Let's Talk Money

December 13th, 2025.

Episode Transcript

Speaker 1 (00:00):
Good morning everyone, Thanks for joining me on this cold
but sunny Saturday morning.

Speaker 2 (00:05):
At least where I am.

Speaker 1 (00:06):
I see a lot of snow out my window where
I sit a little north of Saratoga, so looks like
we're going to have a white Christmas, and it is.

Speaker 2 (00:13):
It is very beautiful. It's hard to believe.

Speaker 1 (00:16):
We're almost halfway through December already. The holidays are coming
up quickly or already in the middle of them for
a lot of us busy season and then it's the
new year, and there's just so many financial things that
go on around this time of year, you know, in
our business, of course, tax season, you know leading up
to April fifteenth is very busy, but this is probably

(00:36):
a close second in terms of a lot of things
going on, and that means a lot of things that
we get to talk about on the show this time
of year. So it's exciting. There's a lot to talk about.
My name's Harmony Wagner. I'm a wealth advisor at Bouchet
Financial Group. I've been with Steve and the rest of
the team here for over nine years now. I'm a
Certified Financial Planner or CFP, and also a certified Private

(00:56):
Wealth Advisor a CPWA, so really enjoy working with clients
and especially on those more advanced financial planning strategies. Both
of those designations kind of lead into that being my
my Niche and I really enjoy the financial planning and
getting to know clients, and also of course appreciate the
opportunity to speak to our radio audience every now and then. So,

(01:19):
whether you're tuning in for the first time or a
loyal listener who doesn't miss a week, thanks for joining
me today. I hope that you'll get something valuable and
interesting out of the show as we discuss all things financial.
We'll talk about the markets, the economy, financial planning topics,
personal finance, what do we do in our own portfolios,
and of course whatever you as a listening audience wants

(01:39):
to talk about. We do have the phone lines open.
That number is one eight hundred talk WGY or one
eight hundred eight two five five nine four nine, and
we also have the email inbox, which is ask Bouche
at Bouche dot com. That's ask ask BOUCHA b as
and boy O U c h ei at dot com.

(02:00):
So if you prefer to ask in a written format
or you don't have the ability to make a phone
call where you are. That is an option as well
to ask your questions. So I look forward to hearing
whatever our audience wants to discuss today well as I
usually do. Let's kick things off with a market recap.
We had a mixed week for stocks, with a little
bit of some volatility at the end on Friday's trading session,

(02:24):
so that brought the SP five hundred index down for
the week too point sixty eight, down point six to
eight percent for the week ending at sixty eight twenty seven.
Nasdaq was down one point nine to six but we
did see the Dow post gains for the week, up
almost one point three percent and the Rustle two thousand
and up point eight six percent, So we did see

(02:45):
the decrease in the sp and the NASDAK driven primarily
by fresh concerns in AI spending. We saw the chip
designer broad Calm down almost eleven and a half percent.

Speaker 2 (02:55):
Oracle also closed.

Speaker 1 (02:56):
The week down thirteen and we saw some ripple effects
from those losses, with Navidia following over four percent for
the week and AMD was down over three percent. So
we're seeing again this has been the story for a
while a lot of investors are concerned about AI valuations,
monitoring that closely, and this week showed once again just
how much of a player these big AI companies are

(03:18):
and how much that movements in that space affects the
market at large. Even corporate bonds issued by some of
these big AI players saw higher trading volume as investors
tried to reduce exposure to some of these areas. So
there's been a lot of caution, a lot of discussion
about AI valuations, a lot of spending going into AI infrastructure.

(03:39):
But you could also make the argument that some of
this more general worry as the sentiment around the AI
space a lot of focus on it, some of that
can be a contrarian indicator and it can help temper
market exuberance and allow room for this strong market to continue.

Speaker 2 (03:55):
So time will tell. We keep watching it closely.

Speaker 1 (03:57):
You know, a lot of investors are, you know, worried
or optimistic about it, maybe depending on on the day
or what you're looking at and what you're reading. So
there's a lot to follow in this particular space and
the way that it affects the market so dramatically at
this point, but even with a down week for the
S and P and NASDAK. We're still seeing a lot

(04:18):
of strength this year. The S top five hundred US
sixteen percent so far for twenty and twenty five, NASDAK
up over twenty percent, So we're seeing a lot of
strength as we go into the end of the year.
December tends to be a positive month for stocks. You know,
it's just an average and it doesn't mean that it's
going to happen every year. But you know, as we
approach the end of the year, we do see investors
sometimes looking to sell, either they're looking to lock in

(04:39):
games before the end of the year and or harvest
tax losses for year end. We'll talk more about that
in a little bit. And on the other hand, holidays
can sometimes create a slowdown in trading, so the thinner
volumes can create some additional volatility. As you know, market
moves are more felt when there's not as much trading
going on. So just some interesting things that you know
happen in last month of the year, and as we

(05:01):
headed into the new year. On the economic front, we
had you know, a lot going on last week and
a lot coming up in this this coming week as well.
The Fed cut rates a quarter point on Wednesday, which
was widely expected. No surprise there. There were three descents
on the cut. There was two who felt there should
be no cut in December, and also one who argued

(05:22):
the opposite, that the cut should have been half a
percentage point instead of a quarter point. We're seeing the
FED navigate this uncertain economic environment in real time, and
so you know, kind of seeing some of the descents
and the disagreement there, it makes sense. There's signs of
a weakening labor market, which Ja Powell referenced in his commentary,
but we're also still seeing inflation remain above target. And

(05:44):
there's also been kind of some blindness when it comes
to economic data. We came off of a long government
shut down. I think forty three days was the total
from start to finish, and so there was a lot
of data that was missed and the FED was making
decisions with you know, what they could go off of,
but there was some some cloudiness going on with with that.

