November 14, 2025 • 38 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian lay out a smart, rapid-fire checklist of year-end money moves to trim your tax bill, boost your wealth strategy, and set yourself up for a strong 2026. From maximizing retirement contributions and handling required minimum distributions to strategic charitable giving and capital gains planning, they’ve got your December 31st deadline covered. They’ll also walk through smart uses for HSAs and FSAs, how to manage equity comp surprises, and why now is the time for business owners to button things up. And don’t miss the tips on tax-smart family gifting and checking your account beneficiaries—small things that make a big impact. This is a packed segment for anyone serious about making their money work smarter as the year winds down.
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Episode Transcript
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Speaker 1 (00:06):
Tonight some key money moves to make before December thirty first.
You're listening to Simply Money, presented by all Worth Financial
on Bob Sponseller along with Brian James. Well, the end
of the year always seems to sneak up on us.
One minute, it's pumpkin carving season. The next year untangling
string lights for Christmas and wondering where the time went
(00:28):
before December thirty first comes and goes. We've got a
few deliberate financial moves that we can all make to
help trim our tax bill, strengthen our financial plan and
really put us in a good place and give us
a head start on twenty twenty six. Brian, this is
going to be kind of like a rapid fire segment
tonight because we've got ten tips here heading into the
(00:51):
end of the year.
Speaker 2 (00:52):
Kick us off with step number one.
Speaker 3 (00:55):
End of the year checklist.
Speaker 4 (00:56):
Ideally we're thinking about these things a little earlier than now.
We've got about a month and a half left and
you know, certainly having those that Low's started putting up
Christmas decorations around Labor Day, so end of the years
sneaking up, as we're always reminded. Number one maximize those
retirement savings. Look at how much you've contributed to your
workplace retirement plan. This is your four oh one K,
four or three B or maybe a four to fifty
(01:17):
seven if you're in a public entity.
Speaker 3 (01:18):
There's other flavors as well.
Speaker 4 (01:20):
But if there's still room to increase that contribution room,
meaning you haven't hit that limit and it doesn't affect
your cash flow and your bills. Got to make sure
you keep the ship afloat as well. But this is
one of the simplest ways to reduce your taxable income
while still building that long term wealth. You get to
get out of jail free on iras, you can file,
you can all the way until tax filing day.
Speaker 3 (01:40):
You can make a contribution for a prior year, so
that's April.
Speaker 4 (01:43):
But doing it now makes one last thing you got
to do, and you get those dollars invested sooner and
you'll feel better having done it now. While you're looking
at this too, let's say you change jobs. This is
something a lot of people don't know that There are limits,
of course, to what can go into a four oh
one K if you had two four oh one k's
during the year, because you move from one employer to another, Well,
that limit stays the same both of your accounts, both
(02:04):
your four to one K contributions have to stay underneath it,
and there's no way for your new employer to know
what you put in your old employer's plan. That is
your responsibility to make sure you don't go over that accidentally.
It's pretty hard to go over that limit in one
four oh one K because the custody and the bookkeeper
will stop you from making those contributions.
Speaker 3 (02:21):
But if you had two, you can end up.
Speaker 4 (02:23):
With a nasty gram from the IRS that you put
too much money, and so be careful you don't.
Speaker 3 (02:27):
Miss on that. What's another one I think think about
about two.
Speaker 1 (02:30):
Item number two, take care of your required minimum distributions
before the deadline, which by the way is December thirty first,
in order to avoid costly penalties if you're required to
take those distributions from iras or workplace plans from which
you've separated from service. And we find this I won't
say often, but occasionally people have those old four to
(02:52):
oh one K plans lying around and you know they've
reached age seventy three seventy five and they've completely forgotten
to take their arms, and believe me, if you're not
paying attention, the irs definitely is and you'll get a
hefty penalty if you don't take care of that. If
you don't need the income from your r and ds,
consider making a qualified charitable distribution directly from your IRA
(03:15):
to a qualified charity. The amount donated will not count
towards your taxable income, and that really creates a win
win for your generosity and for your tax efficiency.
Speaker 5 (03:26):
What do we have next, Brian?
Speaker 3 (03:27):
Speaking of charities? Right, So, what Bob just talked about is.
Speaker 4 (03:30):
For people who are seventy and a half an older
with iras and they have to they have the ability
to do those qualified charitable distributions.
Speaker 3 (03:36):
But those aren't the only people who might be charitable.
Speaker 4 (03:39):
So if you are charitably inclined and not that age,
then you can be gifting appreciated securities instead of cash.
If you are sitting on a pile of stocks and
bonds and things that are sitting at gains and you've
always felt like I shouldn't touch these, that's a bad
idea because that's going to trigger capital gains. And then
you turn around and write a check to a church
or some other charity. You're doing it wrong. Give them
those long held investments that you've convinced yourself you can't
(04:02):
touch because the taxes hand them over in kind. You're
literally just giving them the shares of P and G
or Microsoft or whatever stock you own. You're not selling them.
The charity will sell them, and they are a tax
free entity. Provided they're a real five oh one C
three charity. They don't pay taxes either, So that's a
way that you can avoid your own capital gains taxes
and not hit your own checking account for those charitable
(04:25):
charitable contributions. Also, bunch them together with the hired standard deductions.
A lot of households aren't itemizing any year, which means
this is why we're not keeping receipts anymore for that
bag of laundry that we just gave to goodwill, because
itemization just doesn't do it anymore with a much higher
standard deduction we got in twenty seventeen. So one approach
is to if you know you're going to be giving
(04:45):
a lot of money to one charity, you can bunch
all of that into one tax year. A really efficient
way to do this is through a donor advised fund
which allows you to make several years worth of donations
in one year for that year's tax deduction, but you
also are not giving it.
Speaker 3 (04:59):
Direct to the charity.
Speaker 4 (05:00):
That donor advice fund acts as a middleman and it
keeps the charity from assuming that you're always going to
be giving them five years worth of contributions every single year.
Donor advice funds are a really really powerful tool for
that type of thing.
Speaker 5 (05:14):
All right.
Speaker 1 (05:14):
Next, let's talk about reviewing capital gains and losses. Tax
loss harvesting is huge, and it can help offset gains
elsewhere and even reduce a small portion of your ordinary income.
Just be mindful of the wash sale rule, which prohibits
repurchasing what's referred to as a quote substantially identical unquote
investment within thirty days. That's kind of how the wash
(05:37):
sale rule works. Gain harvesting can also be valuable if
you're in a lower tax bracket this year. Realizing gains
intentionally now can reset your cost basis at a higher
level for the future. All right, Brian, let's get into
hsays and FSAs. These health savings accounts an often overlooked
(05:58):
tool that really really generates some huge tax benefits.
Speaker 4 (06:02):
HSA FSA Health savings accounts and flexible spending accounts two
very different things that are to support the same spending goal.
So a health savings account HSA, that's one of the
most tax advantage tools available. Your contributions are deductible when
you put them in the growth if you invest it right.
That's usually a second step. A lot of employers just
have something that looks like a bank account and people
(06:23):
think they don't have any options.
Speaker 3 (06:24):
You do.
Speaker 4 (06:25):
You're allowed to move those dollars if they don't offer
you investment. You know, there should be options that look
like you're four h one K mutual funds and those
kinds of things.
Speaker 3 (06:32):
If they don't offer that in that account, you can move.
Speaker 4 (06:35):
That to some other providers such as a fidelity and
there's others out there as well. But anyway, so assuming
you've got it invested, then that growth is tax deferred,
and if you're withdrawing for qualified medical expenses, that's tax
free too. Now here's the trick though, since you can
because you might look at this and say, well, why
am I going to invest money? I'm going to pull
right back out for medical expenses. No, no, no, you're not.
(06:56):
If you really want to take advantage of this, then
make sure you're you're set up in a way where
you can leave those dollars in there, leave them invested
just like any other investment. If you can cash flow
your actual medical expenses, just pay them out of your
normal cash flow, hang on to the receipts, stack them
all up for decades, and you in the future you
can use those receipts to take out a very sizeable
(07:17):
tax free distribution off of money that has been growing
for a couple decades. That's how you really take advantage
of a health savings account. Now you might have a
flexible spending account that's a little different. Check your plans,
rules and your balance.
Speaker 3 (07:29):
Here's the big one. Most FSAs are user to lose it.
Speaker 4 (07:32):
You got six weeks to go buy fifteen pairs of
glasses or whatever you're going to do, But those dollars
are not probably not going to be available to you
after year end. So get those appointments, scheduled, refill prescriptions.
Talk to your dentist. Maybe you can prepay the next
whatever you're going to do for next year. Get the
new glasses frames, all that kind of stuff. If you
have an FSA, don't forget to spend it.
Speaker 5 (07:51):
You're listening to simply Money.
Speaker 1 (07:52):
It's about all Worth Financial IMBOB sponsorer along with Brian James,
and we're continuing to work through some year end tax
planning tips. Here's another one that's very important. Check your
withholding in your estimated taxes. If you had variable income
this year thank bonuses, commissions, stock sales or business related income.
Make sure you've paid enough in taxes to avoid under
(08:15):
withholding penalties, but not too much that you're giving the
government an interest free loan. And what this usually involves
is just a quick check in with your tax professional
or CPA just to confirm whether you've met the IRS
safe harbor for withholdings or estimated taxes. And if you
need to make an estimated payment before year end, make
(08:36):
sure that gets done so you can avoid some penalties.
