Category: Income Tax

Rocky (But Good) Start to the Year… PS. “Alts”

This may be the last weekend we can say, “Happy New Year!” to friends. And a fairly happy new year it has been for the markets… with a few bumps here and there. The “bump” was a mini-cavernous plunge for shares of Nvidia shares, down 15% in one day without a rebound. Both the S&P 500 and Nasdaq 100 (tech focused index) promptly rebounded.

However, there may have been a few investors, especially those newer to the markets or those less patient among us, who need a “gut check” when markets get rocky. Here are a handful of questions investors can ask themselves, in order to stay put with current investments in down and seriously down markets – providing a plan is already in place:

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Next Level Crypto – 4Q 2024

A handful of today’s readers may be super-advanced Crypto intelligentsia, but for the majority this is not the case. For those striving to understand digital currency, cryptocurrency, blockchain, spending cryptocurrency… and the differences in the meaning of these terms, you have reached the “next level in the crypto journey”.

Although, the present of crypto and blockchain is far ahead of simply understanding these terms. In the interest of advancing knowledge closer to the present, let’s look at a couple of these concepts and the greater crypto and blockchain environment.

At most basic, digital currency refers to any currency that exists online, whereas cryptocurrency refers to currency held as a record on a blockchain database. The distinction is important because it can have significant tax implications.*

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Top of Mind Issues in US Presidential Transition

Today’s edition could be a risky one to write, as anything related to the recent US Presidential election can stir up division. BUT – there are a healthy handful of issues that unite all Americans. These issues, ironically, are similar to those facing the 2016 version of President-Elect Trump.

Below are excerpts (in italics) from a November 2016 edition of TGIF 2 Minutes with thoughts on updates for 2024 (in bold) –

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Key Upcoming Changes to 401k & IRA Rules

There are a bunch – almost too many to count – of important details that a valued financial adviser can obsess over, so clients do not have to. One of those details is the 2022 SECURE Act 2.0 which continues to unfold, in two short months starting on January 1, 2025.

A number of the changes affect rules around two items:

  • 401k saving
  • RMDs (required minimum distributions) from Inherited IRAs.

Changes to both will also have present and future tax consequences.

 

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The Election/Markets Waiting Game

This week in a conversation with one of my favorite people, I discovered – or confirmed – something that was already obvious: the US Presidential election has nearly everyone on edge. There are varying degrees of “on edge” including,

  • overwhelmed
  • nervous
  • confused
  • curious
  • angry
  • discouraged
  • (fill in the blank).

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Reining In the Amount Your Kids Spend

Let’s start by saying that it is nearly impossible to rein in the amount of money your kids spend. The caveat is that the impossible can become possible IF a few “standards” can be set – the earlier in life the better.

What are “standards”? These are concepts that can be discussed with kids of all ages – or dictated, with discussed definitely preferable! The concepts can be educational for the immediate time frame, while perhaps also becoming life lessons.

Case in point: three years ago, a young person asked for my advice upon graduating from college at age 22. This person, now 25 years-old, made my entire year last week when she told me that (over three years) she has accumulated $54,200. The kicker is that this awesome young person lives in one of the more expensive cities in the USA, which means income taxes are being paid at Federal, State and City levels.

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Decluttering Financially & In Real Life

Decluttering can be a sensitive subject. But mostly, decluttering is a positive game changer – financially and in real life.

The reason decluttering in “real life” can be sensitive may be obvious to married couples who, together, have gone through their garage lately (grown men can cry over getting rid of old ski gear from the 1990s – story from a friend).

Barriers to decluttering include:

  • emotional attachment to “stuff”
  • memories of times long ago when the stuff was useful
  • the hassle of carting all the old stuff off to a reclamation center (AKA the dump) which is time-consuming.

These factors prevent decluttering from happening.

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Timely Tax & 401k Info

At this time of year, it makes a ton of sense to focus on how best to maximize 401k accounts and which year-end tax considerations can be meaningful for tax year 2024. There is still plenty of time remaining in 2024 to make a difference.

Remember that Roth *401k* plans have slightly different income requirements than Roth IRA accounts:

  • Roth 401k accounts have NO income limits.
  • Roth IRA accounts DO have income limits.

Advice for higher earners who no longer qualify for Roth IRA accounts: make sure to utilize the Roth 401k to some extent, if your company offers a 401k plan with the Roth option. Also remember that Roth 401k contributions are made after-tax, whereas regular or traditional 401k contributions are made pre-tax.

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Elections, Debates & Markets

As this edition of TGIF 2 Minutes was written prior to the first US Presidential debate, one piece of the “proof” will already be in the pudding for readers post-debate on Friday morning. Though not much should matter to markets related to the debate.

For the sake of thought and discussion elections can matter to stock and bond markets in the short- to intermediate-term. Debates – and State of the Union speeches – may (and may not) matter in the short-term as well. Big-picture policies like taxes, healthcare (drug prices and insurance coverage), social security, Medicare policy, government spending and more… these are all mentioned in presidential debates and speeches.

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Mid-Year & Critical Decisions

Mid-Year is an important time to review several significant saving and spending decisions, possibly affecting taxes too. There are slightly over 6 months remaining in the tax year – enough time to make a meaningful difference. Consider:

  • Amounts being deferred from compensation pre- or post-tax into 401k and other retirement accounts (and whether to max out?)
  • Savings goals versus reality
  • Savings goals in need of formation from scratch
  • College savings account contributions
  • Creating and funding Trusts

These and other important decisions can be evaluated and adjusted with just over half a year remaining to accomplish goals or mini-goals.

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