Let's Talk Money

at Bouchet Financial Group and I'm your host today. Let's talk money as always. If you have any questions, I encourage you to call in with those questions and you can reach me at eight hundred talk WGY. That's eight hundred eight two five five nine four nine, or you can email. This is what we've started in the last few months here. If you're too shy to be on the radio, whatever, you want to email us, you can email us at ask Bouche at Bouche dot com. That's

ask Bouche at Bouche dot com. And Bouchet spelled b o U c h e y, So either way, go ahead and either send me an email or give me a call and we can chat. As I always say, you may be doing your fellow listener favor by asking a question that they have as well, So give me a call. I hope that you're doing well today on this you know, gorgeous winter day, right, I'll tell you this, this is a winter. We've actually had winter this year,

you know. I think we've had snow on the ground since Thanksgiving, and we got more snow coming this weekend and this week. You know, if you listen to the show, you know that you know role to be speaking. I'm a hot weather guy, but at the same time, I do love when winter comes and so lots of activities. I mean, snow shooting, skiing, downhill, cross country, snow abailing, and skating, whatever it is, get out there and enjoy it. So hopefully you're doing that. It's definitely a good winter

to do it. It feels like we've been kind of missing out on this for the last number of years. But a lot to discuss on the show today, certainly discussing the markets. We got some economic data on inflation expectations and the labor numbers for January. We'll also discuss the number of financial planning topics, including a question that we get quite often is whether you should pay off

your mortgage or not. And also we'll be discussing the Secure Act two point zero that was legislation that passed a few years ago that has really impacted four one K plans in a number of ways. So we'll discuss that. But again, if you have any questions, feel free to give me a call. You can reach me at eight hundred eight two five five nine four nine. Again that's eight hundred eight two five five nine four nine. Send me an email it ask Bouchet at Bouchet dot com.

So let's talk about the market. So really kind of flat for the week. We started off down a little bit because we had the news about the tariffs with Canada, Mexico and China. And we've talked about this, you know, to the extent that tariffs and this was at twenty five percent, we're actually going to be put into place against two of our major trading partners, Canada Mexico, and they had already stated they would retaliate with tariffs of

similar amounts. That's not a great thing, right, it really is not. There could be some circumstances where if you have very defined tariffs for particular products or situations, that can work. But certainly having a trade war with two of your biggest trading partners not a great thing. But what we saw within twenty four or forty hours was

that those issues were resolved. Whatever you know that was Trump was looking to get from those two countries, they got what seems to be at least a thirty day reprieve, give or take on those tariffs. And so we've said this all along that you know, there could be situations where these terrorists are actually applied, and if it's widespread, it would be problematic, in particular as it relates to inflation.

You know, probably one way or the other, consumers are going to be seeing prices go up if those tariffs were actually put into place, and then there would be retaliatory tariffs from those countries on items that were shipping out, and that would be problematic for our producers of those goods. So again it's hard to look at this and say, hey, if you have a trade war, this is going to be a positive for the economy. The answer is probably not. But again to the extent that it is used as

a negotiating tool in general, it seems to be pretty successful. Uh. And in general, you know, you sell with the market. By the end of the day on Monday, Uh, the the market had kind of come back from the loads that it started at and for the week it was just more or less up or down. Nothing there's no real direction right now. But you know, for the year, it's still up about two point five percent for the year.

That's the S and P five hundred. And you know, we are seeing a little bit difference this year as we start the year that the small MidCap elements are actually doing fairly well, which is that surprising to the extent if you have a strong economy, and you know, if industrates a little bit lower from where they were, then you're probably going to see the small and MidCap

sectors do pretty well. They you know, certainly, the last number of years, it's been by far only the real large cap and certainly even the megacap the mag seven that has really been driving the market performance. So you know, to see some other asset classes start to do a little bit better relative to those large cap it's not surprising. It's something that you might expect, but you know, then we saw some additional data that came in the Michigan

