Hello everyone, This is Vincenzo Tesla. I'm one of the wealth advisors here at Bouchet Financial Group. I'm sitting in and giving a well deserved break to Stephen Bouchet, who will be on live tomorrow morning. I'm also joined by my colleague Katie Buck, and I'll let her give her a little introduction about herself.
Good morning, everyone, is then, he said, I am with Bouche and I am a certified financial planner. I'm really happy to be here this morning. It's a beautiful day out and I'm excited to see where the show takes us.
Thanks Katie. Yeah, we have a lot of talent here at Bouchet Financial Group. We have nine cfps, four CPAs, and a couple other designations as well.
I'm myself.
I'm a CPA and a CFP, and I also have another designation called the ECA, which is really structured to hone in on planning around your equity compensation. So if you worked at Regeneron or you know GE and you get stock options or restricted stock, the designation really, you know, gave me the skills to kind of help folks exit those positions in a risk, you know, a way that we were managing risk and also managing taxes and mitigating them and limiting.
Taxes as much as possible.
So with the major recap from the markets this week that everything was pretty flat. So the S and P five hundred was up point four to three percent, now Jones was up point one five percent, and the Nasdaq was up point three eight percent, So really not a ton of activity in terms of, you know, the volatility in the stock market this week, So the major industries were pretty flat considering.
You know, as far as economic.
News, payroll did surge two hundred and fifty four tw hundred and fifty four thousand jobs in September, So in September we had an increase of two hundred and fifty
four thousand jobs, so it's pretty significant. I mean, the economy is showing some signs of strength, right, and you know, on the flip side, the Federal Reserve is expected to continue lowering interest rates, right, but it's kind of creating this situation where you know, we have this strong economy and the Federal Reserve is you know, expecting to you know, continue to lower interest rates.
So you know there are risks to that, right.
So we we why do we raise interest rates in the first place, because we're trying to fight inflation, right, So now we're lowering interest rates again while the economy is strong. So there's risks that you know, inflation could come back, right, and that's one of the major things the Federal Reserve is trying to mitigate.
Right.
We had a situation in the seventies where interest rates were, you know, going up and down, and you know, we had inflation, but it's stuck for an extended period of time.
Right.
We want to kind of obviously avoid that situation because that would create some serious issues in the US economy and the global economy. So it's Cybersecurity Awareness Month. We just did a webinar here at the firm. It's on our website, and I'm going to let Katie just jump in and talk a little bit more about her thoughts on cybersecurity.
Sure, thanks Finny. So, as Anny said, October is cyber Awareness Month, and I thought it would be a great time to talk about some common threats and ways to protect yourself from cyber attacks. So the purpose behind cyber Awareness Month is to educate the public, discuss safe practices, and raise awareness of cyber threats. As Benny said, we recently did a cybersecurity webinar. We did that in the middle of September and you can find that recording on
our website at bouchet dot com. So just some common threats to be aware of is definitely scammers contacting through the most popular way, which is through phone, and that's according to the FTC. The most popular form of financial transportation of fraudulent transactions is actually through cryptocurrency and bank transfers, but that doesn't mean that there aren't other ways. And I know a more common scam is to ask for
gift cards, So just be aware of that. When you receive a call and there's some type of urgency behind it, take a breath, take a second and realize and understand who's calling you. And I'd say the most important thing is if you believe that it is a family member or some type of financial institution, hang up, find the number online and call that number back and ensure that they are the people who are actually trying to become contacting you. So a popular type of cyber attack is
called phishing. It's where an attacker attempts to deceive an individual into revealing sensitive information. So if someone asks for your social security number and account number, or even some type of multi factor authentication code that may have been sent to a mobile device. Those are phishing attacks. And be aware that if someone is calling you, as I said, saying that they're a person that is a family, friend, or works or a financial institution, again hang up, find
the correct number and call that number back instead. Another way that of Another more common cyber attack is a data breach. So we've been seeing things on the news of hospital breaches, phone companies having data leaked, and this is where clients and account holders personal information is accessed and leaked online by a hacker. So I know that these are some very scary and real things, but what can you do to protect yourself? Uped at your passwords?