And kind of tying into that whole thing, review your
equity compensation for the year. You know, we deal with
a lot of people that have incentive stock options that
got exercise this year. Run a projection for alternative minimum
tax before exercising those options to avoid some surprises. The
(08:58):
same thing with restricted stock units. I mean those things
generate taxable income when they vest, and then you know
decide whether to sell the shares when they vest to
diversify and set aside those funds for taxes, or hold
them as part hold the stock as part of your
long term allocation of that particular company. If you had
a large vest this year, strategies like charitable giving, gifting
(09:22):
to a donor advice fund, or tax loss harvesting can
really help balance the impact of that equity based compensation
and taxable income.
Speaker 3 (09:32):
Hey Bob, all right, yep, yeah, I want to go
back real quick.
Speaker 4 (09:35):
You made a comment about making an estimated payment before
the year end if you need to do that, and
that's of course a great, great, great thing to look at.
I want to make sure everybody knows that you can
do that electronically.
Speaker 3 (09:45):
There is a site out there.
Speaker 4 (09:46):
I don't know why that the IRS doesn't push it,
but they have a website for Electronic Funds Transfer.
Speaker 3 (09:51):
And it is e f T P S dot go ov.
Speaker 4 (09:53):
Electronics Funds Transfer PS dot go ov and you can
link that to your bank account, you set up your
own profile, and it will keep track of those payments
you made. I think a lot of people are hesitant
to make estimated payments because it's a pain in the butt.
I gotta deal with paper, because the only way I
can do that is with this little slip that came
out of my turbo tax output. You don't have to
use that, you don't have to mail it in. You
can go electronically. That's what I do, and then I've
(10:16):
got a record. All I gotta do is log in
at tax time and I can say, here's the money
I paid for estimated.
Speaker 3 (10:20):
Taxes, so I know that that's done.
Speaker 4 (10:22):
Otherwise I'd have to maintain my little copy of my
check and I'm just not good.
Speaker 1 (10:25):
And finally, well, Brian, I think it's great that you
brought up that up for another reason, and that's just
keeping your money secure.
Speaker 3 (10:31):
And here's what I mean.
Speaker 1 (10:32):
This time of year, I never like to mail checks
of any size, you know, in the regular US postal service,
because that's stuff they tend to get lost and in
rare cases they get stolen. So, you know, setting up
a secure, encrypted way to pay the irs, it's more
convenient and it makes sure that your money remains safe. Great,
(10:53):
good for you for bringing that option up. I'm going
to look into that myself. Talk about what we need
to be doing tax wise before the end of the year.
If you're a business owner.
Speaker 4 (11:02):
Yeah, so you've got key opportunities there. If you are
a business owner, then there's a lot of extra bells
and whistles and levers and buttons.
Speaker 3 (11:08):
You can pull.
Speaker 4 (11:09):
But so set up at fund that retirement plan. A
SOLO four oh one K or a sepi RA can
deliver really meaningful deductions, but those have to be established
by year end and often even sooner. So if that's
something that rings a bell you've been meaning to do
it all year, get on the horn of your accountant.
Time the income and the expense is the right way.
Make sure those deductions if you can accelerate them now,
pay for stuff that you're going to use in January.
Speaker 3 (11:30):
Go ahead and do it. If you need the deduction,
and it's time.
Speaker 4 (11:32):
To tidy up the books and make sure payroll filings
are current so that you don't have a miserable Q
one running a business and preparing for taxes. Your CPA
will thank you. Another one is take a look at
family gifts. Education funding. Annual exclusion gifts are a real
tax efficient way to transfer wealth to your children or
your grandchildren without affecting your lifetime exemption. There are creative
ways to get that money out of your state without
(11:53):
paying any taxes at all, and you can benefit them
now while while you can still see them enjoy it too.
And last, and not least, just tie up these loose ends.
Make sure your retirement accounts have beneficiaries attached to them,
make sure your insurance policies all have up to date beneficiaries,
and health savings accounts. All that stuff overrides your will,
so make sure the beneficiaries that can be clearly named
(12:13):
on financial accounts are named.
Speaker 5 (12:16):
Here's the all Worth advice.
Speaker 1 (12:18):
Taking action now ensures your money is working as efficiencly
as possible.
Speaker 2 (12:23):
For the goals that matter most to you.
Speaker 1 (12:26):
Coming up next, we'll explain why chasing an upcoming seasonal
trend might land your portfolio on the naughty list. Plus
the end of an era for the most famous investor
there is. You're listening to Simply Money presented by all
Worth Financial on fifty five KRC the talk station. You're
(12:48):
listening to Simply Money presented by all Worth Financial on
Bob Sponseller along with Brian James straight ahead of six
forty three RMD surprises, stock options, tax traps, and what
to do with an inherited home. All of that coming
up in our Ask the Advisor segment. Well, our show
producer was out and about and the other day and
(13:09):
was asked this question, what is the Santa Claus Rally.
Let's answer that one for you, Brian. What is the
Santa clause Rally?
Speaker 4 (13:17):
Well, the Santa Claus Rally, that's what's about to start happening.
It's the stretch from the trading day after Christmas through
the first two trading days of January when the Dow
Jones has historically risen seventy seventy seven percent of the time.
The whole idea here is that slower trading, holiday optimism,
year end bonuses, institutional managers wrapping up for the year
(13:38):
all might contribute slower trading. Basically, that means that there
aren't as many trades being made because a lot of
people are on vacation. There's just less activity, and that
it tends to push the market up a little bit
and there's not as much a dissent in the market
as if.
Speaker 3 (13:52):
You will, because there's fewer people participating. It doesn't last
very long.
Speaker 4 (13:55):
But so now we've got people trying to expand it
to mid November or even just declaring that it's already here,
same way as we just drag the holiday decorations out
in the hardware stores around, you know, back in September,
just because the market had a good few good weeks
and it's cold outside. We're just declaring this is the
Santa Claus rally. That's not really investing, that's just calendar
cherry picking, right, Bob.
Speaker 2 (14:17):
Yeah, for sure.
Speaker 1 (14:18):
I mean Wall Street, And let's face it, the media
they love this kind of seasonal chatter because it keeps
people watching and trading and clicking. But it's really, you know,
when it comes down to it, it's just entertainment. It's,
for lack of a better term, it's just market astrology.
Speaker 2 (14:36):
Let's be honest.
Speaker 1 (14:37):
If there really was a consistent exploitable rally every December,
it wouldn't exist anymore because smart market participants would get
out ahead of it and it would already be priced
into the market. So, you know, just avoid what all
these talking heads get on there and do. People are
going to talk their book either hoping the market goes
up or down.
Speaker 2 (14:57):
It's just the way things tend to work all right.
Speaker 1 (15:00):
On another topic, Warren Buffett just made a quiet announcement
that marks the end of an era. After decades, he
is stepping away from writing his legendary annual Berkshire Hathaway
shareholder letter and he will no longer partake in the
annual shareholder meetings. Brian, have you ever been to one
of those shareholder meetings? I have not, but I've heard.
(15:22):
I've talked a couple people that have actually been in
those meetings and they were just fantastic. It's it really
is the end of an era where you know, mister
Buffett would just sit down and talk about you know,
their company and the economy and everything. It's kind of
sad to see this happening, but life marches on.
Speaker 4 (15:38):
Yeah, one of the greatest brains in investing history is
starting to step back. And the man's ninety five years old,
so of course I think he's earned the right to.
Speaker 3 (15:46):
Call his shot at this point.
Speaker 4 (15:48):
But no, I have not ever attended one of those,
but I do read that letter when it comes out.
Is it always has good insights there, and so it's
gonna be interesting to see who will step in to
fill that void because we've always had Uncle Warren to
look to just to think, just to check in and
see what he thinks, you know, when we're thinking about
our investments. So interestingly, yeah, obviously one of the one
(16:11):
of the richest people on the face of the earth,
and gave it away at least once, the bulk of it,
and then built it all back up again.
Speaker 3 (16:17):
So he's going to continue to do that.
Speaker 4 (16:20):
He's going to continue to give away billions to charity
until there's nothing left, and he's also assigning his own
children that responsibility to continue to distribute it. And alongside that,
he announced a donation of about one point three billion
dollars worth of his own company, Berkshire Hathaway, to four
different family foundations. And so even after that gift, he's
still got about one hundred and ninety six thousand Class
(16:40):
A shares of Berkshire. These are the big ones, right,
These are the ones where you look at people look
at and they go, wow, that's I got to pay
that much for one share.
Speaker 3 (16:46):
Well, that's why the Class B exists.
Speaker 4 (16:47):
Well there's almost one company that has retail and institutional
shares of itself.
Speaker 3 (16:52):
But anyway, his.
Speaker 4 (16:53):
Ownership represents about one hundred and forty seven billion dollars
worth of Berkshire hash away. So the next question is
when's he going to dis that money out. What's he
had to say about that, Bob.
Speaker 1 (17:04):
Well, he says he would like to hang on to
a significant amount of that stock until Berkshire shareholders developed
the comfort level with incoming CEO, Greg Abel. I think
that they they've done a pretty good transition here bringing
mister Abel on board. So mister Buffett said he doesn't
think the level of confidence is going to take that long.
(17:25):
I think shareholders of you know, Berkshire agree. But uh yeah,
he's not going to unload one hundred It would be
hard to unload one hundred and forty seven billion dollars responsibly,
you know, in very short order, but it'll be it'll
be fun to watch how mister Buffett and his family
benefits society through those you know.
