you do not own more than five percent of
the business you're working at, most plans allow you to
postpone rm DS from your current employer plan until no

(12:54):
later than April first of the year after you finally
stop working. The caveat to this is if you have
an IRA or a previous employer plan, you still have
to take an R and D from those accounts when
you hit RMDH. You can only delay the R and
D from your current employer plan. So why does productive

(13:16):
planning matter right, Well, the most obvious reason is higher
tax brackets. So, since rm ds are a function of
your IRA account balance, the larger the IRA, the larger
your R and D, and each dollar that comes out
of an IRA is taxes ordinary income. So if you
are someone with a large IRA, your rm D requirement

(13:40):
may be more than your regular cash flow needs and
this could put you at risk being pushed into higher
tax brackets. So if that's something that can be avoided,
it's a good idea to start doing some planning now
to try to do so. Another reason is your IRMA
premium could be increased. For those that aren't aware, ERMA

(14:02):
stands for income related Monthly Adjustment Amount and it is
applied to your Medicare premiums once you reach sixty five.
IRMA is calculated based on modified adjust cross income from
two years prior. So the risk of rm ds is
that without proper planning, an individual could be in a
situation where their larger requirement forces them into a higher

(14:23):
premium situation, and at the highest point, a married couple
could be paying up to twelve seven hundred dollars more
per year for Medicare premiums compared to their peers in
the lower bracket. So something to certainly just watch out for.
Another element is inheriting iras. Before the Secure Act and

(14:45):
Secure Act two point zero, a beneficiary could stretch rmds
over their lifetime, taking out only small amounts each year. Now,
any non spouse beneficiaries of iras must distribute the entire
account within ten years of the original owner's passing, and
they'll be paying ordinary income on each tax dollar that

(15:06):
comes out. Now, considering that many beneficiaries are adult children
who may be at their peak earning years when they
inherit this account, this can represent a significant tax cost
as the added income from inherited diarray withdrawals as to
their household income, which of course in turn means potentially
higher tax brackets and paying a higher percentage of their

(15:29):
inheritance to the irs. And that's something that I don't
think anyone wants to do. So what can we do
to plan ahead well. One of the best ways to
mitigate these issues is by taking strategic withdrawals before ARMDH.
Take advantage of your gap years. Most retirees experience gap
years when they are retired, so they no longer have

(15:52):
that earned income, but they are not yet in the
rm D phase. This means that they have several years
where they may be in a potentially lower tax bret
and that can execute strategies like that will help reduce
the impact of rmds down the line. And some of
these strategies include ROTH conversions or qualified charitable distributions. ROTH

(16:13):
conversions are one of the strategies that are of particular
interest to our clients, so we thought we would drill
down on that a little bit today. Benny, can you
walk through the strategy behind ROTH conversions in the long
term benefits?

Speaker 4 (16:26):
Yes, thanks Sam, and again we encourage all listeners to
call in at one a hundred talk WGY. That's one
a hundred eight two five, five, nine, four nine. And
I think you know this is what differentiates our firm
from a lot of other firms is we do this
in depth tax planning for clients. And Sam's right, roth
conversions are a really great tool that we're executing for

(16:48):
our clients day in and day out. And reason being
is because you know, like Sam said, you know that
R and B it could create some issues from a
tax perspective and the IRMA brackets, right, so if your
RMB is a number that's uncontrollable and really high, you're
going to have issues with being in higher tax brackets
and having higher Medicare premiums. Then in addition to that, also,

(17:10):
like Sam said, inheriting an ira, the rule is when
you inherit an ira, you have liquidated in ten years.
So if you think about that on the surface, if
there's a two three four million dollar Ira, you're taking
out two hundred three hundred four hundred thousand dollars per year,
it's going to create serious tax issues for you. And
doing ross conversions or taking withdraws before arm d ah

(17:34):
is going to be really helpful. And a row conversion,
just to put it into Layman's terms, is moving money
from your traditional IRA or rollover IRA or four one
K tax deferred retirement plan to a tax free IRA,
so a roth ira. And you know, obviously it's beneficial
for all the reasons I just listed, but there's ways

