Let's Talk Money

email ask Bouche at Bouche dot com. That's ask b O U C h e Y at Bouche dot com. We'd love to hear from you. Scott. Would you like to introduce yourself to the listening audience?

It's a pleasure to be on with everyone this morning.

of this community. I moved up to this area about four years ago, specifically to join the Bouchet team, and we're, as John mentioned yesterday on our show, really celebrating some milestones with the company. So again proud to have been a part of this team for close to four years now.

But we just hit Steve's thirty fifth anniversary as a firm, so I know in the intro it says over thirty years, but we just hit that thirty five year mark, or Steve did this week, so we're really happy to celebrate that. And also, as John mentioned yesterday, thirty years with this show, So you know, this is a great part of our jobs, myself, Scott, many of our other team members, because we love to share the information we've learned throughout our careers and that

we help our clients with with a broader audience. So again, if you have a question today, please feel free to give us a call. That's eight hundred and eight two five fifty nine forty nine. We'd really love to hear from you if there's something we can help with. So we have a great show set up today for you know, a market outlook, economic updates, some of the numbers that

John talked about yesterday. But given that Scott and I both have some tax background as well, we're going to also share some to dos and some thoughts as to how you can really prepare yourself going into this tax season, meaning you know you're going to start getting documents and what should you be doing to get organized and what are the things to make sure that you're reporting correctly

or communicating with your tax prepare correctly. But again, to get started, let's let's recap kind of where we ended the year and started with this first, you know, partial trading week of the week We've had, you know, two again short weeks in the financial markets, given the holidays, personally, I got to take some time off. So Scott, you know, going into this year, before we start talking about numbers and the market, you know, are you doing anything differently

for this year? I know it's a time when people talk about New Year's resolutions. Is there anything kind of on your agenda?

related to those two areas. You know, we have some short term you know, just working out, but also just eating well. So what about you, Nicole, Yeah, I actually.

I certainly still reach for that chocolate chip cookie unfortunately, but again trying to think about you know, I do, you know, try to exercise every day and at least eat healthy food in addition to the bad things I eat, right, But I know you have two little ones at home, and I have a four year old and eight year old, so you know, certainly don't get as much time as I would like to focus on my health. But you know,

again just trying to find that balance. And thankfully, I think with both of our careers right maybe the financial side of things come easier to us because we're coaching our clients on that all the time. You know, Scott, did you want to mention a little bit about Ryan's blog that he shared this past week.

your lifespan where you're looking at your number of years, you're really focusing on making sure that the quality of your life is what you're focusing on, just the overall have a better experience. Again, when working with a professional such as ourselves, you know we can help you with the financial aspect, we also really want you to be able to take the time to focus on your overall health because, as Steve has says all the time, you know,

if you have your health, you have everything. So really great blog that Ryan recently put out that you can check out again on our website.

So while we're going to today obviously talk about some short term numbers, you know, both for last year and also you know what happened in the market this week, also talk about some economic data, we really need to focus on the long term and that's what we do with our clients is really ensuring that we're setting them up for long term success, but also again helping them to determine what are the action steps to take towards their you know, short term goals or maybe those rests, right,

So your resolution could be something as simple as I'm going to save fifty dollars from every paycheck towards something, you know, whether that's a new vehicle, whether it's a home, whether it's a you know, great vacation. But again, you know, just setting some goals and attainable goals, right, you don't want to set it out there. I'm not going to set my goal to lose twenty pounds, because you know

that's certainly going to be a long term goal. But if I set my goal maybe to lose you know, five pounds, you know during the spring, I think, you know, that's much more attainable. But also it means that you know, again it's something that maybe I can reach and then it's going to motivate me to to do more. So again, thinking that in that sense with your financial goals as

well as taking the small steps. I know, Sam talked yesterday about, you know, saving for retirement, and we had a caller call in about when should you start saving for retirement? Again, doing that as early as possible, a little bit goes a long way when you have many

years to grow. Sam and I met with a couple of twenty year olds this week, the you know, sons or grandsons of clients, you know, just to help them with a how do they start a roth Ira and a Brokeridge account with you know, some part time work. So again, if they're twenty years old and that's a forty year timeframe, that money has to grow. Even putting one thousand dollars away today, that you know, again compounds growth makes a huge difference later on. Great, So let's