I know that is a very frustrating and common thing you hear, but it's true, and I'd say I myself use this, but purchase a password manager. It's a very easy and safe way to make complicated passwords and not having to keep everything down. You have one giant password that you use to access everything, and it's a great way to stay organized. Make sure that your accounts are
locked away properly. I also recommend adding multi multi factor authentication also known as MFA to your devices so it'll send you a little code that you have to type in as well into any type of log in. Make sure your view your bank and credit card statements and your credit reports consistently. Don't send personal information via email
like social security number data, birth or account numbers. And if you believe you have fallen victim to a scam, contact your bank, your credit card company, and an investment firm like Bouchet and notify those institutions immediately. We can help you, and we have help clients. Make sure that they have everything taken care of to make sure that we are aware of any type of scam they may have encountered. Next, you report your scam to the FTC,
Social Security Administration and local law enforcement. And lastly, alert your credit monitoring services. And if you can get into your accounts, make sure you change your password immediately. So if you like to learn more about cybersecurity again, please watch our latest webinar and that can be found at our website at Bouchet dot com.
Thanks Katie, Yeah, I mean you know, I forgot the messice before. I encourage all listeners to call in at eight hundred talk w g Y that's eight hundred eight two five five nine fort nine. Please call in if you have any questions at all, you know, just to piggyback off what Katie was saying. You know, cybersecurity is rapidly growing, right the industry itself, and that's really a huge reason why the tech industry is growing, you know, in whole no One with AI, cloud computing and.
You know, cybersecurity.
I mean it's there's so many ways people are coming up with to infiltrate systems, to get people's information, to see it's you know, it's it's a lot of cybercrime going on, and the cybersecurity industry is really you know, growing rapidly. Because of that, you always have to keep your head in the swivel. You know, we do trainings every week, you know, issued you know, once a week there is its called micro trainings and they're always you know,
revolved around cybersecurity. Kind of just to give us that reminder that you know, there are people out there that are looking to you know, steal from our clients potentially or make withdrawals from our client accounts and calling Schwab and you know, we always have our head into swivel and our compliance officer, uh you know, Dave Clark always is reminding us every week, Katie, I mean, correct me if I'm wrong.
Dave always basic kind of yeah, just uh.
You know, always keeping our head in the swivel, making sure that we're protecting our clients and making sure that uh.
You know, we're doing our due diligence. And we're gonna take a quick break.
I encourage all listeners to call in when we get back at eight hundred Talk w g Y.
That's eight hundred eighty two five five nine four nine.
Thanks you were listening to Let's Talk Money, brought to you by Bouchet Financial Group. I encourage all listeners to call in at eight hundred Talk w g Y eight hundred eight two five five nine four nine. So before before Katie got into a cybersecurity awareness, I was discussing the potential impacts of lower interest rates on the US economy, and there's a lot of things that this can impact in regards to the US economy and to the consumer,
which is everyone here listening right. We're all consumers in the US economy, and lower interest rates mean a lot of different things.
For us. Right, you know, the FED lower's interest rates.
It's the Federal funds rate, right, so in turn, it's basically the overnight rate that banks are allowed to loan money to other banks, so that that's the rate that the FED is setting. In turn, that affects you know, mortgages, you know, the interest rates on mortgages, you know, car loans, credit cards, and what have you. So it's basically affecting the overall borrowing rate for US consumers.
So when rates.
Get lowered, that obviously incentivizes us as a consumer to buy more, right because it's cheaper to borrow. So you know, we're talking about supply and demand and economics. You know, it increases demand right when you when you have lower interest rates. So you know, who wants to have an eight percent mortgage when you can have a three percent mortgage?
Right? So you know, back during.
COVID, interest rates work, you know, pretty close to zero in terms of the Federal funds rate. Some folks have mortgages at two point five percent, three percent. If you going to get a mortgage now you're looking at like six to seven. So, you know, really different environment, and that's kind of what has created this you know, supply issue.
In the real estate market.
Right, we have this issue where you know, not that many homes of for sale. Reason being is a lot of folks have their mortgage interest rate at three percent or even less than that. Why would they want to put their home on the market and move and get a new mortgage at a six or seven percent rate. It's not they really don't have the incentive to do so,
you know, the cost of borrowing is much higher. So with interest rates lowering, it's going to increase them in and in turn might even increase supply in the real estate market in the US economy. Right, So if interest rates go back down closer to what people have their mortgage rates at, they might be incentivized to put their homes on the market, right, So there might be some more supply, but the the increase in demand might offset that.
So you know, you know, it really encourages consumer spending as well.
Right.
You know, people you know have this situation where you know, maybe they're using consumer debt. You know, if you swipe your credit card, you know it's gonna give you a lower interest rate on your credit card bill, right, and you know, credit card bills are pretty high in terms.
Of their interest rate.