Speaker 2 (17:45):
Large gains over the years.
Speaker 1 (17:47):
He ended his letter his Thanksgiving letter this year by
giving thanks to all shareholders, even the ones he didn't like,
and he said quote, I wish all who read this
a very happy Thanksgiving, Yes, even the because it's never
too late to change. How about that for a way
to sign off to the general public.
Speaker 3 (18:06):
There, Brian, when I am ninety five, I'm gonna be
warned of it all right.
Speaker 1 (18:12):
Every Sunday you will find our all Worth Advice in
the Cincinnati Inquire And here's a preview, Brian. Here's a
question for you. DS from Oakley says, my wife was
just offered a severance package to leave her corporate job.
How do we know if she should take it?
Speaker 4 (18:29):
Well, hopefully this is one of the reasons that we
would want a financial plan in place before we get
this kind of a curve ball here, because this can
be very jarring for somebody who hasn't taken the time
to build a financial plan, probably doesn't really have a
great idea of where they are. They could be perfectly fine,
but they don't know because we haven't done that math.
So when these things drop out of the sky and
I got to think about a huge decision, a huge
(18:49):
life changing decision, I don't really know what my baseline is.
So I would suggest getting a financial plan together.
Speaker 3 (18:56):
Run those numbers.
Speaker 4 (18:57):
Run the numbers you and I would think this is
very important too. Run the numbers. Is if the severance
packages doesn't exist first and run yourself out to whatever
whatever you have in mind for a retirement age, and
then now do it again. Take that take into account.
All right, this job is going to end here? Can
I get away with retirement?
Speaker 5 (19:13):
Now?
Speaker 4 (19:13):
We don't know how old DS and his spouse are.
Uh so, maybe they're in the retirement window anyway and
could be could potentially benefit from that. But run the
numbers again with the severance package in and retiring a
little sooner. If you can do it financially, then focus
on the bigger question, which is what am I going
to do with all of that free time? If you
can't do it well, then you're going to probably want
to start thinking about what that next move is going
(19:34):
to be to create some more income.
Speaker 1 (19:36):
Yeah, and that leads us to a great question you
might have asked yourself, should I quit, retire or go
part time next? Some decision making tools for when you're
financially ready but maybe not professionally ready to pull the
ripcord and leave your job. You're listening to Simply Money,
presented by all Worth Financial on fifty five KRC the
talk station. You're listening to Simply Money because I know
(20:06):
by all Worth Financial. I'm Bob sponsorer along with Brian James,
joined tonight by our career expert Julie Balki. Julie on
the job Julie, first of all, thanks for making time
for us tonight, and we've got an interesting topic to
cover with you. You know, some open ended question here
here for you just to start.
Speaker 3 (20:26):
And I know you deal with a.
Speaker 1 (20:27):
Lot of people that are going through this question. You know,
should I retire altogether, meaning just quit and hang it
up and retire or go part time? And how what
goes into making those kinds of decisions. So we're interested
in your thoughts on that, Julie, as you navigate these
complex questions with your clients all the time in your practice.
Speaker 6 (20:48):
Of course. Thing the analogy I always like to use
when it comes to this is, you know how we
all use Google maps or ways, So when you think
about when you're trying to get when you want to
get where you're trying to go with those with those apps,
you put a destination in you know exactly where you're
trying to go. The problem with so I like to
use that analogy to say, to really be successful getting someplace,
(21:13):
you've got to have some general idea of where you're
trying to go. So the first question I would ask
someone is if you're financially ready. If that's not an issue,
how do you feel about the work you do right now?
If you say I absolutely hate it and I can't
wait to get out, then I think I can you
throw the baby and the bathwater out and start with
(21:33):
a fresh sheet of paper and say, Okay, I'm going
to create something for the next stage of my life.
The next option would be like, Okay, I like parts
of it. There's parts of what I'd love to keep doing.
And in that case, I recommend you talk to your
leaders about is there a way that you could go
part time maybe just doing the things that you're uniquely
(21:54):
qualified and skilled at doing. Just make sure you don't
accept part time pay for full time work. So what
what pieces of what I do now can I carve
out in order to make that transition from forty plus
hours a week zero hours a week much smoother. And
then there are times when we can't. We say, you
(22:15):
know what, I want to keep doing what I'm doing now,
but I only want to do it for another year
or so. And so in that case, what can you
start doing to start filling up that other life bucket,
let's call it. So getting clear on what your situation
is today and what your possibilities are. You might work
for a company that says, naw, we need you a
(22:35):
full time or not at all. Okay, well that's going
to tell you what you need to do, and you
at that point it's like, Okay, now I need to
start planning for the day when the retirement party. They've
taken the streamers and balloons down and now it's time
for me to go do something else. It is a
wildly underestimated, under talked about stressful process to surely retirement.
Speaker 3 (23:02):
So okay, well let's talk about that.
Speaker 4 (23:04):
So yeah, yeah, it is very stressful, and you get
to hear a lot of stories.
Speaker 3 (23:07):
So but Bob and I have.
Speaker 4 (23:08):
Our own war stories from the financial side, right, So
how do we make the numbers work from all this?
Speaker 2 (23:13):
What are some of.
Speaker 4 (23:13):
The stories that you hear? But you're more on the
day to day career side. So so let's say you
sense that somebody is they're really kind of ready to go,
but maybe there's not a little bit. What if somebody
pulls the trigger a little bit too soon? What are
the biggest regrets you tend to hear from people who
may be hung it up too early.
Speaker 6 (23:31):
Yeah, the biggest regrets come from people who hung it
up too early because they've not jumped to something that
they're excited about. In other words, the dislike for what
they were doing over road their patients. So they might say,
you know what, I'm going to go be a volunteer
full time, or I'm going to go play golf until
(23:53):
I can't stand it anymore, or I'm going to go
do more, you know, spend more time on a hobby.
I actually at a client several years ago who was
on the road so much, and when he got to
the point that he could retire, he quit cold Turkey
and he went moved to Florida golf, pickleball, tennis, racketball.
He said so much of it that he hurt his shoulder.
(24:15):
And he's like, now, I said, I jumped from one
hundred and twenty percent at one thing to one hundred
and twenty percent at another. And he realized at that
point that that life of one hundred percent leisure, while
tantilizing in concept, was not only not good for his body,
but it also wasn't good for his mind and so
he went back to work doing some consulting, and so
(24:36):
it's it's you know, you have to know if your
identity is tied up in your job, then you are
going to have a harder part. You're going to have
a harder time of this, or if you don't have
anything that you're interested in. I've been talking about this
with people recently, and with men it's especially hard because
(24:57):
they generally don't have the friend and support at work
that women do. And so now you're sixty some years
old and you're trying to find people to do stuff
with and wives are saying, we don't really want to
be your one hundred percent entertainment.
Speaker 3 (25:12):
And so how my.
Speaker 4 (25:14):
Wife would never say that she loves every minute.
Speaker 6 (25:18):
She just spit her coffee out right now she's looking.
Speaker 3 (25:21):
At this, But apparently you've met okay, real work.
Speaker 6 (25:26):
Yeah, you have to get realistic about all the pieces
of your life. If things are really, really, really bad
and you feel like you're being pushed out, and then
it can be worth it to just stop pull turkey,
take up breast, and then rebuild something new. But if
you generally like what you do a portions of what
you do, the smarter play can be a slower exit,
(25:47):
or you get a chance to try some things on
the other end and to build on the other end
before before you go full time, because some of the
things you think you're going to enjoy doing in retirement
you won't, and you're going to discover some new things.
Once you allow yourself to be really open minded around
that that you do choose to pursue, it can be
a really wonderful time. But it's not an easy time
(26:10):
because you're also dealing with the mental piece, which is,
oh my gosh, this is that last portion of my life,
which is really quite you know, quite sobering, and so
you're dealing with a lot of that kind of stuff
as well, maybe some regret, maybe you know, all that
stuff that comes with a major transition. And so be realistic,
(26:32):
be realistic about who you are, what your support systems are,
which your hobbies and interests are, and you have to
get out there and be bold and vulnerable a little
bit and know that you're really, in a lot of
ways building a brand new stage of life, all.
Speaker 1 (26:47):
Right, Julie, In the minute we got left here one
of the best ideas I've heard on this topic, and
I think the idea actually came from you in one
of the prior segments we've done with you. And that's
once you get to that point where you know you're
going to probably retire in a year or a year
and a half or what have you, that's the time
to maybe take that one or two week vacation and
(27:08):
actually trial run retirement. Now that takes some planning, right, Julie,
But pretend that you're retired on your vacation and actually
plan out what you think you're going to want to
do to make sure that that's really what you're going
to enjoy.
Speaker 5 (27:21):
Am I on the right track there?
Speaker 6 (27:23):
Yeah? Absolutely, you've got to try things out. You've got
to get out of your head. You've got to say, look,
if my goal is to give back or contribute more
in my community, maybe you take time to figure out
what is it, What is the way you want to contribute.
Then start researching organizations that do that and figure out
(27:43):
what your role might be. And so you have to
take this on like a project and you're the project.
And that's the stuff. It's really really uncomfortable for us
because it causes us, it causes a bunch of other
stuff to surface.
Speaker 5 (27:55):
But maybe we have to deal with Thanks for listening.
