Unlock expert year-end financial strategies with WindRock Wealth’s Brett Rentmeester and Brandy Maben. Learn actionable tips to save on taxes, maximize retirement contributions, and leverage gifting tools like donor-advised funds and 529 plans. Whether you’re minimizing this year’s tax bill or setting the stage for long-term wealth, this discussion is your guide to finishing the year financially strong.
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Brett Rentmeester 0:00
Planning overall is very important. And really, you know, it should be a year long effort of optimal planning, but what is
Brandy Maben 0:06
it going to cost you in retirement to live a life that you’re currently living, or even better,
Andrew Brill 0:16
as we approach Thanksgiving in the holiday season, it’s very important to take a look at your financial situation. I’m your host. Andrew brill, if you need help being financially resilient, head over to wealthion.com/free for a free, no obligation portfolio review. We’ll talk about end of year strategies to maximize your wealth and minimize your tax bill. Right now,
Andrew Brill 0:42
I’d like to welcome back Brett, Brent Meester and Brandi Mabin of our partner, Ria wind rock. Brett is the founder and managing director, and Brandy is a director of Winrock. Brent and brandy, welcome back. I usually get to talk to you guys one on one, so today it’s a treat for me to get to talk to both of you at once. How are you guys doing?
Brett Rentmeester 1:01
Great. Thank you, Andrew, doing really
Brandy Maben 1:03
well. Thanks for having us absolutely
Andrew Brill 1:04
now i This is the time of year when we start thinking about the end of the year stuff. I know we’re getting into Thanksgiving, and there’s end of year planning that has to go on. And a lot of people like, ah, you know, I’ll put that off and put that off, and then it gets to be too late. How important is end of the year planning when it comes to taxes and finance and setting up yourself to try and bring down that that income a little bit?
Brett Rentmeester 1:33
Yeah. I mean, I kick that off, Andrew by saying planning overall is very important. And really, you know, it should be a year long effort of optimal planning. But in reality, what happens for most people is they get to this time of the year, and it’s, you know, feels like you have all this time between, say, Thanksgiving and the end of the year. But as we all know, it’s a mad rush, and you start getting together with family at holidays and talking about investment markets, tax stuff, and there’s kind of this Panic of, my gosh, I got to get this done before year end. I wanted to do this. Wanted to do that. So I think, you know, it’s critical if you’re going to do it, to start thinking about it right now, when there’s still this window of time, you know, ahead of us, how
Andrew Brill 2:13
big of a surprise can it be if you don’t plan, I know, you know, personal story, I went to buy a house and my financial person, oh, we’ll sell all this stock, and they didn’t do it, right? So how surprised can you get? I got surprised with a pretty big tax bill. So if you’re not thinking about this, how big of a surprise can you find?
Brett Rentmeester 2:36
Yeah, well, listen, from a tax perspective, you can be very surprised, right? Like your situation. And I think really your question comes down to kind of a fundamental point of planning, and that is really you need a team of advisors around you that are helping you stay abreast of the changes in law and up to date on all of your planning. And that would generally be an investment advisor, a good CPA, an estate planning attorney, or some other legal counsel. So if you have a good team in place, and it’s actually a team of people that talk and collaborate, then you know, nothing should really be a surprise. But to your point, Andrew, a lot of times we find people with a big surprise. So today we’re hoping to walk through some critical kind of core areas to think about for everybody in Year End planning, and really across four major categories, tax gifting, retirement planning and benefits. So
Andrew Brill 3:27
I Brandi, I know this is your your your area of expertise, and you counsel people on this, and we’ve had discussions about getting your the right team around you, but let’s just for argument’s sake, we’ve got the right team. What are some of those strategies for optimizing or optimizing? What, how little taxes we could pay?
