Episode Transcript
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Speaker 1 (00:00):
Hello everyone. You are listening to Let's Talk Money, brought
to you by Bouchet Financial Group. My name is Vincenzo Testa.
I'm a CPA and CFP. I'm giving a well deserved
break to the one and only Steve Bouchet. We encourage
all listeners to call in at eight hundred Talk WGY.
That's eight hundred eight two five five nine four nine.
(00:21):
Bouche Financial Group has been in business for about thirty
five years, started by Steve Bouchet. It was a long
time ago, way before my time. He's been acting as
a fiduciary for thirty two years. And Steve has been
hosting this radio show, Let's Talk Money for thirty years,
so he has a lot of experience. You know, really
(00:41):
great firm, Bouchet Financial Group. You know, I've been here
for about five years now. I used to work in
public accounting, specifically at one of the big four accounting
firms KPMG prior to coming on, so I was a
CPA doing tax accounting and Polo Lapietra, who I've been
lifelong friends with, was working for Eve and he reached
out to me, and you know, there was this tax initiative,
(01:05):
this tax planning and tax preparation initiative that Steve wanted
to kind of roll out at the firm, and I
came over and you know, I became a wealth advisor,
but that tax expertise really carried over to you know,
the wealth advisory portion. There's a lot to financial planning
and tax planning is you know, really huge. So you know,
(01:26):
really grateful, uh, you know, Steve for giving me that
opportunity and obviously for Polo for reaching out. So the
firm has nine cfps, three CPAs and we have reached
yet another milestone of one point six billion of a
u M. We're growing fast and the outlook is good.
(01:48):
I really enjoy working at the firm. I think, you know,
we have a great future ahead of us, and really
eager to see what the future brings. Obviously, it was
Thanksgiving two days ago, Black Friday yesterday, and classic we
we got some snow yesterday, first of the season, and
(02:08):
you know, I know, at least I am eager for
spring to be around the corner. I'm not a big
winter guy. I don't ski, I don't snowboard, so the
snow is really not my forte encourage all listeners to
call in at eight hundred talk WGY. That's eight hundred
talk WGY, eight hundred and eighty two five five nine
(02:28):
four nine. So I'm going to go into the market recap.
I have Ed Wilhelm joining me. I should have introduced
him earlier, but I wanted to do it right before
he was going to give the market recap. He's a
huge part of the portfolio strategy and management here at
Bouchet Ed. Please introduce yourself.
Speaker 2 (02:48):
Hey everyone, Happy to be on as always, you know,
sitting here in the Saratoga office, and we got a
beautiful morning out there.
Speaker 3 (02:55):
The sun is shining.
Speaker 2 (02:56):
I'm looking at a nice American flag waving a happy
Happy to be on the show as always, a great
way to kick off holiday weekend. Then before we jump
into market returns, wun't you would you?
Speaker 3 (03:08):
We're we go to for Thanksgiving.
Speaker 1 (03:11):
I just went to a friend of mine's house, hung
out there for a little while. What'd you do?
Speaker 2 (03:18):
It's nice to get to spend some time with some family.
Grandma hosted you. Unfortunately, I'm a I'm a Packers fan,
so big win over the Lions. It's pretty much, you know,
perfect Thanksgiving for me. Able to eat my body weight
in Turkey and see the Packers win.
Speaker 1 (03:34):
Yeah, and AD's from Illinois, so he stayed in New
York just to work at BLUs Financial Group.
Speaker 2 (03:39):
Right, yeah, I mean, you know, maybe a good opportunity.
A little bit background on myself, you know, as you mentioned,
from a small town out in the Midwest. My mom
was from out here. She went to Siena, followed in
her footsteps. I'm actually third generation Siena graduate and right
out of school, you know, had the opportunity to get
connected with Steve and the rest of the firm and
(04:03):
have not looked back since. So it's crazy to think about,
but I graduated in twenty twenty two and joined the
firm right after. So I've been here a little over
three years now. It feels like just yesterday I was
interviewing in the Troy conference room.
Speaker 1 (04:18):
It's been a while. So Steve brought us down to
the Fasios in Troy. Two weeks ago they opened up
a new restaurant. So the Fasio's has been this high
end pizza place in South Troy. So I grew up
in South Troy. You know it's really it's a rough area, right,
but there is this kind of a gem pizza place
down there called the Fasios. And you know Dave Portnoy,
(04:40):
if anyone's familiar with him, he is the CEO of
Barstool Sports. He does pizza reviews and for some reason,
he's not even Italian. I'm not sure why, but people
look to him and his reviews as like scripture in
terms of, you know, what pizza is good and what's not.
And he actually went down there because Dave has a
(05:02):
house up in Saratoga and he loves Saratoga Racetracks, so
he has done some pizza reviews in the area. And
this the Fasios, has been around since I was a kid.
It's owned by rock O to Fasio, a longtime Troy guy.
But the old Vanilla Bean in downtown Troy, vinnyone remembers
it was a bakery years ago when I was a kid.
I remember going there all the time and getting pastries
(05:24):
and whatnot. But it closed down a while ago. In
the building has been kind of vacant, and Rocco actually
bought the building and it actually took him a couple
of years to kind of get it up and going.
But it's, you know, really a nice restaurant that he
has in addition to the pizza place. So the pizza
place is kind of like this small, you know building
where you're going and get your pizza, and he has
(05:45):
some seating out in the back. But the restaurant that
he opened, you know, it's it's it's really beautiful inside.
Like I said, it's the old Vanilla Bean on four
Street and it's it. It was really great. Steve brought
us the team down there. We had a good time,
really difficult, and and it's passed the first portion of it.
(06:11):
So I'm gonna let him quickly, sorry, we're having some
technical difficulties. I'm gonna let him quickly jump in and
give a market recap because you know he's he's he
can do it a little bit better than I can.
So go ahead.
Speaker 3 (06:23):
Yeah, thanks, Vin.
Speaker 2 (06:24):
Uh So, just diving right into it, looking at some
index returns for the week.
Speaker 3 (06:30):
Strong, strong week, you know, really across market.
Speaker 2 (06:33):
So it's nice to you know, see a little bit
of a rally after some volatility, and you know, also
pretty broad in that rally. You know, we've seen the
really the greater part of the last two years tech
tech dominant markets, you know, extreme concentration in mag seven,
So you know something we're always watching his breath, you know,
how how concentrated are the market movements, but you know
(06:56):
it was positive this week. So we saw S and
P five hundred up over to percent. Uh same with
the NASDAC now outperforming a little bit, up just shy
of three percent. And then you know, the big winner
on the week was small caps Russell two thousand up
you know, a little bit over three and a half percent,
(07:17):
and a lot of that outperformance there is on the
back of rate cut expectations, you know, looking at December cut,
which I will dive into in a little bit here.
Looking at bonds, not a great week for bonds up
you know, about point two percent. And then also big
winner this week was Bitcoin up just shy of five percent.
(07:41):
Now on the flip side your date performance equity markets,
you know, having another great year. S and P five
hundred up almost eighteen percent, NASDAK up almost twenty two percent.
Looking at bitcoin though, up five percent this week, awesome,
but down almost two percent year to date. You know,
so certainly some of those longer term holders hoping to
(08:03):
see some strong seasonality into the end.
Speaker 3 (08:04):
Of the year.
Speaker 2 (08:07):
Now this rally this week was risk on let and
we see that on bitcoin, you know, up almost five percent,
consumer discretionary, very cyclical sector tied to a lot of
macroeconomic movements up almost seven percents, and then teching communications
both up around five percent. So strong, strong week in
(08:28):
the markets and certainly risk on. It was nice to
feel a little bit of juice coming back into markets,
and a lot of that has to do with the
volatility we've seen, actually more around the fixed income market,
which of course is going to be driven by the
Federal Reserve, you know, which has really been focused on
the labor market. So if we just think about, you know,
(08:48):
kind of the macro economic landscape over the last two
weeks or so, we saw last week we finally got
some payroll data, so you know, the government shut down,
we had two months hold up, our delay in getting
some of that macroeconomic data inflation and jobs.
Speaker 3 (09:09):
Really the focus was on the jobs market, and we
know that's.
Speaker 2 (09:12):
What Federal Reserve, Jerome Powell, our fread share, that's what.
Speaker 3 (09:15):
He's focused on.
Speaker 2 (09:16):
So delay in that data makes their lives very tough,
and it adds to volatility. Right We're seeing bigger swings
in the expectations of a rate cut or not looking
into the end of the year. So we finally got
the payroll data. It came in super strong, added one
hundred and twenty thousand jobs for the month of September.
Interesting enough, August was actually revised down to essentially being flat,
(09:40):
no jobs added, you know, twenty thousand payroll adjustment. That
was interesting and it certainly those revisions are something we
watch very closely, you know, as that headline data comes in,
you know, those revisions are important because it is comes
down to the accuracy, and just with all the drama
we've seen in the political landscape this year, it's really
(10:03):
nice to see that those numbers are are being adjusted accurately.
So we added one hundred and twenty thousand jobs, you know,
very strong, and we saw the December rate cut expectations
moved down drastically, right. You know, the Fed was seeing
a softening labor market, so they've been ready to cut.
(10:24):
We get some super strong jobs numbers and they're thinking, hey,
we may not need to cut rates, especially given that
we will not be getting October's payroll data. So the
data we just got was from September. They were unable
to collect the data for October. So the next job
roll data print that we get will be in December,
(10:45):
December fifteenth. Now, unfortunately that is after the Federal Reserve
meets for the rate cut decision, which will be on
the tenth, December tenth. Now, this week on the data front,
we did get PPI, that's an inflation reading. Uh. It
came in very tame, pretty much in line with expectations. Uh,
you know, buoyed a bit by energy, which can be
(11:07):
one of the more volatile sectors of inflation readings. So
you know, market's not really looking too far into that.
