Women's Money Wisdom

Episode 193: Year-End Financial Planning with Alexa Kane

• Melissa Fradenburg, CDFA®️, AIF®

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Are you ready to wrap up your financial year and set yourself up for success in the next? In this episode of the Women's Money Wisdom Podcast,  with Co-Host Melissa Joy, CFP® and guest  Alexa Kane, CFP ®  we discuss what you can do in the last few weeks of the year to get your finances in order. We all know how chaotic this time of year can become with the holiday season approaching. Alexa shares valuable insight on things we should review in retirement planning, employee benefits, and taxation before we ring in the new year. This episode is brimming with practical wisdom to help you make smart financial decisions to round out this year and welcome the next. Don't miss out on this chance to elevate your financial planning game!  

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Links are being provided for information purposes only. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Pearl Planning cannot guarantee that the information herein is accurate, complete, or timely. Pearl Planning makes no warranties with regard to such information or results obtained by its use and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Pearl Planning financial advisors do not render advice on tax matters. You should discuss any tax m

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Speaker 1:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and founder of Pearl Planning. I'm Melissa Freidenberg financial advisor.

Speaker 2:

We dive deep into topics like work-life balance, financial planning, personal growth and the intricacies of the sandwich generation.

Speaker 1:

Tune in for money conversations that every woman needs to have. Hello everybody, it's Melissa Joy and welcome to the Women's Money Wisdom Podcast. This week, we are talking about year-end advice, what you need to do before the end of the year and how to plan for next year. I am excited because I am joined by our colleague here at Pearl Planning, alexa Kain. We break down a lot of great ideas for you to consider before the end of the year when you're a financial planner.

Speaker 1:

The list is long in terms of possibilities, but the thing I would keep in mind is that if you accomplish three things, then I think you'll do well. One of them is just take your temperature, get a feeling about your money mindset and also reflect upon the things that you've accomplished during the year. Take a look back and also take your pulse. The second thing I think you need to do right now, with a little more than a month left in the year, is to make a list of the things that have to get done now and get those things done. Don't delay.

Speaker 1:

Sometimes there's year-end deadlines that are not 1231, so get on it, make your list, and that is where you need to focus. The third thing that I would suggest that you do, if you have time, is to look ahead and plan out, map out your following year. It's always helpful if you get started with some intentions for the future year, if you focus on what you want to change, how you want to adjust or just what you want to accomplish. If you can do those three things and they don't have to be huge we love incrementalism If you can do those three things, then I think you'll accomplish a lot. Alexa, I'm teaming things up and handing off to you.

Speaker 3:

Perfect. Yeah, one of my favorite things to talk about is goals. A lot of the work we do is what are your retirement goals, what do you want to achieve and what do you want the future to look like? While we talk about the future goals, it's also really important to take a step back and look at what you have already achieved. What have you accomplished this year? Have you crossed off the list, Taking a minute and telling yourself I got some stuff done and I think it's a good time to see where you've come and also to identify the future goals and what you want to accomplish in the near term so 2024 and also for the long term.

Speaker 3:

I know Melissa talked about being incremental. To me, one of the easiest is making small… increases to your retirement savings plan, so bumping up by one or two percent at the end of the year and just slowly setting yourself up for success for the future, so kind of in line with your goals. What has changed? Are there big purchases coming up? Are there things that we need to plan for? Do we need to get some cash or more liquid investments available for upcoming purchases, and are you still comfortable with the investment allocation that you have? Have you rebalanced your accounts this year? Oftentimes things get set and are either kind of forgotten or left to their own devices, and your allocation can get severely skewed in good years and in bad years. Alexa, I would mention.

Speaker 1:

In a year like this year, the biggest companies and the growthiest companies, like NASDAQ companies, have done the best. So you may have started out and they were a smaller portion of your overall allocation and they balloon because other things have been kind of flat to negative. Of course, it feels good to have more of this stuff doing really well until everything reverts to the mean. So those are some areas that you may want to focus on when you're trying to rebalance things.

Speaker 3:

On that note, if you are invested in a target date fund often in 401Ks and 403Bs great places, because they do adjust the allocation as you get closer to retirement. But you want to check in every couple of years and make sure that allocation still aligns with your goals and long term plans. Do you have taxable or brokerage accounts that you're invested in Tax loss harvesting? So if there are losses on the holdings, we will move to a similar investment in the same space and capture that loss for the tax return while staying invested in that asset class. So make sure we're taking advantage of the opportunities when they arise and setting ourselves up for a good tax situation this year and also in future years.

Speaker 3:

There Losses are a huge part that plays into every aspect of the financial decisions. And if your taxable accounts have mutual funds, this time of year they are paying out capital gain distributions and then Roth IRA conversions. If you are retired or in a low income tax year, it may make sense to convert some of your traditional assets to the Roth bucket and then also for younger or people in that accumulating phase, it may make sense to do a Roth 401k or Roth IRA contributions there. So those are a couple of things we look at.

Speaker 1:

I think that this area the tax discussion is where there's been the biggest acceleration in terms of capability in the financial planning world, and only some clients are getting that. So if you work in some investment advisory organizations, you're not even allowed to ask for the tax return and so you just don't have those details. And with new software, the ability for us to have space for focus on taxes. When people say, focus on what you can control for a better life, this is one of the areas that in many cases you can control taxes, and one of the things you can control is just information. You may not have a choice on the tax costs, for example on restricted stock units, or if, hey, we want you to earn good money, and in that case that might create taxes.