Brandy Maben 3:50
Right? Yeah, that’s first on our list, and we we’re going to go over a couple on this podcast, but keep in mind, we have a little bit more detailed list and an article that you can also click on. So the four areas, I would say, would be some income timing deferrals, tax loss harvesting, RMDs and qualified charitable distributions. And a little bit about each of those tax tax strategies would be going back to income timing and deferrals. Some business owners especially, really try to give their employees incentives or bonuses at the end of the year, while it might be fortuitous of them to do so January 1, if they didn’t have a very profitable year, an employee, if they had a lot of commissions and they want to go to their employer and say, Is there any chance I could defer my bonus that you plan on giving me until the beginning of January of next year that could help their taxes as well? The next topic was tax loss harvesting. This is a strategy of selling investments with Unreal. Losses to offset capital gains. Just make sure on this that you think and you go through with an advisor, but a lot of people are investing on their own. Just avoid the wash sale rule. So if you are offsetting these capital gains, let’s say in an S and p5 100 ETF, such as VO, you want to get tax loss savings and you sell VO, you can still optimize and maintain exposure in the s, p5, 100 through a different ETF, like IV, V, within that was sale time frame, which is 30 days. So a wash sale rule, you cannot get from vo back into VO, but you could go VO, IV, V and tax harvest those losses. The next topic was RMDs. So if you are 73 or above right now, you want to make sure with your advisor or your custodian or your CPA that you’re making sure that calculation is correct and you’ve taken all that you are required to take at the end of the year. RMD stands for required minimum distribution those happens in any qualified retirement account that has been deferred tax benefits throughout your life. Now with that, if you don’t take it, you’re going to get a 50% penalty on the money you don’t take out. So let’s say you have a million dollar IRA that will calculate roughly around $40,000 to take, either in a lump sum or throughout the year, to cover your RMD. If you didn’t take that in January 1 hits, you’ll be penalized 50% or $20,000 on that $40,000 you were supposed to take out. Um, go ahead. Yeah, it looks like
Andrew Brill 6:57
Yeah. What happens if you you, you said, okay, you know what? I’m going to take that $40,000 over 12 months, but you only get to $38,000 you’ve taken 38 you still have two to you. Can Can you make a withdrawal of that 2000 before December 31 but if you don’t, you get penalized the 20,000 or do you just get penalized on the 2000 that’s left?
Brandy Maben 7:21
That’s a good question. So it’s only what you have not taken out. The penalty of 50% would only cover whatever minimum distribution you missed, so it would be $1,000 in that $2,000 example you just gave.
Andrew Brill 7:36
Are you concerned about your financial future or think your investments could be doing better. I’m Andrew brill, one of the hosts here on wealthion, and I’ve been there, not sure my money was in the right places. It’s why I’ve gotten help from a financial advisor. Maybe it’s time you think more about your financial future or get a second opinion about your investments. We’ve made that process easy. Simply go to wealthion.com/free to speak with one of wealthions, registered investment advisors for a free, no obligation, portfolio review. Again, that’s wealthion.com/free I’m now less anxious and confident I can achieve the financial goals I’ve set for me and my family. Right? So all these things that you’re you’re talking about are trying to lower our adjusted gross income, is that some of those things that we’re trying to, you know, and that’s what a lot of your tax on,
Brandy Maben 8:31
yeah, a lot of it is now. It just depends on the tax bracket you’re in, the income level, the high net worth versus low net worth strategies you’re in if you’re having a low tax year, low income year, your strategies are going to be a lot different, like trying to convert some of your deferred accounts into a Roth IRA, for example. If you’re having a low income year, that’s a great strategy to think about. But if you’re in a high income earner, you’re trying to think of tax loss harvesting and income timing. So it all depends on your situation. And going back to Brett’s point, making sure you have that team in place behind you to advise you on your current annual strategy would be best. So
Andrew Brill 9:14
Winrock has a team of people. Not only you deal with finance, you know people’s finances, but you can actually also recommend teams of people that will help in that realm, right?
Brandy Maben 9:27
Always? Yeah, we we have a lot of trusted advisors around our team that we can counsel our clients to go to, but a lot of clients come in with their own preferences, and if that happens, we are really great at being the quarterback of these teams and making sure we’re all getting on the same page, whether it’s phone calls, zooms, emails, we’re in constant communication for the betterment of our client. So
Andrew Brill 9:51
we’re you know, I know the charitable distribution. Charitable distributions are on that list. Where does that come in when you’re talking about this sort. Stuff,
Brandy Maben 10:01
right? It comes into play mainly with our high net worth clients or people that have a lot of income in one year. And there’s two areas to this, charitable gifting, and then family gifting. So charitable gifting, we look at certain areas like, well, how much did you give last year in 2023 let’s plan on maybe gifting right now to an account that you and we like to use donor advised funds. Let’s gift a lump sum to that now to strategize for your 2004 obligations that your CPA could help estimate for us, one of the strategies we use to fund a donor advised fund are gifting appreciated stocks. Let’s say, if you have a huge growth in the S and p5 100, we can actually sell that stock to a donor advised fund, or even not the fund. If you have a charity of preference, you can give the stock to that charity, and then you get the tax write off for the sale of that stock and not have to take incur any capital gains. Another way we do is just we try to front load charitable gifts, front load these donor advised funds, so that in those high tax years you’re really strategizing well. And then family gifting. Brett works this. Works with this a lot, especially with our family office sector and our high net worth sector. So he can cover a couple of those areas too.
