Let's Talk Money

Good morning. This is Nicole Cobo here with you on this lovely morning in the Capital region. We do have some chili temperatures this morning, but looks like it will be warming up and so lovely to see the sun as we haven't been seeing it much recently. I'm here with you this morning filling in for Steve Bouchet. I'm one of the wealth advisors director of financial Planning at the firm. I'm a certified public accountant and certified divorce financial analysts. And

with me this morning is my colleague Vinnie Testa. You want to say hi, Vinnie. All right, thanks Nicole, thanks for having me on. I'm also one of the wealth advisors here at the firm. I'm also a certified public account like Nicole, and I'm also a certified financial planner, So Nicole and I really specialized in tax planning here at the firm as well as financial planning. So you know, it's tax season, so if there's any tax questions, feel free to call in at eight w g Y. It's

eight hundred Talk WGY. Thanks Vinny, and you know our colleague John Malay, our CFO and COO, hosted yesterday and I loved how he had started the show and basically said, hey, if you you know, came out of your whole Friday morning, you might have thought that nothing had happened, given where the markets ended up, But really we had a lot going on last week. So for those of you who did tune in yesterday, we'll do a quick recap of the market week, but we, as Vinnie said,

have a lot more content. So Vinnie, do you want to start out with just kind of you know, how we ended the week in the

markets? Yeah, I mean, you know, the two things that I think are worth noting are you know, the Dow Jones and the S and P five hundred both closed at record highs, so you're to date, I mean, the Dow Jones is up two point six percent, in S and P five hundreds of four percent, so for the week, they're both up one point four percent, So you know, it's really something worth noting obviously

that we're hitting record highs in those two indices. You know this this week ending on Friday, the Nasdaq was up four point one percent year to date so far, and then for the week there it was up one point one percent. The N S C I E, A F E which is you know, uh, into see that tracks developed markets in Europe, Australia, all of those international you're developing markets overseas. Uh. You know, it's down zero point two percent year to date through Thursday, and for the week

it's up point four percent. So that's definitely something worth noting that you could see the international you know, the US indices are outperforming international so far you're to date, thanks Fanny. And you know, again, as Steve often talks about on the show, right now, we're not invested directly in international. Of course, we have you know, exposure to international revenues certainly through all the US megacap names, but you know, we've continued to see just

the US economy and financial markets be much stronger than international. So while we're not saying we'll never go back in to those markets, because they're certainly buying opportunities, you know, from our perspective, we're just more comfortable sticking to

the US. You know, there was a lot of volatility also in treasury markets, so you know, again again it ended basically the ten year treasury yield down point one percent on the week, up about one percent year to date, and the bond index right, that tracks the price versus the yield of bonds. You know, ended the week up aboutero point four percent,

which is all that it's gained this year. So you know, again you wouldn't think that much had happened based on the end results, but certainly there was three big things that you know, John talked about yesterday and Ryan sent out a newsletter to our clients on Friday, you know. So the first was the FED meeting, uh. The second was some really big earnings releases, you know, big company, and the third was the jobs report on

Friday. So you know, Vinnie, do you want to just do a quick quick recap of the FED meeting and kind of you know, the the rate and kind of what happens through the talking points there. Yeah. Absolutely, So you know, Jerome Powell spoke this week, you know, and then came to the conclusion that rates are going to remain unchanged. You know,

March twentieth rate cut is highly unlikely. But now I wouldn't say highly unlikely, but it's unlikely, you know, but at some point this year, you know, they could lower rates depending you know, the direction in which the economy goes. I mean, the economy is still strong. Obviously, that Job's report came out, we you know, added double the amount

of jobs which was expected. You know, we had three hundred and fifty three thousand jobs added in January when analysts were only expecting one hundred and eighty thousand jobs added. So you know, that's pretty alarming, you know, but it is a testament, you know, showing that the economy is still very strong. So so you know, even in this higher rate environment, with the economy being as strong as it is, that's really the you know,

reasoning behind why rates are going to remain unchanged. I mean, you know, why lower rates would the economy booming as it is and so many jobs being added, So that was really you know, the reasoning behind you know, rates remaining unchanged. Thanks Finny. Yeah, and you know that Job's report came out Friday, but I think you know, leading up to this, it was really exactly as Vinnie said, the you know, the

economy remained strong. And you know, one of the points that Ryan made in our State of the Economy presentation that will be posted on our website shortly is, you know, a FED pause is a great time to be invested in both the stock and the bond markets, right, So you know, while we do, as Vinnie said, anticipate rate cuts at some point later

this year. After that Job's report came out on Friday, the likelihood or the probability from kind of consensus estimates drop to about seventeen and a half percent. And again that's something that changes daily that the predictions. But you know, again coming into the year, certainly there was a much higher probability from US analysts out there that we would see an early rate cut, you know.