Speaker 3 (11:13):
It was a tame reading and on that.
Speaker 1 (11:16):
You know.
Speaker 2 (11:16):
So we've seen probabilities for December rate cut. You know,
a month ago they were at ninety five percent, you know,
almost guaranteed we were going to get a cut. We
got that really strong labor number. Those expectations created, you know,
we saw the probabilities drop all the way down to
thirty percent for a December cut, and then after last
week's or this week's PPI number, the inflation reading, we
(11:39):
saw that jump back up to we're looking at like
an eighty five percent chance for a December rate cut.
A quarter basis point of course, so certainly some some volatility.
We see that that carries through to fixed income markets
of course, but also equity markets and especially small caps.
You know, these small cut companies are are very sensitive.
(12:00):
They're very cyclical to the financial condict conditions of the
you know, broader economy, and even the same can be
said for tech and you know the mag seven leaders. Right,
it's the valuation craze we've seen, and you know, such
frothy valuations right now, it's really important that these companies
can justify them. But a key component is, you know,
(12:21):
when companies and analysts are running these valuations, you know,
priced equity is you know, really a very simple calculation
they run. These big companies on on the cell side
will run much more in depth analysis. And the Sederal
funds rate is essentially how they discount future cash flows.
(12:42):
So when that when that rate drops, it essentially like
lowers valuations as well because you're discounting those cash flows
at a lower rate.
Speaker 1 (12:51):
Yep, thanks ed. So again you're listening to Let's Talk Money.
We encourage all listeners to call in at eight hundred
top w g Y that's eight hundred eight two five
five nine four nine, and when you look at all
this data, I mean, hello, yeap hey, sorry about that
(13:12):
some more technical difficulties. Apologize everybody. So ED was just
kind of going to the nitty gritty of economics and
what's going on in the country and the market returns
and all of this stuff that's going on in the
back end. You know, economics is a really interesting topic.
You know, it's an art and a science, and it
applies to how people react socially, and it applies to
(13:32):
how money moves around in this country or other countries.
And hello, sorry everyone once again. So I just wanted
to go into a little story. So our colleague Marty Shields,
who is a chief wealth advisor here at the firm,
his son Hayden's attending Saint Lawrence College and he's taken
(13:55):
some economics classes. And I was talking to the other
day and it makes me think about a story. I'm
a cianigrad as well. I have my bachelor's and Masters
in accounting from Sienna. But I had this professor at Sienna.
His name was doctor Trees. And you know, the first
day attending the class, you know, doctor Trees has no
hands and no feet, and I we go in there
(14:17):
and no one really knows why. And you know, he
makes us read this book about corporate greed, about all
these stories about General Electric how they dump toxins into
the Hudson River, and you know General Motors how you
know their cars had defects and it costs, you know,
more or less to pay out the wrongful death suits
(14:38):
that came from the defects, and it what to do
a recall. So all these stories about corporate greed. And
you know, this is where I really got interested in
economics when it came to this class, because doctor Trees
really pointed out, you know, all of the nuances with
how economics can affect people socially, and sometimes people can
do things that you know, they wouldn't normally do because
(14:59):
money is a motive. And at the end of the class,
the last day, he made us read the last story
in the book, and it was about a drug called theldamide.
And I believe the Pilotto mind was a anti depression
drug that a lot of spouses took when their husbands
were away in the war during Vietnam, and you know,
(15:20):
they were pregnant and they took this drug and the
effect that the drug had and you know the company
knew about it and obviously didn't do anything about it.
Was that their babies would be born with no hands
and no feet. And that's doctor Trees said, That's what
happened to him. So it was really such an interesting
class at Sienna, and you know that's what made CIMA
so great. You know, we had these small classes and
(15:41):
you had these relationships with your professors that you wouldn't
get at you know, the U Albanese of the world
or any of these Sunni schools because the classes are
too big. So just really a touching class. And you
know that's really how I got so interested in economics.
We're gonna take a quick break. You were listening to
Let's Talk Money, brought to you by Say Financial Group,
where we help our clients prioritize their health while we
manage their wealth for life. Thank you. You were listening
(16:07):
to Let's Talk Money. This is Vincenzo Testa. I'm enjoying
about my colleague Ed Wilhelm. We encourage all listeners to
call in at eight hundred Talk WGY. That's eight hundred
eight two five five nine four nine. Please call in
with questions. We love questions, So feel free to call
(16:27):
in if you have any. So when we meet with
initial clients and prospects. You know, the one thing that
I think is a common misconception. I think that people
that are looking for a financial advisor and are looking
for someone to manage their money. Sorry, I keep getting
cut out. Sorry, I apologize everybody. So when you're looking
for a financial advisor, I think there's something that most
(16:49):
folks need to understand, right, A lot of folks are
so concerned with investment return, and investment in return is
extremely important, right, Giving your life savings to somebody and
trusting them to manage your money is extremely important, and
making sure that you get a return that you know
(17:10):
justifies the fee and makes sense. Right, So, ed, how
do we compare our returns? We have a benchmark, and
you know, I just want you to go into how
we go about that process.
Speaker 2 (17:24):
Yeah, no, certainly, of course. I mean one of the
largest challenges you know when it comes to you know,
performance reporting, is that majority of clients, and I mean
really all retail investors on the equity side are going
to benchmark to S and P five hundred. Now, the
challenge with that being is most investors' risk tolerance does
(17:47):
not match that of the the S and P five hundred. Right,
if you're getting ready to enter retirement, you don't want
to have your entire life savings just completely bundle up
in the S and P five hundred. You want some
sort of ballast, you know, heading into their retirement, you know,
such as fixed income. So we're doing our benchmarks, you know,
on the equity side, we certainly compare it to S
(18:09):
and P five hundred. Now, also other component is the
S and P one hundred is diversified domestically, but it
has no international exposure and it doesn't have any exposure
to small or mid caps really. So you know, when
we're benchmarking, we use a slew of you know, risk
(18:29):
adjusted Schwab and Vanguard funds, so you know, kind of
all across different risk tolerances. So for our sixty forty portfolio,
we're going to benchmark that to both Schwab and vanguards,
you know, sort of lifestyle funds sixty forty portfolio to
try and match up some of that that equity to
fixed income exposure because as we know, equities over the
(18:50):
long term certainly outperformed fixed income just albeit a little
bit more volatile. So we we benchmark against those funds,
and then we all also have a few custom benchmarks
we've put together on our side that we feel, you know,
maybe a little bit more fair as well. There's another
lens to kind of look at things through.
Speaker 1 (19:09):
Yeah, yeah, apologize. Yeah, So the process is complex, right,
a layman, you know you're going to have difficulty on
managing their portfolio. But you know, what I think is
really important is realizing how else advisors add value. Like
I said, investment management is important, right, you're trusting your retirement,
(19:31):
your life savings with an individual and you know, we
don't take that lightly here at the firm. But I
think what differentiates us, who say financial group, from a
lot of other firms in the area is the other
value adds that we provide to our client. So what's
really important is clarity. Right. So there's there's tax implications,
(19:51):
there's investment management, there's state planning. And for someone who's
a laymen, for lack of a better term, they could
read articles, they can again, they could read articles, they
can you know, try and figure out all these things
for themselves. But when you have professionals like us, right,
like I'm a CPA and a CF the d a
(20:13):
CFA level one. You know, we have the experience in
the subject matters and we're able to plain to the
client in layman's terms, you know when it comes all right.
Speaker 2 (20:27):
Sorry, everyone looks like still having some technical difficulties on
Vin's and but you know, just as he was saying, uh,
you know, being able to offer that that clarity and
sometimes communicate those more complicated subjects, you know, that's really
one of the core areas we add value. But it's
also something that we're doing on a daily basis, uh,
(20:47):
you know, for retailers. Then he was mentioning, you know,
our layman more layman Uh, investors, this is something we're
doing every day. You know, you can take the time
to read the articles and do the research on your
own end. And but as we're all aware, you know,
time is money. So if you're you know, willing to
put the time into yourself and and you know, certainly,
(21:08):
all the more credit to you. You see a lot
of successful people do that, you know, but for us,
it's it's really what we do for for a living,
and we like to think we're we're pretty good at
it and that's that's all across the spectrum. So that's
from investment management to tax planning, to account structure to
even estate planning. You know, really really kind of cover
it all, and sometimes the hardest part is putting it
(21:30):
all together. You know, it's how do you combine that
tax management with the investment management and the estate planning.
You know, tying those things together can be can be
really really important.
Speaker 3 (21:42):
Thanks the area, you know.
Speaker 1 (21:44):
So we are going to a commercial breaking again. Apologize
everyone for the technical difficulties you are listening to. Let's
talk money brought to you by Bouche Financial Group, where
we help our clients prioritize our health, what we manage
our wealth for life. Thank you. I'm Fintential test Stuff,
one of the wealth advisors here at the firm, and
I'm right Willhelm. The phone numbers and the phone line
(22:04):
are open following any questions at eight hundred Paul Wgy
that's eight hundred and eighty two five five nine four nine.