talk about the market. So, you know, we had a great year in twenty twenty four, a second great year. So you know, the Dow was up about thirteen but the S and P and nasdak twenty three and close to thirty percent on the year. You know, international markets still struggled, you know. So so that's something where you know, did see a positive return about five percent, but still struggled on the year. So and again that's where we've continued to remain you know, invested directly in the US

versus invested in the international developed or emerging markets. And again we realized that through all of the larger companies in the US, we certainly have international exposure, you know, but again from an economic perspective, we don't feel that any other country is in the same position the US is coming out of COVID certainly ten year treasuries, right, so you know, you didn't see a huge amount of movement from the beginning of the year where yields were

about four percent to four point six percent, but there were ups and downs certainly, So again you know, the ending value doesn't necessarily represent the volatility we've seen. A bond market was only about one point three percent, so underperformed cash for the third out of four years. But again we saw some nice yields, especially out of treasuries where we were investing our clients, and really oil ended

up pretty much flat. Same same story as treasuries where you saw volatility, right, You saw, you know, things go up last spring and then come back down in the fall, and really ending kind of about where we started the year at about seventy four dollars a barrel, so not

you know, a get a huge difference there. But the good news right as we this was the as John mentioned yesterday, the first time since nineteen ninety eight, we had two twenty plus years in the s and P five hundred in a row, so twenty four percent last year and twenty three point three percent this year, so you know, that's great. We also the S and P set fifty seven record highs this past year, so that's

the fifth most of all time. The most ever was seventy seven record highs back in nineteen ninety five, and the most recent year in that you know, top five years of record hiz was twenty twenty one. We had seventy record highs. So again a great year overall, you know, So what are we seeing going into this new year. Let's take a short commercial break and then we'll talk about kind of what the outlook is for this year. Hello,

and welcome back to Let's Talk Money. This is again Nicole Global, director of Financial Planning here at Bouchet Financial Group. Please give us a call with any questions eight hundred eight two five fifty nine forty nine or myself or Scott Strochecker would be happy to answer. So I was just recapping this past year and talking about what's to

come for this year. What are the expectations. No one has that crystal ball, but but you know, what are you know, again the experts out there supposedly you know, looking at so you know, we had another year where you know, mega cap stocks, tech stocks still outperformed. Right that mag seven is up over sixty percent compared to as I talked about the broader market being up twenty

four you know, twenty three to thirty percent. And as John also mentioned yesterday, the ten largest stops in the market now make up close to forty percent of the S and P five hundred, So that's the largest concentration of those top ten names in the last thirty years. So that says a lot as to the outperformance we've seen,

you know, continually from those big names. You know, we do feel that you know, valuations though, while we're not saying their companies are necessarily overvalued, we're going to need to see some strong earnings to support valuations and see continued growth in the market. So you know, we still think positive year, but maybe not the stellar years we've seen the last two years. So you know, we do still see a lot more room for growth in small

and mid cap companies. Right they rallied coming out of the election. However, again there's still you know, very inexpensive compared to the large growth and technaus, value stocks, dividends stocks, which we talk about all the time, we have some exposure in our portfolio because we believe in a well diversified portfolio. So you know, while we we do feel that again growth stocks have benefited from you know, this AI craze and and just you know the potential out there,

we do feel that other areas could benefit. You know, So while not we don't want to make it political. If there are pro growth policies and less regulation that can affect markets such as financials and industrials, whereas growth stocks. Actually, if we do see tariffs could be more affected that value aims because more of their revenue comes from overseas,

you know. So that's again no reason we've kind of stayed out of international markets at this point because tariffs would certainly have a larger effect on you know, both exporters as well as you know, international companies because we're a huge market in the US. So, you know, when we we kind of look at what analysts out there from all the major financial institutions are predicting, the estimate for where the S and P five hundred nine end

twenty twenty five is around sixty six hundred. That's about an eleven percent increase, right, so that would be a great year if we've got another eleven percent. In fact, only one out of the major kind of strategists pulled, you know, predicted it down. So again we do still see a lot of optimism out there, but also with the understanding that we're maybe not going to see you know,

the same numbers we saw last year. And it does depend how AI now is you know, not only affecting the names that started you know, kind of this this rally around what the possibilities are, but how is AI kind of applied across different markets, And I do think we're going to see kind of a broader scope of how it can be used in different businesses, different industries.

