2024's Best Stocking Stuffer: Financial Freedom

Plan With The Tax Man

The holiday season is here, and while you’re stuffing stockings for your loved ones, don’t forget to stuff your own financial stocking with tips that can bring you closer to a secure retirement. Today, we’re unwrapping 10 bite-sized, actionable ideas to help you save smarter, invest better, and plan for the future you deserve.

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Transcript:

Speaker 1:

The holiday season is upon us. And while you're stuffing stockings for your loved ones, don't forget to stuff your own financial stocking with hopefully some tips that can bring you closer to a secure retirement. Today on Plan With The Tax Man, let's look at some financial freedom and some best stocking stuffers in 2024.

Hey everybody, welcome in to the podcast. Thanks for hanging out with Tony Mauro and myself as we talk investing, finance, retirement. We thought we'd have a little fun here. As this is our early December episode, we're going to unwrap a few action items to hopefully help you be a little bit better on your way towards retirement with Tony and just have a little fun with this concept since it's that time of the year. What's going on, my friend? How are you?

Speaker 2:

I'm doing good. Just off of Thanksgiving and a quick vacation. So although it's getting cold here, it's the holidays, so. My favorite time of year.

Speaker 1:

It is what it is. I mean, it's that time of the year and it comes fast and furious too. It's like soon as one starts, it just, well, snowballs, no pun intended, but it just snowballs its way through to the end of the year. But anyway, well, I'm glad you're doing well. Hopefully our listeners are also. And so let's have a little fun here. Why we might want some of these things as financial stocking stuffers, okay? Is it a good idea as a stocking stuffer? Is it a bad idea? That kind of thing. Have a little fun with it, wherever you want to take it.

Speaker 2:

All right.

Speaker 1:

All right, so I'll give you the item. You tell us what you think. All right, so the first one, maxing out your retirement contributions. Is this something you'd like to have in your stocking, is to max those out?

Speaker 2:

I would say definitely, yes. And for those of the people listening that are in the Iowa area, I actually brought the newspaper article in to share with my staff and it was an article about people that are mostly in the central Iowa area just living on social security. And it's a sad article and I'd encourage people to read it, but the point of it was you don't want to end up just living off social security, which means that, and I tell people this literally like a broken record every tax season, you need to increase your retirement contributions to whatever you're doing. And if you haven't started, you need to start because nobody's going to be there to take care of you and social security, while it's a safety net, it's not a very good existence. And so I would definitely say that's number one on my list.

Speaker 1:

Yeah, max it out. Especially as we get to 50. 50 plus, you get those catch up contribution stages, making more money than ever hopefully, kids are off the payroll hopefully. So max those jokers out. Certainly a good idea for a stocking stuffer. All right, diversifying your investments. If somebody says, "Hey, Tony, for Christmas this year, I'm going to help you diversify your investments." That sounds like a pretty good stocking stuffer.

Speaker 2:

Absolutely. It goes right along with number one that you definitely don't want to have too much of your investments, of course, concentrated in one area. The old adage, and you still hear some people having it where I've got all my 401(k) wrapped up in my own company's stock. That's probably not the best, that's an extreme example. But I do think you need to be diversified. This is where an advisor can certainly help you and provide some value to make sure you're adequately diversified so that you've always got something in your portfolio that might be doing well when other sectors may not be.

Speaker 1:

Yeah, yeah. And to kind of have fun and play on the holiday spirit here, again, you said you want a qualified professional, an advisor to help you. Yes, that is the preferred thing. Not just having Cousin Eddie from the Vacation movies. You don't want Cousin Eddie helping you diversify.

Speaker 2:

We don't want Cousin Eddie. No, no.

Speaker 1:

We don't want that. We want a qualified like Tony helping us. Same with all of these. So what about reviewing our social security strategy? So good time to think about that and say, "Hey, you know what? For Christmas, I want to make sure my social security strategy is sound as a pound."

Speaker 2:

And of course all of these coming around Christmas, it's kind of coming into the new year where people start to think about this. But social security strategy and when to take it, that's always a big question on people's minds as they approach 50 and beyond. And there's some nice calculators that we have that can help you and that we can discuss that on what's the best optimization strategy for you because it's different for everybody. Yes, social security, you can take it early at 62 and then you've got a full retirement age and then of course the latest. But depending on your situation and longevity and all kinds of other things, I think it's important to review that. And believe it or not, social security administration does make it relatively easy to go out and get your report online. And if you can't get it, we'll help you get it, but I do think that's very important.

