Ep 80: 7 Financial Strategies To Help You Be Successful In 2023
The X's & O's
With the likelihood of a recession almost certain and most households having some amount of credit card debt, building effective financial strategies is more important than ever.
In this episode, Matthew Theal, Brent Pasqua and Joshua Winterswyk focus on financial planning tips for the new year. They share some of their favorite strategies to increase investment returns, ensure families are financially protected and decrease taxable income through investment and retirement tax returns.
Matthew, Brent, and Joshua discuss:
Why is current spending contributing to an increase in household debt
How US treasury securities can help maximize liquidity and increase interest on uninvested cash
The importance of updating beneficiaries and insurance to provide protection for the next generation
How 401(k) and taxable brokerage accounts can reduce your taxes before the new year
And more
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Transcript
Welcome to the Retirement Plan Playbook with Brent Pasqua, Matthew Theal, and Joshua Winterswyk from RPA Wealth Management. In this podcast, we cover current events, retirement planning strategies. And provide you with the tools to help you build a successful retirement playbook in any political or financial landscape.
Join Brent, Matthew and Joshua as they navigate the issues that can make the later stages of your retirement plan challenging and help you create the best retirement plan playbook. Now let's get to the show.
Welcome to The Retirement Plan Playbook. I'm your host, Brent Pasqua, founder of RPA Wealth Management. I'm here with Matthew Theal, certified financial planner and Joshua Winterswyk Certified Financial Planner. Uh, we got a great topic today. Uh, we're gonna be talking about financial tips for the end of the year, and as the year is starting to wind down, I think there's some adjustments that we can all make as we get into the end of the.
And so we're gonna talk about the seven financial strategies, uh, to set up a successful 2023. And as we get into that, though, I know Thanksgiving is right around the corner. Uh, what is your favorite dishes? Uh, hi Brent. Uh, nice to see you. I'm a mashed potato guy. I don't know why, but I feel like with the gravy, it always tastes a little better.
Usually plain mashed potatoes kind of boring, but when you add the gravy in, I like all the sides too. Like I, I'm not as excited for like the Turkey and the ham, but like some stuff in mashed potatoes and gravy, some like mac salad, all of that side stuff is just like what I look forward to.
It's crazy cuz the turkey's like the most work, it seems like, and it's the least favorite for a lot of people. Yeah. Yeah, it's kind of funny. It's all about the Turkey, but I'm looking forward to all of those sides. My grandma makes some killer deviled eggs too. I'm looking forward to that as well. Like, I think it's, cuz the turkey's the hardest to make.
Um, and like, you know, there's somes like, oh wow, Turkey tastes bomb, right? Like it's moist, it's perfect. There's somes like, who's watching the Turkey? Like this thing is dry man, . You know what I mean? Like it's hard to come out. I was gonna say green bean casserole, that's good too. But mashed potatoes and that, it's just, I, I think they just go hand in hand.
Yeah, it's perfect. You know what's good for Turkey? The next day you make Turkey taquitos. Oh, I, I usually make Turkey sandwiches. Oh. We're a little different there, but try Turkey taquitos. Dude, I don't know how to make taquitos. Why don't, why don't you have me over to your house? Okay. That sounds good. Can you put a Turkey taquitos recommendation out there in a, maybe a recipe in the show notes?
Yeah. No, definitely make some homemade GAC fire next day. All right, well, let's get to the headlines. Let's talk a little bit about inflation. The Labor Department said that the consumer price index increased 7.7% in October from the same month a year. Which is actually down from 8.2% in September and below June's 9.1% rate.
Tell us a little bit more about what's happening here. Yeah, this was great news, right? It was a bigger than expected drop in inflation. And we said what we've been telling clients or we saw what we, we had been telling clients in all our review meetings is the reason why you don't want to be outta the stock market right now is because when we get something better than expected like this, the market was gonna rally.
And sure enough, the market was up five and a half percent that day, and if you were in cash, you missed it. So when is there. When do we get another, uh, update on the, the rate so we can get another spike in the market? Again, on the inflation rate? It should be in mid-December. Um, but in hindsight, you know, we've talked about a lot on this podcast.
We, we go over this in all of our client review meetings. Um, this was pretty obvious that inflation was gonna start to tick down a little bit. The question is, what happens next? Is it gonna stay this high? Is it gonna, drop a little bit more or is it gonna go back higher? So does this change.
The Fed's approach on them raising rates this next time might change the approach. It might just kind of actually set a ceiling if we continue to see it come down, which is positive. A lot of reason why the market also is, you know, had that big pop the day after this data was printed. But also the writing was a little bit on the wall.