So that's one thing certainly with the Fed. Now again the hawkish as it's put language out of the Fed saying, hey, we're you know, we're saying things are strong and we're not necessarily going to do anything near term. We don't necessarily feel that's a bad thing because, as Vinnie said, really the Job's report showed us that, you know, again more than double

the jobs. Also, as John mentioned yesterday, the December number was revised from about two hundred sixteen thousand jobs added to three hundred and thirty three,

so the the prior month's number was also updated to add more jobs. Unemployment also remained unchanged, so really all these jobs are actually additions to the workforce, which that was something also, you know, Ryan pointed out with our level of comfort with the US economy compared to internationalis all these other developed countries, in addition to China, their workforce in the you know, kind of prime workforce range of age twenty six to fifty four is going to be declining,

whereas the US is workforce, right is increasing. So that's something again we feel strongly about is you know, we we do have more people that are potentially coming into the labor force or back into the labor force, which we love to see. So, Vinnie, do you want to maybe talk a little bit about just some of the big tech earnings that happened this week and uh, you know, because that was certainly a big move middle of

the week. Yeah, absolutely, so, Apple, Amazon, and Facebook or Meta you know, reported earnings this week and you know, some pretty significant changes, you know, really for Facebook, right, so Facebook announce that they're going to start paying a dividend for the first time. Fifty cents on the dollar is a dividend they're gonna start issuing. So you know, that's really a testament. So for so many years, these tech companies,

they were more growth oriented right. And you know investors were you know, investing in these companies because you know the expectation that they have rapid growth or exponential growth over the course of time, right, So you know you're paying a premium for future performance of these companies, right because the growth potential was

so significant. So now you know, Facebook's issuing a dividends, so you know, that's sort of kind of shifting to that value aspect you know of a company, right, So you're going from growth to value potentially, you know, you could have certain companies that could be considered you know, growth and value stocks, right, and that's sort of what Apple is meant for

a long time. But now you start to see that, you know, Facebook is now issuing this capture some income there and they're paying you know that they're paying it forward to their investors now, right, They're starting to receive that dividend and get a piece of the profits you know, at that metas

or Facebook has generated over so many years. So you know, this could start to be a pretty significant shift for these tech companies if you know, the other ones follow suit and eventually they can become value companies at a certain point. Apple reported early again Nicole. No, I was gonna say, great point, Vinnie, and I know you know John mentioned that yesterday. But you know, certainly something that our colleagues have talked about of Apple,

just that shift. And these are not the you know, tech companies of the early two thousands that you know, these companies have significant profits and earnings and that's what we love to see. And you know, they fit into that high profitability and quality factor in a lot of cases that Ryan talks about as part of our investment for a lot the faith. Yep, yes, it's so, you know, just like I was talking about Apple. Apple also reported earnings, so they beat revenue for the first time in a year.

But the outlook for iPhones in China is affecting their stock price, right, So, you know, Meta and Amazon had a pretty good week, but Apple kind of stayed relatively flat. You know, they beat revenue. Yeah, that's great and all, but you know, the iPhone demand is really starting to you know, affect the stock price. Well, not in a negative way, but you know it's not growing as fast obviously as investors would expect it to be. Uh In Amazon also reported earnings and they and

they beat estimates as well. So it's it was a decent week for for the magnificance. Well three of the companies in the magnificant magnificent seven, so you know, every you know, they're all doing well. But Apple just you know, the stock price isn't moving as much as you know investors would like it to be. Perfect. So we'll take a quick break, but we want to remind the listeners out there, I'd love to hear from you. Eight hundred eight two five five nine four nine. Welcome back, and

thank you for staying with us through the break. This is Nicole Goebel, director of financial Planning here at Bouchet Financial Group, along with my colleague Vinnie Testa. So again we'd love to hear from the listening audience if there's anything that we can assist with planning, taxes, anything on investments. As Vinnie said, we're both CPAs, so this is tax time and we'll certainly be

getting into some of that later today. The other company I wanted to talk a little bit about that was in the news this week, and John did mention it last week. But we want to make sure always that we're educating our listeners and our clients, and you know, we're not allowing them to just be put off by some of the headlines as New York Community Bank.