We still see it a strong tenure treasury, so you know, certainly good for investors, but it's rough for mortgage rates, right because longer term rates are tied to that ten years. So if we're you know, still at around four point six percent, we're still seeing again mortgage rates significantly higher

than they were a few years ago. So that is you know, still causing really I think a shortage of inventory in the housing market because people don't want to move and you know, not be able to get that three percent mortgage that they had a couple of years ago. So as I mentioned, cash out performed bonds again this year. But you know, again I think it's it's something that we're going to continue to look at and we monitor weekly for our clients. You know, we had good GDP.

So the year of about two point seven percent is what's kind of predicted to two point nine depending on again the estimates used for the fourth quarter. Consumer spending is still strong and the labor markets still strong, and you know, certainly again we've seen inflation come down, so you know, those are things that we're looking at. But you know, of course a really big part of this is the Federal Reserve. So Scott, you want to just do a quick recap of kind of where the Fed funds,

you know, rate has been and what we've seen. Yeah.

money market funds. So going into this year, the Feds predicting or projecting to rate cuts at this time, obviously that can change. So we'll see rates to continue to come down, and again that really impacts what you may want to consider doing with your cash.

other alternatives within your portfolio. Also, with equities having the run up that they've had, it's really a great time to overall look at your portfolio and see what sort of rebalancing you may want to do, may make sense now to shift some into you know, into the market, whether that's equities or even fixed income. Just again with not being able to get as much of a return or interest on these you know, short term vehicles like cash and money market funds.

But certainly what we do here for our clients who are receiving distributions from their portfolios, as we talk about, you know, very regularly, as we set up to two years worth of their cash needs aside and something you know, stable, whether that's short term treasury, is money market funds, because we want them to know that if we see volatility in the market, that two years worth of what they need to live on right their normal cash flow needs is not risked in the market. So think about that

when you're doing that. But again, as Scott said, for those of you out there that have been you know, sitting on a bit too much cash because it made sense and you were getting that five percent interest rate, definitely take a hard look at what you need and what should be invested in the longer term, and you know,

talking about kind of investing. You want to talk Scott just about some of the contribution rates, you know, and any changes we've seen now for the twenty two twenty five contribution limits.

five hundred. That's again just the regular contribution and then the catchup contribution of seventy five hundred and again that's gone up to buy five hundred dollars, so your max between fifty and fifty nine is thirty one thousand, and this year you'll actually see a special catchup contribution for anybody between the ages of sixty to sixty three and twenty twenty five, you can do an additional four thousand, two hundred and fifty, so your max is slightly higher

of thirty four thousand, seven hundred and twenty thousand. Though that again I want to highlight that it's really just for anybody age sixty to sixty three during this calendar year, because once you become age sixty four or older, you do revert back to the lower contribution max of thirty one thousand. So just a new thing that was written into the tax code, So I want to make sure that you are aware of these contribution limits. We did

see iras and raw iras. Their contribution limits remain the same of seven thousand dollars, and then anybody older than age fifty can do an additional thousand dollars, so their max is eight thousand dollars. For IRA is traditional I ras there is a amount of income where you know if you contribute to it and you're above that threshold, you can take it as you can no longer take it as a deduction, So you really want to be aware of that as you're looking to see where should

I park some my additional cash for rough iras. There's also an income limit factor as to whether or not you can contribute directly to your roth IRA, though there are some strategies to do it as a backdoor rough contribution, which is one thing that we'll be talking about when we do our tax to do lists sort of as you get ready for this upcoming tax season.