Speaker 1:

Yeah, that's a great point for sure. And speaking of optimization, our next one is optimizing tax efficiency. Well, as a CPA, I know you're all on board for that one.

Speaker 2:

I am. This is my big pet peeve, because I talked to a lot of people about yes, you might be working with an advisor or maybe you're not, but are you planning with a tax efficiency slant or making sure you optimize or reduce, let's put it should be, taxes because it's usually the biggest thing in our whole life is paying these taxes, whether it's now or deferred. And you really have to try to maximize your tax savings all throughout the investment life. So that's the one we hit on, is that and everything we talk about.

Speaker 1:

Yeah, I mean, tax efficiency is going to go a long way. I mean, none of us want to pay taxes. We don't like the... We get taxed to death as it is, but the rules are the rules, so we have to adhere and follow along. But you can be efficient and hopefully pay as little as legally possible.

Speaker 2:

Exactly, you got to use them to your advantage.

Speaker 1:

That's right.

Speaker 2:

Yep.

Speaker 1:

Play the game as best you can.

Speaker 2:

Best you can, yeah.

Speaker 1:

Yeah, for sure. Okay, so another stocking stuffer idea, Tony, would it be a good thing to boost that emergency fund?

Speaker 2:

I would definitely say yes. Another thing we talk about with every client that we work with is it's amazing how many people don't have emergency funds and it's never a bad idea to boost it to a level where between you and your advisor agree upon. It's a little different for everybody, the old adage three to six months of income, but it could be different for different things. But boy, it's essential to have that at least until you're at retirement age and then you can back it down some, but it's not a bad idea to even have it in the wealth distribution stage just for those things that pop up. So we do like to go over that. We do like to make sure that people, even if it's just a few bucks every month to get that boosted every year.

Speaker 1:

Got you, okay. I'm going to throw a bonus one or two in here at you as well, Tony, catch you off guard a little bit. Not that you don't talk about this enough stuff, you'll be just fine, but based on what you were kind of talking about right there, it made me think about something else. Should we, at the end of the year, we're thinking this is our early December, we're talking stocking stuffers. What about rebalancing our portfolio? Is it a good idea calendar wise, maybe every December or every January to just kind of take a look at things and make sure we're rebalanced properly if we don't have someone like yourself doing it for us?

Speaker 2:

I definitely think it is. If you are working on it on your own, you definitely want to go in and rebalance toward the end of the year right after the first to make sure that you're continuing with your original investment philosophy. And because what happens is is if you've got say 10 different investments over 10 different sectors, some of those sectors are going to do very well during the year and some are going to do worse.

Speaker 1:

And the market's done great, the last year.

Speaker 2:

Yeah, market's done great.

Speaker 1:

But you may have a couple of dogs in there.

Speaker 2:

Yeah, and so what you want to try to do is rebalance so that two to three years go by and all of a sudden, let's say for example, your growth sector is now 75, 80% of your portfolio, that might be out of balance with what you originally wanted to have in the overall strategy. And so by doing that, you also in essence kind of sell high and buy low, because you're going to rebalance and you're going to keep that balance so that when sectors that were doing poorly start to perform, you're adequately invested in those. So I do think that's a very, very good idea.

Speaker 1:

Yeah, and it's been doing really well. The market has to give and take. The market rebalances, if you think about it, that concept of you want to rebalance your own portfolio, well, the market has to rebalance itself and we're probably going to see some volatility coming into the new year with new changes and things happening and administration changes. And I think ultimately, I think if you look at the statistics, Tony, just about every presidency, the market tends to go up, but there is going to be some shakes along the way. That's what it does. It's par for the course.

So rebalancing is a good way, especially at the end of a good run like we're seeing right now to maybe make sure you're still aligned with your risk tolerance and all those good things. So good conversation piece to have. Let's do two more and then we'll wrap it up this week, Tony. How about considering Roth conversions to reduce future taxes, especially now that we may see, we don't know yet, we'll see probably in the first a hundred days, but we may see the current tax cuts and jobs acts extended moving past '25, which it was set to expire on. So that could be a good stocking idea.

