Latest / The Millionaire Dentist™ / IRS 2024 Retirement Limit Changes: What Dentists Need to Know

Transcript

IRS 2024 Retirement Limit Changes: What Dentists Need to Know · The Millionaire Dentist™

• 0:03
  Hello, everyone, welcome to the Millionaire Dentist podcast, brought to you by
• 0:07
  four Quadness Advisory. On this podcast, we break down the world of dentistry,
• 0:12
  finances and business practices to help you become the millionaire dentist you deserve to
• 0:16
  be. Please be advised we do speak with an honest tongue and may not
• 0:20
  be safe for work. Hello and welcome to another episode of The Millionaire Dentist.
• 0:26
  I am your host, Jared Bridgeman. Casey Hires is out right now.
• 0:30
  He is out shaking babies and kissing hands with some other docs and practice
• 0:35
  owners out there at the moment. So instead today I've got the legendary Steve
• 0:40
  Levy. He is a CPA and a JD and we call him Pipes because
• 0:45
  of his wonderful voice. Steve, how are you great? How are you?
• 0:48
  Jared? Doing well? Steve? I wanted to bring you in today.
• 0:51
  You are our tax guru. People come and worship at your feet kind
• 0:57
  of thing like the boot up. Today, we wanted to talk about the
• 1:00
  retirement plan limits and they I'm assuming the changes or the IRIS has announced the
• 1:07
  changes already, that's right. Yeah, it was actually hot off the presses
• 1:11
  with just about a week ago, the IRS on its website had announced these
• 1:18
  changes. So this is for like retirement plans and like Social Security wage limits.
• 1:23
  Yeah, is that what that means? Yeah, that's okay. And
• 1:26
  I remember doing this last year. So this is almost a yearly, yearly
• 1:30
  type of thing. It is. It's kind of based on inflationary considerations and
• 1:36
  also yeah, a lot of different factors that each year it gets changed.
• 1:42
  Is there ever a time where nothing's changed? I don't think so. You
• 1:46
  don't think so, Yeah, yeah, yep, yeah, but it may
• 1:48
  be different things changing at different amounts. It's never quite the same. That's
• 1:51
  right. That's right. Okay, So let me straight up off the bed
• 1:53
  ask you what are the new limits for the four oh one K deferrals.
• 1:56
  Yeah, so from twenty twenty two twenty twenty three we saw a pretty big
• 2:01
  jump twenty twenty four not as much of a jump. Those from twenty two
• 2:10
  to twenty three jump two thousand from twenty thousand, five hundred to twenty two
• 2:17
  thousand, five hundred, and the catchup contribution, which is for those that
• 2:23
  are fifteen over, jumped from sixty five hundred to seventy five hundred between twenty
• 2:29
  two and twenty three. For twenty twenty four, the jump isn't as big,
• 2:32
  so we're just looking at a five hundred dollars jump for the regular contribution
• 2:38
  limit from twenty two to five hundred to twenty three thousand, and the catchup
• 2:45
  contribution didn't change at all for those that are fifteen over, so it remains
• 2:51
  at seventy five hundred. So combined, if you're fifteen over, then you
• 2:55
  can contribute as a deferral thousand, five hundred, Okay, okay, yeah,
• 3:02
  five hundred does not seem like a lot compared to the two thousand from
• 3:07
  the your prior right, And a lot of that is, like I said,
• 3:09
  inflationary considerations and also just sort of what when you defer the your to
• 3:19
  your four to one k, the irs loses tax on that amount that you
• 3:24
  defer and so maybe it's a tax preservation idea kind of across the board,
• 3:31
  because anybody that participates in the four one K and is deferring, that's a
• 3:36
  lot of people, so they have to factor in everyone participating. So this
• 3:43
  it's it's the twenty twenty four, so this was not coming to effect until
• 3:46
  next year, that's correct. Moving from January first or yeah, yeah,
• 3:49
  basically on pays that happen in like actual payments that happened for compensation. So
• 3:55
  don't don't rush out and throw another five hundred bucks in there right now,
• 4:00
  right if you get over the limit, Uh, it's kind of a headache
• 4:04
  to figure that out to undo that. So okay, just take that five
• 4:09
  hundred bucks and utnderneath your pillow case or something, or yeah, that'll be
• 4:13
  fine, all right, cool, cool, Go buy some lottery tickets.
• 4:15
  Yeah, recommend that. Oh yeah, that's our biggest you know, throw
• 4:20
  it all in for me. It's only it's like Christmas time. My grandmother
• 4:26
  used to get a scratchers in the stockings and thing. It was always fun
• 4:29
  for the kids to do that. And oh yeah, we'd always run around
• 4:31
  and brag, I think I won fifty bucks once and oh that's yeah,
• 4:34
  I mean ten. That was a big deal, right, if you get
• 4:38
  anything from those severals, you know. So what does this mean? So
• 4:46
  when it comes to retirement playing compensation in their limits, what is the new
• 4:48
  limit for that? So retirement plan compensation limits are basically a certain amount of
• 4:56
  compensation can be factored in too the match that you're allowed to get from your
• 5:03
  company. Got it's a compensation. Is your company matching what you're putting in?
