Let's Talk Money

Good morning everyone. My name is Martin Shields. I'm the chief well Advisor at Bruchet Financial Group, and I'm gonna be your host today for Let's Talk Money. It's great to be here with you. Do answer any questions you may have regarding your financial planning or investment management concerns, and you could reach me at one eight hundred Talk WGY. That's eight hundred eight two five five nine four nine. Again, it's eight hundred eight two five five nine four

nine. I hope that you're doing well today. On this rather dark but warm February morning, it feels more like spring when I do the radio at a I'm up pretty early, and I was up even earlier. There was birds chirping. I think at five o'clock. It felt like we were more in May or late April than February. I think probably all the wildlife is a little bit confused. Is it has been an interesting winner? Right?

We had some cold, then some warm. I tell you, as I've said before, I'll take a cold snow a day over rainy and fog at any point. It's good to hear. We may have some snow coming in the next day or two. But you know this weekend. Yesterday was in the fifties and the same with the Friday, felt like it could have been March. But interesting times. I don't that you're doing well. It's Super

Bowl Sunday here, so it'll be interesting to see what happens. We got the Chief and the forty nine Ers, and certainly, you know with it being in Las Vegas and you get the star power of Taylor Swift and Mahomes

and Kelsey Travers, Travis you know, BBC what happens. I'm a forty nine Ers fan on this game at least, you know, I might like to see Brock Purdy win it. I think it's interesting to see that he was was called mister irrelevant, meaning that he was the last person in the draft two years ago, and now he's the starting quarterback on the team in the Super Bowl. So it'd be curious to see what happens. But I hope that you're doing well. And again, any questions you may have regarding

your financial planning or investment manager concerns, I encourage you to call. With those questions. You can reach me at eight hundred Talk of AGI. That's eight hundred eight two five, five, nine four nine, So a lot to talk about today. A couple different topics. I want to talk about regarding ross and how you can actually be able to contribute to a roth even if you think you may not be able to because of your income. There

are different ways to make that happen. And then certainly be talking about the markets. The s P five hundred goes on to hit all time highs up above five thousand this week, So great news in that regard. But you may be looking at your portfolio and say, well, wait a second, I don't see my portfolio up, and that is because it depends on how

you're invested. We are continuing this trend where it's the Magnificent seven, the big seven companies that includes Tesla and Navidia, includes Amazon and Apple, it includes Meta which is old, Facebook and Google. Those big tech companies continue to power this market. Hire. So if you have international stocks, let's say international developed, you're down for the year. If you have emerging market stocks, you're down for the year. If you have only small cap stocks,

you're down for the year. The only inecs right now that are up, the NAZAK one hundred is up six point eight percent. And as you if you listen to the show. You know, we have a large allocation to the Nasdaq. We're big believers in technology, both in our business and also from an investment perspective. We obviously you have exposure to the S and P five hundred and the sp is up five point five percent year to date, and the Dow Jones, uh Induicy is up two point seven percent,

but all those other indices that I mentioned to you are down. So again you may be looking at your portfolio saying, hey, why am I down when the market's up? And again it makes it's just important to you know, make sure you have exposure. As we've talked about, we only have

exposure to the US markets. We just feel that in the last number of years it's the best place to be and we haven't had any exposure to international and coming on will be more than three years now, and we've been underweight in the international for probably the three or four years before that, so that's been beneficial to our clients. But this is where it's important to you know, know what you're doing from an investment perspective and be able to stick to

that strategy. Now we get a lot of questions about folks to say, well, I just want to have exposure to those seven names, and I would caution you from just piling in only on those seven names. Right, they have powered the market higher year to date, they part powered the market hire last year. But you still have to approach this at from a discipline perspective, and if you don't have any exposure to those companies, certainly getting

exposures fine, but appreciate that. You know, you don't always want to chase the hot asset class and only have exposure to that. You know, we could be in a situation where small mid caps start doing well and you want to make sure you have something in that. So this is where it's important to, you know, be balanced in how you're allocated. We're going to go the phone lines we have carry from this unit. Carry you there, Hi, Ryan, how are you? I'm so happy to talk to

