February 5, 2024 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for February 5, 2024

Preparing To File Your 2023 Taxes in Retirement

In this Episode of the Secure Your Retirement Podcast, Radon, Murs, and Taylor discuss how to prepare to file for the 2023 taxes. The first things you should be looking at include your different sources of income and tax forms connected to that income. Listen in to learn the importance of working with a professional tax preparer to avoid misreporting different income taxes.


Preparing To File Your 2023 Taxes in Retirement

Taylor Wolverton sat down with us to discuss prepping your taxes in 2023. Taylor helps our clients with a focus on tax planning, and she shares a wealth of information in our recent podcast that you’ll find invaluable. Waiting until the last minute to file your taxes is stressful. The earlier you begin, the less anxiety and stress you’ll experience. What do you need to be thinking about when preparing to file your 2023 tax return?

2023 Tax Planning to Tax Preparation in Retirement

Taylor Wolverton sat down with us to discuss prepping your taxes in 2023. Taylor helps our clients with a focus on tax planning, and she shares a wealth of information in our recent podcast that you’ll find invaluable.

We’re going to be covering all the insights she provides in the podcast below, but feel free to listen to the episode, too.

Waiting until the last minute to file your taxes is stressful. The earlier you begin, the less anxiety and stress you’ll experience.

What do you need to be thinking about when preparing to file your 2023 tax return?

Gather Tax Forms

  • Report all 2023 Sources of Income; to name a few:
    • W-2 from your employer
    • Self-employment income and all amounts reported on 1099-NEC (nonemployee compensation)
    • 1099-INT for interest income 
    • 1099-DIV and/or 1099-B for investment income
    • 1099-R for IRA/401k/annuity/pension account distributions
    • SSA-1099 for Social Security benefits
    • Documentation of rental income
    • Any other income that applies to your situation

With money market interest rates around 4% – 5% this year, the interest reported from those accounts will likely be higher than you’re used to. If you made transfers to and from accounts in 2023 to take advantage of higher interest rates or for any other reasons, be sure that you track down your tax forms from both institutions. 

Rental Properties

Rentals are popular and allow you to make an income from properties you own throughout the year. We have many clients with rentals who will need to report this source of income on their tax return. Supply your tax preparer with as much documentation as you have available; deducting expenses associated with your rental property will lower your overall tax bill.

If you have an Airbnb or long-term rental, consider the following:

  • Work with a CPA/professional tax preparer to not avoid misreporting information
  • Maintain documentation on your rental income
  • Maintain documentation for all expenses relating to the rental
    • Include mortgage interest from your form 1098

Standard Deduction vs Itemization

Everyone who files a tax return can at least take the standard deduction. If you had certain expenses during the year that add up to a value greater than the standard deduction, you can use that value as an itemized deduction instead. If those expenses add up to less than the standard deduction, you’ll take the standard deduction since that will offer the greatest benefit in lowering tax liability.

Itemized deductions include:

  • Mortgage interest
  • Real estate property taxes on primary home
  • Personal property taxes
  • Charitable donations (subject to dollar limitations)
  • Medical expenses (subject to dollar limitations)

It can be a lot of work to gather the above information, but especially if you’ve just started working with a tax preparer that is new to you, it may be worth submitting all of these documents to see the outcome. If you took the standard deduction last year and these items haven’t changed much, you probably don’t need to supply all of these documents. Every person is unique and there’s no right or wrong answer for everyone.

Note: For the year during which you turn age 65, your standard deduction increases. Verify your date of birth with your tax preparer to be sure you are receiving the additional standard deduction; otherwise, you may be unnecessarily overpaying taxes.

Reporting QCDs on Your Tax Return

Qualified charitable distributions (QCDs) are something we talk a lot about because they’re such a valuable tool for anyone who is charitably inclined. You can donate to whatever charities you’d like to support while reducing your tax bill in doing so. As an example, let’s assume you’re in the 22% tax bracket and made a $1,000 QCD. As long as you meet the requirements, you’ll save an immediate $220 in federal tax. 