(17:54):
to do it even more strategically than just saying, hey,
let's just move thirty thousand today or let's move ten
thousand and right, you want to do it in the
years that your income is low. So maybe you know,
you know retirement is coming up, maybe you're sixty five,
right about eight years before RMV age, maybe you start
doing ross conversions. You know, the year after retirement, that's
going to be a lower income here, because the years

(18:15):
that you're working you're going to have higher income, you're
going to be in a higher tax bracket, so you
don't have as much flexibility with the amount that you
could do for ross conversions. On the flip side, another
great time to do ross conversions is when the market
takes a dip. So if you think about this, if
the market takes a dip in your traditional IRA and
you move money out, you know, as history says, the

(18:36):
market always goes on to make all the time highs.
And if you move it from the traditional ira over
to the ross ira when the market's down and it
recovers in the ross ira, all of that growth is
tax free, right, and that's also really beneficial for obvious reasons.
And when we're doing ross conversions for clients. We're looking
at it very strategically, very in depth. You know. One

(18:57):
of the main things I'm looking at is tax bracket management. Right,
So tax brackets are marginal. So there's a ten percent
tax bracket, there's a twelve percent tax bracket, twenty two,
twenty four, thirty two, so on and so forth. So
the higher your income gets, the higher your tax bracket
will get. So you think about that. On the surface,
there's a gas Let's say someone's in the twelve percent
tax bracket and the twenty two percent tax bracket is

(19:19):
the next tax bracket above that. So if I'm looking
to do a ross conversion for someone in the twelve
percent tax bracket, I'm gonna kind of do a stress
task to say, Hey, what's it look like if we
do twenty thousand, but then you get bumped up in
the twenty two percent tax bracket. No, okay, but we'll
good with that amount. Was to look like, if we
do fifty thousand, if that bumps them up to the
next tax bracket, I might try to limit the amounts

(19:42):
that we're doing for ross conversions for clients. That way,
we can manage your tax brackets in an effective way,
and we're doing you know the time and when all
these things come together, right, it's in a low income year,
the market's down and you're managing your tax brackets. This
stres it's so effective for the long term for estate planning,
for your arm D planning, and it's really beneficial because

(20:02):
those medicare premiums. If you're eight seventy three and you
have a significant rm D Let's say it's two hundred thousand.
Let's say you know you've maxed out your four O
one K for years and you have this huge, huge
rm D your medicare premiums. I mean potentially, depending on
how much your income is, could be six hundred dollars

(20:23):
per spouse every month. And it's like, that's why this
stuff is so effective, because not only do you have
to manage your tax bracket in that regard, but that's
also an extra tax and it's significant and it takes
money out of your pocket. So tax thaying really saves
folks a lot of money. And like I said, it
really differentiates us from a lot of firms. Like I said,

(20:43):
I'm a CPA. You know, we have a tax team,
we have Scott Strohecker who's an enrolled agent, and all
the advisors do tax planning at an in depth level.
And again I encourage all listeners to call in at
eight hundred talk WGY. That's eight hundred eighty two five
five nine four nine.

Speaker 2 (21:01):
Thank you, Vinny. Yeah, roth conversions can really just be
so impactful for your long term financial picture, and we
do implement that strategy a lot for clients and whether
their early career, mid career, or they're in those gap years.
I mean, there are different strategies to each of those
time periods in someone's life, and of course we look
at their exact tax situation to make sure that it

(21:24):
does make sense. But it can really, like Vinnie said,
save you from those higher rm ds in the future.
Great for legacy planning and also just helping you avoid
taxes in the future for your lifetime tax payout when
we look at them, you know, from that perspective. And
one thing that is worth considering is that you have

(21:45):
to really consider when your arm D start, like we
were saying, but one of the main reasons is that
rm ds cannot be used for roth conversions. So if
you have an R and D requirement, you have to
take that money out and pay taxes on it, and
then you can do a roth conversion with additional dollars,
but you cannot use your rm D towards a wroth conversion.