And so you know, again we talked a lot about Silicon Valley Bank last year, and really, you know, the issues that came about when we saw such a steep increase in rates and these banks had long dated, right, so treasuries that weren't going to mature in the long term and had locked in pretty low rates for their own investment portfolio. And again, a bank has certain requirements that you know, they have to invest your money in something

very safe, so treasuries are a great option there. But when treasury rates started increasing so dramatically and certainly deposit rates, right there was kind of a run on that bank. And it was a very unique situation for a number

of reasons, but it is something that could have affected other banks. So the government put some programs in place now to avoid that New York Community Bank it's kind of a bit of a different story, right, So they actually purchased a lot of the assets of Signature Bank, which was one of the banks who was also in trouble due to long data treasuries last year, and right now they're writing off some mamercial real estate loans and that is, you

know, taking a hit to their dividends. But this is because now they're held to different standards as a larger bank with one hundred billion. So just wanted to give some clarification there. Now we have Tom from CHOI on the line. Tom, what can we help you with? Good morning, Thanks for your show, it's really enjoyable. My wife and I are. My wife and I are considering either gifting or loaning our daughter and her family a

couple hundred thousand to help them buy a house for cash. We're leaning towards gifting it to them because of what we think is the simpler way of going. Because I think, and you can you can tell me if this is right. I think we only have to do a gift a Federal Gift Act return if we gift them the money and have that reduce our exemption. And we only have to do that one time we gift, versus loaning them the money and having to go through a loan pay payback and reporting every year.

And so I wanted your opinion. Sure, so you know you are correct, absolutely absolutely, and you know what we work with many of our clients who do the same and in some cases they're buying their family home from their parents, right, is what we see sometimes too, And so the question is, you know, what do we do? So you know, as you mentioned, so there is the gifting limit which each you and your wife

can gift eighteen thousand dollars to any one person per year. So that means that technically, you know, you could gift them, you know, eighteen thousand dollars each, and you can give now is your you said your daughter is married, yes, okay, right, so so really technically you can give them seventy two thousand dollars before you have any any gift tax return requirements, write anything above the seventy two thousand dollars, because you could each gift

the eighteen to each of them. What I would say is, you know it's a gift tax return right that you file as you said, it just comes off your lifetime gift in a state exemption. So it's just tracking it to ensure people aren't giving away millions of dollars to avoid an estate tax later on. So it's not a difficult process. The loan, you know, there's not necessarily specific requirements, right, what you would look at is there's

certain minimum rates that you have to have them pay you back at. But you know, what I've often seen people do is, you know, basically you kind of set up that loan, but then they gift in subsequent years for the payments to come back to them. Right, So the gift, there's reporting required if you do a loan, correct, not necessarily who your recording. Well, I've let your daughter. I mean, you just report it on your tax return time or there might be a reporting requirement for a

ten ninety nine for the interest income. Yeah, that's what. Yeah, that's why I'm saying gifting outright would be probably the simpler method as far as going forward with any reporting requirements. Correct, that's correct, it's one time. I guess what I'm saying is is it's up to you. You know. Also from the perspective, now, what I would ask kind of upfront though, is why are they intending to buy a house in cash? We know mortgage rates have gone up, but you know, again we certainly feel

that that's the good type of debt to have to build credit. Yeah, they're planning on moving and they don't want to tie the purchase of a new home to the sale of their existing home. So this is almost like an intermediate step towards the purchase and sale of their existing house. Okay, they're moving out of they're moving out of state, got it, got it? So they know the market and the market is easier for a person or or

a family with cash versus waiting for a loan. Understood. And so since it's only a temporary requirement, then you're intending to would you be intending to receive that gift back, because then it's really not a gift. And again then honestly, a short term loan might make more sense because your interest you know, on that again at the kind of minimum requirement might not even you know, get to a reporting requirement level. Yeah yeah, yeah, okay,

yeah yeah. And you know, we haven't crossed that bridge, okay. And as far as as far as whether it's going to be just an outright gift and that's the end of it, or there's going to be a payback, okay, we And do you have this cash sitting on the sidelines, because again, you know, it's taking something that could be growing and it's becoming available. We were we're we have it in a money market earning you know, for four percent plus, So it's we're gradually transferring money.