you. Listen to your father for years back when he was on a Sunday six o'clock in wd g Y. Right in the beginning. Oh that's great to hear. Let's say he's been doing it for twenty nine years. But just so you know, this is Marty. This is Marty, not Ryan. Sorry, Okay, that's Okay, I know your name too, so yeah, that's that's okay. No, absolutely, I always joked when I first joined it was Ryan Steve, and I always said I was one of the Bouchet brothers. So yes, yes, yeah, so that's all right,

you were there forever. Yes, I know that. Yees, yeah, that's right. So forgive me. But so this is my question. And I've asked Steve, but and he said I can come, We can come and almost friends and family. Because I've talked to him so many times as well, when exactly is the best time for us to come to see you guys and talk and plan. And here's the deal. I'm going to be sixty two soon. My husband's going to be sixty three. I really am. He's chomping at the bit to retire. I really don't don't want

him to go at this time yet. I think it's a little too soon, but we want to get on the right track to head towards that way. Also, the other part of that question is we have a TSP. I put it massively in the C fund, which is the S and P relative. I'm going to say for years. He took it out and put it more in the G Fund, which is all that slow drip one, because he got a little nervous because we were so close to retirement, and I'm telling him we should start putting it back in in the C fund because

we're not there, you know, not at the retirement yet. And I feel comfortable with that, and I know Steve usually does. But I know he's listening in another room somewhere, so he's got to hear somebody then, you know, me tell him this, What would be a good ratio? Yes, I know right, I'm only the wife. What would be a good ratio for us so he could be comfortable with thirty percent? Would forty percent be a good one? To go back into the C fund, which

is like the S and P at this time? So how far unto you retire? How long? I would love to go tomorrow? But I would really like to You're always afraid that it's too soon. I think that we, you know, can be there. But that's probably another reason why we should come in and start talking to people, to say this is where you are, this is you're there now, or it would be better if you're here, do you know what I mean? Oh? Yeah, absolutely absolutely.

Well, So a couple of things. I would highly encourage you, you know, to come in and talk to our firm and get some guidance, right because you are there, you need to get guidances to what this roadmap looks like as you approach retirement and during retirement. So I would really encourage you to do that. What I would tell you is this is, and we always say this, even though you're going to retire, you're not planned on dying, right, so you know, you could have another thirty

years of living and needing growth. So I think what's reasonable. Many of our retirees have sixty percent inequities and forty percent in more consertive allocation. Now, if you if you have that felt a little bit too aggressive, you could do the other way around. You can do forty percent in equities sixty percent in a more conserve allocation. But I do think having something inequities as

you approach retirement is fine. You know, I think going all in the conservative fund is probably you're giving up some growth that you would really going to need over time. So this is a more of a personal discussion and it's not you know, I always say your risk tolerance, there's no right or wrong answer is what fits best for you. But I would say at least

having forty percent and as much as sixty. I mean, we have many retirees that have eighty percent in stocks because as we've talked about before in the radio, we put away two years with the distributions in a more conservative fund. So again, there's so many nuances to this, but I would absolutely encourage you to call into our office and set up a time to talk about your own personal situation and make sure that we had that plan in place for

you. It's going to give you a level of comfort when you make that decision to retire. Thank you, Thank you so much, and I'm glad. I'm sure he's listening. And I'm glad you said forty because I said, if he wanted to be conservative, twenty five. But I'm telling you there were years ago when he didn't know the passwords, and only I did. I put us one hundred percent. So he was very happy about that. And right before all the rises, right after COVID, we took it

out and we're ultra conservative. And I'm crying every day I think of that. But you know what, you can't cry over spilled milk. So yeah, that's why. I'm glad you said the forty Yeah, thank you so very much. And yes, yes, now I'm sure he'll be more motivated to get in there and make the call and come see you guys. Sounds great, Carrie, You take care now, thanks you too, bybye,

okay bye. So that's a great you know question that carry asks. You know, it's a question that we hear quite often with our clients and prospective clients. And you know, I'll tell you you have to I would, well, this is what I would say. If you are in your fifties or you have any big changes in your life, you're you know, many times our clients are executives. They got a lot of stock conversation, they got to make decisions with they're switching jobs, you're getting married, you're getting

divorced, you loss a spouse. You know, you're within ten fifteen years of retirement. In these circumstances, you need to get some guidance. And you know, the only any way always say we'd love to come and talk to you. We do have a half million dollar minimum with our clients to come work with us, but we will always point you in the right direction,