Brett Rentmeester 11:34
Let me just add if I could Andrew on the just charitable gifting, echoing what Brandi said, you know, a lot of people don’t realize they can gift appreciated stock. So we’ve had situations, of course, where people gift stock that they’ve had for 20 years, and again, you get the full deduction without ever having to pay that embedded tax. But we’ve also gifted Bitcoin. You can gift any highly appreciated asset. So I think it’s, you know, it’s a pretty powerful gifting tool that that people should be aware of. And again, as Brandy said, when you start front loading, gifting, if you have a big income year, or you sell a business, then you’re trying to park more away to at least get the charitable deduction. It doesn’t mean you have to give it away to specific charities that you’re doing these donor advised funds, or even a Family Foundation, which is similar, but for maybe a larger donation allows you to get a deduction, park the money away, and then over the next, you know, remainder of your lifetime, choose the charities you want to gift it to. So it’s a nice legacy. Yeah,
Andrew Brill 12:31
it’s an interesting point you make, because about seven or eight years ago, when I bought this house and we found a financial advisor and didn’t realize I could give charitable donations without having to take cash out of my pocket. It’s, you take a stock and you say, okay, you know, I’m gonna gift this stock. And the stock, you know, the the gift that you’re giving is that stock price on the day that you transfer those assets. And many, many charitable organizations are, you know, they’re, they’re 501, c3, organizations, and they can take that stock, sell it, and you don’t have to take cash out of your pocket. So it’s not affecting your cash flow at all. Let’s say you have a good year in the market and say, okay, you know, I’m going to give these people a couple shares of Nvidia and call it a day. So that’s a great point and something I wish I had learned a long time ago, but it’s it’s learned Nonetheless, when should someone start planning for this stuff? You know? I know that you talk about best practices and, you know, start. I actually have already started. I had my my meeting with my accountant. We went over a whole bunch of things. They say, Okay, here’s what you have to do towards year end. When does someone have to? Should someone start doing that? And how do they go about doing
Brett Rentmeester 13:49
Yeah, I mean, just coming back to the charity, if you’re gifting a stock or Bitcoin or anything else, some of these custodians have deadlines, so I’m saying probably now until first week of December, if you start pushing it past then you may or may not get it done, you know, because you’re transferring an asset. So that’s probably the right guidance,
Andrew Brill 14:09
right? And when you’re talking about planning in general, when is, what are best practices for starting that, gathering all your information, stuff like that, you
Brett Rentmeester 14:21
want to address that Brandi, yeah,
Brandy Maben 14:23
I ideally, I would say it’s an ongoing process. There’s different planning objectives throughout the entire year. So now that we’re two years end, I have a lot of new clients being onboarded right now that we’re gathering a lot of information where this will be their toughest year for end of year planning, but as of January 1, we’re going to be in touch every quarter about any new things that are happening, any business cells, any big bonuses that they’ve had, and we’ll already be prepared for this crunch time and how to strategize on. What we want to put into place. So I would say, ideally, all year long.
Andrew Brill 15:06
So let’s get into gifting a little bit. We talked a little bit about that, you know, not taking cash out of your pocket, giving, you know, appreciated stock. What about you? Talked about family gifting, right? How does that work? And how do you get a tax deduction for giving a family member money?
Brett Rentmeester 15:27
Yeah, it’s great question. So first of all, it’s understanding what the general rules are. So you can’t just give another person unlimited amounts of money, right? If I give you a billion dollars, you couldn’t just hand me $100 million because there’s a set of rules in the US called gift tax during lifetime, or death tax, as some people think about it, estate tax at death, and it’s a very specific set of rules. So one way you can do gifting during lifetime is you’re allowed to gift up to $18,000 per recipient. So for example, a family with two children, a husband and wife, could each give 18,000 per kid. That’s 36,000 a year. So that’s a great way to start gifting along the way. It’s incremental, and, you know, depending on wealth levels, you know could, could be a high number. But for other people, it’s, it’s something that makes sense to do early, and that’s the amount you’re allowed to transfer without any gift tax. Now there’s a separate side of the of the law referred to as, most people think of it as the death tax, and that is, you have almost next year, almost $14 million per person that can get gifted to the next generation, either during your lifetime or at death. And so for wealthier families doing that, that annual exclusion gifting that I first mentioned is a way to do gifting above and beyond the 14 million per person. For the 14 million a person, that is something that has more of a magnitude, if done today than in the future, because it’s just, you know, it’s calculation of present value of money. So if you have the means and are looking to get assets out of your estate, because, again, if you were an individual with more than 14 million