Right? Man, I mean, we've talked about this on multiple podcasts and did. Thought it would do. Yeah, it it absolutely did. And, and now I think, um, you know, the current consistent consensus is it'll trend a little bit lower, um, especially in the next year. Um, that said, I know on one of the podcasts I like to listen to the All In podcast.
Uh, Chamath Poly, one of the investment managers on that podcast was saying that, um, it seems like the consensus is changing to more of it's gonna drop and then spike back up. So curious to see if he, he's right on that. Uh, but would be interesting. That would be interest rates higher for much longer. Yeah.
It's interesting to see what's gonna happen, I think, what, in the first quarter of next year. Mm-hmm. Yeah. It's gonna be very interesting. Uh, let's talk a little bit about, um, household debt. Uh, household debt increased, uh, at the fastest pace in 15 years due to FDA increases in credit card usage and mortgage balances.
The credit card balance collectively rose more than 15. From the same period in 2021. That's the largest annual jump in more than 20 years, according to the New York Fed. That's 351 billion from July to September in increased debt. We've kind of hinted to this story, um, in past podcasts too, that savings rates were dropping credit card uses, which increasing.
Um, and this is, you know, kind of a, another economic indicator. That's, potentially going to slow down demand as these credit card debts and just debts rise for American households. So not like the greatest news. We don't wanna see that big of an increase, um, cuz it means that households are overspending.
Yeah, and I think I have a little different take too. If you are one of these households that's overspending and your credit card debt is increasing looks, you need to cut back your spending. And here's the reason. There's a recession coming if we're not already in, in one, um, you know, Facebook, Amazon, they're laying off, you know, 10% of employees.
You don't want to be in this period of where you're paying for things you can't afford. And if you're going into credit card debt to buy something you can't afford. Can this, this data though, just be somewhat choppy because in 2021, we're at a very low point in credit card debt because of the amount of money that was in the economy and the amount of money that was given throughout the pandemic.
And now, we're sitting here a year and a half later and it's higher. Well, of course it's higher because it was at the lowest points. It's not gonna take much to go higher. That's true. But I. You know, we also had 9% inflation in June and people didn't like that. Well, the reason why we had 9% inflation is cuz the government gave everybody a bunch of money.
No one's gonna give you money to get outta this credit card debt. So if it's already starting to happen, it's gonna get worse next year. You know, as a financial planner, my, you know, my point to the people listening to the show is if you're going to the credit card debt, you cannot afford what you're buying.
That's not normal. That's ire responsible of you. I will say small credit card debt. You know, if you're continuing to grow and project wage growth is, is not you. The end all the end game to your financial plan, you know, so a lot of households do that. In America, it seems like it's kind of the way, but like you're saying, to piggyback on that, it can lead to a big issue.
And we see a little bit of the writing on the wall for next year. If it is recession and you know, more job cuts and everything else that comes along with recessionary periods, this could be a very slippery slope if you're not managing this debt appropriate. Yeah. And I think it too depends on what your job is.
Is your job stable? Is your job not stable? I mean, the layoffs right now are in the technology industry. You know, later, next year, it'll probably be some of the larger, you know, industrial Fortune 500 companies that are laying people off. But you know, if you have like a, a very stable job, say you're a teacher or you know, you work in the medical field, chances are you're probably not gonna get laid off.
We rarely see layoffs in, in those fields. So your point makes sense, but you know, again, if you know you're putting on credit cards, you probably can't afford it. People are, you're gonna see a lot more job losses coming and we're already, we hear 'em every day now. So with interest rates being as high as they are right now, is the interest rate on credit cards increasing also?
Right now? Yes. So new, more So this calculation of debt also includes mortgages, right? So balances of mortgages are increasing. Uh, and then also that could also. Taking out equity of a home, right at even a higher rate. This also affects credit cards and their variable rate. So as rates go up, you're gonna be paying more interest on that same credit card debt than you did a year ago.
When interest rates are rising you don't want to be increasing debt. Like you want to be paying down debt. You don't want to carry a lot of debt. And right now, simplest ways, interest rates are rising. Banks don't give you any grace and they raise the rate on the credit cards very quickly and it's a lot quicker than they raised the rates on your savings account.
I was just gonna say that I bet they've raised the rates on their, uh, their credit card debt you know, quite a lot this year and on their mortgages, but, uh, Bet they haven't raised a savings account, right that much. what a, what a spread though, right? Giving you 3% on your deposits, but they're charging you 22% for interest on your credit cards.
My secret goal in life is to own a bank. What a great job those guys have. All right, let's get into probably the hottest headline over the last couple of weeks. Super hot, and one that I think all of us need your opinion on, Matt, because this has been something that you've talked frequently about over the last couple of.
