Ep. 240 – End Of Year Issues to Consider in Retirement



In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss the retirement issues to consider as we approach the end of the year. As the year ends and another begins, it’s important to have a checklist to ensure you have things closed out for 2023 and things set up for 2024.

Listen in to learn about tax planning strategies to look at, such as threshold tax brackets, qualified charitable distributions, donor-advised funds, and more. You will also learn the benefits of having a Health Savings Account (HSA) and contributing to 529 accounts at the end of the year.

In this episode, find out:

Assets and debt issues
Required minimum distributions.
Tax planning
Threshold tax bracket –Why look at your threshold to manage it?
The qualified charitable distributions tax-free strategy
Why you should Bunch contributions/donor-advised funds.
Did you or will you be receiving windfall type of money?
Marital status changes – understand where you are going and the advantages and opportunities to take.
Health Savings Account (HSA) – the tax benefits
Check if you maxed your 401k and contribute to a Roth account if eligible for future tax benefits.
How to contribute to a 529 account using your annual gift exclusion amount.
Insurance – if you have met your deductible
Estate planning – review your beneficiary destinations to make things easier if anything occurs.
Tweetable Quotes:

“You want to plan ahead if you’re going to turn sixty-five in a couple of years because whatever you make now affects your Medicare surcharges in the future.”- Radon Stancil
“If you’re looking to contribute to a 529 account, just realize that you can use some of those annual rules to get money in there for your kids or grandkids.”- Murs Tariq

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil:

Would you like to have a checklist to help you think through all the things you need to do before the end of the year? Well, if so, listen to this episode. We give you a lot of detail and actually give you access to your own checklist.


Murs Tariq:

To learn more about how to secure your retirement and all the different elements you need to know, please subscribe to our channel and hit the bell so you’ll be notified when we release episodes every Monday. We have helped hundreds of our clients gain clarity and get on the path to a great retirement. Now it’s your turn. Let’s dive in.


Radon Stancil:

Welcome to Secure Your Retirement. Cannot believe we are at this time of the year where we’re doing the 2023, what issues or things should I consider before the end of the year? It seems like we just kicked off 2023 and here we are talking about the end of the year. Why we think this is so important is, every year it’s just nice to be able to have a checklist that you walk through and say, ‘What is it that I need to make sure that I didn’t forget?” We try to do this at a point in time where if there is something, you can actually have time to take care of it and think through it.



But even if you happen to have not listened to this episode and it’s the first of the year, you can still go through many of the checklists here and make sure that those things are still set up for 2024. Because much of what we’re talking about is a couple things to close out 2023, and then there’s a couple of things to get us set up for a good 2024, kind of thinking through all those different options that we might need to think through.



So what we’re going to do is we’re going to walk through this, what we have is a checklist. So I’m just going to tell you right up front, if you’re listening to this and you’d like the full complete checklist, all you need to do is contact our office and we will share it with you absolutely free, no cost to you. We’ll just email you over the PDF of this and then you’ll have your own very own checklist that you can go through. But we’re going to give you the things that we think are important. So let’s go ahead and start, and we’re going to kind of start under this idea of assets and debt issues.


Murs Tariq:

All right, so the first thing that we want to make sure we’re taking a look at is unrealized investment losses in your taxable accounts, your taxable accounts or your brokerage accounts where you can take advantage of losses. You also can get hit with capital gains in these types of accounts, but what we’re saying here is that if you have any unrealized, that means you’re holding a position, let’s just call it Apple stock or any other stock that is in a loss position. It’s called tax loss harvesting, where you could sell that position, realize the loss, and use that loss for a couple of different reasons.



You could use it to offset a game that’s in the account or in a different account. You could use it to realize a loss that can be used against your ordinary income. We’re limited to 3000 per year on that, or you could just bank some losses. If you know that you’ve got a future liquidation or something that’s coming up, you can start building up losses. Those losses do carry forward. So tax loss harvesting at the end of the year is a big thing.


Radon Stancil:

Yeah, I’d like to just speak on that a little bit too, just to make sure you got what Murs said there. Just one other step because it kind of ties into this other thing. If I’ve got capital gains that either I’ve got to take or I sold something that had a capital gain, what Murs just told you was, you kind of get to a part of that if I have another position that has a loss to it. So really think about it, I just did this with a client. We were talking it through. He had one position that had a long-term capital gain to it, and then we were able to sell that and offsets, we would offset it by a loss.



