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By:  Arash Navi, CFP®, CPA, Controller & Wealth Manager

Our goal is to help our clients build and grow their wealth and tax planning plays an important role in this process. We recommend that you mark your calendar to review your finances in the first week of October, annually. Take this time to review your income for the year from employment, businesses, investments, or any other sources. This will help you project your tax liability ahead of time and allow your financial advisor or tax accountant to find strategies to reduce your tax burden. Implementing this consistently and reducing your tax burden annually will have a compounding impact over the years and increase your retirement nest egg. Here are a few tax planning strategies to keep in mind:

IRAs and Retirement Plans

Take full advantage of tax-advantaged retirement accounts. By contributing to Traditional IRAs and employer-sponsored retirement plans such as 401(k) plans, you can reduce your taxable income and lower your taxes. For 2023, you can contribute up to $22,500 to a employer-sponsored retirement plan ($30,000 if you’re age 50 or older) and up to $6,500 to a Traditional IRA ($7,500 if you’re age 50 or older).

Roth Conversions

If you are in a lower tax bracket this year and expect your income tax rate to increase in the future, you may want to consider a Roth IRA conversion. You can convert all or part of your pre-tax retirement account into a Roth IRA and pay the taxes now at a lower rate. The funds in your Roth IRA will continue to grow tax free, and you will have more income flexibility in retirement. Watch here as we make a case for Roth conversions and how they could benefit you.

Charitable Donation

If you are charitably inclined, you should plan your donations in advance to ensure you maximize the tax benefits. For those over age 70.5, you may want to consider Qualified Charitable Distribution (QCD), where you can transfer up to $100K from your IRA to a charity. This method not only reduces your Required Minimum Distribution (RMD), but the distribution is also excluded from your taxable income. Beginning in 2024, the QCD limit ($100k) will change as it will be linked to inflation. Also, with the passage of the SECURE Act 2.0, starting in 2023 taxpayers may take advantage of a one-time gift up to $50k (adjusted annually for inflation) to fund a Charitable Remainder Unitrust, Charitable Remainder Annuity Trust, or a Charitable Gift Annuity. This is an expansion of the type of charity, or charities, that can receive a QCD.

Tax Bracket Management

The IRS uses a progressive tax system which means as your income grows, it is subject to a higher tax rate. Therefore, it is important to know which of the seven federal tax brackets you will fall into. In your high-income years, you may want to reduce your tax liability by increasing your retirement contribution or utilize a tax-loss harvesting strategy. On the other hand, in low-income years, you may want to consider Roth IRA conversions, accelerate income recognition, or postpone deductible expenses.

Tax planning should be part of every individual investor’s financial and retirement plan. There are many strategies available for individuals and business owners, but it requires proper planning throughout the year. If you’d like to learn more about tax planning strategies unique to your personal circumstances, feel free to Talk With Us!

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

By:  Braden Priest, CFA®, Retirement Plan Consultant

Hiring the right advisor for your company’s retirement plan is one of the most critical decisions you will ever make as a plan sponsor. Many brokers and retail wealth managers dabble in retirement plan advisory services, but putting your plan in the hands of a non-specialist advisor can lead to expensive plan corrections, penalties, and poor retirement outcomes for your employees. Here are five things a Retirement Plan Advisor can provide that you won’t get from a non-specialist advisor:

1. Risk and Fiduciary Compliance – Is the regulatory landscape of retirement plans a complicated mess? Admittedly, yes. Staying apprised of the most recent legislation, regulation, court decisions, and departmental guidance affecting retirement plans is a full-time job, and it’s not an easy one. The stakes are too high to trust an advisor without the intricate knowledge to navigate the complex regulatory environment. 

• Influence – To put it plainly, service providers want to keep top advisors happy. Well-respected specialist firms have significant influence with vendors and can help you get the best pricing and service personnel for your plan. Vendors often assign more experienced relationship managers and operations teams to the clients of firms that specialize in retirement plans, and in cases where service has been underwhelming, Retirement Plan Advisors have more pull to request personnel changes.

• Coordinator-in-Chief – Retirement Plan Advisors know where to go to get problems fixed, and they speak the language of payroll providers, third party administrators (TPAs), and recordkeepers. When plan sponsors have questions about their retirement plan, their first call is often to their advisor, who can bring together the right parties to find the best solution.

• Big Cost Savings – A Retirement Plan Advisor knows which rocks to turn over to find the most meaningful cost savings. Administrative cost savings can be found through direct negotiations with vendors or the Request for Proposal (“RFP”) process, but it requires proper benchmarking beforehand to ensure plans are getting the best deal. Significant investment savings, ranging from thousands to hundreds of thousands of dollars, can be found by evaluating and properly selecting the share class of each investment in the plan. These savings can often be realized without changing a single investment manager in the plan.

• Big Time Savings – Tired of scheduling committee meetings, drafting agendas, writing meeting minutes, and following up with service providers? A Retirement Plan Advisor should be highly engaged and willing to take these items off your plate so you can focus on running your business.

Speak with one of our Retirement Plan Advisors today to see how your plan can realize these benefits and more!

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

By:  Braden Priest, CFA®, Retirement Plan Consultant

A recent survey from TD Ameritrade showed only 27% of 401(k) participants knew how much they were paying in fees, and 37% mistakenly believed their retirement plan was entirely free! We’re here to set the record straight about 3 common retirement plan myths:

1. The Retirement Plan is Free – Don’t shoot the messenger, but retirement plan service providers do not work for free. If it appears your retirement plan has no explicit costs, it’s because your providers have done a great job of burying their compensation in the Plan’s investment options, and what you can’t see you can’t measure! If this is the case, you are required as a fiduciary to “know your Plan’s fees”.
2. All Participants Share Equally in Plan Fees – If your retirement plan utilizes revenue sharing to cover its administrative costs, chances are there is a highly unequal distribution of fees across your participants. Some investments may contribute nothing to the administrative costs of the Plan, while others may contribute more than is needed. 
3. The Plan’s Recordkeeper Already Provides Adequate Fee Benchmarking – Recordkeepers are in business to make money and they are not fiduciaries to your plan participants. While provider fees may well be reasonable, it is the responsibility of the plan sponsor to independently benchmark fees against the broader marketplace.

Reach out to one of our Retirement Plan Advisors today to see if your plan is receiving competitive fees from your service providers.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

Learn how to prepare for retirement by learning the basics of your retirement plan. Why save in your retirement plan? How to invest in your retirement plan? What to do with your retirement plan after you retire? Get these questions answered and more.

Come join the conversation with Tina Schackman, CFA®, CFP® and Keith Johnson, CFP® of BFSG.

Register today for this important discussion! Click here to register.

What is the rule of 55? How does it work? Are there any catches? The rule of 55 allows those looking to retire earlier than normal or those who need the cash flow, a way to take distributions from their retirement plans sooner than is typically allowed. This quick 3-minute video gives the details with BFSG’s own, Tina Schackman, CFA®, CFP®. Watch here for more.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.