You know, when we're working with clients, I mean, a lot of our clients are really savvy financially, right, you know, they're very disciplined, right, so they're not really using their credit cards much, and if they are, they're paying off every month. But you know, when we talk to clients that do have credit card balances, you know, we're always
encouraging them to pay that off first. Right that you know, you could have an interest of over twenty percent on a credit card, right, and then you have your mortgage that's could be six seven, but it's much lower, right, So we want to kind of make sure our clients are paying off that high interest debt initially.
Right.
So, and now I was discussing before how lowering interest rates could have an impact on inflation. Right, there's a risk that if we lower interest rates, inflation can grow higher.
Right.
That's what If demand grows faster than the economy's ability to produce goods and services, it's going to create inflation.
Right.
So by decreasing interest rates, we're increasing demand. So there is a risk to that.
Right.
You know, moderate inflation is healthy, but if it's unchecked, it could erode, you know, the purchasing power of our dollar, right, and that's a huge issue.
Right.
It's going to you know, raise costs on businesses.
It's gonna you know, just not we're not gonna have as much bang for our buck. And it also creates challenges if you're saving money, right, So you know, you know, with our clients, sometimes clients have short term cash needs, right, So if a client is taking distributions out of our portfolio, we're setting that to the side and a conservative allocation of money market fund. We're taking two years worth of
those distributions. Right, if you have your IRA and you have an r m D, or you just take distributions for your funds and retirement, we're setting two years worth to the side, right in a money market fund. And those money market funds right now, they're yielding five percent. There's virtually no risk to holding your money in there. Right, So with lower interest rates, you really don't have the luxury of earning five percent on your cash, right because the banks aren't you know, they have.
You know, they're they're bringing in.
Less revenue with the lower interest rates, so they're not able to pay five percent on a money market fund. Anymore, right, they're you know, they're using your cash, but they're not getting as much as you know they they are right now, then they will be interest rates for lower.
So that really creates an issue.
And you know, back during there is a concept called tina right, and that meant there is no alternative for your cash. Right, So, like it was really hard to get a yield on cash. A lot of folks would buy us Treasury bonds. You know, they're getting two percent
over an extended period of time. You know, back during COVID when interest rates for lower obviously, but you know, it really creates a challenge in terms of earning a yield on your cash, you know, and you know in that regard it it's tough to you know, keep especially if there's inflation.
Right.
So one thing is, you know, if you're not investing your cash and there's inflation, like you're losing money, right because the purchasing power of your money is going down, you're not.
Earning any yield on it.
And with lower interest rates, yeah, you don't have any conservative you know, the short term bonds won't pay you, you know, a yield, and while your money's losing purchase losing purchase power.
You know, you're not.
Earning anything on it while it is, so you're losing money in that regard.
Okay.
You know, and as we're coming to the end of the year, something that's really important, and you know, the tax deadline is ten days away, the extended deadline, so it's October fifteenth. So if you extended your individual tax return, you have to file by October fifteenth, right, So you know, just keep that in mind.
You know, don't do anything last minute. You want to have more time to plan around filing and kind of get all of your your order, your affairs and order. Right.
You know, there's a lot if you have a complicated tax return, if you have own real estate, if you own a business, it's really important to kind of gather that information that you need, you know, have a conversation with your tax professional and making sure that you're taking advantage of all the deductions credits that you're entitled to, right, you know, these these could be some serious dollars, right.
You know, I have a client we're preparing their tax return the other day and they had a ten ninety eight, Right.
A form ten ninety eight.
Is shows how much mortgage interest you paid, you know, how many how much points you paid on your mortgage if you had got a mortgage in that year. So they formed ten ninety eight and they didn't provide it to me, but I had noticed that in the prior year they you know, had taken mortgage interest as a deduction, and you know, I had pointed it out to them, and it was you know, it costs a thirty thousand dollars tax savings right by including that deduction on their tax return.
So it's pretty significant.
They're in the highest tax bracket and you know, their mortgage is you know, has a pretty high uh, you know balance, so there was some significant mortgage interest to deduct. But you know it really, you know, these things really count. We're talking some serious dollars here that this person could have missed out on, you know, if VI had not
included the mortgage interest initially. But the end of the year is coming, right, so there's a lot of tax planning tips you could use for your end tax planning strategies aside from October fifteenth deadline. There's a lot of things you could do to sort of take advantage of your tax situation.
Aside from the actual preparation of the return.