• 5:08
  That's right? R percentage of it exactly. So the IRS sets the
• 5:12
  limit that can be considered for the match, whatever percentage they're matching. Anything
• 5:18
  above that that retirement plan compensation limit you wouldn't get a match for. It
• 5:24
  would be kind of capped there. So for twenty twenty three it actually jumped
• 5:30
  some not as much as the jump between twenty two and twenty three. From
• 5:34
  twenty two it was three usred five thousand, and twenty three it jumped twenty
• 5:41
  five thousand to three hundred thirty thousand, and so for twenty four it's at
• 5:46
  three hundred and forty five thousand, So a fifteen thousand dollars jump pretty good,
• 5:51
  not as crazy as as the one from twenty two to twenty three.
• 5:56
  And it's actually the exact same amount from twenty one to twenty two. Okay,
• 6:00
  let me, I guess this is where I may get confused on this.
• 6:04
  So on your own personal retirement plan, you can right now, you
• 6:09
  can do twenty three thousand a year if you're under fifty, that's right,
• 6:12
  So how is the company going to be able to match three hundred and forty
• 6:15
  five. So what they do is typically they use let's say five percent of
• 6:21
  your total compensation they can use as a match up to typically what you've deferred
• 6:29
  in the in your formal K deferral. That's usually a cap there, so
• 6:35
  kind of dollar for dollar potentially. So let's say you make just for ease
• 6:42
  of use, you put in exactly twenty three thousand, right, your company
• 6:46
  could put in more than that. Let's say you're making one hundred thousand,
• 6:49
  could they or is it still just no, it's it's still up to what
• 6:53
  you defer generally for that. So so basically over the last year from twenty
• 6:59
  three twenty four, we're looking at a fifteen thousand increase from three thirty to
• 7:02
  three forty five K. That's right, Okay, let's going to iras and
• 7:06
  their contributions. What are the limits for that one? The new one that
• 7:10
  has kind of been steady over time. There was a jump from twenty two
• 7:15
  to twenty three to from six thousand to sixty five hundred, and from twenty
• 7:23
  three to twenty four it jumps another five hundred to seven thousand per person,
• 7:29
  and the catchup there's always a catchup for both four one K and iras.
• 7:35
  That ketchup has stayed at one thousand throughout time and is staying again at one
• 7:42
  thousand for twenty four Now. Irays are are kind of a different story in
• 7:46
  that a lot of times if you also have a four to one K plan,
• 7:53
  then you shouldn't expect to also get a deduction for a IRA contribution.
• 8:01
  There's kind of some overlap there. You can still put in it, put
• 8:05
  in an IRA contribution, but it won't be deductible, but it will factor
• 8:13
  in. Let's say you cash out your IRA, you take out out of
• 8:16
  it, it factors in, and so the potential taxation of the money that
• 8:22
  you take out. Okay, do you find that usually if someone has a
• 8:24
  four to one K they don't tend to do our race. Yeah, that's
• 8:26
  true. They may look to potential other retirement vehicles or maybe just contributing to
• 8:35
  your investment account watching that grow. Okay, So what does the Social Security
• 8:41
  taxable wage base mean? So that is the base that it's the limit that
• 8:48
  the any person that has wages, that's the cap that where it will stop
• 8:56
  withholding Social Security. So when I get my when I get my paycheck,
• 9:01
  there's that das you know, social security with the next amount of dollars,
• 9:05
  there's a certain cap of how much they are they will take out. That's
• 9:07
  right. So once you're at this taxable wage base, no further so security
• 9:16
  will be taken out no further. So security is assessed. Is that a
• 9:18
  dollar amount? Is that a percentage amount? So that's a dollar amount.
• 9:22
  So again with inflation, it's grown over time, and so the it also
• 9:30
  allows it allows more money to get put into the whole social security pool.
