Announcer:
It’s 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 representative 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. 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. I’ve got James with me this morning. Pretty pleasant Wednesday. We finally got some rain yesterday.
James Nelson:
Yeah, exactly.
Nate Kreinbrink:
We needed it. Not that I want to go back out and keep mowing again, but the grasses were looking a little brown in a lot of areas.
James Nelson:
Yeah. We’re well overdue for that. And yeah, it’s perked things up a little bit here in the last day or two. So that’s been nice.
Nate Kreinbrink:
And you made it through the Labor Day weekend and now all of a sudden it seems fall is here and you’re starting to see kind of those fall decorations coming out. And that means soccer is well underway with you every night, probably multiple nights a week, football, cross country, volleyball, just fall activities into full swing and days are getting a little bit shorter. Temperatures are cooling off a little bit. I think we’ve turned the corner.
James Nelson:
Yeah. Yeah, exactly. And then college football, NFL here. It’s a fun time of year.
Nate Kreinbrink:
Week one in the NFL is done. A lot of crazy stuff going on. So definitely exciting. Baseball playoffs leading up a little bit. It’s always a lot going on here this time of year, so if you’re into that, saddle up because it’s going to be interesting I think.
James Nelson:
Yeah, if you’re a sports fan, this is a good time of year.
Nate Kreinbrink:
So again, getting into this time of year, it also means we’re into the fourth quarter in financial markets as well. And we talk a lot as far as whether it’s Andy Ferguson or Mike VanZuiden with NelsonCorp Tax Solution, David, on the first Wednesday of each month live and then our shows in between there as far as the importance of planning and obviously we get to the fourth quarter here, you’re starting to get a pretty good idea as far as what your income is going to be at the end of the year. Now granted, you may have some overtime yet between now and the end of December, but again, it’s getting you a pretty good idea of that and that brings into the importance of planning and looking at the income and what that may mean to some of the things that you can look at before the end of the year deadline.
James Nelson:
Yeah, definitely. IRAs always jump out to me, although we have the tax deadline being the last minute to make those contributions for the prior year, that’d be April 15th. Towards the end of the year is when most people make those contributions and they just kind of play it by a calendar year. But those traditional IRAs, as far as being able to deduct those contributions, that is all predicated on your taxable income. If you make too much, you can’t use that as a deduction. And then Roth IRAs also phase out depending on where your income falls.
Again, if you’re above that threshold, you’re not really able to contribute to a Roth IRA. So again, like Nate said, we’re getting to that time of year where most people have a pretty good idea where their income’s going to fall. And if that’s the case now you can start sizing things up a little bit. Should I make the traditional contribution? Could I make a Roth contribution? And then we always want to take a hard look at those non-IRA accounts, the non-retirement accounts where we can do a little tax planning this time of year as well.
Nate Kreinbrink:
And you mentioned contributions too, whether it’s a Roth or whether it’s the IRA, do go by the tax deadline as far as the deadline to when you can put money into those. A thing that kind of gets lumped in with that but is misinterpreted is Roth conversions and Roth conversions go by the 12/31 deadline, not the tax deadline. So again, we’ve talked a lot about the Roth conversions, basically taking money from those tax deferred accounts, those tax deferred IRAs, and then converting them over, paying the tax to get them over into a Roth account and have that tax-free benefits that Roth accounts bring. But again, those type of changes, the Roth conversions have the 12/31 deadline. So again, when you start looking at what is your income, we start looking at how much are we able to convert, working with your accountant, working with your financial advisor to see where this falls into it and what makes the most sense again by that 12/31 deadline.
James Nelson:
Absolutely. And then going back to the non-IRA accounts, the non-retirement accounts, this is when you start sizing up the positions. Certainly the markets could move plenty between now and the end of the year, but if we can start matching up some gains and losses, there’s probably some positions that have done okay this year. There’s probably some others that maybe haven’t done so well and if we could match those up and sell the winners and then sell the losers and take the gains from the winners and the losses from the loser and kind of wipe out that tax liability, this is also when we start sizing that kind of stuff up this time of year and try to be as tax efficient as possible. Now that doesn’t mean we just sell everything that’s strategically going in there and picking a position or two and trying to match those up, but again, this is a good time to start sizing that up and see where you’re at year to date.
Nate Kreinbrink:
And also, again, Andy has mentioned this numerous times as far as on the Wednesday show, when he’s on as far as being able to look at what your withholdings are and is it going to be enough. If you’ve had a life-changing event throughout the course of the year, maybe your income has drastically changed, you picked up another job, are you actually withholding? So again, getting with your accountant now in the next month or two is going to be the time when they’re going to have time to do that. You keep waiting until after the first of the year, obviously they’re going to start getting bombarded with tax returns and all that type of stuff. So again, meeting with your accountant, letting them run a scenario tax return for you and saying, “This is estimating where you’re going to come out.” You still have time to change your withholdings on any payroll on anything that you’re getting now until the end of the year to have it kind of impact what it is that you’re doing.