Overview on QCDs:

  • Must be over age 70.5 when the donation is made
  • Donation must be distributed directly from your IRA and be sent to a 501(c)(3) charitable organization
  • Limited to donating $100,000 through this method in 2023
  • The donated IRA distribution is completely federal and state tax free because you won’t claim the distribution as income on your tax return

QCDs are reported as normal distributions on form 1099-R from your IRA. For that reason, you will need to be the one to provide the additional context to your tax preparer by letting them know the dollar amount of the QCD. For example, let’s assume you took $50,000 in distributions from your IRA and also made a QCD of $5,000 from the same IRA account in 2023. Your 1099-R will show $55,000 in distributions with no specification that $5,000 went to charity. You need to be the one to let your tax professional know to input the $5,000 as a QCD. Otherwise, it may be reported as a fully taxable distribution which negates the whole purpose of QCDs and may result in an unnecessary overpayment in taxes. 

Reporting Roth Conversions and Contributions on Your Tax Return

Like QCDs, tax forms reporting Roth conversions will not differentiate Roth conversions from normal distributions. It is true that whether it was a distribution to your checking account or a conversion to your Roth IRA, the distribution is taxed the same; however, not specifying that it is a conversion can have other consequences. 

If you’re under age 59 ½, you cannot take a normal distribution from an IRA without penalty (unless you meet certain exceptions), but you are eligible for Roth conversions at any age. It will be helpful for your tax preparer to know the additional context around the dollar amount of the Roth conversion to eliminate any unnecessary penalties that would otherwise attach to early distributions from an IRA. 

The second important specification is not just that it was a Roth conversion, but WHEN it was processed. If the WHEN is not communicated to the tax preparer, it could put you in danger of owing unnecessary underpayment penalties. For example, one of our clients did a Roth conversion in November and paid estimated taxes in November. Since the IRS is a pay-as-you-go system, they want you to pay taxes at the same time you’re receiving income/distributions, so the timing is another detail that will be important for your tax preparer to be aware of.

Context matters!

Reporting Contributions on Your Tax Return

Roth IRA contributions will not impact your taxes and are not reported on tax returns at all. You will receive a form 5498 from the account you contributed to, but oftentimes, this form isn’t available until May. You don’t need to delay submitting your tax return until you receive this form as it is just to show the contributions that you made.

If you do have any questions and are a client of ours, feel free to give us a call and we’ll help clarify anything that we can.

Want to schedule a call with us?

Click here to book a call or reach us at (919) 787-8866.

June 20, 2023 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 20, 2023

This Week’s Podcast – Mid-Year Tax Planning – Why So Important in Retirement?

It’s important to look at the previous year’s tax situation because some things, like Roth conversions and qualified charitable distributions, need to be done before the end of the year in order to be reported on your tax returns.

Listen in to learn the importance of coming up with a good tax withholding strategy to avoid tax liabilities and bills during tax season. You will also learn about the tax benefits of donor-advised funds and qualified charitable distributions.


This Week’s Blog – Mid-Year Tax Planning – Why So Important?

Why are we talking about tax planning in the middle of the year? Mid-year tax planning allows you to get everything in order before the end of the year to lower your tax obligation as much as possible.

In June of 2023, we’re doing a lot of work to get ready for our tax planning and strategy meetings we’ll be having later this year. A lot of prep work goes into these meetings because it’s one of the most intense that we’ll have all year.

Mid-Year Tax Planning – Why is it So Important?

Why are we talking about tax planning in the middle of the year? Mid-year tax planning allows you to get everything in order before the end of the year to lower your tax obligation as much as possible.

Note: We are not giving specific advice. We’re talking in general terms and advise you to discuss your own tax planning with a professional who can recommend the best method to reduce your tax burden.

In our most recent podcast (listen to it here), we have two members of our team with us, Nick Hymanson, CFP® and Taylor Wolverton

In June of 2023, we’re doing a lot of work to get ready for our tax planning and strategy meetings we’ll be having later this year. A lot of prep work goes into these meetings because it’s one of the most intense that we’ll have all year.

Why Do We Do Tax Planning and Tax Strategy Before the Beginning of the Year?

First, we want to review your tax situation from last year so we can understand potential moves we can make before the end of this year.

For example, Roth conversions or qualified charitable distributions (QCDs) need to be made before the end of the year to be reported on your tax return. Changes to your contributions or account conversions must be completed before December 31st of the year to be claimed on your taxes.

Mid-year tax planning helps us get everything in order to have a discussion with our clients on which strategies we can employ to lower your tax burden.

How Financial Planning Ties into Tax Planning

Financial, tax, and retirement planning are all linked together, or they should be if they’re done professionally. We have clients who first retire and live on cash in the bank, and then they start taking money from an IRA or a required minimum distribution.

