Announcer:
It is time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representatives securities offered through Cambridge Investment Research Incorporated, a broker, dealer, member, FINRA, SIPC, investment advisor representative, Cambridge Investment Research Advisors Incorporated, Arretive Investment Advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now, here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. Well, this is Nate Kreinbrink bringing you today’s show. Hard to believe this is the last show of October. I know we kind of say that the year’s flying by already, but again, hard to believe that we are already to this point. Halloween Parade in town a couple days ago turned out great, had great weather for it, which again, kind of makes it feel a little odd that we are in the end of October, 80 degrees yesterday. Pretty decent day today. But looking at the week ahead, reality I think kind of sits in finally, some precipitation moisture, which looks like to definitely some accumulated totals over the next week or so. But again, it is that time of the year kind of expected, but again, another kind of fun time of where we’re at with it.
If you’re a sports fan, it’s the ultimate time to be watching. I know we had the World Series wrapping up, extended it last night with the Yankees stealing one, going back to three one here. We’ll see how many games they can extend it or make it a series there. Obviously football, basketball is going to be starting here, hockey’s back on, it’s just again, a busy time with it. But as we say, the years always seem to fly by summer was no exception to this. It seemed to blink. And boom, kids were back in school. Now we’re back to Halloween officially on Thursday here, and then it’s I guess you could say officially holiday season with Thanksgiving. And then boom, into Christmas. I know they’re already starting kids were coming home saying they’re practicing their Christmas program song.
So again, will not be long and we will be full-fledged into that time of the year. So again, I just encourage you to enjoy it, appreciate it, because it will continue to fly by. So again, with it being where we’re at in the year, I thought it was a good time to circle back. I know last week, third Wednesday of every month, we talk a little Medicare. We also talk a little taxes the week before that. But again, wanted to look at, again, from a planning standpoint where we’re at in this time of the year. Maybe some things to look at as we do still have two months left in 2024, and that’s looking at some end of the year planning. I know when we get to this time of the year, you’re just wrapping up and think, well, it’s pretty much done with what I’ve withheld, contributed.
But again, it’s a great time to still have a little bit of time to make this take into effect as far as any changes you want to make from a tax standpoint looking at it. So again, we talked tax preparation or tax planning a lot, especially when we have Andy Ferguson with Nelson Corp Tax Solutions on. He’s big into that component of taxes, that planning time period. And now is the time to really get heavy into any planning that you want to do for the coming year, because again, as he always says, that refund or that amount that you owe when you file your taxes, they can make that number, whatever it is that you want it to be, by adjusting any withholding that you may have. So again, we want to start looking at it as we have a better idea as far as what our wages will be for the year and looking at it to say, hey, do I need to start withholding anymore?
Am I withholding a little bit too much? I can kind of back off of that to see where we’re at again. And then looking at any contributions. I think that is the main point to say, hey, are we able to max out any contributions at either an employer plan, either through a 401k, a 403B, any other type of simple plan or whatever that you have at work or on an individual aspect if you’re able to through a individual IRA account or an individual Roth account. And again, so when you start looking at those and those contributions, again, it’s important to understand the differences of what it will do to you from a tax standpoint.
Again, you decide, yes, we’re going to save. We’re going to max out a traditional IRA. How’s that going to impact my taxes? Again, if you do it in a tax deferred manner, whether it’s through your traditional 401k tax deferred contribution at work, or if it’s through a traditional IRA where you do get that tax deduction for any contributions, if you’re eligible, again, it is going to lower your income in the year that you put that contribution in.
So again, if you’re over age 50 and you’re looking at maxing out a traditional IRA account, you can put up to $8,000 a year into it that would lower your taxable income by $8,000 in 2024 when you file your taxes. So again, if you’re in a higher tax bracket, sometimes this makes sense as far as taking that bigger deduction. You may look to say, hey, we may be in a lower tax bracket later on when we retire, so the deduction gives me a little more benefit than what I will be taxed on the back side of it. Now, the flip side of this is that again, any gains that you would happen to get with inside of that traditional IRA because you got that tax deduction when you put that dollar in it, any gains and the contribution that you put in basically grow tax deferred, meaning that you are going to have to pay taxes on that money when you take it out. The contribution of the 8,000 that you put in and any gains that that $8,000 would’ve gotten until you take that money out.
