Latest / Money In Motion with Klaas Financial / RMDs, QCDs, & ABCs

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RMDs, QCDs, & ABCs · Money In Motion with Klaas Financial

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  Speaker 1: tell number six oh eight four four two five six
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  Speaker 1: three seven and joining us this morning for a Class
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  Speaker 1: Financial or Nate Briby and Eric Schwartz. Nate, how you
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  Speaker 1: doing this morning?
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  Speaker 3: Hey, Sean doing good?
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  Speaker 2: Good to hear from be great to talk with you
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  Speaker 2: at Eric, how have you been?
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  Speaker 4: I'm doing great, Son, how are you doing?
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  Speaker 2: I'm doing good.
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  Speaker 1: We've got we've got some fun stuff r mds would
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  Speaker 1: be talking about this week, which is a really important,
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  Speaker 1: uh really important conversation and it's also a really uh
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  Speaker 1: really cool thing for folks to understand how they work.
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  Speaker 1: I think there's a lot of a lot of misunderstanding
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  Speaker 1: about what required minimum distributions are and how they apply,
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  Speaker 1: and we're gonna get the details from Eric and Nate.
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  Speaker 1: We will get that in just a moment. Mention the
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  Speaker 1: phone lines being open to you. I'd love to hear
• 1:57
  Speaker 1: from six oh eight three two one thirteen ten. That's
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  Speaker 1: six eight three two one thirteen ten the website for
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  Speaker 1: Class Financial class financial dot com and they're telph number six,
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  Speaker 1: So eight four four two five six three seven. Before
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  Speaker 1: we get rolling on this week's conversation with Eric and
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  Speaker 1: Nate about required minimum distributions. One of the cool features
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  Speaker 1: of the program is, of course, the Class Quiz Question
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  Speaker 1: of the Week, your chance to win a fantastic prize
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  Speaker 1: this week, no exception, our friends from Class Financial have
• 2:20
  Speaker 1: provided a twenty five dollars gift card to the cheesecake Factory.
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  Speaker 1: We'll tell you a little bit later on the program
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  Speaker 1: how you can win that with the Class Quiz Question
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  Speaker 1: of the week. Let's actually speaking up the Class Quiz
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  Speaker 1: Question the week. Let's actually look back to last week's show,
• 2:32
  Speaker 1: get the question and answer there as well.
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  Speaker 5: Nate yep, thanks everyone for listening as always, and congrats
• 2:38
  Speaker 5: to our winner from last week, Mark of Fitzburg, who
• 2:42
  Speaker 5: correctly answered the true or false question, which was your
• 2:46
  Speaker 5: beneficiary designations on your investment accounts will will override your
• 2:50
  Speaker 5: will or trust and the correct answer is true.
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  Speaker 3: So definitely important to keep in mind.
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  Speaker 1: Yeah, really important, And that was a great show as well.
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  Speaker 1: You can listen back over at coss financial dot com.
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  Speaker 1: So you know, when we're talking about future retirement income,
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  Speaker 1: I know r m ds they are a big deal.
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  Speaker 2: What if folks need to know about those?
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  Speaker 4: Eric, Yeah, this is what we spend a lot of
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  Speaker 4: our time talking to clients about. And honestly, it's a
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  Speaker 4: I think a lot of the reason clients approach us
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  Speaker 4: to begin with, because not only are these pretty confusing,
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  Speaker 4: but they feel like they're constantly changing. But think of
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  Speaker 4: think of required minimum distributions or r m ds as well,
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  Speaker 4: we'll call them today. Think of them like the irs
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  Speaker 4: saying all right, we've we've allowed you to to uh
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  Speaker 4: put dollars into your retirement accounts pre tax uh and
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  Speaker 4: and defer tax on those dollars for all of these years.
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  Speaker 4: Now it's time that we want you to start taking
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  Speaker 4: it out so we can generate some some tax revenue
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  Speaker 4: on it. So they're gonna they're gonna make sure that
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  Speaker 4: your tax areferred. IRA money doesn't just stay there forever.
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  Speaker 4: And this is something I think that for folks has
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  Speaker 4: gotten a little more confusing because you know, they've heard
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  Speaker 4: certain ages they hurt seventy and a half, they've heard
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  Speaker 4: seventy two, seventy three, seventy five. You know, when does
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  Speaker 4: it start? So rm ds have changed in the last
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  Speaker 4: probably five years now, I think. And for folks born
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  Speaker 4: between January first, nineteen fifty one, in December thirty first,
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  Speaker 4: nineteen fifty nine, their rm ds are going to start
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  Speaker 4: at seventy three. And then anybody born after nineteen sixty
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  Speaker 4: their rmds are going to begin at seventy five. And
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  Speaker 4: I mentioned earlier it used to be seventy and a half,
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  Speaker 4: then it was seventy two. The the Secure Act and
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  Speaker 4: Secure Act two point zero legislation have pushed back rmds
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  Speaker 4: a couple of times here, and I think now for
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  Speaker 4: folks it's it's easiest just to think of it as
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  Speaker 4: if you're born before December thirty first, nineteen fifty nine,
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  Speaker 4: rm ds start at seventy three. Anybody after you're starting
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  Speaker 4: at seventy five. Now, if you miss your rm D
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  Speaker 4: there is a penalty. We'll get into the details of
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  Speaker 4: that later, but there is a penalty for not taking
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  Speaker 4: out your required amount when the time comes. And these
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  Speaker 4: distributions are taxable income. Okay, so unless you have after
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  Speaker 4: tax contributions in your retirement plans, which are less common
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  Speaker 4: these days. You are going to pay income tax on
• 5:16
  Speaker 4: those distributions. Again, that's why the I R S is
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  Speaker 4: actually wanting you to take those dollars.