In our process, at the beginning of the year, we have a financial planning meeting to update where their income is coming in this year, and we review what happened in 2022 (or the year prior).

From an income perspective, we want to understand where your income came from last year. We want to understand any unique changes that may have transpired this year and your income last year.

During the year, you may have income coming in from multiple sources, and it’s crucial that you have a good tax withholding strategy in place.

Proper tax withholding will allow you to avoid any unexpected tax surprises the following year. Having conversations throughout the year allows us to position our clients to pay less taxes by making smart financial decisions.

For example, if you want to sell a highly appreciated stock, we may recommend holding off until the beginning of the coming year because there are tax advantages.

We perform a full software analysis of our clients’ past year taxes to look for:

  • Filing status
  • Social Security number accuracy
  • Sources of income (interest, dividends, etc)
  • Withholdings 

We look through all these figures with our clients to help you better understand the tax obligations of each form of income. If you want to adjust your withholdings or make income changes, we’ll walk you through this process.

For example, you may not want a refund at the end of the year and want to withhold just enough taxes to be tax-neutral. You won’t pay or receive anything at the end of the year from the IRS.

With a mid-year tax plan, we have a better understanding of the steps that must be taken to reach your goals in the coming year.

Things to Do Before December 31st

Retirees must do a few things before the end of the year by law. Here’s what you need to know:

Donor-advised Funds

Sometimes we learn from a tax return or through a conversation with our clients that they give $10,000 to charity per year. Can you itemize? Sure, but the standard deduction is so high that it often doesn’t make sense to do this.

What’s the Standard Deduction

For your reference, the standard deduction in 2023 is:

  • Single: $13,850
  • Married filing jointly: $27,700 (65+ goes up by $1,500 per spouse)

Itemization won’t make sense if you have less than the standard deduction amount in contributions.

If you do a donor-advised fund, you can stack charitable contributions and use the multi-year contributions as a deduction this year.

Let’s assume that you put $40,000 into a donor-advised fund. You can still make $10,000 contributions to your favorite charity, but you can then take a $40,000 deduction this year to negate your tax burden. Itemizing is the best course of action if you have more deductions than the current standard deduction amount.

We may recommend this strategy if you expect a very high tax burden and want to lower your tax obligation.

Opening a Donor-advised Fund

We use Charles Schwab for our funds, but you can use a custodian of your choosing. A donor-advised fund looks just like any other account held at Charles Schwab, except for a few differences. Checks are written directly to a Schwab charitable account and funds are held directly in this charitable account. You can assign contributions to charities of your choice.

Funds remain in the account and can be withdrawn and moved to the charities in the future. Once you put money into the fund, you cannot reclaim it in the future. You can decide annually on who you want to distribute contributions to.

However, it is very important that Charles Schwab has information on the charity that you want to disperse the money to and that everything is in order for the distribution to be made problem-free.

Qualified Charitable Distribution

Qualified charitable distributions (QCDs) are another tactic that you can use if you’re over the age of 70-and-a-half. Age requirements and the time of your distribution are crucial and one of the reasons that people often work with a financial planner.

We can make sure that you’re making the QCD properly and get all the tax benefits that go along with it.

Note. If you have a required minimum distribution (RMD), you can set up the QCD to be taken directly from this. A key benefit is that if the RMD never hits your bank account, you don’t have to pay taxes on it.

Making Out Your QCD Check

In terms of Charles Schwab, we want to make sure that the QCD check is made out directly to the charity and not the account owner. If the check is written to the tax owner, it is considered taxable income.

We need a few things when writing out the QCD check:

  • Name of charity
  • Charity’s tax ID
  • Charity address
  • QCD amount

One important thing to note is that there’s an option to send the check directly to the charity or to the account owner, who can then hand-deliver the check to the charity.

The most important thing is to have the check written to the charity itself with the tax ID.

What You Need to Gather for a Tax Planning Strategy Meeting

Whether you work with us or someone else on a tax planning strategy meeting, you’ll need a few documents to get started:

  • Last year’s tax returns
  • Income for the coming year
  • Changes to income in this year
  • Change to cost of living on Social Security

We really need to know your sources of income and if any changes to this income have occurred in the last year. Cost of living adjustments are a big one and will impact your taxes, but all of this is information necessary for a tax planning strategy meeting.

IRMAA is another thing that we want to consider, and we have a great guide on the topic, which you can read here: IRMAA Medicare Surcharges.