Before the break, we're going into how advisors add value
and how it's a lot more than portfolio management. You know,
in relation to the portfolio management, the biggest drag on
returns is usually you the investor, not the investment. One
(22:29):
of the major things I think we do as a
pertman a lot of advisors do is they're there when
things go wrong. They're there during COVID, they're there doing
during eight, they're there during the tech bubble, and they're
there to say, hey, you know, when when you're a
client and you're an investor in you're panicking, they there
to say, hey, pump the brakes, wait a minute. The
(22:50):
market has always gone on to make all the time
eyes and that's a direct quote from the great Stephen
Bouchet himself. And they're there to make sure that you
don't do anything stop because the worst thing you could
do is sell equities when they're in a downturn. Right,
So advisors keep clients from panic selling or chasing trends
or timing the market, and we take the emotion out
(23:12):
of investing. And that's really what I find, you know,
the most important part about portfolio management is being there
that individual right can't make you can't have a robot
or AI be there to tell you not to do
that right. It's got to be someone you trust, and
there has to be, you know, that trust between you
(23:33):
and that individual and you trust them to listen to them. Right,
some clients still make that mistake. Right, We were going
to punch it down their throats though not to do it,
and they always regret it. Right, History always shows that
it goes on and make all the time himes. The
next thing that advisors and our firm especially does, which
(23:53):
a lot of firms don't do, is the tax efficiency
and the tax planning aspect of how we manage the
portfolios and how we manage our client's money. Not only that,
the tax strategies that we implement for our clients to
save them money. Right. One of the most I think
revolutionary ideas and we are rolling it out on the
firm is something called asset location and ED and I
(24:15):
are going to get into this right now, but asset
location versus asset allocation. Right. Our clients have a risk tolerance.
You know, most folks that are nearing retirement or in
retirement are in our growth and income portfolio, which is
that standard sixty percent equities and forty percent fixed income
and conservative asset portfolio. Right, that's a standard risk tolerance
(24:40):
for someone in that demographic. You know, what's important is
you look at all the accounts that you have, right,
And like I said, we're rolling this out at the firm.
I think it's very important. You have your IRA, which
is your tax to for a retirement account. It probably
came from your WROTH or I'm sorry, probably came from
your four to one k at work, or it was
a traditional IRA that you opened and contributed over the years.
(25:01):
That's tax deferred money, which means when you contribute to it,
you get a tax reduction. When you pull it out,
it's taxable. Then you have your raw ira. So your
raw IRA could be from your wraw for one k.
Some people have a raw portion on their four oh
one k or a raw ira that you contributed to
over the years. So when you go in and contribute
to it, it's after tax money and the money goes
(25:24):
gross tax free. And then you have your tax file account. Right.
This might be a standard total household portfolio that we
manage for a client. The taxable account is your after
tax money. You're the you know, it generates dividends and
interest maybe right, and that's taxable on your tax return
you know at the time you receive it, and then
anything you sell within the taxable account is considered short
(25:46):
term or long term capital games. Long term being if
it's one year or more, then you get that preferential
tax treatment.
Speaker 2 (25:53):
Right.
Speaker 1 (25:53):
The rates are a little bit lower if you hold
it for longer than the year the i R s.
You know, when tax law is written, it's kind of
organized in the way that is used to stimulate the economy. Right,
So if you're giving investors, whether it's a stock, property,
what have you, and you give them lower tax rates
(26:14):
for holding it for more than your that incentivizes folks
to invest right and hold and you know, put their
money into things, and that helps grow the economy. So
that's really the rationale behind all this. But these three
accounts is normally what we might see. There might be
other accounts, but when you think about what we see
for maybe a standard client, this is what you'll see.
(26:35):
Asset location is very important. So we have the sixty
forty portfolio and a lot of advisors putting ourselves. They
might make every one of those accounts sixty forty, and
that's not beneficial. Reason being is you have your IRA
for those who know when you hit a certain age,
(26:56):
and right now the age of seventy three, and for
some folks seventy five, you have to do something called
a required minimum distribution. Okay, it's called the RMD. That
means the IRS is saying, hey, you deferred your taxes
for as long as you contributed to that account. Now
we want our money back, because when you pulled out,
you have to pay taxes on it. So it's usually
about four percent of the account balance in the prior year. Okay,
(27:19):
the ROSS doesn't have an RMD, and the money pulled
out is tax free, and a taxable account doesn't have
an RMD, but the tax rates are a little bit
lower than if you use long term capital gain strategies.
With the taxable account, they're lower than the IRA. And
when your benefitial inherits your IRA, they have to liquidate
it in ten years, and all that money's taxed. And
(27:42):
when they inherit it, they might be working. So if
you know you have you're seventy years old, seventy five
years old, you passed away. Your kids might be fifty
to fifty five, forty five and they're still working, so
they might be in a high tax bracket already, and
now your family as a whole is paying more because
they have to liquidate a three million dollar I in
ten years. So when we think about a state planning
(28:03):
and you know, holistic financial planning, tax planning, this is
what we're looking at. And when you have the sixty
to forty portfolio, you really kind of want to be
strategic about where you're placing the assets. So the idea
is to kind of suppress the balance of the IRA.
And how do you do that. You look at the
balances of all these three accounts, and you know the
most optimal way to do it is putting all the
(28:24):
bonds in the IRA and then putting all the equities
in the tax bill and the wroth IRA, right, because
the tax treatment of each of those accounts is different
and more preferential, with the wrowth and taxable, so you
want to grow, and the estate planning aspect of it
is more preferential. So the tax bill account, if you
had a million dollars in gains and your beneficiary inherits
(28:45):
a tax bule account, it's all wiped away. It's called
a step up in basis. So if your beneficiaries inherit
the account and sell that they date of your death,
there's no tax implications when there could have been maybe
one hundred and fifty two hundred three hundred thousand dollars
in tax liability that you would have had to recognize
if you sold it. So that's really how we you know,
(29:09):
this is what we're looking at. I think it's revolutionary.
And you know, as a firm, you know, by suppressing
the IRA, you're suppressing R and D s, you know,
lest hop liability for the client, keeping AUM at the firm.
You know, it's beneficial with the client and the firm
and ed. Why don't you go in a little bit
(29:29):
more about how you know, tax drag can impact the portfolio.
Speaker 2 (29:35):
Yeah, certainly, so just kind of a couple of interesting
caveats with the asset location, you know, one thing you
want to start off. It is a phenomenal strategy, but
it is certainly for the long term investor who is
a little bit later in their life. You know, if
you're younger, you might not have you know, a sizable IRA,
(29:57):
you might really just only have a row, you know,
your four oh one K, which you're gonna have a
limited pool of investments and you know, maybe starting to
get that taxable up and running. So this is certainly
for someone who has a you know, developed pool of assets.
Speaker 3 (30:11):
Uh.
Speaker 2 (30:11):
Now the other big caveat you know, vin as you mentioned,
you're gonna want those equities in you know, a taxable account.
Now why this really only makes sense for the long
term investor if you are you know, constantly in and
out of securities. You know, you're trading, you're making speculative
investments and moves. You know, that's that's great. That certainly
has a place as a portion of your portfolio, you know,
(30:35):
having some some higher risk in there. But now the
place you don't want to do that would be in
your taxable account because churning those positions, you're going to
be realizing you know, capital gains on the exits, on
the on the sales, so that that is something you
want to be cognizant of. It is really more for
you buy and hold, uh investor. And then of course,
(30:56):
you know there is the difference between you know, your
wroth and your eye you know the ross, especially for
the younger investors, you really want to focus on your
your highest growth assets, you know, maybe your more speculative investments.
So you know, when I when I think roth, ira,
I think you know technology, you know, maybe some crypto
or you know, just concentrated large cap exposure.
Speaker 3 (31:20):
So I would say those.
Speaker 2 (31:21):
Are you know, some kind of other key concerns as
far as tax drag on your portfolio goes, I think
a lot of investors would be really surprised, you know,
just what that drag can look like. You know, especially
in a taxable account, if you're moving in and out,
you have to factor in those gains.
Speaker 1 (31:39):
You know.
Speaker 2 (31:40):
An important exercise we do here at the firm every
year is called tax loss harvesting. I mean you've probably
heard me talk about it a few times in the
radio as of late.
Speaker 3 (31:49):
That's essentially just.
Speaker 2 (31:50):
Going into your taxable account, sitting down, looking through the positions,
and if you have any losses, it's it's it's trying
to realize those losses and then you can offset some
of those gains. So you know, just because you have
losses in a portfolio, isn't isn't necessarily a bad thing?
You know, you can exit. You can't buy the exact
(32:12):
same security immediately. There's a it's called the wash sale rule.
You have to wait thirty days before you buy the
same security. But for example, if you know you had
you know, maybe you bought bitcoin at the at the
start of the year. Uh, and you bought I bit
uh that's uh I shares bitcoin ETF. You might you
might be down you know, two percent on that since
(32:33):
the start of the year. You know, if it's a
sizeable position, you could realize those losses, sell your position
and replace it with a different cryptocurrency ETF like maybe
van x h O d L that's another bitcoint one.
So you know, even though it's not the exact same security,
it is the same exposure. That's not going to trigger
a wash sale rule under I r S. And that's
(32:54):
the way you can just add a little bit of
tax alpha or reduce that tax drag on your on
your portfolio, looking for those opportunities and losses to replace
with some like kind exposure. And then on the same time,
what that lets you do is you know, with those
losses you can offset some gains. You know, maybe your
Apple position has grown to be a little bit too
much of your portfolio, it's too concentrated for your risk tolerance.
(33:17):
You've got some losses elsewhere you can go in.
Speaker 3 (33:19):
You can trim that.
Speaker 2 (33:20):
Position that's been maybe keeping you up at night from
a risk perspective.
Speaker 1 (33:24):
Yeah, I mean this is how deeply we're looking at things, folks.
Not a lot of advisors are doing this. Not a
lot of firms have the expertise. You know, we have
three CPAs in the EA. You know my colleague Scott Strohecker,
you know him and I kind of manage a tax
team in John Malay, you know, sees it over who's
the CFO and a share shareholder and COO. John has
a lot of hats, he's a CPA. But we're looking
(33:47):
at things really deeply, folks. And this saves you money
over the long term. If we're doing this for our
clients on an annualized basis, it really adds up. And
when you keep money in the portfolio by saving your
money in taxes, by being efficient, you know ETFs, we
don't use mutual funds. The reason being is the expense
ratios are lower and then more efficient for tax purposes.