Right, So you know, one of the major things to pay attention to is maximizing retirement contributions. Right if you have a four oh one K, a four oh three B traditional ira rawth ira, especially when it comes to your employer retirement plan, your four oh one K or your four h three B, it's really crucial to you know, kind of pay attention to the contribution limit a year
after year because it goes up year after year. Usually sometimes it will it will stay flat, but for the most over the past couple of years, it's it's gone up. So you know, making sure that the way you have your contribution set up, if you want to contribute the limit right to your four oh one k, the maximum not allowed, making sure that you're changing that.
In you know, in your payroll.
Right, So if we're going into twenty twenty five and there's an increase in the contribution limit, you want to make sure that that's accounted for in your paycheck. So it's taking the correct amount out every week and you're going to hit that contribution limit and ensuring that you know, you are maximizing your retirement contributions and you are you know, kind of working, working to make sure that you're reading
you're going to meet your retirement goals. On the flip side, you know, another tax planning strategy you could always do at the end of the year, and we do it for a lot of our clients is harvesting capital gains and losses.
Right, So if you have significant.
Capital gains, let's say you sold a you know, a rental property, or you sold a stock position you held for a long time that had significant you know, capital gains incorporated it, look at your portfolio and see if there's any positions that you can sell right to kind of offset those gains. Right, Let's say you have, you know, you put some funds into, uh, you know, a stock and it really took a dip, and you know it's
just sitting in the portfolio. But you know a lot of folks I see get really attached to some positions and you can't do that. And especially when you're you know, harvesting capital losses. You know you're going to pay tax on the capital gain in another position. Just let that investment sit there at a loss, it just doesn't make sense. So it's really, uh, you know a great strategy to offset those losses or off set the gains of any losses you do have in.
Your portfolio, you know.
And the other thing is too, there's this new technology that we're incorporating at the firm is you know, it's called direct indexing. So direct indexing is basically a way to invest in ETFs or mutual funds, basically a basket of stocks, but being able to kind of pinpoint and see, you know, how much funds you have in each position.
Right, So you know, if we're talking about a ETF.
You have money in multiple companies because that ETFs holding hundreds of companies. But with direct indexing, you're able to sell out of those specific companies individually or buy into them individually and managing it in that manner, and that creates, you know, an opportunity to harvest capital losses. Right, You're able to so if one position in your basket of stocks is down significantly, you're able to exit that position
and you know, not exit the entire ETF. So it does create some great opportunities to harvest your capital losses. And for folks that really don't have a high income, so you're able to if if you're married, you're able to have zero percent long term capital gain rate, right, And that's only if you're you know, a low income earner.
So if you're married, if I believe it's about around eighty thousand, if you make under eighty thousand including the capital gain, you can have a zero percent capital gain tax rate.
Right.
So if you're looking at your portfofitt and you know, let's say you're somebody just who just receives Social Security check and you have uh stock gains in the portfolio before the end of the year, you know, maybe reset those games, right and it's you know, getting that zero percent tax y.
If you need money from your portfolio and you know you have an IRA and uh you've already taken your r M D.
Let's say, and you have a taxable account with some long term capital gains, but you're a low income earner, use the taxable account. It's not going to be taxable if you if you're you know, entitled to that zero percent long term capital gain rate. There's a lot of things to pay attention to when it comes to your taxes.
It gets more complicated than just that, you know, but you know, there are some great opportunities even for you know, the everyday folks right like doing things like this and you know, making sure that we're maximizing your retirement contribution. It's a lot of things you could do before your end to you know, sort of just better your tax situation. So we're gonna take a quick break. Let me call I'm gonna come back. I encourage all listeners to call in at eight hundred Talk w g Y. That's eight
hundred eight two five five nine four nine. You were listening to Let's Talk Money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health, but we manage their wealth for life.
Welcome back everyone.
This is Vincenzo Tesla, one of the wealth advisors here at Bouchet Financial Group. I'm joined by my colleague Katie Buck. I encourage all listeners to call in at eight hundred Talk w g Y eight hundred eight two five five nine four nine. Before the break, I was dis Before the break, I was discussing tax planning tips for year end,
you know, just discussing the importance of it. We are going to take another break soon, but you know, when we get back from that break, I'm gonna go a little further into that, and then Katie is going to talk about retirement planning and really focus on you know, some financial plan items and discuss the difference between WROTH four oh one k's and Roth Ira. So a lot of fun stuff when we come back. So we're gonna
jump on a break. You were listening to Let's Talk Money brought to you by Bouchet Financial Group, where we help our clients prioritize our health and we manage our wealth for life.
Thank you.
You're listening to Let's Talk Money brought to you by Bouchet Financial Group. This has Bevincenzo Tesla. I'm one of the wealth advisors here at Bouchet. I'm sitting in for Steve Bouchet giving him a well deserved break.