Medicare looks back two years to determine your surcharges, which is something we can plan for with enough time and a strategy in place. We want to manage your Medicare surcharges so that you don’t need to pay more than necessary for your Medicare.

Tax strategy can help you better prepare for your taxes and make strategic moves that will save you a lot of money in the future.

We have a team of people working with us to handle all these moving parts and walk our clients through the process.

Want to learn more about retirement planning?

Click here to view our latest book titled: Secure Your Retirement.

May 1, 2023 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 1, 2023

This Week’s Podcast -Maximizing Tax Benefits by “Bunching” Charitable Contributions

Listen in to learn how to bunch your charitable contributions into one year using the donor-advised fund. You will also learn why the donor-advised fund is the most flexible version of giving through the bunching strategy.


This Week’s Blog – Maximizing Tax Benefits by “Bunching” Charitable Contributions

Taxes are something very few people are excited to talk about. We know that it’s far more exciting to talk about maximizing tax benefits when trying to secure your retirement. And that’s what this entire blog post is about: saving money by bunching your charitable contributions.?

Maximizing Tax Benefits by “Bunching” Charitable Contributions

Taxes are something very few people are excited to talk about. We know that it’s far more exciting to talk about maximizing tax benefits when trying to secure your retirement. And that’s what this entire blog post is about: saving money by bunching your charitable contributions.

Note: We have a podcast on this very topic, which you can find here.

Why Should I Consider Charitable Contribution Bunching?

If you’re charitably inclined, you can save a lot of money by bunching your charitable contributions together. In the current tax code, whether you’re single or married, you receive what is known as a “standard deduction.”

Before this deduction, people would itemize all of their deductions one item at a time. The IRS decided that instead of itemization, people should have a standard deduction that doesn’t require them to list all of their deductions and saves the IRS time, too.

In 2023, the standard deduction is:

  • Single person: $13,850
  • Married: $27,700

When you take this deduction, you cannot itemize. Anyone who is giving money to charity will not be able to deduct their donation unless it is itemized, which really only makes sense if the figure is higher than the two listed above.

Bunching charitable contributions is one way to use deductions to maximize tax benefits.

Examples of Standard Deduction vs Itemizing Your Deductions

Today, the standard deduction has changed so much from 2017. In 2017, a married couple filing jointly would have a standard deduction of $12,500. With the figure being $27,700 in 2023, it becomes much more difficult to reach the amount of itemized deductions to justify not taking a standard deduction.

For example, let’s assume someone is charitably inclined and gives $10,000 in a calendar year.  The person also has $13,000 in other deductions, bringing their total deduction to $23,000. Since this figure is lower than the standard deduction, it doesn’t make sense to itemize.

However, people like getting tax benefits from giving their money away, and this is where bunching comes into play. A donor-advised fund is the perfect way to leverage bunching, and we’ll be talking about this type of fund more in the next few paragraphs.

Let’s assume that every year, you give $10,000 to charity.

In 2022 and 2023, instead of giving $10,000 each year, why not “bunch” it into an account that allows you to deduct $20,000 in 2022? You don’t even need to give all of the money out in 2022.

When you do this, you can deduct:

  • $20,000 in contributions
  • $13,000 in the other deductions that you have

Adding up all of these figures, you can deduct $33,000 in expenses, which is much higher than the standard deduction. You’ll deduct more from your taxes in 2022 using this strategy and can still take the $27,700 deduction in 2023.

  • How can you bunch all of your charitable contributions into a single year?
  • Do you need to give the full $20,000 in a single year?

For many people giving money to charity, they make a commitment to give a certain amount of money each year. Your church may need $10,000 a year and a lump sum of $20,000 may not be beneficial for them.

Donor-advised Funds and Bunching Charitable Contributions

Donor-advised funds allow you to do a few things:

  • Group deductions in one year
  • Give the funds to the account and not the church (like in the example above)

Charles Schwab, Vanguard and similar custodians will have a donor-advised fund. You will write a check to one of these funds for $20,000 and it will sit in these accounts. If you don’t want to write a check, you can also put stock in the account. Any money in the account can also be invested, which is a nice way to give even more money to charity.

When you put money into the fund, it’s an irrevocable gift to the charitable fund, but you’re in complete control over how to use this fund.

If you want, you can gift $10,000 a year to your church as long as it’s an approved charitable organization. You can log into your fund and request a check sent to the church from your fund.

