Episode Transcript
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Speaker 1 (00:00):
Now it is coming up to the end of the year.
I don't know if you guys know this. I don't
know how it's already November twenty second, when it was
October thirty first, like fourteen minutes ago. Grant's still wearing
his costume from Halloween. I mean, you know, that's how.
It's just so close. But it is the end of
the year, and for a lot of people that means
it's time to kind of begin tax planning and stuff
like that. I thought it would be interesting to have
(00:21):
Josh coomeran from a retirement planning center of the Rockies,
come on to do a little nerdy financial talking about
the end of the year. Josh, welcome to the show.
Speaker 2 (00:28):
Thanks Mandy, and I love that you use the term
nerdy because we are nerds.
Speaker 1 (00:33):
Yeah it is, but you want nerds when you're having
someone help you with your finances. You don't want like,
you know, some wack a doodle someone. So let's talk
for a second. First of all, because this is a
question that has come up over and over and over again.
What does a new administration mean for people going forward?
I know, you put guys are probably getting these questions
(00:53):
because there's anytime, although there's a little bit of a
known quantity here. So does this kind of get easier
for you guys to answer that question?
Speaker 3 (01:00):
Well?
Speaker 2 (01:00):
Absolutely, and you're right, that is probably the biggest question
we're getting even more than a year planning type stuff
right now. There's a pretty large level of optimism surrounding
the markets going forward, as evidenced by immediately after Trump
was elected, right, the markets responded favorably, and you just
(01:23):
due to his own policy and things that he stands
for that bodes well for the market going forward. So
a lot of people have been asking us, well, do
I need to make changes? Do I need to get
more aggressive? Do I need to do X, Y or z?
And really, Mandy, the simplest answer that I can give
you is, don't go crazy making changes in your portfolio,
because when you're chasing the market, that's when you tend
(01:46):
to hurt yourself a little bit more.
Speaker 1 (01:47):
Right, Those for me feel like emotional decisions right when
you're chasing the market that is not based in rational analysis.
That is, oh my gosh, I'm afraid I'm going to
miss out on something if I don't do something.
Speaker 2 (01:58):
Now, Yeah, fomo is a real thing, and we talk
about it. You know, in the pop culture world, fomo
I want to be involved. The same applies to the market.
Don't try to chase everything that you can that you
think is going to be advantageous to your returns over
right the course of the next year or so, you know,
stick to your plan. That's what we're here for us
(02:19):
at Retirement Planning Center. We're focused on helping people stick
to a plan that they know is.
Speaker 3 (02:24):
Going to work right.
Speaker 2 (02:25):
That's whether it's a good market, whether it's a poor market,
it doesn't matter. You're going to stand the test of
time because you have a plan and you got a
steady plan one hundred percent. We call the Summit Retirement
Guide in our office.
Speaker 1 (02:37):
So at the end of the year, as people are
doing their tax planning, or maybe they're sort of looking
to see how they did year over year, maybe they're
maybe they're going to take some profits, maybe they're going
to do that. What are some of the things that
you need or you guys look at when it comes
to someone's age, like if someone's forty, what has to
happen at the end of the year versus someone who's
fifty five or sixty retirement, What do you guys recommend
(03:01):
in that.
Speaker 2 (03:01):
Respect, right, So, the name of the game as we
near the end of the year is tax planning.
Speaker 3 (03:06):
I mean, pure and simple.
Speaker 2 (03:08):
There's nothing you can really do from an investment standpoint
that's going to change the outcome between now and the
end of the year. So the thing that you can
control is what you do to help mitigate your tax
liability going forward. A lot of that can be done
by maxing out your contributions to retirement accounts.
Speaker 3 (03:24):
That's a big one.
Speaker 2 (03:25):
Obviously, seeing if there's any tax savings that can take place,
you know, through business expenses or other avenues, you know,
health savings accounts, whatever, you want to take advantage of
those so that you can lower your taxable income prior
to the end of the year.
Speaker 3 (03:40):
That's that's critical.
Speaker 2 (03:42):
It doesn't really matter how much you earn in your
investments if you don't get to keep any of it
because I'm doing that appropriate tax planning.
Speaker 1 (03:48):
Let's talk for a second about catching up the IRS
allows how much extra in contributions into a four oh
one K if you're over is.
Speaker 3 (03:56):
It fifty two or fifty five fifty fifty?
Speaker 2 (03:59):
Yes, So my partner jaris I'm going to give him
a shout out. I'm gonna throw himuner the bus. He
hit that old man age jump up this year to.
Speaker 1 (04:08):
Check the different box on the age. I just did that,
and it broke my heart all of a sudden. I'm
in the fifty five to sixty four group.
Speaker 3 (04:16):
What the hell?
Speaker 1 (04:17):
It's not cool?
Speaker 2 (04:18):
Right, It's kind of depressing, But in reality it's actually
a blessing too, because then you have an additional catchup
that you can throw into a four to one K.