He will be on.
Live tomorrow at eight am, and I'm also joining with my colleague Katie Buck. Before the break, we were discussing, you know, some year end tax planning tips and some things you could do to kind of better your tax situation. And one of the things that we do for a lot of our clients and we tax plan around is Wroth conversions. And Wroth conversions can give you a great opportunity to push your money from tax deferred accounts into an account that will allow your funds to grow tax free.
So when the market's down and you know, maybe in a bear market or correction, that's really the most optimal time to do a Wroth conversion. Uh, you know, really to think about it, you're moving a percentage of your tax deferred funds to a Wroth IRA which is going to grow tax free.
So when the market takes a dip, you're.
Able to kind of get those funds out of the IRA while they're depleted for lack of a better word, right, and then when the market rebounds, as it always does, it'll be in the Wroth IRA and it'll be tax free in terms of the gains on the funds that are invested.
Right. So, Wroth iras are really a great tool.
It's really important to make sure that you know you have a good balance of money in tax free accounts and tax deferred.
Right.
You don't want to have all of your money tied up in tax deferred accounts because that can create issues for you, and the issues being that when R and d H comes so require minimum distributions, or when the IRS says, hey, you know you made contributions to your four oh one k or ira, uh, you know, for all these years, and you save taxes for doing so they're saying, they are basically saying, hey, now pull it out.
We want our money, right, we will they you know, they want you to pay tax on the funds uh in the IRA or four oh one k. So when you hit rm d AH, the IRS is basically forcing you to take a certain amount out so you don't have control of your taxable income. So if you have significant dollars in a four oh one k or IRA, your rm d could be you know, pretty large, right,
it's about four percent of the account balance. So if you have two or three million in there, it could be eighty thousand, could be one hundred and twenty thousand. So they're forcing you to pull that out of your portfolio every year. And that's all tax at ordinary income.
Right.
So before rm d AH, if you're able to do ROTH conversions, it really creates a good opportunity for you know, your portfolio and you know, for your situation in retirement, because while the I r S is forcing you to recognize ordinary income, not can affect your Medicare premiums. Right because your Medicare premiums are determined on the amount of money you make, right It's called IRMA you know, or there's IRMA brackets, right like just like there's tax brackets.
So when you hit certain IRMA bracket thresholds in terms of your gross income and your tax terms, your premiums go up, you know, for both you and your spouse if you're married. So you know, not being able to manage your taxable income can create issues more so than just the tax you're going to pay, right I mean, it's basically you're paying another tax if you're an increase in your Medicare premiums due to your you know, an increase in income from an R and D or or
what have you. So that's something we really look at with a lot of clients. When they hit eight sixty five and they're eligible for Medica, you kind of have to be weary of, you know, how much income you're recognizing because what they do is they take your income from two years prior. So right now it's twenty twenty four, so they would look at your income from twenty twenty two, and that's where they would make the determination of how
much you're going to pay in Medicare premiums. Well, sometimes there's situations where, you know, if you own one rental property and you sell it and they have a significant gain in one year, you're able to like kind of contest you know, the amount they're forcing you to pay for your Medicare premium. So, you know, doing Roth conversions allows you to have a little bit more control and
retirement over your tax bill income. And you know, now that we're talking about roth iras, Katie is going to go into some retirement planning topics and she's going to discuss differences between a roth flora one K and a roth ira.
Thanks Benny, So yeah, let's talk about it. There are actually some major differences between a roth flora one K and a roth ira, So I thought that i'd touch upon a roth ira first. I think most people are more familiar with this, and then we can really compare and contrast contrast the rough four for a one k. So, as we know, Roth accounts allow people to contribute after tax dollars into an account where the growth is tax
free and where the distributions are also tax free. As Vinnie has talked about a lot, you know, having a Roth bucket can really give you flexibility and retirement so that you don't have to pay too much ordinary income tax on your funds to support your lifestyle. Roth flour one ks in roth IRA's are two different types of accounts really based on a few different variables contribution limits,
eligibility requirements, employer contributions, of applicable withdrawal rules. So there are some types of exceptions and or loans available depending on the types of account and investment options. So let's talk about roth iras for the irs. The twenty twenty four income limits for roth contributions into a roth ira is to have them modified adjusted gross income greater than are equal to one hundred and forty six thousand dollars for single filers head to households or marrying filet separate.
