March 25, 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 March 25, 2024

Navigating Tax Withholding – A Guide for Retirees

In this Episode of the Secure Your Retirement Podcast, Radon, Murs, and Taylor discuss navigating tax withholding for retirees. When you retire, you have various sources of income, and you can choose to either withhold the tax on them, make estimated tax payments throughout the year, or do a combination of both.


Navigating Tax Withholding – A Guide for Retirees

While you’re working and earning a salary, your employer handles tax withholdings. When you retire and transition to multiple sources of income, it’s worth reviewing your tax situation to be sure you’re withholding enough to avoid any surprise payments and/or penalties due at the time you file your return.

Navigating Tax Withholding – A Guide for Retirees

Taylor Wolverton joined us on our podcast this week, and for those who don’t know, she’s our go-to person for everything taxes. This week we’re discussing tax withholding, which can change considerably when you retire.

While you’re working and earning a salary, your employer handles tax withholdings. When you retire and transition to multiple sources of income, it’s worth reviewing your tax situation to be sure you’re withholding enough to avoid any surprise payments and/or penalties due at the time you file your return.

What is Withholding vs Estimated Tax Payment?

There are two main ways to pay taxes (you can do a combination of both) which include:

  1. Withholding from income sources
  2. Making estimated tax payments

For our first method, taxes can be withheld from pensions, social security, IRA distributions, etc. Once you have your withholdings set up properly, this option requires the least amount of effort to maintain.

Estimated tax payments are another option and are due quarterly. At the time your tax return is filed, it’s common for your CPA / tax preparer to help you estimate how much you’ll need to pay every quarter with vouchers listing the amount to pay and when you need to pay it. You can go to and your state government website to make your quarterly payments.

The payment due dates are not even quarters and are:

  1. April 15th (for tax due on income received January 1 – March 31)
  2. June 15th (for tax due on income received April 1 – May 31)
  3. September 15th (for tax due on income received June 1 – August 31)
  4. January 15th (for tax due on income received September 1 – December 31)

The IRS requires taxpayers to ‘pay as you go.’ For example, if you sell highly appreciated stock before the end of March, the IRS requires that you make an estimated tax payment for the tax due on that sale of stock by April 15th of the same year. If you sold the stock during the month of November, your estimated tax payment would be due by January 15th of the following year. The potential consequence of not making estimated tax payments on time is underpayment penalties from the IRS which will be determined and reported on your tax return once it has been filed.

What You Need to Think About: Social Security

Social Security is something we review with our clients annually. You might receive your benefits immediately and your spouse years from now, so there may be a transition period for some families to consider.

The default withholding amount on Social Security is 0%. If you don’t make an election to have federal taxes withheld from social security, you may need to pay quarterly taxes on the income. We have an entire episode on taxation of social security benefits (listen to the podcast or read the blog post) if you’re interested.

Most benefits will be taxable on the federal level, but each state varies on whether they will tax social security benefits or not. The state of North Carolina does not tax social security.

If you want to withhold taxes from your Social Security, you can Google “form W-4V” or go to the IRS site (here). It’s an easy form to fill out and will allow you to start withholding taxes, with options for:

  • 7%
  • 10%
  • 12%
  • 22%

Once you fill out the form and submit it to the social security administration office, taxes will automatically be withheld. If you want to stop withholding taxes, you’ll fill out the same form again but ask for the withholding to stop.

It is not possible to withhold state tax on social security.

What You Need to Think About: Pension Income

Not everyone will have a pension, but if you do and want to begin withholding taxes from your pension, you’ll need to fill out Form W-4P. You’ll often receive the form from where your pension is coming from, such as the government or a union, but you can also find it publicly available online.

Unfortunately, the form is not as straightforward as the social security withholding form, and it’s more of a guide to approximate withholding taxes.

We recommend using the IRS Tax Withholding Estimator, which will help you fill out the form.

What You Need to Think About: IRA Distributions

An IRA is an interesting form of income because you contribute to your IRA for so long, and then in retirement, may begin withdrawals to cover expenses, and/or be forced to withdraw through required minimum distributions (RMD).

Clients turning 73 begin RMDs for the first time and will owe federal and state tax on those distributions. The amount of the RMD, the associated tax liability, and appropriate rate for withholding is a conversation we often have with clients.

If you’re starting recurring monthly distributions from an annuity, the most common default federal tax withholding is 10%. You can fill out Form W-4R to withhold an amount other than 10% or not withhold taxes at all.

