Nate Reineke (00:12)
Hello, physician moms and dads. I'm Nate Renneke, certified financial planner and primary advisor.
Chelsea Jones (00:19)
And I'm Chelsea Jones, also a certified financial planner and primary advisor here at Physician Family Financial Advisors. And Nate, we've talked about before, I'm down in Florida and it, I'm so happy to say, is finally starting to feel like fall. The temperature has dropped from being consistently in the mid 80s to finally being in the 70s for a whole week.
Nate Reineke (00:36)
Mmm.
What a treat.
Chelsea Jones (00:45)
It's, it is a treat indeed.
Nate Reineke (00:49)
The older I get, the more I β just am enamored by Oregon fall. Like just driving down my street. And also, you my wife's from California and her family, when they visit from California, they just will go driving to look at the different colors of trees. you're like, yeah, this is fantastic. Feels like it's been fall here for a while.
Chelsea Jones (00:56)
Christmas.
It's great.
Finally catching up down here. What do you guys do for fall? Do you do fall activities?
Nate Reineke (01:14)
Hmm.
So our fall activities are usually about the same. I mean, we go to the pumpkin patch. We do trunker treats, things like that. That's all really fun. First year this year that my seven-year-old actually wore a scary costume. It was kind of a sad day for me, but it was also fun to watch him. He wore like a scary pumpkin thing. And I don't know why he picked it, but.
β But most of fall and every other season seems like it's filled with β soccer for my seven-year-old and β I'm sad to say that the spicy peppers did not go undefeated this year. So Matteo's soccer team, β the spicy peppers, these spicy peppers were undefeated. I think they had a tie in there, undefeated and Matteo was so intent on
Chelsea Jones (01:58)
No.
They're called the spicy peppers.
Nate Reineke (02:11)
β winning his last game and they didn't and they faced a very good team. His team's pretty good. They have some good players on it. And obviously, you know, the competition is hit or miss, right? They're seven. β But they had a hard fought game in a field full of mud. And they they lost by one or two. But we finally got a ref that would like actually ref because you know, normally they're about 13 years old and they kind of just stand there and blow the whistle at halftime. So
Chelsea Jones (02:24)
Yeah. Yeah.
Yeah.
Nate Reineke (02:41)
Yeah, that was me. What about you? Is this your first fall in Florida? First fall in Florida.
Chelsea Jones (02:45)
We, first of all in Florida, yep.
We did a pumpkin patch, which looked different this year because there are no actual pumpkin patches in Florida. sand. You can't grow pumpkins in sand. Uh, so it was like a little, they made a little path at one of the nurseries here and they just put pumpkins that had already been picked and you got to pick one. So it wasn't our traditional pumpkin patch, a ride experience, but.
Nate Reineke (02:52)
haha
Yeah.
Nice.
Chelsea Jones (03:15)
There are a lot of people here that decorate in our neighborhood. We would go around our neighborhood and look at all the Halloween decorations and there's already Christmas decorations up. So yeah, but just being outside.
Nate Reineke (03:18)
Mm-hmm.
yeah. Yep.
Thanksgiving,
Thanksgiving does not get the attention it deserves because it's sandwiched in. Right. It's kind of a bummer. But this was the first year that without me kicking and screaming at the pumpkin patch that the kids all agreed that the pumpkins were overpriced at the pumpkin patch because they had been grocery shopping with me and they saw pumpkins for like a few dollars. And they're like, how much? So I was like, yes.
Chelsea Jones (03:31)
It really doesn't. Yeah.
Yeah.
Nate Reineke (03:55)
come to the dark side of pinching pennies with me. all right, so we got some questions today. Looking pretty good.
Chelsea Jones (03:58)
Yes.
We do.
Yeah, we've got a few. So the first one up on the dock, a cardiologist in Oregon asks us, as I approach my retirement date, what should I be doing to optimize taxes for the near future?
Nate Reineke (04:18)
Okay, I think this is
all you because you're mostly working with older physicians who are looking at retirement.
Chelsea Jones (04:27)
Mm hmm. Yep. And I, this was one of my clients that asked me this question. β and so the name of the game before retirement, it directly before retirement, especially is to defer as much as you can defer, defer, defer. Cause, β I think we talked about this a little bit the last time I was on, β that the benefit of tax deferral gets greater, the closer you are to retirement. So you want to defer.
Nate Reineke (04:43)
Mm-hmm.
Mm-hmm.
Chelsea Jones (04:56)
your income as much as you can. So make sure you're maxing out your 401k, getting money into your cash balance plan if you have one, β maxing out your HSA. And once you retire, there are gonna be opportunities to make sure that you're taking advantage of those low tax breaks.
Nate Reineke (05:12)
Yeah.
Chelsea Jones (05:14)
Retirees have this opportunity window of post-retirement, lower tax bracket, because they're not earning a high income, and pre-required minimum distribution age. There's a lot of opportunities in that window for you to take advantage of those lower brackets and do things like Roth conversions or taking money out strategically while you're in a lower bracket or looking at gifting.
Nate Reineke (05:26)
Mm-hmm.