Cryptocurrency Exchange FTX filed for Chapter 11 bankruptcy. The company's valuation plunged from 32 billion to bankruptcy in a matter of days, and founder and ceo, Sam, uh, Bankman Frees 16 billion net worth went to basically zero was completely evaporated. Matt, you had a lot of support for the crypto market during the craze.
You were talking about NFTs, you were talking about the crypto market. You said it was a good investment. And here we are sitting here. It seems like that this is the failure of 2022, this market. Tell us a little more what's happening. Yeah, so this has been a pretty crazy story. I think we'll cover crypto broadly first, and then talk more about ftx.
Um, but I, you know, I think it's important for people to understand, you know, in 20 20, 20 21, we're fielding a ton of questions on crypto. And we talked about it a lot on the podcast. You know, the number one thing we said is don't put in more than you can afford to lose. So my strategy with my own crypto investments was 1% of my net worth.
And then the brokerage firm, we always recommended clients start their crypto accounts at was always Coinbase. And there's a specific reason for that is because Coinbase is the only, um, exchange in the US That's one publicly. And two provides audited financials. So one, don't gamble what you can't afford to lose.
Don't put in, I mean, it's a, you know, a made up internet coin. What do you think was gonna happen? Like, let's be realistic, right? We're all gambling with them. Number two, do it at a US based company. Why would you send your money to a Bahamas based company? You're just asking to get ripped off. You know, and number three, the, the coins that we were talking about are still doing well, right?
They weren't any of these meme coins or, you know, the doggy stuff or anything made up is Bitcoin and Ethereum, which were, you know, always kind of the, the stalwarts of the industry, right? They're kind of like the cold and silver in a way. So tell us what's happening with ftx. Yeah, so this is interesting.
Um, this FTX was founded by Sam Bankman free, and he had two companies going. One was a hedge fund called ala. and the other was a brokerage firm called ftx that was designed for basically serious traders, right? People who really wanted to trade cryptocurrencies. They were headquartered into Bahamas.
What's interesting about it is a lot of venture capitalists poured a lot of money into it and what he was doing now and as the facts come out right, we're recording. Um, on Friday. What's the date today? November eight, 18th. Yeah, Friday, November 18th. There's new facts every day, right? The bankruptcy, um, proceeding really just started, but it sounds like what he was doing was he would take customer deposits from fdx, right?
People would deposit money FTX and go trade cryptocurrencies and think they're actually trading those cryptocurrencies. And he would take their deposits and put 'em at his hedge fund and go trade them, him. . So he was stealing the money from clients and then from there, whenever customers needed withdrawals, what it sounds like he did was he would raise capital in the venture market, right?
Like venture capital deal. I'll sell five, 5% of my business, FTX for 10 billion. You know, he gets a check for a billion dollars from a venture capitalist. He would then take that to go repay back people who wanted to pull their money outta ft. It all came spiraling out of control within the last two weeks.
So not an exact Ponzi scheme, but it seemed to have some elements similar to what a Ponzi scheme has. Yeah, no, you pretty much was just flat out stealing money from people. This is, yeah. Fraud. This is Bernie Madoff. He's the Bernie Madoff of crypto. Money came in, he stole it from people. He used it.
Um, funnel money to Democrats. Um, he spent 130 million funding Democrats. He was the second largest donor besides George Soros in the midterm elections. Um, he bought multimillion dollar houses in The Bahamas. Um, the whole thing is, is just a mess. And it's really sad cuz um, at the end of the day, he took, he stole money from Americans and to set this back up, part of the reason he got.
Was because several of the cryptocurrency tokens that are out there basically went under this year as the market had declined setting his hedge fund up for failure, essentially. Exactly. Um, yeah, that's, that's what happened. A few coins that, the ones that weren't recommended Luna a couple of the other ones, they're called like meme coins, or people call them like poop tokens or whatever.
Right. They. They went under this year and that hurt his hedge fund cause he was invested in 'em. It sounds like his hedge fund basically went and solvent when that happened. It it did, but it sounds So he also texted a reporter, which is crazy. He texted all the DMed, a reporter like late night on Instagram or Twitter, and he said he had just been slowly taking customer money from FTX over to all media to trade with.
And he said, you know, a little bit turned into a lot. I have more questions than I have even comments. There's just so much to cover here. It's like, it's so hard to do this Right. On a podcast. Uh, it it's wild. Yeah. I mean, if we set the whole podcast up for just this topic, but I think the other thing that's somewhat interesting about all of this is there was this big crypto cult-like following that's been swarming around this industry for the last several years.
And it was all about having this unregulated ability to trade currency and you know, the devalue the dollar and we don't, we don't want to pay bank fees and we don't want regulation and there's this deregulate the monetary value and then all of a sudden there's a scam around all of this. And then people are screaming, why is there no regulatory body?