Speaker 1 (27:58):
You've been listening to Simply Money presented by all Worth
Financial on fifty five KRC, the talk station. You're listening
to Simply Money presented by all Worth Financial. I'm Bob
Sponseller along with Brian James. Do you have a financial
question you'd like for us to answer. There's a red
button you can click while you're listening to the show
(28:20):
right on the iHeart app. Simply record your question and
it will come straight to us. All right, Brian, John
and Madeira says, our required minimum distributions are going to
be much larger than our actual spending needs. What strategies
can help us avoid a huge tax bite?
Speaker 4 (28:38):
We have very common question, John, Thanks for sending it
in and thanks for trusting us with to provide you
some feedback there.
Speaker 3 (28:44):
Well, well, we don't know John's age.
Speaker 4 (28:46):
He talks about RMD's requirementium distributions in the future tents,
so we're assuming he's not quite there yet. That's the case,
and he's got a couple alternatives. John, you can be
looking at roth conversions and the window for this is
the most ideal window for this is when you're in
the lowest brack you'll ever see. So perhaps you're retired,
maybe you haven't turned on social Security or pension benefits yet,
so there's no income generating tax taxation there, and obviously
(29:09):
you're not at requirementum distribution age, so those are That's
probably the lowest bracket that you've seen in decades, So
you might want to look at ROTH conversions here, or
even if maybe that's not on the table, or maybe
you got other things going on, another thing you can
do is just start accelerating withdrawals. Don't rule out the
IRA when you do need money for that vacation, the
next car or whatever.
Speaker 3 (29:28):
Remember you're in the lowest bracket of your life.
Speaker 4 (29:30):
If you take a chunk out, you can calculate what
the bracket will be and get an idea for how
you'll stay below whatever bracket.
Speaker 3 (29:37):
You want to.
Speaker 4 (29:37):
You want to avoid, but don't always avoid the IRA
because you know it's income taxable. Spread that out more
distributions over a longer period of time is going to
stretch it out into more tax years, therefore less taxes
percentage wise. So we will move on then to our
next question here, which comes from Jerry and Levin and
Jerry says he's the executor for his father's estate and
(29:58):
he's got business interests. Smoking ratulations, Jerry, that's going to
be a couple of curve balls for you to go
chase down. What steps does he need to take, Bob
to avoid some personal liability as he's selling this estate.
Speaker 3 (30:07):
This is a tough one.
Speaker 1 (30:09):
Well, it is a tough one, Jerry, And with you know,
with I take these questions literally and based on the
lack of information contained in the question. That's not your fault,
that's just the way you ask the question. Here's my advice.
Hit the pause button immediately, don't do anything, and go
network around a little bit and find a good qualified attorney,
(30:32):
someone that specializes in both business planning and estate planning.
They're out there. Just network around a little bit and
find one and don't take any action. Don't do anything
until you have consulted with a good attorney. Perhaps it's
your father's attorney, you know, who might be well skilled
in these things. And if that person has retired or
(30:54):
moved on or is no longer active, talk to your
your friends and colleagues and find a good attorney.
Speaker 5 (31:01):
That's my best advice, because if.
Speaker 1 (31:04):
You're involved in making decisions on behalf of the business
or operating the business in any way. After your father's passing,
you want to be real careful, you know, to protect yourself.
So get some good legal counsel here. I know it'll
cost a little bit of money to do that, but
my experience has been you know, a good attorney is
(31:25):
worth his or her weight in gold and can help
you avoid some possibly significant problems.
Speaker 5 (31:31):
That's the best advice I could give.
Speaker 1 (31:33):
All right, Kevin and Erlanger Brian he says, I've accumulated
stock options through work. What's the smartest way to exercise
them without triggering a massive tax bill all at once?
Speaker 4 (31:46):
Okay, So this is another good one here, some complicated
features here to a very popular benefit plan that some
employers share with their employees. So your stock options are
gonna fall one of two categories. They're either ISOs incentives options,
or their nqsos non qualified stock options. Big differences between them.
If they happen to be of the incentive variety, then
(32:08):
you cane a little bit of a tax benefit there
if you hold those shares exercise and hold the shares
one year from the exercise in two years from the grant,
then you should qualify for long term capital gains tax,
which is the most favorable kind of tax. If we
got to pay it, that's the one we want. But
you want to watch out for alternative minimum tax. We
can do a whole fascinating, boring show on the alternative
minimum tax. We can't get into that here, but just
(32:29):
be aware that if it's an incentive stock options, that's
something you're going to want to be paying attention to.
On the other hand, if it's non qualified, those are
going to be taxed as income at exercise, so you're
going to pay ordinary income tax on the spread, which
is the difference between the market price whatever everybody would
pay for it on the open market, and whatever the
strike price was which you were given at time of
the grant, and then any further appreciation after you exercise this.
(32:52):
That's taxes capital gains when you sell. So if you
want to, if you want to avoid this, you can
spread it out over multiple years. Try to wag if
you can wait until you have a lower income year.
For example, let's say you're planning on retiring at the
end of this year. Awesome, don't exercise anything. Now, wait
until January. If you've got that ability through your employer.
And also there may be options for cashless exercises, which
(33:14):
basically means that you liquidate the whole thing. You don't
have to lay out any cash. They'll pull the purchase
value right out of the proceeds. And also, as always,
you can consider some charitable giving to offset taxes. If
you're already doing some of that anyway, then there may
be a way to combine these things. So get with
a fiduciary financial advisor and they'll help you put these
puzzle pieces together. Next question, This one comes from Mark
(33:36):
and Indian Hill, and Mark says they've saved steadily, but
they've mostly used mutual funds, and he's wondering if exchange
traded funds ETFs or direct indexing might be a better
option for them at this stage.
Speaker 1 (33:47):
Well, Mark, I would say, all things being equal, of
course ETFs and direct indexing are more tax efficient than
having everything in mutual funds. But you know, first of all,
congratulations for saving Stafaly in building a nice portfolio of
mutual funds, because you know, I'm assuming you've done this
over years and decades and that that was the only
(34:08):
game in town. So you did you did right? You saved,
you accumulated. The industry has evolved over the years to
have these ETFs and direct indexing and tax loss harvesting strategies,
so it's good that you're aware that those are out there.
My advice would be, have a good fiduciary advisor sit down,
look at your portfolio, and there might be spots where
(34:32):
you can gradually move into some of these more tax
efficient strategies without causing you to just dump all your
mutual funds or most of them and pay a huge
capital gain tax bill in the process. So it's important
to look at the details, have a good advisor sit
down with you that could give you good fiduciary advice
(34:52):
and help you transition responsibly into some more tax efficient strategies.
Speaker 5 (34:57):
You know, moving down the road.
Speaker 1 (34:59):
Coming up next, I've got my two cents on how
maybe to evaluate what kind of financial advice you really
need based on your situation. You're listening to Simply Money
presented by all Worth Financial on fifty five KRC the
talk station. You're listening to Simply Money presented by all
(35:20):
Worth Financial. I'm Bob sponsorller along with Brian James. All Right,
we started off tonight's show by giving four or five
different examples of fairly well to do families that had
gotten some bad advice and kind of went to sleep
on not doing some important things. I want to bring
this back, Brian, to kind of real world how should
(35:42):
these people? How should these people be evaluating their situation
and what I'm talking about here? And I run into
this quite often a lot of times people don't need
or want a professional advisor to help them with everything.
They might already have a good estate plan, they might
be very comfortable self managing their portfolio, but there's some
(36:05):
of these things like tax efficiency or more complex estate
planning or distribution strategies that they haven't even thought of,
and it can really move the needle in their overall
financial plan from a tax standpoint and from a legacy
standpoint to their families and chosen charities. And so my
(36:27):
message tonight is be open to sitting down with somebody
and be a little self aware about what you haven't
covered or you might not know or might not want
to do, because oftentimes, Brian, we don't do every single
thing for clients, but there's one or two value added
things we can add to somebody's situation really move the
(36:50):
needle for them and they walk away feeling glad that
they worked with us or with another good fiduciary advisor.
Speaker 5 (36:58):
That's my message tonight.
Speaker 1 (37:00):
Have an open mind, you know, is you evaluate comprehensive
advice and comprehensive planning.
Speaker 3 (37:06):
Yeah, And I would add to that.
Speaker 4 (37:07):
I would add this that one of my favorite times
as an advisor is when I come across something where
I can educate somebody using an actual, real example, because
I think people are very comfortable knowing that they're not
alone in whatever weirdness they're facing.
Speaker 3 (37:20):
Sometimes it can be good weirdness. Right.
Speaker 4 (37:23):
Unfortunately, I've got a lot of money that provides a
lot of opportunities. What do other people do in my situation?
And sometimes it's terrifying stuff, you know, where maybe there's
a healthcare problem or something in the mix. And I
think the value that any advisor brings is the ability
to say, I've been through this before. Here's how other
people who look just like you have responded to it.
Here's the techniques they used, Here's the results that they
that they got out of it. Here's the pros and
(37:44):
cons of all the decision options. That they had, and
then everybody can move forward having made a confident decision.
But it helps an awful lot to have somebody who
is an independent bystander, an arms length away, who can
kind of guide you, sort of the docent in the museum,
if you will, of here's how things have worked for
other people historically, and here's how it can work for you.
Speaker 5 (38:03):
Yeah, it doesn't.
Speaker 1 (38:04):
It doesn't mean that you have to do what everyone
else does. But to your point, Brian, just knowing what
some of your options are and maybe hearing some real
life examples, three or four ways to possibly skin the cat.
Oftentimes you know, the bells and whistles go off in
people's brains and say, yeah, I never thought.