Now here’s the other thing, let’s say that you own that stock that you really love and you go, I don’t really want to sell the stock. You could still do this strategy and after a period of time, go buy the stock back again and reset your basis. So we’re not saying you got to get rid of the stock and never own it. You could buy it back after a period of time and still own the stock, but you got some tax benefit.



All right, real quick, let’s jump over here and talk about something that Murs and I talk about very regularly, and that is required minimum distributions. A required minimum distribution is based on your age. Typically, for most people it’s the early seventies and it can kind of vary based on what age you turned, what year you were born. So I’m just going to go to the early seventies. If you don’t know if you need a required minimum distribution, then check with your financial advisor and ask your tax planner and ask, but you want to make sure that’s done and we encourage you to get that done.



You have to have that done before the end of the year. Now here’s another thing. If you inherited an IRA or a 401k, you automatically have required minimum distributions that you at least need to consider. Now, if you’ve inherited one recently, you’re able to make that decision of taking it or not. But in 10 years it has to be empty. So you might not have a required minimum distribution, but what you do have is a consideration. Does it make sense to take money out of that? You want to do that before the end of the year. All right, let’s move on to tax planning.


Murs Tariq:

All right. Tax planning. There’s quite a few here that we’re going to walk through because there’s a lot of tax planning things that we want to be aware of at the end of the year, especially going into 2024. So do you expect income to increase in the future? And there are strategies that you could consider if you do expect your income to be going up?



One is to maximize your Roth and Roth 401 k contributions going into the next year or even as we approach the end of the year, making sure that those are maxed out. The Roth IRA is somewhere around 7,500 depending on your age. The Roth 401k is much significantly higher than that. So if you see your income going up in the future, then you want to take advantage of that before it starts to go up.



And then if you’re 59 and a half or above, you could consider accelerating your IRA withdrawals as you are in a lower tax bracket. What that means is let’s say your income is a hundred thousand this year, but next year for whatever reason, it could be 200,000. Well, it could make sense to withdraw some of your tax deferred money if you’re above the age considered normal retirement, it can make sense to start withdrawing some or converting some of that as you’re in a lower tax year. So that’s just something to consider there.


Radon Stancil:

All right, we’re going to kind of jump over here to the threshold tax brackets. What we’re talking about when we say threshold tax brackets, it’s the amount of money that you make that’s adjusted gross income that could put you into a higher tax bracket or that could, and for some folks, impact you when it comes to your Medicare payments, your surcharges. And so you want to kind of look at that and really why you want to look at that and kind of have a projection here. It kind of almost comes back to this idea, if I’ve got losses, I might be able to offset some of my income or I might want to defer a little bit more money and not claim it as income if I’m able to put that money over into a 401k or something to keep me below a certain threshold.



So I’m going to say it this way instead of us talking through all these thresholds, just realize that you need to look and say, where are my brackets? Because of the way our tax code works, it does not affect you back to dollar one. It just affects you going forward on the top dollar. Just be aware that I need to know what a potential adjusted gross income is so that I can manage that. So if you do not know what that is, I’m just going to say reach out to your financial advisor or your tax advisor and just say, “Look, here’s my projected income.”



Now we do this with a lot of our clients where we’re projecting what their income is going to be. So it might be if you’re listening to this and it’s too late to do anything, that’s okay, not ideal, but at least let’s start planning for 2024. And in 2024, we might have a better strategy to say, “Okay, what are we going to do in 2024 to not have a mistake on our income so that we make sure that we’re thinking about this ahead of time?”



By the way, whatever your income is today on that Medicare issue will affect you in two years. So you want to plan ahead if you’re going to be turning 65 in a couple of years because whatever you make now affects your Medicare surcharges in the future. So just keep that in mind. Really think about what is my taxable income is going to be and plan around that.


Murs Tariq:

Yeah, I know that on the Medicare IRMAA, I know that I’ve talked to a few people and they’ve started getting those letters in the mail from the Social Security Administration telling them whether or not they’re going to have an IRMAA surcharge. So you don’t want that to be a surprise. Pay attention to your tax levels and understand where you may stand as far as a Medicare IRMAA surcharge and your tax brackets in general.



The next topic is if you’re charitably inclined. So first you got to answer the question, am I charitably inclined? Do I give to charity or do I not? Because what we’re not trying to do is talk you into giving money away just to get a tax benefit. If you’re already giving money away, well, there are some strategies for you. One that is very popular, we talk to our clients about it all the time. If you’re above the age of 70 and a half, then you qualify for what is called a qualified charitable distribution. What that means is you can take money from your IRA and just think your pre-tax, your traditional IRA, typically any withdrawal that comes out of that bucket of money is going to be fully taxable.