However, you can bunch your charitable donations every few years by putting the funds into an account that you can control.

You can even decide to:

  • Reduce contributions
  • Give money to other charities

You don’t need to decide who gets the money when you create the fund. Once the money is in the account, you can direct the money as you see fit. Perhaps you want to let the $20,000 sit in the account for a few years and then give $2,000 of it away for 10 years. You have this option.

The only thing that you cannot do is give the funds back to yourself. After all, you’ve been given a tax break and the IRS won’t allow you to take the funds back.

Bunching can be done for two, three or more years. There are strategies around bunching that can save you more money. Typically, two to three years of bunching is what we see with our clients because it helps with maximizing tax benefits.

When you use bunching, you:

  • Save money on taxes
  • Still maintain full control over who gets the money

Donor-advised funds are available from most custodians. We work with Schwab, and they allow us to create one of these funds right online for our clients. Different custodians may have different setup requirements, but they all make it rather easy to set up your donor-advised fund. The process of setting up a donor-advised fund is as easy as opening a checking account.

 You can transfer money or stock into the account, too.

Our clients who are focused on retirement planning save a few thousand dollars by bunching their charitable contributions. If you are committed to donating a certain amount to charity each year, it makes sense to give bunching a try for yourself.

Do you want to learn more about bunching and donor-advised funds?

Click here to schedule a call with us to discuss charitable bunching with a member of our team.

2022 End of Year Tax Strategies

Taxes should be on everyone’s mind at this point in the year. Retirement planning and end-of-year tax strategies should be interlinked to help you secure your retirement and pay as little as possible in the process.

We’re happy to have CPA Steven Jarvis of Retirement Tax Services (RTS) to explain to us that with one month left in 2022, there are a lot of tax strategies we can put in place that can make a big difference this coming year. In fact, he recommends that we think about tax planning every month of the year.

However, there’s a lot to do before the calendar year flips over.

What to Ensure Gets Done Before the End of 2022

A few things that Steven explains that we need to think about, and they may not apply to everyone, include:

  • Required minimum distributions (RMDs): You need to begin taking care of your RMDs. RMDs are required when you hit 72, and if you don’t take them, you will face a major penalty from the IRS. The penalty is up to 50%.
  • Qualified charitable distributions (QCDs): At 70-½, you can begin using QCDs if you’re charitably inclined. You can use QCDs during the filing year and it allows you to give to charity with some tax benefits attached.
  • Retirees still working: Some retirees are still working and accumulating income, and they should check in with their CPAs to ensure that their taxes are in order. The filing deadline may be in April, but the IRS is anxious to get your money and will apply interest if the money isn’t received in January. You also go into 2023 knowing if you need to set up your tax withholdings.

There’s a lot to consider, and an accountant can help you navigate these complex tax considerations.

For example, let’s assume that someone at age 72 has an RMD of $30,000 and doesn’t need the money. In this case, you may want to consider a QCD if you’re charitably inclined. If you’re not charitably inclined, you’re better off just paying the taxes on the money and keeping it.

However, if being charitable is important to you, a QCD fits into your tax planning perfectly. The logistics here are very important:

  • Don’t take the RMD. Put it into your bank account and then transfer it to the charity of your choosing.
  • Do use a QCD, which allows a direct contribution to the charity without the money ever entering your possession and having to pay taxes on it.

Your IRA will allow you to write a check to the charity of your choosing. You can take the QCD and benefit from the tax deduction without needing to add it as a line item. Since most people take the standard deduction (more on that soon), this is a tax strategy that is perfect for you.

QCDs are very important tools that you can use before the end of the year to help reduce your tax burden while maximizing the amount of money the charity receives.

Standard Deductions

A standard deduction is available for:

  • Married and filing jointly: $25,900
  • Heads of household: $19,400
  • Single filers: $12,950

The standard deduction allows you to remove the amounts above from your income. So, in this case, the $25,900 is not taxable for someone filing jointly.

For many people, a standard deduction is a win because it allows you to reduce taxable income drastically.

However, it doesn’t make sense for some people to use a standard deduction. If you do not have deductions that surpass the figures above, it’s better to use a standard deduction. Otherwise, you can reduce taxes more by using line items and taking these additional deductions.