For married filing jointly, that's two hundred and thirty thousand dollars. So if you are out or above these limits, you cannot make roth IRA contributions for twenty twenty four. However, if you do qualify and you are under these limits, you can contribute up to seven thousand dollars in twenty twenty four, and if you're over the age fifty, you can actually add another thousand for a total of eight thousand dollars to maximize your twenty twenty four roth IRA contribution.
Just to note, you do need earned income, so you need to be working and have w two income to make contributions, so you can contribute up to your earned income amount or the limits I just said above. So roth iras generally offer a wider range of investment options than roth four one ks and you have access to your contributions to your roth ira at any time without penalty. Earnings can be withdrawn tax free after age fifty nine and a half and if the account has been open
for at least five years. Most importantly, there are no
required minimum distributions for roth Ira accounts. You can let these funds sit and grow, and there are great assets to leave behind for your errors, compared to traditional iras, where your errors will be required to pay ordinary income tax on those distributions, and most likely at a time when those beneficiaries are at a time in their lives with their highest income levels, and they also need to deplete the entire account balance in ten years if they
are designated beneficiary and that's just for traditional IRA. If you are under age fifty nine and a half. There are some penalty and tax exceptions so you can access the growth or conversions other than the death of the account owner and disability. Some include education expenses, personal emergency expenses, and qualified first time home buyer expenses. And there are a few more that are out there, but those are
just a few that I think are more applicable. So let's jump on into and talk about WROTH for one ks. I find these very interesting, and I feel like there are some people who don't realize that they can still contribute WROTH funds even if they are a high income earner.
So in twenty twenty four, an employee can contribute up to twenty three thousand dollars with a seven five hundred dollars fifty plus catchup, for a total of thirty thousand, five hundred dollars in twenty twenty four of after tax contributions. If your employer offers a roth Flora one K option,
then you are therefore eligible to make these contributions. Of course, you must be eligible for the retirement plan, but there is no income limit for you to make these contributions into a roth Flora one K. That is not the
case when we talk about roth iras. So if you do find yourself in that situation where you want to make ROTH contributions and you know you can't contribute to a roth ira, and your employer offers this roth Floura one K option, it's a really great way to make sure that you have that ROTH bucket built up in retirement. Of course, I recommend consulting your financial advisor to make sure that this makes sense for you, but overall, i'd
say it's definitely available. We are always proponents of making your ROTH bucket bigger. Additionally, if your employer provides a match, these funds will be put into your pre tax or traditional four to one K account, so it won't be ROTH funds yet. There is some upcoming legislation about this, but as of now, it's pre tax and regarding account withdrawals, to make a qualified withdrawal, you have to wait until age fifty nine and a half to access your funds,
even your contributions. This is unlike a roth ira, where you can have access to your contributions at any time regardless of age, and a ros Flourah one k requires a minimum distribution, so you have to take an r and D from the account once an account owner reaches RMDH. This is not the case if you're still working. If you're still working and contributing to a current four oh one K and you have reached RMDA, you don't need
to take a required minimum distribution out. But if you have an old four to one K with ross funds in it and you hit rmd AH, you will need to take an rm D from those accounts, and you don't want to do that. You want to make sure that these funds grow in this roth bucket tax free as long as possible. So if you're getting to that point where you have funds sitting in a roth foura one K, we highly recommend rolling this into a roth ira, and you won't. You won't be required to take the
funds out of that roth bucket too soon. Lastly, four to one k's allow employees to access loans from their accounts, although I'd say this is probably a last resort option. You can take ten thousand dollars or fifty percent of the account balance, whichever is greater, up to fifty thousand dollars. So everyone's situation is unique. There is really no one size fits all recommendation to this again, I'd say consult, consult with your financial advisor to determine what makes sense
for you. But if you do have this option to either contribute to a ROTH account or a ROTH Flora one K or a roth IRA, I recommend taking advantage of receiving an employer match in your ROTH FLOORA one K. And that's all I have back to you, Vinnie.
Yeah, thanks Katie.
I mean the roth ira, you know, it was enacted in nineteen ninety seven with Bill Clinton was president, with the Taxpayer Relief Act. That's when the roth iras you know, first came a foot, and they're such a great planning tool,
you know, in retirement and for your financial plan. I mean, you know, letting your money grow tax free is invaluable, right, I mean, it's not the best tax advantage to retirement account is always going to be HSA because the money goes in tax free, it comes out tax free, and it grows tax free.
Right, So that's really the best.
Obviously, you can only use it unqualified medical costs for you know, for it to be eligible in terms of the dibutis you're taking out of it to be tax free. But you know the wroth ira is you know, doesn't have the same opportunities the HSA have, but but it has you know, more flexibility in the spending in retirement rights your money you could you could use it, you know how you want it.