Or that's protecting, you know, the small investors. Yeah, it's pretty hypocritical. Everybody wants regulation until their money gets stolen. Then now you find out that this is, hey, this is why we have regulation, right? This is why we have banking laws in this country. So you don't get your money stolen.
But you know, it's just one of these stories, um, where we'll, we'll look back and be like, wow, this was so obvious in hindsight. But at the time, you know, it was exciting. It was something new. , your neighbor's getting rich, you know, you wanna try a little bit too. But also he, he was painted as this brilliant mind for crypto, so, Gained a really big following for people to believe in him, you know, for a long time now.
I mean, you know, that's why I think this kind of spiraled out of control cuz he had such support and following. Yeah. He was a figurehead. Mm-hmm. . Yeah, I mean there was stars that were literally following him and, and they were using for marketing. I mean, I don't know if you guys know this, but Major League baseball's umpires had the FTX patch.
As advertisement, they named the Miami Stadium and, uh, for the Miami Heat FTX Stadium. I mean, they in Super Bowl ads. Yes. Yeah. I mean, he spent a ton of money on, you know, advertisements to make his company look legitimate. It, it's like literally the perfect you're right Brian. It's not a Ponzi scheme, but this guy had the perfect scheme going.
He acted super woke, which he admitted was an act, right? So he played exactly into the majority of the media's hands. He used a lot of money on advertising so it could look like his company was really big. And then he got people to send his company money and then he stole the money. So going back to the crypto market, I guess there was thousands and thousands of crypto tokens out there, different types of currencies.
Where does this, number one, how many of these are now failed? Because a lot has gone under this year. How many big ones have failed? And then where does it put this market going forward? I don't know the exact number on how many tokens have failed, but a lot of companies have failed that have been in the crypto space.
And a lot of tokens are down massively this year. The two we always talked about, you know, number one being Bitcoin and number two being Ethereum, they're still chugging along. They have decreased in value. I think around 60 or 70% for both tokens. Um, I think they have a lot lower to go, most likely that said, You know, they're surviving and they're most likely gonna survive.
There's been multiple schemes in, in crypto that are, have been like this. Ftx FTX was just a really big one, right? It wasn't, a hundred million dollars or a billion dollars. It was, you know, 16 to 18 billion is what the current estimates are. Um, so it's just much larger in scale with any new asset class.
I think if we can kind of bring it full circle for the listeners. There's that risk, right? We're seeing that risk with investments and new asset classes and hype. Um, so, just to be mindful, with this headline that these things do happen, right? We're reminded through times like this of being, you know, doing your due diligence and, and actually, you know, investing appropriately for your situation.
Yeah. And, this happens. This is normal and I think it's important for us to talk about, I, I had fun, you know, investing in crypto in 2020. You had real fun without having more money in it. in 2021. Well, no, I still have money in it though. I mean, I still have, he's just no longer smiling when he is talking about crypto and his little NFTs that he could buy.
But I, I think it's important though, for all listeners of the podcast said, oh, like there's always gonna be investment fads that come and. And crypto was a fad, just like.com stocks were a fad, just like Beanie Babies were a fad. Um, sports cards were a fad, right? And they come and go. And the the key is to, if you wanna participate, participate, but never put more money in than you can afford to lose.
Yeah. And our, our position as a company, I to. Uh, in retrospect, we never invested a single penny of client money ever with a client in the crypto market, not even in Bitcoin or Ethereum or any of the coins, uh, we talked about on the podcast considering bringing in a custodian where we could, uh, open client accounts with them and have a small crypto portfolio, if that's where the market continued to go into.
But as we continue to look into all of that, We saw a lot of the writing on the wall, not only in just that market, but also the cost that was involved in it, that it wasn't worth it for people. So we really stayed away from it and our message was always to be very, very careful with it, cuz it did seem like a fad.
And as soon as the levee broke, they all started coming down. Yeah, well, well said. Stocks and bonds, safest investments and you know, obviously you wanna buy. All right, so let's get into the retirement planning corner. Um, as this year is winding down, we're almost at the end of the year. Uh, we always start to look ahead towards next year and what we can do to put ourself in a better position financially.
I think a lot of us, uh, new Year goals, and we try to establish what our goals are for the following. and one of those things can be really helpful is, taking some financial tips from this year and implementing them right as we get into the end of the year to start off next year. Right. And as we look at that, this year has been a, an evolving year where it's given us more opportunities cuz we've already just talked about them.
We don't want as much credit card debt because now we're gonna be paying a lot more interest on that debt. As we look at some of what we can do going into next year, what's the first of the seven that you have for us? Yeah, I'll get us started. The number one thing is to develop out your cash management strategy.