whether it's working with a firm or working with another fiduciary. That's the big thing is make sure that you're working with that fiduciary to get your guidance. They're going to make sure that you have the right investment allocation. They're going to make sure that your plan is in place, looking at state planning, looking at insurance reviews, anything that you need to have. As we've said before, we're our client's personal CFO and anything it's finance related we're going

to give them guidance on. But it becomes so important that you get that in place, and it's going to make that decision to retire that much easier. I see it all the time with perspective, clients coming in this level of uncertainty, this level of stress or anxiety because they're trying to make these decisions on their own. And I think about this, even though I was always in an economics and finance person, I was in corporate finance for twelve

years. I didn't know personal financial planning, I didn't know portfolio management, And now that I have twenty plus years in this, all this training, I think it'd be very daunting and I could very well make mistakes. I would try to do it on my own and planning like this. Uh So I would encourage any listeners that, if you're in a situation like carry is, to have that conversation with a fiduciary investment advisor. You know, we

always we'd be loved, love to have a conversation with you. And as we said before, even if we can't help you, we'll point you in the right direction. We'll make sure you get the right person to talk with. We're gonna go back to the phone lines we have, Rick from half Moon. Ricky there, Yes, I am. How are you doing this morning? Good morning, good morning, good good getting ready for the big game. Yeah, it's right, everybody is right. It's gonna be exciting.

Ye should be, Yeah, it should be. What can I help you with? So it's can continue in the conversation about asset distribution diversification. So I'm seventy and so I'm retired, and when he's retired, I have I am not I have around sixty percent of my portfolio inequity, thirty percent

in bonds and then and then ten percent and cass. Okay, So I think it's I think it's still important to be diversified versus I know, going one hundred percent in equity, and also how many I've always thought I should have at least a couple of years of cash on hand in case something drastic happens with the market. What would you what's your thoughts and all of that. Okay, great, Well, initially I think that allocation seems very reasonable.

As I mentioned, many of our retirees are in our with our growth and income which is sixty forty, so that would really reflect what you have. And then what we do as well is we put any distributions that our clients are taken on a monthly basis and we put it into more concervative allocation. So it's kind of like your two years worth of cash now now right now, you can get five and a half percent on a money market in cash, but for the years prior to this, it we get very little.

So we didn't want to keep it in cash cash, but you know, keeping it more conservative fun. So I think you're very well allocated. Are you taking distributions from your portfolio? No, I haven't, and I'm not. I don't have to make any required ones yet. But I think they pushed that, they pushed the age out on that. I mean, you have to make the r m D they call that's right at age seventy three now, and it was seven and a half a few years ago, so yep, they did push it out. So do you have a pension?

I do, okay, So yeah. The only thing I would say is, you know, because you have a pension private so security. It sounds like you're in a good financial spot. You could be more aggressive, right, I mean if you want it to be. You don't have to be, but you could because you don't have to be too concerned about market volatility. I still think being like eighty twenty so eighty percent inequity and twenty percent in bonds, cash and alternatives is okay. But you could be more

aggressive because you don't need to worry about distribution. So that again, this is where it's a personal decision. You may say to me, Marty, I sleep better at night at a sixty forty portfolio and I'm good with the growth I get in a year like twenty twenty three. So that's the question you have to ask yourself. I mean, we actually the last two years are actually let's say three years between twenty one, twenty two and twenty three.

You had opportunities to see how your portfolio performed both in a bear market where the market is down by twenty percent and in a big bull market. And if you're happy with it, then you're good. But if you either you know, were frustrated because you didn't have the growth or you were really nervous because you were down so much, now it's a good time to assess your allocation and make changes where appropriate as good. Thanks for that advice,

you got it. Enjoy your Sunday and enjoy your Super Bowl. Same to you. Okay, thanks, Yes, folks, this is a I'm telling you, this is a good time right now to assess your allocation, in particular if you think that you were too aggressive before, meaning that in twenty twenty two you were very nervous with the market being in a bear market territory

or as in Carry's situation, now she already is too conservative. But if you were approaching retirement and you've been you know, in a let's say, in eighty twenty allocation or all equity portfolio, then this is a good time to take that step back and become a more little more conservative, because not only are would you be selling equities while they're at all time highs, but you would be rebalancing into bonds while they currently have a good yield. So

certainly not a bad time to make that change. But even let's say it's the other way around, like Lacarrys, let's say you were too conservative, it's still a good time to reallocate and to increase your allocation to stocks. As I was getting ready for the show today, I was I always kind of looked through and think about some of the meetings and conversations I've had with clients and the topics that came up, and two clients that stood out.