Speaker 1 (04:27):
Right.
Speaker 2 (04:27):
For example, those under fifty can put up to twenty
three thousand dollars for the year in but because you're
over fifty, you have an additional I think it's like
seven seventy five hundred dollars eight thousands. Yeah, they're changing
it all the time. So you get an extra catchup
provision that allows you to put more into your four
to one K that helps lower that tax liability on
(04:48):
your touch and you can.
Speaker 1 (04:49):
Actually do that into next year. I don't know until
tax time is when you can make those contributions for
this year.
Speaker 2 (04:54):
Yes, and no, with a four to one K, it's
just a payroll deduction, right, so you can't catch up
that way. If you're using like an IRA, which you
have total control over. Now, the contribution limits are much
much less than IRA. Right, you can only put up
till like eight thousand dollars if you're over fifty into that.
So you can retroactively pay into that RA up until
(05:15):
April fifteenth of next year for the prior year's contributions.
Speaker 1 (05:20):
Okay, so we got the IRS catchups for people over fifty.
I've been reading a lot lately about minimum distributions and
roth IRA conversions. At what age do you need to
start worrying about we're thinking about those things. Let's start
with the required minimum distribution distribution.
Speaker 2 (05:40):
Yeah, for most folks, seventy three is going to be
the age where you have to start pulling money out
of your retirement accounts. That's whether you need the income
or not, right, And that's a hard pill for a
lot of people to swallow, especially if income's either strong
where you just don't need that additional income. But that's
something that you're gonna have to do. And at that
age it's about three point sixty five percent.
Speaker 1 (06:03):
So what is the logic that the government? Why is
that rule in place?
Speaker 2 (06:06):
Sure, So the agreement that we enter into with the
government when we contribute to retirement accounts is hey, I'm
going to let you defer those taxes for Ah.
Speaker 1 (06:18):
They just want the money.
Speaker 2 (06:19):
It's time for us to get ours essentially, you know.
And is there any sort of rhyme or reason to
the age, No, not really.
Speaker 3 (06:25):
That's just when the government deemed okay, you've.
Speaker 1 (06:28):
Had your money enough long enough, we want our cut, right.
That is just Isn't that just the most the most
excellent example of government just being a blood sucking vampire
on the American people, isn't it? Yeah?
Speaker 3 (06:43):
And can I make it worse?
Speaker 2 (06:44):
Oh?
Speaker 1 (06:44):
Yeah, exactly.
Speaker 2 (06:45):
So if if you don't pull out the whole require
minimum distribution that you're supposed to pull out, there's a
penalty of twenty five percent.
Speaker 1 (06:54):
Oh about, because they're going to get their money either way.
So oh my god, of the.
Speaker 3 (07:00):
Amount you should have but didn't. So there's no.
Speaker 1 (07:03):
Real way around this. Okay, So those alternative what if
people don't necessarily need that cash? Do they just reinvest it?
What happens there? So you're basically pulling it out, taking
the capital gains, and then just putting it back into
the market.
Speaker 2 (07:15):
Yeah, that's that's a way to look at it. Some
folks will do that a lot of people. What's interesting
is if they are more focused on creating like a legacy,
you know, leaving something behind, what they'll do is they'll
funnel that from their retirement accounts over to say, like
a life insurance policy.
Speaker 3 (07:31):
Okay, because what that's doing.
Speaker 2 (07:33):
Is that's, you know, not only funneling cash into a
life insurance policy, it's creating additional death benefit. A lot
of times there could be long term care benefits through
that life insurance policy. But really what they're doing is
they're turning a dollar into multiple dollars, right, so that
they can leave behind a legacy that's going to be
tax favorable to their errors.
Speaker 1 (07:51):
So let's talk about Speaking of tax favorable, let's talk
about roth conversions. When I first heard the phrase wroth conversion,
I had absolutely no idea what we were talking about
or why you would want to do this. Why would
someone First of all, what is a roth conversion? For
someone like me? I now know what it is, but
I'm just going to play the dummie on the radio
for you. What is that?
Speaker 3 (08:10):
Yeah?
Speaker 2 (08:10):
So this is a really cool strategy for a lot
of folks that maybe can't necessarily contribute to a roth
ira because there's a lot of people that are phased
out of income. But what a roth conversion essentially is
is you take money from either a four oh one
K or an ira and you convert that over to
a wroth while paying taxes on the amount that you
convert over to the wroth.
Speaker 1 (08:31):
What is that benefit?
Speaker 2 (08:32):
So what that does is that allows you to kind
of take control out of how much you're pulling out
of your retirement accounts in the first place, as opposed
to waiting all the way until R and D age
right told what you have to take out. But there's
a little bit of strategy, Mandy, where you know, we
try to help folks stay within that same tax bracket.
Speaker 1 (08:50):
Right, And we'll say, okay, so if you're still working
at a full capacity, it might not be the best
idea because then you'll just add that to your income
and it'll possibly push you into a different tax bracket.