(06:04):
So there's the payroll data has showed an increase of
forty thousand jobs per month since April, but the Fed's
expressed that they feel those numbers are overstated, and I've
even seen you know that they think the real data
maybe closer to twenty thousand jobs lost each month. That'll
be a sixty thousand a sixty thousand job swing, so
you know that that would be a huge impact onto

(06:26):
how they're gonna play this out with with future cuts.
So as we go into the next week, we're gonna
essentially see three months worth of data on labor and
inflation coming out between now and the January FED meeting
because the government shut down. Now there's this catch up schedule,
and so that's what we're going to be seeing a
lot of data, a lot of potential impact coming out
of you know, the upcoming reports. So investors in economics

(06:50):
are going to be closely watching next week as the
November jobs report comes out on Tuesday, so we'll see
an update on the on the labor market. And then
on Thursday, we've got the CPI report, so that consumer
price index coming out, very closely monitored inflation read So
both of those coming out next week. It'll be interesting

(07:10):
to see, you know, how they affect markets and and
trajectory at the economy as we head to the end
of the year. You know, up to this point, there's
been strong corporate earnings that have really supported the markets.
We've seen the FED cut rates several times that supported
the markets as well, but we have again not seen
the ecadomic data that we normally would be seeing because
of the shutdown. So we'll really learn more this next week.

(07:31):
If you pay attention to it, there's a lot that
will be be learned.

Speaker 2 (07:35):
Well.

Speaker 1 (07:35):
I mentioned earlier, how you know this is a really
busy time of year, and the twelve thirty one date
is a tax deadline for a lot of different strategies.
And so as we get to the end of the year,
if you are considering doing some strategies in your portfolio,
I would suggest doing it sooner than later. Right, we
do have a couple of weeks left, but the financial

(07:56):
custodians can get really busy as they get to the
end of the year. Advisers can get really busy. And
so if you have some of these things that you
want to do, and you know now is the time,
and the sooner you can do it the better, especially
with holidays, you know, having some uh some business days
that that banks or financial institutions will not be operational
as we go into the end of the year. So

(08:17):
here are some things that you might be considering as
we go up to the twelve thirty one deadline, and
the first, which I mentioned a few minutes ago, is
tax loss harvesting.

Speaker 2 (08:25):
So for those with taxable.

Speaker 1 (08:27):
Accounts, you can if you have losses and now you
can sell those and realize those which you can use
to offset capital gains for tax purposes. So you know
you can capture those losses, use them to your advantage,
use them to offset gains that you might have. Now
you know, if you maybe you will have something that's
in a loss but you still want to hold it,
how do you handle that? Uh, there's a couple of

(08:49):
different ways you can do it because there are wash
sale rules that make it a little bit more complicated,
meaning that you can't sell something that's at a loss
one day and then buy it back the next day
and use that loss.

Speaker 2 (08:59):
Yeah, have to wait thirty days before or after.

Speaker 1 (09:02):
You can't make a similar trade to buy the same
stock and still recognize the loss that would be disallowed.
So if you have something at a loss, you'd like
to realize that loss and use it for tax purposes.
There's two different ways you can approach it. You can
either buy something that is similar but not the same,
so it's not going to trigger wash sale rules. The
example that you may hear most often is, you know,

(09:23):
if you want to sell coke at a loss, you
can buy into pepsi.

Speaker 2 (09:27):
That way, you still have.

Speaker 1 (09:28):
Exposure to a similar company, but you're still going to
be allowed to use that loss that you realized in
the one that you sold. The other option is to
is to wait and to wait that thirty days, and
after thirty days after selling and realizing the loss, you
can buy back into it. Now that's you may run
a little bit of a risk of what's going to

(09:48):
happen in the market or that particular stock in that
thirty days, So you know that is the possibility you
could sell out at a low markets go up, and
now you're trying to buy back in at a higher price.
Fairly ideal, but it is a way if you say,
I do want to get back into this, you can
always wait the thirty days and after that point you
can buy back into that position if you'd like to.

(10:11):
So tax loss harvesting, it's a good time to go
through your taxable accounts.

Speaker 2 (10:15):
I will note that.

Speaker 1 (10:16):
In iras roth iras four one ks this does not
work right, So you don't see any capital gains or
losses realized within these tax deferred or tax free accounts.
So if you have qualified accounts, that that's not the
place to look. You're going to be using individual or
joint accounts, trusts. Those are the places that you're the
taxable accounts where you could really take advantage of some

(10:38):
of this tax loss harvesting. And maybe maybe you're thinking
about it, but you're saying, I don't actually have any
gains that I realized this year.

Speaker 2 (10:45):
That's okay.

Speaker 1 (10:46):
You can still realize the losses now, and you can
carry them forward so you can use them in future years.
So the way that it works is that you'll be
able to deduct up to a net loss of three
thousand dollars on the capital loss front. But let's say
you had more than that. Right, Let's say you had
fifteen thousand in capital losses that you realize this year
and no gains, so you can use three thousand of

(11:07):
that against your income this year, and then the other
twelve thousand in losses you'll just carry forward, meaning that
if you have gains next year, you can apply it there.
If you don't, you just want to keep using those
three thousand every year until it's used up. That works too,
so you don't feel that you have to have gains
this year in order to harvest losses in a meaningful
way for your tax situation. It can be carried forward

(11:28):
and saved for the future sometimes that that's a great,
great strategy to have some of those in your back pocket.
We also have had a great year in the markets, though,
so if you're saying, you know, looking at your portfolio
and you're seeing that you've had some stocks or ETFs
or mutual funds that have really increased in value, and
maybe you have some that are at a loss as well,
it's a good time to you know, realize them at

(11:49):
a gain, realize them at a loss, and you can
maybe offset that and create a tax neutral situation. But
also while trimming some of those positions that have done
really well, if you're really valuating your risk tolerance as
you can into the end of the year, that's a
good way to do so without creating a lot of
taxable gains for yourself. This leads into another conversation that's

(12:10):
very front of mine for a lot of people at
this time of year, which is mutual funds capital gain distributions.
So at Bouchet, we don't use mutual funds hardly ever,
but we do a lot of clients that have them
as legacy positions, meaning that when they came on board
with us, they brought mutual funds over from a path advisor,
maybe something that they had inherited, something they purchased before,

(12:31):
and they maybe have enough built in gain that they
haven't sold those so it's still part of their portfolio
at this point in time. Now, we don't use mutual
funds typically because for a number of reasons. You know,
Number one, they tend to have higher fees than ETFs.
Now there's been downward pressure on fees across the industry,
so mutual funds are not as expensive as they used

(12:51):
to be, but they still do come in higher than
ETFs when you compare on a peer to peer basis
quite often, so mutual funds may average between point six
two point eight percent as an expense ratio. That's the
fee that you as an investor pay every year just
for the privilege of holding that fund. And you know
what the organizers do in terms of putting it all
together and selecting the funds and doing the management of it.