and you were to die, anything above that amount, you’re going to pay a tax on a death tax that might be 40 or 50% of what’s left. So there’s a big incentive for wealthy families to plan over a multi year period and get assets out of their taxable estate, and depending on their you know, ambitions, either get it in the hands of other family members or charities. But I think that framework of understanding the gift and estate tax rules is important. So most people should be thinking about gifting to children. And the the gifting, you know, of the estate at death type stuff is for bigger, bigger investors. But I will note that that 14 million a person is based on a law that was put into place in 2018 and so that law goes through the end of next year and then so called sunsets, which is it reverts back to the 2017 law if no you know, act is made to extend it or change it. So if that were to happen, then the $14 million you can pass on during lifetime or at death become seven gets cut in half. Now, something will probably happen between now and then. But for people with a taxable estate in excess of that, either, again, 14 million per individual or 28 million for a family, they ought to be thinking about looking at gifting and perhaps doing something proactive, certainly by the end of next year. Now
Andrew Brill 18:36
is that gift money? Does that come off your adjusted gross income. The gifter, does that come off there adjustable? Yeah,
Brett Rentmeester 18:44
you know, it’s actually a different concept. The adjusted gross income and stuff all relates to income tax, paying tax on income. This is really avoiding death tax or estate tax, which is a different layer of taxation, and one that really only wealthier families deal with. But nonetheless, you know, it’s a pretty punitive tax, as I mentioned earlier. It’s probably ends up taking 40 or 50% of what’s left above these thresholds. And so, you know, there’s another side to this, Andrew for you know that the wealthiest families, they might have businesses or private investments or things that they want to gift to the next generation that are hard to value, hard to figure out exactly what it’s worth. And so they can oftentimes gift a lot more than the 28 million combined by using more sophisticated planning techniques that we talk to clients about, but in conjunction with the state attorneys that might you know, gift more than 28 million, but only use up 28 million of exemption by making arguments that, well, you gifted an asset, but it’s not that marketable. There’s no market for other people willing to pay you for this, because it’s a private investment. So we don’t really know what it’s worth in lack, lack. I’m sorry that would be. Lack of marketability. And then there’s something called minority interest, which is simply, if I gift you 1% of something that’s not as valuable as having a controlling stake in something. So by using some of these discounts, I’ll call them, wealthier families are able to gift much more than 28 million. And let me just add, none of this should be construed as investment or legal advice. This is really just educational, and you really need the right team of professionals around you that can, you know, do the planning correctly, but also walk you through these complexities and make it as simple as possible. Now, Brandon, I
Andrew Brill 20:35
have a question about gifting to a five to nine. Now, a lot of people look when your kid is little, you’re trying to save for college, save for education. And not only can a parent contribute to a five to nine, but grandparents, aunts, uncles, if they wanted a gift, they could do that as well as a deduction. Couldn’t they?
Brandy Maben 20:56
They can, right? And that is one of the areas like Brett is talking about, that we can use different strategies for these families trying to avoid death tax. And one of these families can take $90,000 per grandkid and front load contributions to a 529 that would count as a five year front load, but $90,000 right away into a 529 can have a substantial amount of growth, if you’re giving that to a child that’s in their 10 and under, or even as a teenager, that can make a huge impact for them. And then with a 529 being able to pass that on generationally at this point, the IRS allows you to move that on to your child or nephew or niece. It can really support families all around if you have the means to do
Andrew Brill 21:50
it. So five to nine, it was funny when I looked at a five to nine is like, Okay, I’m going to put away enough money for my child to go to college, but now you can put a lot more money in there, and just change the name on the five to nine to a family member and continue that education fund.
Brandy Maben 22:09
That’s right. And that means that no matter how much college tuition skyrockets, your money is growing tax free, as long as spent on educational funds for all of your family, if it works out
Andrew Brill 22:24
so there’s and do you have to be a grandparent? Could it be aunts and uncles, but putting into that fund,
Brandy Maben 22:33
it can be we even have godparents doing it that have no bloodline relation whatsoever. So anyone can open a 529 for a child and help it be funded. You can also fund your friends 529 for their for their kiddo. It doesn’t have to be blood lineage to fund these in any way. So
Andrew Brill 22:54