Speaker 3 (08:59):
Correct. Yeah.
Speaker 2 (09:00):
Where we really find that sweet spot is is between
retirement and RMD age. So for some folks that might
be sixty five years old that they retire and they
have until seventy three before they have to start pulling out.
Speaker 3 (09:11):
So we've got an eight year window.
Speaker 2 (09:13):
Cool.
Speaker 1 (09:13):
Do you have a limit on how much you can
convert one year? No?
Speaker 2 (09:16):
If you have a million dollars and you want to
convert a million dollars, you know, if you'd have.
Speaker 3 (09:20):
To stick tax, I'd have to take a pretty heavy tax it.
So there's no limitation there.
Speaker 1 (09:24):
Now, you know, I want to This is going to
be a kind of a dumb question, but we have
a lot of people in our audience. They are like
late thirties, early forties, and maybe they're just socking money
into their four to one K and when they hear
you talking about you know what you guys do, they think, Oh,
you know, I'm either not ready for that, or you know,
I don't have a big enough portfolio, or I'm doing
(09:44):
just fine. I wish that I had engaged with someone
like you a lot earlier. I mean, oh my gosh,
cause I just I didn't know anything. And when you
don't know anything, you're just honestly, my first few four
to one K, like when I was you know, I
just I literally could have just thrown a dart against
the wall and just picked something. I've learned a lot
since then. Sure, But what do you say to the
(10:05):
people who are like, well, I'm not right for.
Speaker 3 (10:07):
This yet, you know, just start.
Speaker 2 (10:10):
I mean, really, the benefit that folks have is establishing
the habit, right, because when you get in the habit,
then it's all a sudden out of side, out of mind.
Speaker 1 (10:19):
It's meaning just shoveling money into savings instead of having
it come to your.
Speaker 2 (10:23):
Bank, right, absolutely, and then you know, over time you
can progressively, you know, increase that amount to really take
advantage of the benefits that you get for doing that.
But yeah, just start. I mean everybody always thinks, you know, Mandy,
I'm never going to reach you know, fifty sixty years old,
so far down the road. I don't even have to
worry about it. I got so much to worry about. Now,
(10:44):
just start the habit, even if it's fifty dollars a month.
Speaker 1 (10:47):
See, I was going to say, I was talking to
a friend and and she said, look, even if you
only have five dollars to save five dollars, you mentally
start that habit. And when that five dollars turns into
fifty dollars, turns into one hundred dollars, you begin to
realize how fast that snowballs, and it does. She was
specifically talking about creating that mentality. So for people that
(11:08):
are kind of working on the margins, you don't have
to save a million dollars every paycheck, but save something
because that is a muscle that has to be worked,
that savings muscle to make that happen. So when you
are talking about tax preparation and mitigating tax stuff like that,
that sounds very foreign to people who have been doing
a ten forty easy their entire life, the most basic
(11:29):
tax form. At what point in someone's financial life do
they need to go, you know what, maybe I need
to talk to an accountant. I talk about it all
the time. That money I pay my accountant is the
best money I spend all year, hands down, sure, hands down.
At what point does someone in their financial journey need
to start saying, you know what, maybe it's time to itemize.
Speaker 2 (11:47):
Yeah, so that's a really good question. So, while we're
not CPAs, we understand taxes very very well. You know,
if you've got a family, you know, multiple kids, you've
got a home that you're paying mortgage insurance and taxes on.
If you contribute to charity, I mean so many different
things you probably don't even think about, like, oh, that
(12:07):
adds up real quick. That standard deduction all of a
sudden is getting smaller and smaller for me, So maybe
it makes sense to start talking with a CPA or
something of that sort. But not only that, it's not
even just about itemizing taxes or not. It's what kind
of forward looking can I do to help not only
set myself up for success right now, but in the future.
(12:30):
Right That's one of the biggest things that people just
don't think about, Mandy, is how can I set myself
up for success in the future right And that's when
you really probably ought to consider talking to a CPA.
Speaker 1 (12:42):
I when we first went to the CPA, genuinely thought
this is a waste of money, and then like, Nope,
that was not a waste of money because I did
him on one of the online tax things and he
came back and my tax burden was so much lower
because I don't know what's in the tax code. You know,
I have no idea he does. That's what you pay for, Mandy.
We have been working with a management company for a
(13:04):
while now and haven't seen much in the way of returns.
Can you ask your guest if there's a good way
to go about validating investment strategies, and if there's a
good way to get a second opinion.
Speaker 2 (13:14):
Yeah, second opinion, call us.
Speaker 1 (13:17):
I was gonna say, I was kind of locked in
that softball up for you.
Speaker 3 (13:20):
John.
Speaker 1 (13:20):
You don't knock that out, is it? I mean, I
have a certain level of paranoia about this stuff. How
often should you seek a second opinion or just in
the case of this texter who says, eh, you know,
we're not getting great returns, we'd like to have somebody
else look at it.