(13:13):
That's the fee that you pay them. You don't always
see that, and oftentimes people think they're not paying any fees,
and if they were to drill down and look at,
you know, what are the fees in their portfolio, they
would see that they really are. It's not going to
be a line item on your statement, but you know,
all these funds, ETFs and mutual funds alike are going
to have an expense ratio for the services you receive
by those fund organizers. So mutual funds do tend to

(13:35):
come and hire. You know, our ETF portfolio, which includes
some core holdings that might be more simple in nature,
also a lot of tactical holdings that are more complex,
we come in between point one six and point two
percent as the expense ratio. So we're paying close attention
to the fees that our clients are paying and trying
to minimize those so that we have as little fee

(13:55):
drag on the portfolio as possible, while still selecting the
right investments that are, you know, based on our research
and due diligence, that the appropriate ones for our clients
to hold. So the fee comparison is a big difference
in a differentiating factor why we like ETFs over mutual funds. Also,
there's a performance element to it. And you know, as

(14:17):
if you've ever read an investment statement, you will see
this past performance is not indicative of future results. But
when we look at the past performance, especially in recent years,
ETFs have gotten so efficient that they outperform mutual funds
a wide majority of the time. Overall, it's between about
sixty to eighty percent of the time. If you look
into the US large cap space, specifically, it's closer to

(14:38):
ninety percent of the time that you can buy a
US large cap ETF and you will do better than
a US large cap mutual fund. So that's another reason
why we prefer ETFs. We can really be tactical with them,
but because if there's less fees and the way they're
more efficient, there there's better performance. Finally, which is the
point I've been trying to boil down to the are

(15:00):
more tax efficient. Ets are more tax efficient than mutual funds,
and the way that mutual funds distribute their capital gains,
which for many of them happens right around this time
of year on November and December. You may not have
sold or realized any gains in that fund by taking
any action in your taxable accounts, but you still may
be receiving a capital gain distribution for trades that occurred

(15:21):
within the fund that you may or may not even
have been aware of. They distribute those gains to their
shareholders on an annual basis, and again for many of
those it is around this time of year. What that
means for people who hold it, especially in a taxable account,
which is you know what we're talking about now, is
that you may be receiving capital gain distribution where you're
having to pay income tax on it and you didn't

(15:43):
even sell anything, but you're having to pay taxes on it.
You can't really predict it ahead of time. There's not
really any way to know. They announce it a little
bit before they actually pay it out. But if you're
a shareholder, you have that as a possibility, and so
it can really create some variability in unpredictability in your
tax situation. If you're saying, well, I hope these mutual funds,

(16:05):
I don't know what they're going to pay out to
me in taxes, and I have to try to plan
for it and make sure I'm paid in and make
sure I'm doing the right things. And I've just you know,
until until it happened, until it's announced, I have no
idea what that's going to be. Let's go to the
phone lines Dow and talk with Sam from Albany. Good morning, Sam,
How are you?

Speaker 2 (16:29):
Sam? Are you there? I think we lost Sam.

Speaker 1 (16:32):
For anyone who does have any questions, you can you
can call into the phone lines and hopefully Sam will
call back if he's able to.

Speaker 2 (16:39):
UH.

Speaker 1 (16:39):
That phone number is one eight hundred talk w g
Y or one eight hundred eight two five five nine
four nine. If you prefer to ask your question over email,
you can do that as well at ask Bouche. That's
a s K b O U C H E Y
at Bouchet dot com. Let's go to a quick break.
We'll be right back with more. Let's talk money on WGY.

Speaker 2 (16:58):
Hi.

Speaker 1 (16:59):
Everyone, thanks for saying, basically through that brief break, this
is Harmony Wagner, wealth advisor at Bouchet Financial Group, joining
you on this cold and snowy December morning. Thanks for
joining me and talking about all things financial, the markets,
the economy, financial planning, and you know right now we're
discussing some end of year portfolio moves that you might
be considering.

Speaker 2 (17:19):
Talked about tax loss.

Speaker 1 (17:20):
Harvesting, we're talking about mutual fund capital gain distributions as well.
And for those who hold mutual funds, maybe you've held
them for a while and you know some of the
frustration that comes with this, the year end capital gain distributions.
You may be thinking about, you know, what what can
I do? And we look at this for clients as well.
Like I shared, we don't hold them typically in client portfolios.
We don't purchase them or have them as part of
our portfolio models, but we do have a lot of

(17:42):
clients who have brought them over to us. And so
when you have mutual funds, what we typically pursue is
a you know, disciplined and kind of spread out approach
where every year we're looking at it. So we have
a matrix we would plug in the fund tickers, so
we're monitoring, you know, which ones have the highest expense
ratio that would be that could be a reason to
target one over another. What's the performance? We're always looking

(18:04):
at that as well. How do the different types of
funds and the different focuses play into the investment portfolio
That we're trying to design for our clients. And then
also the capital gain distribution rate, so we might highlight
ones that are the worst culprits for these capital gain
distribution meaning they're paying out the highest percentages over time,

(18:25):
and so we might look we would look at those
three factors and say which ones each year are we
going to target and how much room do we have
in the tax picture to realize them gains. For many clients,
the reason why we didn't sell these funds is because
they have really high built in gains. So we would
be looking very strategically to say maybe we only trim
a little bit at a time year over year.