So if we could save your money within the portfolio
(34:10):
and save your money in general right cutting your taxes,
then that money is gonna grow and compound and you know,
overall you're going to see a huge difference. If you
were to look back thirty years at an advisor that
might not have done that right, huge differences because when
you think about compound interest, it truly makes the difference.
(34:30):
Making you money is important, but saving your money is
just as we're gonna take a quick commercial break. You
were listening to Let's Talk Money, brought to you by Bouchet
Financial Group, where we help our clients prioritize their health
so we manage your wealth for life. Thank you you
were listening to Let's Talk Money. Thank you for everybody
for listening. This is Vincenzo Tesla, one of the wealth
advisors here at the firm, joint on my colleague Ed Wilhelm.
(34:51):
Please call in with any questions at eight hundred Talk
W eight hundred talk WGY. That's eight hundred and eight
two five five nine four nine. So we're focused. Today
has really been a lot, you know, on a lot
about how we're saving our clients and taxes and how
we're being tax efficient. There's an there's another strategy aside
(35:12):
from asset location that is kind of revolutionary as well,
and we haven't enacted at the firm, and it's called
direct indexing, and Ed is really a huge component of
enacting that strategy and he's really well versed on it.
So ed, Why don't you talk a little bit about
direct indexing.
Speaker 2 (35:30):
Yeah, direct indexing has certainly been big for the firm
over the last year and a half, but also big
for the wealth management landscape. You know, strategies like this
are certainly picking up in popularity. You know, I hear
about it on the institutional side. You know, at least
once a week, you know, a new fun family launching
a strategy of their own. But also just you know,
(35:52):
attending conferences and networking events and meeting other advisors, other
professionals in the space. It really is a big topic
of conversation. So if you're if you're a current advisor,
is not talking to you about it, it is it
is certainly worth a question if it makes sense for you.
I think it's only going to continue to grow and
it really is kind of a more modern way or
(36:13):
it is the future of the investing landscape.
Speaker 3 (36:16):
But as I was.
Speaker 2 (36:17):
Talking about before with the tax loss harvesting, you know
where you're kind of handcuffed by doing that. You know,
yourself in an ETF based portfolio is you know, in
any given year, you know about thirty percent or so
of the S and P five hundred, It might be
down even though the broader index is up. Now, why
that's unfortunate is because you do have exposure to some
(36:39):
securities within that basket that are at a loss, and
you're unable to take advantage of that. So what direct
indexing allows you to do is instead of just owning
that basket, you're just going to take away that basket
and own the underlying stocks individually. Now, if you were
just going to do that yourself in an Excel spreadsheet,
(37:00):
that would be that would be tough to track. You know,
you have to track each company's waitings. You know, you're
gonna have to own five hundred different securities. It's just
not very realistic from an operational standpoint. Uh So where
direct indexing comes in, this is really only now available
because of the advancements in technology. What it's going to
do is it's going to replicate the S and P
(37:21):
five hundred by owning those individual stocks, you know, via
the software. Now, it's not going to go out and
buy every single name within the index. It's going to
buy you know, one hundred and fifty to two hundred names.
But what it's going to do is it's going to
buy very specific names that are going to give you
S and P five hundred like exposure, and typically they'll
(37:44):
quote you based on tracking air. So normally you see
about one percent of tracking error, which means you're going
to overperform or under perform by half a percentage relative
to S and P five hundred. But on top of that,
on top of that S and P five hundred exposure
you're getting, you're owning the individual names. So, especially in
(38:04):
the last three years where we've seen such concentrated market returns,
you know, you have the market being carried by seven
names which have done really well. There are a lot
of names in the S and P five hundred that
have not done as well. You know, we've got plenty
of even great companies down at a loss. When you
own the whole basket, like I said, you can't take
advantage of those. Now with the software, you are able
(38:26):
to take advantage of those, and you're able to offset
some of those games elsewhere in your portfolio to keep
that tracking error down. But also over time we've seen
is you're actually able to accrue those losses. And when
you take those losses and you apply them back at
your tax rates.
Speaker 3 (38:44):
You know, this year we have.
Speaker 2 (38:45):
Clients who have seen you know, between two to four
percent of additional tax alpha, where you know, they are
accruing so much losses that they're they're able to offset
gains you know, elsewhere in their in their life for
stock file those for you know, for maybe a future
business sale. So it's really become an attractive piece of
(39:06):
technology and it continues to advance. You know, now you're
not limited to just tracking an S and P five hundred,
but you can actually get really creative with what you
want that underlying exposure to look like. You know, So
for us here at the firm, you know, we're certainly
you know, tech focused investors. You know, Steve has been
preaching QQQ since before I was even born, So we're
(39:29):
able to overweight you know, some of that large cap
technology and still track the index. So it's been a
very successful strategy for us in that regard. On top
of adding you know what we call tax tax alpha.
Speaker 1 (39:42):
Yeah, thanks, Ed. So if you see how tax planning,
investment management, and financial planning may all come together, all
the dots are connected, and when you work with an
advisor that's touching on all these topics and you know,
has all the expertise, which a lot of firms don't,
so kind of bring this all together and make sure
(40:02):
your whole financial situation is being accounted for from a
tax planning, financial playing, and investment major perspective, it's invaluable.
Won't find a lot of firms that do what we do,
I'll tell you that. So on the flip side, there
was some pass legislation passed earlier this year in July fourth,
twenty twenty five, called the One Big Beautiful Bill. So
(40:25):
we you know, obviously you should know by now, we
have a tax division here at the firm and it's
kind of headed up by myself, Scott Strohecker and John Malay,
and we are keeping up the date on all the
updates and new legislation that's coming into play.
Speaker 3 (40:43):
We stay educated on it.
Speaker 1 (40:45):
And we actually did a webinar two weeks ago Scott,
myself and John. It was a Year in Tax Planning webinar.
And we also did a webinar on the One Big
Beautiful Bill and you can find those on our website
at Bouchet dot com, bou Ch e Y dot com.
And I'd also wrote a blog on the One Big
Beautiful Bill. So what the One Big Beautiful Bill really
(41:06):
does is it makes some slight changes to a previous
tax law that was passed in twenty seventeen, which was
the Tax Cuts and Jobs Act that during Trump's first term.
Trump came in, he need lower tax rates and he
also made some other moves. So what the Tax Does
(41:28):
and Jobs Act and how it's written and what it
says is that the law was supposed to the sunset
after twenty twenty five, which means all of the provisions
that were listed in the Tax Does and Jobs Act
going to end. So the One Big Beautiful Bill, Trump's
second term, with another president in between, came in and said, hey,
(41:48):
there's some new things we're going to add, and we're
going to make sure that these provisions are pushed out
until twenty twenty eight. So one of the major things
that is going to affect a lot of folks that
are listening right now, most likely is the senior deduction.
So if you watch Trump on TV, you know he
says a lot. He said a lot about you know,
(42:10):
no tax on Social Security and you know, lowering taxes
for seniors. So a lot of folks I've talked to
he thought that there was actually no tax in Social Security,
and that's not the case. So folks that are sixty
five and older are entitled to an extra deduction. Right,
This isn't a credit, This isn't This is a deduction.
So it comes directly off your taxbile income of six
(42:32):
thousand dollars and then married folks received twelve thousand dollars
if you're over the age of sixty five. And this
is really a way to reduce those taxes on Social
Security rather than eliminate them. So that's what this senior deduction,
senior deduction is really aimed to do, and I think
it's great. There's there's an income phase out for it.
It's relatively low. For married folks, it's one hundred and
(42:54):
fifty thousand. For single folks it's seventy five thousand. So
if you're over that amount and starts the phase out,
and you might not get that full six thousand or
twelve thousand dollars deduction, but I think it's honestly great
putting back money in the pockets of seniors, and you know,
they're really the ones that built this economy as of
right now, so I think it's great. Then you have
(43:14):
the charitable deduction for non itemizers. So charitable contributions and
charitable planning is something that we do very extensively are
at the firm. We help our clients start donor advise funds.
We help our clients maximize their tax benefits when they
make charitable contributions. So this deduction that was added, it
(43:35):
was actually added back during COVID. During COVID, if you know,
you could take it three hundred dollars deduction on your
tax return or six hundred dollars for married folks for
charitable contribution even if you're in't itemize, so you have
the standard deduction and you have itemized deductions. Charitable contributions
are on your itemized deductions. So if you're itemized deductions
(43:55):
which consist of state and local income taxes, medical expenses,
mortgage interest, charitable contributions, when all those you know exceed
your standard reduction, which the standard reduction is what everybody
gets no matter what, but your itemized If you exceed
the standard by adding up all of those items you know,
(44:17):
you are considered to be itemizing your reduction. So what
this terrible deduction does is allows folks who aren't itemizing
to receive a one thousand dollars deduction for single folks
or two thousand for married without itemizing, right, And you
know that's kind of incentivizing individuals to contribute the charity.
And again there's always a reason behind anything that's written
(44:40):
in the tax law. You know, they're looking at data
and there's they're seeing specific numbers, and they're trying to
incentivize folks to do specific things by writing legislation to
do so. Then you have the salt cap update, and
this is the most important one, I believe, especially for
folks in New York. Back in twenty seventeen, there was
(45:01):
a cap put on the state and local income taxes
you could deduct on your itemized deductions at ten thousand,
and that has now moved to forty thousand. There is
income phase out numbers, so folks, you're going to save
some taxes this year if you follow in a specific demographic.
Really important to pay attention to that salt cap is
really going to help a lot of folks out there.
(45:22):
A lot of folks listening. You know, we have high
real estate taxes and income taxes in New York State
relative to other states, So definitely something to pay attention
to and a good thing for most of you folks
listening out there. You know, I'm excited to kind of
utilize that and save some money on my taxes this year.
Thank you for everybody for listening. You were listening to
(45:44):
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. Thank you.
