Voice Over: [00:00:00] Welcome to Metcalfe Money Moment, the podcast, unlock financial clarity and confidence with expert insights to achieve your goals hosted by Jeb Graham, Ethan Hutcheson, and Eric Wymore. Each episode offers decades of combined expertise in wealth management, retirement planning, and more. Join us for practical strategies to inspire your financial journey.

Now your hosts.

Jeb: Welcome to Metcalfe Money Moment, the podcast. My name is Jeb Graham, Metcalfe Partners Wealth Management with. Co-hosts and partners, Ethan Hutchison and Eric Wymore. Welcome to the podcast. How you guys doing today? Doing good. Yeah. Wonderful. Glad to be here. Yeah, it's January . You know, we're through the holidays.

We had New Year's. That's right. We've had, uh, fun and now it's kind of recalibrating. Right? And so. Um, today, you know, more than anything, you know, a lot of our clients went through 2024 and I'm sure a few of them probably [00:01:00] look back at the end of the year and realize that they could have done some planning earlier in the year, uh, to maybe do a couple of different things.

Um, and here we are in January of 20. 25 and, uh, you know, I was actually looking at a statistic, uh, and this was on being, but it says that only 35 percent of households have a long term financial plan. And the good thing with our clients is all of our clients have already taken care of that long term financial plan, you know, but what a lot of people don't do is a this year financial plan.

Okay. And so January is the time to do that. It's not October. It's not November. And I think we have a lot of clients and I'm, I'm guilty of it myself sometimes too, as you get to October, you get to November and you're like, Oh, I haven't maxed out this, or I need to do that. Or I want to give some money to charity.

And I think sitting down in January and really starting to kind of think through some of those things through that, you know, that you can do throughout the year, it really smooths it out. If you can start it earlier in the year, as opposed to later in the year. Um, So anyway, I think today we can kind of focus on maybe some things [00:02:00] that our clients and any listener, uh, can think about planning out.

Uh, and I think a great thing to start with and maybe, uh, you know, Ethan, uh, you and I were talking about this is, is 401k levels of change and stuff like that. So maybe we can go through, through that sort of stuff. Yeah, it

Eric: is. Yeah, it's kind of every year, you know, the IRS releases new rules on, Hey, your, your IRA maximums have gone up or your 401k contribution.

Uh, maximums have gone up. There's a lot of tax law changes that happen year to year as well. Um, so we're going to kind of hit on a little bit of, of what we think is very pertinent information to adjust for your accounts, um, in January leading throughout the year. Um, so. Funny enough, IRA contribution limits have not changed.

So, um, your Roth IRAs and your traditional IRAs, you can max those out at 7, 000 per year. If you're age 50 and above, uh, and you're still working and have earned income, you can, um, add an additional 1, 000 catch up contribution. So if you're 50, 57, [00:03:00] 62, anything north of 50, you can put 8, 000 away into a Roth.

Or a traditional IRA. Um, so that really hasn't changed. That was the same for, for 2024, 2025 moving forward. There's no need to adjust contribution rates there. Some really unique tax law changes that have come to fruition for 401ks. Um, they're increasing the max 401k contribution in 2024. It was 23, 000.

Now it's 23, 500. Um, if you're over the age of 50. You have an additional 7, 500 that you can contribute to your 401k. Okay. I'll say that one more time. If you're 50 and above, you can put 7, 500 extra above the 23, 500 into your 401k.

Jeb: Really? You, what does that get you to a total of 31, 000.

Ethan: If you're over 50.

Yep. Yep. And here's, this is new for 2025. This is really unique. If you're 60 from the ages of 60 to [00:04:00] 63. You can add an additional 11, 250 to your catch up. Okay. So the 7, 500 catch up I mentioned before from age 50 to 59, that goes away from age 60 to 63 and it is 11, 250 of additional catch up contributions.

Kind of unique. I'm still kind of confused why they stopped it at 10, 000. Age 63, because when you're 64, that, that contribute, that ketchup goes back down to 7, 500. So

Jeb: you're not, you're not even to full retirement age at that point,

Ethan: but exactly. You may

Jeb: have the reasons, but that is a cool new thing this year.

We, and oddly enough, I didn't even know that until we started planning for this podcast that they added that in. And I think it's, um, you know, it's, it's interesting and I think it will certainly come into play for some of our clients, I would think. Yeah. So, yeah,

Eric: and, and, you know, back to the maximums too.