(22:07):
So that is one reason why people do focus on
those gap years to again use the lower tax bracket situation,
but also take advantage of not having to take out
additional income on top of their R and D requirement
at that time. Now, of course, one of the cons
to doing this, which you know we don't dwell in
as much, is you're paying taxes immediately in that year

(22:29):
right for doing a wroth conversion. But again, if it
makes sense because you're paying less in taxes, then you
would later on for being in a higher tax bracket.
That's when you want to do it, and you also
want to make sure that you have cash on hand
for this. You should only consider it if really you
have that cash on hand, because you want to maximize

(22:50):
how much is going into your wroth high array. We
don't want you to be doing with holdings from the
actual conversion itself because that kind of minimizes the impact
for you over the long term. I want to make
sure that you're maximizing what that situation will do for you.
So next after we have our commercial break at the

(23:10):
bottom of the hour, we will be focusing on another
potential strategy for people as they think about R and
D planning, and this is a qualified charitable distribution. And
we do have a question and we will be addressing
that question after the commercial break as well. But a
qualified charitable distribution is essentially when someone is able to

(23:33):
do a distribution from their IRA tax free to a
charity of their choice. And we'll talk about the pros
and cons why you implement the strategy and really who
is the best fit for it after this, So please
stay tuned again. If you have a question, you can
call us at one eight hundred talk WGY. That's one

(23:53):
one hundred eight two five five nine four nine, And
you can also email questions to us over the break.
If something on your mind, please please share it with us.
You can email us at Askbouchet at Bouchet dot com
and of course we'll try to address them during the
show and if we can't get today to it today,
maybe someone on tomorrow show will be able to answer

(24:13):
your question then. So always feel free to turn tune
into the next day's show. All right, well, we are
very getting very close to this commercial break. One thing
I wanted to bring up is if this is an
interesting topic for you. We did recently have a webinar
where we talked about the all of these topics, really,

(24:35):
the R and D strategies, ROTH conversions, qcds. It gets
very in depth. You can navigate to our website to
learn more about it. It is certainly something that I
would say is worth the time. If you are someone
that you feel like you fall into this category, well,
thank you so much for joining us today. It was

(24:57):
a pleasure sharing everything so far. Please stay tuned. You're
listening to Let's Talk Money, brought to you by Bouchet
Financial Group, where I help our clients for prioritize their
health while we manage their wealth for life.

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Speaker 6 (26:57):
W g y Agi Weather forecast for today, mostly cloudy
and humid with thunderstorms. The heaviest will be later in today.
Storms can provide flash flooding, damaging winds and even a
possible tornado with the high of eighty three for tonight.
Thunderstorms in the area and spots early on in the evening.
Otherwise of leary, human lost sixty five more and mostly
sunny sky's hi eighty three from the WGY Weather Center.

(27:19):
I'm Kinglin Lawrence.

Speaker 1 (27:21):
You only get one shot at retirement. Are you truly prepared?
There's no do over when it comes to securing your
financial future. Do you have the right plan in place?
Does your advisor have the expertise and experience to manage
your wealth? More importantly, do you trust their advice? At
Bouchet Financial Group, we bring decades of experience to the

(27:42):
table with offices in historic downtown Troy, Saratoga, Springs, Boston
and South Florida. Schedule a complimentary in person or virtual
consultation today where we'll assess your financial well being and
help you plan for the future. Call our client concierge
at five one eight seven two zero thirty three thirty three.
That's five one eight seven two zero thirty three thirty three,

(28:07):
or visit www dot Bouche dot com. That's b O
U c h e y dot com. Stephen Bouche has
built a team of twenty skilled professionals, including nine certified
financial planners, three CPAs, one IRS enrolled agent, one accredited
investment fiduciary, one certified private wealth advisor. To name some

(28:31):
expertise you can trust, confidence you deserve. Thanks for staying
with us through the news break. The phone lines are
now open. Call one eight hundred talk WGY one eight hundred,
eight two five five nine four nine. And now here's
WGY's financial analyst, Stephen Bouche or one of his expert colleagues.