What You Need to Think About: Income Not Eligible for Withholding

Some forms of income are not eligible for withholding. Some of these sources of income include interest (from a money market account, CD, checking account, and/or savings accounts) dividends, capital gains, sale of property, rental income, self-employment income, royalties, alimony, etc.

For a one-off income event such as the sale of property or sale of highly appreciated stock, you may consider making a one-time estimated tax payment.

However, if you have income not subject to withholding that recurs more regularly such as self-employment or rental income, you want to consider paying quarterly taxes before each due date during the year.

To review your situation in-depth and determine whether any adjustments to withholdings are needed, you will need to review all sources of income, determine the annual dollar amounts expected to be received, and review all current tax withholdings.

Every client’s goal is different. You may want a refund every year, or you might prefer to make a payment at the time your tax return is filed.

Your financial professional can help you set this up properly to align with your goals.

If you’re unsure about taxes in retirement, just reached retirement, or want to adjust your withholdings so that you’re not hit with a surprise tax bill, feel free to give us a call and we’ll be more than happy to help you through this process.

Schedule a call to speak with Taylor Wolverton.

Harnessing the Power of Step-Up in Basis

Step-up in basis is something that the average person only needs to deal with once or twice in their lifetime. If you’re not sure what this means or how it relates to retirement planning, don’t worry: we’ll explain in detail.

There are two main scenarios in step-up in basis you may want to focus on:

  1. You inherited property or stock.
  2. You own a highly appreciated asset and want tax efficiency on the future disposal of the asset

What is Basis?

Basis is a tax term that the IRS and tax professionals assume everyone understands, but many don’t. “Basis” is your original purchase price of an asset. Let’s say you purchased a stock for $100. Your basis is $100.

If you purchase a real estate property for $300,000, this initial purchase price is your basis. Real estate does have a few additional nuances to determining cost basis, but for simplicity, this example works.

Cost basis is required when determining the gain or loss of a stock or other security; the difference between the sale price of an asset and the basis, or purchase price, of an asset is your gain.

Understanding your basis is crucial when talking about a “step-up.”

What is Step-up?

Let’s say that you purchased a property for $100,000 and have owned it for quite some time. Then in today’s market, you sell the property for $500,000. The difference between the purchase price and sale price means that you have a $400,000 gain.

If, instead of selling that same property, you decide to gift the property to your child (or anyone else), your child’s basis will be the same $100,000 basis that you had before you gifted the property. If your child decides to sell that property, they will have to pay taxes on the property’s appreciation in value beyond the $100,000 basis.

If you keep the property rather than selling or gifting it during your lifetime, and then your child inherits that property after you pass away, that is when a step-up in basis occurs. Instead of your original $100,000 basis carrying over to your child, their basis in the property will now “step-up” to the current market value of the property at the time of your death. Thus, if the value of the property at the time of your death is $400,000, your child (or whoever inherits the property) will have a basis of $400,000.

This difference matters. In the scenario where your child receives the property as a gift and later sells it for, let’s say $425,000, they will owe tax on the difference between their $100,000 basis and the $425,000 sale price which is a $325,000 gain. In a scenario where your child inherits the property and later sells it for $425,000, they could owe tax on the difference between their stepped-up basis of $400,0000 and the $425,000 sale price which is a $25,000 gain. The table below shows a side-by-side comparison of the example numbers in these scenarios.

Gifted Property Inherited Property
Basis $100,000 $400,000
Market Value at Sale $425,000 $425,000
Taxable Gain $325,000 $25,000


The more the property appreciates in value beyond the time of a gift or inheritance, the higher the potential taxable gain will be. But an inherited property with a stepped-up basis is more favorable as it will likely reduce what the potential taxable gain could be compared to a gifted property with a carryover, or transferred, basis.

Put simply, a step-up in basis helps relieve inheritors of what could otherwise be massive capital gains taxes.

Example of Step-up in Basis and Stock

Many people hold Tesla, Apple, NVIDIA, and other stock as part of their portfolio. For this example, you purchased $100,000 worth of stock many years ago, and today it’s worth $500,000. You might be receiving dividends, and this may be all you really need in terms of income from the stock.