Speaker 2 (18:45):
We want to you know, spread it out over several
tax years. But over time we.

Speaker 1 (18:49):
Want to reduce these positions so that their tax situation
is more controllable. We're not having these capital gain distributions overall,
ideally less fees.

Speaker 2 (18:56):
In the portfolio.

Speaker 1 (18:57):
So it does take patients, but there's no time like
the present to start. And if you sell before the
capital gain distributions are paid out, you're no longer a shareholder.
You're not going to experience that. So even if you
can sell a little bit, every little bit counts, and
you want to use as many tax years as possible.
After twelve thirty one, any any realized gains that you
have are going to be for twenty twenty six, so

(19:18):
you'd lose the opportunity to realize them in twenty twenty five.
And for many people, especially those who are retired, and
I will add in the earlier years of retirement, often
the first ten, twelve, fifteen, maybe years of retirement, there's
a lot going on in terms of your income picture changing,
and we call it the gap years. We do a
lot of planning in those years of retirement right after

(19:39):
you're done working. Obviously, your earned income would typically drop
off if you're fully retired and not pursuing any additional work,
so that can create an opportunity. Now, of course, you're
replacing your cash flow from somewhere, so whether that's maybe
it's pensions, maybe it's social security, maybe it's your portfolio.
And do you pull from taxable accounts, do you pull
from your IRA or four one Kay, There's so many

(20:00):
different things that you might different ways that you might
replace your income, and all of those have different tax implications.
So quite often there are times where you may have
lower income for a year or several years, particularly after
you retire, and those can be great years to start
targeting some of these mutual funds to realize gains when

(20:22):
you're in low tax brackets and try to reduce the
capital gain distributions in the future. Of course, you know,
we try until the tax tail wag the dog. Right,
It's not the only reason to make a decision, and
that's why we're looking at other things as well, like
expense ratios, like the investments, and the reasons why you
might sell or holds. So I don't mean to say
in any way that you know you should only try

(20:42):
to avoid these capital gain distributions and structure your whole
portfolio around that, but it is something to consider, and
especially if you're someone where you're maybe tax sensitive and
the mutual funds capital gain distributions create issues for you
where you're not able to really, you know, control your
tax situation to the level that you would like to
reducing them, especially over time. It is a great option,

(21:03):
and you know, now is a great time to look
at it, especially if they have not paid out the
capital gains yet, you know they likely will be in
the next couple of weeks. So it could be a
good time to take action. And if you're doing some
tax loss harvesting, like we talked about earlier, then you know,
you may have some losses to offset, so that could
be a good way to try to make it as
tax neutral as possible. Another thing that people are talking

(21:25):
a lot about as they go to the end of
the year is roth conversions, right, and I feel in
the past maybe three or four years, it seems that
the number of clients who are asking about roth conversions,
wanting to really do planning around roth conversions has gone
up a lot. You know, people are focusing on it
more aware of the strategy, and a lot of people
are just trying to think about, you know, if it

(21:45):
makes sense for them. I talked about it already, you know,
I'll say it again, it's those gap years that the
roth conversions can be the most important, most strategic. Where
your income is low, you have a lot more room
in lower tax brackets to fill it up with roth conversions,
So those can be great times to do it. And again,
it doesn't have to be all at once, you know,

(22:05):
doing it over a number of years and spreading it
out is a great way to you know, over time,
you may feel like you're taking little steps, but over
time it ends up being.

Speaker 2 (22:14):
A really big impact.

Speaker 1 (22:16):
So with roth conversions, you take money out of an
IRA or four oh one k, a place where you
put dollars in and got tax deduction, so a pre
tax account, and where every dollar that comes out is
going to be taxed as ordinary income, and you pay
the ordinary income now and you convert it over to
a wroth IRA so that you don't have to pay
taxes on it in the future, and all future growth

(22:37):
is going to be tax free. When it's pulled out
later by either yourself or your spouse or your kids,
or whoever your beneficiaries are, it will be tax free
to to you know, whoever withdraws it in the future.

Speaker 2 (22:48):
So it can be a really nice way.

Speaker 1 (22:51):
To to move money from that ordinary income tax bucket
and to put it into a wroth, And a lot
of people are thinking about it. So if you've been waiting,
and the strategy oftentimes with it is to put it
in when the markets are down right, so you move
it over when markets are down and then you get
the recovery in a tax free location. So a lot

(23:12):
of people do wait and they say I want to
see the markets full back ten fifteen percent before I
pursue this. Well, you know, if you've been waiting and
we haven't really seen that this year, I wouldn't wait
any longer. If you plan on doing it for twenty
twenty five, you know, now's the time to execute that
and to make sure it gets done before the end
of the year. Like I said, there could be some
slowness on the execution of some of these strategies towards

(23:34):
the end of the year, and so you don't want
to miss that opportunity.

Speaker 2 (23:38):
So I would do that.

Speaker 1 (23:39):
Do that now if you're considering it at all. We're
coming to the bottom of the half hour. Here go
to a quick break, but we'll.

Speaker 2 (23:46):
Be back with more.

Speaker 1 (23:46):
Let's talk money, brought to you by Bouche Financial Group,
where we help our clients prioritize their health while we
manage their wealth for life.

Speaker 2 (23:52):
Stay tuned, we'll be right back with more. Hi.

Speaker 1 (23:55):
Everyone, thanks for staying with me through that news break.
This is Harmony Wagner joining you on this old Saturday morning.
I'm a wealth advisor here at Buchet Financial Group. I've
been here with Steve and the team for over nine
years now. I'm a Certified Financial Planner or CFP and
also a Certified Private Wealth Advisor CPWA, and it is
hard to believe, as I said earlier in the show,

(24:15):
it's hard to believe that we are almost halfway through December,
the holidays, right around the corner and the new year,
and with that comes a lot of different strategic planning
that can that can go on with with that twelve
thirty one deadline for tax purposes. And that's what we've
been talking about. A few more items to hit on
that note before we talk about some more planning topics.
But as always, I would love to hear what's on

(24:36):
your mind. If you have a question or a topic
you'd like to discuss, please call in or email. I
would love to hear you know what the listening audience
wants to talk about. The phone number is one eight
hundred talk WGY or one eight hundred eight two five
five nine four nine, and you can also send email
if you prefer to ask that way.