employee contribution potentially. So again the total limit that both you and your employer or again that can be you if your self employed, can put in is up to seventy thousand dollars for most individuals and for that group that we talked about, you know, sixty to sixty three all the way up to eighty one thousand and two fifty. So you know, we'll talk more about some of these items when we come back from the break, But thank you again for tuning in. We'd love to hear from

you after the break. You're listening to us Talk Money brought to you by Boushet Financial Group, where we help our clients prioritize their health while we manage their wealth for life. Hello and welcome back to Let's Talk Money. I'm Nicole Gobel, director of Financial Planning Care at Bouchet

Financial Group, along with my colleague Scott s Johecker. So we were talking about some of the contribution limits for this year, and again we can't stress enough how important it is to be planning, as Scott mentioned and Ryan's blog The Wealth three point zero right, the planning for the future. So even if you don't necessarily feel like it's going to make a big difference, you know, starting early and contributing early really makes a lot of sense.

I know Sam mentioned on the show yesterday. You know, you know, first and foremost, making sure that you're putting in enough to get any employer match that you might be receiving, because if you're not, you're you're you know,

really leaving some free money on the table. But again, really, you know, trying to target ten to fifteen percent of your income if you're able to long term, really that that makes the most sense because most of us are not going to have unless you're working for, you know, the government, the stately, you know, a teacher in the public school system, you're going to be dependent pretty much

on your own savings for retirement. There's there's not a lot of people that are going to have pensions in the future, so it's really important to be setting aside

those funds for yourself for your future. So you know, again we've talked about some of those limits and some unique things for those who are turning age sixty to sixty three this year, and has Goot noted, you know, once you're sixty four, you revert back to kind of the lower limits, but that age sixty to sixty three was part of the Secure Act two point zero higher

contribution limits for that age range. So certainly something to make sure you're talking to your advisor, talking to your tax prepayer, making sure that your employer is aware of those higher contribution limits for that age range, because I'm sure that there is going to be a number of retirement plans that are not being proactive and letting people know that. So make sure that you're a and utilizing

the options available to you. So I know, Scott, you dealt with kind of a unique situation too with one of our clients where now employers you know, can put their match in for via ROTH as well. Is that correct.

Even though you may not be happiness, it is subject in come taxes. So you receive a ten ninety nine R. And then in the future years, you know when you take a distribution from that money, you won't be taxed on it. Again, so again new little caveat when it comes to four oh one ks, it really depends on your situation of whether you want it to go to the WROTH or your traditional four oh one K your

employer match. And again that's something that we would be more than happy to sit down with you and see if it makes sense.

coming down for many retirement plans out there. As my understanding is, you can't make any catchup contributions if you don't have that wrath available for those who are making over that threshold. So talking about ten ninety nine hours, I'm not sure if our whole listening audience knows what

that is. Can you talk, you know, as we go into this, you know, twenty twenty five and we start receiving our tax documents, can you maybe just coach our listening audience on kind of what they should be receiving, what to make sure to look out for, you know, especially if maybe they're transitioning from you know, work to retirement, maybe they're going to be receiving some different documents.

will have received by January thirty first. Also, you'll receive you other forms like you're ten ninety eight for any mortgage interest and other documentation related to deductions, again by the end of January. Typically the next round of documents that you'll receive will come in about mid to late February, and these are your ten ninety nine's that you get

for investments and brokerage accounts. These are consolidated ten ninety nine so they bring together you're not only the interest that you've earned on your account during the year, but also your dividends reports, your capital gains, so it's called a consolidated ten ninety nine. There is the possibility of corrected ten ninety nine's for these accounts, so those will be generated after your initial ten ninety nine is issued. If you know a specific holding that you have, reclassifies

their income. You know whether it's going from a return of principle to maybe dividends. Oftentimes you know with what we're holding. Most of our client portfolios, which are ETFs, you don't see this reclassification, and more so happens if you're holding individual stocks within your broker's account. These companies often will reclassify income or at least a handful of them,

depending on what the underlying stock is. Next, after you receive your consolidated ten ninety nine you will typically it may receive your form fifty four to ninety eight, which is simply more of an informational sheet that comes out related to your IRA. It'll often give you details such as any rollover contributions that you made in addition to any you know, direct contributions that you made to an

IRA raw IRA. It also give you the fair market value of the account and also can indicate what your RMD amount was for last year. Again, so the fifty four ninety eight for twenty twenty four will be coming out in May of twenty twenty five, you know, so it is after the April fifteenth deadline. But it is more of just an informational page for you. So when

you receive it, don't worry. It's not like you miss something and need to provide it to your prepare It is more of just a double check that everything was caught that needed to be. And then typically the last forms or tax documents that you'll receive are k ones, which are a tax document that comes out if you happen to hold any private investments or masted limited partnerships or other partnerships. Again, these really range when they come out.