gifting another you know, we’ve covered the tax cut, the tax angle. We’ve covered the gifting angle. Let’s talk about the retirement angle for a minute. And it was interesting, because on wealthions, YouTube community page, I put up a poll because people are struggling in this economy, even though everybody says the economy is great. And I asked in that poll what people are skimping on, whether it be, you know, are you waiting to buy a house or a car? Are you waiting to go on vacation, or are you not contributing to your retirement fund because of the economy right now? And a good percentage said they’re not contributing to the retirement fund. I know that makes you cringe brandy, because that’s something that you do and counsel people on you know extensively. So how important is maximizing retirement contributions, even in an economy that’s a little tough,
Brandy Maben 23:52
right? And it is one of our topics we we put on here. However, our main goal for retirement is just a savings amount. What is it going to cost you in retirement to live a life that you’re currently living, or even better? So we can get there in a lot of different ways, and there’s a lot of different routes. It doesn’t have to be with retirement contributions. However, the end of year is just a deadline the IRS puts on these retirement accounts that we have to pay attention to. So by December 31 all those people out there that have a 401, K with their companies, they have to try to match that out, if that’s their saving strategy for the year this year, $23,000 for 2024 is a substantial amount to save. However, if you really don’t want to put it in a 401, k, because of your skepticism of the government or how taxes are going, whatever your reasoning, we can also put that in a savings brokerage account that is growing in very strategic ways, but isn’t locked into retirement. Plan. If people are skimping on this, it’s okay to maybe give them other options, like an IRA, for example, you can give to an IR traditional IRA or a Roth IRA. Those maximums are only $7,000 this year, so maybe it’ll make your client feel like you you’re still saving. Maybe let’s just lower that level to still attain our goal when you retire. So
Andrew Brill 25:25
how do you what are some of the vehicles to that retirement? I know there’s a 401, K there’s a Roth, and we’ve discussed these prior, but let’s go through them again, and the contributions that you can can make,
Brandy Maben 25:39
right so through almost every corporation or big company that employees work for, there’s 401 K’s, there’s 403 b4’s 57 plans, some use simple, some use SEPs. There’s an array of different retirement savings options. Then on your own, you can open a traditional IRA or a Roth IRA. Then, if you’re an entrepreneur, you can open a solo 401, K, you can do a SEP on your own. You can do a defined benefit plan. There’s so many options out there that really, you just need that team to advise you on what suits you best, any which way we believe that having an IRA, a traditional IRA, and a Roth IRA are really important to your core set of accounts. And that’s because if you do have a good year and you want to save even to that $7,000 level, an IRA is a good avenue. If you’re in a low income tax bracket and you can give to your Roth every year, you should give to that as well. And one area we also use with our high net worth clients is a backdoor Roth. And we love this strategy because it grows tax free, and with everyone a little bit worried about how much money has been printed and what could happen to our tax brackets, growing an account tax free is really preferable. So
Brett Rentmeester 27:04
brandy, the the backdoor Roth, just to clarify, is, is really for someone that’s over the income threshold to make a traditional or a regular Roth IRA contribution, right? So it’s
Brandy Maben 27:15
go, yeah. So if you are a single individual making $161,000 or more, you’re technically ineligible to directly fund your Roth if you’re married filing jointly, that number is 240,000 now there’s a little asterisk there that there is a little bit of a pro rata for certain income levels, but those are the maximums that really cut you off. So if we’re dealing with those income levels, we offer to open an empty Ira fund it with that $7,000 and then we call our custodians say we want to convert that to a Roth. And in doing so, you go on your tax form and you make sure you you titled it as a non deferred contribution to your IRA. So you, you checked all the boxes, followed all the rules, but then we get to transfer it over to the Roth with absolutely no tax implication.
Andrew Brill 28:16
So you can actually put things move a traditional IRA to a Roth IRA with no tax implication. Now the Roth IRA is post tax. When you fund that, it’s post tax. Your traditional IRA, or 401, K is pre tax. So when you convert it, there’s a you have to do it very carefully, I would assume, to avoid that tax. Correct? Yeah,
Brett Rentmeester 28:38
I think in the in the example, Brandy was going through. You do that by doing non deductible contributions into an IRA, which is different than a normal Ira contribution. So normally it’s pre tax money, but if you do a non deductible or non pre tax money, then you are able to convert to the Roth without a tax hit at the conversion. But I’m you know, the Roth IRA Andrew is probably one of the most powerful vehicles that we believe in, because, you know, IRAs are great, but at some point you’re taking the money out on the back end in an uncertain future and uncertain tax rates the Roth IRA, once they change something, you don’t get the tax benefit up front, but that money is forever, tax free during your lifetime, even when You take it out. So it’s a very powerful vehicle. And you know, we even see, and this is back to your end planning, we even see opportunities where wealthy, very wealthy clients, you would think there wouldn’t be an opportunity to convert from an IRA to a Roth, but there is. But normally, that’s