University of Michigan. Consumer confidence came in below expectation, and it showed a bit of a decline in consumer confidence. You know, that could be driven by a number of different things, and it can be kind of volatile, but it's certainly something to be aware of because, as we've talked about this before, the consumer makes up around seventy to seventy five percent of GDP gross domestic product, So you really want to make sure that the consumer is

in a strong spot. Now, what we've had is this bifurcation of you know, individuals depending on where they stand with the income spectrum. So individuals that are in the lower income spectrum, they have been more, right, they have been the raises they've seen have been smaller. They are more impacted by inflationary pressures, in particular as it relates to energy and food and also as it relates to rents. Right, So I've talked about this. Before you think about this,

you have let's take two families. One that's more in the higher income spectrum, one that's in the lower income spectrum. The family that's in the lower income spectrum that maybe have minimum wage shops and or you know, just slightly above that, a larger part of their budget goes towards food, and it goes towards rent. Now, rent over the last three or four years has gone up quite dramatically, and so that would be a real squeeze on their budget,

as has food. Right, you can't whether it's eggs or whatever, other foods, every time you go to the grocery store, you realize the prices continue to go up. That that family over the last two three four years has been really squeezed hard. Now let's look at the other family. They're more in the higher income spectrum. They own their house, right,

They're not renters. They own their house. So what has happened over the last three or four years for them is the price of their house has actually increased in value, in many cases in a fairly dramatic fashion. They probably refinanced their house. Right now, approximately fifty percent of all mortgage holders in the US have a mortgage rate below

four percent. Below four percent. That's amazing. So not only has the price of their house gotten up quite dramatically, they also have lowered the cost for their mortgage because now they refinance and their mortgage is under four percent. Chances are this family also has money in the stock market right just the way it usually shakes out, that has done quite well over the last three or four years, and they probably have gotten larger raises than that family

in the lower income segment. And oh, by the way, you know, they also have to get food, but food as a relative percentage of their budget is less than that lower income family. So again you have this real kind of difference between these two groups, and you're seeing it in the spending numbers. So, for example, luxury goods in general are doing quite well, both actual goods and services. You know, you're seeing this. Airlines are seeing this with travel.

You know, you hear about this with travel both domestically and internationally, where there's some European cities that are almost trying to close their doors. There's so many travelers in particularly US travelers going over there, and you know, in general that tends to be more affluent individuals. The other thing that I think highlights this as well is amex American Express. His head just blowout numbers, just you know, really big numbers over the last year or so. And

when you think about that, those AMEX cards. Those usually tend to be higher income earners. These are people that are willing to pay anywhere from two hundred and fifty to six hundred and fifty or even up to one thousand dollars a year to hold those AMEX cards. So you think about it. If you want, you can go get a VISA card and you know, basically in many cases not pay anything for that card, or you can upgrade and get an AMEX card. Now, those AMEX cards

usually have additional privileges for paying those dollars. So if you're paying six hundred and fifty dollars, you know, maybe it's with an airline or with a hotel chain, and you're going to get definitely get some privileges by paying those dollars. But you know, you're only paying six hundred and fifty dollars for a credit card if you're doing well and you're spending a lot of money on that credit card. So you know, to hear that am is doing well, to me, that indicates that the higher income

earning group is doing well. But you know that's definitely driving this current, this good current economic situation. Right. So you know, we heard in the last couple of weeks that GDP gross domestic product was up two point five percent, which is below you know, some of the other prints that we saw eight over the last year or two, but well above or certainly above kind of the more moderate approach that we saw or growth that we saw

for most of the twenty tens. Right, So you know, from about twenty ten almost a twenty eighteen nineteen GDP group between well one and a half percent. That was kind of what defined as the new normal for economic growth. So again we're still seeing strong economic growth. And the labor numbers, you know, came out quite strong. So you had labor numbers for January there was one hundred and

forty three thousand jobs added. Now that was down a little bit from expectations, but still a very strong number by all means. And you had an unemployment rate that actually dropped to four percent. And to me, you know, we talked about this concept of a soft landing with the economy. You know, in general, i'd say it's been achieved to the extent that you still have a strong economy. You've had an inflation that has come down. Now we're not at that two percent target that the Fed has.