Speaker 5 (38:22):
About it that way. I like that idea.
Speaker 1 (38:25):
Let's let's explore how that might impact my plan. So yeah,
keep an open mind, keep an open mind to working
with advisors, but pick advisors properly so that they're actually
operating in a fiduciary role, operating in your best interest,
not theirs. Thanks for listening. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KARC, the
(38:49):
talk station
Tonight some key money moves to make before December thirty first.
You're listening to Simply Money, presented by all Worth Financial
on Bob Sponseller along with Brian James. Well, the end
of the year always seems to sneak up on us.
One minute, it's pumpkin carving season. The next year untangling
string lights for Christmas and wondering where the time went
(00:28):
before December thirty first comes and goes. We've got a
few deliberate financial moves that we can all make to
help trim our tax bill, strengthen our financial plan and
really put us in a good place and give us
a head start on twenty twenty six. Brian, this is
going to be kind of like a rapid fire segment
tonight because we've got ten tips here heading into the
(00:51):
end of the year.
Speaker 2 (00:52):
Kick us off with step number one.
Speaker 3 (00:55):
End of the year checklist.
Speaker 4 (00:56):
Ideally we're thinking about these things a little earlier than now.
We've got about a month and a half left and
you know, certainly having those that Low's started putting up
Christmas decorations around Labor Day, so end of the years
sneaking up, as we're always reminded. Number one maximize those
retirement savings. Look at how much you've contributed to your
workplace retirement plan. This is your four oh one K,
four or three B or maybe a four to fifty
(01:17):
seven if you're in a public entity.
Speaker 3 (01:18):
There's other flavors as well.
Speaker 4 (01:20):
But if there's still room to increase that contribution room,
meaning you haven't hit that limit and it doesn't affect
your cash flow and your bills. Got to make sure
you keep the ship afloat as well. But this is
one of the simplest ways to reduce your taxable income
while still building that long term wealth. You get to
get out of jail free on iras, you can file,
you can all the way until tax filing day.
Speaker 3 (01:40):
You can make a contribution for a prior year, so
that's April.
Speaker 4 (01:43):
But doing it now makes one last thing you got
to do, and you get those dollars invested sooner and
you'll feel better having done it now. While you're looking
at this too, let's say you change jobs. This is
something a lot of people don't know that There are limits,
of course, to what can go into a four oh
one K if you had two four oh one k's
during the year, because you move from one employer to another, Well,
that limit stays the same both of your accounts, both
(02:04):
your four to one K contributions have to stay underneath it,
and there's no way for your new employer to know
what you put in your old employer's plan. That is
your responsibility to make sure you don't go over that accidentally.
It's pretty hard to go over that limit in one
four oh one K because the custody and the bookkeeper
will stop you from making those contributions.
Speaker 3 (02:21):
But if you had two, you can end up.
Speaker 4 (02:23):
With a nasty gram from the IRS that you put
too much money, and so be careful you don't.
Speaker 3 (02:27):
Miss on that. What's another one I think think about
about two.
Speaker 1 (02:30):
Item number two, take care of your required minimum distributions
before the deadline, which by the way is December thirty first,
in order to avoid costly penalties if you're required to
take those distributions from iras or workplace plans from which
you've separated from service. And we find this I won't
say often, but occasionally people have those old four to
(02:52):
oh one K plans lying around and you know they've
reached age seventy three seventy five and they've completely forgotten
to take their arms, and believe me, if you're not
paying attention, the irs definitely is and you'll get a
hefty penalty if you don't take care of that. If
you don't need the income from your r and ds,
consider making a qualified charitable distribution directly from your IRA
(03:15):
to a qualified charity. The amount donated will not count
towards your taxable income, and that really creates a win
win for your generosity and for your tax efficiency.
Speaker 5 (03:26):
What do we have next, Brian?
Speaker 3 (03:27):
Speaking of charities? Right, So, what Bob just talked about is.
Speaker 4 (03:30):
For people who are seventy and a half an older
with iras and they have to they have the ability
to do those qualified charitable distributions.
Speaker 3 (03:36):
But those aren't the only people who might be charitable.
Speaker 4 (03:39):
So if you are charitably inclined and not that age,
then you can be gifting appreciated securities instead of cash.
If you are sitting on a pile of stocks and
bonds and things that are sitting at gains and you've
always felt like I shouldn't touch these, that's a bad
idea because that's going to trigger capital gains. And then
you turn around and write a check to a church
or some other charity. You're doing it wrong. Give them
those long held investments that you've convinced yourself you can't
(04:02):
touch because the taxes hand them over in kind. You're
literally just giving them the shares of P and G
or Microsoft or whatever stock you own. You're not selling them.
The charity will sell them, and they are a tax
free entity. Provided they're a real five oh one C
three charity. They don't pay taxes either, So that's a
way that you can avoid your own capital gains taxes
and not hit your own checking account for those charitable
(04:25):
charitable contributions. Also, bunch them together with the hired standard deductions.
A lot of households aren't itemizing any year, which means
this is why we're not keeping receipts anymore for that
bag of laundry that we just gave to goodwill, because
itemization just doesn't do it anymore with a much higher
standard deduction we got in twenty seventeen. So one approach
is to if you know you're going to be giving
(04:45):
a lot of money to one charity, you can bunch
all of that into one tax year. A really efficient
way to do this is through a donor advised fund
which allows you to make several years worth of donations
in one year for that year's tax deduction, but you
also are not giving it.
Speaker 3 (04:59):
Direct to the charity.
Speaker 4 (05:00):
That donor advice fund acts as a middleman and it
keeps the charity from assuming that you're always going to
be giving them five years worth of contributions every single year.
Donor advice funds are a really really powerful tool for
that type of thing.
Speaker 5 (05:14):
All right.
Speaker 1 (05:14):
Next, let's talk about reviewing capital gains and losses. Tax
loss harvesting is huge, and it can help offset gains
elsewhere and even reduce a small portion of your ordinary income.
Just be mindful of the wash sale rule, which prohibits
repurchasing what's referred to as a quote substantially identical unquote
investment within thirty days. That's kind of how the wash
(05:37):
sale rule works. Gain harvesting can also be valuable if
you're in a lower tax bracket this year. Realizing gains
intentionally now can reset your cost basis at a higher
level for the future. All right, Brian, let's get into
hsays and FSAs. These health savings accounts an often overlooked
(05:58):
tool that really really generates some huge tax benefits.
Speaker 4 (06:02):
HSA FSA Health savings accounts and flexible spending accounts two
very different things that are to support the same spending goal.
So a health savings account HSA, that's one of the
most tax advantage tools available. Your contributions are deductible when
you put them in the growth if you invest it right.
That's usually a second step. A lot of employers just
have something that looks like a bank account and people
(06:23):
think they don't have any options.
Speaker 3 (06:24):
You do.
Speaker 4 (06:25):
You're allowed to move those dollars if they don't offer
you investment. You know, there should be options that look
like you're four h one K mutual funds and those
kinds of things.
Speaker 3 (06:32):
If they don't offer that in that account, you can move.
Speaker 4 (06:35):
That to some other providers such as a fidelity and
there's others out there as well. But anyway, so assuming
you've got it invested, then that growth is tax deferred,
and if you're withdrawing for qualified medical expenses, that's tax
free too. Now here's the trick though, since you can
because you might look at this and say, well, why
am I going to invest money? I'm going to pull
right back out for medical expenses. No, no, no, you're not.
(06:56):
If you really want to take advantage of this, then
make sure you're you're set up in a way where
you can leave those dollars in there, leave them invested
just like any other investment. If you can cash flow
your actual medical expenses, just pay them out of your
normal cash flow, hang on to the receipts, stack them
all up for decades, and you in the future you
can use those receipts to take out a very sizeable
(07:17):
tax free distribution off of money that has been growing
for a couple decades. That's how you really take advantage
of a health savings account. Now you might have a
flexible spending account that's a little different. Check your plans,
rules and your balance.
Speaker 3 (07:29):
Here's the big one. Most FSAs are user to lose it.
Speaker 4 (07:32):
You got six weeks to go buy fifteen pairs of
glasses or whatever you're going to do, But those dollars
are not probably not going to be available to you
after year end. So get those appointments, scheduled, refill prescriptions.
Talk to your dentist. Maybe you can prepay the next
whatever you're going to do for next year. Get the
new glasses frames, all that kind of stuff. If you
have an FSA, don't forget to spend it.
Speaker 5 (07:51):
You're listening to simply Money.
Speaker 1 (07:52):
It's about all Worth Financial IMBOB sponsorer along with Brian James,
and we're continuing to work through some year end tax
planning tips. Here's another one that's very important. Check your
withholding in your estimated taxes. If you had variable income
this year thank bonuses, commissions, stock sales or business related income.
Make sure you've paid enough in taxes to avoid under
(08:15):
withholding penalties, but not too much that you're giving the
government an interest free loan. And what this usually involves
is just a quick check in with your tax professional
or CPA just to confirm whether you've met the IRS
safe harbor for withholdings or estimated taxes. And if you
need to make an estimated payment before year end, make
(08:36):
sure that gets done so you can avoid some penalties.
And kind of tying into that whole thing, review your
equity compensation for the year. You know, we deal with
a lot of people that have incentive stock options that
got exercise this year. Run a projection for alternative minimum
tax before exercising those options to avoid some surprises. The
(08:58):
same thing with restricted stock units. I mean those things
generate taxable income when they vest, and then you know
decide whether to sell the shares when they vest to
diversify and set aside those funds for taxes, or hold
them as part hold the stock as part of your
long term allocation of that particular company. If you had
a large vest this year, strategies like charitable giving, gifting
(09:22):
to a donor advice fund, or tax loss harvesting can
really help balance the impact of that equity based compensation
and taxable income.