Okay, got it, Because again, we wouldn't want you to take something that's meant for you long term, and and certainly we would want to make sure that you can afford you outright and versus you know, utilize it for your long term need. It's yeah, no, so those are the things we would look at, Okay. So that so the only thing we would have to do if it was a gift outright is like I said, it's

just a one time federal gift tax return. In the year we give, we gift the money, yes, okay, Yeah, and again I would just yeah the other way. Again, it's going to depend on kind of that interest in the term of the loan. You know, what kind of the reporting requirements are. You know, we often work with our clients when there's a need for a short term loan, they often will take whether it's a heelock or a secured line of credit versus you know, just you know,

taking cash out of something that's growing. In this case, it sounds like it's just in a money market account, but you know, those are two other options. You know, we certainly utilize for bridge loans for clients when you know it is the situation of they're not selling their home before buying the next one. Yeah, okay, okay, Hey, well thanks for listening, Tom. We appreciate your call. Thank you all right, thank you by perfect well, thank you Tom for calling. So, you know,

Vinnie, I know we deal with a lot of clients. Do you want to talk just uh for a moment about the you know, the ability to super fund a five twenty nine plan. I know you've been working with one of our clients on that. Yeah. Absolutely, So for those of you who don't know five to nine plans or college savings vehicles tax advantage, college saving vehicles, UH savings vehicles to be exact, so you know, they're minister by almost every state pretty much. So for the New York Vanguard

five twenty nine plan, you make contributions. You know, let's say your child's young. You know, you start to make contributions to the five two nine plan and it gets invested over time. Right, so you get a ten thousand dollars deduction on your New York state tax turned if you're married in a five thousand dollars deduction for contributions if you're filing single or filing head of household, so you know, you basically make those contributions and that money grows

tax free within the five twenty nine plan. If the funds are spent on qualified education costs. You know, obviously it could be years down the road. If you have a young child, you know, by the time they're eighteen, you could accumulate some pretty significant funds if you are you know, diligent and make contributions, you know, year after year, and you know, before you know it, you could have you know, potentially their full tuition you know, built up in that five to twenty nine plan. You

know, by the time it's time for them to start attending college. But you know, the thing with five two nine plans is they're subject to gift limits. So when you make contribution, it's considered a gift right. So you have an owner and a beneficiary. So the gifting limit we're just talking to Tom who just called in. You know, the gifting annual exclusion is eighteen thousand dollars you know, per person, and if you're married, you

can make a thirty six thousand dollars contribution. But there's a way to super fund that is what they call it the five twenty nine plan, and that's putting five years worth of contributions at one time, and you know that's obviously beneficial when your child's young, so you don't have to keep you know,

staying under that annual exclusion limit year after year. You can get it in the five twenty nine plan, and it can grow tax free as early as possible, So you know, it's really a great advantage if you are able to do that. You are and when you do super fun that you are required to file a gift tax term because you are above that limit, but

it doesn't reduce your lifetime exemption. Thanks Finny. Yep. So that's the important point there is, you know, and we are seeing this used more and more actually for trust and kind of generationally super funding, kind of like an educational trust for families too, So it is becoming that kind of tool

to almost pass down wealth meant for education to generations. So we're coming up to the news break, so we thank you for tuning in, so we hope you'll join us after the news break, but you know, keep in mind that we'll be also talking about some tax planning. If anyone has any tax questions you're listening to Let's talk money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health while we manage their wealth

for life. Thanks for tuning in. And after we come back, as I noted, then we'll be talking about taxes. We'll be talking exactly about Tom was talking about financing a home and today's interest rate environment. So we hope to hear from you. Eight hundred eight two five fifty nine forty nine. Good morning, and welcome back from the brink. Great, thanks for

staying with us. I'm here with my colleague Vinnie Testa. So since both of us are CPAs, we thought we would just remind people as they're gathering their tax documents and about to file their twenty twenty three tax returns what they should be looking at, you know, both to kind of finish up last year as well as planned for this year. So, Finny, do you

want to talk a little bit about just funding and changes to contributions. Yeah, absolutely so Individual retirement accounts as the first thing I'll it started on. So you know you have your traditional IRA and your roth IRA. You do have until April fifteenth to make contributions for twenty twenty three, and the contribution limits for those are sixty five hundred for those under the age of fifty, and those over the age of fifty can make contributions of up to seventy five

hundred dollars. You do have to have earned income to make contributions to individual retirement accounts. That's something to keep in mind. And then in twenty twenty four, the contribution limits have increased to seven thousand for those under the age of fifty and then eight thousand for those over the age of fifty. You can make up to a contribution of eight thousand dollars, and you can actually

do those simultaneously. Let's say you wanted to make a contribution for twenty twenty three, you know right now February fourth, you know, you have until April fifteenth, so there's actually a fifteen month window in which you can make

those contributions in any given year. And you know, let's say you wanted to double up and you could actually do twenty twenty three and twenty twenty four simultaneously, you know, before April fifteenth, So you know, really a great benefit there to get that money in there and get it invested, especially in the raw IRA. You know, it's obviously ideal to get you know, funds and that after tax retirement account and let it grow tax free for

