Transcript:

Welcome to the Life Unlimited Podcast with Larry Heller. You deserve complete financial advice so you can confidently live your life your way. For life. Now, let’s get into this week’s podcast episode. 

Matt: Hello, and welcome to another Life Unlimited podcast with your host, Larry Heller. Today, Larry and I are going to talk about the 10 savings and tax planning tips to implement before year end.

Now we’re going to talk about three separate categories. We’re going to be talking about savings, IRA, and then overall taxes. Now, Larry, you’ve talked about this in other episodes before where do we begin? 

Larry: Yeah. So, as we’re getting closer to year end, that time is coming again. 2024 is almost upon us, but 2023, we still have some time here.

So, I thought I would throw out, you know, 10 tips here. Not everyone is going to benefit by each one, but there’s some good nuggets in here and ways of saving money or saving for your [00:01:00] future that if you let this time go and you miss the deadline, it’s gone forever. So, so you still have a few months to implement them.

So I figured now is as good as any time to let’s talk about them again. Beautiful. All right. Well, let’s start with savings. What is the number one thing that you can do or number one on your top 10 list of what you can do with savings? Okay. So savings. So one is really for as an individual savings is to maximize that your annual.

savings in your retirement plan. So, so if you’re an employee and you have a 401k and listen, I know sometimes for people out there, the, the life gets in the way but putting away more money for retirement is only going to make it easier. So, last year. Based upon inflation factors, they increase what you can save for this year.

So if you’re over 50, you can save over 30, you can save 30, 000 in your retirement plan, 22, [00:02:00] 500. If you’re under under 50, but if you’re 50 and above, you get a catch up for 7, 500, so you can maximize that amount to 30, 000. So, and if you can’t max that a lot of the 401k plans have company matching.

And there are so many times that, you know, even young people, but even older people, they give up that free money by not putting away at least what the company is matching. So look at your plan. Make sure that if you’re at least getting the match and try to hit the maximum savings that you can do and if, depending upon what kind of plan you have, then maybe other ways of of saving as well.

So that’s, that’s item number one, item number. Two, it’s also saving for retirement, but now if you’re a business, so now you have a couple of, of ways of saving maybe even more money in than your 401k plan. And there is a new law that came into play. [00:03:00] So previously you could only put a retirement plan in place.

Up until December 31st, but now this is kind of a little tip, but you do have a little bit more of a timeframe here. You can put a retirement plan in place up until you file your tax return. So if you hearing me right for 2023, you can wait until you file your corporate tax return all the way until October in 2024 and put a plan in place retroactive for 2020 retroactive for 2023.

So, so even if you’re not sure how much you can do, start thinking about that and doing that. And you may even want to look at a different plan. Maybe you’re doing a simple IRA plan and you’re better with a 401k plan. Now, if you’re going to put a 401k plan in place, you can only do the employee deferral portion of that through the end of the year.

But the employer part you can do next year. And maybe you’re having a great year. You [00:04:00] think you’re going to have a great year and you want to do more than the limits. And you can do what’s called a cash balance plan and maybe say sock away a couple of hundred thousand hours a year. You can check out our podcast on the cash balance, but a lot of these.

Tips that I’m talking about there. We’ve done separate podcasts on them alone. So that’s the number one, number two tips for saving before the end of the year. And I thank you for breaking that down between individual and business, because it’s really important that a lot of people can take advantage of both of them.

And a lot of people, especially don’t take care of those cash balance plans. And we’ll make sure that we have a link to that previous episode. In the show notes. All right. So that is, that is the category one and two under savings. Now we’re at number three and now we’re into IRAs. Yeah. So there’s so much when you’re looking at I at IRAs.

So the, you know, the first thing is, you know, if you’re contributing and this is actually the first one is really. Either IRA or 401k, but should you be doing a Roth or you [00:05:00] should be doing a regular contribution? So we talked about the maxing limits, but what’s the right one for you? And maybe you’ve been contributing to the regular one for the year, but there was a change in your income.

And maybe now you want to switch. To your Roth, or maybe you’re doing the Roth and you want to switch to the regular. So look and see which is the best way bending upon your tax deduction. If, if not reach out to someone, reach out to your account, try to figure that out and make sure that you’re saving in the right type of IRA or 401k plan for you.

So that’s the first thing. The second is some of the IRA little quirks that you can do, um, one is called the backdoor Roth. The other one is Roth conversions. Again, both of these are important to do are the Roth conversions that you’re doing for the, uh, possibly could save you money now by lowering, save you money in the future by lowering your taxes later on, even though [00:06:00] you’re paying paying them out again we’ve done a podcast about this, Matt, maybe we’ll even do another one before the end of the year, but look at the numbers now do the planning now, because after the end of the year, it’s too late to go back and do any Roth conversions.

I’m going to pause you there because hold on, I want to pause you there for two reasons. Number one, this is one of the reasons why it’s so important for you to subscribe to the podcast because when you subscribe to the podcast, then you can go back and listen to these previous episodes as we continue to move forward and reflecting back on other ones.