Speaker 2 (24:55):
So the email address is ask Bouche.

Speaker 1 (24:57):
That's a sk bo u c a Ey at Bouchet
dot com.

Speaker 2 (25:03):
Well, we've talked about tax loss harvesting.

Speaker 1 (25:05):
We've talked about mutual fund capital gains and how you
can try to minimize those by making some strategic trades.
Now talk about ross conversions as well, which is a
really big topic they shared and I know I hit
it very quickly, but it is very nuanced for each
individual as well. So you know, if you're finding that
something you're curious about, you want to explore it, but
you're not sure if it's right for you, you know,

(25:27):
either call in or talk with your advisor, do more research.
It's a very powerful tool when it comes to maximizing
your after tax wealth, but it is not for everyone,
and it's you know, even if it is for you,
it's the timing is really important. And you know, if
you're someone who maybe you're thinking about retirement and so
that's why some of these strategies are on your mind.

(25:48):
But you're not retired yet. You could very feasibly be
in some of the highest income earning years of your career,
not typically the time to do it. And again, you
know you could do the analysis and really see, but
the mostategic way to do it is when you can
use a lower tax brackets, and if you're in the
highest tax bracket, that you're going to be for the
rest of your life. It is probably a time where
patients is going to pay off and maybe doing it,

(26:10):
you know, once you are retired or once your income
situation changes could be more strategic. So, you know, I
can't emphasize enough how nuanced it is as a strategy
and how important it is to really do it right.
If you don't, you can really lose the entire benefit
of it. So it's not just about getting money into
a tax free bucket. It's about doing it the way

(26:31):
that's most strategic and the right timing. You know, I'll
talk now about rmds as well, because twelve thirty one
is an important deadline for those. Now, if you are
eligible for rmds, which stands for required minimum distribution, hopefully
you've handled it by now. You know you do have
that twelve thirty one deadline to take it. The time
when you do have a little bit of a grace

(26:52):
period is the first year that you take rm ds.
So let's say you turn seventy three in twenty twenty five,
and you have a qualified account, meaning a traditional IRA
or a four oh one K that's pre tax.

Speaker 2 (27:07):
You'd be required to take required minimum distributions.

Speaker 1 (27:10):
So the way that is calculated, it's a factor that's
based off of your age. You can look up online
what that factor would be. The IRS puts out the
table for what that factor is, and it's divided by
the twelve thirty one balance of the previous year. So again,
for if anyone turns seventy three this year and you
have that type of qualified account, you'd use your year

(27:30):
end balance from twenty twenty four twelve thirty one. You're
going to divide it by the factor. I believe for
the first year it's twenty six point five, So you
divide that balance by that factor. You can check me
on that, but that's how you calculate your rm D
that you have to take for the first year. Like
I said, you get a grace period up to April
of next year. But if you if you think about it,
if you do use that grace period, you won't get penalized,

(27:52):
which is great. You're gonna have to take two rm
ds next year. You're gonna have to take you this
year's RMD by April and then next year's r m
D by December. You're not going to get that grace
period again. So in many, many circumstances. I don't think
i've ever, actually in almost ten years, recommended someone use
that grace period and take it the next year, unless
they really genuinely forgot. But you typically want to take

(28:14):
it in the year that it's required for.

Speaker 2 (28:17):
So you can look at that.

Speaker 1 (28:18):
You know, if you're working with an advisor again, he
or she should have been communicating with you about this,
telling you the amount, making sure it happened, talking about
tax withholdings. But if you're doing this on your own,
and maybe it just slipped your mind or you weren't aware,
you didn't realize that you were now eligible, you know,
take a look at it now and try to get
that process as soon as possible. You don't want to
get penalized by the irs for failing to take it.

(28:41):
There also are required minimum distributions for inherited iras as well,
So maybe you're younger than seventy three rmds are not
on your radar, but you inherited IRA or four to
one K from someone who was not your spouse, you know,
a parent or a sibling, someone else, a non spouse
beneficiary has to take funds from the account. Now this

(29:01):
has gotten much more complex in recent years with some
legislation that passed. So there is both a ten year rule,
meaning that that inherited IRA or inherited four O one
K has to be fully distributed within ten years of
the original owner's passing. So you're gonna have to keep
an eye on that ten year clock. But also if
the original owner was taking rmds annually, then the recipient

(29:26):
has to do the same thing, and so that would
be a smaller amount, typically a smaller percentage, but you
would have to take a small amount every year in
order to avoid penalty. So again it's very complicated. There
are calculators online you can use. You can talk with
someone that you trust who knows it, an advisor or
someone that you're working with to kind of help you

(29:46):
through that navigating that if you.

Speaker 2 (29:47):
Do have a non spouse inherited IRA.

Speaker 1 (29:50):
But it is just important to be thinking about that
and even just a double check, right if you think
you may have satisfied it, it's a good time to
double check now while you still have a couple of
weeks till the end of the year, because that amount
does change every year. You know, for some folks who
are taking monthly distributions from their IRA.

Speaker 2 (30:06):
You want to make sure that.

Speaker 1 (30:06):
You updated that you know that you are updating that
every year to cover the R and D amount, meaning
that you know, the monthly amount that would have satisfied
your rm D last year might not cover it this
year and sing going into next year. So you know,
good times, a double check, triple check. Just make sure
that you're all set when it comes to those required
amounts that you're needing to take from from.

Speaker 2 (30:27):
Your iras you know.