They're just great folks. We've been working with them for more than ten years, and I will tell you to a t what these two clients did is they were just very good from a financial perspective. They did not overspend, they have good incomes, but they were always aware of what they were spending.

And so with that, you know, I always stress the importance of budgeting, and you know, I always say it doesn't have to be a you know, a budget that figures out every detail and line on them, but just big picture, where are you spending your money, what categories, and it just allows you to track. From a monthly perspective, are you within the range that is acceptable that you had talked about in your budget.

So that is just so important. If you're not budgeting and you're struggling right now from a cashblo perspective, you have to put in a broad based budget that allows you to understand where is your cash going. And in that budget, I always say, the first thing you need to be doing, either right before or right after you're paying your taxes is saving. Right it could be saving in your emergency emergency reserve fund, which is the cash that you

need to cover unknown expenses. It could be saving for retirement, It could be saving for your kid's education, or it could be saving for a house. Whatever you're saving for. Those dollars are the first dollars you go in. It's in the same category as paying tax. You just go ahead and you do it. And then everything else after that is a variable cash flow that you can spend how you want, right and someone's going to be fixed

if you have a mortgage, whatever. But again that is after that savings element, and if you have a budgeting piece, you're going to be successful. And then the other thing that these clients did. They were okay with being invested either at eighty percent in equity or up to one hundred percent in equity in a number of their accounts. And you know, we've been able

to manage these accounts for them. We've done a very good job over the decade plus that they've been with us, and they've let us do our job, right, they have not interfered with us. They've they've let us do our job. And you know, we have a reporting software that clients can go on and look at everything from their portfolio and it looks at it by either account or an aggregate, and it looks at it. You can look

at performance by position, so a lot of information. And there's one pays called the capital Flows page, and it shows the portfolio of value over time along with the principal mount that you either put in or took out of the portfolio. And I always love to, you know, work with clients where they've been with us for a long time and we see this mountain of blue, and that blue is the value of the portfolio. So the principal mount

in these cases pretty much has started to take some distributions. They're moving into retirement. But the principal mount is this big, huge mountain of blue and that's the value of the portfolio that has grown over time because they're smart, educated investors that in this case they allowed us to do our job and be successful and they were not concerned with having allocation to stocks. Right. It cannot stress that enough to you that you've got to feel comfortable that over time

stocks will recover from volatility like we saw in twenty twenty two. And you know, the big element is you have if you're a stock investor, just ask yourself this question. Do you think that over time that the US economy will grow and you think that over time the companies in the US economy will be able to find ways to increase profitability, whether it's through increased sales, lower cost increase profitability, maybe selling overseas, whatever the case may be.

If you can answer that question yes, then you should, you know, feel comfortable investing in stocks. There was just a I've talked about this before, and in particular we'll bring it up because of the Super Bowl being in the Las Vegas. But when you look at the odds of casinos winning, right, so you know, if you go to Vegas or go to any casinos. What are the odds of the house winning? And the odds are

around fifty percent, right, a little over fifty percent. If you are investing in the market, the odds over different time periods, let's say ten years, it's like ninety nine percent that you're going to be positive. Ninety nine percent chance that you're going to be positive with the stock market. So again you think about just having that long term perspective and how important it is.

I can't stress it enough. And again that's where our firm comes in and gives good guidance to our clients to make sure they're doing the right things. Well, folks, we'll go to commercial break, but come back and join us as we continue to take your 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. Come back and join

us, folks. Welcome back, folks. For those of you just joining us, my name is Martin Shields and I'm your host today for Let's Talk Money. I give you my colleague Steven Bouchet. I well deserved break and it's great to be here with you as always to answer any questions you may have regarding your investment management or financial planning situation. And you can give me a call. You can reach me at eight hundred talk WI. That's eight

hundred eight two five five nine four nine. Again it's eight hundred eight two five five nine four nine. So I was talking about the weather and the fact that we're boy, we've had a lot of very mild days this year, and as you know, if you're a listener, I have it ice