as long as possible. That's going to be what's most official. You know,

something else you should pay attention to. Now we're in twenty twenty four, you know, there has been a bit of an increase in the four to one K contribution limits, So those under the age of fifty can make contributions of up to twenty three thousand, and then there is a catchup for those over the age of fifty of seventy five hundred, So there you can make a total of thirty thousand, five hundred dollars of contributions to a four

to one K if you're over the age of fifty. So if you had, you know, fixed them out coming out of your paycheck week after week that adhere to you know, prior year contribution limits, you know, it might be a good idea to adjust those contributions week after week to kind of you know, make sure you're hitting that maximum contribution limit if that's what your

goal is. Thanks Finny, and you know, some of the other things we work with clients on if, for example, they increase their contributions significantly later in the year to catch up because you know, maybe they were cash flow changed or they didn't realize, you know, go back and make sure you're you're looking at, you know, not only if your contributions need to be adjusted, but any other adjustments to your payroll, right because in some

cases, you know, things have changed and you might want to take another look at that and just ensure that you're withholding enough. I know that's something that a lot of our clients right after they file their taxes and they realize, oh, well, I either had a big refund or I owed a lot, what can I do this year, or to you know, ensure that I'm not in that same situation. So again, something certainly to look at as you finish your twenty twenty three tax returns in the next couple months.

Another thing we often see is when we have clients that are changing jobs midyear. A couple things to be aware of. What is don't over contribute, right, There's no cutoff if you've contributed to say one for one K for a few months of the year and then you change jobs, and you know, even if you for example, get a year end bonus, you're not expecting you could end up over country beat and that is you know, difficult because you do have to report it and any earnings or you know,

anything that was pre tax that went in. So you know, definitely keep an eye on that. If you are changing jobs and you're on a trajectory to contribute the maximum to your plan, to ensure that you're again cutting that off and not over contributing. Another thing that happens if you are a high earner and you're maxing out your Social Security withholding, the new employer will typically again also withhold social Security. We've only seen it not happen in one instance,

but you know, basically they are required to withhold that. So that excess social Security withholding just comes back to you as additional federal tax on your tax return. So you could end up, you know, just getting a refund unexpectedly of that social Security tax, but they do have to take that out. Vinnie, do you want to just talk a little bit about the

timing of tax documents as people are kind of gathering things. Yeah. Absolutely, So you know, tax documents, they're obviously going to come in, uh, you know round this time of year. But you know, not every tax documents going to come out at the same time, right, So you know, when you're collecting your documents, you know you have ten ninety

nine's, right. You know a lot of our clients have taxable brokerage accounts at the firm and they get something called the consolidated ten ninety nine and this, you know, it reports your investment income, your realize gains, your dividends, your capital gain distributions, your interest income and it's all reported on this consolidated ten ninety nine. You know, we use Schwab as a custodian, So Schwab is you know, issuing these ten ninety nine's to clients.

And this is a really important tax document to you know, for clients to obviously prepare their taxes and need to report the information. And the timing could be it could you know, sometimes it could be a little bit, you know, after you wanted to get your taxes done, maybe you're you're you know, you get ahead of the game and you want to get them done in early February. But you know, Schwaz and a lot of the custodians, you know, they might not issue it to mid February, So something

to look out for. And a lot of the times the ten ninety nine is the issue. Aren't the final ten ninety nine that you'll receive, right, So you'll get something called the correct at ten ninety nine that you know, some information on the ten ninety nine will be amended and you'll have to you know, if you had already given you know, your tax repairer of the original ten ninety nine, you might have to give them the correct to

ten ninety nine. And what if they already filed your tax return at this point, well, I guess what, you have to amend your tax return if it's a significant change. So just keep on the lookout for all of those tax documents and make sure that you know you have everything before you do give them to your tax repairer so you don't get charge of the extra preparation

fees. And so you know, we know many people out there prepare their own tax returns, and we feel that's great, and you know, we want to just make sure we're sharing, you know, these tidbits and make sure that you're aware of different changes and different things that could affect you.

But you know, when we're working with clients. We're certainly doing more of the tax planning end of things and and trying to figure out Okay, well sure we you know, from a compliance perspective, you filed your twenty twenty three tax returns. But what's changing this year? Right? I talked a little bit about, you know, changing your withholding or Vinnie talked about changing

your retirement contributions. But maybe there's a much bigger change and that's something again you want to think about, you know what this changes, how does that affect my taxes? So you know, number one, you're not over contributing and giving basically the federal government a loan of your money interest free that you're going to get back next year. And two you know you're not under contributing and you're going to be in a position where you owe interest in penalties.