But you know what most people don't realize is that two percent target. It's a little bit arbitrary, right, you know, it is a target that other federal banks have around the world, but really it was only put out there starting in twenty twelve, and so there's nothing necessarily magical about that number. And I think the FED has said that listen, if we're getting close to that two percent target or we're in the range, they're probably going to be okay with it. Now we'll see, you know, what

actually comes to bear. But you know, we're still you know, inflation is you know, in the high two's right now. And now that one piece is a little bit problematic is that you had wage growth at four point one percent, which is great, listen that that's fantastic, but you also had inflation expectations that increase. So about a year ago, inflation expectations was at three point three percent. Now for

the next year they're at four point three percent. So you may say, Marty, what does that have to do with actual inflation, But expectations of where inflation is going to go is a big driver of where inflation actually goes. And the reason for that is is that if consumers are expecting prices to go up at a higher rate. Well, guess what, you know, sellers and producers are usually well aware of that, and that gives them latitude to start

increasing prices. And that means that consumers would be willing to pay more for goods and services because they're expecting it, right, They're already kind of budgeting it, they're already aware of it. And you will see producers and sellers take advantage of that, right because if I'm selling a good goods or service and I can increase my prices and therefore increase my bondom line and it will not impact the demand for my goods or services, well, I'm going to do that.

That's what companies do. And so if you have higher inflation expectations, that usually translates into higher inflation over the next six to twelve months. So, you know, I think what you're going to see is just kind of this new normal perhaps of where we're in this environment where interest rates may remain at the levels where they are, and yes, they're well above you know, where they were, you know, three years ago, four years ago, and even

for much of the twenty ten. But when you look at it from a historical perspective, these interest rates are really more normal, right, you know, this is kind of where we were for many, many years or even decades, and so you know, to me, if we can find an equilibrium for the economy at these higher interest rates, I actually think that's a better piece to be. I like this better than getting back to some of those very low, kind of almost artificially low interest rates levels.

I mean that becomes where it's more problematic for a number of different reasons. And you know you're really hearing it from the Fed, which is they did not reduce rates in their last meeting. There's another meeting coming up in March. I think, all things considered, the expectations is that they will not lower rates then. And you know, there is now much more debate as to whether they can be lower rates at all for twenty twenty five,

which is quite a change for what expectations were. But I've said this all along, which is, if you can have a strong economy, if you can have inflation even where it is or hopefully moving slightly lower, and if you can have interest rates where they are right now, all those things basically come together for a good economic environment. And you think about it. You know, we see this

all the time with clients of ours. In general. You know, one of the biggest things that interest rates will drive is the housing market, and the housing market remains very strong. You know, of course, with the housing market, it can depend on individual markets and cities, but broadly speaking, across the country and particular here in the Capital region, the

housing market is very strong. And you know, I think that to me is a sign of a good, healthy economy, and that strength certainly is a strong demand for houses and also a little bit of a week supply as well. And that kind of goes into my next topic, which is, you know, we get this question a lot whether people should pay off their mortgage, and just want to kind

of dive into that for a little bit. But before I do, again, if you have any questions, you can give me a call at eight hundred eight two five five nine four nine. Again that's eight hundred eight two five five nine four nine, or you can send me an email at ask Bouchet at bouchet dot com. Again that is ask Bouchet at Bouchet dot com. And Bouchet is spelled b O U c h E Y, so let's let's go into that that question as to whether or not you should pay dout your mortgage. And again

we get this question a lot from our clients. And you know, there's a financial talking head, uh, Dave Ramsey. And if you can't tell, I'm not a big fan of some of these talking your heads because uh, you know, they they seem to kind of spout out different things with they don't necessarily work with clients, right, they don't see how these uh this guidance impacts people data day. And one of his big things is to not have any debt. And you know, all things considered, I could

actually support that to a certain extent. I think, you know, there's a problem in the US where people take on too much debt, certainly too much consumer credit card debt, and that's problematic. But at the same time, if you have a mortgage at you know, two and a half three and a half four percent, I mentioned to you that fifty percent of all mortgage holders have their interest rate at under four percent, there is no rush to

be paying that down. You know, if if you can go ahead and save those dollars and said and get it invested, then that's what you should be doing rather than rushing to pay that down, because the basic analysis is is that over time in a diversified portfolio, let's say, over five, ten, fifteen, twenty years, can you earn more than three percent in a diversified portfolio, And I willing to bet that you probably can't. That seems like a

reasonable about to take. So in that regard, you really should be rushing to pay down the mortgage with the only exception is if you just can't handle that well, and there could be some people in that category. Well, we'll come back to this discussion, but we have Steve from Albany on the line.

And you can buy individual bonds certainly. You know, if you're on SWAB or Fidelity, they have a whole section where you can go out and buy them. And you know, the thing you have to appreciate is that if you're going to buy individual bonds that you know there's default risk, right and you know in general, if you're buying Apple bonds, or you're buying Google bonds, or you know, any of the blue chip companies, that the fault risk is very low.