• 9:35
  So this is really more about they've increased a way to take more money out
• 9:39
  of your out of your income. That's right, that's right. A lot
• 9:43
  of times what we see is people actually maybe don't notice once they've hit the
• 9:50
  taxable wage base that the max that oh I'm getting more money, uh more
• 9:56
  take home all of a sudden, what's going on here? Right, Well,
• 9:58
  you've hit it, and you may have hit it every year. And
• 10:01
  so like if you're setting your compensation, your compensation at that retirement plan compensation
• 10:07
  limit, you're definitely going to hit that every year. So you're actually going
• 10:11
  to get in six point two percent, you're going to get more take on
• 10:15
  pay based on that six point two percent not being without from your wages,
• 10:20
  and so over time, it's like between twenty twenty two and twenty eighty three
• 10:24
  there was a big boost like everything else. From twenty one to twenty two
• 10:28
  it went up a little over four thousand. From twenty two to twenty three
• 10:35
  it went up a little over thirteen thousand, and twenty three to twenty four
• 10:39
  is sort of in between that really Okay, So in twenty three it was
• 10:45
  one hundred and sixty thousand, two hundred, and in twenty four it will
• 10:50
  be one hundred and sixty eight thousand, six hundred, so about so really
• 10:54
  eight thousand, four hundred, So really upwards of almost one hundred and seventy
• 10:58
  thousand dollars a year can be taken out for soial security. Yeah, that
• 11:03
  that's what you're going to expect requirement. So what's that level? How much
• 11:07
  do you on averat? How much would you have to be pulling in to
• 11:11
  hit that limit? Well, if your compensation is set at one hundred and
• 11:18
  seventy thousand for the year, you're going to have the bulk of that is
• 11:22
  going to be subject to social security. A little bit isn't. But let's
• 11:26
  say it's you're going to be at that three hundred and forty five thousand,
• 11:31
  half, like over half of your compensation is not going to be subject to
• 11:37
  the six point two percent Social security. Now that's separate from medicare. The
• 11:43
  one point four to five percent that's going to that continues on beyond that one
• 11:48
  hundred and sixty eight thousand, that doesn't stop, that doesn't get capped at
• 11:52
  any particular amount. So that'll continue on, but so security will stop.
• 11:56
  Also, I just realized with the retirement plan composition limit we talked about three
• 12:03
  hundred and forty five thousand, I was totally thinking backwards on that. The
• 12:07
  three hundred and forty five thousand is the income amount of the person, that's
• 12:13
  right, not the amount matched by the company exactly. That's where I was
• 12:16
  getting confused. Ah okay, okay, okay, that's right. So you
• 12:20
  take like a four percent of three hundred and forty five thousand, and anything
• 12:24
  over that doesn't get counted. It's still the four percent of that three forty
• 12:28
  five right, So you make five hundred thousand a year, right, Okay,
• 12:31
  Yeah, got it? Yeah, Steve, that was awesome. Anything
• 12:35
  else you'd like to add besides uh, you know, if you have any
• 12:37
  questions about you know, taxes and accounting, where the people that email and
• 12:41
  call we are. And actually, what we've been telling our clients is that
• 12:48
  the rates have been inflation adjusted as well, just regular federal income tax rates
• 12:54
  where more of the income has been pushed down lower rates. So that's helpful.
• 13:03
  So what that means is, if you have the same income between twenty
• 13:07
  three and twenty four, you're gonna have have to pay less tax in twenty
• 13:11
  four. So a little inflation saver. That doesn't help with all the increased
• 13:20
  prices you've had to pay in the grocery store, it's nice to hear at
• 13:22
  least one possible something throwing a bone to I mean, have you seen the
• 13:26
  cost of like just ground beef at the grocery store now? Right? It's
• 13:28
  insane, It is insane. At least I'm hearing some deals on turkey dinners
• 13:33
  from different places, kind of stabilizing that. So it's helpful. So,
• 13:37
  I mean, at some point I got a stop feed my kids kibbles and
• 13:41
  beds, you know, yeah, yeah, I'm sure they're pretty tired of
• 13:43
  it, and maybe barking or yawing and things. So yeah, yeah,
• 13:48
  they did that before. Steve, I want to thank you so much for
• 13:52
  being here today and help me figure out you know, what this stuff means.
• 13:56
  Obviously this is not my forte and so that's why I come to you
• 14:00
  to help me out. Sure, listen, if you want to learn how
• 14:03
  to master the business side of dentistry, don't forget. We have events coming
• 14:05
  up all the time. We're going to be in the Phoenix area in November.
• 14:11
  Wait's November, now on it it is. We're going to be in
• 14:13
  the Phoenix area very soon. Also, we will be in Louisville, a
• 14:16
  Laulville in mid December. Yes, we're gonna be doing a really cool whiskey
• 14:20
  experience along with dental financee Yes, So make sure you go to four Quadrantadvisory
• 14:26
  dot com slash events and sign up. There is a fifty dollars registration fee,
• 14:28
  but that is refundable if you show up because we don't like no call
• 14:31
  no shows. I heard that either. Yeah sounds terrible. So Steve,
• 14:35
  once again, thank you so much and we'll see you next week. All
• 14:39
  right, thanks Jared, that's all the time we have today. Thank you
• 14:45
  to our guests for their insight and for sharing some really great information and thank
• 14:48
  you to you the listener for tuning in. The Millionaire Dennis podcast is brought
• 14:52
  to you by four Quadrance Advisory to see if they might be a good fit
• 14:54
  for you and your practice. Going over to four Quadrantsadvisory dot com and see
• 15:00
  why year after year they retain over ninety five percent of their clients. Thank
• 15:03
  you again for joining us and we'll see you next time.