Hello everyone. You are listening to Let's Talk Money, brought
to you by Bouchet Financial Group. My name is Vincenzo Testa.
I'm a CPA and CFP. I'm giving a well deserved
break to the one and only Steve Bouchet. We encourage
all listeners to call in at eight hundred Talk WGY.
That's eight hundred eight two five five nine four nine.
(00:21):
Bouche Financial Group has been in business for about thirty
five years, started by Steve Bouchet. It was a long
time ago, way before my time. He's been acting as
a fiduciary for thirty two years. And Steve has been
hosting this radio show, Let's Talk Money for thirty years,
so he has a lot of experience. You know, really
(00:41):
great firm, Bouchet Financial Group. You know, I've been here
for about five years now. I used to work in
public accounting, specifically at one of the big four accounting
firms KPMG prior to coming on, so I was a
CPA doing tax accounting and Polo Lapietra, who I've been
lifelong friends with, was working for Eve and he reached
out to me, and you know, there was this tax initiative,
(01:05):
this tax planning and tax preparation initiative that Steve wanted
to kind of roll out at the firm, and I
came over and you know, I became a wealth advisor,
but that tax expertise really carried over to you know,
the wealth advisory portion. There's a lot to financial planning
and tax planning is you know, really huge. So you know,
(01:26):
really grateful, uh, you know, Steve for giving me that
opportunity and obviously for Polo for reaching out. So the
firm has nine cfps, three CPAs and we have reached
yet another milestone of one point six billion of a
u M. We're growing fast and the outlook is good.
(01:48):
I really enjoy working at the firm. I think, you know,
we have a great future ahead of us, and really
eager to see what the future brings. Obviously, it was
Thanksgiving two days ago, Black Friday yesterday, and classic we
we got some snow yesterday, first of the season, and
(02:08):
you know, I know, at least I am eager for
spring to be around the corner. I'm not a big
winter guy. I don't ski, I don't snowboard, so the
snow is really not my forte encourage all listeners to
call in at eight hundred talk WGY. That's eight hundred
talk WGY, eight hundred and eighty two five five nine
(02:28):
four nine. So I'm going to go into the market recap.
I have Ed Wilhelm joining me. I should have introduced
him earlier, but I wanted to do it right before
he was going to give the market recap. He's a
huge part of the portfolio strategy and management here at
Bouchet Ed. Please introduce yourself.
Speaker 2 (02:48):
Hey everyone, Happy to be on as always, you know,
sitting here in the Saratoga office, and we got a
beautiful morning out there.
Speaker 3 (02:55):
The sun is shining.
Speaker 2 (02:56):
I'm looking at a nice American flag waving a happy
Happy to be on the show as always, a great
way to kick off holiday weekend. Then before we jump
into market returns, wun't you would you?
Speaker 3 (03:08):
We're we go to for Thanksgiving.
Speaker 1 (03:11):
I just went to a friend of mine's house, hung
out there for a little while. What'd you do?
Speaker 2 (03:18):
It's nice to get to spend some time with some family.
Grandma hosted you. Unfortunately, I'm a I'm a Packers fan,
so big win over the Lions. It's pretty much, you know,
perfect Thanksgiving for me. Able to eat my body weight
in Turkey and see the Packers win.
Speaker 1 (03:34):
Yeah, and AD's from Illinois, so he stayed in New
York just to work at BLUs Financial Group.
Speaker 2 (03:39):
Right, yeah, I mean, you know, maybe a good opportunity.
A little bit background on myself, you know, as you mentioned,
from a small town out in the Midwest. My mom
was from out here. She went to Siena, followed in
her footsteps. I'm actually third generation Siena graduate and right
out of school, you know, had the opportunity to get
connected with Steve and the rest of the firm and
(04:03):
have not looked back since. So it's crazy to think about,
but I graduated in twenty twenty two and joined the
firm right after. So I've been here a little over
three years now. It feels like just yesterday I was
interviewing in the Troy conference room.
Speaker 1 (04:18):
It's been a while. So Steve brought us down to
the Fasios in Troy. Two weeks ago they opened up
a new restaurant. So the Fasio's has been this high
end pizza place in South Troy. So I grew up
in South Troy. You know it's really it's a rough area, right,
but there is this kind of a gem pizza place
down there called the Fasios. And you know Dave Portnoy,
(04:40):
if anyone's familiar with him, he is the CEO of
Barstool Sports. He does pizza reviews and for some reason,
he's not even Italian. I'm not sure why, but people
look to him and his reviews as like scripture in
terms of, you know, what pizza is good and what's not.
And he actually went down there because Dave has a
(05:02):
house up in Saratoga and he loves Saratoga Racetracks, so
he has done some pizza reviews in the area. And
this the Fasios, has been around since I was a kid.
It's owned by rock O to Fasio, a longtime Troy guy.
But the old Vanilla Bean in downtown Troy, vinnyone remembers
it was a bakery years ago when I was a kid.
I remember going there all the time and getting pastries
(05:24):
and whatnot. But it closed down a while ago. In
the building has been kind of vacant, and Rocco actually
bought the building and it actually took him a couple
of years to kind of get it up and going.
But it's, you know, really a nice restaurant that he
has in addition to the pizza place. So the pizza
place is kind of like this small, you know building
where you're going and get your pizza, and he has
(05:45):
some seating out in the back. But the restaurant that
he opened, you know, it's it's it's really beautiful inside.
Like I said, it's the old Vanilla Bean on four
Street and it's it. It was really great. Steve brought
us the team down there. We had a good time,
really difficult, and and it's passed the first portion of it.
(06:11):
So I'm gonna let him quickly, sorry, we're having some
technical difficulties. I'm gonna let him quickly jump in and
give a market recap because you know he's he's he
can do it a little bit better than I can.
So go ahead.
Speaker 3 (06:23):
Yeah, thanks, Vin.
Speaker 2 (06:24):
Uh So, just diving right into it, looking at some
index returns for the week.
Speaker 3 (06:30):
Strong, strong week, you know, really across market.
Speaker 2 (06:33):
So it's nice to you know, see a little bit
of a rally after some volatility, and you know, also
pretty broad in that rally. You know, we've seen the
really the greater part of the last two years tech
tech dominant markets, you know, extreme concentration in mag seven,
So you know something we're always watching his breath, you know,
how how concentrated are the market movements, but you know
(06:56):
it was positive this week. So we saw S and
P five hundred up over to percent. Uh same with
the NASDAC now outperforming a little bit, up just shy
of three percent. And then you know, the big winner
on the week was small caps Russell two thousand up
you know, a little bit over three and a half percent,
(07:17):
and a lot of that outperformance there is on the
back of rate cut expectations, you know, looking at December cut,
which I will dive into in a little bit here.
Looking at bonds, not a great week for bonds up
you know, about point two percent. And then also big
winner this week was Bitcoin up just shy of five percent.
(07:41):
Now on the flip side your date performance equity markets,
you know, having another great year. S and P five
hundred up almost eighteen percent, NASDAK up almost twenty two percent.
Looking at bitcoin though, up five percent this week, awesome,
but down almost two percent year to date. You know,
so certainly some of those longer term holders hoping to
(08:03):
see some strong seasonality into the end.
Speaker 3 (08:04):
Of the year.
Speaker 2 (08:07):
Now this rally this week was risk on let and
we see that on bitcoin, you know, up almost five percent,
consumer discretionary, very cyclical sector tied to a lot of
macroeconomic movements up almost seven percents, and then teching communications
both up around five percent. So strong, strong week in
(08:28):
the markets and certainly risk on. It was nice to
feel a little bit of juice coming back into markets,
and a lot of that has to do with the
volatility we've seen, actually more around the fixed income market,
which of course is going to be driven by the
Federal Reserve, you know, which has really been focused on
the labor market. So if we just think about, you know,
(08:48):
kind of the macro economic landscape over the last two
weeks or so, we saw last week we finally got
some payroll data, so you know, the government shut down,
we had two months hold up, our delay in getting
some of that macroeconomic data inflation and jobs.
Speaker 3 (09:09):
Really the focus was on the jobs market, and we
know that's.
Speaker 2 (09:12):
What Federal Reserve, Jerome Powell, our fread share, that's what.
Speaker 3 (09:15):
He's focused on.
Speaker 2 (09:16):
So delay in that data makes their lives very tough,
and it adds to volatility. Right We're seeing bigger swings
in the expectations of a rate cut or not looking
into the end of the year. So we finally got
the payroll data. It came in super strong, added one
hundred and twenty thousand jobs for the month of September.
Interesting enough, August was actually revised down to essentially being flat,
(09:40):
no jobs added, you know, twenty thousand payroll adjustment. That
was interesting and it certainly those revisions are something we
watch very closely, you know, as that headline data comes in,
you know, those revisions are important because it is comes
down to the accuracy, and just with all the drama
we've seen in the political landscape this year, it's really
(10:03):
nice to see that those numbers are are being adjusted accurately.
So we added one hundred and twenty thousand jobs, you know,
very strong, and we saw the December rate cut expectations
moved down drastically, right. You know, the Fed was seeing
a softening labor market, so they've been ready to cut.
(10:24):
We get some super strong jobs numbers and they're thinking, hey,
we may not need to cut rates, especially given that
we will not be getting October's payroll data. So the
data we just got was from September. They were unable
to collect the data for October. So the next job
roll data print that we get will be in December,
(10:45):
December fifteenth. Now, unfortunately that is after the Federal Reserve
meets for the rate cut decision, which will be on
the tenth, December tenth. Now, this week on the data front,
we did get PPI, that's an inflation reading. Uh. It
came in very tame, pretty much in line with expectations. Uh,
you know, buoyed a bit by energy, which can be
(11:07):
one of the more volatile sectors of inflation readings. So
you know, market's not really looking too far into that.