If you were to sell all the stock today at a $400,000 gain, this would trigger substantial capital gains tax. Another option aside from selling could be to hold onto that stock with the plan to pass it onto your beneficiaries as their inheritance. With this intention, you do need to have faith in the company for it to at least maintain its stock value or ideally continue to increase in value; be aware of the risk that the stock’s value may decline by the time your beneficiary does inherit it.

Let’s say you choose the second option to continue holding the stock, and by the time your heirs receive the stock, it is worth $1 million. By doing so, you avoid the capital gains tax that you would have paid if you liquidated the stock during your lifetime. And your heirs inherit the stock with a stepped-up basis of $1 million.

Your heirs could sell the $1 million in stock at the time they inherit it without a capital gains tax.  If they hold the stock in their own portfolio, they will not owe tax until the stock appreciates above their $1 million basis.

Dividend Reinvesting

Dividend reinvestment is one strategy that we see a lot of people engage in. What this means is that if you buy a dividend-paying stock, each dividend you receive will purchase more of that same stock. Each dividend purchase creates basis in that stock.

To correctly calculate the gain at the time the stock is liquidated (sold), you need to know the basis on each of these buys. Currently, most custodians do keep a record of basis for you that can be viewed on most statements or online in your account. As long as the custodian has a record of the basis, it will also be reported on the tax form generated for that account.

In contrast, when your children or someone else inherits the stock from you, your basis is no longer relevant because the inheritor’s basis will be the stock’s value at the time it is received.

How to Determine Basis at Inheritance

The IRS is easy to work with when dealing with step-up in basis. Your basis is the value of the inherited asset on the day of death. For stock or other securities, you can use historical values and all the data that is available on stock price value for a given day.

Real estate will need to be appraised for value at the time of death.

Should You Hold Something for Step-up in Basis or Diversify Because of Risk?

You may or may not want to hold an asset for the purpose of step-up in basis. Perhaps you need the money and want to sell the investment. You may also see that the investment’s value is likely to decrease soon, so you decide selling while the price is high is optimal.

Ideally, you should speak to financial professionals to understand the risks and benefits of selling versus holding.

You may have a $1 million portfolio and the stock in question is worth 10% of your total portfolio. If the stock has a good run and now accounts for 20% or 30% of your total portfolio value, you’re increasing your concentration risk by continuing to hold it. A significant decline in the value of that particular stock can negatively impact a substantial part of your portfolio, so it’s something to think through.

Diversifying by selling some or all that concentrated stock will likely require you to pay taxes, but it may be a better option long-term because it allows you to safeguard your total portfolio by spreading your dollars out. Speaking to your financial professional(s) on this topic can help with your decision, because your situation is unique, and you may not want to carry such a high risk.

If you want to talk to us and have us evaluate your situation, we’re more than happy to schedule a call with you.

Click here to schedule a call with us to discuss your step-up in basis situation.

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.

September 5, 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 September 5, 2023

This Week’s Podcast – Integrated Wealth Management Experience in Retirement

Learn more about the elements of an integrated wealth management experience: a retirement financial plan, specific-to-the-client investment process, and tax planning. You will also learn how we’re involved in every step of the wealth management process, in-house or with a partner.


This Week’s Blog – Integrated Wealth Management

Integrated wealth management experiences are our way to help clients have the type of retirement planning assistance that is provided in a “family office.” If you don’t know what this term means or who it applies to, we’re going to cover that in great detail before explaining the concept of integrated wealth management to you.

Integrated Wealth Management Experience

Integrated wealth management experiences are our way to help clients have the type of retirement planning assistance that is provided in a “family office.” If you don’t know what this term means or who it applies to, we’re going to cover that in great detail before explaining the concept of integrated wealth management to you.

Note: Click here to listen to the podcast that this article was based on using Spotify, Apple Podcasts, Google Podcasts and Amazon Music. 

What is a “Family Office?”

A “family office” caters to what can be considered ultra-high net worth. You have enough assets that you require an entire team to help manage your assets. These offices will help you with:

  • Family businesses
  • Taking care of budgets
  • Paying bills
  • Managing cash flow, credit cards, real estate

Individuals in a family office have assets of $50+ million. Anyone who falls into this category can be their “own client,” meaning that the entire team works for you to manage your wealth. Extensive assistance is offered, including tax and estate planning, to the degree that 99% of people will never require. You’ll also work with attorneys and CPAs.

All these employees work for you, they’re registered with the SEC, and they assist with managing your “family.” If a person has this high of a net worth, they may need to have a chief financial officer (CFO) who will handle hiring or working with certain experts to meet their family’s needs.