So again, do I want to put it in, have it grow and then pay taxes on the growth? Or again, the flip side of this is do you put it into a tax-free vehicle? Essentially a Roth that can be through a lot of 401k plans now, 403Bs have Roth accounts attached to them now that I’ve seen, and again, any just individual Roths that you save on your outside. Again, money going into this tax-free, this Roth world, you do not get a tax deduction for when you put it in because it’s after tax money, meaning that that money’s already been taxed. You put it into that Roth vehicle, you don’t get the deduction. The trade-off is that, again, that 8,000 continues to grow. When you take it out on the back end, assuming you meet the age requirements for taking it out any gains, you could take out that whole bucket of Roth money at no tax later on.
So again, when you start looking at it again, what are my tax rates going to be in the future? You can start looking at that a little bit. If you know you have a pension, if you know you have Social Security, you can start seeing where your tax brackets maybe would fall from a income standpoint. The uncertainty, I guess that you could say that it takes out by putting it into a Roth, is you are choosing when you pay tax on that money to hopefully, essentially, never pay taxes on that money ever again. So again, when we put it into a Roth account, whether it is your 401k or whether it is a traditional IRA, again, you are paying with after tax money, meaning that money was taxed in the year that you put it into that account. So again, I am choosing when I pay tax.
I know what I’m going to pay tax on this money to again, take out any uncertainty of what taxes may do in the future. So again, there’s two different avenues. Again, and as we always say, no situation is the same. It’s an individual decision to see where you sit financially, both now and in the future. And again, looking at what is the best one to, again, try to limit any tax that we can. Again, as we get to the closer to the end of the year, Roth conversions are another big item that we are looking at again, and this is taking that assets that you have in a tax defer world, so the traditional IRAs and essentially paying tax on them to convert them over to a Roth account.
Now, by doing that, this does become a taxable event. So again, any money that you put into a tax-deferred vehicle you’re going to pay, or somebody is probably going to pay taxes on that money at some point, either boom one, taking it out of your pocket, paying taxes on it, or if we do a conversion when we convert that money from the pre-tax world over to the Roth world, we pay tax on that.
Again, why would somebody do this? Maybe they’re in a lower tax bracket and have some room before they fill up that lower tax bracket. Again, we can choose then when we want to pay tax on that money, and if we can fill up and use up those lower tax brackets and not let any kind of room go in those lower levels. Again, we want to try to take advantage of that at any point that we can and get it over to that Roth world to, again, never pay tax on it. So again, when you start looking at some of these, the last one is kind of if you have any inherited accounts, if you have to start taking an RMD, a required minimum distribution if you’re of age and have to start taking money out of these retirement accounts because the IRS says that you have to, again, we want to make sure that we get the amount that we have to take out because if we don’t, there’s a penalty that applies to the amount that we do not take out when we have to.
So again, there’s deadlines, whether it’s 12/31 for a conversion, for any distributions that need to come out. That is a 12/31 deadline, sometimes contributions to a traditional IRA and to a Roth, we can have the tax deadline. So again, understanding when those different ones are and if there are some opportunities, we want to make sure we take advantage of them and not leave any room on the table if we can do that. So again, questions on any of this. Like I said, we still have some time left in the year. It will go by fast with holiday seasons kind of coming up. Thanksgiving, and then obviously Christmas, new Year’s, Christmas programs, just it starts getting extra busy it seems in these next two months. So again, give us a call. I’d be happy to sit down and go over things with you. Before I do run out of time though, I did want to mention that every Friday, Nelson Corp Wealth Management and Nelson Corp Tax Solutions are wearing jeans for charity.
Money raised in the month of October will be donated to the Mississippi River Eco-Tourism Center at the Rock Creek Marina. Again, I appreciate you tuning in this morning. This is Nate Kreinbrink with NelsonCorp Wealth Management, bringing you this week’s Financial Focus. Thanks for tuning in and have a great rest of your week.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and be invested into directly. Registered representatives securities offered through Cambridge Investment Research Incorporated, a broker-dealer member FINRA SIPC. Investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.NelsonCorp.com.