You know, occasionally they'll be available as early as the end of February, but these typically have a later deadline and can come out as late as you know, May June, depending on what sort of fiscal year they're reporting, so it's often delayed and requires a taxpayer to go on extension. So that's again usually the last tax document you'll receive.

let's use a quick easy example to understand. Let's say you have you opened up a raw ira and also a traditional ira, so started out with zero balances. You have too high of an income. Let's say you make

three hundred thousand as a married couple. You want to put some money into your raw fira, so you first start by making the contribution of seven thousand dollars to your traditional ira as a non deductible contribution, and then you simply convert it over roll it over into your rough ira, so again goes as a non deductible IRA contribution.

So you have seven thousand dollars of basis, you take it out, so the full seven thousand dollars, you know, because you have that seven thousand dollars of basis, is able to go over into your roth IRA and you don't pay any taxes. Again, the main caveat here is that you can't have a balance in that traditional IRA. Otherwise this strategy won't work because it does look at

a pro rata. So if you did have AE hundred thousand dollars already, it would look at you know, that seven thousand dollars, how much of it is going to be taxable in relation to the overall balance of the account?

becomes more difficult because you have that basis. But we've seen you know, some you know, very long term tax prepairers not know how to report this and and do it incorrectly, and we've had to go back to our clients and say, hey, you really need to you know, a mend your return or you need to get this corrected. So the form that you report this on is eighty six O six. But I'll take a pause there because we have John from Delmar with a question.

number even before deductions. Right, it's not taxable income, it's adjust a gross income. So unfortunately that will count when in that year. Obviously, you know, obviously anything you've done in a previous year does not affect things.

certainly something to consider. So if you're near that threshold, it's really important to look at that and again plan for that before you make a wrath contribution because it's it's a kind of a pain of the butt process, so to speak, to back it out of a roth ira if you've made a contribution and then you discover later that you're over the threshold. So for those clients we know that maybe very close to that threshold, we say hold off because you have until April fifteenth of

the following year to make that contribution. So you know, again if in the event you're close to the threshold, and you know, come December thirty, first you feel your wages are under that threshold, you start getting the tax documents that Scott mentioned for your interest and dividends and capital gains and all of that looks to be in line with being under the threshold, then go ahead and make the contribution, but much better to wait and make

sure you see them. So let's take a quick commercial break and then we'll come back to some of our tax tips. Hello, and welcome back. So let's talk money. And this is Nicole Goebel from Bouchet Financial Group, director of financial Planning here with my colleague wealth advisor Scott Strohecker. So we were just talking about some of the mistakes that we see and you know, trying to make sure

to make our listening audience aware of that. And again, even if you're working with a seasoned tax professional, we've had to do some educating on our end to really help our clients make sure that these things are reported correctly. So one of them is the backdoor off. So again this is an individual who is over the income limit

can't make a direct WROTH contribution. Instead they make a non deductible contribution in Scott's example of seven thousand dollars to a traditional IRA, but they don't have any other balance, they convert it to their WROTH. There is seven thousand dollars a basis, so that's being reported on what's called Form eight six zero six eighty six oh six, and then again it's flowing through that. You see that there is that contribution and there is that conversion, but essentially

there is no tax consequence to doing that. So again it works for people who don't have any traditional IRA bunce. It's not to say you can't do it if you do have an IRA balance. You know, I had a client who had a small IRA balance, So let's just say hypothetically, right, their total IRA balance was fourteen thousand dollars. Seven thousand of it was a non deductible contribution for the current year. Seven thousand was from a former retirement plan, right,

a part time job they had years ago. If you convert seven thousand of that, right, then what happens is that pro rata calculation. So it's not as if you can take that full seven thousand and say, well, hey, I put this in seven thousands, not you know, not taxable. Instead, it's going to take fifty percent. Right, the seven thousand dollars basis represents fifty percent of the total account value, so thirty five hundred of that amount is going to

be taxable. If you convert the full amount, the full fourteen thousand dollars, right, you're going to pay tax on the seven thousand that was not basis. But sometimes that makes sense. Right, if you again have a small traditional IRA balance and you're younger, you have many years to grow, and by doing this conversion and paying tax on a small piece of that, it's going to alloe to do backdoor conversions going contributions going forward. That might make sense.