Often, with a family office, they have a CPA working with them full-time.

The family office works solely for the family and will handle all their financial and wealth management needs. If a lawyer needs to be hired to work on estate plans, that’s all handled for you behind the scenes.

Integrated Wealth Management Experience

In our office, our average client doesn’t have $100 – $200 million or a billion dollars. We can’t create a family office for these individuals, but we wanted to create a system that offered the same experience as a family office for all our clients.

What we devised is known as our integrated wealth management experience.

What Does an Integrated Wealth Management Experience Look Like?

Instead of working with one individual, we work with many and take on the role similar to a “CFO.” We look at the person’s entire financial picture and beyond to help you secure your retirement. We partner with multiple professionals on a range of services, in addition to in-house wealth management.

For simplicity, we’ll break this down into a few of our in-house and partnered services.

In-House Wealth Management

In-house, we specialize in wealth management. We are financial advisors, and fiduciaries- which means we’re required to put your best interests first. The majority of our clients are people close to or retirement, and we’re big on the retirement-focused financial plan.

In a few words, the retirement-focused financial plan:

  • Analyzes where you are today
  • Outlines retirement goals
  • Identifies changes that need to be made to reach your goals

Reaching your financial goals will often mean investing in some sort of return. We may invest in the market, bonds, annuities, or a wide range of other financial vehicles. We invest for a return that is comfortable for the client and is based on individual risk tolerance.

Next, we offer tax planning. Some of the tax planning is in-house and some of it is done by working with outside experts. We have checks and balances in place to understand:

  • What your taxes look like today
  • What strategies we can implement before the end of the year to lower the tax burden
  • What to do to save you money next year

We can also handle the tax return for you, and we have partnered with CPAs to lead this process. CPAs will also provide a stamp of approval for all the tax planning strategies that we prepare to ensure that everything moves along smoothly.

Our team helps clients understand where their income is coming from and ensures that their retirement-focused financial plan is operating to reach their goals.

Estate Planning

Estate planning is a crucial part of retirement planning that folks really struggle to talk and think about. However, we incorporate this planning into the experience because it provides you with peace of mind that your estate matters are all handled in a legal manner.

Without an up-to-date estate plan, it can be difficult for you to leave assets in your desired way for heirs and beneficiaries. If you’ve had a major life change since you’ve created or looked at your estate plan, it is a good idea to have your estate plan professionally reviewed and updated. 

For our clients, we have a system in place for the state they live in to create a:

  1. Trust
  2. Will
  3. Power of Attorney
  4. Healthcare Power of Attorney
  5. HIPAA form

We believe this aspect of your retirement-focused financial plan is urgent, and strongly encourage our clients to review and update these documents on a regular basis.

Social Security

We work with a Social Security consultant, so our clients have an expert look at avoiding mistakes when filing for Social Security. Some clients have an easy process for Social Security, and we can help them apply for their benefits. However, other clients do not have as easy of a time.

Our consultant is on retainer and will help consider:

  • Complex decisions
  • Divorce
  • Optimizing for certain forms of income
  • Survivorship

She assists us when running the numbers for Social Security to help you make the best decision on when to take your benefits and how to reach your financial goals.


Insurance includes many different options, but one of the major ones is health insurance. When you retire, you’re responsible for your own health insurance, which will be Medicare.

Medicare can be overwhelming when it comes to options, plans, and thresholds. We work with our clients and partners to help them find the best Medicare options for their health scenario and budget. We may be able to structure things to avoid IRMAA surcharges on Medicare, too.

Additionally, we help clients during open enrollment to find plans that may be more affordable or a better overall option for them. 

Long-term Care Planning

Speaking of healthcare planning, we also dive into long-term care planning. Hopefully, you’ll never need this level of care, but you just never know what the future will hold for you. We recently had a podcast on long-term care planning.

We’ll analyze your long-term care options and even help you secure the insurance you need to pay for a nursing home or assisted living facility.

Life Insurance

We’ll work through the question of life insurance and how to structure it for you and your family. 

These are just some of the insurance options that we can use to help build our clients retirement-focused financial plan. As we’ve outlined, we do our best to mimic the “family office” so that it works in your best interests.