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  Speaker 2: Out, always looking for their money.
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  Speaker 4: Had they won't forget about it, Shohn, I don't worry.
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  Speaker 2: They won't forget about it. They certainly don't.
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  Speaker 1: Talking this morning with Eric Schwartz and Nate Brivey, our
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  Speaker 1: retirement planning professionals from Class Financial. If you've got a
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  Speaker 1: question for Nate and Eric, love to have you joined
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  Speaker 1: us this morning telephone number six oh eight three two
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  Speaker 1: one thirteen ten at six oh eight three two one
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  Speaker 1: thirteen ten.
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  Speaker 2: So Nate, what kind of accounts are we talking about here?
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  Speaker 5: Yep, So rmds are going to apply to any pre
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  Speaker 5: tax retirement accounts, Like Eric said, so think of traditional iras,
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  Speaker 5: step irays, simple iras, four oh one k's, four oh
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  Speaker 5: three b's, and four fifty seven b's. So most of
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  Speaker 5: you may have some of those accounts infully those names
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  Speaker 5: ring a bell for you. There is one key exception
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  Speaker 5: that if you are in past age seventy three, you
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  Speaker 5: don't need to take r and ds from your company
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  Speaker 5: sponsored retirement plan if you're still employed with them. Now,
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  Speaker 5: I do believe you actually have to be working through
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  Speaker 5: the full year. So it's not like you can say, well,
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  Speaker 5: I work New Year's Day and then I don't have.
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  Speaker 3: To take it for the whole year.
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  Speaker 5: I'm you know, Eric, you can correct me if I'm wrong,
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  Speaker 5: but I'm pretty certain you.
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  Speaker 3: Have to work through the whole year to get that exception.
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  Speaker 3: So true.
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  Speaker 5: Notice one important point in that simple and set plans
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  Speaker 5: are do not fall under that exception. So if you
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  Speaker 5: have a simple plan, your simpler set plan that you're
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  Speaker 5: self employed, and you say, well, I'm seventy three and
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  Speaker 5: I'm still doing electrical work, it's like, well, I'm sorry,
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  Speaker 5: it's a simple IRA and unfortunately not qualify for that
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  Speaker 5: I'm working past age seventy three exemption there. So, of course,
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  Speaker 5: notably excluded from this list is ROTH accounts, so Roth
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  Speaker 5: iras are made with you know, after tax contributions tax regrowth,
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  Speaker 5: so there are no required.
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  Speaker 3: Minimum distributions on those while you're living.
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  Speaker 5: I think Eric has a section on about inherited rm ds,
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  Speaker 5: which are a whole nother ball of wax, but for
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  Speaker 5: the original contributor to ROTH iras there is no required
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  Speaker 5: minimum distributions, which is great.
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  Speaker 3: Really, there was a wonky, a wonky.
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  Speaker 5: Nuance in the tax code where actually Roth four oh
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  Speaker 5: one k's required.
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  Speaker 3: A minimum distribution, which is wonky.
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  Speaker 5: But actually starting last year in twenty four that they
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  Speaker 5: got rid of that requirement. So Roth four oh one
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  Speaker 5: k's do not require a minimum distribution at this point.
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  Speaker 1: It's all that's stuff. I find that stuff so interesting.
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  Speaker 1: You mentioned, you know that they made that change back
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  Speaker 1: in twenty twenty four. I remember when we were doing
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  Speaker 1: shows previous to that change is always like what is
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  Speaker 1: that all about? And that's, you know, one of those
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  Speaker 1: one of those very fascinating things like how did that
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  Speaker 1: get forgotten? Of course, eventually kind of figure everything out
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  Speaker 1: and level it all out as well. As we talked
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  Speaker 1: this morning with Eric Schwartz today Briby retirement planning professionals
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  Speaker 1: from Class Financial talking this week about required minimum distributions.
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  Speaker 1: If you have a question, whether it's about required minimum
• 8:06
  Speaker 1: distributions or anything as far as your retirement planning, left
• 8:09
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• 8:10
  Speaker 1: professionals from Coss Financial, All I gotta do is dial
• 8:12
  Speaker 1: in here to the station six soh eight three two
• 8:14
  Speaker 1: one thirteen ten. That's six oh eight three two one
• 8:17
  Speaker 1: thirteen ten. Of course, you can learn more about COSS
• 8:19
  Speaker 1: Financial on their website coss financial dot com that's Coss
• 8:23
  Speaker 1: k l aas Financial dot com and their telephone number
• 8:26
  Speaker 1: six oh eight four four two five six three seven.
• 8:29
  Speaker 1: No charge for that initial gets to know you appoyment
• 8:31
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• 8:34
  Speaker 1: that number six oh eight four four two five six
• 8:37
  Speaker 1: three seven. So how do you figure out and how
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  Speaker 1: do they figure out what those RMD amounts are each year?
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  Speaker 1: And what if you slip up and maybe a miss one?
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  Speaker 5: Sure, this is a simple two party equation. So you
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  Speaker 5: start with your previous year ends balance divided.