And, and Jeb, you mentioned a statistic earlier, um, about retirement, you know, holistic financial planning. Um, I found a statistic earlier this morning that only 14 percent of [00:05:00] investors max out their 401ks. Okay. Uh, that doesn't, Take into account, catch up contributions and all that fun stuff, but 14 percent of the workforce that's eligible for an employer sponsored plan maxes out their 401k.

So, you know, it's tough to do. We look at cashflow planning and, you know, putting 23, 500 away into a 401k. That takes a lot away from cashflow, but if you can work to get closer to that number, we always recommend increasing your contribution rate by one or 2%. Per year, if you get a 5 percent raise, you know, maybe increase your contribution rate to 2 percent above what you were doing the year prior.

So small little things from there. Um, last note that I really want to talk about 401ks for is, you know, switching jobs, um, what happened. To your career in 2024, did you leave a job? Um, did you get promoted? Did your business that you work for sell and split into another entity? Where's that old 401k? And if it's hanging out there a good time to consolidate and bring in those assets to a, you know, bigger IRA it's [00:06:00] January, go ahead and get the money over to where you can manage it, where it's accounted for.

You know, it's there. You don't want to be 62 years old and have 10 old, old 4 0 1 Ks out there, you gotta hunt down, you know, prior to retirement. So we, we do recommend getting that stuff under, under order.

Jeb: I, I would say one other thing there, um, is that, you know, we, and we run into this with clients all the time, uh, is that they, they come.

To us. And they're like, I know I have old 401ks out there. They don't know how to access them online. They haven't seen him for a while. Maybe they've, they know they've got a statement. I think, you know, digging in and kind of doing that and consolidating all of those things can absolutely just make you feel more organized.

And number, and the other, the other part of that is, is, you know, that all your assets are working together that way. You know, if everything's in a bunch of different accounts everywhere and you're not really managing them, you don't necessarily know. In my opinion, you know, kind of how everything's being managed and whether they're working together and, and really what your overall risk tolerance and allocation could be.

Right. Um, and then, and then back to that too, I think, uh, not only is it, you know, [00:07:00] talking about maxing out your 401k, your 401k contributions, a great thing to do is, is reevaluate based on your tax bracket as to whether you should be doing the Roth or the traditional piece of that 401k. Um, because, you know, obviously there's differences there.

And, and I, I'd say a lot of times. The Roth portion of that benefits a younger client, or even sometimes, you know, clients that are closer to retirement. Uh, and they haven't really done the math to figure that out or do the forecasting to know which one's the better thing to do. Um, so I think that's a great thing to do.

And it's a great thing to do it in January, right? Because that's our January, February, because that's when you can make that change and have a big impact. Um, and then I think, you know, as we're talking about contributory plans, one other thing that you can do to get a tax break. Not only get a tax break, but also save money for, uh, your, either your child's or your grandchild's college education is what's called a 529 savings plan, according to Sally Mays, how America saves for college about 37 percent of families use a [00:08:00] 529 or a like plan.

Uh, to save for college, and there's some huge benefits to doing that. Um, I would argue that the, the best benefit is if the child is pretty young, has a, a ways to go until they get to college, is that you get tax free growth in there, very similar to a Roth IRAA 5 29 plan. If you put in $5,000 today and that 5,000 grows to 50,000.

Um, that 50, 000, as long as it's used for college education purposes. And that's a pretty broad category there. So you can use it for tuition books, you know, and there's a lot of different things that can be used for, uh, it comes out completely tax free. Uh, and then the other thing is, is you do get a small, and this isn't hugely significant, but it is something is that you do get a state tax break for putting money in there.

So, um, so for, for instance, for Kansas taxpayers. You can, for the first 3, 000, an individual puts into a five 29 plan. It's deducted from your state income taxes. And if you're a married couple, you can put up to 6, 000 and you get to deduct that [00:09:00] from your state income taxes. And then if you're in Missouri, since we're right on the border and we have a lot of clients in both states, um, You can put up to if you're a married couple, you can actually deduct up to 8, 000 and an individual.

I'm sorry. 8, 000 as an individual and 16, 000 as a couple. So that's a much more significant tax deduction in Missouri than it is in Kansas for someone that wants to contribute. To that, uh, to that five 29 plan. So, so those are kind of contributory plans. And I know Eric, uh, we've gone through some other things.