What Getting Started with Our Integrated Wealth Management Experience Looks Like

If you call us to discuss your options, we already have:

  • Ongoing, up-to-date research to aid in building plan for your goals
  • Multiple estate planning methods in place
  • Many in-house Insurance and Wealth Management strategy options

We’re involved the entire time, working to have all your questions answered. We will do the research with the estate planner or Social Security expert to have your questions answered.

Since we work with the outside experts, you bypass the extra step to make sure your financial, tax, and estate planning professionals are all on the same page when it comes to your retirement-focused financial plan. We’re very much involved with every aspect of your plan to help you make sound financial decisions.

Want to learn more about our Integrated Wealth Management Experience? Schedule a free call with us today.

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.

How Secure Act 2.0 Could Affect Your Retirement

Denise Appleby was our special guest this past week. She’s our consultant for IRA and 401(k) planning, and she is an invaluable asset for our clients. However, this week she’s sharing her insights into the Secure Act 2.0, which could affect your retirement in a few significant ways.

Quick Background on the Secure Act 2.0

The Secure Act 2.0 was passed the last week in December 2022, and everyone is scrambling to:

  • Learn the rules
  • Changes that we need to know about
  • Who we need to contact

With thousands of pages to go through, the Act has a lot of significant rules that everyone needs to understand. Denise is here to help us understand some of the changes in 2.0.

Note: Even though the Act was signed very late in the year, the changes went into effect on January 1, 2023. 

Secure Act 2.0 Updates You Need to Know

Secure Act 1.0 changed the required minimum distribution (RMD) age from 70 ½ to 72. Secure Act 2.0 changes these dates further, but now there’s a calendar to deal with. If you have already reached 72 before 2023, you should be taking your RMD. However, if you turn 72 after 2022, the RMD starts at 73.

The problem is that a lot of custodians sent out letters stating that people turning 72 could wait to take their RMD until 73. Custodians simply weren’t given enough time to make changes on their end to stop these mails from going out.

What Happens If You Took Your RMD Even Though You Needed to Take It at 73 Instead?

The good news is that the distribution isn’t an “RMD” in this case. Instead, you can roll it over to next year. If you reach 72 in 2023, you have the option to roll the money that you take out.

Typically, when you take an RMD, you have to include it in your income for the year unless an exception applies.

In this case, the exception is that you can take the RMD and roll it back into your IRA or 401(k). You normally need to do the rollover within 60 days of receiving the funds. A rollover isn’t taxed, so you don’t need to claim this money. The IRS does permit a self-certification procedure that will allow for a rollover even if 60 days have passed.

There’s one issue: you can only perform one rollover per 12 months. If you rollover a traditional to a Roth account in the past 12 months, then you cannot rollover the RMD.

Missing the Deadline and an Excise Tax

Secure Act 1.0 had an excise tax of 50%. If you missed your RMD of $10,000, you would pay a 50% tax or a $5,000 penalty. Thankfully, Secure Act 2.0 has changed this excise tax to 25%. Additionally, there’s a correction period in place under the new Secure Act modification.

If you take your RMD during this correction period, you only pay an excise tax of 10%.

There’s also a chance that you can have the excise tax waived completely, and this is obviously something to pursue because you should never be paying more taxes than absolutely necessary.

We never want you to pay an excise tax. If you’re unsure whether you need to take an RMD or not, be sure to call your advisor.

Annuity and IRA Aggregation

Secure Act 1.0 states that if you have an annuity that has been annuitized and a regular IRA, you cannot aggregate these accounts. 

What does aggregation mean?

You calculate the RMD for IRA A and IRA B, and you can take the RMD that you want from these. However, in Secure Act 2.0, you can now aggregate these amounts, meaning you can aggregate your annuity and IRA now.

For many people, it’s a break if you have more than enough from an annuity and don’t need to take the RMD. Now, the person doesn’t need to take the RMD.

Designated Roth Account RMD Changes

Many people question why they need to take an RMD on their Roth accounts. Now, the beneficiary of the account needs to take an RMD but now the owner. Designated Roth accounts no longer need to take an RMD, starting in 2024.

Terminally Ill Provision

If you’re terminally ill and a doctor certifies that you have an illness that can result in death in 84 months, the 10% penalty for withdrawing funds early is eliminated under a special tax treatment.

Domestic Abuse Provision

In 2024, penalty-free distributions to anyone who experiences domestic abuse are now possible. Unfortunately, this rule only comes into effect in 2024, but it can help anyone in a domestic abuse situation find relief.