Yeah, I think this question has a really good extreme example where like imagine you make a million dollars this year and it's December 31st and you could defer your last paycheck like the whole thing. So you could defer like $100,000. This isn't real life, but β imagine that was the situation or you could take it as a check and you know it's going to get cut in half with taxes.
Chelsea Jones (05:42)
There's a lot of opportunity there.
Nate Reineke (06:11)
You can defer the hundred grand and then the next day, take it out and cut your, I mean, cut your taxes probably in half. Right. Yeah. So, deferral, the closer you get, like you said, this is why cash balance plans are very good for physicians approaching retirement. And the further you are away from retirement, the less valuable they are. Not to say that they never make sense for young physicians, but they make a ton of sense.
Chelsea Jones (06:23)
at least.
Nate Reineke (06:40)
for physicians approaching retirement.
Chelsea Jones (06:43)
Yeah. Okay. So the next question, also a cardiologist in Oregon, but a different cardiologist says, β I'm retiring next year and we want to downsize our home. If we have to buy the smaller house before our current house sales, did we liquidate part of our portfolio to pay for it or have a sizable down payment?
Nate Reineke (06:50)
you
Mm hmm. Yeah. So this this question, β it β it's it's just wrong. Right. It's a wrong question because the answer is you don't have to buy it before you sell your current house. All right. And this is we're all scarred from covid times and buying houses because the market was so competitive that you had to if you wanted to buy a house at all, you had to say
Chelsea Jones (07:22)
Mm-hmm.
Nate Reineke (07:35)
I'm going to buy your house, Mr. House Seller, β without making a contingent that I sell my house. And by the way, this whole like, hey, I need 90 days to sell my house or I need 60 days to sell my house before I can buy your house. That has been the standard for decades. And then all of sudden COVID changed the game and everybody still thinks they can't go buy a house with making a contingent offer.
That is no longer the case. And some people, some sellers will still want that and they will make you feel like you're not going to be able to buy their house unless you come in with a non-contingent offer. And here's the thing, in the environment we are in today with housing, there's just another house right down the street that's for sale. Okay, it's going to be difficult, more difficult to sell your house today than it has been in the last few years.
Chelsea Jones (08:21)
Exactly.
Nate Reineke (08:27)
And I do not wish it upon anybody listening to be floating to mortgages for several months while they're trying to sell their own house. So take this slow. OK, everybody gets very frantic when they're about to sell their house. I know all too well how scary it is to sell your house. Maybe they're going to see the bad the little bad things about my house that I see every day. I promise you nobody looks at your house the same way you do after you've lived there for several years.
So let's say for some reason that β you actually had to do this. had β to buy a house without selling your current home. One, would say, β again, you never have to. You could just move on and buy a different house if they don't accept your offer. But let's imagine that you really wanted to for some reason.
I would be very careful about cashing in retirement assets paying a whole bunch in taxes when you're about to retire. So you're in a really high tax bracket and you're selling out of your brokerage account to get your hands on some cash so that you can go buy a house and then 30 days later when you sell your house or 90 days later when you sell your current home. What do you do with that cash you're investing it back in the market in and you just paid a bunch of taxes to be in.
in a worse position. So there are a couple options that you have. It all depends on your your positioning in your current home. If you have a lot of equity in your current house, you want to be careful when you do this and the timing of how you do this. But you can go take out a home equity line of credit. And you can stay in. So let's say you had a house, it's worth a million bucks. You only owe 500 grand on it. You could go take out at least two hundred thousand dollars. Sometimes there's a limit.
But at least a couple hundred thousand dollars, and by the way, very easily and very inexpensive. mean, you could probably do it for under a thousand bucks. Get your hands on that money. Now you're holding a loan of seven hundred thousand dollars on that house, but you have two hundred thousand dollars in cash to go make put 20 percent down on another million dollar house. OK.
Chelsea Jones (10:46)
Yeah, that
you didn't have to pay $50,000 in taxes to get out.
Nate Reineke (10:49)
No
taxes. And here's the other thing. I mean, at the time of this episode, the stock market is just gone up and up and up for the last several years. And so you're paying taxes at a horrible time. Right. Every position you have has gain. Hopefully, like unless you're picking stocks or something. Right. So in that case, I just don't see a good reason to do it because the bank can help you out of this. They can help you get a home equity line of credit.
Chelsea Jones (11:08)
Yeah.
Nate Reineke (11:18)
you can make an offer in the next house. Again, I don't necessarily recommend this because now you're getting your leverage on yourself even more just so you don't have to make a contingent offer on a house. Like there's lots of houses for sale right now. Believe me, they'll be happy to get any offer. OK, and you should think about that for yourself in that it's not going to be so easy to sell your house or as easy as it used to be.