James Nelson:
Yeah, you talk about changing the withholding Nate, you could also look at what you’re contributing to those retirement plans because again, we’re not to the end of the year quite yet. So if somebody were to up those contributions and maybe put a little bit more money away in the 401k, that could have some impact on your overall tax situation. The time the end of the year comes, there’s plenty of pay periods left. So changing those percentages and maybe upping those contributions could have a positive impact on your overall tax situation because there is a little bit of time left.
Nate Kreinbrink:
And if you are meeting with your tax accountant or your financial advisor looking at it to say, “Hey, next year is there any magical birthdays that happen there? Do you turn the age where you have to start taking money out of it? Do you turn 65 and can… or start taking Medicare with it?” And all those that kind of come into it where it could impact again, what you have been done, what has been the normal up until this point. Is there anything that’s going to change? You look at cost of living adjustment will be put out usually by mid-October as far as what it will look like for next year, Medicare part B premiums, what those are going to be next year. Again, how is that going to impact your cash flow if that is your only income coming in, how is that going to change it?
And again, now you can start budgeting and planning and doing that preparing ahead of time so that way when it does, new rules, new laws, new legislation that could be thrown on at the end of the year, we’ve seen the last couple of years, how is that going to impact you and what is your plan to accommodate that.
James Nelson:
Yeah, it’s really just staying on top of everything. The RMD rule that you just mentioned, Nate, as far as that required age to start taking money out of the pre-tax accounts. That’s been a moving target the last several years. And who knows, they might change it again that in a year or two. So staying on top of where you’re at and like you said, those life changing events, “Hey, I’m planning on retiring later this year,” or, “I plan on retiring early next year.” Okay, what opportunities is that going to open up? What things can you do between now and then or even after that to put yourself in a better position going forward? So it’s really staying on top of your situation like you said, Nate, chatting with your advisor and making sure they’re in the loop and coordinating all of these things together.
Nate Kreinbrink:
And we mentioned too, James, as far as contributions, it’s also a good thing to look at what current allocations you have inside of your investments inside of your 401k and things like that. If there’s been changes as far as markets up or markets down a little bit, you may want to look at that and potentially rebalance to get you back in your comfortable mix from where you started the year versus where you’re kind of at now. I mean, we’re nine months into the year. There has been some market movement this year. And again, if that sways a position one way where it’s maybe a little bit bigger holding or a little bit lower percentage than what you’re comfortable with, we may need to look at those and rebalance them back to what we’re comfortable with.
James Nelson:
Well, and how about the 401k plans as far as the employer switching the investments? This is kind of generally the time of year where they start kicking out a few funds and maybe adding a few new funds. And again, if people aren’t paying attention to that, they’re just going to kind of map over the old ones into the new ones and maybe that’s fine, but maybe it’s not. So again, staying on top of that and making sure that, “Hey, I’m invested where I want to be invested,” versus just putting it on autopilot. Good idea to consider that and look at that on a regular basis.
Nate Kreinbrink:
And seeing if you are going to get a pay raise, if we want increase that contribution that you’re putting into it, the percentage that you’re putting in. Again, you always want to look at what the company is matching and try if you are able to take 100% advantage of that match in anything they’re willing to put in, that should be the bare minimum when you start to see how much you should put in. And then again, you start getting pay increase at the beginning of the year whenever they come. Increase your percent into your retirement plan accordingly with that. And never had anybody say that they’ve saved too much or started too early. And that’s going to continue on, especially in today’s world with retirement savings and planning. The people that save are going to be good, the people who don’t are going to struggle.
James Nelson:
And the obligation is pretty much solely on the employee. Gone are the days of the pensions and the stay at an employer for 30 or 40 years, and I’ve got a pension the rest of my life. That doesn’t exist too much anymore. So absolutely starting earlier and saving what you can will make the difference in the long run.
Nate Kreinbrink:
So again, we’re not trying to push the year by any faster than probably what it will go, but if it’s like any the previous nine months of the year, it’s going to be here before you know it. So anytime you can do a little planning, you’re going to be ahead of the game. Did want to mention real quick before we run out of time that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of September will be donated to the Living Peace 365 organization here in Clinton. James, I appreciate you joining me this morning.
James Nelson:
Absolutely.
Nate Kreinbrink:
Nate and James 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 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, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website www.nelsoncorp.com.