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  Speaker 3: By your life expectancy factor.
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  Speaker 5: So if you're turning seventy three this year, you would
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  Speaker 5: take your twelve thirty one of twenty twenty four IRA
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  Speaker 5: balance and divide it by a factor that will get
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  Speaker 5: a number here, a factor that we'll getting tier in
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  Speaker 5: a second. But most individuals will use the uniform life
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  Speaker 5: table to find your life expectancy. This factor will decrease
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  Speaker 5: every year, and all else being equal results in a
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  Speaker 5: higher RMD going forward. Now it should be hopefully be obvious,
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  Speaker 5: but you will have a different RMD amount every year.
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  Speaker 5: So an example would be someone turning seventy three. Their
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  Speaker 5: life expectancy factor is twenty six point five years. So
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  Speaker 5: on one hundred thousand dollars account, you need to take
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  Speaker 5: out about three thousand, seven hundred and seventy four dollars.
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  Speaker 3: So for US math.
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  Speaker 5: Wizards, that's about three point seventy eight percent if you
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  Speaker 5: want to think about it that way. Rmds are calculated
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  Speaker 5: per IRA, so if you have three, you'll have three
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  Speaker 5: separate rmds. But now you can aggregate that total amount
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  Speaker 5: and distribute it from one single IRA IRA. But notably,
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  Speaker 5: this is only for iras. Once again another new liance,
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  Speaker 5: So four one k is or three b's four to
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  Speaker 5: fifty seven plans must be taken from each company's separate plan,
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  Speaker 5: so that's something to be aware of. Now another special note,
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  Speaker 5: because there's not enough already. If your spouse is the
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  Speaker 5: sole beneficiary of your IRA or retirement.
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  Speaker 3: Account and they are more than ten years younger.
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  Speaker 5: Than you, you actually get to use a different table
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  Speaker 5: called the joint life expectancy table to calculate your life expectancy,
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  Speaker 5: and once again, all else being equal, this will result
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  Speaker 5: in a slightly smaller RMD to account for a younger
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  Speaker 5: spouse potentially inheriting the money down the road. Now, you
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  Speaker 5: can delay your first RMD to what's called your required
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  Speaker 5: beginning date, which is April first of the year after
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  Speaker 5: you reach age seventy three or seventy five. But if
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  Speaker 5: you do that, you would actually be doubling up and
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  Speaker 5: having two years worth of minimums distributed.
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  Speaker 3: In the same tax here.
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  Speaker 5: Right, So if I take my defer my first year's
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  Speaker 5: RMB til next year in twenty six, I take twenty
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  Speaker 5: five's minimum in twenty six plus twenty twenty six minimums
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  Speaker 5: in that same calendar year as well, if you follow
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  Speaker 5: me there. So generally we don't recommend that, but just
• 11:12
  Speaker 5: that's kind of a whoops, you shoe it.
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  Speaker 3: I forgot about the first time.
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  Speaker 5: They kind of give your grace period that for that
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  Speaker 5: first quarter of the following year there. But as we said,
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  Speaker 5: missing an R and D is kind of a big deal.
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  Speaker 5: Now they have dropped the penalty on this. It used
• 11:26
  Speaker 5: to be a fifty percent penalty on any amount that
• 11:29
  Speaker 5: you failed to distribute. That has been reduced to twenty
• 11:32
  Speaker 5: five percent on the shortfall. If you do correct it
• 11:36
  Speaker 5: within two years, you're eligible to drop that penalty to
• 11:39
  Speaker 5: ten percent.
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  Speaker 3: Now you can still apply to actually waive.
• 11:43
  Speaker 5: That penalty as well, basically begging for forgiveness with the
• 11:45
  Speaker 5: IRS to potentially get that wave. So if you do
• 11:48
  Speaker 5: miss one, the first thing you need to do is
• 11:50
  Speaker 5: talk to your advisor or your bank wherever your money
• 11:52
  Speaker 5: is held, get the get the missed amount taken out,
• 11:55
  Speaker 5: and then talk to your account about what to do next.
• 11:58
  Speaker 2: Sounds it's very important. It's just sounds that it's painful.
• 12:02
  Speaker 1: You don't want to mess around with that souf as
• 12:03
  Speaker 1: we talked this morning with Eric and Nate. Of course,
• 12:05
  Speaker 1: our retirement planning professionals from Class Financial, Nate Briby.
• 12:08
  Speaker 2: And Eric Schwartz.
• 12:09
  Speaker 1: Learn more online the website COLSS financial dot com. That's
• 12:11
  Speaker 1: coss k l AA S Financial dot com. Urtelphon number
• 12:15
  Speaker 1: six so eight four four two five six three seven
• 12:18
  Speaker 1: no charge for that initial get to know your appointment
• 12:20
  Speaker 1: at COSS Financial. It will beat complimentary to you. What
• 12:23
  Speaker 1: if you inherited in IRA, We'll get the details on
• 12:26
  Speaker 1: that and so much more as we continue our conversation
• 12:28
  Speaker 1: with Nate and Eric, our retirement planning professionals from Class Financial.
• 12:31
  Speaker 1: We will do that next as Money and Motion continues
• 12:34
  Speaker 1: right here. I'm thirteen ten wib A hanging out this
• 12:37
  Speaker 1: morning with our retirement planning professionals, Eric Schwartz and Nate Bribe.