So when it's.
Growing tax free in the roth ira, and the longer than it grows tax free in the roth ira, it's gonna be more beneficial to you. I mean, if you've all heard about compound interest, you you know, you know that putting money in earlier on in your life is going to give you any yield you a better result, you know, down the line when you are retired, right so you know, a dollar a day in the roth ira forty years from now, you know that's going to compound.
You know, if you have it.
Let's say you know, all equity allocation in your wroth ira and every year you have a ten percent return on average, you know, the gains in that roth ira are going to be pretty significant, you know, over a forty year period of time. So having money in that roth ira is always gonna be beneficial for you. And like we said, you know, we do help our clients do tax planning, you know, to get money in the roth IRA.
We have Ron from Glenn's Falls on the line.
Yes, I good morning. I just want to get your your opinion or your feelings of a four H three B retirement plan.
Yep. Is there a specific question you have?
Uh? Yeah, it's it's a newly hired educator and four three B which I have never heard of until this year, and I'm just hearing about negative aspects of conversions to annuities and the heat structure and the limited number of companies that you could you choose to participate in. And if you didn't go that route, do you have any suggestions for a younger person, even if it's a taxable
situation to with fifteen percent? Yah? You know it would be after tax money, but with fifteen percent every year, just have a build up. You know, she already has a rough IRA, so that's taken care of.
Yep.
So what I would say is this, so I would definitely utilize the four or three B for sure. Right, So if she's already maxing our individual retirement accounts, you know she could put money into a taxbile account and get that invested. But the four O three B you mentioned converting to an annuity I've never heard of a plan converting the four or three B to an annuity without the discretion of you know, the employee or the owner.
Of the account.
But you're gonna be able to make those contributions to the four or three B, they're going to be tax deferred. If it has a WROTH portion, you could make a wroth contributions as well. But utilizing that four three B, it's it's basically the same thing as a four oh one K. It's just labeled differently because it's a it's a plan that's offered by a school, and a lot of charities offer them as well, and not for profits.
So that's really what a four or three B is.
It's not much different from a four oh one K in terms of the structure. You know, you're making contributions, the contribution limit is the same.
It's tax deferred, and like I said, it.
Could also offer WROTH accounts, So I would definitely not steer away from making those contributions.
On on the UH, the information of the companies that they participate in clearly says at a certain point it converts to an annuity that that's the it's it's contributory tax deferred, but then at a certain point it becomes an annuity where they guarantee you income for whatever the number of years that the annuity takes place, and it
really doesn't have much choice. And so you know that that that's really a puzzling thing because I know Steve talks about negative aspects of annuities, which which is what's stopping us from doing that. So right now we're sitting in the situation where we do not want to have that.
I mean, we got the documentation and everything indicating it says clearly it says annuity on it, and so that was gearing us away from that, and that's why I was thinking more of a factable situation, you know, just to at least ensure that you're putting away fifteen percent of your of your of your salary.
Yeah, I would discuss that further with you know, the finance office that at the school that administers the plan. You know, I'm I'm totally with Steve onto that stance about annuities. You know, we don't sell them, you know,
we tell our clients not to get into them. So definitely would look into that further because most of the four three B plans that we deal with are just folks that are retiring the automatically just roll over their four three B to an IRA and we you know, it comes over in cash where you're able to sell the investments. Yeah, obviously the investment choice or selections are limited in these types of plans, but that's just you know, one of the down sides of having.
An employee retirement plan.
When you get it out of the employer retirement plan, you're able to have more flexibility over your investments you have it an IRA. But I would just talk further with your finance office and kind of make sure because.
I've never really heard of you know, uh, four or three B.
Plan having investments that automatically turn into annuities and you're and you have surrender fee and you're kind of stuck in it. That does That doesn't make much sense to me, So I would just look further into that for you.
Thank you very much. I appreciate it.
Thanks Ron. And we also have Wendy from Half Moon in the line as well. Hello, Hi Wendy, how are you.
The fine? I'm actually calling for a question about buffered etf bufferdtfs. Yes, do you recommend them? Can you tell us a little bit about them.
Yeah, absolutely, So buffer ETFs, you know, I would recommend them, but I would make sure that you're using them in the right way. So give you an example that when the Federals are sort of raising interest rates, right, that created issues in the bond market, and you know, we ended up putting buffer ETFs in our portfolio.
And for those who don't know, buffer.