But the other thing that’s really important is. Making sure that your financial services professional understands these things, right? Making sure that if you’re sitting down with somebody outside of Heller wealth management, that you ask them these questions and they need to be knowledgeable on all of the things that we’ve talked about, and we haven’t even gotten into five, six, seven, eight, nine, 10.

So I’m sorry, Larry. I just wanted to jump in there and now we’re on number five. Yes. So number five, this has to do with inherited IRAs. So, the inherited IRAs rules have changed [00:07:00] last year. So many of you are aware of previously, if you had an inherited IRA, you were able to take what’s called your required minimum distribution based upon a combination of theirs and your required minimum age of distribution.

That’s no that’s gone. But if you did have an IRA from someone who passed away previously, you still have to take a required minimum distribution by the end of the year. So don’t forget to do that. But let’s talk about really the new 10 year rule. And this is where there’s still some fusion with the government.

And of course they now just. kick this down the road. But there’s also a lot of planning that needs to be done here. So with a few exceptions, if you inherited an IRA from, uh, from a loved one, you need to take out the balance of the entire amount within 10 years. You could take it out a little each year.

You could wait to year 10, but you need to take it out within 10 years. And [00:08:00] there’s the, here’s where the confusion is, is there’s some ambiguity on whether you have to take a required minimum distribution out each year. So the IRS has actually been punting on this. So they’re saying yes, but they’re not sure.

So we’ve had three years of this and you didn’t have to take the requirement and distribution out each of the three years. And now hopefully in 2024, we’ll get some clarification whether you have to take a requirement distribution, where you have to go back. And take the retroactive ones that you haven’t taken.

But now is still the time to plan. So even though you don’t have to take the requirement of distribution, maybe you want to take a little bit out this year, rather than waiting to year 10. The reason why is depending upon how much it is, could kick you up into a higher tax bracket. So you want to look and see what brackets you are.

And if. Taking it all at one time, time, you may end up deferring this, but paying a lot more in [00:09:00] taxes with it at taking each year. And we all love our CPAs, but they’re not mostly proactively looking at this. So you want to look at this and you want to do some projections and you want to do some plannings and you want to reach out to a professional to help you with this.

You’re really going through this quickly, man. I want to make sure everybody understands. And one of the reasons why Larry is able to go ahead and do this and be so clear and succinct is because of all of the experience he brings to the table. All right, Larry, uh, anything before we get rolling on six, seven and eight?

Yeah. So before we get to tips five, six, six, seven, eight, nine, and 10 here is a special offer to our listeners out there.

MIDROLL

 and now back to our podcast. All right. So now we are on to taxes. So we just talked about savings. We just talked about IRAs and the different kinds and really the complexity of all of that.

And now we’re going to talk about taxes, Larry number six. So number six is bunching the [00:10:00] deductions. So a few years ago, they, they raised the. Standard deduction for individuals and for married couples. So for married couples in 2023, it’s 27, 700. So until you reach 27, 700, of itemized deductibles, such as your mortgage interest or charitable deductions, or there is some exceptions with some lower child deductions, but property taxes and medical deductions, you get, you can’t.

Use them because the government’s already given you 27, 700. However, what you may want to start to look at is that you get close to the end of the year. Are there some deductions that I can maybe push you off to next year when I know I’m going to have higher deductions? Or are there some that I can do before the end of the year, because this is a year that my [00:11:00] deductions, my itemized deductions were higher, making that limit above the 27, 700.

So looking at all that and doing some planning and doing the timing on this. So you don’t, you don’t lose it is important. Like if you do certain child deductions each year, maybe you’re better off. Instead of doing it December 31st, do it January 2nd of this year. And then next year, do December 31st.

You got both of them in that one year, which will push you over, could push you over the limit. So looking at your deductions before the end of the year and see if you can bunch them together is number six. Number seven would kind of goes along those lines, but even takes it. further is a donor advised fund.

So here’s a way of maybe doing multiple years of deductions all at once, but you don’t have to distribute it to the charities all at once. Uh, so if you, if you’re [00:12:00] charitable and inclined, and let’s say you want to do, Um, the net in next five years, you’re going to do 2, 000 a year. I’m just picking a number out.

You may be better off from a tax purposes to funding that in 10, 001 year getting a tax deduction and then distributing that amount to the charities over the next five years. And while it’s in a fund the, that amount can actually grow. So between the tax savings and the amount that’s growing, you may actually be able to give more to charity by doing something like that.

So a donor advised fund is number seven. I’m sorry, I need to pause you because I don’t know if you said this. I’m sorry if I missed it, but when it comes to overall charitable deductions, is there a limit on the charitable deductions annually that you can give without getting in trouble for lack of a better description?

Yeah, there, there, there are, there are different limits for different. types of charitable deductions depending upon if it’s clothing [00:13:00] or property. So there are different limits. So be careful about, you know, about, about those. And there are, I don’t know if off the top of my head, but there, there is some number amount that you can do without itemized induction.