Speaker 1 (30:29):
One last note I'll talk about in terms of you know,
end of year things is charitable giving, and this leads into,
you know, a time when a lot of people do
feel more generous, whether it's giving to charities around the
holidays or thinking about making bigger gifts to family. There's
a lot of a giving going on this time of year.
And so for charitable giving, if you will, if you

(30:49):
plan on doing so in a way that's tax deductible
for you, doing it before the end of the year
is important. So there are a couple of ways that
you can make gifts to charities. One of those is
called qualified charitable distributions, and that's very closely related to
the R and D conversation as well. So, a qualified
charitable distribution is when you take a donation straight from

(31:12):
your IRA and you pay it directly to the charity.
It can be by check, it can be you know,
electronically sent by the financial custodian. A couple of different
ways that you could do it. But it will be
tax free, which is nice because even if you are
someone who uses a standard deduction, which many taxpayers do
now that stand reduction is higher than it has been historically,
then you're not if you're not itemizing your taxable deductions,

(31:34):
you're not really seeing a charitable benefit for donations that
you're making. So by using qualified charitable donations out of
your IRA, you're able to get that benefit. Even if
you use the standard deduction, you have to be aged
seventy and a half to do it. I know that
that half year is you know interesting, I think it's
back from when the r M d A used to
be seventy and a half now it's seventy three. But

(31:57):
they never change the age for qcds, so meaning that
you can be seventy and a half, you don't have
to take required minimum distributions for another two and a
half years. But you still can use the qualified charitable distributions,
and so it's a great way to do it if
you already are charitably inclined. Right, a lot of clients,
you know, they want to reduce their taxes, and so
they're thinking about giving to charity even though they didn't

(32:17):
do it before. And I was saying, well, you're still gonna,
you know, quote unquote lose money by doing that. It's
money that's going out from you. So yeah, even though
you might get a nice tax deduction, it's not actually
really US savings if you weren't already going to be
making that gift. But if you are, or if you'd
like to be charitably inclined to make some of those gifts,
doing it from the IRA if you're seventy and a
half can be a great strategy. You know, twenty twenty

(32:41):
five is the last year before there's going to be
some changes to charitable giving tax benefits brought about by
the One Big Beautiful Bill. So next year in twenty
twenty six, charitable deductions are going to be a little
more complicated. There's going to be a zero point five
percent AGI floor as well as a thirty five percent
tax rate cap, So thirty five percent ray cap will

(33:01):
really only affect taxpayers and the you know, higher higher
tax brackets, but the AGI of floor is going to
affect everybody. On how that works is that you know,
you have to look at your adjusted gross income and
you calculate what half a percent of that, and you
can only deduct charitable donations on top of it. So,
for example, let's say your adjusted growths income is one
hundred thousand dollars, zero point five percent would be five

(33:24):
hundred dollars, and so you know only deductions. Only donations
above five hundred dollars are going to be deductible. And
as you know, as your AGI goes up, that's a
higher threshold that you have to cross, and that's some
charitable benefit.

Speaker 2 (33:36):
That's lost on that floor.

Speaker 1 (33:39):
So if you do have charitable donations that you want
to make, this could be a good year to do it.
Uh And you could even consider bunching them together and saying,
I'm going to put a couple of years worth of
my planned donations into this year to make sure that
I'm getting a higher tax benefit, as opposed to if
you wait till next year, you know you're going to
have to handle that floor every year, and if for
really high tax payers in a thirty five are up

(34:01):
above tax rate, there's going to be even more things
to consider. So there are some things to think about. Again,
you don't have much time, but if you're planning on
making some of those gifts before the end of the
year to get the tax benefit, there is some reason
to do it this year as opposed to waiting till
next year. And it's a good way as well to
reduce your IRA balance and to get money.

Speaker 2 (34:21):
Out of their tax free.

Speaker 1 (34:23):
You know, what I would hate to see is someone
who's making suredable gifts out of cash. They maybe have
a big IRA, they're not using it for the qcds,
and so they're missing that opportunity to move money out
of it in a tax free basis. So you know,
it's something to really think about if you're in that spot.
Some folks may also be thinking about gifting to family
on this time of year, and while there's no tax

(34:44):
benefit for doing that, it is nice to It is
a great way to maximize the impact of your wealth,
which is such an important thing for me and for
us at Bouchet. As we're sitting with clients every week,
every month of a year, and we're really focusing on
how do we maximize the impact of your wealth? Right,
a lot of people focus on just maximizing their wealth.

(35:05):
And that's a little bit sad to me when I
sit back and think about it, because if you're so
focused on just growing your portfolio and you know, optimizing
taxes so you keep as much of it, and you
know all that stuff, but you don't think about those bigger,
more philosophical questions of you know, how do I really
make my wealth work the best for me and my family?

(35:26):
How do I get the best utility, the most joy
out of it. Well, you know, the sad fact is
that you're going to pass away with a lot of money,
and you know you're going to have missed out on
a lot of the experiences that it could bring. And so,
while we're sitting with clients going through their financial plans,
especially when their plans are so strong, which of course
is what you want to see better than the alternative,

(35:46):
better than a plan that that's failing. But some clients
have a plan that's too strong, meaning they're not spending
enough money and they're going to you know, die with
millions and not have used it or enjoyed it in
their lifetime. So gifting to family could be a great
way to do that. And maybe it's on your mind
given the time of year, and so some things that
think about when it comes to that. You know, it
really depends so much on the situation, on the person

(36:10):
and how they feel about it. You know, some folks
really want to just give cash to their loved ones
and you know, they feel good about that. Others want
to be more directed in the way that they give,
and they may want to donate some into some specific purpose.
So an example might be, you know, saving for education
for their children or grandchildren, and that might be more

(36:31):
important to them than just giving you know, a check
that could be used towards anything.

Speaker 2 (36:35):
So thinking about, you know.