only diagnosed by working with a CPA and actually doing, like, a kind of a year end projection before the year is over. And sometimes a client will walk away and say, Well, I don’t owe any tax. Nothing to do here. But I tell you, in practice, we’ve seen a number of times where we’ve been able to identify a fact pattern. Like, for example, we had a client that said, Yeah, I don’t know, owe any tax. And we looked closer, and they actually had a net operating loss from a business that was going to carry forward for a number of years, but they were now retired, so they didn’t have income. So their account was like, Well, you just don’t owe tax. We looked at it, and they had large IRA accounts, and we said, you can convert those to Roth IRAs, use up the net operating loss and basically end up with everything in the Roth IRA, we’ve also had people that are retired, that again, are high net worth. So you normally wouldn’t think they’d be in low enough brackets, but every now and again, they’ll have a year where maybe their incomes from municipal bonds. So that’s tax free, and you’re not pushing yourself up in the tax brackets. And maybe you have either capital losses in a given year, or maybe you’re a private real estate investor and you have depreciation on assets that’s kind of wiping out all all appreciation and income and other gains, and you find yourself in a situation where you either have negative income or maybe you’re in the lowest brackets. And so there might be a rationale to say, hey, why don’t we convert enough from a regular IRA to a Roth IRA to just work you up through the lowest tax brackets. Pay a little bit of tax, but tactically, do it so we end up with a lot more in the Roth over time. And you know, if you want to take this, excuse me, one step further, the biggest power in the Roth IRA is, you know, the younger you are, the more powerful the compounding in a tax free environment. So we also have a number of clients saying, Hey, how can I pass on? How can I give my kids a leg up in a very difficult world of saving money and wealth over time, and one way is by helping them contribute to Roth IRAs, the big catch on it, though, is a child needs earned income. But, you know, maybe they’re working, they’re 1415, working a job. They can and maybe they need that money for spending money. But you the parent, can take that amount of money. Let’s say they made $4,000 maybe they use that for spending money. But you can take that money on the side, 4000 and now open a Roth in their name and put 4000 away. And for clients with businesses, which you know is, is a large segment of our client base. You have the ability to employ a child, put them on the payroll, pay them enough doing various tasks to justify, you know, an amount that will get them a full contribution to a Roth IRA every year. So if you can start doing that when a child’s in their teenage years, you can only imagine, by the time they’re 30, how much wealth might accumulate, you know, with that type of strategy. So
Andrew Brill 32:26
I want to ask you this question, because, you know, we I told you about the survey I did. What do you say to the person who comes to you say, You know what, it was a tough year. Cash flow is I’m a little strapped. I’m not going to contribute this year. How do you counsel them? What do you say to them? And say, Look, you know what? I understand. This is really important.
Brandy Maben 32:49
So I’ve had a couple of those situations this year, and actually, and we’re taking a large step back from when we onboarded them and said, let’s review your budget again, and and let’s just go through the areas that we maybe need to talk about sacrificing and pinching pennies on to make sure we’re hitting that 5% savings goal, when once upon a time, they were trying to save 20% making making it a priority to At least hit 5% of your income each year is vitally important to your retirement. So we take a big step back and really try to pinch pennies in area and re educate our clients. And it’s really important because every year your client is going through different different aspects of life, different phases. Yeah,
Brett Rentmeester 33:38
the other thing I’d add Andrew is it’s creating good habits. You know, for example, I saw an article I shared with my daughter, who’s a teenager, which is, hey, instead of spending x amount of dollars a day at Starbucks, had you spent that $8 and just slowly invested in Starbucks stock in 10 years, you you know, you have like, $500,000 versus zero. It’s that same concept. You know, if you put a little bit in cryptocurrencies or a little bit in, you know, some of these other areas that might have growth potential, even small amounts of savings compound and add up over time. So I think it’s, it’s as much about creating a habit when people are younger, and as they get older, like Randy said, it’s raining in on a budget and having priorities. And listen, we understand it’s a tough world out there, and for a lot of people, this is more of a luxury some of these topics, but that is how you grow and compound wealth over time.
Andrew Brill 34:27
But I want to reiterate something you said, it’s all about planning. So if you’ve planned, if from the beginning of the year to now, it shouldn’t be a surprise and struggling a little bit, shouldn’t Matt, shouldn’t take its toll on contributing to your IRA or your your plan, because you’ve sort of not that you can plan for a huge downturn. But you plan for certain things like this. You plan for, you know, maybe struggling a little bit more than you had, depending on person’s jobs. You have to evaluate all of that. So planning is. Is of the utmost importance.