And if you buy a five or ten year bond, you're going to probably get a better yield then you're going to be on the US treasury, which is yielding around four point five percent right now. So you think about it. You buy a corporate bond, you lock in for ten years and you can get maybe five percent interest rate on that and the blue chip company, so that that is a good way to do it. Now. There are many ETFs and mutual funds that have exposure

to bonds. One of them that's kind of out there is very well known as b O n D UH. That's a diversified kind of an intermediary bond fund that primarily has corporate bonds and has a good yield of around five percent plus. And there are a number of other ETFs out there that you know, it depends if you want a little bit more risk as far as credit risk. Do you want a little more duration going out longer? Uh? Do you want you know, something that's

a littit shorter, more liquid. So it depends on exactly what you're looking for. Uh, But there are a number of ways to get exposure. And then you know, one of the other things too is you know, if you're in a higher income bracket here in New York State for your tax will accounts, you can use what's called a muni bond fund where those media bonds you don't pay any federal or state taxes. Uh, if you're if they're New York State media bonds.

good one. And that's a great way to get you know, bond exposure with good corporate bonds and to get the good yield without either taking on too much credit risk or taking on too much maturity risk term risk.

So again you have to appreciate it's a different risk equation return equation than the stock market. Hey, I'm gonna have to sign off here, Steve. It was good asking your questions. Folks. Come back and join us as we take your questions, you'll listen to Let's Talk Money, brought to you by Bouchet Financial Group. Will we help our clients prioritize their health while we manage their wealth for life. Welcome back, folks. For those of you just joining us,

my name is Martin Shields. I'm the chief Wealth Advisor at Bouchet Finance Group, and I'm your host today for Let's Talk Money. It's great to be here with you to answer any questions you may have regarding your financial planning or investment managing concerns. And I encourage you to call in or email me with those questions. You can give me a call at eight hundred eight two five

five nine four nine. Again that's eight one hundred eight two five five nine four nine, or you can email me your question at ask Bouchet at Bouchet dot com. That's ask Bouchet at Bouchet dot com and Bouchet is spelled b o u c h eu y. So again, the number of things I want to discuss, let's just kind of go back to a couple items here. One

just to fallow up with Steve's question on JETPY. You know, I think it's important to appreciate and it was a great question, both a couple of different questions, but the one on JEFPY was very good because you invest, you know, you have to appreciate both what that risk and return

equation is for any investment. And you know what, that's what we like JEFPY because it's a nice We put it in our alternative category, uh, and it really fits well in there, to the extent that it does very well in and up market, but not as well as the SP five hundred. Right. So last year when the SP was up in the twenty percent range. JEFPY was

up in the in the team range. And you know what happens with that fund is, as I mentioned, it's a cover call fund, So you're basically selling a call, which is an option for another investor outside the fund to be able to buy the positions in the fund.

And they're only gonna they're going to pay you money a yield of six percent or so to do that seven And the only reason they're going to exercise that call is if the position goes higher, they'll exercise it and they'll have a gain in place because of that. But what it's going to do is going to cap you out, so you're never going to do as well

as the sp does on the upside. But again, as I mentioned in twenty twenty two, when stocks were down twenty plus percent, bonds were down eighteen percent, that JEBI fund, because it tends to have more defensive positions like utilities and consumer staple funds like Procter and Gamble or Walmart, and they have good dividend yield, that fund was actually between the cover call premium and the income and just the performance of the stocks was actually positive for the year.

So again and it doesn't mean it's always going to be like that. I mean, there it is a stock fund, so there's there's certainly risk to it, but it does do a great job of diversifying that type of performance. And so you really want to to Steve's question, you know, why would I hold that versus holding the S and P five hundred, Well, you would hold it if you want a portfolio that has that diversification, right, And you know, certainly, as we talk about, we live in a world of

global risk. Uh. You know, the things that I we can kind of highlight to you in the beginning of the year are probably not even the ones that are going to be problematic. But if you as you get older and what gives you peace of mind to be able to sleep at night is kind of dampening some of that risk, then putting in these types of positions into a portfolio helps to do that. So, you know, very important that you you know, understand when you're looking

at anything. You know, even we you know, have people come in they talk about, you know, the performance of a fund or or even a portfolio, and you know, just give them guidance to appreciate that if they're getting great return or great yield, there's usually some element or risks they're taking on that they have to be aware of. And you know, many people don't appreciate that. Right, you're not going to get high return without some element of higher risk. The two go hand in hand. And that's

the equation just in general with business. The other elements that you want to be appreciated, you know, consider is liquidity you want to have. Make sure you know having a liquid investment investment is much greater than That's the problem with annuities is you know, they lock you up for ten twelve years and you can't sell and oh, by the way, if you do, you get a penalty.