Everybody wants to, you know, pick the winning stocks or have the best bonds in their portfolio. And they often ignore the cash that's, sitting around in their bank account. But, you know, we just, our first news topic was today is how inflation's at 7%. So that means if you have your cash in the bank account, you're losing 7%.
That's not a very great, um, strategy. So there's a couple things you could do with your emergency fund. Number one is you could look towards online savings banks. Um, they pay pretty good interest rates right now. The one that we use with our own personal funds and we like to recommend to our clients is going to to Marcus by Goldman Sachs.
I think their rates at three. . And then my second favorite strategy that I talk about all the time with clients is using short term T-bills to create a bond ladder portfolio. And you're investing in US treasury securities and they're, you could currently create a portfolio that yields about four and a half percent in interest, and you could put your cash into that, and it's a great way to make extra interest on your.
Um, it's, literally my favorite strategy right now. So you can put money, uh, into some bonds, and then how do you kind of ladder that strategy so that you can maximize your interest in liquidity with it so you have the money if you need it. Right. So laddering is a way to create, like you said, that flexibility and liquidity.
So laddering. Amongst multiple timeframes of the money. So give an example of this. You have a hundred thousand dollars, um, and you're gonna take $20,000, um, and buy a three month treasury bill another $20,000, and buy a six month treasury bill. Follow that by another $20,000, a nine month treasury bill, and you can go.
Expand this time horizon, all the way up to a year, to five years, or however long your your ladder's going to be. Why this is effective is because if rates do change, you constantly have money that's maturing and you can reinvest that whether into stocks or new treasury bills if rates went up. So this is a way to not only maximize, you know, cash management and yields for your cash, but also create flexibility and liquidity within your plan.
So just a really, really great strategy right now as rates. Rates have. This strategy was the best strategy in the 1970s and the 1980s to beat inflation. Uh, you know, it's what our grandparents did with their monies. They, you know, with ladder CDs, CDs are okay now we have, uh, really an open trading market.
So if you're working with an advisor, they'll get access to the bond market. They, they're able to do it with us treasuries much better than a bank cd. That, that's a good point because I bet a lot of our listeners to. Heard of a CD ladder. Yes, but maybe not necessarily a bond ladder, cuz the banks do promote CD ladders a lot and you're probably at your, your bank, well maybe a little bit more than you're researching, you know, new cash management situations.
But another point too, um, just with personal money and cash management, you're a small business owner as well out there and you have cash. Like take a look at the cash management for the cash that's in your small business too. There's good options out there. Yeah. What's your favorite brands at Live Oak that you like?
Yeah, live Oak's, a great business bank. There's not a ton of banks that you could work with that support the higher end interest accounts. Um, so you, you gotta really know what banks you're working with on the corporation side. I think they're at 2.75. Yeah, that's pretty good. That's good. I guess then my next question is, is, why haven't we been able to use these bond strategies over the last 15 years?
Rates are low, uh, point. Um, you know, with rates below 1%, 2% like's not gonna make anything. Right? And so how is the interest then taxed on the interest you make from the bonds? So let's say you make four and a half percent on the hundred thousand dollars value that you were talking about. You're making $4,500.
How is that taxed ordinary income? But again, like I was talking with the client yesterday and she was like all, she was very, um, held up on the, the fact the income gets taxed. She was like, well, it gets. I'm like, right, but like I'm telling you, if we do this strategy, you're gonna get a $10,000 raise.
Like if I got a $10,000 raise at work, I'm gonna be happy. I'm not gonna be mad that I have to go pay a little extra tax on my all my money. So is there state tax on it? Um, no. I don't think there's state tax, just federals tax. And to your point, if the money's at a bank account and bank account rates are just increasing even just a little bit, you're probably.
Getting a 10 99 for the money. If it's in the bank account, it might just be $10 or $12 or whatever. So it's not like it's completely adding, a new tax form or something like that for most clients. Um, so implementing the strategy, you know, that wouldn't be a good reason to not do it. Right. And I think, you know, if you've been managing your financial plan or your assets for the last, like you said, 15 or 20 years, this just hasn't been able, something you've been able to utilize for a long period of time.
Now let's reevaluate you sort of that situation and make as much money on your money as possible, right? And we forget that interest rates going higher is bad for borrowers, but it's good for savers and this is exactly what we're talking about. So I think that's a very helpful tip, and I think that's something that can really help going into next year.
What's the second tip we have? Updating your beneficiaries. So we have, we talk about, um, bank account savings accounts, your brokerage account, ira, life insurance. All of these can have designated beneficiaries and they can quickly get outdated. And these results can just be disastrous for your financial plan.
One example is you never updated an ex-spouse on, let's say, your IRA to your new spouse. Very detrimental. If you were to. Change that. Also, we just reme recommend reviewing all life insurance group life insurances with work. Very important there. We've seen so many times that like beneficiaries aren't even elected when we log into a client's kind of company, benefits or life insurance policies.