Speaker 3 (11:13):
It was a tame reading and on that.
Speaker 1 (11:16):
You know.
Speaker 2 (11:16):
So we've seen probabilities for December rate cut. You know,
a month ago they were at ninety five percent, you know,
almost guaranteed we were going to get a cut. We
got that really strong labor number. Those expectations created, you know,
we saw the probabilities drop all the way down to
thirty percent for a December cut, and then after last
week's or this week's PPI number, the inflation reading, we
(11:39):
saw that jump back up to we're looking at like
an eighty five percent chance for a December rate cut.
A quarter basis point of course, so certainly some some volatility.
We see that that carries through to fixed income markets
of course, but also equity markets and especially small caps.
You know, these small cut companies are are very sensitive.
(12:00):
They're very cyclical to the financial condict conditions of the
you know, broader economy, and even the same can be
said for tech and you know the mag seven leaders. Right,
it's the valuation craze we've seen, and you know, such
frothy valuations right now, it's really important that these companies
can justify them. But a key component is, you know,
(12:21):
when companies and analysts are running these valuations, you know,
priced equity is you know, really a very simple calculation
they run. These big companies on on the cell side
will run much more in depth analysis. And the Sederal
funds rate is essentially how they discount future cash flows.
(12:42):
So when that when that rate drops, it essentially like
lowers valuations as well because you're discounting those cash flows
at a lower rate.
Speaker 1 (12:51):
Yep, thanks ed. So again you're listening to Let's Talk Money.
We encourage all listeners to call in at eight hundred
top w g Y that's eight hundred eight two five
five nine four nine, and when you look at all
this data, I mean, hello, yeap hey, sorry about that
(13:12):
some more technical difficulties. Apologize everybody. So ED was just
kind of going to the nitty gritty of economics and
what's going on in the country and the market returns
and all of this stuff that's going on in the
back end. You know, economics is a really interesting topic.
You know, it's an art and a science, and it
applies to how people react socially, and it applies to
(13:32):
how money moves around in this country or other countries.
And hello, sorry everyone once again. So I just wanted
to go into a little story. So our colleague Marty Shields,
who is a chief wealth advisor here at the firm,
his son Hayden's attending Saint Lawrence College and he's taken
(13:55):
some economics classes. And I was talking to the other
day and it makes me think about a story. I'm
a cianigrad as well. I have my bachelor's and Masters
in accounting from Sienna. But I had this professor at Sienna.
His name was doctor Trees. And you know, the first
day attending the class, you know, doctor Trees has no
hands and no feet, and I we go in there
(14:17):
and no one really knows why. And you know, he
makes us read this book about corporate greed, about all
these stories about General Electric how they dump toxins into
the Hudson River, and you know General Motors how you
know their cars had defects and it costs, you know,
more or less to pay out the wrongful death suits
(14:38):
that came from the defects, and it what to do
a recall. So all these stories about corporate greed. And
you know, this is where I really got interested in
economics when it came to this class, because doctor Trees
really pointed out, you know, all of the nuances with
how economics can affect people socially, and sometimes people can
do things that you know, they wouldn't normally do because
(14:59):
money is a motive. And at the end of the class,
the last day, he made us read the last story
in the book, and it was about a drug called theldamide.
And I believe the Pilotto mind was a anti depression
drug that a lot of spouses took when their husbands
were away in the war during Vietnam, and you know,
(15:20):
they were pregnant and they took this drug and the
effect that the drug had and you know the company
knew about it and obviously didn't do anything about it.
Was that their babies would be born with no hands
and no feet. And that's doctor Trees said, That's what
happened to him. So it was really such an interesting
class at Sienna, and you know that's what made CIMA
so great. You know, we had these small classes and
(15:41):
you had these relationships with your professors that you wouldn't
get at you know, the U Albanese of the world
or any of these Sunni schools because the classes are
too big. So just really a touching class. And you
know that's really how I got so interested in economics.
We're gonna take a quick break. You were listening to
Let's Talk Money, brought to you by Say Financial Group,
where we help our clients prioritize their health while we
manage their wealth for life. Thank you. You were listening
(16:07):
to Let's Talk Money. This is Vincenzo Testa. I'm enjoying
about my colleague Ed Wilhelm. We encourage all listeners to
call in at eight hundred Talk WGY. That's eight hundred
eight two five five nine four nine. Please call in
with questions. We love questions, So feel free to call
(16:27):
in if you have any. So when we meet with
initial clients and prospects. You know, the one thing that
I think is a common misconception. I think that people
that are looking for a financial advisor and are looking
for someone to manage their money. Sorry, I keep getting
cut out. Sorry, I apologize everybody. So when you're looking
for a financial advisor, I think there's something that most
(16:49):
folks need to understand, right, A lot of folks are
so concerned with investment return, and investment in return is
extremely important, right, Giving your life savings to somebody and
trusting them to manage your money is extremely important, and
making sure that you get a return that you know
(17:10):
justifies the fee and makes sense. Right, So, ed, how
do we compare our returns? We have a benchmark, and
you know, I just want you to go into how
we go about that process.
Speaker 2 (17:24):
Yeah, no, certainly, of course. I mean one of the
largest challenges you know when it comes to you know,
performance reporting, is that majority of clients, and I mean
really all retail investors on the equity side are going
to benchmark to S and P five hundred. Now, the
challenge with that being is most investors' risk tolerance does
(17:47):
not match that of the the S and P five hundred. Right,
if you're getting ready to enter retirement, you don't want
to have your entire life savings just completely bundle up
in the S and P five hundred. You want some
sort of ballast, you know, heading into their retirement, you know,
such as fixed income. So we're doing our benchmarks, you know,
on the equity side, we certainly compare it to S
(18:09):
and P five hundred. Now, also other component is the
S and P one hundred is diversified domestically, but it
has no international exposure and it doesn't have any exposure
to small or mid caps really. So you know, when
we're benchmarking, we use a slew of you know, risk
(18:29):
adjusted Schwab and Vanguard funds, so you know, kind of
all across different risk tolerances. So for our sixty forty portfolio,
we're going to benchmark that to both Schwab and vanguards,
you know, sort of lifestyle funds sixty forty portfolio to
try and match up some of that that equity to
fixed income exposure because as we know, equities over the
(18:50):
long term certainly outperformed fixed income just albeit a little
bit more volatile. So we we benchmark against those funds,
and then we all also have a few custom benchmarks
we've put together on our side that we feel, you know,
maybe a little bit more fair as well. There's another
lens to kind of look at things through.
Speaker 1 (19:09):
Yeah, yeah, apologize. Yeah, So the process is complex, right,
a layman, you know you're going to have difficulty on
managing their portfolio. But you know, what I think is
really important is realizing how else advisors add value. Like
I said, investment management is important, right, you're trusting your retirement,
(19:31):
your life savings with an individual and you know, we
don't take that lightly here at the firm. But I
think what differentiates us, who say financial group, from a
lot of other firms in the area is the other
value adds that we provide to our client. So what's
really important is clarity. Right. So there's there's tax implications,
(19:51):
there's investment management, there's state planning. And for someone who's
a laymen, for lack of a better term, they could
read articles, they can again, they could read articles, they
can you know, try and figure out all these things
for themselves. But when you have professionals like us, right,
like I'm a CPA and a CF the d a
(20:13):
CFA level one. You know, we have the experience in
the subject matters and we're able to plain to the
client in layman's terms, you know when it comes all right.
Speaker 2 (20:27):
Sorry, everyone looks like still having some technical difficulties on
Vin's and but you know, just as he was saying, uh,
you know, being able to offer that that clarity and
sometimes communicate those more complicated subjects, you know, that's really
one of the core areas we add value. But it's
also something that we're doing on a daily basis, uh,
(20:47):
you know, for retailers. Then he was mentioning, you know,
our layman more layman Uh, investors, this is something we're
doing every day. You know, you can take the time
to read the articles and do the research on your
own end. And but as we're all aware, you know,
time is money. So if you're you know, willing to
put the time into yourself and and you know, certainly,
(21:08):
all the more credit to you. You see a lot
of successful people do that, you know, but for us,
it's it's really what we do for for a living,
and we like to think we're we're pretty good at
it and that's that's all across the spectrum. So that's
from investment management to tax planning, to account structure to
even estate planning. You know, really really kind of cover
it all, and sometimes the hardest part is putting it
(21:30):
all together. You know, it's how do you combine that
tax management with the investment management and the estate planning.
You know, tying those things together can be can be
really really important.
Speaker 3 (21:42):
Thanks the area, you know.
Speaker 1 (21:44):
So we are going to a commercial breaking again. Apologize
everyone for the technical difficulties you are listening to. Let's
talk money brought to you by Bouche Financial Group, where
we help our clients prioritize our health, what we manage
our wealth for life. Thank you. I'm Fintential test Stuff,
one of the wealth advisors here at the firm, and
I'm right Willhelm. The phone numbers and the phone line
(22:04):
are open following any questions at eight hundred Paul Wgy
that's eight hundred and eighty two five five nine four nine.
