Upticks: 2025 Tax Brackets, Lending to Loved Ones, Savers and Interest Rates, and Smart Money Moves
By Jake Falcon on October 31, 2024
On this episode of Upticks, Jake and Cory share their Halloween plans and discuss a listener’s suggestion about the “Terminator Roth”. They recap Jake’s experience at the 15 and the Mahomies charity event and highlight the 2025 tax brackets, emphasizing tax planning.
Cory talks about the impact of lower interest rates on savers, while Jake discusses lending money to friends and family. They also share 7 smart money moves to finish 2024 and debate the practice of signing credit card receipts.
Thank you for joining us this week! If you have a topic that you would like Jake and Cory to discuss or debate live on Upticks, please email it directly to me at luke@falconwealthadvisors.com and I’ll be sure to ask them to bring it up on the show!
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Read a summary of the conversation below:
Event Recap
Jake and Cory begin by giving a recap of an educational event they hosted at Falcon Wealth Advisors, where they discussed the impact of elections on financial markets. Jake emphasizes the importance of not having short-term money in stocks to avoid being affected by market volatility. He shares two key takeaways from the event: gridlock in government can be good for the markets and having a well-constructed financial plan that doesn’t require liquidating stocks in the short term can be important.
Listener Suggestions
A listener suggested discussing the “Terminator Roth,” a strategy that involves converting unused 529 plan funds into a Roth IRA after 15 years. This strategy can be beneficial for individuals who earn too much to contribute directly to a Roth IRA. Cory explains that with the Secure Act 2.0, the use of 529 plans has been expanded, allowing for tax-deferred growth and tax-free distributions for qualified educational expenses. The new legislation now permits the conversion of unused 529 funds into a Roth IRA, providing a long-term strategy for those looking to maximize their retirement savings.
The listener also shared information about observatory telescopes in Kansas City, which Jake and Cory found intriguing. They discuss the possibility of visiting the observatories, one located in Louisburg, KS and another on the roof of UMKC.
The 2025 Tax Brackets Are Here. See Where You Land.
Jake explains that the 2025 tax brackets have been slightly adjusted for inflation, but there are no major changes. He emphasizes the importance of tax planning, especially with the potential expiration of the Tax Cuts and Jobs Act in 2026. Jake discusses clients meeting with financial planners to help ensure they are not overpaying taxes and to explore strategies like Roth conversions and 401(k) contributions. He highlights the importance of proactive tax planning to help prepare for potential changes in the tax code and to help minimize lifetime tax liabilities.
Savers Bid a Sad Farewell to Higher Yields
Cory discusses the impact of the Federal Reserve lowering interest rates, which results in lower yields for savers. He shares a story about a retired couple who will earn less income from their CD portfolio due to falling rates. Cory and Jake emphasize the importance of having a diversified financial plan to mitigate the impact of interest rate changes. They discuss the trade-offs involved in choosing low-risk investments and the importance of understanding one’s financial goals and risk tolerance.
If You Really, Really Need to Lend Money to Friends or Family…
Jake believes against lending money to friends and family, suggesting that if one chooses to do so, it should be considered a gift. He outlines steps to formalize a loan if necessary, including creating a contract, setting an interest rate, and establishing a repayment plan. Jake stresses the importance of ensuring one’s financial plan can support such a decision to avoid potential stress and relationship issues. He also highlights the potential risks and complications that can arise from lending money to loved ones and the importance of clear communication and formal agreements.
7 Smart Money Moves to Finish 2024 Strong
Cory shares seven financial tips from a Barron’s article to end the year on a strong note:
- Top off savings and retirement accounts: Help ensure that you are maximizing contributions to your savings and retirement accounts before the end of the year.
- Fund an emergency fund: Have adequate cash reserves to cover unexpected expenses.
- Engage in tax planning: Now is the time to plan for your 2024 taxes, including evaluating potential Roth conversions and other tax planning strategies.
- Evaluate Roth conversions: Consider converting traditional IRA funds to a Roth IRA before the end of the year to take advantage of current tax rates.
- Prioritize physical health as part of financial health: Take advantage of health checkups and use any flexible savings account (FSA) dollars before they expire.
- Plan for healthcare open enrollment: Review your healthcare options and make any necessary changes during open enrollment.
- Consider strategic charitable giving: Use strategies like bunching appreciated stock and contributing to a donor-advised fund to help maximize your charitable giving impact.
Signing Credit-Card Receipts Is Pointless. Why Do We Still Do It?
Jake and Cory discuss the outdated practice of signing credit-card receipts. They note that credit card companies no longer require signatures due to the impracticality of storing them. Despite this, both Jake and Cory admit they still sign receipts out of habit. They also mention that in some countries, like those in Europe, signatures are not required for credit card transactions. They reflect on the cultural differences in payment practices and the potential future changes in how transactions are conducted.
Thank you for tuning in, we hope you have a great week!
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