• 12:41
  Speaker 1: Of course, they come to us from Claus Financial. The
• 12:43
  Speaker 1: website Class financial dot com. That's Class k l a
• 12:47
  Speaker 1: A s Financial dot com. Great website and resource to
• 12:50
  Speaker 1: learn more about Class Financial, learn about their separate divisions.
• 12:53
  Speaker 1: You can learn about the team at Coss Financially. You
• 12:55
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  Speaker 1: that available to you at coss financial dot com. Del
• 13:00
  Speaker 1: for number six oh eight four four two five six
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  Speaker 1: three seven, No charge for that. Initial'll get to know
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  Speaker 1: you appointment tech Lass Financial. It will be complementary to
• 13:08
  Speaker 1: you again their numbers six oh eight four four two
• 13:11
  Speaker 1: five six three seven. Talking this week about r mds,
• 13:14
  Speaker 1: of course, they are an important important thing to know about.
• 13:17
  Speaker 1: And uh, as we kind of left off, I had
• 13:19
  Speaker 1: mentioned inherited iras and Eric, let's talk a little bit
• 13:22
  Speaker 1: about that.
• 13:23
  Speaker 2: Let's say you inherited one. Are there any special rules
• 13:26
  Speaker 2: for these?
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  Speaker 4: There are a lot of special rules fun before I
• 13:31
  Speaker 4: before I kind of jumped into going over the the
• 13:34
  Speaker 4: basics of inherited diaries. These are very very complex calculations
• 13:41
  Speaker 4: in some cases, and make sure you're working with an
• 13:44
  Speaker 4: advisor or or whoever is holding the funds that you inherit,
• 13:48
  Speaker 4: because inherited diaries they'll usually have rm ds. But beginning
• 13:53
  Speaker 4: back in twenty twenty, when the first Secure Act legislation
• 13:56
  Speaker 4: went through, they changed a lot of the rules surrounding
• 14:01
  Speaker 4: how much you have to take out when you have
• 14:02
  Speaker 4: to do it. They passed that in January, well, it
• 14:06
  Speaker 4: took effect in January twenty twenty, and then by about
• 14:09
  Speaker 4: January twenty twenty one we finally had enough clarity to
• 14:12
  Speaker 4: actually go ahead and make some judgments based on it.
• 14:16
  Speaker 4: But inherited iras in general will have r and DS
• 14:21
  Speaker 4: if you inherited those dollars before twenty twenty, so before
• 14:24
  Speaker 4: Secure Act, the first Secure Act legislation. The distributions are
• 14:28
  Speaker 4: based on your life expectancy. If you inherited in twenty
• 14:32
  Speaker 4: twenty or later and the original owner had already started
• 14:36
  Speaker 4: taking required minimum distributions, you will need to keep taking
• 14:39
  Speaker 4: them out. And if you're a non spouse beneficiary, you
• 14:43
  Speaker 4: have an additional rule that says you have ten years
• 14:46
  Speaker 4: to draw down the account. Okay, so you only have
• 14:48
  Speaker 4: to take your required amount for the first nine years,
• 14:52
  Speaker 4: but in the tenth year if you haven't, if you've
• 14:55
  Speaker 4: only taken out the minimum amount, odds are there's a
• 14:59
  Speaker 4: big chunk of money leftover that you then need to
• 15:01
  Speaker 4: distribute in the final year, and at that point it's
• 15:04
  Speaker 4: hitting you all in one tax year. So this would
• 15:06
  Speaker 4: be where you'd want to work with an accountant and
• 15:08
  Speaker 4: advisor to figure out how you spread out those distributions
• 15:13
  Speaker 4: and what makes the most sense for your situation. Now,
• 15:17
  Speaker 4: if you're a spousal beneficiary, you do have the option
• 15:19
  Speaker 4: to roll the funds into your own IRA. That way,
• 15:23
  Speaker 4: you can defer your r and DS until you are
• 15:25
  Speaker 4: seventy three. So basically in that case you're once you
• 15:29
  Speaker 4: roll it over, the IRS views it as if you,
• 15:32
  Speaker 4: the surviving spouse, actually saved all those dollars.
• 15:35
  Speaker 3: It sort of.
• 15:35
  Speaker 4: Loses the the inherited classification. And lastly, here as a
• 15:43
  Speaker 4: spousal beneficiary, you can also leave it as an inherited IRA,
• 15:48
  Speaker 4: in which case you take required minimum distributions based on
• 15:51
  Speaker 4: your life expectancy. You might say, why would you ever
• 15:54
  Speaker 4: do that? It seems to reduce your flexibility if you
• 15:58
  Speaker 4: have an age difference where you know where, for example,
• 16:02
  Speaker 4: maybe the surviving spouse was younger, or in the case
• 16:06
  Speaker 4: of passing away earlier in life, you actually have access
• 16:10
  Speaker 4: without a penalty to inherited IRA dollars before fifty nine
• 16:14
  Speaker 4: and a half. So if someone passes away young and
• 16:18
  Speaker 4: their surviving spouse thinks maybe they would need access to
• 16:21
  Speaker 4: funds before they reach fifty nine and a half, they
• 16:23
  Speaker 4: might leave it in an inherited IRA just to keep
• 16:27
  Speaker 4: access to it.