Before the break, we're going into how advisors add value
and how it's a lot more than portfolio management. You know,
in relation to the portfolio management, the biggest drag on
returns is usually you the investor, not the investment. One
(22:29):
of the major things I think we do as a
pertman a lot of advisors do is they're there when
things go wrong. They're there during COVID, they're there doing
during eight, they're there during the tech bubble, and they're
there to say, hey, you know, when when you're a
client and you're an investor in you're panicking, they there
to say, hey, pump the brakes, wait a minute. The
(22:50):
market has always gone on to make all the time
eyes and that's a direct quote from the great Stephen
Bouchet himself. And they're there to make sure that you
don't do anything stop because the worst thing you could
do is sell equities when they're in a downturn. Right,
So advisors keep clients from panic selling or chasing trends
or timing the market, and we take the emotion out
(23:12):
of investing. And that's really what I find, you know,
the most important part about portfolio management is being there
that individual right can't make you can't have a robot
or AI be there to tell you not to do
that right. It's got to be someone you trust, and
there has to be, you know, that trust between you
(23:33):
and that individual and you trust them to listen to them. Right,
some clients still make that mistake. Right, We were going
to punch it down their throats though not to do it,
and they always regret it. Right, History always shows that
it goes on and make all the time himes. The
next thing that advisors and our firm especially does, which
(23:53):
a lot of firms don't do, is the tax efficiency
and the tax planning aspect of how we manage the
portfolios and how we manage our client's money. Not only that,
the tax strategies that we implement for our clients to
save them money. Right. One of the most I think
revolutionary ideas and we are rolling it out on the
firm is something called asset location and ED and I
(24:15):
are going to get into this right now, but asset
location versus asset allocation. Right. Our clients have a risk tolerance.
You know, most folks that are nearing retirement or in
retirement are in our growth and income portfolio, which is
that standard sixty percent equities and forty percent fixed income
and conservative asset portfolio. Right, that's a standard risk tolerance
(24:40):
for someone in that demographic. You know, what's important is
you look at all the accounts that you have, right,
And like I said, we're rolling this out at the firm.
I think it's very important. You have your IRA, which
is your tax to for a retirement account. It probably
came from your WROTH or I'm sorry, probably came from
your four to one k at work, or it was
a traditional IRA that you opened and contributed over the years.
(25:01):
That's tax deferred money, which means when you contribute to it,
you get a tax reduction. When you pull it out,
it's taxable. Then you have your raw ira. So your
raw IRA could be from your wraw for one k.
Some people have a raw portion on their four oh
one k or a raw ira that you contributed to
over the years. So when you go in and contribute
to it, it's after tax money and the money goes
(25:24):
gross tax free. And then you have your tax file account. Right.
This might be a standard total household portfolio that we
manage for a client. The taxable account is your after
tax money. You're the you know, it generates dividends and
interest maybe right, and that's taxable on your tax return
you know at the time you receive it, and then
anything you sell within the taxable account is considered short
(25:46):
term or long term capital games. Long term being if
it's one year or more, then you get that preferential
tax treatment.
Speaker 2 (25:53):
Right.
Speaker 1 (25:53):
The rates are a little bit lower if you hold
it for longer than the year the i R s.
You know, when tax law is written, it's kind of
organized in the way that is used to stimulate the economy. Right,
So if you're giving investors, whether it's a stock, property,
what have you, and you give them lower tax rates
(26:14):
for holding it for more than your that incentivizes folks
to invest right and hold and you know, put their
money into things, and that helps grow the economy. So
that's really the rationale behind all this. But these three
accounts is normally what we might see. There might be
other accounts, but when you think about what we see
for maybe a standard client, this is what you'll see.
(26:35):
Asset location is very important. So we have the sixty
forty portfolio and a lot of advisors putting ourselves. They
might make every one of those accounts sixty forty, and
that's not beneficial. Reason being is you have your IRA
for those who know when you hit a certain age,
(26:56):
and right now the age of seventy three, and for
some folks seventy five, you have to do something called
a required minimum distribution. Okay, it's called the RMD. That
means the IRS is saying, hey, you deferred your taxes
for as long as you contributed to that account. Now
we want our money back, because when you pulled out,
you have to pay taxes on it. So it's usually
about four percent of the account balance in the prior year. Okay,
(27:19):
the ROSS doesn't have an RMD, and the money pulled
out is tax free, and a taxable account doesn't have
an RMD, but the tax rates are a little bit
lower than if you use long term capital gain strategies.
With the taxable account, they're lower than the IRA. And
when your benefitial inherits your IRA, they have to liquidate
it in ten years, and all that money's taxed. And
(27:42):
when they inherit it, they might be working. So if
you know you have you're seventy years old, seventy five
years old, you passed away. Your kids might be fifty
to fifty five, forty five and they're still working, so
they might be in a high tax bracket already, and
now your family as a whole is paying more because
they have to liquidate a three million dollar I in
ten years. So when we think about a state planning
(28:03):
and you know, holistic financial planning, tax planning, this is
what we're looking at. And when you have the sixty
to forty portfolio, you really kind of want to be
strategic about where you're placing the assets. So the idea
is to kind of suppress the balance of the IRA.
And how do you do that. You look at the
balances of all these three accounts, and you know the
most optimal way to do it is putting all the
(28:24):
bonds in the IRA and then putting all the equities
in the tax bill and the wroth IRA, right, because
the tax treatment of each of those accounts is different
and more preferential, with the wrowth and taxable, so you
want to grow, and the estate planning aspect of it
is more preferential. So the tax bill account, if you
had a million dollars in gains and your beneficiary inherits
(28:45):
a tax bule account, it's all wiped away. It's called
a step up in basis. So if your beneficiaries inherit
the account and sell that they date of your death,
there's no tax implications when there could have been maybe
one hundred and fifty two hundred three hundred thousand dollars
in tax liability that you would have had to recognize
if you sold it. So that's really how we you know,
(29:09):
this is what we're looking at. I think it's revolutionary.
And you know, as a firm, you know, by suppressing
the IRA, you're suppressing R and D s, you know,
lest hop liability for the client, keeping AUM at the firm.
You know, it's beneficial with the client and the firm
and ed. Why don't you go in a little bit
(29:29):
more about how you know, tax drag can impact the portfolio.
Speaker 2 (29:35):
Yeah, certainly, so just kind of a couple of interesting
caveats with the asset location, you know, one thing you
want to start off. It is a phenomenal strategy, but
it is certainly for the long term investor who is
a little bit later in their life. You know, if
you're younger, you might not have you know, a sizable IRA,
(29:57):
you might really just only have a row, you know,
your four oh one K, which you're gonna have a
limited pool of investments and you know, maybe starting to
get that taxable up and running. So this is certainly
for someone who has a you know, developed pool of assets.
Speaker 3 (30:11):
Uh.
Speaker 2 (30:11):
Now the other big caveat you know, vin as you mentioned,
you're gonna want those equities in you know, a taxable account.
Now why this really only makes sense for the long
term investor if you are you know, constantly in and
out of securities. You know, you're trading, you're making speculative
investments and moves. You know, that's that's great. That certainly
has a place as a portion of your portfolio, you know,
(30:35):
having some some higher risk in there. But now the
place you don't want to do that would be in
your taxable account because churning those positions, you're going to
be realizing you know, capital gains on the exits, on
the on the sales, so that that is something you
want to be cognizant of. It is really more for
you buy and hold, uh investor. And then of course,
(30:56):
you know there is the difference between you know, your
wroth and your eye you know the ross, especially for
the younger investors, you really want to focus on your
your highest growth assets, you know, maybe your more speculative investments.
So you know, when I when I think roth, ira,
I think you know technology, you know, maybe some crypto
or you know, just concentrated large cap exposure.
Speaker 3 (31:20):
So I would say those.
Speaker 2 (31:21):
Are you know, some kind of other key concerns as
far as tax drag on your portfolio goes, I think
a lot of investors would be really surprised, you know,
just what that drag can look like. You know, especially
in a taxable account, if you're moving in and out,
you have to factor in those gains.
Speaker 1 (31:39):
You know.
Speaker 2 (31:40):
An important exercise we do here at the firm every
year is called tax loss harvesting. I mean you've probably
heard me talk about it a few times in the
radio as of late.
Speaker 3 (31:49):
That's essentially just.
Speaker 2 (31:50):
Going into your taxable account, sitting down, looking through the positions,
and if you have any losses, it's it's it's trying
to realize those losses and then you can offset some
of those gains. So you know, just because you have
losses in a portfolio, isn't isn't necessarily a bad thing?
You know, you can exit. You can't buy the exact
(32:12):
same security immediately. There's a it's called the wash sale rule.
You have to wait thirty days before you buy the
same security. But for example, if you know you had
you know, maybe you bought bitcoin at the at the
start of the year. Uh, and you bought I bit
uh that's uh I shares bitcoin ETF. You might you
might be down you know, two percent on that since
(32:33):
the start of the year. You know, if it's a
sizeable position, you could realize those losses, sell your position
and replace it with a different cryptocurrency ETF like maybe
van x h O d L that's another bitcoint one.
So you know, even though it's not the exact same security,
it is the same exposure. That's not going to trigger
a wash sale rule under I r S. And that's
(32:54):
the way you can just add a little bit of
tax alpha or reduce that tax drag on your on
your portfolio, looking for those opportunities and losses to replace
with some like kind exposure. And then on the same time,
what that lets you do is you know, with those
losses you can offset some gains. You know, maybe your
Apple position has grown to be a little bit too
much of your portfolio, it's too concentrated for your risk tolerance.
(33:17):
You've got some losses elsewhere you can go in.
Speaker 3 (33:19):
You can trim that.
Speaker 2 (33:20):
Position that's been maybe keeping you up at night from
a risk perspective.
Speaker 1 (33:24):
Yeah, I mean this is how deeply we're looking at things, folks.
Not a lot of advisors are doing this. Not a
lot of firms have the expertise. You know, we have
three CPAs in the EA. You know my colleague Scott Strohecker,
you know him and I kind of manage a tax
team in John Malay, you know, sees it over who's
the CFO and a share shareholder and COO. John has
a lot of hats, he's a CPA. But we're looking
(33:47):
at things really deeply, folks. And this saves you money
over the long term. If we're doing this for our
clients on an annualized basis, it really adds up. And
when you keep money in the portfolio by saving your
money in taxes, by being efficient, you know ETFs, we
don't use mutual funds. The reason being is the expense
ratios are lower and then more efficient for tax purposes.