So anytime a family member passes away, there's a new grandchild or just a life event that does merit a beneficiary review. We wanna make sure, and this just is a great time to implement this end of the year tip, uh, to get all of the beneficiaries updated. And I will say it's so important to know which accounts should possibly have the beneficiary.
To be the trust in which accounts should actually be a person. Yeah, that's very important too because that decision can actually equate to different tax consequences. So making sure you know who should be listed as a individual or your living trust or should the title be changed to a living trust instead of it being held in your name or jointly with your spouse.
Um, it's very important. Again, just. Good thing to review before the end of the year. A great tip heading into next year. What's the third one we have? All right, so this time of year, usually most, um, corporations will have open enrollment. So right now is a good time to take a look at your health insurance policy.
Um, make sure you know you're getting the best bang for your buck. Um, You know, if you're younger, you might not need the best plan. If you're older, you might want, um, a primo plan. If you have kids on the way, more, the reason to probably ha have a better plan. So just look at your coverage options, see what your company offers.
Like Josh said, um, group life insurance. You might wanna bump that up or bump that down based on your financial circumstances. And then finally the last one if you're, if you're at a publicly traded corporation and they give you like an ESP plan or a stock option plan that you could put money, Uh, most likely your company's stock is down this year.
Uh, market's off by about 20%, NASDAQ's off by 30%. This is probably the time where you actually might want to increase your periodic buys to corporate stock if your company's stock is down. So you could be buying those shares at a discount. also just increasing your 401k contributions. Now we're gonna talk about that in a minute.
Yeah, I stayed away from that one cause we're talking about it. Um, but also I think that a lot of clients when we, when we look into financial plans, not utilizing the group life insurance benefit to its full extent. I agree. A lot of times it's very cheap. They even have a spousal option on there. So like if your spouse can't get insured or you just haven't implemented it yet, this is now is a good time to get that reviewed and updated.
All right. That's a good one. I, you know, I, I, I feel like people neglect looking so much at their company benefits, and if you spend a little bit time on them, you could really find ways to maximize the benefit and also reduce some of the cost. Totally agree. Uh, what's the next one we have? So this kind of relates to company benefits, but opening up a healthcare savings account and hsa, um, as they also like to call it, um, healthcare savings accounts can be piggybacked on high deductible medical plans.
So this is gonna, you know, go coincide with your medical coverage if you do have a high deductible plan. Um, what this does is actually you can save money for future medical cost and that savings is actually pretax. You can invest that money once it's in the account, it grows tax free. And then when you distribute that money to use, this is called a triple tax benefit.
It's actually not tax when you distribute it for healthcare expenses. So this is just a great tool if you do have a high deductible plan to implement and save some extra money for future healthcare costs on a tax-free. Can all employees put into an HSA only if you have a high deductible plan. And it's offered, so you do have to review your company benefits to see if it's available or even if you're using something like Covered California to seeing your options there.
Yeah, yeah. Real quick on it, it's one of those strategies where you might actually want to have the low deductible healthcare plan. We see a lot of positive articles about HSAs in our industry. Usually it's advisors trying to sound smart. Um, especially young advisors, but you know, they're not for everybody, right?
Because you do have to have that high deductible plan. Um, so if you, you know, have a health condition, you might not want a high deductible plan. Therefore, an HSA is pointless. . Right? And so should you be thinking about hsa, if you're younger or towards the middle of your career, you're into your career.
When are you really thinking about putting into the hsa? Generally when you're younger, right? Because you're not needing as much you know, healthcare benefits and coverage. Um, and this is a way for you to instead paying for a higher. Premium plan that you can pay for a lower premium plan with a higher deductible and then save the difference.
Makes sense. Um, and then allowing that money to be saved and, and to be invested. So it is a good strategy. Generally speaking, it's, you know, probably for healthier younger clients. The next strategy is probably one of my favorite on the list. Uh, Matthew, why don't you kick us off on this one? Yeah. Max out that 401k.
This is financial kind of tip number one, right? Get your emergency fund, then start maxing out your retirement. I know it's tough for a lot of people to do. Probably minimum, I usually recommend clients is at least to put 10% of their earned income into their 401k annual basis. But if you can afford to match end of the years coming out, and that's a great time to do it.
22,500 if you're under 50, 30,000 if you're over age 50. Um, and the beauty of the 401ks, it reduces your taxable income. So if you get a rather large bonus, uh, maybe your business did really well this. You could put a little extra into the 401k to reduce the taxes on that bonus. Also, if you don't have a 401k, there's employees out there that their company doesn't offer 'em.