• 16:28
  Speaker 1: Eric, you know, as we talk about this stuff too,
• 16:31
  Speaker 1: I feel like we've talked in the past rmds and
• 16:34
  Speaker 1: charitable giving charities. There is there is an aspect to
• 16:37
  Speaker 1: these as well that folks need to be aware of,
• 16:40
  Speaker 1: isn't there.
• 16:42
  Speaker 4: Yeah, So, as tax law has changed in the standard
• 16:46
  Speaker 4: deduction has increased in the last eight years. Here, the
• 16:51
  Speaker 4: ability to actually deduct charitable distributions through itemization has gotten
• 16:56
  Speaker 4: a lot harder because most people don't have enough itemized
• 16:59
  Speaker 4: deduction to actually exceed that standard deduction. So while while
• 17:05
  Speaker 4: you're still doing good by by giving away giving away
• 17:10
  Speaker 4: dollars to charitable organizations. It's many cases not shown up
• 17:14
  Speaker 4: on your tax return. So qualified charitable distributions or qcds
• 17:19
  Speaker 4: have become much more popular and much more talked about.
• 17:23
  Speaker 4: Qcds that you donate up to one hundred and eight
• 17:26
  Speaker 4: thousand dollars per year and that's for twenty twenty five
• 17:29
  Speaker 4: directly from your IRA to a qualified charity. Okay, So
• 17:34
  Speaker 4: when this happens, you're basically it's going right to the
• 17:37
  Speaker 4: charitable organization. And you do not then need to report
• 17:41
  Speaker 4: those dollars as taxable income. Okay, So it counts towards
• 17:45
  Speaker 4: your required minimum distribution and and it's it's not going
• 17:50
  Speaker 4: to show up as income on your tax return. Now,
• 17:53
  Speaker 4: you do have to be seventy and a half in
• 17:55
  Speaker 4: order to utilize the qcds. And it's you can't just
• 17:59
  Speaker 4: say like, well, I see or I turned seventy and
• 18:01
  Speaker 4: a half. Let's say in August and it's June, I'm
• 18:03
  Speaker 4: going to do a QCD. Now you can't do that.
• 18:05
  Speaker 4: You have to wait till you are actually seventy and
• 18:08
  Speaker 4: a half to give away funds directly from your IRA
• 18:12
  Speaker 4: to a charity. They do need to come out by
• 18:15
  Speaker 4: December thirty first, and they have to go to an
• 18:19
  Speaker 4: eligible charity or five oh one C three organization donor
• 18:24
  Speaker 4: advised funds and other supporting organizations. Those are actually not
• 18:28
  Speaker 4: eligible to receive qcds, and you're not getting a charitable
• 18:32
  Speaker 4: deduction in addition to the QCD benefit, because remember the
• 18:37
  Speaker 4: QCD benefit is basically, hey, if I give ten thousand
• 18:41
  Speaker 4: dollars to this charity, that's ten thousand dollars less of
• 18:44
  Speaker 4: income that I'm actually reporting on my tax return. So
• 18:47
  Speaker 4: you don't get to claim a charitable deduction in addition
• 18:50
  Speaker 4: to that. But you're actually you're actually coming out in
• 18:54
  Speaker 4: many cases pretty well because you're actually able to deduct
• 18:58
  Speaker 4: the full amount you're giving without itemizing. Now, last thing
• 19:01
  Speaker 4: here is keep good records. Because you're ten ninety nine R,
• 19:05
  Speaker 4: which is your your tax reporting form that you get
• 19:07
  Speaker 4: from your retirement account in January, it doesn't actually show
• 19:11
  Speaker 4: the amount that went to a QCD, It just shows
• 19:14
  Speaker 4: the total amount that came out. So you actually need
• 19:16
  Speaker 4: to let your accountant know, hey, I gave you know,
• 19:18
  Speaker 4: five thousand or ten thousand dollars of that away, so
• 19:21
  Speaker 4: that the accountant can then exclude that from your income
• 19:24
  Speaker 4: on your tax return.
• 19:25
  Speaker 1: Important important guidance and warnings there as well as we
• 19:29
  Speaker 1: talk with Eric Swartz and Nate Briby. They are all
• 19:31
  Speaker 1: retirement planning professionals from Class Financial. The website cossfinancial dot com.
• 19:35
  Speaker 1: That's Class k l aas Financial dot com. It's all
• 19:39
  Speaker 1: phone number six so eight four four two five six
• 19:42
  Speaker 1: three seven, no charge for the initial gets to know
• 19:43
  Speaker 1: you appointment tech Loss Financial.
• 19:45
  Speaker 2: It will be complementary to you.
• 19:47
  Speaker 1: So Nate, Eric, that kind of you know, we touched
• 19:50
  Speaker 1: on qcds, would would somebody?
• 19:53
  Speaker 2: Is Is there a reason.
• 19:53
  Speaker 1: Why somebody would choose to use them even even if
• 19:57
  Speaker 1: they're not required to take r mds.
• 20:00
  Speaker 5: Yeah, So this is another interesting nuance in the tax code.
• 20:03
  Speaker 5: So once again, qcds can start at age seventy and
• 20:06
  Speaker 5: a half, but your rm ds don't have to start
• 20:09
  Speaker 5: until seventy three or seventy five. So obviously there's a
• 20:11
  Speaker 5: little bit of a gap there where you have this
• 20:13
  Speaker 5: opportunity to do qcds before you're required to even distribute
• 20:18
  Speaker 5: funds from your IRA. So, honestly, this is kind of
• 20:21
  Speaker 5: cute even by my standards, This even really makes sense.