So can you talk a little bit about how we work with clients, Viny when they're kind of transitioning from earning money and having withholding to retirement where again

they don't have that wage withholding. Yeah, absolutely, I mean, you know, just the surface for a lot of our clients, this is a tough transition, right, you know, they work so many years and they were saving for so many years for retirement, and then when they make that transition, you know, to retirement, it's difficult, that difficult for them to grasp that they're going to start spending down the money in their portfolio and

start taking distributions for their from the rollover IRA or the roth IRA or maybe a taxable broke which account that you know, they had accumulated, you know, over so many years. Right, you know, they were in save

mode. Now they have to kind of be in spend mode. So that's a lot of what we do for clients, right, So when they take distributions out of the rollover IRA, we determine what their cash flow needs are, right, and this is where Nicole and I come in, and we determine, you know, what the tax withholding should be on their IRA distributions.

Right. We don't want to pull too much money, you know, from the IRA more than we might have to, right, because that could maybe push them into another tax bracket that could you know, increase their Medicare

premiums. So these are things that Nicole and I look at very closely, you know, determining withholding, you know, making sure our clients are getting as close to zero as possible when they all their tax return, because that's really you know ideal, right, a lot of people love getting that huge refund, right, a lot of people hate owing, but you know, getting close to zero as possible, especially in this higher interest rate environment,

you don't want to give the government a tax free loan over the course of the whole year, especially with a significant one. So you know, withholding analysis that we do here at the firm is really crucial exactly. And again between either if you're taking distributions from an IRA withholding rates on that, if you're electing social security, or you have a pension. Right looking at the withholding on that, we often see pensions are such low withholding rates like you

know, nine percent. For example, we had somebody when they were in the twenty eight percent tax bracket, you know, so thinking about that and looking at you know, is that adequate or some people choose to make estimated payments right where technically you're supposed to be making them equally throughout the year.

So that means that planning needs to be done before April fifteenth, when that first tax payment do So, you know, again just kind of talking to your tax prepare about that or your advisor again if they have that tax background, to make sure that you're thinking about that beforehand. You know, another thing we work with a lot of clients on and I know Ryan's you know, done some specific certification in this area is you know, liquidity events.

And I know Marty is working with a number of clients right now going through this transition of you know, the sale of a business or we have clients certainly that have a big, large, you know, capital gain, you know, maybe related to a big position or a buyout of company stock for example. So can you talk about just some of the ways that we can accelerate deductions in that kind of big tax here? Yeah, absolutely, you know, accelerating the deductions you know a lot of the things we do with

the firm. You know, it's something called a donor advise fund, right, So donor advise fund is a way to you know, accelerate at your itemized deductions. Right if you're charitably inclined, and let's say, you know, maybe you make five thousand dollars of charitable contributions year after year, and if I look at your tax turn and I see that you're not itemizing your deductions, I'm want to say, hey, you know, let's talk about this for a second. Let's open this donor revised fund, right and maybe

front load you know, five to ten years worth. If you're planning charitable contributions, you can get it invested, so maybe it'll grow. If it's five years worth of contributions, maybe it'll grow to six over the time it's invested. So the initial contribution to the donor advice fund, it's a charitable fund that you're putting, you know, money into the right checks out of

to specific charities. When you front load the contributions. The initial contribution to the fund is a deduction for your itemized deductions and charitable contributions the entire amount. So these are sort of the things some of the things that we do to accelerate deductions. Maybe it's a high tax here, and we know that you're going to make a charitable contribution, you know, a pretty significant one well into the future, right, maybe you sold the property this year,

or or you know, you had some unexpected significant income come in. You know, these are the kind of tools that we use at the firm and how we incorporate tax planning into you know, the financial planning process to sort of you know, you know, help your financial picture because if you save taxes your money, your overall net worth is going to increase if you're paying attention to it very closely. So these are the type of things we do

to accelerate deductions. Yeah, loss harvesting is another big one, and thankfully because of last year, we don't really have much in the way of loss harvesting, but certainly it's something we did for our clients right in twenty twenty two, and we did it multiple times in twenty twenty two. So loss harvesting is something you want to make sure that you're you know, again working with an advisor on because you have you know, what's called the Washtale rule.