Speaker 2 (13:34):
I love this question more than anything because oftentimes when
we work with a money manager, it's only focused on
the investment piece, right, that's it. Typically you're going to
pay what one one and a half percent somewhere in
that range, which is very, very common. And I'm not
saying that's a horrible fee. But the problem is all
you're getting for that one to one and a half
percent fee is investment management.
Speaker 1 (13:57):
Right.
Speaker 2 (13:58):
I can go throw my money in the S and
five hundred index fund and be just fine for thirty
forty years, right, But what you really need to get
for that fee is not only the investment performance, but
you need to get an income plan.
Speaker 3 (14:13):
Out of that, you need to have a tax plan.
Speaker 2 (14:15):
Out of that, you need to have a healthcare plan,
you need to have a legacy plan. Those five things,
including the investment piece, that's what creates a financial plan
or a retirement plan. And too often we hear those
financial outfits out there. They're all they're focused on is
that investment piece and collecting their fee, and we have
a huge issue with that. And yeah, that's where you
(14:37):
collect the fees is from the investments. Totally get that right.
But if you don't have the other four areas complementing
that investment piece, then you might need to seek a
second opinion, which in this case sounds like it might
be necessary.
Speaker 1 (14:48):
Yeah, just call Retirement Planning Center of the Rockies. You
can find them online ourpcenter dot com. I love this.
I love this adage that a texture just set in.
The best time to plant a tree was twenty years ago,
the second best time is today.
Speaker 3 (15:02):
Yeah, I love it.
Speaker 1 (15:03):
I have always loved that saying because it's so good.
Best to do roth conversions when you are primarily in
the twelve percent tax bracket before you're advancing into one
of the higher brackets. Yeah, yeah, I don't remember the
last time I was in a twelve percent times bracket
to be and if I was, I sure didn't have
(15:24):
a wroth that I was or four to one k
I was looking to convert. So there you go, all right, Josh,
So let's give a checklist for people. What should they
be doing before the end of the year at the
very beginning of the next year. You know, we're all
kind of making goals for our new year at this point.
Financial goals should be a part of that. So what
do people need to do?
Speaker 2 (15:42):
Yeah, make sure we get those contributions in by the
end of the year. If you're of age, make sure
that you start the process on those requirements or required
minimum distributions like now, because if you missed that December
thirty first deadline of getting the money out, that penalty
will hit you.
Speaker 1 (15:59):
Yeah, so you got to do that. How long does
that take to get a required distributor?
Speaker 2 (16:03):
Depending on the type of account that your money's in, right,
it could take a week, it could take a few days.
We've seen them take two, three weeks the occasion, Yeah,
we've we've you really don't know, you really, you just
need to make sure that you can get it out
in time, So we tell all of our clients do
not contact us after December first if you can avoid it.
Speaker 1 (16:22):
Wow.
Speaker 2 (16:23):
That that's so we have enough roomke sure that we
get it out, no hiccups, no issues whatsoever.
Speaker 1 (16:30):
That to me sounds crazy, isn't it. It is crazy.
It takes that long, and you're gonna get penalized if
you don't get it done in time.
Speaker 3 (16:43):
Of course.
Speaker 1 (16:44):
Is that the financial services part? That is?
Speaker 2 (16:47):
Oh yeah, okay, okay, it depends on like I said,
depends on the account. If it's just in a bunch
of mutual fund stock, that's easy to get out. But
there's folks that have money in like annuities or other
other types of things that take a little bit of
time to get out. Okay, I want to just make
sure you cross your t's and dot your eyes get
it done early.
Speaker 1 (17:04):
What age is that again?
Speaker 3 (17:05):
Seventy three from most.
Speaker 1 (17:06):
Twenty three, So if you are seventy three this year,
you've got to take that minimum distribution and you probably
need to do it now. Okay, that's that thing. What
else do we need to do before the end of
the year.
Speaker 2 (17:16):
If you have like health savings accounts, this is not
something we really manage ourselves at Retirement Planning Center, but
we help folks advise because there's tax benefits obviously, sock
whatever money you can into those, that's going to be
to your advantage. And then you know, because we all
have medical costs that come up. Gosh, those are probably
(17:37):
some of the biggest.
Speaker 3 (17:38):
Really, they surround taxes.
Speaker 2 (17:40):
You're minimizing your taxes because other than that investment management,
there's no real changes you need to make better.
Speaker 1 (17:45):
If you want to talk about any of this stuff.
Because I got to tell you there's a few things
you just said. I was like, hmm, okay, I probably
need some help with that. I want to you can
talk to Josh and the team at Retirement Planning Center
of the Rockies. They do an incredible job. Find them
online at our piece and dot com.
Speaker 2 (18:01):
What's the phone number, Josh nine seven zero six six
three three two one one thirty two eleven.
Speaker 1 (18:08):
Josh, Permin and Joy, thank you for the great information.
Thank you man, really good information. That was very helpful.