And it also don't have transparency into what you're holding many times, and that's also the issue with private investments, whereas if you have a publicly traded ETF, you can see what's in that ETF on any given day and you can sell it in any given day. Now, the downside is that people overreact when it's going up or down on any given day. But you know, again you have to appreciate that from an investment perspective, there's value

in that. If you needed your money, you could sell that day, get your case action the next day, and there's there's value to that. There's a reason for that. We're going to go to an email question that came in from Dennis says, I currently hold a few mutual funds with large amounts in them, and the catal gains they pay out are driving my tax is too high. Do you have any suggestions in terms of ETFs that

did not provide current income or tax penalties. Do you find that higher income couples really benefit from filing taxes separately? All right, so let's take that first question. So Dennis highlights one of the main reasons that we do not like mutual funds. One, they tend to have higher fees if they're actually managed. And you look at performance of a mutual fund versus an ETF, which is an index fund. Usually over a long period of time, about seventy five

to eighty five percent of those ETFs index funds. I'll perform the manager that you pay more for plus with a mutual fund if you have that in a tax will account that mutual funds distribute gains at the end of the year November December of a year, even if you don't sell it, right So whereas an ETF ninety nine point nine percent of the time, you only experience a gain in that position in a taxile account is

if it's appreciated in value and you sell it. So for example, you could buy a muta fund in September of this year and then in November the muta fund could actually be down and you can get a gain distributed to you. That can actually happen. So not only did you not sell it, not only is it down since you bought it, but you're getting a gain distributed to you. So really, when you think about it, they're

very inefficient tax from a tax perspective. So and to you know, so his question, do you have any suggestions on terms of ets that do not provide current income? I mean any of the ETFs, None of them do, right, So that's my answer to you, Dennis. You know we like you know, you want broad market exposure. If you listen to the show, you know we like qqq sh that's the Nasdaq one hundred u SHB is the Schwab

broad market uh. And then from a portfolio perspective, what we utilize is different sector funds to provide exposure to sectors. But any ETF does not provide up. Again, it's not one hundred percent, but ninety nine point nine percent of time do not distribute gains like a mutual fund UH. And now there it is possible you can check. There are a number of fun families that are converting those mutual funds into ETFs UH and if you can do that,

that would remove that those distributions. So you might want to check with your mutual fund provider to see if that's occurring, because again, it's becoming much more aware to everybody that that that structure, that wrapper of a mutual fund in a taxi account does not work well. And then do you find that higher income couples really benefit from filing taxes separately, I'm gonna say no, I can't

think of I'm not saying there's not any situations. And there can be very unique situations where that might work in your favor. You know, maybe you know if you're trying to qualify for financial aid or something, but it really is not the case. The only time I see this a little bit is if one spouse is frustrated with how those spouse is handling their taxes. Sometimes they'll do that, but in general, it does not benefit them by filing separately. All Right, we're gonna go to the

phone lines. We have Alan Alan you there.

does the cost basis way in? And what I'm liable on taxes?

way back when that appreciated so much. So you can actually go in and select the actual positions and the actual cost bases that you want to sell, and that way you can minimize your gains. But yes, you know, if you've got gains in all those holdings because the stock price keeps going up, then you will once you sell that, You're going to have a gain in that in that transaction. And you know, I always remind people

that's a good thing, that's what you want. But you can minimize those gains by looking at particular tranches and selling those and selling the ones with the highest cost bases.

So you're gonna pay taxes on that gain of eighty thousand, and uh, you know it's either going to be fifteen or twenty percent for federal if you're over five hundred thousand dollars in total income, will be a twenty percent plus a three point eight percent medical device arch charge, and then you're gonna pay uh, state taxes. But yes, it's on the gain, so that it's the what you

sell for the total proceeds less the cost bases. And it's this is assuming that it's all long term capital gains, meaning that you've held it for at least a year.