So basically, if you take a loss on a specific position, so whether that's an individual stock right or an ETF or a fund, you cannot purchase that same time within thirty days. So this really is to prevent people from taking a loss and immediately getting that exposure again and buying that company back,

so from selling just for the purpose of the tax laws. So again, when you have, for example, the entire market goes down right or you know, the Nasdaq for example, you can sell that specific ticker that you're invested in for a loss, buy something kind of similar but not exact, right, because you want to make sure you're you know, not again duplicating that, you know, to still get exposure to that general market,

and then thirty one days you can buy back into that. But again, loss harvesting is something certainly we look at to see, hey, is there something you know out there? Maybe you know, we have a number of clients who maybe worked for you know, a larger company like a GE or an IBM, and they have shares from you know, many many years ago that are in a loss position. We can utilize that again when there's a sale of a business or maybe if we want to take a capital gain on

something else in the portfolio. Something that we're looking at with our investment team and implementing is called direct indexing, you know. And what that really allows us to do, and we're partnering with a company called Canvas and may have them on to kind of talk about this in the future. It's when you have kind of an individual stock portfolio and we've used them to actually mimic and

create a custom benchmark for our portfolio model. Then you can sell individual stocks again buy something similar from a risk and an industry perspective, so you're maintaining that diversified portfolio, but you're actively loss harvesting. So this works well for clients that are in a high tax bracket. And I've used it in a variety of forms over the last say, twelve fifteen years at other firms before

you know, joining this wonderful Bouchet team. So you know, that's something certainly we look at, especially if a client is a and a high earner and a very large, you know, high tax bracket. Vinnie. What are some of the things people can look at if maybe they're in a low income year, say you know, they're going part time, or maybe it's early retirements and they're not taking significant distributions or Social Security or pension yet.

Yeah. Absolutely, so, you know, especially if someone is retiring early in the year. You know, we have some folks that are retired, retired in March or April. So if you think about it, you know, obviously they're going to have a small percentage of the income they normally have in you know, previous years, right, So what's that mean? That means that they're going to be in a lower tax bracket and maybe there's room

to start accelerating income. Right, we're talking about accelerating deductions. Now let's talk about accelerating income. So there's certain situations where you know, folks, if they have a taxable brokerage account, they can get zero percent tax rate on long term capital gains, right, you know, I think, you know, I'm just thinking off the top of my head. You know,

for single filers, it's around forty thousand dollars of income. If you have under that, you can you know, sell potentially some stock with some built in gains. And if you stay under that amount, you know, you can get that zero percent tax rate. And if you're married, to believe, the mounts around eighty thousand. So you know, these are some of the things you could do, you know, while you're in that low tax bracket. I mean, you know, who would have wanted to get a

zero percent tax rate on the federal side on capital gains? Right? To see, these are the things that Nicole and I look at very closely when

we're working with clients and we're doing tax planning. You know, the other thing we do for clients, you know, we I know, Nicole and I have a client that we work with that you know, they have this significant charitable deduction that carries over a year after year, you know, and Nicole, you know, had advised client, you know, doing roth conversions, right, they had really huge charitable deduction that's carrying over a year after year, so you know, it ends after a five year period, it

completely disappears. So in the meantime, we're looking closely to accelerate income for this individual getting money out of their roll over iran converting it to the row

while they're in this extremely low tax bracket, and that's so beneficial. You know, obviously it's you know, it's tough to see on the surface how much money this is really saving an individual, right because when they pass away, their their beneficiaries are going to have to liquid would have to liquidate that IRA in a ten year period, and you know, it's a pretty significant

balance. So you know, if you think about it, they're in their working years, the beneficiary, this is going to put them in the highest tax bracket potentially, you know, if there's really no way around it. So while getting money out of the tax deferred retirement account into the row, while you know the owner is in this low tax bracket, it's going to be beneficial for you know, the owner of the ira as well as the

beneficiary. That's great, Vinnie. And yeah, and you know, even as Vinnie mentioned, in the instance where you do have some earned income right making a ROTH contribution. You know, we have some clients who actually start a roth ira the year they retire because their income was too high previously, right, because there are limitations as to high earners not being able to put

make direct wroth contributions. But you know, really you work for a couple of months and you make a ROTH contribution and that continues to grow tax free, and it also provides that base for you know, starting a roth ira. There's kind of a five year look back as to when you started that wroth ira, you know, as to getting the gains out now wroth conversions each kind of start that five year limit kind of moving for that specific conversion.