But if you’re doing a qualified charitable distribution where the check is made directly to the charity and not to you, then you can get it out of the IRA completely tax-free. It goes straight from the IRA to the charity of your choice as long as it’s approved and then you have no tax liability on that withdrawal. So a pretty powerful strategy. Again, if you are charitably inclined.



Also, once you reach the age of required minimum distributions, RMDs, your charitable distributions can account for a portion of what your RMDs are. So for example, if your RMD, your required minimum is 20,000 and you give say 10,000 as a qualified charitable distribution, it counts towards that. And so now you only have 10,000 left to pay taxes on as your required minimum distribution. So again, a pretty powerful strategy there.



The other one when it comes to charitable giving is going to be around this strategy called bunching contributions or setting up a donor advised fund. So a lot of people are in the position where because of how strong the standard deduction is for your taxes, that a lot of us are in a place where we just take the standard deduction and we don’t get really any other deductions on top of that. And especially if we are giving to charity, we’re not really getting the full benefit of that unless we are itemizing.



Bunching contributions can put you in a position to itemize and take advantage of your charitable giving in a calendar year. So again, for example, let’s say that you give on average $10,000 a year to a charity of your choosing on average. Well, 10,000 right now isn’t going to give you the best deduction if you’re married filing jointly because you’re not above the standard deduction at this point. But what if you said that I’m going to take three years worth of contributions or three years worth of charitable giving. I’m going to do it, I’m going to front load it in the calendar year 2023 into a donor advised fund, which we have a separate podcast on specifically what that is.



But just imagine you’re taking 30,000 from one bucket, putting it into a donor advised type of bucket. Now you get a $30,000 deduction, which puts you into a place where you can itemize and take advantage of that much better, and then you can now have the flexibility to give however you feel. You don’t have to give all 30,000 out that year, but you got the tax deduction as if you gave out 30,000 in a year. So donor advised funds and qualified charitable distributions at the end of the year are a big topic for us right now.


Radon Stancil:

All right, the other one topic here around this idea of tax planning is did you or will you, so we’ll say it that way, did you in 2023 or will you in 2024 be receiving some kind of a windfall type of money? Now that could be an inheritance, that could be stock options, that could be that you exercise, that could be a lump sum payment of some sort. That could have been a significant Roth conversion. The IRS expects that if you have this come in as that, you need to look at and say, do I need to do some estimated tax payments on those? Because if I get that money and I don’t, the IRS would say, “Hey, you knew you had this money, you knew you owed the taxes to us and you didn’t give us anything, so therefore we’re going to penalize you on that.”



And so if you don’t want to get the penalty, then you go ahead and give them some estimated tax and say, “Okay, now we’ll settle up.” And usually if I do within a certain percentage, they don’t give me a penalty cause they said at least I tried to come real close to that. So again, I’m going to come back, I’ve said this a couple of times, if you are looking at that and going, “Wait a minute, how do I run that?” We have an enrolled agent in our office. She runs those projections all the time to let you know, “Hey, what should I be paying?” You can reach out to us if you’d like or anyone, a tax advisor or a financial advisor, and they should be able to help you run those calculations.


Murs Tariq:

All right, the last one on our tax planning issues is if there have been any changes to your marital status. Now this could be that you got married this year or you got divorced or it could be unfortunately a scenario, and we happen to see this just because of the nature of our work that someone passed away and you’re going from being married to widowed. In the world of taxes in our tax bracket system, married filing single and married filing jointly are two significantly different things. So you want to understand which one you are in currently, which one you may be going to if there is a marital status change, and what advantage or opportunities that you may be able to take as you make that transition from year to year. So definitely something that you want to consult your tax advisor, your financial advisor with. If you see that change coming up in your near future on either side of the coin, if you’re going up to married filing jointly or if you’re going down from married filing jointly to single big things to consider there.


Radon Stancil:

All right, we’re going to talk a little bit now you’re getting close to the end of the year and you think, “Hey, I’ve actually got a little bit more money sitting in the bank than what I thought. That I had a good year.” Meaning could I save some more money? One of the things I love, I do myself is a HSA health savings account. Now, in order to do this, you’ve got to have a high deductible health insurance plan, which most employers offer today. If that is the case, you are able to put in $3,850 tax deferred or $7,750 as a family. So 3,850 as a single person, $7,750 if you are a family plan. And then another extra thousand if you’re over 55.