Can I avoid the taxes by doing this at a certain age? So first of all, you have to be seventy point five to do a QCD. You cannot do it before seventy point five. So now inherited IRA, I'm sorry, rm ds start at seventy three these days, it used to start at seven and a half. But qcds are still at seventy and a half. And you can do qcds on both your IRA or an inherited IRA. But again you have to be seven and a half, so

you cannot do that. I'm not sure who your advisor is if they're telling you that you can, but you have to be seven and a half in order to do a QCD. But great question. And you know, by the way, qcds for any that's a qualified charitable distribution that basically means that you can make that distribution to that charity has to be a five H one C three charity and you don't pay any taxes that at distribution. And if you are required minimum distribution age rm D

H then it meets that requirement. So if your rm D is ten thousand and you do a QCD for ten thousand, then there you have no tax on that distribution to that charity. So it is a great way to make charity contributions because now many people don't get the deduction for their contributions because of the higher fixed deduction that exists out there standard deduction. So this is a great way to actually not pay taxes on your

distribution from your IRA. And oh, by the way, to the extent you have r and ds meet your rm ds. But again even with inherited irays, you have to be seventy and a half to do that. Okay, we're going to go on to another email. This is from Paul. He says, give my personal circumstances, I am trying to have as much income as possible generate copal gains at

the fifteen percent tax rate. I prefer that do you have any suggestions on how to do this versus ETFs as an example, which either build and defer and given my age, it will take tax time bomb and non qualified money. So great, great question here, So you know a couple of things. You know, you can look at this by making a determination if you're gonna put more money into a pre tax account, so you know, into a four and K or into an IRA, or you're

gonna put money into a taxable account. Right, So if you're gonna put moneyes into a IRA pre tax dollars or a full and K, when you take those dollars out, their taxes ordinary income, which is you know, much higher tax rate in for most people than long term capital gains at fifteen percent. So you know, to answer Paul's question, you know he can put more money into a taxble account and now when he has sells those positions, he's not paying ordinary income. He's paying more likely fifteen percent

on those capital gains. The other the other thing too is if you have qualified dividends, which is basically have to hold those positions for a year, and are some other requirements that those qualified dividends are taxed at fifteen percent not at the higher ordinary income level as well. So it can be very beneficial, and this is what we tell clients. You know, it can be very beneficial

to put money into a taxbile account. Yes, you'll have to pay taxes on it, but certainly to contrast that with putting some people put dollars that are not pre tax dollars, this is post tax dollars into an IRA, and to me, that doesn't make any sense at all for a number of reasons, but one of which is any gains in that account, for any distributions over your cost basis, you're gonna pay ordinary income, or you can put it into a taxable account and you only pay

fifteen percent capital gains. Now, with all of this said, you know, and this is also with Paul, to the extent you can't, you're always better off putting into a wrath. Right, So you know, if you're gonna put a taxbile account, that money in that taxable account, you've already paid taxes on it. Well, if you can put those same dollars into a wrath, you've already paid taxes on those dollars as well. But any gain, any income in a wroth,

you never pay taxes on it. So again, first and foremost in this strategy, Paul, you're going to want to try to maximize dollars intoard WROTH. And you know, these days, whether it's a rowth i array or pretty much all four and K plans now have a WROTH component. You know, you really want to maximize your dollars into a wrath before you put moneys into a taxi account. But again,

putting dollars into a taxbile account can be beneficial. The other thing that's very important is from a state planning perspective, dollars in a taxi account get a full step up of cost basis at your day to death. We just met with a client recently and great client, and it's done so well for us. Literally it is portfolio. It's

billions of dollars right now. It's all gains just about and you know, we've kind of come to the agreement that, uh, you know, there's going to continue to let us manage it, let it grow, and you know at some point when he passes away, you know that all those gains will get wiped away. Now that tax law could change, but under the current tax law, uh, that's what exists. And

so you know versus you can trast that with an IRA. Uh. You know, with an IRA, if you pass away and it non spouse gets it, let say your kids, they're gonna have to distribute those dollars more or less equally over the next ten years. Uh. And that's all going to be ordinary income. So you know, taxb accounts have gotten to be much better from an estate planning perspective than IRA is a particular traditional iras. Now, you know, back five six plus years ago, you were able to