Speaker 1 (36:36):
The manner in which you want a gift at the
purpose behind it, it is a good time to think
about that. Now, when it comes to gift tax, it's
something that many people are not going to encounter because
they gift tax exclusion is very high, so there's no
gift tax in New York from the federal level. You know,
it's very high and it increases every year, so you'd

(36:58):
have to give you know, billions millions away in order
to actually pay a dollar and gift tax. But there
is also this other element to it of gift tax reporting.
And when you give above the annual gift exclusion, which
is nineteen thousand per person this year, it's going to
be nineteen thousand next year as well, then you trigger
a filing requirement where you have to file a gift

(37:20):
tax return which is a seven h nine. You or
you know, your tax for pair CPA would have to
do that. So it does create a little complexity. Again,
you're not going to pay anything in gift tax, you
are going to pay somebody probably to file the return,
and so it is something just to think about when
you are giving, especially more significant gifts, how to kind
of you know, work within that framework. So it's nineteen

(37:41):
thousand per person, meaning that if you're married, both you
and your spouse can each give nineteen thousand to any
single recipient, so a total of thirty eight thousand per couple.
Maybe you're giving to your child and they're married as well,
you can give nineteen thousand to your child, so can
your spouse, and each of you can also give nineteen
thousand each to your child. Spouse so you can give

(38:05):
a lot to a family unit, same with you grandkids maybe,
and again it all depends on how comfortable you are
giving such large amounts to those individuals. But there are
ways to kind of, you know, work around it. And
also if you want to give some now and then
some in early January, you'll have that new twenty twenty six.

Speaker 2 (38:22):
Annual exclusion available to you. Then.

Speaker 1 (38:24):
So for folks who are really trying to move large
amounts of money without filing the gift tax return, you'd
have to operate under that nineteen thousand amount. The other
way to avoid that gift tax return is to make
gifts directly to institutions in two different ways. So let's
say you're paying either education or medical expenses for someone

(38:47):
that you love. Instead of just giving them the cash
and having them pay it, you can give directly to
either the educational institution or the medical provider and you
don't have to worry about the annual exclusion at all.
A way to kind of work around it and to
give funds for a very specific purpose, if you give
it directly to the institution, then it's not triggering a

(39:08):
gift tax return.

Speaker 2 (39:09):
For those two specific areas.

Speaker 1 (39:13):
I talked about five twenty nines as well, and I'll
talk about them as you know it get just in
a little more detail. Five twenty nine is are education
specific savings plans, So you open them for each person
that you're saving for would have their own five twenty
nine they'd be the beneficiary of, and then you contribute
to it. There's a tax benefit for contributions. It's five
thousand per person in New York. Each state is a

(39:35):
little bit different, so if you live outside of New York,
you'd have to look up what that is for your state.
But for New York it's five thousand per person, meaning
that a married couple could contribute up to ten thousand
and get a New York state income tax deduction for
doing so. Not a huge amount, I mean, you know,
for a single person it's probably going to come in
somewhere around three hundred dollars and benefit married couple might
get six hundred if they.

Speaker 2 (39:55):
Do the full amount. But really where that.

Speaker 1 (39:58):
The main tax benefit comes into the is that money
in a five twenty nine is going to grow tax
free as long as it comes out for those qualified
education expenses. So that is really where the tax benefit starts.
To amplify, especially if you start saving when the child
is very young. Right, Sometimes as soon as someone has
a child, their grandchild, they open this five twenty nine

(40:19):
and start saving, so they have probably around eighteen years
before they're going to use it, lots of time for
the money to grow and compound on a tax free basis,
so that's really nice. The ways that they can be
used have expanded a lot in recent years. You know,
used to be more college specific and a lot of
people will be worried about limitations there.

Speaker 2 (40:38):
Now you can use.

Speaker 1 (40:39):
It for grad school, trade schools, even primary school if
they're you know, private school tuition for pre college years.

Speaker 2 (40:48):
That is a little bit.

Speaker 1 (40:49):
State specific as well, so you have to look into it,
but it is a possibility if your child, their grandchild
is going to go to a private school, you'd be
able to use you know, some funds from the five
to twenty nine towards that also.

Speaker 2 (41:00):
So that really expands it.

Speaker 1 (41:01):
And even as the last resort, if you never never
pay a diamond education expense for that individual, you can
convert up to thirty five thousand to a roth ira
for them down the road. So there's a lot of
options in terms of fully utilizing these five to twenty
nine's a lot of tax benefit for doing so, and
it can be a really nice way to save in
a directed way for something that's important to you. I

(41:23):
know for a lot of clients that I speak to,
stating for the education for some young people in their
life that they care about is a really important, you know,
thingy that they want to support, and so this is
a great way to do that and have it be
a focused, kind of for a specific purpose gift that
will really mean a lot, I'm sure you know to
that young person and their parents. So these are some

(41:46):
things to think about, you know, if you're thinking about
gifting to your family this year. I know a lot
of people also, you know, around this time of year.
Maybe this is more in the new year, but they
start thinking about, you know, what their cash flow needs
are going to be in the fu following year. It's
certainly conversations that we're having with clients now, is you know,
as we recap the year that we just had and

(42:07):
talk about cash flow, we're looking forward and saying what
do you need from the portfolio. For many people it's
on a more regular basis. They might take out monthly
quarterly to you know, withdraw and support their cash flow needs.
For those who are retired most commonly, there also can
be times where they take one time distributions or as
needed distributions to pay for different things. Maybe they take out,

(42:29):
you know, certain amounts in January or September for property taxes,
or they have a big chip planned and they're gonna
need it in April to cover that. So there's different
reasons why and different frequencies when you might need to
pull from that. And as we near the end of
the year we've had another very strong year, it can
be a good time to start setting aside some of
those funds, good time to rebalance, to look at risk tolerance,

(42:52):
and to make sure that as you go into the
next year and you start some of those planning items
to be preparing for it, and when mark it's our
near all time highs, it's a good time to do that.
Particularly in irase or roth iras or four to one
case where you can set aside cash, you can move
it out of the markets into something more conservative without
triggering any taxable event to yourself. You know that that