529 Provision to Rollover into a Roth IRA

One exciting change is with a 529 plan used for college savings. However, when you’re putting money into these accounts, it’s impossible to know whether the person will receive a scholarship. Under the Secure Act 1.0, any additional money left over that is not used for education expenses is subject to income tax and a 10% early distribution penalty.

A change in the Secure Act 2.0 allows you to rollover $35,000 (lifetime) into a Roth IRA account from a 529.

There are a few stipulations:

  • Annual amounts moved cannot be more than what you put into your regular IRA contribution
  • Contributions to traditional or Roth IRA must be added up to know how much you can rollover from the 529
  • Funds must be a direct transfer from the 529 account to the Roth account
  • Funds transferred from the 529 account must have been in the account for the past five years in hopes of stopping people from gaming the system

If you have the 529 company deposit the money into your account and then you transfer it to the Roth account, this will not count. You need the transfer to go from one institution to another without it ever touching your account.

Transferring the money from a 529 to a Roth account must be transferred back into the beneficiary’s account. You cannot transfer the funds from this account back into your own unless you’re going back to school and have the funds transferred to a 529 for you.

Biggest Mistakes in IRA Planning

We couldn’t help but ask Denise about the biggest mistakes she sees in IRA planning. She tells us that the biggest mistake she sees, which doesn’t happen often, is moving assets. Many people rollover their accounts multiple times in a single year, breaking the once-a-year rule for rollovers.

Once these multiple rollovers happen, it’s often too late to correct this year.

You’re allowed one 60-day rollover per year. However, this only happens if you have the check made out to you, the funds hit your bank account and then you put it into a new account via a rollover.

However, if the rollover goes from one institution to the next, such as Schwab to Fidelity, these types of transfers can happen as many times as you want.

Often, there are solutions that the IRS allows if something happens and you cannot meet deadlines. It’s important to speak to your advisor to understand your options and how you may be able to prevent penalties, taxes or other issues along the way.

Click here to schedule a call with us if you have any questions about the Secure Act 2.0.

P.S. If you want to learn more about changes to the Secure Act 2.0, head over to, where Denise shares her insights with readers.

Planning For Taxes in Retirement

Filing your taxes in retirement is important. You may have worked diligently your entire life, but the IRS still wants you to pay your taxes in retirement. However, there are many ways that you can combine your tax and retirement planning to save money.

Now, if you’re stressed when thinking about this topic, don’t be.

We’re going to walk you through the documents that you’ll need to make planning for taxes in retirement as simple and straightforward as possible.

What to Do If You Have Self-Employed Income

If you’re self-employed, you’ll likely receive your 1099. A 1099 means that taxes have not been paid on these dollars yet, so you’ll need to have this document when filing your taxes. If you’re still involved in a partnership, you may receive a K1 as well.

Investments can also generate a K1.

Unfortunately, K1s often do not get generated quickly. Many people get their tax returns done, file them and then have to start all over to incorporate this form into their taxes.

If you’re self-employed, you also need to keep everything in order to claim deductions, such as:

  • Check registers
  • Credit card statements
  • Business use asset information
  • Receipts

Anyone with a home office will want to consider whether or not they want to claim their office as a tax deduction, too.

If you’ve been paying your taxes quarterly, you’ll want to gather this data to give to your CPA so that they know what you’ve paid so far. 

Ideally, you’ll keep these documents in a folder throughout the year to make tax season less stressful. If you have everything in order beforehand, you won’t have to deal with the stress of getting everything in order come tax time.

Making estimated quarterly payments online on the official IRS website will be very useful, too. At the end of the year, you can log in to the website and print off a statement showing the taxes you paid throughout the year. This will make it very easy to supply your accountant with these important figures so that you’re not paying more taxes than necessary.

Note: If you happen to file an extension, the site only keeps records for 14 – 16 months. You need to print out these payments because they will include filing dates, which need to be filed to make sure that you don’t get penalized.

Rental House Income

If you have rental income coming in, you need to keep track of:

  • Rental income and payments
  • Expenses relating to the properties

You want to keep a record of every possible expense you made relating to these assets, along with the dates of these transactions and why these expenses occurred. You will need to file these taxes quarterly, so also keep this in mind.

Retirement Income

Retirement income is going to revolve around your 1099, and there are multiple forms of this document that you need to collect before filing your taxes. Most financial institutions have all the way until the end of February to get these documents to you.