I made myself a list as you were talking
Now it is coming up to the end of the year.
I don't know if you guys know this. I don't
know how it's already November twenty second, when it was
October thirty first, like fourteen minutes ago. Grant's still wearing
his costume from Halloween. I mean, you know, that's how.
It's just so close. But it is the end of
the year, and for a lot of people that means
it's time to kind of begin tax planning and stuff
like that. I thought it would be interesting to have
(00:21):
Josh coomeran from a retirement planning center of the Rockies,
come on to do a little nerdy financial talking about
the end of the year. Josh, welcome to the show.
Speaker 2 (00:28):
Thanks Mandy, and I love that you use the term
nerdy because we are nerds.
Speaker 1 (00:33):
Yeah it is, but you want nerds when you're having
someone help you with your finances. You don't want like,
you know, some wack a doodle someone. So let's talk
for a second. First of all, because this is a
question that has come up over and over and over again.
What does a new administration mean for people going forward?
I know, you put guys are probably getting these questions
(00:53):
because there's anytime, although there's a little bit of a
known quantity here. So does this kind of get easier
for you guys to answer that question?
Speaker 3 (01:00):
Well?
Speaker 2 (01:00):
Absolutely, and you're right, that is probably the biggest question
we're getting even more than a year planning type stuff
right now. There's a pretty large level of optimism surrounding
the markets going forward, as evidenced by immediately after Trump
was elected, right, the markets responded favorably, and you just
(01:23):
due to his own policy and things that he stands
for that bodes well for the market going forward. So
a lot of people have been asking us, well, do
I need to make changes? Do I need to get
more aggressive? Do I need to do X, Y or z?
And really, Mandy, the simplest answer that I can give
you is, don't go crazy making changes in your portfolio,
because when you're chasing the market, that's when you tend
(01:46):
to hurt yourself a little bit more.
Speaker 1 (01:47):
Right, Those for me feel like emotional decisions right when
you're chasing the market that is not based in rational analysis.
That is, oh my gosh, I'm afraid I'm going to
miss out on something if I don't do something.
Speaker 2 (01:58):
Now, Yeah, fomo is a real thing, and we talk
about it. You know, in the pop culture world, fomo
I want to be involved. The same applies to the market.
Don't try to chase everything that you can that you
think is going to be advantageous to your returns over
right the course of the next year or so, you know,
stick to your plan. That's what we're here for us
(02:19):
at Retirement Planning Center. We're focused on helping people stick
to a plan that they know is.
Speaker 3 (02:24):
Going to work right.
Speaker 2 (02:25):
That's whether it's a good market, whether it's a poor market,
it doesn't matter. You're going to stand the test of
time because you have a plan and you got a
steady plan one hundred percent. We call the Summit Retirement
Guide in our office.
Speaker 1 (02:37):
So at the end of the year, as people are
doing their tax planning, or maybe they're sort of looking
to see how they did year over year, maybe they're
maybe they're going to take some profits, maybe they're going
to do that. What are some of the things that
you need or you guys look at when it comes
to someone's age, like if someone's forty, what has to
happen at the end of the year versus someone who's
fifty five or sixty retirement, What do you guys recommend
(03:01):
in that.
Speaker 2 (03:01):
Respect, right, So, the name of the game as we
near the end of the year is tax planning.
Speaker 3 (03:06):
I mean, pure and simple.
Speaker 2 (03:08):
There's nothing you can really do from an investment standpoint
that's going to change the outcome between now and the
end of the year. So the thing that you can
control is what you do to help mitigate your tax
liability going forward. A lot of that can be done
by maxing out your contributions to retirement accounts.
Speaker 3 (03:24):
That's a big one.
Speaker 2 (03:25):
Obviously, seeing if there's any tax savings that can take place,
you know, through business expenses or other avenues, you know,
health savings accounts, whatever, you want to take advantage of
those so that you can lower your taxable income prior
to the end of the year.
Speaker 3 (03:40):
That's that's critical.
Speaker 2 (03:42):
It doesn't really matter how much you earn in your
investments if you don't get to keep any of it
because I'm doing that appropriate tax planning.
Speaker 1 (03:48):
Let's talk for a second about catching up the IRS
allows how much extra in contributions into a four oh
one K if you're over is.
Speaker 3 (03:56):
It fifty two or fifty five fifty fifty?
Speaker 2 (03:59):
Yes, So my partner jaris I'm going to give him
a shout out. I'm gonna throw himuner the bus. He
hit that old man age jump up this year to.
Speaker 1 (04:08):
Check the different box on the age. I just did that,
and it broke my heart all of a sudden. I'm
in the fifty five to sixty four group.
Speaker 3 (04:16):
What the hell?
Speaker 1 (04:17):
It's not cool?
Speaker 2 (04:18):
Right, It's kind of depressing, But in reality it's actually
a blessing too, because then you have an additional catchup
that you can throw into a four to one K.
Speaker 1 (04:27):
Right.