(43:14):
makes it even more simple of a decision to do so.
But even in taxable accounts, right, you want to do
it in a tax conscious way. But at the end
of the day, if if you're paying capital gains taxes
because you did so well in the accounts, that is
a good thing. You know, you can sometimes offset with losses.
But at the end of the day, you know, if
you end up having to pay taxes, you you paid

(43:35):
it because you made it. As a client told me
this week, which I really liked, So you know, to
start setting aside capturing those gains. You wouldn't want to
have the market go down and sell then and you know, yeah,
you don't pay capital gain taxes, but it's because you
lost money that you could have had. So as you
as you're planning thinking about what are you going to
need on a monthly basis, what are you gonna need
as one time distributions? You know, where is your risk tolerance,

(43:59):
how are you how's your allocation? Right now, you know
it's a good time to kind of be thinking about
those things. What we recommend tour clients is any money
they're gonna need in the next one to two years,
is that we take it out of the infested part
of their portfolio. That's more prone to volatility and put
it in some kind of cash management strategy. That could
be a money market fund, you know money market funds.
The yields have gone down as the FED has cut rates,

(44:22):
so the one that you know we use most commonly
is around three point seventy five percent right now, still
much better than your typical, you know, bank down the street.
So it's a nice place to park money and still
have it working for you in the short term, but
it's going to remove it from from a volatility standpoint.
You could also, if you know exactly when you're gonna

(44:43):
need the funds and maybe it's more in that twelve, eighteen,
twenty four month horizon, you could consider purchasing either a
CD or an individual treasury that lines up with when
you're gonna need it. That way, you know you're not
taking on as much risk. You're going to hold it
to maturity or you have every intention to, and you
know you're gonna potentially get a higher interest rate for
for doing so, for locking it in for that period

(45:05):
of time, but you still are going to know you're
going to have that cash coming back to you at
the time that you need it most. We we know
even after a good year in the markets, we have
to keep in front of mind that there is always
the possibility for for volatility and so not to get
too greedy if you know you're gonna need the funds
to set it aside, and to to make sure that
you know you're you're you're handling it in a prudent way,

(45:25):
especially the short term cash needs, so you know that
can all be part of this these kind of end
of year planning items, whether it's you know, gifting or
maybe big family vacation, something you might want to do
as as a Christmas gift. Everybody you know starting to
a set these things aside now it is really important.
This kind of leads into uh, you know, our related topic.

(45:48):
But something that I've been seeing a lot with clients
recently is ways to finance things. And I bring it
up because you know, for those who are thinking about
the next year and maybe a big purchase is on
the horizon for you, you know, maybe a new home
or something else that that's really major. It could be
even a home improvement project on in your current home.

(46:08):
A lot of people are thinking right now with rates
being higher than they were a couple of years ago.
For mortgages or home equity lines is the best way
to access these funds. You know, for really large dollar amounts.
It can be daunting to try in and pull that
out from the portfolio all at once. You know, obviously,
if it comes from an IRA, that's going to be
a very big tax bill. If you're paying an ordinary
income on every dollar that's coming out.

Speaker 2 (46:30):
If it's you know.

Speaker 1 (46:31):
One hundred, two hundred, three hundred plus coming out, that
that can really add up. Same thing with a taxable account,
right if you're starting having to realize in the hundreds
of thousands, make trades in the hundreds of thousands of
dollars range, you could really be having some taxable gains
to think about. And so, you know, one thing that
we've been seeing and recommending a lot for clients is

(46:51):
using a pledged asset line. Charlie Schwapper is our custodian
and they offer it. Many other financial custodians do as well.
This allows you to collateralize your securities in a taxable account,
not not a qualified account, not an IRA. It has
to be a taxable individual joint account or avocable trust,
your vocable trust, something like that. But you can collateralize
your securities and borrow against that. For Schwab, it's based

(47:15):
off of a more short term rate. It's based off
of the SOFUR, which is a secured overnight financing rate,
and that is lower than the average mortgage rate right now.

Speaker 2 (47:24):
So when you when you look at.

Speaker 1 (47:26):
That, especially if you have a really significant taxable account
a lot of assets there, you can borrow against it
and you know, get often a better rate. It also
gives you a little more flexibility. So unlike a mortgage
where you're gonna have to pay that fixed payment every month,
with the pledged asset line or the PAL as we
often shorten it too, you're going to be required to
pay the interest each month, but in terms of paying

(47:48):
down the line, it's up to you. You can do
it all at once. You can just pay the interest
for several years and then you know, pay it off
in chunks whatever really makes the most sense. And that
allows you, as the borrower, the control to access the
cash when it's most efficient for you from a tax perspective.
Maybe you have high income right now for the next
couple of years, so you don't want to be realizing

(48:10):
more gains or pulling more from iras in your portfolio.
You just want to pay that minimum interest for a
couple of years, and then after you retire, when your
tax picture opens up, you can realize the more gains
and start to knock off that.

Speaker 2 (48:21):
Loan more quickly.

Speaker 1 (48:23):
So it can be a great alternative to a traditional
mortgage or to a home equity line where rates are
higher right now, at least in the situations I've seen
than the pledged asset line. And also just that flexibility
right it gives you as the barrow er, a lot
of control over your tax situation, over your cash flow,
and it's really nice. Also, just like a home equity line,

(48:44):
you know, when you have the line available, if you
don't use all of it for the initial purchase, you
still have access to more for whatever you might need.
So it's a nice way to do that, and we
are seeing it a lot as a great tool. So
again to use it, you're going to have to have
have a taxable account, and you can reach out to Schwab, Fidelity, Vanguard,
wherever you do your do your investing and see what

(49:09):
the options are. But you know, we have been seeing
it as a really strategic tool with with the rates
being better than the traditional mortgages, and also just that
flexibility which is which is really nice. So if if
that's a big plan for you going to the next year,
or maybe you want it to be right. We talked
a lot about how do we maximize wealth and if
you're one of those people that knows you need to
be spending more to really get the most out of

(49:31):
the dollars that you've saved, that is really important.