Speaker 4 (28:55):
Where Hi, everyone, it's the Vincenzo So, one of the
wealth advises is here at Bouchet. We're going to talk
about an email we receive. We just received from a
client we do have an email where you can ask questions.
It is ask Bouche at bouchet dot com. Or if
you want to call in, that's great too. We love
callers one eight hundred talk WGY. That's one eight hundred,

(29:18):
eight two five, five, nine four nine, Please call in
if you have any questions. And the question we received
was from Paul and he said, is there a method
short of buying individual securities where you could buy something
like the S and P five hundred but exclude a
few stocks that you think are not appropriate such as

(29:38):
my latest example micro micro Strategy led by Michael Sailor,
and perhaps a Max seven stock that I perceived as
grossly overvalued. So what Paul's referring to is buying individual securities. Right,
So a lot of what we do in our portfolio
is buy ETF. So we'll buy, you know, a text ETF.
And what that is is it's a fund that is

(29:58):
made up of one hundred is of companies. Right, it
might track at indoicy like to ask the P five
hundred or NASDEK or small caps or mid caps, and
Paul is asking, how can you basically buy the AS
and P five hundred or one of these industries and
exclude or include companies. And we do have a way
to do that, and we just implemented this over the

(30:20):
past couple of years. It's kind of a new strategy
in the finance world, and it's called direct indexing. So
direct indexing is exactly what Paul is referring to. Basically,
you can customize your portfolio. Right Let's say you want
to buy the S and P five hundred, and you
know you're not a big person that is a supporter
of war, so you want to you know, not invest

(30:42):
in any defense contractors. You could do that, and it's
really a great tool. Or if you want to be
overweight tech more so while buying the SP five hundred,
you could do that. And or if you want to
exclude investments in tobacco or fossil fuels, you could do that.
So direct indexing is a way to perch just the
S and P five hundred and exclude or include more

(31:05):
of companies or exclude companies that you don't want to
be invested in. And there's other benefits of doing so too.
Versus the portfolio destruction. Customization is tax loss harvesting, and
tax loss harvesting is basically when maybe you have realized
capital gains throughout the year and it's the end of
the year, the market's taking a little bit of a dip,
and you want to basically sell some of your positions

(31:28):
that are at a loss to offset any gains that
you have realized or are going to realize. So that's
what tax loss harvesting is. It's basically using your investments
to minimize your taxes. And you could do that with
direct indexing because you're not invested in the S and
P five hundred as a whole. You're actually invested in
each individual position and you could buy and sell those

(31:49):
individual positions individually, right, So it gives you more flexibility
to basically, you know, execute that tax loss harvesting. So
it's really beneficial, really great school. So Paul, if that
didn't answer your question, please feel free to fall in
and I'll let Stam kind of take it from here
and get in the QCPS.

Speaker 2 (32:10):
Thanks FINDI, and thank you Paul for emailing us that question.
Great question. So yeah, so next we wanted to talk
about another strategy here that has to do with helping
you minimize your future rmds, but also just helping you
avoid taxes from your IRA, regardless if you have RMD
minimization in mind. So what I'm saying QCD, I mean

(32:31):
qualified charitable distribution. And as I said before, this is
a tax free charitable donation withdrawn directly from your IRA
and sent to a charity of your choice. So the
money never actually goes to your checking account and goes
straight from your IRA to the charity. So how it
actually works is besides you needing to have a traditional

(32:53):
IRA or inherited IRA to do the strategy, you have
to also be seventy and a half years old or
old older. Now for those that remember, our m D
age is actually closer to seventy three or seventy five,
depending on when you were born. Oh, it looks like
we have a caller here, Amy from Northville. Why don't

(33:13):
you go ahead?

Speaker 3 (33:16):
Hi? Yes, I had a question on the loss conversions.
I replayed early and I have about a decade that
on that spot that I can do these lost conversions.
But I'm also balancing with is buying my health insurance
of the New York State of Health and the premium
tax credit. And I was wondering, I talk.

Speaker 2 (33:37):
A little bit, Benny, do you want to take that.

Speaker 4 (33:44):
Yeah, I mean I do have. I've had a little
trouble hearing you. But what I got from that is
you want to start executing ross conversions and you're in
a position to basically purchase health insurance in the marketplace.