So if we could save your money within the portfolio
(34:10):
and save your money in general right cutting your taxes,
then that money is gonna grow and compound and you know,
overall you're going to see a huge difference. If you
were to look back thirty years at an advisor that
might not have done that right, huge differences because when
you think about compound interest, it truly makes the difference.
(34:30):
Making you money is important, but saving your money is
just as we're gonna take a quick commercial break. You
were listening to Let's Talk Money, brought to you by Bouchet
Financial Group, where we help our clients prioritize their health
so we manage your wealth for life. Thank you you
were listening to Let's Talk Money. Thank you for everybody
for listening. This is Vincenzo Tesla, one of the wealth
advisors here at the firm, joint on my colleague Ed Wilhelm.
(34:51):
Please call in with any questions at eight hundred Talk
W eight hundred talk WGY. That's eight hundred and eight
two five five nine four nine. So we're focused. Today
has really been a lot, you know, on a lot
about how we're saving our clients and taxes and how
we're being tax efficient. There's an there's another strategy aside
(35:12):
from asset location that is kind of revolutionary as well,
and we haven't enacted at the firm, and it's called
direct indexing, and Ed is really a huge component of
enacting that strategy and he's really well versed on it.
So ed, Why don't you talk a little bit about
direct indexing.
Speaker 2 (35:30):
Yeah, direct indexing has certainly been big for the firm
over the last year and a half, but also big
for the wealth management landscape. You know, strategies like this
are certainly picking up in popularity. You know, I hear
about it on the institutional side. You know, at least
once a week, you know, a new fun family launching
a strategy of their own. But also just you know,
(35:52):
attending conferences and networking events and meeting other advisors, other
professionals in the space. It really is a big topic
of conversation. So if you're if you're a current advisor,
is not talking to you about it, it is it
is certainly worth a question if it makes sense for you.
I think it's only going to continue to grow and
it really is kind of a more modern way or
(36:13):
it is the future of the investing landscape.
Speaker 3 (36:16):
But as I was.
Speaker 2 (36:17):
Talking about before with the tax loss harvesting, you know
where you're kind of handcuffed by doing that. You know,
yourself in an ETF based portfolio is you know, in
any given year, you know about thirty percent or so
of the S and P five hundred, It might be
down even though the broader index is up. Now, why
that's unfortunate is because you do have exposure to some
(36:39):
securities within that basket that are at a loss, and
you're unable to take advantage of that. So what direct
indexing allows you to do is instead of just owning
that basket, you're just going to take away that basket
and own the underlying stocks individually. Now, if you were
just going to do that yourself in an Excel spreadsheet,
(37:00):
that would be that would be tough to track. You know,
you have to track each company's waitings. You know, you're
gonna have to own five hundred different securities. It's just
not very realistic from an operational standpoint. Uh So where
direct indexing comes in, this is really only now available
because of the advancements in technology. What it's going to
do is it's going to replicate the S and P
(37:21):
five hundred by owning those individual stocks, you know, via
the software. Now, it's not going to go out and
buy every single name within the index. It's going to
buy you know, one hundred and fifty to two hundred names.
But what it's going to do is it's going to
buy very specific names that are going to give you
S and P five hundred like exposure, and typically they'll
(37:44):
quote you based on tracking air. So normally you see
about one percent of tracking error, which means you're going
to overperform or under perform by half a percentage relative
to S and P five hundred. But on top of that,
on top of that S and P five hundred exposure
you're getting, you're owning the individual names. So, especially in
(38:04):
the last three years where we've seen such concentrated market returns,
you know, you have the market being carried by seven
names which have done really well. There are a lot
of names in the S and P five hundred that
have not done as well. You know, we've got plenty
of even great companies down at a loss. When you
own the whole basket, like I said, you can't take
advantage of those. Now with the software, you are able
(38:26):
to take advantage of those, and you're able to offset
some of those games elsewhere in your portfolio to keep
that tracking error down. But also over time we've seen
is you're actually able to accrue those losses. And when
you take those losses and you apply them back at
your tax rates.
Speaker 3 (38:44):
You know, this year we have.
Speaker 2 (38:45):
Clients who have seen you know, between two to four
percent of additional tax alpha, where you know, they are
accruing so much losses that they're they're able to offset
gains you know, elsewhere in their in their life for
stock file those for you know, for maybe a future
business sale. So it's really become an attractive piece of
(39:06):
technology and it continues to advance. You know, now you're
not limited to just tracking an S and P five hundred,
but you can actually get really creative with what you
want that underlying exposure to look like. You know, So
for us here at the firm, you know, we're certainly
you know, tech focused investors. You know, Steve has been
preaching QQQ since before I was even born, So we're
(39:29):
able to overweight you know, some of that large cap
technology and still track the index. So it's been a
very successful strategy for us in that regard. On top
of adding you know what we call tax tax alpha.
Speaker 1 (39:42):
Yeah, thanks, Ed. So if you see how tax planning,
investment management, and financial planning may all come together, all
the dots are connected, and when you work with an
advisor that's touching on all these topics and you know,
has all the expertise, which a lot of firms don't,
so kind of bring this all together and make sure
(40:02):
your whole financial situation is being accounted for from a
tax planning, financial playing, and investment major perspective, it's invaluable.
Won't find a lot of firms that do what we do,
I'll tell you that. So on the flip side, there
was some pass legislation passed earlier this year in July fourth,
twenty twenty five, called the One Big Beautiful Bill. So
(40:25):
we you know, obviously you should know by now, we
have a tax division here at the firm and it's
kind of headed up by myself, Scott Strohecker and John Malay,
and we are keeping up the date on all the
updates and new legislation that's coming into play.
Speaker 3 (40:43):
We stay educated on it.
Speaker 1 (40:45):
And we actually did a webinar two weeks ago Scott,
myself and John. It was a Year in Tax Planning webinar.
And we also did a webinar on the One Big
Beautiful Bill and you can find those on our website
at Bouchet dot com, bou Ch e Y dot com.
And I'd also wrote a blog on the One Big
Beautiful Bill. So what the One Big Beautiful Bill really
(41:06):
does is it makes some slight changes to a previous
tax law that was passed in twenty seventeen, which was
the Tax Cuts and Jobs Act that during Trump's first term.
Trump came in, he need lower tax rates and he
also made some other moves. So what the Tax Does
(41:28):
and Jobs Act and how it's written and what it
says is that the law was supposed to the sunset
after twenty twenty five, which means all of the provisions
that were listed in the Tax Does and Jobs Act
going to end. So the One Big Beautiful Bill, Trump's
second term, with another president in between, came in and said, hey,
(41:48):
there's some new things we're going to add, and we're
going to make sure that these provisions are pushed out
until twenty twenty eight. So one of the major things
that is going to affect a lot of folks that
are listening right now, most likely is the senior deduction.
So if you watch Trump on TV, you know he
says a lot. He said a lot about you know,
(42:10):
no tax on Social Security and you know, lowering taxes
for seniors. So a lot of folks I've talked to
he thought that there was actually no tax in Social Security,
and that's not the case. So folks that are sixty
five and older are entitled to an extra deduction. Right,
This isn't a credit, This isn't This is a deduction.
So it comes directly off your taxbile income of six
(42:32):
thousand dollars and then married folks received twelve thousand dollars
if you're over the age of sixty five. And this
is really a way to reduce those taxes on Social
Security rather than eliminate them. So that's what this senior deduction,
senior deduction is really aimed to do, and I think
it's great. There's there's an income phase out for it.
It's relatively low. For married folks, it's one hundred and
(42:54):
fifty thousand. For single folks it's seventy five thousand. So
if you're over that amount and starts the phase out,
and you might not get that full six thousand or
twelve thousand dollars deduction, but I think it's honestly great
putting back money in the pockets of seniors, and you know,
they're really the ones that built this economy as of
right now, so I think it's great. Then you have
(43:14):
the charitable deduction for non itemizers. So charitable contributions and
charitable planning is something that we do very extensively are
at the firm. We help our clients start donor advise funds.
We help our clients maximize their tax benefits when they
make charitable contributions. So this deduction that was added, it
(43:35):
was actually added back during COVID. During COVID, if you know,
you could take it three hundred dollars deduction on your
tax return or six hundred dollars for married folks for
charitable contribution even if you're in't itemize, so you have
the standard deduction and you have itemized deductions. Charitable contributions
are on your itemized deductions. So if you're itemized deductions
(43:55):
which consist of state and local income taxes, medical expenses,
mortgage interest, charitable contributions, when all those you know exceed
your standard reduction, which the standard reduction is what everybody
gets no matter what, but your itemized If you exceed
the standard by adding up all of those items you know,
(44:17):
you are considered to be itemizing your reduction. So what
this terrible deduction does is allows folks who aren't itemizing
to receive a one thousand dollars deduction for single folks
or two thousand for married without itemizing, right, And you
know that's kind of incentivizing individuals to contribute the charity.
And again there's always a reason behind anything that's written
(44:40):
in the tax law. You know, they're looking at data
and there's they're seeing specific numbers, and they're trying to
incentivize folks to do specific things by writing legislation to
do so. Then you have the salt cap update, and
this is the most important one, I believe, especially for
folks in New York. Back in twenty seventeen, there was
(45:01):
a cap put on the state and local income taxes
you could deduct on your itemized deductions at ten thousand,
and that has now moved to forty thousand. There is
income phase out numbers, so folks, you're going to save
some taxes this year if you follow in a specific demographic.
Really important to pay attention to that salt cap is
really going to help a lot of folks out there.
(45:22):
A lot of folks listening. You know, we have high
real estate taxes and income taxes in New York State
relative to other states, So definitely something to pay attention
to and a good thing for most of you folks
listening out there. You know, I'm excited to kind of
utilize that and save some money on my taxes this year.
Thank you for everybody for listening. You were listening to
(45:44):
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. Thank you.
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