Speaker 3 (09:32):
Hey Bob, all right, yep, yeah, I want to go
back real quick.
Speaker 4 (09:35):
You made a comment about making an estimated payment before
the year end if you need to do that, and
that's of course a great, great, great thing to look at.
I want to make sure everybody knows that you can
do that electronically.
Speaker 3 (09:45):
There is a site out there.
Speaker 4 (09:46):
I don't know why that the IRS doesn't push it,
but they have a website for Electronic Funds Transfer.
Speaker 3 (09:51):
And it is e f T P S dot go ov.
Speaker 4 (09:53):
Electronics Funds Transfer PS dot go ov and you can
link that to your bank account, you set up your
own profile, and it will keep track of those payments
you made. I think a lot of people are hesitant
to make estimated payments because it's a pain in the butt.
I gotta deal with paper, because the only way I
can do that is with this little slip that came
out of my turbo tax output. You don't have to
use that, you don't have to mail it in. You
can go electronically. That's what I do, and then I've
(10:16):
got a record. All I gotta do is log in
at tax time and I can say, here's the money
I paid for estimated.
Speaker 3 (10:20):
Taxes, so I know that that's done.
Speaker 4 (10:22):
Otherwise I'd have to maintain my little copy of my
check and I'm just not good.
Speaker 1 (10:25):
And finally, well, Brian, I think it's great that you
brought up that up for another reason, and that's just
keeping your money secure.
Speaker 3 (10:31):
And here's what I mean.
Speaker 1 (10:32):
This time of year, I never like to mail checks
of any size, you know, in the regular US postal service,
because that's stuff they tend to get lost and in
rare cases they get stolen. So, you know, setting up
a secure, encrypted way to pay the irs, it's more
convenient and it makes sure that your money remains safe. Great,
(10:53):
good for you for bringing that option up. I'm going
to look into that myself. Talk about what we need
to be doing tax wise before the end of the year.
If you're a business owner.
Speaker 4 (11:02):
Yeah, so you've got key opportunities there. If you are
a business owner, then there's a lot of extra bells
and whistles and levers and buttons.
Speaker 3 (11:08):
You can pull.
Speaker 4 (11:09):
But so set up at fund that retirement plan. A
SOLO four oh one K or a sepi RA can
deliver really meaningful deductions, but those have to be established
by year end and often even sooner. So if that's
something that rings a bell you've been meaning to do
it all year, get on the horn of your accountant.
Time the income and the expense is the right way.
Make sure those deductions if you can accelerate them now,
pay for stuff that you're going to use in January.
Speaker 3 (11:30):
Go ahead and do it. If you need the deduction,
and it's time.
Speaker 4 (11:32):
To tidy up the books and make sure payroll filings
are current so that you don't have a miserable Q
one running a business and preparing for taxes. Your CPA
will thank you. Another one is take a look at
family gifts. Education funding. Annual exclusion gifts are a real
tax efficient way to transfer wealth to your children or
your grandchildren without affecting your lifetime exemption. There are creative
ways to get that money out of your state without
(11:53):
paying any taxes at all, and you can benefit them
now while while you can still see them enjoy it too.
And last, and not least, just tie up these loose ends.
Make sure your retirement accounts have beneficiaries attached to them,
make sure your insurance policies all have up to date beneficiaries,
and health savings accounts. All that stuff overrides your will,
so make sure the beneficiaries that can be clearly named
(12:13):
on financial accounts are named.
Speaker 5 (12:16):
Here's the all Worth advice.
Speaker 1 (12:18):
Taking action now ensures your money is working as efficiencly
as possible.
Speaker 2 (12:23):
For the goals that matter most to you.
Speaker 1 (12:26):
Coming up next, we'll explain why chasing an upcoming seasonal
trend might land your portfolio on the naughty list. Plus
the end of an era for the most famous investor
there is. You're listening to Simply Money presented by all
Worth Financial on fifty five KRC the talk station. You're
(12:48):
listening to Simply Money presented by all Worth Financial on
Bob Sponseller along with Brian James straight ahead of six
forty three RMD surprises, stock options, tax traps, and what
to do with an inherited home. All of that coming
up in our Ask the Advisor segment. Well, our show
producer was out and about and the other day and
(13:09):
was asked this question, what is the Santa Claus Rally.
Let's answer that one for you, Brian. What is the
Santa clause Rally?
Speaker 4 (13:17):
Well, the Santa Claus Rally, that's what's about to start happening.
It's the stretch from the trading day after Christmas through
the first two trading days of January when the Dow
Jones has historically risen seventy seventy seven percent of the time.
The whole idea here is that slower trading, holiday optimism,
year end bonuses, institutional managers wrapping up for the year
(13:38):
all might contribute slower trading. Basically, that means that there
aren't as many trades being made because a lot of
people are on vacation. There's just less activity, and that
it tends to push the market up a little bit
and there's not as much a dissent in the market
as if.
Speaker 3 (13:52):
You will, because there's fewer people participating. It doesn't last
very long.
Speaker 4 (13:55):
But so now we've got people trying to expand it
to mid November or even just declaring that it's already here,
same way as we just drag the holiday decorations out
in the hardware stores around, you know, back in September,
just because the market had a good few good weeks
and it's cold outside. We're just declaring this is the
Santa Claus rally. That's not really investing, that's just calendar
cherry picking, right, Bob.
Speaker 2 (14:17):
Yeah, for sure.
Speaker 1 (14:18):
I mean Wall Street, And let's face it, the media
they love this kind of seasonal chatter because it keeps
people watching and trading and clicking. But it's really, you know,
when it comes down to it, it's just entertainment. It's,
for lack of a better term, it's just market astrology.
Speaker 2 (14:36):
Let's be honest.
Speaker 1 (14:37):
If there really was a consistent exploitable rally every December,
it wouldn't exist anymore because smart market participants would get
out ahead of it and it would already be priced
into the market. So, you know, just avoid what all
these talking heads get on there and do. People are
going to talk their book either hoping the market goes
up or down.
Speaker 2 (14:57):
It's just the way things tend to work all right.
Speaker 1 (15:00):
On another topic, Warren Buffett just made a quiet announcement
that marks the end of an era. After decades, he
is stepping away from writing his legendary annual Berkshire Hathaway
shareholder letter and he will no longer partake in the
annual shareholder meetings. Brian, have you ever been to one
of those shareholder meetings? I have not, but I've heard.
(15:22):
I've talked a couple people that have actually been in
those meetings and they were just fantastic. It's it really
is the end of an era where you know, mister
Buffett would just sit down and talk about you know,
their company and the economy and everything. It's kind of
sad to see this happening, but life marches on.
Speaker 4 (15:38):
Yeah, one of the greatest brains in investing history is
starting to step back. And the man's ninety five years old,
so of course I think he's earned the right to.
Speaker 3 (15:46):
Call his shot at this point.
Speaker 4 (15:48):
But no, I have not ever attended one of those,
but I do read that letter when it comes out.
Is it always has good insights there, and so it's
gonna be interesting to see who will step in to
fill that void because we've always had Uncle Warren to
look to just to think, just to check in and
see what he thinks, you know, when we're thinking about
our investments. So interestingly, yeah, obviously one of the one
(16:11):
of the richest people on the face of the earth,
and gave it away at least once, the bulk of it,
and then built it all back up again.
Speaker 3 (16:17):
So he's going to continue to do that.
Speaker 4 (16:20):
He's going to continue to give away billions to charity
until there's nothing left, and he's also assigning his own
children that responsibility to continue to distribute it. And alongside that,
he announced a donation of about one point three billion
dollars worth of his own company, Berkshire Hathaway, to four
different family foundations. And so even after that gift, he's
still got about one hundred and ninety six thousand Class
(16:40):
A shares of Berkshire. These are the big ones, right,
These are the ones where you look at people look
at and they go, wow, that's I got to pay
that much for one share.
Speaker 3 (16:46):
Well, that's why the Class B exists.
Speaker 4 (16:47):
Well there's almost one company that has retail and institutional
shares of itself.
Speaker 3 (16:52):
But anyway, his.
Speaker 4 (16:53):
Ownership represents about one hundred and forty seven billion dollars
worth of Berkshire hash away. So the next question is
when's he going to dis that money out. What's he
had to say about that, Bob.
Speaker 1 (17:04):
Well, he says he would like to hang on to
a significant amount of that stock until Berkshire shareholders developed
the comfort level with incoming CEO, Greg Abel. I think
that they they've done a pretty good transition here bringing
mister Abel on board. So mister Buffett said he doesn't
think the level of confidence is going to take that long.
(17:25):
I think shareholders of you know, Berkshire agree. But uh yeah,
he's not going to unload one hundred It would be
hard to unload one hundred and forty seven billion dollars responsibly,
you know, in very short order, but it'll be it'll
be fun to watch how mister Buffett and his family
benefits society through those you know.
Speaker 2 (17:45):
Large gains over the years.
Speaker 1 (17:47):
He ended his letter his Thanksgiving letter this year by
giving thanks to all shareholders, even the ones he didn't like,
and he said quote, I wish all who read this
a very happy Thanksgiving, Yes, even the because it's never
too late to change. How about that for a way
to sign off to the general public.