Looking into other retirement accounts that you can contribute into and prepping yourself, um, to be able to contribute into them for 2022, uh, you have a little bit more time to do that up until April. Um, but also looking at IRAs, set, IRAs, if you're a small business, uh, those are also good options to kind of prep for, for the end of.
Yeah, well said. And if your company doesn't, um, give you a 401K option, I mean, it's kind of table stakes these days. With employ unemployment at 3%, you probably should be looking for a new job to get some better benefits or bug them. Yeah. Or that, and you know, I think this one's important too because if you do have money that's sitting in your savings account and you don't actually need to take a paycheck in December, you could contribute a lot of your paycheck in December to your 401K plan if you have room to continue to co.
And I think that that's really important because not only is it gonna save you tax dollars, but it puts more weight, money away from the future. And you're sitting on money in a savings account that's probably not earning all that much. Yeah, it's a great tip. Uh, alright. What do you have for the sixth financial tip as we head into 2023?
This is usually like a popular tip. Would you agree, Matt? Like. Yeah, I'm gonna, I'm excited for you to tell everyone what the tip is and then I'm gonna tell everyone how overrated is . It's the most, we talk about this a lot today. It's the most overrated thing. Roth conversions. I be a lot of listeners, like I heard of that before, like it's popular.
But Roth conversions in years that we have volatility can be just a great time to actually do it. So if you're an investor and your portfolio has dropped, We're down let's just say 20%, you're actually gonna pay fewer taxes because the value is lower on the conversion compared to peak years.
So converting a traditional IRA into a Roth IRA also increases tax flexibility in retirement. Since the distributions on Roth IRAs are actually tax free. So Roth conversions come with regulations. They can't affect other assets or financial areas such as Medicare premiums. So make sure though that if this is a strategy that's interested in, or you're interested in to consult with an advisor before you move forward.
I think this is a pretty overrated strategy. Number one is most people don't like to pay taxes. Uh, right. The number one pushback to doing a bond ladder portfolios. I don't want to pay taxes on the extra interest I earn. Well, I got an industry, if you do a Roth conversion, you're gonna pay taxe. And if you're not converting a large amount of money, it's pointless.
The juice isn't worth the squeeze for a lot of people. So I think it's one of those strategies that gets, again, talked about by young financial planners to try and sound smart and break into the industry. And also tax people. And there isn't tax people mention it is cuz they don't have a lot of strategies that can actually save you money.
So they try and mention this to keep your. This is a long term benefit, like you said. I mean, it's gonna increase your taxable income and most people don't want to do that. Very good point. I wanna go back though and say that for 2022, the max contribution of 401k plan is 20,500, and the ketchup is 6,500.
The in 2023, the maximum contribution is 20 2005. With the contribution catch up of 7,500. So that puts you at 30,000 into going into next year. That was a great fact. Check, Brent. Yep. That was just wanna make sure we don't give the listeners the wrong advice. Yeah, sorry about that. Um, alright, so let's go into the last one, which is another one.
We talk about a lot on the show, but I think again, another one of my favorite, we've been doing a lot of this throughout the year, but tell us, Matt, what the last one. If the last strategy was really overrated, I think this one is so underrated by so many people. Um, but it's essentially in your taxable brokerage account.
90% of all investments are down this year. I bet you have a loss in there. If you have a taxable brokerage investment account, you probably have something that has dropped in value and you have a loss. You could sell that. and you'll get a deduction on your tax return for $3,000 as long as that loss is equal to $3,000 or greater.
If the loss is 2000, you'll get a $2,000 income deduction. Great strategy. Absolutely love it. If you're working with an advisor, the advisor better be helping you on this right now. I know we've been doing it for the last six months with all of our clients. But very underutilized in my opinion. What I really like about this strategy too is you can finally maybe ditch some positions that you weren't wanting to sell, like previously that you didn't like, or bad performers.
Um, and now you didn't sell them because they had a big gain. You didn't wanna accrue the taxes, but you could now sell them and. It's not as much gain or it's even at a loss. So I love it because now we can actually ditch those bad investments. So to, to make it simple, I think client, if you have a after-tax brokerage account, go into your positions.
Positions are the things that you own in your portfolio. Look at the cost basis on them. You'll potentially see some things that have lost money. And try to sell some that can get you a $3,000 loss. Correct. And potentially sell the stocks that you don't wanna hold at least for the next, what, 30 days?
Mm-hmm. sell those and then if you choose to buy them back, go buy them back in 30 days. Yeah. And even 30 days isn't a long time. Um, we've been pretty clear we're in a bear market. Market's probably not running away from you in 30 days. Get the tax benefit, buy the stock back if you really want. And this also works for mutual funds and et.