• 20:25
  Speaker 5: But a couple of reasons I thought of here really
• 20:27
  Speaker 5: you know, once again, to maximize charitable impacts. So if
• 20:30
  Speaker 5: you're going to take a distribution, you know, just give
• 20:34
  Speaker 5: for example anyway that makes no sense.
• 20:35
  Speaker 3: So you're gonna want to do it to you know,
• 20:38
  Speaker 3: for pre.
• 20:38
  Speaker 5: Tax dollars directly from your IRA, and I say, basically
• 20:41
  Speaker 5: everyone wins but the irs when you do qcds. Okay.
• 20:44
  Speaker 5: So still in most cases, the qcds are probably the
• 20:47
  Speaker 5: most powerful way to do to donate to charity because
• 20:52
  Speaker 5: they really okay, So that is the key term. AGI
• 20:56
  Speaker 5: sets a lot of different credits and deductions. Potentially your
• 20:59
  Speaker 5: medicare part B premiums, there's issues with the tax torpedo
• 21:05
  Speaker 5: for social security. There's a thousand different things reasons why
• 21:08
  Speaker 5: you potentially want to lower your AGI, which is you know,
• 21:11
  Speaker 5: above the line deduction basically if you want to think
• 21:14
  Speaker 5: of it that way.
• 21:14
  Speaker 3: So that's the main thing.
• 21:17
  Speaker 5: The other logical reason it's kind of once again super
• 21:19
  Speaker 5: cute and nuance where if you think about rm ds
• 21:22
  Speaker 5: in general, they're based on the size of your account,
• 21:25
  Speaker 5: So those with larger account balances that are worried about
• 21:28
  Speaker 5: higher taxes in the future or whatever whatever, whatever, getting
• 21:32
  Speaker 5: money out of the produce future rm ds. Right, So
• 21:35
  Speaker 5: if you're seventy and a half, you have two million
• 21:37
  Speaker 5: dollars in your iran is going to be I don't
• 21:39
  Speaker 5: know what that is, A one hundred and twenty thousand
• 21:41
  Speaker 5: dollars minimum or something. You want to say, what can
• 21:44
  Speaker 5: I do to prevent future minimum distributions. It's like give
• 21:46
  Speaker 5: twenty thousand dollars to your church today, right, there's twenty
• 21:49
  Speaker 5: thousand dollars less that's going to be.
• 21:50
  Speaker 3: Subject to rm ds at some point in the future.
• 21:52
  Speaker 5: So it's been cute, but slight, you know, slight benefit
• 21:57
  Speaker 5: there for giving as soon as.
• 21:59
  Speaker 1: You're talking this morning with Nate Briby and Eric Schwartz,
• 22:03
  Speaker 1: they are our retirement planning professionals from COSS Financial. A
• 22:06
  Speaker 1: lot of great information about our mds, also qualified charitable distributions.
• 22:10
  Speaker 1: If you missed any part of the show, don't forget.
• 22:12
  Speaker 1: You can always listen back Class Financial dot Com. That's
• 22:15
  Speaker 1: coss k l a as Financial dot Com. Listen back
• 22:18
  Speaker 1: to this in previous programs all at the website. You
• 22:21
  Speaker 1: can also sign up for the weekly market Paul's newsletter.
• 22:23
  Speaker 1: Again the website Class Financial dot Com. Delphy number six
• 22:26
  Speaker 1: oh eight four four two five six three seven.
• 22:28
  Speaker 2: No charge with the initial.
• 22:29
  Speaker 1: Gets new your appointment at Claus Financial. It will be
• 22:31
  Speaker 1: complementary to you. Again their number six O eight four
• 22:34
  Speaker 1: four two five six three seven. We'll set our conversation
• 22:37
  Speaker 1: with Eric and Nate. Walso head on over to the
• 22:39
  Speaker 1: Money in Motion Listener question corner. We will do that
• 22:42
  Speaker 1: next as Money in Motion with Glass Financial continues here
• 22:44
  Speaker 1: on thirteen ten. Wu ib A just a ton of
• 22:48
  Speaker 1: great information in this week's program. Don't forget you can
• 22:50
  Speaker 1: always listen back Onlinecloss Financial dot com. That's coss k
• 22:55
  Speaker 1: l a a s Financial dot com. Great website and
• 22:59
  Speaker 1: can give us back this previous show's podcast. There teph
• 23:01
  Speaker 1: number six O eight four four two five six three seven.
• 23:04
  Speaker 1: No charge for that initial gets to know you appointment
• 23:06
  Speaker 1: deck Coss Financial. It will be complementary to you. Before
• 23:09
  Speaker 1: we head on over and get some questions listener questions
• 23:13
  Speaker 1: and the Money and Motion listener question corner. One last
• 23:15
  Speaker 1: thing is as we as we talk this morning, Nate,
• 23:19
  Speaker 1: when it comes to this stuff, it really seems to
• 23:21
  Speaker 1: be like being proactive and strategic with taxes and of
• 23:24
  Speaker 1: course what a great opportunity as well to not only
• 23:27
  Speaker 1: be proactive and strategic, but also support your favorite charities.