So the beauty of this with an HSA is I can put the money in, I can let it grow tax deferred, and then I can use it for medical needs without paying any tax on it. So it’s like having my money go in tax deferred and getting tax-free access to it to pay for prescriptions to pay for different items I need. Then if I keep it there until 65, I can actually use it for retirement as well. But I just think this is such a great plan to be able to have it for future medical needs and it’s just a super-duper tax efficient plan.



The other is that if you’ve gotten down here and you’re thinking, wait a minute, I didn’t max out my 401k, so you might be able to catch that up. The maximum this year is $22,500 for you as an employee and if you’re 50 and over, you can put an extra $7,500 in there. So if you look at it and go, wait a minute, I didn’t really max it out, I’ve got extra money there, then go ahead and do that.



I’m going to throw in one more. If you are eligible, you can actually contribute to a Roth IRA even if you’ve got a 401k. Now that’s not going to help you on taxes today. That’s going to help you on taxes in the future because I put it into the Roth, I’m able to have it grow tax-free. The beauty of that is as well is that I have access to that money if I were to need it. So even if it’s an emergency fund that I need to pull the money back out, I have access to it if I were to absolutely need it on the contribution part of that. All right, I think that’s all I got on that.


Murs Tariq:

All right. And then we have 529 accounts. The 529 accounts are really for college savings. So you may have one for your kids or you may be funding it or been thinking about funding one for your grandkids. And the point I want to drive home here is that you can contribute. There isn’t really a deadline or like an IRA contribution deadline or an amount or something like that, but you can use your annual gift exclusion amount to fund a 529 without having to basically follow the form that says you gave a very large gift out. So that annual exclusion amount is $17,000 a year per person. So you could use that to fund a child’s or grandchild’s 529 if that is something that you’ve been looking to do.



Also, there’s a strategy where if you need to get money out of your estate, you could do that five times. So 17 times five, that equals 85,000 that you could do in one year and it’d still go under that gift tax exclusion. You definitely want to understand the details there, but if you’re looking to contribute to a 529, just realize that you can use some of those annual rules to get the money in there for your kids or grandkids.


Radon Stancil:

All right, one thing we’re going to talk about here is insurance. If you have met a deductible this year, so if you have a deductible plan and you’ve met your deductible, don’t forget if there’s something you need medically done, go ahead and try to get it in this year because by doing so, I’ve already met my deductible, it’ll be covered. And sometimes we might not think about it that way. If I don’t get it done now and I go into January, well now I’ve got a new deductible. So just keep that in mind, manage that. And again, if you’re listening to this and you’re in 2024 already, then at least think about it in there and kind of bunch those things together cause it’s the way to deal with making my health insurance work efficiently.


Murs Tariq:

I’ll actually add one more to insurance and depending on when this episode gets released, we may have missed it, but open enrollment for Medicare is a big thing in November and December, and so you always want to be evaluating your Medicare supplements and those things like that. We have a resource that can help someone evaluate what they have and get good comparables and help them understand if there’s any advantages to switching. So make sure you pay attention to open enrollment because it is a limited window.


Radon Stancil:

All right, estate planning, real quick. A couple things here we like to tell you every year, just kind of use whatever you want to use beginning of the year, end of the year, but review all of your beneficiary designations. Sometimes things go and you think you know how it is, you want to make sure that the company has it the way you want it. Check it on your 401K’s, check it on your IRA’s. By the way, you can add beneficiaries to your brokerage account, your bank account, your savings account, and it makes it so much easier if anything were to ever occur. So make sure you’ve got those beneficiaries listed there. I don’t know, Murs, I think we might’ve hit everything.


Murs Tariq:

I think we’ve covered… Obviously this checklist is not exhaustive of every little thing that you need to do by the end of the year, but it’s a good place to start to help you at least check some of the boxes to make sure you’ve at least thought about it as we approach the end of the year. So what else you got, Radon?


Radon Stancil:

Yep, that’s it. I was just going to remind you one more time, we do have a blog written on this, but if you want the actual checklist, just contact our office. You can do that in a couple ways. You can call us, go to the website, pomwealth.net. You can go to the far right-hand corner and you can schedule a call if you got any questions. But we’ll be glad to get this out to you so you can have your checklist and just kind go through it in detail. But we thank you for listening. We hope to again have you with us next week.



We hope this video has given you some confidence and clarity as you plan for a worry-free life in retirement. But what else do you need? We have created a complimentary video course called 3 Keys to Secure Your Retirement. This video walks you through step-by-step, what you need to do to get ready for retirement. You can also check out our podcast called Secure Your Retirement. You can subscribe below.


Murs Tariq:

For more retirement tips. Check out these videos. Also, if you find them valuable, please subscribe to our YouTube channel and give us a like.