Ethan: Yeah. One nice thing with the five 29, and obviously this isn't necessarily investment advice, but you can always invest in, in an age based plan. So the older or the farther away that child is from 18 years old, it's going to be a little bit more aggressive. And then as they age. And get closer to, to college age, it's going to slightly reduce, you know, going to slightly reduce the risk, um, getting ready for the distribution phase.

And, um, and that, you know, kind of carry, carry on to a different, different tax [00:10:00] strategy that we often talk about. Um, it's called harvesting gains or harvesting tax, harvesting gains or tax harvesting losses. So throughout the year, as you're making some kind of an investment, that's in a non non retirement type of an account.

So this would be some kind of an individual or joint account, uh, or some kind of a trust. If you have a living trust, you can open up an account or even a small business account. You can open up one. Um, but basically let's say you invest 10, 000 into, into an investment and it grows to 11, 000. Um, if you sell that.

That position, you're going to have a 1, 000 gain. That's going to have some kind of capital gains on. And that kind of depends on the, you know, if you sold it within a year or sold it, you know, after a year, if it's, if it's going to be a short term gain or a long term game gain. Uh, but the other thing. Is if you invest that 10, 000 and it goes down to 9, 000, well, that's an opportunity to where we are long term [00:11:00] investors and we want to remain invested.

However, we can take, sell that position, take that 1, 000 loss, offset the 1, 000 gain and minimize our tax bill. We can also reinvest that money immediately into some other different type of investment and still remain that long term investment focus. Now, I don't want to get too deep in the weeds, but there are some wash rules involved.

So just be careful of that. Obviously you need to consult your tax advisor and financial advisor for that. But, but that's just an opportunity to look out rather than just. Cramming it into the end of the year to do something throughout the year, uh, harvesting both gains and losses. So Eric, you would say that strategy is more, more of a tax play than an investment.

Absolutely. Like I said, we are a long term investors in the, in that Metcalfe partners, uh, but there are opportunities, uh, to take a gain, to take a loss, so to speak, [00:12:00] um, and still get invested into another, uh, another investment.

Jeb: And that, that can be, we've seen that be a pretty big deal for a lot of clients, like specifically toward the end of the year, and they get ready to, to, uh, you know, file their income taxes.

There's just certain years, you know, 2022 is a great example of that. You know, and it is funny because some years are better for that than others, obviously, because it kind of matters what the market's doing. Uh, 2022 was a great year for that, right? Because so many things lost. And then not only that you get to.

We got to take those losses and then, and then they get to carry it forward as well to future years. Absolutely. Yeah. One other thing to pivot to, um, would be for clients. And this would probably be more of our corporate clients and listeners. Um, which is, uh, when we talk about restricted stock units and stock options, you know, people, uh, that work at large corporations and even mid sized corporations, uh, and especially when you kind of get into that executive level.

Uh, a lot of times a big piece of your compensation package is going to be [00:13:00] stock options and restricted stock units. And a big, um, you know, way to make that a more efficient plan is to, is to know when to exercise options. And uh, obviously with, with restricted stock units. They basically vest when they vest, right?

So if you have a restricted stock unit and it's a three year vesting, well, it's going to invest in year three and you're going to have to pay the taxes on that in that year. And there's not a ton you can do there. But what you do want to think about is do I want to, you know, you, you could end up with a pretty highly concentrated stock.

If all you do is continue to get restricted stock units and you build up that stock. So, so big question is, do you want to reinvest that? Elsewhere and kind of diversify it a little bit, or at least a portion of that, um, after you do, after it does vest, cause you can't do it until it best. And then with stock options, usually you do have, have, uh, discretion to a degree of when you're going to exercise those options.

Um, so, um, I think, you know, working with not only your financial advisor, but also your accountant as to [00:14:00] when the good time and maybe a good year to exercise some of those options, uh, can be, can be a, uh, a really big deal. Um, and then lastly, you know, I think, and this is something that we can kind of talk a little bit about, but I know I was actually looking at the money market fund that we've used for this last couple of years because interest rates have been higher than they have been for, for the last.

12 years in the last two years. And so we've actually been able to make money on money markets. And now that interest rates are starting to go back down, our money market's not paying quite as much. And, you know, the feds have met recently and they're saying that, uh, there's not that they're going to, they're going to cut rates probably another couple of times in 2025.