rink in my front yard. This is our fifth year of doing it, and my son, who's a senior at Saratoga is as a hockey player and he has his buddies that come over and skate and we we called the rink our science project because it's any given day, depending on the weather and whatever's going on, we're detributing what to do with it. And we had we had some great days skating this week. You just got to have the weather that the temperature down in the low twenties or the teens at night, and

it's fantastic even if it gets into the mid thirties during the day. But obviously with the being so warm in the rain now we have kind of a QUASEI pool slash a large block of ice in the front yard, and so hopefully this week, I think it's going to get colder again so we can get back skating. And I was supposed to be doing a hike at the high Peaks. I'm doing the forty six ers and I was going to be

doing it this past Saturday yesterday, and they had to cancel it. I was doing it with a group because of the warm temperatures and the rain, because you go over a couple of creeks that could be running very high with that, so it was unfortunate. But I decided to go skiing instead with my son, and conditions were great at the gore. The other thing is we did have some rain, so you know, as I always say, it's all about the right gear, so you have the right gear to stay

warm. But you had to be okay with a little rain which came down and we basically spring skiing beyond that. But I hope that you're able to still get out today and enjoy this warm weather. It's great to be able to get up for a walk or even a bike ride or whatever the case may be, and then get ready for the Super Bowl. There, we're going to go the phone lines. We have George from I don't need Georgie there. Good morning. How are you doing today? I'm doing well.

How are you? I'm fine? Thanks. I have a sort of a quick question. It's actually not for me for a family members of an annuity which I which I know you're which your boss doesn't like too much. Yeah, yeah, yeah, What can I help you with? Well, the person's retiring, uh, and they have a lot of pretty large amount in an annuity. I guess it was part of the retirement package or whatever when

years ago when they got into it. But anyway, what we wanted to find out is is there a fear anything to close that out and roll it into an eye a regular eye r A with like t Rode Price or Vanguard or something. I mean, to close out an annuity. What's involved in that? Yes, So that's one of the reasons that you know, Steven and our firm, we're not huge fans of annuities because depending on the annuity, there can be fees. So usually annuities have surrender penalties for the first

eight, ten or even twelve years. So the way they set up is if you're just bought the annuity, you want to cancel it within the first year. It's usually it could be as much as eight or ten percent penalty to get out. Now, every year that goes on, that penalty gets reduced. So if they've had it for ten fifteen years, there's a good chance at least yeap, so there's a good chance they can cancel that annuity. And is it in an IRA? I don't know that. I don't

know if it's titled that, but it's a retirement fund. Yes, okay, So if it's in an IRA, then you can cancel that and then just put it into cash and get it invested. If we're not in an IRA, you have to be aware that if you cancel that annuity, you could have a taxable event where any gain in that annuity is considered ordinary income, not long term capital gains, but ordinary income, and when you cancel it, the whole any of the gain comes out as ordinary income at that

time period. So that's it. Yeah, So that's a big you know, is it? If the big question is if it's in an IRA or not? Makes that determination as to how you want to handle that. Oh okay, okay, okay. That's sort of answers this, thank you very much. You gotta George take care now. Yep. But so you know, let me just go on that for a little bit, because I think it's important to communicate that as just annuities on themselves. There's nothing wrong with

an annuity, right, and there could be situations. We do have a couple of situations where clients who have no kids are not worrying about transferring money to the airs. They were concerned about longevity where we got them into an annuity kind of protects on the backside that they're not even going to take the annuity until they're seventy five years old, and they just wanted it for peace of mind, for cash flow if they were to live for a long time,

and it's just protecting themselves in that regard. So there can't be situations where, depending on the person and their situation, an annuity can work.

But it works best when you take money that is not in an IRA that would be taxed as it grows, and then you put it in the annuity and then you annuitize it, right, And when you innuitize an annuity, really what you're doing is you're taking that lump some amount and you really turn it into a pension that's going to be guaranteed for that the rest of that

person's life, right. And but the problem with annuities is they're sold to people and they're and they're sold with this concept of guaranteed without people understanding what they're going to use them for. And so you know, and with that, there's a high commission charge that people don't usually know they're paying that can be five, six, seven, eight, nine, ten percent that that selling the annuities at getting there's high annual expense ratios with annuity that can vary