Speaker 3 (33:57):
Yes, And how do I balance the roth converse in
premium tax credits?

Speaker 2 (34:03):
Yeah?

Speaker 4 (34:03):
Yeah, I mean that's kind of complicated questions. So basically
your premiums for that are also going to be based
on your income, right, So what happens is they kind
of calculate what they expect your income to be, and
then they give you premiums in the marketplace, and then
if your income's higher and lower, they'll give you credit

(34:24):
kind of for the premiums that you might have overpaid. Right.
So it's a very complex calculation, right, And that's why
it's so important to get really in depth when you're
doing ROTH conversions because there's so many moving pieces. So again,
I would definitely work with a professional, you know, unless
you're a CPA or a tax professional. I think it'd
be hard to do it on your own. But again,

(34:46):
you know, managing your income in terms of you know,
how much should you do in ROTH conversions to kind
of manage those premiums to the marketplace. That's another I
just haven't come across that in practice yet, but that's
definitely something worth paying attention to, similar to Medicare premiums.
So definitely, you know, work with a professional on that.

(35:06):
And that's all I would say there.

Speaker 2 (35:10):
Okay, thank you, yep, And we actually have another caller,
Elizabeth from Stanford.

Speaker 3 (35:21):
Oh can you hear me?

Speaker 2 (35:24):
Hi? Elizabeth?

Speaker 4 (35:27):
You know.

Speaker 3 (35:29):
You said that if the carrot and IRN you have
exstribution within ten years.

Speaker 2 (35:37):
Yes, yes, so I can. It sounds a little bit
hard to hear you on this send. But from what
I'm understanding, you're asking about the rules for iras.

Speaker 3 (35:48):
Is that also true with an inherited trust? Uh?

Speaker 2 (35:54):
Well, and a trust has different rules depending on how
it is written and what is in the trust. So
that would be you working with your state attorney to
understand how the trust document was written and make sure
that you fully understand, you know, how the inheritance would
work based on you know, again the assets in the trust.

(36:14):
And that's that would definitely be a question for your
state attorney in terms of how an inherited IRA functions
on its own after the Secure Act two point zero.
Anyone that is not a spouse when they inherit an
inherited iray, they have ten years to take the distribution
out or take the IRA balance out completely. So a

(36:35):
lot of people will try to balance this and take
a tenth out over every year. But if the person
that is deceased was of rm D ah, there is
a minimum amount you need to take out each year,
which is an rm D amount based on the new
beneficiary's age. So at the very least you have to
take out an rm D from an inherited account, but

(36:55):
you actually may need to be taking out more because
if you are trying to strategy keep yourself in a
lower tax bracket over the ten years, you want to
make sure that you're doing, you know, maybe a tenth
every year. Or maybe you have something that you have
planned if you're purchasing a home, or you're helping pay
for your kids college, and you know you need more
funds than a certain year or four years, you know,

(37:18):
and so you can plan ahead for that. But if
there's really no other, you know, major financial goal, a
lot of times it makes sense to just take the
tenth every year. Does that help?

Speaker 3 (37:30):
Yeah?

Speaker 2 (37:31):
So rm D is a required minimum distribution, and when
you reach age seventy three or seventy five, you have
to take it. So if the person that passed away
was of that age, the person that inherited the account
needs to continue taking rm ds.

Speaker 3 (37:48):
Okay, thank you so much, of.

Speaker 2 (37:50):
Course, all right, thank you for joining Elizabeth. If anyone
else has questions, please feel free to call in and ask.
We're happy to have a discussion about any of these
topics we're talking about today or anything else that's on
your mind. So I'm going to jump back into qualified
charitable distributions. I was saying that you have to be

(38:11):
seventy and a half years old to implement the strategy,
and as I stated earlier, the distribution has to go
directly to a five OHO one C three charity and
then once that charity receives your donation, you would receive
a confirmation letter from the charity that states no goods
or services were received in exchange for the contribution. Another