You’ll typically have a 1099 sent to your mailing address, but a lot of institutions are putting these files online for you.

If you’re currently working, you’ll also receive a W2.

The W2 will show your:

  • Wages
  • Taxes withheld
  • 401(k) contributions

If you receive income from any of the following, they will generate a 1099:

  • Pension
  • 401(k)
  • IRA
  • Social Security

These documents will show how much you withdrew within a calendar year, how much taxes are withheld and more. Collecting these files will make it much clearer how much you’ll owe at the end of the year in taxes.

Traditional IRA basis is more complicated because these are non-deductible.

It’s important to gather all retirement income-related 1099s so that you can file your taxes properly. However, there is another form of 1099s, which you’ll need to know about before filing your taxes or handing your documents over to an accountant.

Note: 401(k) rollovers to an IRA will generate a 1099. The 1099R is a non-taxable distribution, so you can rest easy that you won’t be hit with a major tax liability. It’s important to work with a professional to ensure that these rollovers are done properly so that you don’t get hit with a major tax liability.

Savings, Investments and Dividends

Your custodian, such as Charles Schwab, will send you a 1099 for money that you have in savings, investments and dividends. Most custodians will have these files for you on their online portals.

In most cases, the file is ready around February 15, but this date can vary.

These 1099s will include:

  • Interest earned for any interest-bearing accounts
  • Dividends from a stock or ETF that paid an actual dividend
  • Capital gains, whether a short-term or long-term, which have different rates

You need to ensure that you receive this 1099 before filing your taxes. If you forget about this 1099, you’ll find yourself with a huge amount of taxes that the IRS says that you owe, which will then need to be cleared up by amending your taxes.

It’s better to wait until you have all the documents before filing your taxes, or you’ll have to deal with the stress and headache of making a tax amendment.

Tax-deferred accounts, such as an annuity, will generate a 1099 if you take a distribution through the annuity. You may have to pay taxes on interest here, too.

Home Ownership

Offsetting some of your taxable income is possible through deductions. If you have a mortgage or loan on your home, you may be able to write off this interest. You want to keep detailed documentation of your real estate and property tax records, receipts for energy-saving appliances and any other 1098s you receive in the mail.

Note: A lot of these deductions that we’re talking about will require you to itemize your deductions. If you don’t itemize, a lot of what we’re talking about in this section and the next may not relate to your situation.

Charitable Deductions

If you are charitably inclined, you can make the most out of your donations by itemizing your tax returns. We do this with many of our clients by using donor-advised funds, where we combine multiple years of donations into one year.

When you use this type of deduction, you can reduce your taxes dramatically.

You’ll need to reach out to us if you want to discuss using donor-advised funds to reduce your taxes. Donor-advised funds will require you to preplan because you cannot utilize this tax strategy for past taxes.

Medical Expenses and Health Insurance

If you itemize your tax return, you want to keep track of expenses for:

  • Healthcare
  • Insurance
  • Doctors
  • Dentists
  • Hospitals

Depending on these expenses, it may or may not make sense to itemize. Your CPA will help guide you on whether or not taking the standard deduction or itemizing is in your best interest.

Health insurance form 1095A will be generated and sent to you as proof that you have insurance. 

Additionally, HSA contributions will generate a 5498, which your CPA will need to receive credit for these contributions.

State and Local Taxes

Any time you pay state and local taxes, be sure to keep records of these payments. These taxes include:

  • Property tax
  • State income tax

Your CPA can use these taxes to try and save you money on your taxes.

Contributions to your traditional IRA can also be deducted from your taxes.

There’s a lot to go through here, but we recommend starting early and keeping track of these documents to make taxes less stressful. If you prepare for your taxes throughout the year, it will make tax season a lot less chaotic for you.

Click here if you would like to speak to us about donor-advised funds.

January 9, 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 January 9, 2023 

This Weeks Podcast – 10 Tax Tips For The Beginning 2023

Do you want to keep your tax planning smooth as you set goals for this year? As you think about getting ready for the tax season and setting goals for 2023, we know you want to make your life a bit simpler.

We discuss things like tax-free sources of income, Roth conversions, tax withholding, Required Minimum Distributions, and much more.


This Weeks Blog – 10 Tax Tips For The Beginning 2023

With 2023 here, one thing that you want to consider when retirement planning is taxes. You never want to spend more money on taxes than necessary, and that’s why we’re starting this year off by walking you through tax tips.