Uh, so those interest rates are going to continue to go down. So I think looking at, if you have money in money markets, CDs in the bank, uh, anything, uh, out there. Might not be paying what it was a year or two ago. So I think looking at alternatives for that, and that could be a bond portfolio, you know, that maybe is paying a little bit higher interest rate, but also have some, [00:15:00] has some upside potential as interest rates fall.

They might be a little bit more volatile than a money market. Um, but it does give you probably some additional upside opportunity that you're not going to get. Uh, in, in a money market or a CD and, uh,

Ethan: uh, just to interject real quick, Eric made a good point when we were discussing this last week, those I bonds that everybody put 10, 000 in back in 2022.

Remember that was kind of the talk of the town. You can get, you can get a 9 percent return on a 10, 000 investment, which was awesome. Which is great. I mean, yeah, that was. Virtually unheard of, but those I bonds aren't paying anywhere near what they were before. And I've talked to some clients and they said, Oh yeah, I did that.

And I forgot my money's still sitting there. And you know, it's definitely not making the 9 percent that they initially sought after. So keeping track of those, you know, that goes back to those outside accounts, keeping track of those and where those are at, and just be very, very open with your advisor on, on where those are.

Jeb: That's a super, super, super good point. [00:16:00] So a lot of money went into cash a couple of years ago and rightfully so, you know, it was a good, it was a great time to own a, basically a risk free asset and make some good money.

Ethan: So we've talked a lot about like kind of the accumulation phase of, of our clients and, and all, all the things that they're doing during their working careers.

So are there some. Some tactics that they can do during the distribution phase.

Jeb: So yeah, so that distribution phase. Um, so, so, and to, to Eric's point, you know, we have two kind of buckets of clients and there's kind of two buckets of people out there. Some people are working toward retirement and so they're accumulating money and they're growing their money and they're contributing to IRAs and, and 4 0 1 ks and all that sort of thing.

And then we have our clients that are already retired. And all of a sudden they've, they've, they've made all this accumulation over the years and now it's time to take money out. Um, and I think, uh, there's a lot of different things to think about with that. A big one is, you know, for distribution clients this year is if you have, number one is if you [00:17:00] have an RMD, which what an RMD is, and a lot of people, when they call us, they know they need to take money out of their IRA sometime, but they don't know exactly when that is.

Uh, and that's, it's a little bit of a moving target. So right now. It's 73 years old. So if you get to 73 years old, you have to take a required minimum distribution. So right now it's 73 years old, uh, to take a required minimum distribution. And depending upon your age, it could be 75 and it could even be later than that down the road.

Um, But, uh, when you have to take that required minimum distribution, that's fully taxable. So that is going to be taxed as ordinary income, just like any other distribution out of an IRA. And for people that have big IRAs and 401ks, it can be a sizable number and it can greatly impact, you know, your tax situation.

Uh, so one great thing to, to plan out is if you want to, and we're actually going to have Annie Burdett Uh, on our, our podcast is with the greater Kansas city community foundation, but, and we're going to talk a little bit about qualified charitable distributions, donor [00:18:00] advised funds, and those sorts of things.

But a qualified, uh, charitable distribution is where you can take your required minimum distribution and send either a portion or all of that. To a qualified charity and you don't have to pay taxes on it. So if you're going to give money to charity, that's probably the best money to give to charity because it's taxes, ordinary income, uh, and it's, it's just a great thing to be able to do.

So. So I think that's, that's one thing that distribution clients can, can definitely focus on.

Eric: I'd say another one, and this goes, this kind of goes both with the accumulators and, and the distribution phase clients. But, um, you know, thinking about looking ahead in, in planning for that larger distribution that may come down the road, let's say it's January.

Now you want to buy a new truck in July, right? And you're going to need an additional 30, 000 for that vehicle on top of, let's say the 40, 000 that you're taking out over the course of that year, just to manage your cashflow. So when we look at our clients that are in distribution phase, they [00:19:00] have a lot of sources of income likely, um, there's social security, then there's.

Pensions, uh, and then there's retirement account distributions, the social security and the pensions. There's not much control we have over those. Those are what they are depending on when you file and how many years you've worked. We do have control over the distributions from your retirement accounts.

So if you need 80, 000 to live on 40 of that comes from social security and pensions, You need another 40 from your retirement accounts. And we know that as advisors, that our clients that every year they need 40, it might be 45 next year because of inflation or cost of living. Well, what we don't know is that you are planning to buy that truck in January or in July rather, and you need that 30, 000.