(38:36):
item to note is that you need to make sure
that this check that gets sent to the charity is
cashed in that calendar year, because if you want that
tax benefit in the current year, it needs to be
cashed in that year, So try not to send qcds
mid or end December because that can become an issue.
But if you do it any any other time during
the year, it really can be a great strategy. So

(38:59):
who's a good fit. Someone that is a good fit
for a qualified charitable distribution is someone that's already charitably inclined.
So if you're making donations or if you're tithing to
your church, this could be a great way to save
taxes because again it's federally tax free and New York
state tax free. Other states have different rules upon if

(39:20):
it will tax you or not on a QCD, but
worth looking into. For your state. You have to have
an IRA and again you should be seventy and a half.
But you could also be using this when you get
to RMDH to help you minimize your taxes.

Speaker 4 (39:35):
So overall, and then they're too Sam really quick. Oh yes,
like Sam was saying, you know, if some folks are
making charitable contributions are not itemize the introductions, they're making
cash contributions and not receiving a tax benefit. So what
I always tell clients is sable tough clients too, is
instead of making those cast contributions, keep that cash in
your pocket and just make the QCD from your IRA,

(39:57):
and it's completely taxed for your receiving attack benefits. So really,
like you said, Sam, a great way to save in
taxes if you're already making cast contributions because a lot
of folks don't itemize and don't get that tax benefit.

Speaker 2 (40:09):
That's absolutely right. Yeah, with most people taking the standard deduction,
this is one of the very few ways for you
still to get that right off for making a charitable
deduction on top of getting the standard deduction. So thank
you for pointing that out, Vinny. And again, this is
a great way to reduce your income taxes. And I'm

(40:30):
not sure if this was clear yet, but taking a
QCD is a direct deduction from the R and D
amount you are required to take in that year. So
if you have an R and D requirement of fifteen
thousand dollars, let's say, and you decide to make a
fifteen thousand dollars qualified charitable distribution from your IRA, that

(40:50):
fully satisfies your rm D requirement for that year, and
you paid zero dollars in taxes. So for someone that's
already making these donations or just looking for a way
to minimize taxes because they don't need the extra cash flow.
This is an amazing strategy to implement moving forward. All right,
looks like we're coming up on another commercial break here.

(41:10):
Please stay tuned and we will be right back with you.

Speaker 1 (41:14):
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 Stephenbouche 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

(41:35):
hundred eight two five five nine four nine. Here is
Stephen Bouche.

Speaker 2 (41:45):
Welcome back. This is Samantha Mayc, your host for Let's
Talk Money Today, joined by my colleague Vincenzo Testa. Obviously,
we're giving Stephen Bouche a well deserved break this morning,
so again we are encouraging listeners to call in. We'd
love to speak with you. You can reach us at
one eight hundred talk WGY one eight hundred eight two
five five nine four nine, or please send us an

(42:07):
email at Askbouche at Bouche dot com. So I was
in the middle of speaking about qcds and while you
should implement them, and I just wanted to leave you
with a few considerations about that strategy. So for twenty
twenty five, the QCD limit that an individual can donate

(42:29):
is one hundred and eight thousand dollars. Now that's per individual,
so you can double that. If you are a couple
looking to donate to a charity that you care about,
you can also make as many QCD donations as you
would like, as long as you stay under the annual
dollar limit that I was just speaking about. So if
you are someone that you know likes to donate to,

(42:52):
you know, American Cancer Society, but you have another three
charities that you care about, you can do all of them.
You're not limited to just the one that you care
about the most. Then we have what we make. What
we do for our clients to make it easier on
them is we set up what's called a QCD checkbook.
So when you go to make a QCD, you can

(43:13):
contact the custodian of whoever you custody your assets with
and say, hey, I would like to make a QCD,
and they can cut the check themselves and send it
to the charity. But a lot of people like to
have more of a personal touch, and so we set
up what's called this QCD checkbook for clients where they
actually have a physical checkbook that they can write the

(43:36):
checks out and hand deliver them or maybe mail them
to the charities of their choice. But it just gives
them that more tangible feeling of giving, rather than always
just calling into the custodian saying, hey, just send this
check wherever. Of course, there are some clients that prefer
that if that is easier for them, or if let's
say they just donate to one charity and it's the
same amount each month, they might just want to automate

