Retirement Realities: Year-End Taxes

Mark Oberlin joins us to discuss year-end tax decisions - a big series of questions for retirees. 

Episode Transcript

Speaker 1 (00:00):
Whether you're just dreaming about someday retiring, or you're there
and you want to do it better. Our friend Mark
Oberlin has been taking notes. We call it retirement realities.

Speaker 2 (00:11):
Mark.

Speaker 1 (00:11):
Thanks again for doing this today.

Speaker 2 (00:13):
Good morning, guys.

Speaker 1 (00:15):
So we're three weeks away from year end. I can't
believe this. Are there still some things like you can
do to save tax dollars? Let's start there.

Speaker 2 (00:25):
Absolutely. In fact, there's a ton of things you can do.
The clock is ticking, however, so you want to make
sure and start asking your tax account and your financial
advisor or do your own research. But tax block harvesting
is one of the most popular things. This is where
you have an investment that has declined in value. Yes,

(00:45):
even during a bull market like we're having, there are
some losers. So if you've harvested some gains throughout the year,
you can use your losers to offset them. So basically,
dollar per dollar, you want to cut it as a
rectively harvest as you can. But there's also this thing
called tax profit harvesting, not as popular. This is where, hey,

(01:08):
let's say you bought Apple at two hundred bucks and
it's three hundred bucks and you want to take some profits.
It's like, hey, that's that's kind of crazy, right, I
want to hold Apple for a longer term. Well, you
can sell it and take a gain and buy it
right back the next minute. With tax loss harvesting, you
have to wait thirty one days to re establish. So

(01:30):
why would you do this? The capital gains rate for
people making under ninety seven thousand dollars that's a lot
of people. Your capital gains rate is zero. So rather,
let's say Apple doubles from here. If you sell it
some future year, you might be over that limit, So
take some profits.

Speaker 1 (01:50):
Now, Wow, I had no idea. I had no idea either.
How about this one, mark. There's a lot of chatter
these days about wroth conversions. Take us through what that
is and how it makes sense or maybe doesn't make sense.

Speaker 2 (02:04):
Yeah, let's make up a number five hundred thousand dollars.
Your IRA that you put into over the years religiously
used to be a four to oh one k. Now
on ira you want to or get convinced to, Let's
say convert a quarter million, two hundred and fifty of
that into a roth ira because the future gains will

(02:24):
be tax free to either you or your beneficiaries. So
you're going to pay tax on that two hundred and
fifty thousand dollars gain, and you know, yes, it's going
to make a tax free going forward, but you also
might be nailed with some Medicare premium surcharges. It's called
the Ierma penalty. So you need to carefully consider large

(02:48):
wroth conversions. Again, they're highly hyped. I personally am not
a big believer in it. I don't want to pay
the federal government any tax any earlier than I have to.
And a lot of people say, I want to pay
my taxes so my kids don't have to. I you know,
that's my kids problem. Frankly, I earn this money. Let's
them pay the taxes when I croak. So these are

(03:10):
some of the things that people tell us that, yeah,
I just want to do these conversions. Now, it's like,
what's to say the federal government doesn't come back against
larger deposits and instante a wealth tax or a thurve tax.
So you have to think that there might be something
out there that's going to bite you that you didn't

(03:31):
even think of.

Speaker 1 (03:32):
What about charitable contributions among retirings still very popular?

Speaker 2 (03:36):
How come you know. Let me ask you a question,
would you rather have a million dollars or ten kids?
And the answer is a million dollars in you don't
have enough, you know kids is you know you don't
need any more kids. But you can certainly use that money.
But at some point in your life you have enough.
You just know there's enough in there to take care

(03:57):
of you in your spouse. So retire reasonable to donate
highly appreciated stocks like and Video or any other tech stocks.
You can use a qualified charitable distribution from your IRA,
so if you're seventy and a half, you can donate
one hundred and eight thousand dollars every year to your
favorite charity, church, United Way Blood Bank, whatever you want

(04:21):
to do. So these are things that don't pitch your
tax return. They just are going to be gifting that
money to a charity.

Speaker 1 (04:29):
We call the segment retirement realities. Mark Overlin is living
out there in the wild wild West of retirement. Thanks
for your time and reflections today, having Merry Christmas, guys,
and to you thus absolutely