ETFs are ETFs that track the stock market, right, And there's a lot of different ones, but you know, in particular, we used the S and P five hundred and our buffered ETF. So what it does is it gives you upside exposure to the stock market, and you know it so basically caps you out on how much you can make in the stock market. And but on the downside
of the market we're to go down. It kind of protects you, right, So you know, the ETF, if the stock market goes up twenty percent, BUFFERDTF might go up ten If the stock market goes down twenty percent, a buffered ETF might be down five percent, depending on which buffer ETF you're using. So we use buffer ETFs on the conservative side of the portfolio. And like I said, we did use them in place of bonds years ago
when the Federal Reserve started raising interest rates. So when using buffer ETFs, I would just kind of have to understand what your situation is, Wendy.
You know, where are you looking.
To use BUFFERDTF So are you're looking to just put all of your funds into them.
Or uh no, we're not looking to put all it retired. We have Brokeridge accounts and we have money in a variety of ways, but we are looking for downside protection.
Yeah.
So, like I said, I would use them in the conservative side of your portfolio. Right, So if you have a sixty forty allocation, you know you you're going to want to include buffer ETFs in that forty right where you know, maybe in lieu of you know, in replacement of a portion where the bonds would be. Right, So have bonds in the portfolio as well as buffer ets, but just do it on the conservative side of the portfolio.
Okay, Okay, I'm sorry. We were lifting and for the former caller at least in Tia Crap, and I know it's now just tia so I don't know if that's changed. But in Tia Crap, the part of it was you had that option of having it become an annuity, right.
Right, Yeah, but he was saying that just happens automative. Yeah, he just he was saying that it happens automatically, to which I've never seen.
But I think that was the plan. But you've had it. You had an option to saying yes or no. I don't know if you said you didn't want it to do that. I think you got it out as a lung stumb mm hmm. But that's where the see it was.
Okay, absolutely, have any other questions, Wendy, Nope, all right, thank you for calling in, appreciate it.
All right, We're going to take.
A quick commercial break. Courage any listeners to call on me. Get back at eight hundred Talk w G Y. You were listening to Let's Talk Money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health when we manage their wealth for life.
You're listening to Let's Talk Money. This is Vincenzo Testa.
I'm sitting in for Stephen Bouchet and I'm joined by my colleague Katie Buck. Encourage all listeners to call on it. Talk WGY eight hundred talk WGY. You know, we do full comprehensive financial planning for all of our clients that we do financial planning for, and you know, one of the things that we do look at often and it's something really specific. It's your FASPA application, right, and it's the application that you put in when you're going to college.
So in specific for your parents out there, when your children are starting up college, you're putting in a Federal student aid application. And Katie's going to go into that further after we talked to John from Schenectady.
Yes, you made a statement. I think Katie made a statement that non spouseful beneficiaries of individual retirement accounts have to distribute have distributions over ten year period, but they do not have to distribute ROW. Is this correct? Please check that out.
Yeah. Yeah, So when it comes to roth IRA, that's the case.
Right over the ten year period, it has to be completely liquidated, but they don't have to take out an R and D per se.
Katie correct me if I'm wrong.
Yeah, yeah, So the roth IRA, if you're a designated beneficiary, the ten year rule will still apply, but there won't be any type of rm D. That's supposed to be coming from that account. And I'd say more so I was talking as rm DS as in, you are now the account owner of the roth ira, not necessarily in the idea of if you are a designated beneficiary, but the ten year rule does apply to roth iras. That's correct.
Yeah, you still have to take the money out if it's a raw also, yeah, but what.
We're saying is John that you don't have to take it out annually.
You can take it out at the tenth year. Right.
So with an inherited ira, a normal traditional ira, you have to take out an r m D right requirement of distribution every year and you have to liquidate it in ten years. With the raw ira, you don't have to pull out money your one year, two year, three year, four.
You could wait until the tenth year. Does that make sense?
Okay, but it has to be out for ten years, but it doesn't have to come out annually.
Right, exactly right, And usually we would recommend if the ten year rule, if you're a designated beneficiary and the ten year rule does apply to you with the rath ira, wait until you're ten. Let those funds grow text for it as long as possible.
Okay, very good.
Thank you, Thanks.
John, thanks for calling in. So we had a good show today. I was gonna have Katie talk a little bit more about you know, fast for applications, but we are nearing the end of the show. You know, really great talking today about personal finance topics, the economy. Enjoyed having Katie on and you'll hear from me soon. You know, Steve Bion tomorrow at eight am. He's going to watch one of his horses race today. So you know, everyone
have a good weekend. You were 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