Speaker 2:

It could be a real good stocking idea. I'm big on the Roth conversions to reduce future taxes. Especially what we do is basically fill up the same tax bracket of clients in, convert some tax deferred to tax-free, which is the Roth conversion, and then try to do that every year and not bump them into the next tax bracket where they're paying more taxes. But I agree, depending on what happens, whether these things are extended beyond '25 or not, it could make more sense than ever to maybe start doing that depending on the news that comes out.

Speaker 1:

Because if they don't make a change, your window's pretty limited. You've got basically just a year left to do some conversions and you want to do that smartly so that you're not bumping tax brackets. But if they extend it, well now you can get back to that Roth-ing over time conversation.

Speaker 2:

Exactly. And if they don't extend, going back to that's the whole optimizing for tax efficiency is making sure that you're getting enough into the tax-free bucket, but doing it wisely and not needlessly overpaying on taxes, it's not going to ruin you. But why pay more in taxes than we need to?

Speaker 1:

And so many people aren't clear on how the steps work. You want to fill up the steps before you go to the next bracket.

Speaker 2:

Exactly, exactly. So they don't understand. They forget about the progressiveness of the tax rates, where that comes into play and when we can show them that they can, if we only fill up this bracket, then we can save quite a bit of taxes and trying to do it all at once.

Speaker 1:

If you're in the 22% tax bracket, someone's like, well, every dime I make is taxed at 22% and that's not accurate.

Speaker 2:

True. Yeah, it's not accurate. And as soon as you go a dime over the limit, now everything beyond that limit is 24.

Speaker 1:

Beyond that limit, exactly. So even if you did pop a bracket, it may not be the worst thing. It just depends on how much. So again, it's about filling up the brackets and doing it properly. So that's where again, you want to work with a qualified professional to help you with that stuff because it can get a little tricky. And the IRS make things tricky, no. So yeah, definitely work with someone like Tony's, a CPA and a CFP. And that brings me to my last one, which is just schedule a conversation. So for a stocking stuffer, it's a good stocking stuffer, schedule an annual financial checkup, or maybe even a first time checkup, Tony, with a qualified pro to see where you're at.

Speaker 2:

I agree. And of course I have a skin in the game because what we do for a living, but obviously if you have a financial professional already, hopefully they've reached out to you or you're at least getting an annual meeting out of that, because you do need a financial checkup to see how things have gone throughout the year for you. And even if you're on your own, a lot of people will provide free financial checkups or at a small fee and you can bring them in your portfolio and everything else you've got going. And they can sit and tell you, number one, I mean, returns and diversification, some of this other stuff we've talked about, but they may hit on some things in a plan that you haven't thought about. We don't have a lot of time to talk about today, whether it be insurance, long-term care, social security planning, some things like that. Maybe a legacy and estate planning as well. So it's definitely worth at least getting an unbiased opinion.

Speaker 1:

Yeah, definitely. And so certainly would be a good stocking stuffer for yourself to say, "Hey, I'm going to get off my duff and I'm going to go talk with a qualified professional and see what's going on, see where I'm at." Maybe it's a second opinion on a plan you got a couple of years ago. Maybe it's a first opinion, or maybe it's just an annual checkup with your advisor, but you haven't talked to him for a little bit and you're thinking, "I want to make sure things are all set up. My ducks are all in a row, so to speak." So that's our podcast this week. So hopefully you guys had a little fun and enjoyed the conversation with Tony and I as usual to try to highlight some useful nuggets of information when it comes to getting ready for retirement.

And as always, if you need some help, reach out to Tony and his team at yourplanningpros.com. That's yourplanningpros.com or call him at [phone]. We'll have that information in the show description links as well and you can check all that good stuff out. Tony, my friend, thanks for hanging out. I always appreciate you and I guess we'll talk right after Christmas, so I'll say Merry Christmas to you.

Speaker 2:

Yeah, Merry Christmas to you and anybody listening. Have a great holidays.

Speaker 1:

Absolutely. And we'll see you next time here on Plan With The Tax Man. Don't forget to subscribe to us on Apple or Spotify or whatever app you like using. Just type in Plan With The Tax Man.

Securities offered through Avantax Investment Services SM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.