So, cause the government wants to encourage people to, to do charity. I don’t know the number of the top of my head. Well, in very quickly, the donor advised fund is, is that really complicated to get set up? No, the donor advice fund is really simple. It’s really just like you’re opening up any other forms, a couple, you know, more pieces of paperwork that you, you open up and you have your own little chat, little charity.

We’ve had clients do this. It’s a great thing to do with your kids towards the end of the year and you get your kids involved and actually selecting the charities. So it could be a great thing. Family exercise that that could be done as well. And each year the kids help and decide which charities, multiple charities to do.

But it’s really simple to, uh, to, to set [00:14:00] up and to, uh, to implement. Wonderful. All right. Number eight. Now this one we had probably do, and you might’ve already done an entire podcast on this one, but let’s talk about number eight. Yeah. Number eight. I’m, now that we’re up to, I think this is like 138.

I’m sure we did one on tax laws, harvesting somewhere along the lines, but so this one, at least this year we’re having, you know, pretty much of a, of an up year. But that doesn’t mean that every one of your investments have gone, have gone up. So there’s great ways of looking at this and being able to still stay fully invested by, but also getting a tax deduction.

So, um, let’s just do a, a really simple example. You own X, Y, Z fund and X, Y, Z fund is down. Um, from a cost basis and you’re down 10, 000. And if you do nothing, you don’t get any deduction, but what you can do is you [00:15:00] can sell that fund and get a 10, 000 tax deduction while 10, 000 credit, uh, again, against any gains.

But. But now you’re going to say, well, but I want to still be invested. So you can buy what’s called a similar fund. You can’t buy the exact fund. And then after 30 days, you can sell that fund and go back to your original fund. The 30 days is to avoid what’s called the wash sale rules. So what in fact have, have you’ve done, you’ve stayed with the.

The similar investment, but you’ve now have 10, 000 losses, which you can use on your taxes. And maybe you can save 2, 000 on your taxes. So, so looking at that and figuring out what the tax laws harvesting is, and even if you can offset those against any gains that you have this year, you can carry them forward in the future.

So there are some years when there are big down years that you may be able to put these in a. And [00:16:00] actually get the tax deductions without being out of the market. Gotcha. All right. So the last one is something that I know a lot of people forget to do. I’m sorry. Number nine, number nine is one of the things that people forget to do all the time.

So let’s talk about that one. Yeah. So if you work for a company and they have a flexible savings account, that is. set up for certain of your deductible, pre deductible numbers. You have to use them by the end of the year, whether it’s for healthcare or childcare or whatever it was, whatever it’s for.

So people do this the beginning of the year and then they forget to use it or they don’t use it. So look at your flexible savings account and make sure that you spend whatever you have in there before the end of the year. All right. Yeah, it makes it so. So I thank you for being specific that there are different kinds of FSAs and make sure that you are depleting all of those to make sure that you don’t lose that benefit.

All right, [00:17:00] number 10 number 10. So. You know, everyone knows about what most people know about 529 plans and the advantages of doing a 529 plan from a savings for the children’s education. But one little kind of nugget here, and it depends upon which state that you live in, but New York, I’m going to use New York state, for example if you have a child that’s going to go into school, let’s say you’ve even depleted the 529 plans, or you’re not adding to the 529 plan this year.

Cause you, you’re going to have enough money. But one way of doing this is before the end of the year contribute. And the max you can do in New York to get a deduction, contribute 10, 000 to your plan by December 31st. And then in January, when you have to pay next, next semesters tuition, pull it right back out and send it to the college.

So what have you done? You can actually put it in December 31st. Pay the bill on January 2nd, but now by doing this, you have a 10, [00:18:00] 000 New York state deduction, which in the top tax bracket could be 800 just by putting money in and taking money, taking money out, totally legal, totally what you can do and take advantage of that, that savings.

Anything else? So as we’ve been going through this, one of the fun things about being interviewed by somebody is you’re like, Oh my gosh, I probably should have talked about that. Anything else that you want to add about these 10 savings and tax planning tips to implement before the end of the year? Yeah, so I mean, there are others, but these are the 10 that, uh, that I came up with you know, all I can say is spend a few, you know, a few hours going through thinking of these thinking of the, uh, any of the others and they all add up and they all have significant money when you put them all together.

And if you wait until January 1st. Guess what? They’re gone. Yeah. So, and if you have not met with your tax professional or your financial planner, please make sure that you do that for the end of the year. All right, Larry we’ll go ahead and wrap up today’s episode if that’s okay with you. [00:19:00] Absolutely.

All right, everybody, here’s the thing. So it’s a couple of quick things. Number one this is a great podcast for you to share with your friends and family because people need to know these things and it’s a wonderful way for you to get. them introduced to Heller Wealth Management and also the thought leadership that Larry does.

And more importantly, if you want to take a moment and forward hellerwealthmanagement. com, but also get your free financial resilience score, you really need to do this. It’s super fast. It has this wonderful output on the backend to really find out where you are today and potentially where you’re going to be in the future.

So for Larry and all of us here at Heller Wealth Management, this is Matt Halloran, and we’ll see on the other side of the mic very soon