Example of Not Taking a Standard Deduction

Let’s assume that for the next three years, you plan on giving a charity $15,000 annually for a total of $45,000. Donor-advised funds (DAF) will be used in this case, allowing you to put $45,000 in the fund now and take a deduction this year.

A DAF allows you full control of when and how the funds are distributed.

The $45,000 is above the standard deduction, so you can itemize your taxes this year and reduce taxes by $45,000. In net savings, you’ll save $4,000 – $5,000 by itemizing deductions. And next year, when you don’t have a DAF deduction, you can go right back to taking the standard deduction.

Why is this important?

You can save money while giving more money to the charities that you care about.

Deadlines for End of Year Tax Strategies 

Roth conversions and contributions are going to be very important. The IRS doesn’t do us favors with their deadlines. You can carefully put money into an IRA for the previous year up until the tax deadline, but this must be done with precision.

If you have a traditional IRA, you must convert to a Roth IRA before the end of the calendar year.

There are two main things to consider if you’re unsure whether a Roth conversion is good for you:

  1. Bob and Sue will need a lot of money one day, maybe for an RV or roof repair. The IRS will take part of the money you take out for taxes, depending on the income buckets you have in place. A Roth account allows you to pay taxes now and not be concerned about paying taxes on the money in the future.
  2. You think tax rates may go up in the future. Roth buckets require you to pay taxes now and at today’s tax rates. The money that builds in the account is 100% tax-free.

You should proactively decide when you want to pay taxes using the information above.

In our business, a lot of clients ask if there’s a rate of tax on their Roth conversion. Understanding how the Roth conversion is taxed is important and is based on your marginal tax rate.

Roth conversions increase your taxable income, depending on your other income sources. You may have a 0% conversion or one that is 22% or higher. An accountant will need to look through your finances to really shed light on your situation and the taxes you’ll owe.

However, below is a good example to review.

Example of Roth Conversion Strategies

We have an individual who is under 72, so they do not have to take their RMDS. Additionally, this individual also has money in the bank that has already been taxed. When this person retires, they’ve set themselves up to have zero taxable income the first year in retirement because they’ll live on their cash.

The person has 0 income and still has a standard deduction of $25,900 they can take.

In this case, you can convert $25,900 and pay $0 in taxes on it because of the standard deduction that you have. You can also choose to convert $40,000, and in this case, the person would pay 10% in taxes on the $14,100 left.

You can also consider leveraging long-term capital gains to pay as little taxes as possible.

Everyone reading this will want to sit down with an advisor or CPA to find things that you can do to benefit your retirement.

Bonus: Inflation Reduction Act

While talking to Steven, we asked him about the Inflation Reduction Act and what it would mean for our average listeners. The media has made this Act seem very impactful, but Steven explains that the average person will not experience a direct impact.

Yes, 87,000 IRS agents were hired, but the agency has been grossly understaffed and has funding to improve customer service and other aspects of the IRS. The chances of being audited still remain low. Steven states that nothing will change for his clients: he’ll pay every dime in taxes that you owe, but never leave a tip.

Steven provided a lot of great information and ideas on what anyone heading into retirement should be doing before 2023 to help their tax situation.

Please subscribe to our podcast for other, great informative podcasts if you haven’t done so already.

June 20, 2022 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 20, 2022 

This Weeks Podcast -Steven Jarvis – Mid-Year Tax Strategies

Are you committed to having a tax-planning conversation outside the tax season? The only way to win in the tax game is to have a proactive approach when it comes to tax planning.

It’s important to be committed to having some kind of tax-planning conversation on any topic, especially…


This Weeks Blog –Tax Planning For Retirement

Mid-Year Tax Strategies You Should Consider

We recently sat down with one of our good friends Steven Jarvis CPA to discuss tax strategies everyone should be considering whether they’re currently in the middle of retirement planning or trying to secure their retirement.

In one of our previous podcasts, we also sat down with Steven to discuss taxes.

In fact, many of our clients also started working with Steven, and one thing that we continue hearing is that he helps eliminate the stress of taxes. According to him, the stress comes from stressing about doing taxes in April rather than engaging in tax planning throughout the year.

Steven and his team work intensely after-tax season to ensure that their clients follow the recommended tax strategies. So, we’re going to pick Steven’s brain to see what he recommends for your mid-year tax strategies.

First, Don’t Be Under the Impression That There’s Nothing You Can Do About Your Taxes

Before going any further, how did you feel about your taxes this year? Did you feel like you did your duty, paid your taxes and there was nothing else that you could do? If so, you’re like a lot of people that accept taxes as being a part of life.