So being very conversational. With your advisor and or us and letting us know well in advance. Hey, there's a large purchase down the road. We might, we might need to, you know, make a distribution to pay for that. The earlier we know the better, um, just so we can kind of plan out your cashflow, which comes back to what your taxes are going to look [00:20:00] like for that year.

Um, our accumulator clients, people in the accumulation phase, that's also something to plan for, you know, Hey, I'm going to finish the basement this year, or I do need that. I didn't do truck in July, just.

Uh, you know, jab Ethan, I know we've thrown a lot at, at, at everybody, as far as all kinds of little tips and there's going to be one more that I want to share. Um, For them and admit, you know, think about this, you've spent your entire career kind of socking away money into squirreling it away into your 401k, trying to lower your tax bracket.

Then all of a sudden you get into that retirement age. I want to talk a little bit about this Roth conversion thing. Right. So all of a sudden we want to, we are now in a lower tax bracket than we were when we put the money or deferred the money into our retirement account. And if we can take that money out at a lower tax bracket, either do it into [00:21:00] an, send it over to a non retirement account and live off those, those, those dollars later in life.

Or we can do our Roth conversion, reinvest that money, have it continue to grow for us. And then we don't even have to worry about the RMD in the future. Roth conversion is one of the biggest planning pieces that we do for all of our clients to look at every, every single one each and every year.

Jeb: Totally agree.

And I would say too, is that I think we get a lot of clients that come in and they know what Roth conversion is. They've heard of it. They want to do it. They know that a Roth is a better thing, you know, to own than a traditional. But it's hard sometimes to put, to actually know what the numbers mean. Okay.

And what I mean by that is, is what does it mean this year? And then what does it mean for my future? Okay. So when, when I say this year, what we use is, is a software called holistic plan, uh, where basically we can take someone's. Tax return, 1040, scan it in. Uh, and then from there, you know, we can, we can run scenarios.

So we can say, you know, right now they're in the 12 [00:22:00] percent tax bracket and they've got an extra 30, to the top of that tax bracket. So basically, you know, we can plug that in and look at what that Roth conversion looks like. Number one, make sure we're keeping them in the tax bracket. They want to be in.

And then number two, give them a pretty. Pretty close estimate of exactly what kind of taxes they're going to pay. And then not only that, once we figure out what it means this year, let's model it out and in e money and let's see what that means. Five years from now, 10 years from now. And I'll tell you, the numbers are pretty eye opening.

Sometimes when you start to look at that, it's, it's just such a great planning piece. So

Ethan: a big, big reason for Roth conversions is, you know, looking way. Way ahead of, of, of where you're at in retirement, looking at when you pass and kind of passing on those assets down to your, your children or the heirs or wherever they're going, getting money into a Roth efficiently is, is one of the best tools for, for passing down money, because when the, when the client's inherited or when your children inherited odds are they're going to be in their highest earning years, right?

When, when [00:23:00] parents pass, they're in their seventies, eighties, nineties, and us we're in our forties, fifties, and sixties, we're making more than we were making in our twenties. 30s and 20s. So our income taxes are higher. Well, with the pre tax account that you inherit, you're going to be spending a lot of taxes.

A lot of money that comes out of that is going to hit your ordinary income tax brackets, whereas a Roth it's already been taxed. So it's a really beautiful tool to pass down assets to your children. Absolutely.

Jeb: A hundred percent. So, well, guys, this has been a ton of fun. Um, I think, you know, ton of fun for us, right?

I mean, we get to talk about the things that we enjoy talking about and, uh, we certainly appreciate all of our listeners, uh, tuning in and this is Metcalf money moment, the podcast signing off and we will see you soon.

Voice Over: Thanks for tuning in to Metcalf money moment, the podcast. We hope today's episode provided valuable insights to help you unlock financial clarity, confidence, and peace of mind. For more expert advice and resources, visit [00:24:00] metcalfpartners. com until next time, make every money moment count.

Disclaimer: Jib Graham, Ethan Hutchison, and Eric Wymore are registered representatives with and securities offered through LPL financial member FINRA SIPC investment advice offered through WCG wealth advisors, a registered investment advisor. WCG Wealth Advisors and Metcalfe Partners Wealth Management is a, are, separate entity, entities, from LPL Financial.

The opinions voiced in this podcast are for general information only, and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

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