(43:58):
it because that makes their lives easier, and that's perfectly
fine as well. But some people have five, six seven
charities they want to donate to and want to have
various amounts and have the freedom to do that. I
said this earlier, but QCD checks need to be cashed
by December thirty one for tax purposes, So just make

(44:18):
sure you're coordinating with the charity to get that done,
and make sure that you communicate your QCD donation to
your tax prepare properly The worst thing would be if
you went through all of this and then you still
pay the taxes because it wasn't reported properly on your
tax return. So just make sure that you communicate it
that you aren't paying taxes on those dollars and everything

(44:40):
is squared away appropriately, all right. At this point in
the show, I'm going to hand it over to Vinnie,
who's going to talk about some other tax planning and
preparation topics that we think will be impactful and important
for you.

Speaker 4 (44:56):
Thanks Sam. Again, I encourage all listeners to call in
and wait a hundred talk w g Y. That's one
eight hundred eight two five, five, nine four nine. And
I said it before on the show. What I really
think differentiates us from a lot of firms in the
area and across the country is the tax planning piece
and the tax expertise we do have. You know, obviously,

(45:17):
we want to invest our clients money and make them money,
but tax planning saves clients money, and that's basically the
same thing as making money, right and people everyone loves
to save money. So you know, a lot of the
strategies that we put in place for our clients. You know,
obviously we talked about roth conversions how important they are
for multi you know, multitude of reasons. You know, limiting
your R and B you know, is state planning when

(45:40):
you have folks inheriting an IRA, making sure that the
balance and the IRA isn't substantial so they don't have
to take out a million dollars a year over a
ten year period. Uh, you know, managing your IRMA brackets right,
keeping your those medicare premiums low on a monthly basis
in retirement and in old age. So rough conversion obviously

(46:01):
great strategy, especially when you're proactive and not reactive, right,
you're looking at those things ahead of time and not
doing a last minute you know, the year before our
m d age, should be planning those out ten fifteen
years before our.

Speaker 1 (46:15):
M v AH.

Speaker 4 (46:16):
And that way, when you hit R and D age,
you're already in a good position. You're not playing catch up, right,
Similar to you know, making retirement plan contributions, right, a
lot of folks kind of neglect, you know, making those
contributions into retirement plans. They're four one K, they're four
or three B. Making sure that you're you're maximizing those contributions,

(46:36):
getting the match the employer match that your employer is
offering you, and again making sure you're not starting at
age fifty playing catch up because it's not gonna you know,
buy it well for you. You're going to want to get
that in as early as possible. And the earlier you
get it in, the more time it has to grow,
and the more time it has the compound. So all
of these tax planning items, we're always you know, looking

(46:59):
at them with our clients. And on the flip side,
deduction optimization, right, bunching deductions together. And when I say
bunching deductions together, this you know, kind of piggybacks off
of the QCD conversation we were just having is a
lot of folks do not receive a tax benefit for
the charitable contributions that they make, right so if you

(47:23):
have someone that makes five thousand dollars a year in
charitable contributions, they might not be receiving attack medit for that.
So what makes a lot of sense to me, and
what I tell a lot of clients and what we
plan around is bunching those reductions together, maybe taking seven
to ten years of those adductions that you plan on
making anyway, and doing them in one year, and you're
going to get that tax savings and that tax benefit,

(47:44):
and it's gonna be really beneficial for you, especially if
it's a high income here thet you want to be
a high tax bracket when you're kind of utilizing these strategies,
when you're bunching your deductions together. And there's another great
way of doing it, and you know when it comes
to charitable contributions, and that's a don't advised fund. So
donor advice fund is a fund that we you know,
we manage for clients as well. But basically you open

(48:07):
it up similar to any investment account, and the contributions
into that account are considered quote unquote charitable contributions, right,
and when the money goes in there, it could be
invested stocks, bonds, money markets, and you basically write checks
out of that fund to the charity of your choosing.
But when when you write the check, it's not deductible.