Speaker 2 (04:27):
For example, those under fifty can put up to twenty
three thousand dollars for the year in but because you're
over fifty, you have an additional I think it's like
seven seventy five hundred dollars eight thousands. Yeah, they're changing
it all the time. So you get an extra catchup
provision that allows you to put more into your four
to one K that helps lower that tax liability on
(04:48):
your touch and you can.
Speaker 1 (04:49):
Actually do that into next year. I don't know until
tax time is when you can make those contributions for
this year.
Speaker 2 (04:54):
Yes, and no, with a four to one K, it's
just a payroll deduction, right, so you can't catch up
that way. If you're using like an IRA, which you
have total control over. Now, the contribution limits are much
much less than IRA. Right, you can only put up
till like eight thousand dollars if you're over fifty into that.
So you can retroactively pay into that RA up until
(05:15):
April fifteenth of next year for the prior year's contributions.
Speaker 1 (05:20):
Okay, so we got the IRS catchups for people over fifty.
I've been reading a lot lately about minimum distributions and
roth IRA conversions. At what age do you need to
start worrying about we're thinking about those things. Let's start
with the required minimum distribution distribution.
Speaker 2 (05:40):
Yeah, for most folks, seventy three is going to be
the age where you have to start pulling money out
of your retirement accounts. That's whether you need the income
or not, right, And that's a hard pill for a
lot of people to swallow, especially if income's either strong
where you just don't need that additional income. But that's
something that you're gonna have to do. And at that
age it's about three point sixty five percent.
Speaker 1 (06:03):
So what is the logic that the government? Why is
that rule in place?
Speaker 2 (06:06):
Sure, So the agreement that we enter into with the
government when we contribute to retirement accounts is hey, I'm
going to let you defer those taxes for Ah.
Speaker 1 (06:18):
They just want the money.
Speaker 2 (06:19):
It's time for us to get ours essentially, you know.
And is there any sort of rhyme or reason to
the age, No, not really.
Speaker 3 (06:25):
That's just when the government deemed okay, you've.
Speaker 1 (06:28):
Had your money enough long enough, we want our cut, right.
That is just Isn't that just the most the most
excellent example of government just being a blood sucking vampire
on the American people, isn't it? Yeah?
Speaker 3 (06:43):
And can I make it worse?
Speaker 2 (06:44):
Oh?
Speaker 1 (06:44):
Yeah, exactly.
Speaker 2 (06:45):
So if if you don't pull out the whole require
minimum distribution that you're supposed to pull out, there's a
penalty of twenty five percent.
Speaker 1 (06:54):
Oh about, because they're going to get their money either way.
So oh my god, of the.
Speaker 3 (07:00):
Amount you should have but didn't. So there's no.
Speaker 1 (07:03):
Real way around this. Okay, So those alternative what if
people don't necessarily need that cash? Do they just reinvest it?
What happens there? So you're basically pulling it out, taking
the capital gains, and then just putting it back into
the market.
Speaker 2 (07:15):
Yeah, that's that's a way to look at it. Some
folks will do that a lot of people. What's interesting
is if they are more focused on creating like a legacy,
you know, leaving something behind, what they'll do is they'll
funnel that from their retirement accounts over to say, like
a life insurance policy.
Speaker 3 (07:31):
Okay, because what that's doing.
Speaker 2 (07:33):
Is that's, you know, not only funneling cash into a
life insurance policy, it's creating additional death benefit. A lot
of times there could be long term care benefits through
that life insurance policy. But really what they're doing is
they're turning a dollar into multiple dollars, right, so that
they can leave behind a legacy that's going to be
tax favorable to their errors.
Speaker 1 (07:51):
So let's talk about Speaking of tax favorable, let's talk
about roth conversions. When I first heard the phrase wroth conversion,
I had absolutely no idea what we were talking about
or why you would want to do this. Why would
someone First of all, what is a roth conversion? For
someone like me? I now know what it is, but
I'm just going to play the dummie on the radio
for you. What is that?
Speaker 3 (08:10):
Yeah?
Speaker 2 (08:10):
So this is a really cool strategy for a lot
of folks that maybe can't necessarily contribute to a roth
ira because there's a lot of people that are phased
out of income. But what a roth conversion essentially is
is you take money from either a four oh one
K or an ira and you convert that over to
a wroth while paying taxes on the amount that you
convert over to the wroth.
Speaker 1 (08:31):
What is that benefit?
Speaker 2 (08:32):
So what that does is that allows you to kind
of take control out of how much you're pulling out
of your retirement accounts in the first place, as opposed
to waiting all the way until R and D age
right told what you have to take out. But there's
a little bit of strategy, Mandy, where you know, we
try to help folks stay within that same tax bracket.
Speaker 1 (08:50):
Right, And we'll say, okay, so if you're still working
at a full capacity, it might not be the best
idea because then you'll just add that to your income
and it'll possibly push you into a different tax bracket.