anywhere from one percent up to two percent or greater. And there are penalty fees to try to get out of that annuity within the first eight, ten or twelve years, like we talked about with George. So that's the problem with annuities is that they're sold in a way that most people don't understand what

they're buying and they don't really understand even how to use it. Because here's the thing is, if you're not going to annuitize an annuity, if you're not going to put it into a stream of payment payments, you really in most cases don't want an annuity. There are much better ways to get money invested that are more tax efficient, that are more flexible, more liquid than

an annuity. And I always say, before you buy an annuity, you should absolutely be talking to a fiduciary to get guidance on somebody who's not selling that annuity. Right, it's very difficult to assess if it's the right thing for you when you're getting only guidance from the person who's selling that adity to you. And you know, here's the other thing that's important. Remember with our clients right now, we manage over a billion dollars close to one point

two billion dollars for our clients. With any of them, if they decide to go a different direction, they just let us know and we can just delink them from the institutional side of Charles Schwab their account's move to the retail side and nothing changes. We could do that within twenty four hours or less. And you know, all we always ask from our clients is just to communicate with us in case we're going down one direction and they think we should

be going to another. But you know, we lose very very very few clients in any given year but they could they can. There's nothing that's committing them to working with us beyond just the service we provide and the value we

give them. Whereas with any investment, this is so important. With any investment, if you're giving up liquidity, which is what I've just describing their ability to change course with your investment decision, if you're giving up liquidity, if you're giving up transparency, that you should get paid an awful lot more money for that investment. Right. So, with an annuity, you're giving up liquidity, you really you know, you're committing for ten to twelve years.

You're also paying higher fees, and in many cases you don't have the same visibility into your investment that you might otherwise have. So in that regard, you should be getting compensated a great deal more. And I just really would stress you know, whether it's you or you know, a parent, or a sibling or a colleague, whoever it is, before you get into an annuity, make sure you have a conversation with somebody who's an investment froduciary

that knows this space, that's not selling that annuity. You can't stress that enough. That is one of the most important things that you could be doing, and very important do you remember that we're going to move on and talk

about different raws. There's a number of different ways to invest than a wroth, and there are a great investment and I always say, even if you're putting money into a traditional foreill and K or pre tax IRA, which is fantastic, especially if you're in a high tax bracket, trying to put money into a wroth is the same concept is diversifying from a tax perspective, because with a wroth, once you put that money in through the wroth, it's

post tax dollars. You've already paid taxes on it, but it grows tax free. So what is ideal is if you're retiring and let's say you're fortunate enough you've saved two million dollars, which you can do if you're smart with your investing and you start early, and you have half in a wroth, half in a pre tax Now any of those dollars you take out of that wroth, you never pay taxes on it. So you can imagine from a financial planning perspective, that can be very advantageous to have a large sum in

an account where you never pay taxes. When it comes out unlike the pre tax dollars. All those dollars to come out, both the dollars went in there and the growth you pay at ordinary income taxes, right, not even long term capital gains which would have in a taxi account, but ordinary uh income tax brackets. So it's still advantageous, but it can be kind of expensive to get dollars out of there. And that million day and that pre tax is not the same, it's not as good as the million dollars that

you got in the raw. Off Now you know again the advantages. You didn't pay taxes to put it in there, which can be very advantageous when you're a high income earner. But it's just again really important. So a couple of things with the raw before I do just again reminder, if you have any questions, you can give me a call. You can reach me at eight hundred talk w guy. That's eight hundred eight two five nine four

nine again eight hundred eight two five five nine four nine. So one of the things that we've been doing some of our clients is what's called an individual four and K, and all that is is when you have a company where you're the only employee of that company, which can be the case depending on maybe your consultant or maybe you know you just have a business where it's it's just yourself and if you do it very well with that, you can have

an individual fall and K where you set it up just for yourself. And in twenty twenty four, between the employee amount and the fifty plus ketchup amount and the employee er amount, you could put up to sixty nine thousand dollars sixty nine thousand dollars either pre tax into that individual fall on K or now they have a raw fall on K that's an individual fall and K. So we have a number of clients that you know, the way that the small

business is structured, they're able to write off a lot of expenses with their small business and then so their income is not too high relatively speaking from a tax file perspective. But now we're able to set them up in the individual wraw full and K. And this is new, the individual raw case that haven't been around really, which rob they just started off from this year and