(48:29):
The contribution itself is deductible. So that's where this comes
into play, this idea of bunching deductions together. It could
be really beneficial with donor advise fund is a great tool.
We use it for clients all the time, So if
you're charity and charitably inclined, you know, really a great
strategy that we put in place. Another strategy I talked

(48:51):
about earlier was tax loss harvesting, and I talked about
that when we had an email that asked about buying
individual securities in the SP five hundred and maybe excluding some,
including some, and talked about direct indexing. But there's ways
to do that without using direct indexing. Right, if you
have a taxable brokerage account and you have some stocks
that gain, some stock that losses, if we want to

(49:11):
exit some positions, you kind of do an analysis and
look to see what positions are at a loss. Maybe
it's a good time to do when the market takes
a dip and kind of utilize those against each other.
And it's really a great tool. Cost segregation studies another
tax planning tool that we use for some of our
real estate clients. So we have clients that are commercial

(49:32):
real estate investors. Maybe they own strip malls, maybe they
own a restaurant. So basically, a cost segregation study allows
tax payers who own real estate to kind of differentiate
each asset within the real estate they own. Right, because
when it comes to assets, a tax perspective, you don't

(49:54):
write them off as an expense. So let's say you
bought a toilet, you don't write it off as an expense.
You depreciate that over certain amount of years. And each
asset within a building is depreciated, it's not expense, so
you take a depreciation expense. For instance, if you buy
a computer, you take the cost that computer, divide it
by five, and took a depreciation expense year in and
year out for those five years. Commercial real estate itself

(50:17):
is depreciated over thirty nine years.

Speaker 3 (50:20):
So if you've.

Speaker 4 (50:20):
Bought a million dollar piece of commercial real estate, you
divide that by thirty nine and take that expense year
after year. That's a long time, and that expense could
be very little. So a cost segregation study goes in.
That's folk go into your commercial building and basically find
the HVAC system and the computer and the toilet and

(50:41):
all of these fixed asset items and kind of identifies
them and depreciates them over shorter periods of time five, seven,
ten years, and it increases your depreciation expense over that time.
So these are the types of things we're looking at
from a tax sending perspective. We do a lot of
in depth tax planning for clients. Like I said I once,

(51:03):
we'll say it again, differentiates our firm from a lot
of other firms, and you know, we're really big on it.
And again I feel free for all listeners to call
in at one eight hundred talk WGY.

Speaker 2 (51:16):
Thanks so much, Finny. Yeah, these are just some really
great tax planning strategies that again we want you to
be proactive rather than reactive. So just thinking ahead and
making sure that you're doing the right things now to
set yourself up for the future. And maybe that's also
setting up future generations, your children, your your grandchildren. Maybe

(51:37):
you're thinking about how can I help my grandchildren with
college expenses. I mean, college is inflating in a rate
faster than the average inflation rate, and so just think
about what it will cost them in the future. So
a lot of times we'll help with should you set
up a five to twenty nine plan for your your
grandchild for or even your child that might be still

(51:57):
you know, going through college right now or in the
future in a few years. So just thinking about things
like that. One thing that popped into my head was
just people knowing that they can put beneficiaries on all
types of accounts, and this helps them avoid probate in
the future. Have beneficiaries on your investment accounts, but also
have them on your bank accounts. You can have a
tod a transfer on death. This helps you avoid probate.

(52:20):
And a lot of people end up opening and funding
trust because they feel like it's the only way to
help them avoid probate. But that's simply not true. If
you have beneficiaries listed, that does the same thing, and
it saves you a lot of money from setting up
that trust. Of course, there are other reasons for setting
up trusts that make a lot of sense, but this
wouldn't be the one to do that. So again, we're

(52:41):
just so thankful for you know you tuning in today.
It's a pleasure sharing about these important topics. And thank
you for all the callers that called in. I know
Steve's been doing this radio show for thirty two years,
so we really appreciate everyone that you know is a
is a person that follows us, that listens every weekend,
and for those two in for the first time, thank
you to you as well. You're listening to Let's Talk Money,

(53:04):
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