And they are.

But you shouldn’t leave the IRS a tip because you’re not leveraging tax strategies. Taking a proactive approach to your taxes means that you’ll minimize your tax burden as much as legally possible.

Since it’s the middle of the year, it’s time to start thinking about them to lower your coming tax burden.

A few options available are:

Qualified Charitable Distributions (QCDs)

QCDs are one of the tax strategies that we often see with our clients. Steven explains that a QCD works by:

  • Taking money directly from your IRA
  • Sending the money straight to the charity
  • Meeting the QCD requirement of 70 1/2

The money cannot be made out to you or hit your bank account to benefit from a QCD. Instead, this is a process we look at in conjunction with handling your required minimum distributions (RMDs).

QCDs are powerful because when you take money from your bank account and donate it to a charity, there’s a 90% chance you’re not benefitting from it come tax season. 


Ninety percent of people do not itemize their tax returns, so they’re unable to deduct their donations.

QCDs allow you to:

  • Gift directly to charity
  • Benefit from lower income and tax rates

Another advantage of a QCD is that it lowers your adjusted gross income, too. Why is having a lower adjusted gross income important? Your Medicare benefit costs will be lower if your AGI is lower.

So, you’re:

  • Paying less in healthcare costs
  • Lowering your taxes
  • Donating to a cause you care about

QCDs are a great way to give back and receive a benefit from it, too. However, if you’re not 70-1/2 or the standard deduction is more beneficial than itemizing your taxes, what can you do?

Use a donor advised fund.

Donor Advised Funds and How They Work

A donor advised fund (DAF) is something to consider when you can’t use QCDs. DAFs allow you not to tip the IRS and still take a standard deduction. These funds will enable you to:

  • Lump multiple years of donations into a fund
  • Taxpayers still control the funds
  • Eventually use the funds for charitable purposes
  • Get your donations above the standard deduction to itemize

For example, if you donate $10,000 a year, you may not have enough to itemize and take the deduction. Instead, you may decide to put $30,000 into a DAF and immediately benefit by being able to itemize your taxes.

You don’t even need to distribute all the funds to a charity today and can simply opt to give every year to a charity of your choice. The key is to send these funds to a charity at some point.

So, this year, you put $30,000 into a DAF, itemize your taxes, and lower your tax burden.

Next year, you’ll likely go back to the standard deduction, so you’re paying less taxes this year and not paying any additional taxes for years you don’t contribute to a DAF.

However, there are also Roth conversions, which may help you with your tax strategies, too.

Roth Conversions to Lower Your Tax Burden

A Roth conversion converts a non-Roth account into a Roth. You take money out and pay taxes on it now, and let it grow tax-free in the future. You’ll pay more taxes this year, but your money grows tax-free afterward, which is great as your retirement accounts gain interest over the years.

Should you do a Roth conversion? 

We believe everyone should consider a Roth conversion, but what does Steven think? We asked him.

  • Everyone should consider a Roth conversion if they have IRA dollars.
  • Conversions aren’t the right option for everyone.
  • Roth conversions this year happen at a discount because of the markets.

In 2026, taxes are set to go up if nothing else changes, so putting money into a Roth account protects you from higher tax burdens.

If you’re in your peak earning years, it may not be in your best interest to go into a Roth conversion.

Steven states that the only way you’re worse off is if taxes go down. But are you really convinced that taxes will go down in the near future? Most people respond with no.

In this case, a Roth conversion is beneficial.

You’ll need to make your Roth conversion by 12/31 of the year.

Finally, Steven recommends having tax conversations outside of the tax season. You need to take a proactive approach to your taxes, work with a CPA and develop tax strategies to save money on your upcoming taxes.

If you wait until March or April to think about your taxes, it’s too late.

Sit down with a professional, discuss your options and determine what tax strategies you can use this year to lower your taxes – or not leave the IRS a tip.

Click here to learn more about our book: Secure Your Retirement: Achieving Peace of Mind for Your Financial Future.

Tax Strategies for Non-IRA Brokerage Accounts

Tax strategies come into play a lot in retirement planning. Retirees, or future retirees, want to keep as much money in their pockets as possible, and strong tax planning can do just that. When dealing with non-IRA accounts, such as a brokerage account, you’ll even receive a 1099, which takes a lot of people by surprise.