Brett Rentmeester 35:02
Yeah, let me add one other thought, If I could, and that’s almost the opposite of what we said. I have seen situations where people have put too much into all their IRAs and 401 K’s, and they’re left with very little taxable money, or like, rainy day funds, where they feel like, okay, it’s all in these long term savings vehicles, but I really don’t have the money I want to make the car purchase or put the down payment on the home. So, you know, as brandy was alluding to earlier, there is a balancing that has to be done strategically between not only Roth IRAs and IRAs, but also tax deferred long term investments versus taxable money that you can get your hands on in either an emergency or, you know, for more of a long term purchase, like a home. And
Andrew Brill 35:46
Roth IRA is the the vehicle to do a lot of those things. And, you know, after watching some of our videos, both my sons actually opened Roth IRAs and have back funded it. One son funded his 2023 and 2024 and he’s looking to, you know, fund his 212 25 so, and you know, they’re in their early 20s, so, you know, $500 a month, or the maximum $7,000 or something like that, a year at their age, compounded by the time they get the retirement age, it’s gonna be well over a million bucks. So it you can, it’s not a ton of money to put away, but it can pay extreme dividends on the back end. So it’s a it’s great advice. What else are we looking at? Benefits wise, I know there’s HSAs and flexible spending stuff like that. What else or can we put our money into to save on, you know, taxes and what we might owe the government,
Brandy Maben 36:46
right? And these areas go back to planning, where, I would say, annually, whenever people have open enrollment time with their companies, it’s a really good idea to re evaluate these topics. Then you have companies that don’t have any benefits, and there’s still areas to review and make sure you’re maximizing. You brought up HSA and FSAs, those limits and statutory prior amounts go up every year with the IRS, and they let you put away money depending on the type of account tax deferred, and it doesn’t come up on your income. You can then use them for dependent care health costs. It all depends on how the plan is written. If you have a certain health health savings account, those can be a triple tax savings because you put it in tax free, you actually grow it tax free, and then you get to pull it out for any health related needs, tax free as well. So it’s a major benefit if you have that under your company to maximize that to the fullest. FSA is a little bit different, like I talked about dependent care. A lot of parents don’t know about this, but you get $5,000 a year of your income to put in there, and up till the age of 13 for your child, you can pull it out for free, as long as it’s used for anything dependent care eligible, which could be summer camps or summer sports. It could also be private tuition. There’s a variety of ways you can write that off, and it’s really beneficial to do that up to the point you don’t think you could spend the $5,000
Andrew Brill 38:29
so so some of this money can actually go to pay medical bills as well.
Brandy Maben 38:35
Correct, yes. So your dentist appointments, your annual checkups, things like that, and even clients that say, you know, we’re really healthy family. I don’t I don’t think that’s necessary. I can map out the fact that if you do your HSA account every year and get all of these tax savings, it’s much cheaper than long term disability care. Those are very expensive policies to get. Usually, people get them too late in life, and really they’re so unpredictable if you actually get the benefit of those of that insurance or not. So this is the safest and most efficient route to not only use right now for health benefits, but later down the line. I think
Andrew Brill 39:16
this is something that people don’t know a ton about, but help educate me a little bit on the HSA. How does that grow? You know, you’re putting money into a fund. How does that grow? And what do you use that money for?
Brandy Maben 39:32
So most of the time, these HSAs are through your corporation. So just like your 401, k, if you look into it, at your corporation, they give you certain risk tolerance levels to pick what your investments are. An HSA is a little bit more restrictive, but it’s still the company’s selection. You usually, I would say, 95% of the time, cannot touch those investments because it is their fiduciary. Responsibility to grow it at a very low risk level. So it won’t grow substantially like the Bitcoin investments that Brett talks about, but it will be that effective compound of interest over time in a very safe manner. And
Andrew Brill 40:16
what do you use that money for, as opposed to a flexible spending account?
Brandy Maben 40:21
So like I said before, it’s an array of options. You can do it for dentists, annual checkups. There’s even some. There’s on Amazon. You can go on and you can look up what is HSA approved, and start to spend your money on that type of stuff. So some toothpaste are eligible. Some foot massage equipments, like I’ve seen, the craziest things come across my desk that you can use it for. So if it’s a lose it, use it or lose it. Type strategy, which some of these accounts are, where, well, you put $1,000 in, if you don’t take that out, the government just takes it. That’s how some of these are written, too. And that’s where I advise my clients, go on to Amazon, Click on the eligibility, FSA, eligibility and HSA, and spend that money on things you need or could use as Christmas presents. Who knows
Andrew Brill 41:18
what? About insurance policies? Where does that fit into this lot of people, you know, obviously an insurance policy, regular insurance policy, you have until the age of 70 something, but then there’s whole life. Is that a way to save
Brandy Maben 41:33
it can be it all depends on the situation. So the last firm I was with used insurance very strategically for an investment vehicle. And so if my clients are inclined to do that, we can educate them on that versus other means of savings. But in everyone’s life, I would say life insurance, it is crucial if you have any debt or if you have family members that you care for, to be financially stable if anything unfortunate were to happen to you. So it all depends on the client. Again, some people use a term life policy just till their kids are out of college and then they’re done with life insurance. Some people use index Universal Life and policies similar to a whole life policy, where there’s a cash value on it. And those can be relatable to a Roth IRA, where the cash accumulation in it grows tax free, and you can withdraw from that cash. And I always advise if clients have this policy to wait until retirement age, because that’s when it’s going to be most beneficial. The downside of that is that insurance is very expensive. You’re paying for a company to take the risk on whether you’re going to pass away or not. And so the commissions that insurance agents get off that and the insurance policy gets off that is front loaded, usually. And so the first couple years you’re paying into the policy, you’re not really seeing any cash value. So that’s why waiting on those policies till you’re 65 is really
Andrew Brill 43:04
important. So planning is the most important thing. And if you were to speak to a client and say, hey, look, this is where we start, this is where we’ll end, what is the basic message, the most important message you’re giving to somebody?
