Open House 2023 | RMD’s and Pie Preferences

Required Minimum Distribution: If you’re already well into the retirement planning process, you’re fully aware of the required withdrawals each year. The Required Minimum Distribution (RMD) is based on the account’s balance at the end of last year. There are a few ways to “take” this distribution—among them are donating money, taking monthly distributions, or taking the distributions “in kind.” Reach out to your advisor today to discuss your options.

Note that if you are 72+, these distributions must be completed by the calendar year’s end. Charles Schwab works on a few days’ turnaround until the first week of December. After that, it is their best effort. So, unless you’ve already made arrangements with our service team, please reach out as soon as possible to determine the best way to handle it this year.

Do Not Let Washington Determine YOUR Tax Plan: Strong diversification is a hallmark of any financial plan. If you have spoken with anyone on our team, you have heard the merits of investment diversification. Bonds, stocks, alternatives, duration, growth, value. These are all critical elements of a portfolio setup for success regardless of the future environment.

However, we commonly see a lack of diversification regarding a family’s tax plan. Let us explain.

A qualified account is any type of account where you receive a tax deduction for the contribution. Saving on taxes is a great idea, is it not? You might be asking, “What’s the catch”? You receive a tax deduction. However, when you withdraw the money, you must pay tax based on future tax rates. Common qualified account types are 401k, IRA, 403b, and 457.

If you hold 100% of your assets in these types of accounts, you are subject to future tax rate changes in Washington.

That line may concern you. We agree. Don’t worry. We have a solution. They are called Roth accounts.

You do not receive a tax deduction when contributing to a Roth account. However, when you withdraw the money, you do not pay tax at the time of withdrawal. Common types of after-tax accounts are Roth IRAs and Roth 401ks.

You can also conduct a tax planning strategy called Roth Conversions. A Roth Conversion allows you to move assets from a qualified account to a Roth account. You will pay tax at the time of conversion, and the assets will grow tax-free beyond that point in the Roth IRA.

It would be cavalier of us to suggest whether a Roth 401k at your job or a Roth conversion is right for you. That’s where your financial team steps in. A trusted financial and/or tax advisor can help you determine the best way to diversify your assets in the event of future tax law changes.

If you are a client, please reach out. We have the tools and infrastructure to assist you with this.

Business Briefing

• Inflation Head Fakes: Federal Reserve Chair Jerome Powell indicated Thursday that the central bank’s policymakers were in no hurry to raise interest rates again but would do so if necessary to cool the economy further and contain inflation. Earlier this month, the Fed kept rates unchanged in the 5.25-to-5.5% range. Inflation has come down considerably since a summer 2022 peak but remains above the Fed’s 2% target. Powell, speaking from remarks prepared for an International Monetary Fund conference, said Fed leaders had made progress but were still “not confident” they had restricted monetary policy enough to achieve their goals. “Inflation has given us a few head fakes,” he said. (The New York Times)
• Tax Bracket Adjustments: The IRS announced Thursday it is adjusting tax brackets upward by 5.4% to account for inflation. The new limits, which will give some taxpayers a break in 2024, came after the IRS expanded the brackets by a historically large 7% last year when inflation peaked. The annual adjustments are designed to avoid forcing workers into higher tax brackets, so-called bracket creep when they receive cost-of-living raises. There are seven federal income tax rates. The lowest, 10%, will apply to single filers making up to $11,600 and married couples filing jointly making up to $23,200. The top rate, 37%, will apply to single filers making more than $609,350 and married couples filing jointly with income above $731,200. (The Wall Street Journal)

Pie Preferences: Of all the possible controversies at the Thanksgiving table this year, we hope the battle over the best pie is the worst of them. It can undoubtedly be a hot topic! As Americans gear up for this food-centric holiday, Google took a look at pie preferences across the U.S.

They also looked at the popular potato preferences. Au Gratin, potato donuts, or potato soup? Depends on where you live:

Are there any must-have dishes on your Thanksgiving table?