• 23:31
  Speaker 5: Yeah, qcds are really one of the best tools you
• 23:34
  Speaker 5: have in your toolkit for those charitably minded and seventy
• 23:37
  Speaker 5: and a half, it's the best way to maximize your
• 23:39
  Speaker 5: charitable impact and minimize your tax burden. So always consult
• 23:43
  Speaker 5: with your financial advisor tax professional to determine if the
• 23:46
  Speaker 5: qcds makes sense.
• 23:47
  Speaker 3: But honestly, in.
• 23:48
  Speaker 5: Most cases they're going to that's probably what your account's
• 23:50
  Speaker 5: going to recommend to once again lower your AGI and
• 23:53
  Speaker 5: reduce your tax file income.
• 23:55
  Speaker 2: What a great tool we got there.
• 23:56
  Speaker 1: Speaking of great tools and great opportunities, if you head
• 23:58
  Speaker 1: on over the website clausefinancial dot com, you can always
• 24:01
  Speaker 1: submit a question to be answered in the Money and
• 24:02
  Speaker 1: Motion listener question corner. We have a question this week
• 24:05
  Speaker 1: from Brent Brent Wrights, and he says, I'm forty five
• 24:08
  Speaker 1: years old, so still a while from retirement, but wondering
• 24:11
  Speaker 1: if it makes more sense for me to add more
• 24:14
  Speaker 1: into my four ROH one K currently or work on
• 24:16
  Speaker 1: paying down my debt. I'm currently putting away ten percent
• 24:20
  Speaker 1: of my salary into savings and Eric, I'll give this
• 24:24
  Speaker 1: one on over to you, what do you advise for Brett?
• 24:27
  Speaker 4: Yeah, Brent, first of all, it's a great question, and
• 24:30
  Speaker 4: when we get quite a bit and glad you're thinking
• 24:33
  Speaker 4: about it now, and of course thank you for sending
• 24:35
  Speaker 4: this to us ahead of time. It gives us a
• 24:37
  Speaker 4: little time to think about the response and formulate something
• 24:41
  Speaker 4: that hopefully will be pretty helpful. Let's, I think the
• 24:45
  Speaker 4: short answer to this is you should be doing some
• 24:48
  Speaker 4: of both. But in terms of you know which parts
• 24:52
  Speaker 4: to focus on, let's kind of consider a few factors here.
• 24:57
  Speaker 4: So at this point in Brent's life, if he's in
• 25:00
  Speaker 4: the prime wealth building phase, so we do want him
• 25:03
  Speaker 4: to be thinking about saving for retirement. But we also
• 25:06
  Speaker 4: know that, you know, debt is taking monthly cash flow
• 25:10
  Speaker 4: both during the working years and in retirement, so we
• 25:13
  Speaker 4: want to be we want to be paying that down
• 25:15
  Speaker 4: as quickly as possible. So let's think about, first of all,
• 25:18
  Speaker 4: the power of compounding. So retirement savings, especially in like
• 25:22
  Speaker 4: a four oh one K plan where you have a
• 25:24
  Speaker 4: tax benefit, they benefit greatly from compounding. So the earlier
• 25:28
  Speaker 4: that you have the money there, the more time the
• 25:31
  Speaker 4: money has to grow. And at a really simple level,
• 25:34
  Speaker 4: it's you know, your money is growing, and then that
• 25:37
  Speaker 4: money is growing, right, so you're you're actually benefiting from
• 25:41
  Speaker 4: it the longer you have the dollars in there now.
• 25:44
  Speaker 4: On the flip side of that, though, high interest debt
• 25:46
  Speaker 4: works against you in the same way. Right if you
• 25:49
  Speaker 4: have a high interest rate on some on a credit card,
• 25:53
  Speaker 4: for example, you're actually falling further behind by the compounding
• 25:57
  Speaker 4: the compounding interest on the debt. So think of about
• 26:00
  Speaker 4: the type of debt that you have. So if you
• 26:02
  Speaker 4: have credit card debt or other high interest rate loans
• 26:06
  Speaker 4: are a great example, those should be priority. We should
• 26:08
  Speaker 4: be getting those paid off as quickly as possible. Mortgage
• 26:12
  Speaker 4: det or other low interest debt options, those we would
• 26:16
  Speaker 4: say are less urgent, and you wouldn't have to prioritize
• 26:19
  Speaker 4: those oversaving for retirement. So create a list of all
• 26:23
  Speaker 4: your debts and their interest rates and balances, and prioritize
• 26:28
  Speaker 4: wiping out those high interest debts and like I said,
• 26:31
  Speaker 4: it be a little bit less urgent on those lower
• 26:34
  Speaker 4: interest rate loans. We also need to be thinking about
• 26:38
  Speaker 4: the four to one k match. So if Brent's putting
• 26:40
  Speaker 4: away ten percent of his salary in general, I would
• 26:43
  Speaker 4: assume he is he is getting the full employer match
• 26:46
  Speaker 4: in his four oh one. K. No, that's not to
• 26:49
  Speaker 4: say that there can be some strange calculation that the
• 26:53
  Speaker 4: employer uses to figure out the match. But it sounds
• 26:57
  Speaker 4: like you're hitting enough to get the full employer man.
• 27:00
  Speaker 4: Because if you need to put in, you know, three percent,
• 27:04
  Speaker 4: and your employer will put in three percent. Well, if
• 27:06
  Speaker 4: you're not putting in anything, you're you're leaving three percent
• 27:08
  Speaker 4: on the table from the employer. So make sure you're
• 27:11
  Speaker 4: doing enough to get that employer match. But Brent, it
• 27:14
  Speaker 4: sounds like you're doing that right now.