So again, we did do that for one of my clients, and now we can do those backdoor contributions each year and we pay tax on maybe a five thousand dollars amount that they had from a former retirement plan. Scott. Another big one that we coach our clients on is qualified charitable distributions. I know, you know that's something that's also really difficult to report because there's really no tax document. Can you talk a little bit about qcds?

take from a qualified account. The ten ninety nine R will show the full distribution amount with nothing you know on the form noting that you made a QCD. So you really need to again make sure that your preparer knows the dollar amount that you did as a QCD so that they can manually back it out on your tax return. And then did know a QCD was made, So if you just you know about getting two technical I'm.

keeping that record. Obviously, there will be proof on your IRA, your retirement account showing that these distributions went to different charities, whether you have a checkbook attached to that IRA and you're writing checks directly to that charity yourself, or you're having the custodians such as Charles Schwab make that contribution directly from your account. You know. So certainly there's you know, some proof that you have on your end, but there

really isn't anything on a tax document to provide. So again we coach our clients to say, here's your ten ninety nine R but make sure that you know ABC tax preparer knows that ten thousand dollars went to these different charities and they have to again make that adjustment on the return itself. So you know, in doing so, you might ask, well, this sounds a bit complicated, why would I do this? Well, this is a great solution for people that first, you know, they may have a

required minimum distribution that they have to take. Right. So again this starts as Scott mentioned at seventy and a half, but we more likely see this happen when people have to start taking rmds and they don't necessarily need the funds for cash flow, but they have to pay tax on it. So they're essentially if they took that money, paid tax on it. Right, that's part of their adjust

a gross income. It's affecting their Medicare premiums, it's affecting other deduction levels, and then they're giving that money to charity anyway, Right, you're not getting that same benefit. And certainly if you're not giving a way enough to itemize deductions, you're really perceiving no benefit. You're paying tax on money and you're not getting any deduction. A qualified charitable distribution is better than even itemizing because it comes off the top.

So again, when you're reporting that IRA distribution, let's say hypothetically you had to take fifty thousand dollars out of your account and you sent ten thousand dollars of that to charity. Right, ten thousand dollars charitable contribution is not going to get you today to the level where you'd be itemizing deductions because we have a very nice standard deduction.

So instead, now you're reporting forty thousand dollars of taxable IRA distributions instead of fifty, Right, So that affects your total income number. And again your income for medicare premiums for you know, the other deductions are lower for other tax credits is lower by ten thousand dollars, so you don't pay tax on the money. The charity doesn't pay

tax on the money. So you know, Gay, it's a great way to take funds that you would pay tax on otherwise, donate it directly to charity and everyone benefits except for the IRS. And the good news also is if you're a New York resident, New York follows suit with the IRS, and actually you know, you get a New York deduction for that amount as well. So again only forty of that fifty thousand is taxable for New York purposes as well. Scott, So you know, before we

and let's talk a little bit. I know, we we talked about qcds. We only have a couple of minutes left about inherited irase. I know again this is something that we often see, you know, certainly reported incorrectly as well. So can you talk a little bit, you know, I know we often talk about how if you're fifty nine and a half or older, you get to exclude twenty thousand dollars per person in New York of retirement incomes

such as IRA distributions. But can you talk about the exception also for inherited diary distributions?

a quick ease the example to better understand it. So if you're let's say fifty years old or again under fifty nine and a half, you inherit a IRA from your father and mother who was seventy five when they passed away. You can then exclude your arm D amount you know up to twenty thousand dollars on your New York tax return. Therefore you know it won't be taxable. Again, it does need to be handled properly by your prepare when doing your return, so you have to really make sure that we have.