stretch those IRA distributions. You're there required for herited IRA over the lifetime of the individual, but that's gone a way, so now it's got to be out within ten years. So you think about this. If you have a million dollar IRA or two million dollar IRA, which you know definitely exists out there, and you have let's say two kids, you have two million dollar IRA, they've got to each be taking out up to, if not more than, one

hundred thousand dollars annually when they receive this, uh. And so that's a lot of ordinary income they're going to get hit with, assuming that they're probably working as well. So just something to consider. But if you have any other questions, you can give me a call at eight hundred eight two five, five, nine four nine, or send me the email at ask Bouchet at bouchet dot com. You don't have too much time left, but I want

to highlight a couple of things. Uh. You know again, a few years ago they Secure Act two point zero was passed and these laws basically refer to four one K plans and there's a number of things that were impacted. But a couple of things that are important. One is that if you are going to be sixty, sixty one, sixty two, or sixty three this year, and the determining factor is if you're going to be that in December

of this year. Starting in twenty twenty five, the ketchup amount that you can put into a four to one K goes up from seventy five hundred dollars, which is what it is for anybody fifty and older, it goes up to eleven thousand, two hundred and fifty dollars. So again, if you're going to be sixty, sixty one, sixty two, or sixty three this year in December, that's that's the

time point you want to be looking at. In December of this year, you can increase your ketchup amount to eleven two hundred and fifty dollars in your four one K, up from seven thousand, five hundred, which is the normal for anybody fifty and older. Again, just more confusion and complication out there for everybody, right, but it's a nice

little perk for people who are in that age. The other thing to remember is that if you just started a four one K plan for your company and you have more than ten people, and you started it as of basically December twenty I'm sorry, as of twenty twenty three. If you start your full and K plan starting this year, and for all other full and K plans, if you have more than ten people that you're starting, you have

to have what's called automatic enrollment. And what that means is when your participants your employees actually have access to the plan, they're automatically enrolled, right, they have no option to opt out. They're automatically enrolled at three percent contribution rate, and there's what's called an escalation clause of one percent annually up til they get to either ten percent or fifteen percent. Right. So that's new and it started again. It starts this year for any plan started in January

of twenty twenty three or later. So if you're in that category, you've got to make sure that you have this in place, because otherwise the Department of Labor could be after you. You don't want that. So you know, in general, this is a good thing for participants. It forces them to automatically participate, and it slowly, very slowly, starting at three percent that's the initial amount, slowly increases the amount they have to contribute by one percent annually.

And you know, again the rule of thumb is you should be contributing between ten to fifteen percent of your gross compensation annually into a retirement plan. And you know this is where people struggle to get there. Well, this basically automatically does that. Now, most people don't like the government telling them what they should be doing, but the fact of the matter is this is what's in their best interest. And if you do this, I say all the time, you will be in a good spot and

set up for retirement. There. Earlier you do this, the better off you are. If you don't do this, I don't care you know how much money you make. In particular, if you make more money, you're not going to be in a good spot for retirement. So again, it's one of these things where you know, you've got to be aware of these laws. There are Ristell laws, Department of Labors, you know, want to mess around with them when it

comes to a ristal laws. But now the other thing to remember is also put in place are if you're starting a four and K plan this year, over the last couple of years, there's a lot of tax credits are in place to incentivize you to do that. And I can't go into all of them here, but because they're fairly complex, but if you have any questions, you can feel free to call into the office and we can chat. But they also are incentivizing companies to put

full and K plans in place. And you know, basically there's been data that has come out recently that there are larger and larger amounts of people that are contributing to their fall and K and that's a good thing, folks. You know, really for the majority, vast majority of people, you know, pensions are going away. You know, they don't they don't exist anymore. And you know, the four and K is the primarily way or fourth three B that

people have to be able to save for retirement. So you know, if by having them more available, by you know, incentivizing small business owners to provide them, and by increasing the amount that people are putting in. You may not like it, but it really is in your best interest long term to make sure that you're well prepared for retirement. And I tell you, I said this all the time. When we work with a client that's well prepared for retirement, it's a great thing. If we see somebody that's coming

in and they're not in a good spot, it's really painful. Well, folks, it's been a great hour. Hopefully you learned a little bit. As always, I appreciate being here. You listen to Let's Talk Money, brought to you by Bruchet Finance Group, where we help our clients prioritize their health while we manage their wealth for life. Folks, enjoy this winter weather coming in and go Birards. Take care of each other and take care of yourself.