Speaker 3 (08:59):
Correct. Yeah.
Speaker 2 (09:00):
Where we really find that sweet spot is is between
retirement and RMD age. So for some folks that might
be sixty five years old that they retire and they
have until seventy three before they have to start pulling out.
Speaker 3 (09:11):
So we've got an eight year window.
Speaker 2 (09:13):
Cool.
Speaker 1 (09:13):
Do you have a limit on how much you can
convert one year? No?
Speaker 2 (09:16):
If you have a million dollars and you want to
convert a million dollars, you know, if you'd have.
Speaker 3 (09:20):
To stick tax, I'd have to take a pretty heavy tax it.
So there's no limitation there.
Speaker 1 (09:24):
Now, you know, I want to This is going to
be a kind of a dumb question, but we have
a lot of people in our audience. They are like
late thirties, early forties, and maybe they're just socking money
into their four to one K and when they hear
you talking about you know what you guys do, they think, Oh,
you know, I'm either not ready for that, or you know,
I don't have a big enough portfolio, or I'm doing
(09:44):
just fine. I wish that I had engaged with someone
like you a lot earlier. I mean, oh my gosh,
cause I just I didn't know anything. And when you
don't know anything, you're just honestly, my first few four
to one K, like when I was you know, I
just I literally could have just thrown a dart against
the wall and just picked something. I've learned a lot
since then. Sure, But what do you say to the
(10:05):
people who are like, well, I'm not right for.
Speaker 3 (10:07):
This yet, you know, just start.
Speaker 2 (10:10):
I mean, really, the benefit that folks have is establishing
the habit, right, because when you get in the habit,
then it's all a sudden out of side, out of mind.
Speaker 1 (10:19):
It's meaning just shoveling money into savings instead of having
it come to your.
Speaker 2 (10:23):
Bank, right, absolutely, and then you know, over time you
can progressively, you know, increase that amount to really take
advantage of the benefits that you get for doing that.
But yeah, just start. I mean everybody always thinks, you know, Mandy,
I'm never going to reach you know, fifty sixty years old,
so far down the road. I don't even have to
worry about it. I got so much to worry about. Now,
(10:44):
just start the habit, even if it's fifty dollars a month.
Speaker 1 (10:47):
See, I was going to say, I was talking to
a friend and and she said, look, even if you
only have five dollars to save five dollars, you mentally
start that habit. And when that five dollars turns into
fifty dollars, turns into one hundred dollars, you begin to
realize how fast that snowballs, and it does. She was
specifically talking about creating that mentality. So for people that
(11:08):
are kind of working on the margins, you don't have
to save a million dollars every paycheck, but save something
because that is a muscle that has to be worked,
that savings muscle to make that happen. So when you
are talking about tax preparation and mitigating tax stuff like that,
that sounds very foreign to people who have been doing
a ten forty easy their entire life, the most basic
(11:29):
tax form. At what point in someone's financial life do
they need to go, you know what, maybe I need
to talk to an accountant. I talk about it all
the time. That money I pay my accountant is the
best money I spend all year, hands down, sure, hands down.
At what point does someone in their financial journey need
to start saying, you know what, maybe it's time to itemize.
Speaker 2 (11:47):
Yeah, so that's a really good question. So, while we're
not CPAs, we understand taxes very very well. You know,
if you've got a family, you know, multiple kids, you've
got a home that you're paying mortgage insurance and taxes on.
If you contribute to charity, I mean so many different
things you probably don't even think about, like, oh, that
(12:07):
adds up real quick. That standard deduction all of a
sudden is getting smaller and smaller for me, So maybe
it makes sense to start talking with a CPA or
something of that sort. But not only that, it's not
even just about itemizing taxes or not. It's what kind
of forward looking can I do to help not only
set myself up for success right now, but in the future.
(12:30):
Right That's one of the biggest things that people just
don't think about, Mandy, is how can I set myself
up for success in the future right And that's when
you really probably ought to consider talking to a CPA.
Speaker 1 (12:42):
I when we first went to the CPA, genuinely thought
this is a waste of money, and then like, Nope,
that was not a waste of money because I did
him on one of the online tax things and he
came back and my tax burden was so much lower
because I don't know what's in the tax code. You know,
I have no idea he does. That's what you pay for, Mandy.
We have been working with a management company for a
(13:04):
while now and haven't seen much in the way of returns.
Can you ask your guest if there's a good way
to go about validating investment strategies, and if there's a
good way to get a second opinion.
Speaker 2 (13:14):
Yeah, second opinion, call us.
Speaker 1 (13:17):
I was gonna say, I was kind of locked in
that softball up for you.
Speaker 3 (13:20):
John.
Speaker 1 (13:20):
You don't knock that out, is it? I mean, I
have a certain level of paranoia about this stuff. How
often should you seek a second opinion or just in
the case of this texter who says, eh, you know,
we're not getting great returns, we'd like to have somebody
else look at it.