Yes, correct. Very good point. All right, let's get into the end of the show. Uh, as the holidays are around a corner. Tell us a little bit about what you have to recommend. That was a long show. I have a very exciting recommends every four years this event happens. And since I was a kid, I have a picture of myself wearing a World Cup hat.
I mean, I don't, if you listen to the show, you know, I love. But the World Cup is the biggest soccer event, and it's here, it's starting, and I am just super excited. Even if you're not a soccer fan. At least watch just one match cuz it is, it is must watch tv. You have the best players in the world playing, the best players in the world, all representing their countries.
It's just a beautiful event that is just so much fun to watch. And then, you know, you could support whatever country you're from or, um, as myself, American, I'm gonna be rooting for the usa So go. And hopefully uh, we do very well. Did you get some US gear? I did, yeah. I ordered my US gear. I'm very excited.
I'm gonna be all geared up my USA stuff from head to toe. Did you get a jersey shirt? Got a jersey, got a new hats to wear in between game match days. Um, but I have like USA shoes, I have my jersey, my scarf, so I'm gonna be ready to go. Yeah, I think that's a good tip too. I mean, go get some us. Yeah, support.
I mean, even if it's, you know, you're from Netherlands or Brazil, uh, it's just such a, a fun event and to share with family and friends and to watch the matches. And, uh, they are gonna be on early in the morning. I think the latest ones at 11, um, through group stage. But all the US games are 11:00 AM mm-hmm.
Um, and, well you didn't even mention the big game though. We're playing. Um, doesn't happen that much in a World Cup. So, you know, our friendly neighbors across the pond. Yes. And that's always a, always an exciting match. Yeah. This is also on Black Friday. Yeah. So a lot of people, you know, if you're off 11:00 AM.
Black Friday Pacific Time. Hopeful. Hopeful. Listen, we're gonna beat England. Hopefully you listen to this podcast before Black Friday. All right. So I was thinking of doing the World Cup too, Josh. Uh, but you know, we talked pre-show and I left that one for you. Thank you. Appreciate that. I came up, I came up with one on, on the Fly.
I'm probably gonna sound like a, you know, 15 year old girl. Um, but I am a big fan of Taylor Swift and her new album is really good. Um, actually all her music is really good. They're just a recommendation. A little different than what we typically recommend on the podcast, but you know, give it a listen show your grandkids are.
Um, Taylor Swift's new album. And then, uh, one quick Netflix recommendation, uh, and Nola Holmes two. Uh, Netflix is a great, great movie. Highly recommended, good family watch, especially over the holidays. I watched the first one. The first one was really good. Um, excited to watch the second one. Yeah, second one's great.
Uh, sounds like Taylor Swift could be a hot take headline here, coming up in the next pod. Yeah, a lot of controversy with the tickets for her shows on, um, Ticketmaster. It sounds like Ticketmaster wasn't able to handle the demand coming in. Yeah. Sounds like we have a hot take headline coming in. uh, my recommend this she is, or for this pod is gonna be, I think it's, is it pronounced ego or is it e g?
I think it's ego, ego. It's, uh, could be wrong, but I thought it was fine. Virgo? Yeah. No, there's no R in there. Yeah, there's no r. It's just ego. I think it's like electronic go like, so what it is is an electric blower. I've needed a blower for so long where I've been using a blower that I have to plug in, which is just difficult to always carry an extension cord around with you.
Um, so I actually did some research and from the help of Josh and some other people that he knew, I went out and actually, um, got electric blower. I did some research and found. Based on recommendations and by looking online what was the best one. And I got the six 15. And the reason why I got that one though is because some of the other ones were much heavier.
So you charge the battery, you plug it. It's plug and used to go. You don't need a cord. I'm able to do half like the job in half amount of time so I'm not plug a cord around with me. Literally make life so much easier. It's worth the $215 I think it costs. You don't even have to get the extension cord out that that's it or put it away.
Yeah, it's nice. It's amazing. It's a really nice blower and I looked up the company, just so everyone knows. Um, I did a fact check. It is Ego Power Plus is the full name of the company to, to that thing's nice. We used it outside of the office here when you got it, and I might have to get one of those. It looks like they have some nice lawn mowers too, if you're mow your own lawn.
Yes. So if you're listening, uh, you need a good gift idea for your husband or for your wife. This is a great option. And, and like dude, honestly, like if you have a lawnmower, why you put, you don't really wanna put gas. Right. Come on. That's disgusting. Like, let's move. Let's move on from that. Battery. Battery power's so much better.
I agree. All right, so as we close out as advisors, we love helping people. That's why we do it. If you'd like to schedule an appointment with any of us, please go to rpa walt.com and schedule complimentary consultation. You can also download our ebook on our website, and if you'd like to show notes, you can also go to retirement plan playbook dot.
As always, happy holidays and thanks for listening.
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