We’re going to walk you through a strategy that will outline taxes on brokerage accounts.

Taxes on Brokerage Accounts or Non-IRA Accounts

An IRA is the ideal way to not have to pay taxes, but these accounts are limited. Most people will have a brokerage account of some form created to leverage other financial investments. Understanding how a brokerage account is taxed is the first step in really understanding how these taxes work.

How Taxes on a Brokerage Account Work

When you have a brokerage account, whether it be Charles Schwab, TD Ameritrade or others, taxes always work the same. Brokerage accounts are often opened when you have money in the bank that really isn’t working for you.

You want to make this money grow, so you open a brokerage account and start investing in stocks, mutual funds and other financial vehicles.

As the money grows, you’ll have gains.

With brokerage accounts, or a non-qualified account, you’ll be paying taxes on the gains in the account. Let’s assume that you put $100,000 into the account and now you have $200,000 in the account, or $100,000 in gains.

There are a few things that can happen here in terms of taxes:

  1. If dividends are paid and then reinvested, you’ll still receive a 1099, which means you’ll have to pay taxes on these dividends even if you simply kept investing the money you were paid out.
  2. If you own stock and then sell it, you’ll generate a taxable gain on the sale of the stock. There are two main ways that these gains will be taxed:
    1. Short-term: If you hold the stock for less than a year, you’ll pay a short-term capital gains tax, which is in your income category.
    2. Long-term: If you hold your stock for a year and a day, or longer, you fall into the long-term capital gains category. This is favorable, right now, because you’ll pay a lower tax rate. You can view the tax rate on the IRS’ website, but as of right now, you would be taxed at a rate of 15%[1] if your taxable income was $100,000.

We have a lot of clients who are trying to secure their retirement, and they may not want to sell off a stock that they held for a long time due to the tax bracket that they would fall into. This is where it can get tricky for a lot of people when trying to figure out the best time to sell.

There are pros and cons to investment management.

Positives and Negatives with Investment Management

Investment management will often turn into managing risks or taxes. For example, let’s assume that you don’t want to pay taxes on your Tesla holdings, and the stock is booming. You hold on to the stock for years, and natural market fluctuations occur.

Your stock holdings may have been worth 30% more three years ago, but you wanted to avoid paying taxes, so you didn’t sell.

In this case, you managed your taxes rather than your investment and the risk is that the stock went down. You’ll still have to pay taxes if and when you sell your holdings, and you lost significant value in the process.

It’s not an easy conversation to have because no one wants to pay taxes, but there’s no way to avoid them completely.

You need to decide:

  • Do you want to protect your investments?
  • Do you want to shelter against taxes?

We deal with this scenario a lot, and it “sounds” like it actually goes against what we’ve said in the past. But you have to keep reading because this is a strategy that works well if you’re stuck debating on what to do with your brokerage account taxes.

What’s the strategy? A variable annuity.

Yes, we did an entire episode on variable annuities, and we don’t like them personally. Why? You’ll be paying fees of 3% to 5% per year, but then you have to pay additional fees on top of this.

We still wouldn’t put IRA money into an annuity because it doesn’t make sense.

Wait! Is There Really an Option in the Variable Annuity World?

Yes, even though we’ve given you a bunch of negatives to think about with these variable annuities, this is one of the rare circumstances where they may have some benefit. We’ve found a positive in variable annuities when you don’t want to pay capital gains taxes.


Your goal is to save on taxes and not have to pay taxes on the brokerage account. We want to be able to alleviate the tax gain while protecting it, too. The simple plan is to put your money into a tax-sheltered product like an annuity.

In this case, you can:

  • Avoid surrender charges
  • Avoid having to pay commission
  • Liquidate the fund immediately

The only thing that you will have to pay is a $20 monthly fee. You only need to think about taxes when you make a withdrawal, which can be 10, 15 or even 20 years from now. You can do everything that you can with a brokerage account with this variable annuity.

For a small $240 fee a year with this particular annuity, you can avoid having to pay short-term capital gains or when you need to make withdrawals.

The account can even have beneficiaries that you leave the account to if you die.

If you’re interested in this type of account, please contact us to find out whether it’s a good option for you. Again, not all annuity accounts work in the way that we described above, so this is a special option that we’re using with our clients.

Not sure how to begin to secure your retirement? Click here to access our 4 Steps to Secure Your Retirement Course.


  1. https://www.irs.gov/taxtopics/tc409