even with other custodians it would just the last couple of years. So you think about that, if you could put away whether it's sixty nine thousand dollars pre tax. If you have your sole business owner for yourself, that's fantastic, or even up to close to sixty nine thousand dollars in a WROTH. If you're a small business owner and you set up an individual WROTH phone K, it's also fantastic. So just something to be aware of if you are

a business owner where you're the only employee, it's a great avenue. It's really better than what's called a sep iray. It's better than a simple iray, it's better than an individual account. It's just really one of the best ways to put away a lot of dollars, either in the WROTH or pre tax in the traditional individual fall and K. So something to be aware of. The other thing is what's called a mega backdoor WROTH conversion, right,

mega backdoor Wroth conversion. And what this is is that you're let's say you're in a fall and K plan and you max out your contribution, which for twenty twenty four is twenty three thousand dollars for the employee, and let's say you even get a match from your your employer, so there's maybe a profit sharing match or what's called a safe harbor match on that. But again you

can put up to sixty nine thousand dollars in there. So let's say you're fifty and older, so you're maxing out your total employee contribution at thirty thousand, five hundred. Now you can put an additional thirty eight thousand, five hundred in as post tax. It's not as a ROTH, it's a post tax contribution, and then you can convert it into a ROTH in that plan. So again, just go through this. You're maxing out on in your dollars as an employee, and that's the Let's say you're fifty and older,

so that's the thirty thousand, five hundred. Now you're going to put in additional dollars, not get any tax benefit, and you're putting it in just to the normal side, the pre tax side. But it is a post tax contribution. That's where it gets a little complicated. You're not getting a tax deduction for that contribution. It's post tax, and then you do the

megabackdoor roth conversion is when you convert those dollars into a WROTH. So it is a great way for individuals that are high incomers that can't contribute to a wroth to be able to make those contributions, and you can. Obviously, it's up to thirty thousand, five hundred thirty eight thousand, five hundred, so it's a sizeable amount of dollars that you can put in post tax and

then convert it to a wroth. Now, the only caveat to this is your plan has to allow you to do this, right, So some plans don't allow you to make any additional contribution as an employee above the thirty thousand, five hundred, even though a defined contribution plan, which is what a foreign K plan is, allows the rules allow you to put up to sixty nine thousand. Each plan has a planned document that really is the document that governs the full one K plan, and so if your plan document does not

allow for it, you just can't do it. So you can check with your HR manager to see if it's allowed. So what you really need to check with them is if you can put in post tax contributions above that thirty thousand, five hundred amount. And if you can, well, then you're going to be able to and you have a wroth component. You have to have a wroth component of your full one K plan. So if you have

those two criteria, then you can do a mega backdoor wroth. And you know, you could do another as I mentioned thirty thirty eight thousand, five hundred, but you don't have to. You can do it ten thousand, you can do twenty thousand, whatever that number is. But it's a great way to save more dollars, especially if you're if you're in the income phase out level for a ROSS, which many high income earners are phased out from being able to contribute. Now you can also do a backdoor wroth contribution.

So that's where you if you're phased out from contributing, either as an individual or couple, you can put money into a traditional IRA and then turn around and convert that into a WRATH. Now, the only requirement to be able to do that, or reason that where it's going to work well is if you don't have any outside pre tax iras. And the reason for that is when you convert those dollars, you have to do a weighted average of any

of your outside iras. So for example, let's say you had an outside IRA that was let's say it was one hundred thousand dollars and you did the seven thousand dollars into a traditional IRA and then converted it, well you would not be you would only be You have to kind of look at the total value of your accounts, which is the one hundred thousand plus the seven thousand,

so it's one hundred and seven. So when you do the weighted average of that conversion, most of those dollars that you'd be converting would be taxable. It would not be your post tax contribution that you put into into the traditional IRA. So that's why if you're going to do a backdoor WROTH contribution, it's a great tool to be able to contribute to a WROTH if you're above the income levels. But you really only want to be doing it is if you don't have a pre tax IRA as well, and that could be

the case. You could have money in your full and K but not money in a outside IRA. And then you know the final element I want to bring up as far as a WROTH opportunity is with five twenty nine plans, and really five twenty nine plans are a great tool for grandparents and parents to be able to save for their college education for the kids or grandkids. You can put there's really no limit out of how much you could put in there.