10 Tax Tips for The Beginning of 2023

With 2023 here, one thing that you want to consider when retirement planning is taxes. You never want to spend more money on taxes than necessary, and that’s why we’re starting this year off by walking you through tax tips. 

10 Tax Tips to Start 2023 Off Great

1. Take Advantage of Tax-free Income

Tax-free income is ideal, and you likely have:

You may have to pay taxes on all of these sources of income. However, you may have tax-free income that you can begin to take:

  • Roth IRA distribution (not the ideal source of income to start off retirement)
  • Savings 

Using savings for your source of income this year can help you with Roth conversions, avoiding capital gains or Social Security payments, too.

If you consider where your income is coming from, it will allow you to at least leverage tax-free income to your advantage this coming year.

2. Consider Traditional to Roth IRA Conversions

Converting a traditional IRA account to a Roth account may be in your best interest. First, you can allow your money to grow tax-free. Second, if someone inherits these accounts, they benefit from the tax-free account, too.

You will need to pay taxes during the conversion, and this hits on point 1, too.

If you can use tax-free income during the year of your conversion, you may be able to stay in a lower tax bracket and save money on taxes.

3. Review Your Tax Withholding

If you’re early in retirement, you might find yourself:

  • Under-withheld
  • Overpaid 

In both cases, it’s better to be right on the mark with your taxes. If you overpay, there’s no penalty, but you also can’t grow this money if it’s in the government’s hands. We can review these withholdings with you to ensure that you’re not paying too much or too little to the government.

4. Track Medical Expense Deductions

Medical expenses may or may not be deductible, but you need to have these expenses outlined in either case. You can deduct some of these expenses, and your accountant will need this information to know if itemizing and medical expenses can reduce your tax burden.

5. Take Advantage of Charitable Contribution Deductions

If you don’t itemize your taxes, you may still be able to leverage charitable contributions. You may be able to use:

  • Qualified charitable distributions, which will take money from your IRA directly and gives it to charity without the money ever hitting your bank account.
  • Donor-advised funds. You can stack your contributions over a multi-year period into a single year to reduce your taxes if you use one of these funds.

Anyone who is charity inclined can take advantage of their charitable contributions to reduce their taxes.

6. Don’t Forget About Quarterly Payments

Quarterly payments are foreign to a lot of people who are just transitioning to retirement. You may have gains throughout the year that are realized, and the government can assess a penalty because they expect to be paid on this gain as it happens.

For example, if you sell a stock or a house, you may need to make a quarterly payment.

Sitting down with your accountant or tax advisor can help you better understand if you need to make quarterly payments or not.

7. Don’t Forget About State Taxes

State taxes must be considered, too. It’s easy to focus on your federal taxes and forget that the state wants their money, too. If you do live in a state that collects income tax, keep this in the back of your mind throughout the year.

8. Consider Part-time Work

When you’re planning for retirement, you may or may not consider part-time work. A lot of our clients become consultants and others will take on a part-time job to stay busy, cover medical insurance or just generate some additional income.

Working part-time may also open the doors for other things, such as:

  • Eligibility to contribute to retirement plans
  • Taking advantage of benefits
  • Traveling more during retirement

9. Don’t Forget About Required Minimum Distributions

Folks who are 72 or older will need to take their required minimum distributions (RMDs). You can take a monthly payment or a full payment upfront, too. In all cases, you need to make sure that you’re meeting the RMD thresholds every year.

If you’re just turning 72, we highly recommend giving us a call at (919) 787-8866 to discuss RMDs and to better understand how much you need to take out of these accounts each year.

10. Keep Track of Your Tax Documents

You’ll begin receiving mail in February that you need to compile together and give to your accountant. If you don’t keep track of these documents, you’ll need to scour for them rapidly, which is never fun.

A few of the documents that you’ll receive include:

  • 1099s from investment accounts
  • 1099s from Social Security
  • W-2s

Organizing all of these documents is a great way to start the year, whether you’re working with a CPA or doing taxes yourself. It’s good practice to have a system in place to manage all of your taxes, receipts and similar documents throughout the year.

Being fully prepared when going to your CPA will make taxes a lot less stressful in 2023.

We hope that these tax tips will help you go into the year with confidence, knowing that you have everything in order to meet your tax obligations but never pay more than necessary.

If you have any questions, please feel free to schedule a call with us today.