Speaker 3 (18:06):
There, Brian, when I am ninety five, I'm gonna be
warned of it all right.
Speaker 1 (18:12):
Every Sunday you will find our all Worth Advice in
the Cincinnati Inquire And here's a preview, Brian. Here's a
question for you. DS from Oakley says, my wife was
just offered a severance package to leave her corporate job.
How do we know if she should take it?
Speaker 4 (18:29):
Well, hopefully this is one of the reasons that we
would want a financial plan in place before we get
this kind of a curve ball here, because this can
be very jarring for somebody who hasn't taken the time
to build a financial plan, probably doesn't really have a
great idea of where they are. They could be perfectly fine,
but they don't know because we haven't done that math.
So when these things drop out of the sky and
I got to think about a huge decision, a huge
(18:49):
life changing decision, I don't really know what my baseline is.
So I would suggest getting a financial plan together.
Speaker 3 (18:56):
Run those numbers.
Speaker 4 (18:57):
Run the numbers you and I would think this is
very important too. Run the numbers. Is if the severance
packages doesn't exist first and run yourself out to whatever
whatever you have in mind for a retirement age, and
then now do it again. Take that take into account.
All right, this job is going to end here? Can
I get away with retirement?
Speaker 5 (19:13):
Now?
Speaker 4 (19:13):
We don't know how old DS and his spouse are.
Uh so, maybe they're in the retirement window anyway and
could be could potentially benefit from that. But run the
numbers again with the severance package in and retiring a
little sooner. If you can do it financially, then focus
on the bigger question, which is what am I going
to do with all of that free time? If you
can't do it well, then you're going to probably want
to start thinking about what that next move is going
(19:34):
to be to create some more income.
Speaker 1 (19:36):
Yeah, and that leads us to a great question you
might have asked yourself, should I quit, retire or go
part time next? Some decision making tools for when you're
financially ready but maybe not professionally ready to pull the
ripcord and leave your job. You're listening to Simply Money,
presented by all Worth Financial on fifty five KRC the
talk station. You're listening to Simply Money because I know
(20:06):
by all Worth Financial. I'm Bob sponsorer along with Brian James,
joined tonight by our career expert Julie Balki. Julie on
the job Julie, first of all, thanks for making time
for us tonight, and we've got an interesting topic to
cover with you. You know, some open ended question here
here for you just to start.
Speaker 3 (20:26):
And I know you deal with a.
Speaker 1 (20:27):
Lot of people that are going through this question. You know,
should I retire altogether, meaning just quit and hang it
up and retire or go part time? And how what
goes into making those kinds of decisions. So we're interested
in your thoughts on that, Julie, as you navigate these
complex questions with your clients all the time in your practice.
Speaker 6 (20:48):
Of course. Thing the analogy I always like to use
when it comes to this is, you know how we
all use Google maps or ways, So when you think
about when you're trying to get when you want to
get where you're trying to go with those with those apps,
you put a destination in you know exactly where you're
trying to go. The problem with so I like to
use that analogy to say, to really be successful getting someplace,
(21:13):
you've got to have some general idea of where you're
trying to go. So the first question I would ask
someone is if you're financially ready. If that's not an issue,
how do you feel about the work you do right now?
If you say I absolutely hate it and I can't
wait to get out, then I think I can you
throw the baby and the bathwater out and start with
(21:33):
a fresh sheet of paper and say, Okay, I'm going
to create something for the next stage of my life.
The next option would be like, Okay, I like parts
of it. There's parts of what I'd love to keep doing.
And in that case, I recommend you talk to your
leaders about is there a way that you could go
part time maybe just doing the things that you're uniquely
(21:54):
qualified and skilled at doing. Just make sure you don't
accept part time pay for full time work. So what
what pieces of what I do now can I carve
out in order to make that transition from forty plus
hours a week zero hours a week much smoother. And
then there are times when we can't. We say, you
(22:15):
know what, I want to keep doing what I'm doing now,
but I only want to do it for another year
or so. And so in that case, what can you
start doing to start filling up that other life bucket,
let's call it. So getting clear on what your situation
is today and what your possibilities are. You might work
for a company that says, naw, we need you a
(22:35):
full time or not at all. Okay, well that's going
to tell you what you need to do, and you
at that point it's like, Okay, now I need to
start planning for the day when the retirement party. They've
taken the streamers and balloons down and now it's time
for me to go do something else. It is a
wildly underestimated, under talked about stressful process to surely retirement.
Speaker 3 (23:02):
So okay, well let's talk about that.
Speaker 4 (23:04):
So yeah, yeah, it is very stressful, and you get
to hear a lot of stories.
Speaker 3 (23:07):
So but Bob and I have.
Speaker 4 (23:08):
Our own war stories from the financial side, right, So
how do we make the numbers work from all this?
Speaker 2 (23:13):
What are some of.
Speaker 4 (23:13):
The stories that you hear? But you're more on the
day to day career side. So so let's say you
sense that somebody is they're really kind of ready to go,
but maybe there's not a little bit. What if somebody
pulls the trigger a little bit too soon? What are
the biggest regrets you tend to hear from people who
may be hung it up too early.
Speaker 6 (23:31):
Yeah, the biggest regrets come from people who hung it
up too early because they've not jumped to something that
they're excited about. In other words, the dislike for what
they were doing over road their patients. So they might say,
you know what, I'm going to go be a volunteer
full time, or I'm going to go play golf until
(23:53):
I can't stand it anymore, or I'm going to go
do more, you know, spend more time on a hobby.
I actually at a client several years ago who was
on the road so much, and when he got to
the point that he could retire, he quit cold Turkey
and he went moved to Florida golf, pickleball, tennis, racketball.
He said so much of it that he hurt his shoulder.
(24:15):
And he's like, now, I said, I jumped from one
hundred and twenty percent at one thing to one hundred
and twenty percent at another. And he realized at that
point that that life of one hundred percent leisure, while
tantilizing in concept, was not only not good for his body,
but it also wasn't good for his mind and so
he went back to work doing some consulting, and so
(24:36):
it's it's you know, you have to know if your
identity is tied up in your job, then you are
going to have a harder part. You're going to have
a harder time of this, or if you don't have
anything that you're interested in. I've been talking about this
with people recently, and with men it's especially hard because
(24:57):
they generally don't have the friend and support at work
that women do. And so now you're sixty some years
old and you're trying to find people to do stuff
with and wives are saying, we don't really want to
be your one hundred percent entertainment.
Speaker 3 (25:12):
And so how my.
Speaker 4 (25:14):
Wife would never say that she loves every minute.
Speaker 6 (25:18):
She just spit her coffee out right now she's looking.
Speaker 3 (25:21):
At this, But apparently you've met okay, real work.
Speaker 6 (25:26):
Yeah, you have to get realistic about all the pieces
of your life. If things are really, really, really bad
and you feel like you're being pushed out, and then
it can be worth it to just stop pull turkey,
take up breast, and then rebuild something new. But if
you generally like what you do a portions of what
you do, the smarter play can be a slower exit,
(25:47):
or you get a chance to try some things on
the other end and to build on the other end
before before you go full time, because some of the
things you think you're going to enjoy doing in retirement
you won't, and you're going to discover some new things.
Once you allow yourself to be really open minded around
that that you do choose to pursue, it can be
a really wonderful time. But it's not an easy time
(26:10):
because you're also dealing with the mental piece, which is,
oh my gosh, this is that last portion of my life,
which is really quite you know, quite sobering, and so
you're dealing with a lot of that kind of stuff
as well, maybe some regret, maybe you know, all that
stuff that comes with a major transition. And so be realistic,
(26:32):
be realistic about who you are, what your support systems are,
which your hobbies and interests are, and you have to
get out there and be bold and vulnerable a little
bit and know that you're really, in a lot of
ways building a brand new stage of life, all.
Speaker 1 (26:47):
Right, Julie, In the minute we got left here one
of the best ideas I've heard on this topic, and
I think the idea actually came from you in one
of the prior segments we've done with you. And that's
once you get to that point where you know you're
going to probably retire in a year or a year
and a half or what have you, that's the time
to maybe take that one or two week vacation and
(27:08):
actually trial run retirement. Now that takes some planning, right, Julie,
But pretend that you're retired on your vacation and actually
plan out what you think you're going to want to
do to make sure that that's really what you're going
to enjoy.
Speaker 5 (27:21):
Am I on the right track there?
Speaker 6 (27:23):
Yeah? Absolutely, you've got to try things out. You've got
to get out of your head. You've got to say, look,
if my goal is to give back or contribute more
in my community, maybe you take time to figure out
what is it, What is the way you want to contribute.
Then start researching organizations that do that and figure out
(27:43):
what your role might be. And so you have to
take this on like a project and you're the project.
And that's the stuff. It's really really uncomfortable for us
because it causes us, it causes a bunch of other
stuff to surface.
Speaker 5 (27:55):
But maybe we have to deal with Thanks for listening.
Speaker 1 (27:58):
You've been listening to Simply Money presented by all Worth
Financial on fifty five KRC, the talk station. You're listening
to Simply Money presented by all Worth Financial. I'm Bob
Sponseller along with Brian James. Do you have a financial
question you'd like for us to answer. There's a red
button you can click while you're listening to the show
(28:20):
right on the iHeart app. Simply record your question and
it will come straight to us. All right, Brian, John
and Madeira says, our required minimum distributions are going to
be much larger than our actual spending needs. What strategies
can help us avoid a huge tax bite?