• 27:15
  Speaker 1: Really good, good approach there so far as we're talking
• 27:19
  Speaker 1: with Eric and Nate. Of course, Eric Swartz and Nate
• 27:21
  Speaker 1: Bribey are retirement plan professionals from Class Financial Online. Classfinancial
• 27:25
  Speaker 1: dot com. That's coss k l a A s Financial
• 27:28
  Speaker 1: dot com. Sorry about that, Eric, speaking of approached, that's
• 27:31
  Speaker 1: a proper approach is important to this stuff, isn't it?
• 27:34
  Speaker 4: Sure is no problem. Just a couple more things I
• 27:36
  Speaker 4: wanted to go over here. You know, we can't just
• 27:38
  Speaker 4: just give a quick straight answer, Sean. We gotta we
• 27:40
  Speaker 4: gotta tell everybody about everything. The last couple of things
• 27:46
  Speaker 4: here is before you you get really aggressive with paying
• 27:49
  Speaker 4: down your debt, just to ensure that you have an
• 27:51
  Speaker 4: emergency fund, so as we've talked about on the show,
• 27:54
  Speaker 4: before three to six months of living expenses, because that's
• 27:57
  Speaker 4: going to prevent you from going further into debt in
• 28:00
  Speaker 4: the future if unexpected expenses arise. So do prioritize that
• 28:05
  Speaker 4: emergency fund before you're really tackling, really tackling those those
• 28:11
  Speaker 4: short term debts. And finally, seek out professional advice. An
• 28:15
  Speaker 4: advisor can help you figure out kind of the right
• 28:17
  Speaker 4: balance of saving for retirement and paying down debt based
• 28:22
  Speaker 4: on your specific situation and goals. So in short, here
• 28:25
  Speaker 4: prioritize getting the full four one K match, tackle high
• 28:28
  Speaker 4: interest debt aggressively, and maintain an emergency fund. Once you've
• 28:33
  Speaker 4: done those three things, then you can ramp up your
• 28:35
  Speaker 4: retirement savings and know that you're striking a good balance
• 28:39
  Speaker 4: between the two.
• 28:40
  Speaker 1: Really good show, as always from Eric Schwartz and Nate Bridy,
• 28:44
  Speaker 1: our retirement planning professionals from Class Financial their website Class
• 28:48
  Speaker 1: Financial dot com. It's coss k l aa as Financial
• 28:51
  Speaker 1: dot com website is an amazing place. You miss any
• 28:54
  Speaker 1: part today's program, You can always listen back at classfinancial
• 28:57
  Speaker 1: dot com. While you're there, subscribe to the podcast. You
• 29:00
  Speaker 1: can share the podcast as well some information from today's
• 29:03
  Speaker 1: show or previous show. I want to get out to
• 29:04
  Speaker 1: your friends and family, you can do that again right
• 29:06
  Speaker 1: online at Classofinancial dot com. Telephone number six oh eight
• 29:09
  Speaker 1: four four two five six three seven. No charge for
• 29:12
  Speaker 1: that initial get to know the appointment at COSS Financial.
• 29:14
  Speaker 1: It will be complimentary to you again their number six
• 29:16
  Speaker 1: oh eight four four two five six three seven. Want
• 29:19
  Speaker 1: to hold on to that telephone number now because it's
• 29:21
  Speaker 1: time for the COLSS Quiz Question the Week. It works
• 29:23
  Speaker 1: like this, in just a moment, to'll ask you the
• 29:25
  Speaker 1: class quiz question the Week. We'll then have thirty minutes
• 29:27
  Speaker 1: from the end today's program to call the Class Financial
• 29:29
  Speaker 1: office right here in Madison at six oh eight four
• 29:31
  Speaker 1: four two five six three seven. If you are the
• 29:34
  Speaker 1: first caller with correct answer, win this week's prize, which
• 29:36
  Speaker 1: is say twenty five dollars gift card to cheesecake Factory.
• 29:39
  Speaker 1: This week's class Quiz question the week is this true
• 29:42
  Speaker 1: or false? If you were born between January first, nineteen
• 29:47
  Speaker 1: fifty one and December thirty first, nineteen fifty nine, your
• 29:52
  Speaker 1: RMDS would start at age seventy three. Is that true
• 29:57
  Speaker 1: or is that false? Telephone number six oh eight four
• 30:00
  Speaker 1: four to two five six three seven, first call. Correct
• 30:03
  Speaker 1: answer when this week's prize that twenty five dollars gift
• 30:05
  Speaker 1: card cheesecake factory.
• 30:06
  Speaker 2: Don't forget that.
• 30:06
  Speaker 1: As class financial office here in Madison six o eight
• 30:09
  Speaker 1: four four two five six three seven. Eric's always great
• 30:12
  Speaker 1: chatting with you. Have a great day, thanks, Sean Nate.
• 30:15
  Speaker 2: Great to talk to you again as well, and you
• 30:16
  Speaker 2: do with the same thanks Sean.
• 30:18
  Speaker 3: Bye bye, and of.
• 30:19
  Speaker 1: Course doctor Marty Greer, she comes your way next here
• 30:21
  Speaker 1: on thirteen ten wu ib A