Speaker 2 (13:34):
I love this question more than anything because oftentimes when
we work with a money manager, it's only focused on
the investment piece, right, that's it. Typically you're going to
pay what one one and a half percent somewhere in
that range, which is very, very common. And I'm not
saying that's a horrible fee. But the problem is all
you're getting for that one to one and a half
percent fee is investment management.
Speaker 1 (13:57):
Right.
Speaker 2 (13:58):
I can go throw my money in the S and
five hundred index fund and be just fine for thirty
forty years, right, But what you really need to get
for that fee is not only the investment performance, but
you need to get an income plan.
Speaker 3 (14:13):
Out of that, you need to have a tax plan.
Speaker 2 (14:15):
Out of that, you need to have a healthcare plan,
you need to have a legacy plan. Those five things,
including the investment piece, that's what creates a financial plan
or a retirement plan. And too often we hear those
financial outfits out there. They're all they're focused on is
that investment piece and collecting their fee, and we have
a huge issue with that. And yeah, that's where you
(14:37):
collect the fees is from the investments. Totally get that right.
But if you don't have the other four areas complementing
that investment piece, then you might need to seek a
second opinion, which in this case sounds like it might
be necessary.
Speaker 1 (14:48):
Yeah, just call Retirement Planning Center of the Rockies. You
can find them online ourpcenter dot com. I love this.
I love this adage that a texture just set in.
The best time to plant a tree was twenty years ago,
the second best time is today.
Speaker 3 (15:02):
Yeah, I love it.
Speaker 1 (15:03):
I have always loved that saying because it's so good.
Best to do roth conversions when you are primarily in
the twelve percent tax bracket before you're advancing into one
of the higher brackets. Yeah, yeah, I don't remember the
last time I was in a twelve percent times bracket
to be and if I was, I sure didn't have
(15:24):
a wroth that I was or four to one k
I was looking to convert. So there you go, all right, Josh,
So let's give a checklist for people. What should they
be doing before the end of the year at the
very beginning of the next year. You know, we're all
kind of making goals for our new year at this point.
Financial goals should be a part of that. So what
do people need to do?
Speaker 2 (15:42):
Yeah, make sure we get those contributions in by the
end of the year. If you're of age, make sure
that you start the process on those requirements or required
minimum distributions like now, because if you missed that December
thirty first deadline of getting the money out, that penalty
will hit you.
Speaker 1 (15:59):
Yeah, so you got to do that. How long does
that take to get a required distributor?
Speaker 2 (16:03):
Depending on the type of account that your money's in, right,
it could take a week, it could take a few days.
We've seen them take two, three weeks the occasion, Yeah,
we've we've you really don't know, you really, you just
need to make sure that you can get it out
in time, So we tell all of our clients do
not contact us after December first if you can avoid it.
Speaker 1 (16:22):
Wow.
Speaker 2 (16:23):
That that's so we have enough roomke sure that we
get it out, no hiccups, no issues whatsoever.
Speaker 1 (16:30):
That to me sounds crazy, isn't it. It is crazy.
It takes that long, and you're gonna get penalized if
you don't get it done in time.
Speaker 3 (16:43):
Of course.
Speaker 1 (16:44):
Is that the financial services part? That is?
Speaker 2 (16:47):
Oh yeah, okay, okay, it depends on like I said,
depends on the account. If it's just in a bunch
of mutual fund stock, that's easy to get out. But
there's folks that have money in like annuities or other
other types of things that take a little bit of
time to get out. Okay, I want to just make
sure you cross your t's and dot your eyes get
it done early.
Speaker 1 (17:04):
What age is that again?
Speaker 3 (17:05):
Seventy three from most.
Speaker 1 (17:06):
Twenty three, So if you are seventy three this year,
you've got to take that minimum distribution and you probably
need to do it now. Okay, that's that thing. What
else do we need to do before the end of
the year.
Speaker 2 (17:16):
If you have like health savings accounts, this is not
something we really manage ourselves at Retirement Planning Center, but
we help folks advise because there's tax benefits obviously, sock
whatever money you can into those, that's going to be
to your advantage. And then you know, because we all
have medical costs that come up. Gosh, those are probably
(17:37):
some of the biggest.
Speaker 3 (17:38):
Really, they surround taxes.
Speaker 2 (17:40):
You're minimizing your taxes because other than that investment management,
there's no real changes you need to make better.
Speaker 1 (17:45):
If you want to talk about any of this stuff.
Because I got to tell you there's a few things
you just said. I was like, hmm, okay, I probably
need some help with that. I want to you can
talk to Josh and the team at Retirement Planning Center
of the Rockies. They do an incredible job. Find them
online at our piece and dot com.
Speaker 2 (18:01):
What's the phone number, Josh nine seven zero six six
three three two one one thirty two eleven.
Speaker 1 (18:08):
Josh, Permin and Joy, thank you for the great information.
Thank you man, really good information. That was very helpful.
I made myself a list as you were talking
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