Speaker 1:

But one knowledge is power. So being able to know before you get a big, unexpected tax bill in April what is coming down the pipeline, hey, that's just like table stakes. But then if you can add to and say over time, this might be a strategy that potentially could reduce your taxes. We are not your CPA, but we would love to talk to them about this idea or that idea, because a lot of times they're just reporting information that's already happened. Those are where I see a lot of growth and capability for firms like ours that do incorporate knowledge about tax into both our investment strategy as well as our financial planning process. So that's just like one of the most, to me, most exciting and impactful areas of a financial planning.

Speaker 3:

So a quick note on open enrollment. You have benefits. It's a good time to really take a look at what you have. Does it still make sense for your situation, looking, comparing spouses, which one works best for you, the family, at this time, and then also just looking at what the actual coverages are. Do they offer life insurance? Is the coverage that they offer adequate for your needs and your family's needs? Are there options to increase that? Or does it make sense to look outside the company to get that coverage? Health insurance that allows for health savings account contributions those can be a huge thing for the family if it makes sense for the situation. Flex spending accounts Just kind of taking the time. It's not. I know in my family it's not a fun thing to do, but there are, you know, a lot of opportunities to enhance your picture by selecting the right benefits for your situation, which does change from year to year, and what makes sense in 2022 may not be the right answer for 2023 and 2024.

Speaker 1:

And often employers are changing what is available or adding options over time and there is just so much to tackle in general that hopefully some of these details are sinking in, whether they're relevant today or will be over time. Just kind of information to pick up along the way. One reminder is that social security is inflation adjusted and so there was a big bump last year. It's gonna be smaller this year, but 3.2% increase in social security for those of you who are receiving it, and it's also an important factor in how we calculate your social security for the future, which we do still think will exist. Maybe there will be some tweaks along the way. For the average retiree that's $140 more per month and then Medicare Part B is going up by almost $10 to 174.7 per month.

Speaker 1:

Oftentimes tax brackets matter when you get to be Medicare age, which is over 65, because there are extra payments that you make. It's essentially a tax called ERMA. When you're in a higher tax bracket, another good reason to kind of manage for taxes. But it's nice to see that social security is going up. Other things that are linked to inflation also in some cases increasing IRA contributions. That same goes for Roths are going from 6,500 to 7,000 for most of us, but if you're working an over age 50, you get an extra $1,000 catch up that you can also add in. Health savings accounts are increasing. We know that healthcare costs like to increase along the way as well. If you are participating in a high deductible health plan, then as an individual you can put in $4,150. And as a family you can put in $8,300. There's a catch up at age 55 and that catch up is for both individuals. So if spouses both turn 55, there's an extra two time catch up. And then 401ks are increasing just by $500 from 22,500 to 23,000.

Speaker 1:

All great ways to both control your taxes either now or later, and also get prepped for retirement Might as well. Just log in to your 401k, if you have one, and look and see how much you put in this year. You could even put in a little more before the end of the year. And there's even more kind of planning ideas if you're a business owner. So if you are a business owner and you're listening in, reach out to us and we can discuss the specifics for your types of retirement plans.

Speaker 1:

So I thought I would just sum up some of the themes that both like proactively, we've brought up, but also we've been talking about a lot with clients this year I mean the one that we've talked about a time and again managing your cash for yield, because we went through many years really most of the time since 2008 and 2009 would just almost nothing paying you in the banks or otherwise, and really I mean, who's gonna get that excited about 1%? But for many of us, if you pull up your bank account, you're like oh, I get 0.02 on my savings account, or 0.1 in terms of my yield.

Speaker 1:

But nowadays, because interest rates have radically changed from a few years ago or even a year ago, you can actually get paid on the cash that you're saving. And what a reward for savers that they actually can try to keep up with inflation. Or if inflation were 3.2% this year, when the yields are between four and as high as five and a half percent in money market world or CD world or treasury bills, getting paid on your yield does not require you to take a lot of risk. So this is something that has definitely been thematically like we're talking about all the time and you just never know what it's gonna be from year to year. But that's something we'd like to broadcast wide and far that you can get paid for being a saver. So those are some kind of when I kind of gather things up 2023 areas of focus or themes and just as I wrap things up, hopefully we've touched on a variety of things and there's a few things that you can either say, yep, I'm doing a good job, or here's a couple of things I'd like to get done either now or next year.

Speaker 1:

This reminder that people tend to feel more confident when they have a formal financial plan. Some people do that themselves and there's nothing negative about that. But determining and documenting your financial goals helps you to feel more confident that you have control over your life and your finances. It also helps you feel more confident that you have the ability to manage through an unexpected negative outcome. And I've taken two studies, both by Charles Schwab and Fidelity, that look at how people report they feel about their money that people who are similar otherwise when they have access to financial advice and when they have a formal financial plan. So just know if you're someone who's kind of on the fence or thinking about putting that on your list of action items.

Speaker 1:

I had a friend last weekend who's like I don't want to hear the word self care anymore. It's, you know, like or mindset. But really helps to frame your mindset and increase your wellbeing when you can reduce your anxiety and increase your confidence in these areas, like saving for retirement, minimizing taxes is your estate in order, saving for goals you love, like vacation. This is just a process that tends to be helpful for people. That's how they report versus sample groups that are not working with that financial plan and receiving financial advice. So I would encourage you to spend more time on your plan and also the perspective of market history, which we're always happy to give you and spend less time on. You know the doom and gloom that comes with headlines or daily. You know kind of the volatility of daily market movements. Well, with that I will look forward to more, to come in 2024. Thanks for listening and have a good day everyone.

Speaker 2:

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in our conversations, please take a moment to like, follow and subscribe wherever you're tuning in from. It helps us continue to bring these valuable insights every week. Head over to women'smoneywisdomcom. There you'll find tools, tips and a supportive community to help you gain financial confidence.

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Melissa Joy, CFP

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