But again, we think it's worthwhile even if you're going to fund it for seven thousand dollars, letting that grow long term. It's a great emergency fund too. It's Vinnie said, we're always looking at, you know, how much you take from a tax deferred account like an IRA or you know, an employer retirement plan, and you know what's going to put you into

that next tax bracket or make capital gains taxable. So say you need four thousand dollars extra and that's going to throw you into that next tax bracket. But you have a ROTH IRA. Guess what you can take that those funds out and it's not going to change anything from a tax perspective, but you have the cash flow you need. So you know, again, we certainly don't think it's only for you know, young people in a low tax bracket.

We think ROTH is a great emergency fund as well. So, Vinnie, we have a few minutes left and I thought, you know, we do have some clients who end up in a situation where they need to access their retirement funds earlier than necessary. And without getting into you know, too much technical detail, do you want to just touch on the seventy two T because I know we have a number of clients who are utilizing that option.

Yeah, absolutely, Yeah, seventy two T is when you know you want or need funds, right, so you need funds and essentially your IRA or retirement account is the only funds that you have available, right, so you can make a seventy two T election. Right, this is when you know, before you're fifty nine and a half, and when you're in that you know, if you were to take money out of your IRA at this point,

just the regular distribution, there'd be a penalty. Right, So you can make the seventy two T election where you could set up periodic payments and you kind of go on this schedule of payments, a fixed schedule, and you're able to take money out of your IRA, you know, without penalty.

So you know, if all else fails and you back against the wall, maybe you retired early and you want to start, you know, pulling money out of the portfolio, and you had the capacity to do so, you could make the seventy two T election and set up these periodic payments,

and you do so taking money out of your IRA penalty free. And what really happens is you have to even if say you're you know, fifty six, you have to take these payments at least five years, right, and they're called substantially equal periodic payments or until fifty nine and a half, whichever is the longest, right, So that means that once you kind of lock into this, you really have to do it now. It is specific to an account, right, So we'd work with some clients to say, okay,

we're going to move an IRA. They separate the IRA and put an amount into this IRA. We're going to make this election on. That's only the amount you need, so you still have flexibility on that other account if you hit fifty nine and a half prior to that five years. And again it's a calculation of you know, three different calculations. You know, one of the ones that's more popular is similar to a required minimum distribution, you

know. But what I'd also say is make sure you're looking into what options you have to take funds out of a retirement plan or an IRA without penalty. Right, So for example, you know, a roth IRA. We've heard so often Steve talk about, you know, using for you know, a first time home buyer, right, and so you know we're medical needs for example. So there are certainly exceptions, and you know, the Secure Act two point zero that came out at the beginning of last year had some

additional elections, you know. The other thing to think about, and we work with our clients, right, we're a fiduciary, so we make sure that when we're bringing on a new client, we're thinking about the possibilities. So we've had in some instances clients where we've said, you know, keep a portion in your four to one K because most four to one K plans or four to three B plans will allow you to access the funds, say at age fifty five, as long as you've separated from service right four and

a half years earlier than an IRA. So we again are always acting on our client's best interest, and we say, you know what, don't pay us to manage that right now. We'll help you choose the best options within that plan, but keep it for that flexibility, right we know. Another

one is the New York four fifty seven B plans. Same thing. In some cases, there's you know, a benefit to keeping some portion of your funds there to pay medical insurance premiums, you know, through this state, you know, depending again on your retirement package, or again if you're retiring from you know, something like New York State Troopers and you're going to have

access to that well before fifty nine and a half. That's where we want to make sure we're doing what's in our client's best interest and tell them to keep that flexibility versus rolling it all into an I ray that you know, we certainly feel we'll be managed better from an investment perspective long term, but

we want to make sure we're thinking about the taxes as well. So, you know, the last thing I'll just touch on quickly as I know we're nearing the end of the show is you know Tom from Troy called in earlier about, you know, just financing a home. So, Vinny, do you want to just talk a little bit about kind of fixed rate versus arms for a minute, because I know you do a lot of work with clients

on this. Yeah. I mean, in this environment, adjustable rate mortgages or arms can be very beneficial, you know, versus a fixed rate. Right, So we're in a higher interest rate environment. You know, fixed rate you might get locked into a six or seven percent rate. You know, the only way to get out of it is selling your home or refinancing potentially when and if interest rates ever go lower. So adjustable rate mortgage.

You know, actually have adjustable rate mortgage on my home. You lock in a lower rate than you know, the market rate for maybe a ten year period and then it adjusts the market rate, you know, after that ten year period, so potentially before the ten years is up, you can refinance with rates are lower. But I think we're coming to the end of the show. Yeah, thank you, Vinny. So again, flexibility is what we're looking for there. So thank you so much for tuning in. So

we really appreciate you listening. And remember you're listening to Let's Talk Money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health while we manage their wealth for life. Have a great day.