Speaker 4 (28:38):
We have very common question, John, Thanks for sending it
in and thanks for trusting us with to provide you
some feedback there.
Speaker 3 (28:44):
Well, well, we don't know John's age.
Speaker 4 (28:46):
He talks about RMD's requirementium distributions in the future tents,
so we're assuming he's not quite there yet. That's the case,
and he's got a couple alternatives. John, you can be
looking at roth conversions and the window for this is
the most ideal window for this is when you're in
the lowest brack you'll ever see. So perhaps you're retired,
maybe you haven't turned on social Security or pension benefits yet,
so there's no income generating tax taxation there, and obviously
(29:09):
you're not at requirementum distribution age, so those are That's
probably the lowest bracket that you've seen in decades, So
you might want to look at ROTH conversions here, or
even if maybe that's not on the table, or maybe
you got other things going on, another thing you can
do is just start accelerating withdrawals. Don't rule out the
IRA when you do need money for that vacation, the
next car or whatever.
Speaker 3 (29:28):
Remember you're in the lowest bracket of your life.
Speaker 4 (29:30):
If you take a chunk out, you can calculate what
the bracket will be and get an idea for how
you'll stay below whatever bracket.
Speaker 3 (29:37):
You want to.
Speaker 4 (29:37):
You want to avoid, but don't always avoid the IRA
because you know it's income taxable. Spread that out more
distributions over a longer period of time is going to
stretch it out into more tax years, therefore less taxes
percentage wise. So we will move on then to our
next question here, which comes from Jerry and Levin and
Jerry says he's the executor for his father's estate and
(29:58):
he's got business interests. Smoking ratulations, Jerry, that's going to
be a couple of curve balls for you to go
chase down. What steps does he need to take, Bob
to avoid some personal liability as he's selling this estate.
Speaker 3 (30:07):
This is a tough one.
Speaker 1 (30:09):
Well, it is a tough one, Jerry, And with you know,
with I take these questions literally and based on the
lack of information contained in the question. That's not your fault,
that's just the way you ask the question. Here's my advice.
Hit the pause button immediately, don't do anything, and go
network around a little bit and find a good qualified attorney,
(30:32):
someone that specializes in both business planning and estate planning.
They're out there. Just network around a little bit and
find one and don't take any action. Don't do anything
until you have consulted with a good attorney. Perhaps it's
your father's attorney, you know, who might be well skilled
in these things. And if that person has retired or
(30:54):
moved on or is no longer active, talk to your
your friends and colleagues and find a good attorney.
Speaker 5 (31:01):
That's my best advice, because if.
Speaker 1 (31:04):
You're involved in making decisions on behalf of the business
or operating the business in any way. After your father's passing,
you want to be real careful, you know, to protect yourself.
So get some good legal counsel here. I know it'll
cost a little bit of money to do that, but
my experience has been you know, a good attorney is
(31:25):
worth his or her weight in gold and can help
you avoid some possibly significant problems.
Speaker 5 (31:31):
That's the best advice I could give.
Speaker 1 (31:33):
All right, Kevin and Erlanger Brian he says, I've accumulated
stock options through work. What's the smartest way to exercise
them without triggering a massive tax bill all at once?
Speaker 4 (31:46):
Okay, So this is another good one here, some complicated
features here to a very popular benefit plan that some
employers share with their employees. So your stock options are
gonna fall one of two categories. They're either ISOs incentives options,
or their nqsos non qualified stock options. Big differences between them.
If they happen to be of the incentive variety, then
(32:08):
you cane a little bit of a tax benefit there
if you hold those shares exercise and hold the shares
one year from the exercise in two years from the grant,
then you should qualify for long term capital gains tax,
which is the most favorable kind of tax. If we
got to pay it, that's the one we want. But
you want to watch out for alternative minimum tax. We
can do a whole fascinating, boring show on the alternative
minimum tax. We can't get into that here, but just
(32:29):
be aware that if it's an incentive stock options, that's
something you're going to want to be paying attention to.
On the other hand, if it's non qualified, those are
going to be taxed as income at exercise, so you're
going to pay ordinary income tax on the spread, which
is the difference between the market price whatever everybody would
pay for it on the open market, and whatever the
strike price was which you were given at time of
the grant, and then any further appreciation after you exercise this.
(32:52):
That's taxes capital gains when you sell. So if you
want to, if you want to avoid this, you can
spread it out over multiple years. Try to wag if
you can wait until you have a lower income year.
For example, let's say you're planning on retiring at the
end of this year. Awesome, don't exercise anything. Now, wait
until January. If you've got that ability through your employer.
And also there may be options for cashless exercises, which
(33:14):
basically means that you liquidate the whole thing. You don't
have to lay out any cash. They'll pull the purchase
value right out of the proceeds. And also, as always,
you can consider some charitable giving to offset taxes. If
you're already doing some of that anyway, then there may
be a way to combine these things. So get with
a fiduciary financial advisor and they'll help you put these
puzzle pieces together. Next question, This one comes from Mark
(33:36):
and Indian Hill, and Mark says they've saved steadily, but
they've mostly used mutual funds, and he's wondering if exchange
traded funds ETFs or direct indexing might be a better
option for them at this stage.
Speaker 1 (33:47):
Well, Mark, I would say, all things being equal, of
course ETFs and direct indexing are more tax efficient than
having everything in mutual funds. But you know, first of all,
congratulations for saving Stafaly in building a nice portfolio of
mutual funds, because you know, I'm assuming you've done this
over years and decades and that that was the only
(34:08):
game in town. So you did you did right? You saved,
you accumulated. The industry has evolved over the years to
have these ETFs and direct indexing and tax loss harvesting strategies,
so it's good that you're aware that those are out there.
My advice would be, have a good fiduciary advisor sit down,
look at your portfolio, and there might be spots where
(34:32):
you can gradually move into some of these more tax
efficient strategies without causing you to just dump all your
mutual funds or most of them and pay a huge
capital gain tax bill in the process. So it's important
to look at the details, have a good advisor sit
down with you that could give you good fiduciary advice
(34:52):
and help you transition responsibly into some more tax efficient strategies.
Speaker 5 (34:57):
You know, moving down the road.
Speaker 1 (34:59):
Coming up next, I've got my two cents on how
maybe to evaluate what kind of financial advice you really
need based on your situation. You're listening to Simply Money
presented by all Worth Financial on fifty five KRC the
talk station. You're listening to Simply Money presented by all
(35:20):
Worth Financial. I'm Bob sponsorller along with Brian James. All Right,
we started off tonight's show by giving four or five
different examples of fairly well to do families that had
gotten some bad advice and kind of went to sleep
on not doing some important things. I want to bring
this back, Brian, to kind of real world how should
(35:42):
these people? How should these people be evaluating their situation
and what I'm talking about here? And I run into
this quite often a lot of times people don't need
or want a professional advisor to help them with everything.
They might already have a good estate plan, they might
be very comfortable self managing their portfolio, but there's some
(36:05):
of these things like tax efficiency or more complex estate
planning or distribution strategies that they haven't even thought of,
and it can really move the needle in their overall
financial plan from a tax standpoint and from a legacy
standpoint to their families and chosen charities. And so my
(36:27):
message tonight is be open to sitting down with somebody
and be a little self aware about what you haven't
covered or you might not know or might not want
to do, because oftentimes, Brian, we don't do every single
thing for clients, but there's one or two value added
things we can add to somebody's situation really move the
(36:50):
needle for them and they walk away feeling glad that
they worked with us or with another good fiduciary advisor.
Speaker 5 (36:58):
That's my message tonight.
Speaker 1 (37:00):
Have an open mind, you know, is you evaluate comprehensive
advice and comprehensive planning.
Speaker 3 (37:06):
Yeah, And I would add to that.
Speaker 4 (37:07):
I would add this that one of my favorite times
as an advisor is when I come across something where
I can educate somebody using an actual, real example, because
I think people are very comfortable knowing that they're not
alone in whatever weirdness they're facing.
Speaker 3 (37:20):
Sometimes it can be good weirdness. Right.
Speaker 4 (37:23):
Unfortunately, I've got a lot of money that provides a
lot of opportunities. What do other people do in my situation?
And sometimes it's terrifying stuff, you know, where maybe there's
a healthcare problem or something in the mix. And I
think the value that any advisor brings is the ability
to say, I've been through this before. Here's how other
people who look just like you have responded to it.
Here's the techniques they used, Here's the results that they
that they got out of it. Here's the pros and
(37:44):
cons of all the decision options. That they had, and
then everybody can move forward having made a confident decision.
But it helps an awful lot to have somebody who
is an independent bystander, an arms length away, who can
kind of guide you, sort of the docent in the museum,
if you will, of here's how things have worked for
other people historically, and here's how it can work for you.
Speaker 5 (38:03):
Yeah, it doesn't.
Speaker 1 (38:04):
It doesn't mean that you have to do what everyone
else does. But to your point, Brian, just knowing what
some of your options are and maybe hearing some real
life examples, three or four ways to possibly skin the cat.
Oftentimes you know, the bells and whistles go off in
people's brains and say, yeah, I never thought.
Speaker 5 (38:22):
About it that way. I like that idea.
Speaker 1 (38:25):
Let's let's explore how that might impact my plan. So yeah,
keep an open mind, keep an open mind to working
with advisors, but pick advisors properly so that they're actually
operating in a fiduciary role, operating in your best interest,
not theirs. Thanks for listening. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KARC, the
(38:49):
talk station
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