Brandy Maben 43:26
Right? Well, first, I would say there is no end, because it’s it’s perpetual and ongoing, no matter what phase of life you’re in, and even if you are at the end of that timeline, you’re talking about your inheritance, you’re talking about your grandkids and your kids. So planning is a continual, perpetual effort that you really need the right team and someone you trust to talk to that you know has a plan in place and will constantly be your advocate of what you need during those phases of life.
Andrew Brill 43:55
Has anybody come to you a complete disaster, and you’ve put them back together and said, Okay, you know what? We’re gonna plan this, and you’re gonna be okay?
Brett Rentmeester 44:06
Yeah, I think it’s typical. Andrew, I mean, oftentimes people are busy in their own life, you know, especially if they’re working or running a business, and that’s why it does come back to having a key group of advisors. I know we keep saying it, but, you know, I saw the other day, there’s something like, I don’t know, something, a million pages of IRS tax code. And so, you know, the client can’t figure that out. We can’t figure that out. You need someone that’s doing that every day to figure it out. Same thing on the legal side, same thing on the investment side. And so you need the right team. But I will say, just in practice, what oftentimes happens is clients, they like working with their CPAs, but CPAs are always busy and they’re just hard to lock down. You can always get a hold of the attorneys, but the attorneys are expensive, and clients oftentimes know every time they talk to them, they’re paying. So an investment advisor normally sits in the middle and has a pretty good vantage point. Uh, on general planning topics, but you know, we’re not the tax experts. We’re not the estate experts. We identify potential planning things then bring the right people into the mix. And I think for anybody starting out, the other message is, get a trusted group around you that has the right incentives your best interest at heart. And if you can get that team. They’re going to be the ones coming to you proactively suggesting things, as opposed to you feeling like, we’re talking about this paralysis going into Thanksgiving, like I haven’t thought about anything. What do I do? Right? So I know
Andrew Brill 45:31
that, you know, late March into April 15 is the Super Bowl for accountants. This is kind of like you guys Super Bowl time. This is when you’re taking your clients and making sure that the planning you’ve done all year long actually comes to fruition, right? You’re, you know, the you say there’s no end, but this is the end of this year’s planning,
Brandy Maben 45:54
correct? Yeah, and it definitely is busier right now, we’re going through our checklist. We’re making sure clients are on top of it. So it’s a busy time, but in the end, I think it just gets easier each year we work with clients. And going back to your disaster client example, from our angle and how long we’ve done this, the clients that come in and think their financial portfolios are all intact and great. Usually you’re still a disaster. So I think most people aren’t getting enough planning at all. And even if they have a couple of things they’re doing on their own, they’re missing so many pieces. And so it’s really important to get an advisor as early as possible to start the conversation. I have plenty of clients that aren’t technically even on our book right now, but I talk to them and advise them for situations that come up, just to make sure, when they are clients and they’re eligible to be at our marker, our minimum, that we’re ready to go. And it’s not a huge process.
Andrew Brill 46:56
So it’s windrock wealth.com if you go there, they can find the article that you guys have put together, sort of outlining all of this, right,
Brandy Maben 47:06
correct and more, yeah,
Andrew Brill 47:07
and a lot more. But that’s exactly where to find a windrock wealth com. Go there. You can find Brett and brandy and they can, you know, you can read the article. If you need more help, you can go to wealthion.com and find us. Find them through us. And you know, we’ll, we’ll get you all on the right road to financial success. Guys, thanks so much for joining me. This was informative and important, and I think a lot of people will now be like, oh, I need to plan. And that’s a good thing. Thank you.
Brandy Maben 47:43
Thank you, Andrew.
Andrew Brill 47:44
Thanks so much for watching our discussion here on wealthion with Brett and brandy, they provided valuable information on how to protect yourself and your wealth. Heading into the end of the year, if you’re looking to protect your wealth or in need of being financially resilient, please head over to wealthion.com/free for a free no obligation financial review. And of course, if you could like and subscribe to the channel, we greatly appreciate it. Don’t forget to hit the notification bell. So you know when we post new videos on the channel, and please do the social media thing with us. All the links are below in the description. And if you like this content and are looking for more ways to achieve long term wealth. Watch this video next. Thanks again for watching until next time. Stay informed. Be empowered and may your investments flourish.