In New York State, each individual that contributes can get up to a five thousand dollars deduction on the New York state taxes, So that would be

ten thousand dollars for a couple. Let's say your grandparents say you want to contribute to your grandkids, So it's ten thousand dollars per individual that you're contributing, So that would be you know, if you have five grandkids, that would be five times that ten thousand, and you know with that the other element, I'm sorry, it's just per person, so just be ten thousand

for the household. But with that, those dollars grow tax free. And the other thing that's important is if it's a grandparent that's contributing, then that individual that those dollars do not get considered for financial aid. If for a grandkids, it's because it's considered those grandparents' dollars, So that's really valuable. The other thing is those dollars can be used for room and board is as

well as the tuition cost, and they come out tax free. The big thing with this too is now there's a rule that starts actually in twenty twenty four that if the dollars have been in there for more than fifteen years, you can go ahead and convert those dollars into a wroth iray up to thirty five thousand dollars in total, and it would be at seven thousand dollars per

year. But you can convert that for your child or grandchild, so you know, it kind of goes and alleviates the concern that some folks have, which is if they set up a five twenty nine plan and their kids didn't go to college, that those dollars could get stuck there. But now they can convert those dollars into a wroth irray, which is a great advantage.

The other thing that it's very important too, is more and more five twenty nine plans could be used from a state planning perspective because those dollars that are in there, when the owner of those accounts passes away, then it is not there's no requirement that you take those dollars out. So you think about

it. If you have dollars in a traditional iray and you pass away in a goes to a non spouse, you have to take those dollars out within ten years so it's a taxble event over ten years, whereas you can build up that five to twenty nine plan into a sizable amount, and then when the grandparents pass away, it goes on to the parents or kids. There's no requirement to take those dollars out. They can stay in there and continue to grow tax deferred. So really it's one of those things where you can

set this up as a grandparent or a parent. You can use it for your kids or grandkids. If there's any dollars left over, they can convert them to a roth, that's one thing they can do, and or you know, they could potentially use them for their kids down the road, or it can be moved over to you know, maybe one of your kids doesn't have any children, but maybe another one does. It could be moved to

any of those kids. So there's a lot of flexibility. So I would really encourage you when you're thinking about putting money to your grandkids, think about the five twenty nine plans, because the other thing to remember is if you open an account and what's called a UTMA account for your grandkids when in New York State, when they turn eighteen, that is their account, right, so you know you put ten thousand dollars in their twenty whatever that number is,

and you want to use them to use it for something, you have to appreciate that when they turn eighteen, that's their dollars. They can take those dollars and blow it however they want. And you know, many eighteen year olds are not ready to receive a ten or twenty or more thousands of

dollars. So the other thing to appreciate is if you put those dollars into a UTMA account that's in the child's or grandchild's name, that when they're they're applying for financial aid, those dollars are going to be their dollars and it's going to weigh very heavily against them. Whereas if you have a five to twenty nine plan that's in the grandparents' name, it's not considered at all until distributions are taken. So it is a very favorable account to use for contributions

for college and for financial aid. And so just something to consider. I think it's very important that you do that. Well, folks, we're going to be wrapping up here soon, but just want to remind you to go into our website Bouchet dot com and we always have a lot of great blogs out there. I think it to me, it's a testament to the real talent we have in this firm that such smart folks writing on such interesting topics.

And also there's a video of our Stated the Economy presentation, which is an event that we have every year and we've been doing this for about nine years now, and we do it. We had one at the eighteen sixty three Club in Saratoga at the Track and then one at Franklin Plaza and we

outline our thoughts on the markets and the economy. We go through some elements that were new kind of investment ideas we're working with our clients on and it really gives you a good flavor of what our thoughts are from an investment perspective, portfolio perspective with the marketing and economy. And if you want to know what was it looked like to be a client of ours, would highly recommend

it. And again you get to see the talent of our organization because boy, there's just really great presenters with that, and I would highly recommend that you go on the website, look at the blogs, and look at that video. Well, folks, we spend an hour together. It's been great to be here with you as always and look forward to coming back in the

week's coming up. You're listening to Let's Talk Money, brought to you by Bouchet Finance Group, where we help our clients prioritize their health while we manage their wealth for life. Folks, take care of yourself, take care of each other, and enjoy watching the Super Bowl.