So who wants to float to mortgage for potentially several months? This is just costing you money left and right, all because you're listening to your agent or you're listening to sellers saying you have to make a non-continuity offer. That is not true. And you just need to be patient. So go get a home equity line of credit. Lift up your couch cushions and look for money that isn't taxable to get your hands on it. And
Chelsea Jones (12:08)
and
Nate Reineke (12:12)
you know, at the end of the day, if you absolutely had to do it, you're just you just pay some taxes. But, you know, I wouldn't I wouldn't really recommend it. β Most of the time, too, in these downsizes, sometimes people will move again. And I know specifically for for this family, they are planning to move again. So you don't even have to go buy your forever house. They're just finding an in-between house. All the more reason not to leverage your whole, you know, retirement plan just so you can get out of the big house you're currently in.
Chelsea Jones (12:31)
Mm-hmm. Yeah.
A lot of moving pieces there, a lot to think about, but don't overextend yourself at the end of the day.
Nate Reineke (12:46)
Yeah.
That's right.
Chelsea Jones (12:52)
So the next question that we have is from an orthopedic surgeon in Illinois. They said, just read a story that in the future, our catch up contributions to our 401k will have to be put into a Roth. I'm pretty sure our company does not offer a Roth, although I will double check. In the event that it does not offer a Roth, can I just put this into my Roth IRA? So this is a great question, and I'm sure our listeners have heard about this in some form.
but what she is referring to when she says catch up contribution is the age 50 plus. So if you're over age 50, you can contribute an additional 7,500 on top of the regular elective deferral limit. And part of the secure act that was passed a couple of years ago, I know there's been a few iterations of it. There was a rule in there that catch up contributions
Nate Reineke (13:30)
Mm-hmm.
Chelsea Jones (13:51)
it for people who make more than I think it's $147,000 a year, which is majority if not all of our clients. If you're over 50, you have to put your catch up contribution into a Roth account. They keep the IRS keeps pushing out this deadline. Cause originally I think that role was supposed to go into effect in 2024 or five, then they push it out to 26. And now the last time I checked the IRS website, they said this role goes into effect starting in 2027.
Um, they keep pushing it out so that employers can fix their 401ks to make sure there's a Roth offering. So yes, catch up contributions have to go into Roth if you're over age 50 and you make more than 150,000 a year. Um, and then the second part of her question, if my company doesn't offer a Roth, can I just put it in my Roth IRA? The answer to that is unfortunately no.
Nate Reineke (14:29)
Mm-hmm.
Hmm.
Chelsea Jones (14:51)
When I looked into this, you know, the catch up contribution is specific to 401ks. Your IRA has a separate limit of either seven or 8,000 a year, depending on if you're 50 plus or below. And they didn't write it into the tax code that if you're a 401k doesn't offer a Roth, you can put it into your IRA instead. β So from my understanding and what I looked up on this is if your company doesn't offer a Roth account in the 401k,
Nate Reineke (15:13)
Mm-hmm.
Chelsea Jones (15:20)
you're not able to make the catch-up contribution because it has to be into the Roth account. The reasoning behind this, by the way, just a little fun fact, was to generate more income, more tax income, because we all know our government's in a deficit. They want people to pay taxes now, even if it means giving them tax-free growth later.
Nate Reineke (15:27)
Yeah.
Yeah, of course.
Mm-hmm.
Chelsea Jones (15:49)
and requiring catch up contributions to go into the Roth is just trying to make up some income, generate more tax income.
Nate Reineke (15:58)
This is sort of one of those things that we see as things change, everyone else has to catch up. Employers have to catch up with this new rule. β I would be very surprised. In fact, I would say β it's going to happen where employers are going to quickly follow suit here and get you a Roth option. yeah, I don't think it's the end of the world for physicians. β
Chelsea Jones (16:05)
and
Mm-hmm. Yep.
Nate Reineke (16:26)
It is a bit of a bummer. kind of a missed tax break there, but at least you're getting more money into a Roth, you know, so.
Chelsea Jones (16:32)
Yeah,
at least you get the tax free gross.
Nate Reineke (16:35)
Yeah. Okay. What's the next question?
Chelsea Jones (16:39)
The next question is from a family medicine doctor in California. She says, I'm having trouble with my CPA. Should I just do my own taxes or do I actually need a tax professional?
Nate Reineke (16:51)
Hmm. Yeah, we I have gotten this question more and more and more over the years. β This is β gonna sound kind of strange, but I think maybe one problem number one, because it's in the way that this question is asked makes me makes it obvious to me this is a W two employee, they're paying someone to do their taxes, and they probably have pretty simple taxes, I would assume.
because most of the time, if you have a business or, you know, 1099 employee, you get a lot of attention from your CPA and that is because you pay them more money. Okay. Every CPA I talk to literally tells me to my face, I don't really want to work with W2 employees. And it's because it's a big paperwork headache to not make very much money. And the
Chelsea Jones (17:33)
Mm-hmm.
Mm-hmm.
Yeah, because they're competing
in that space with TurboTax.
Nate Reineke (17:50)
That's right. And so everybody sees this what a hundred dollars. It's probably cheaper. It's like a hundred bucks to go on TurboTax. CPA wants a thousand. And everyone's like, what gives? I don't get it. This is just a situation that we're dealing with. β You know, and you and I deal with this, too. mean, it's technology has taken over that space and it is no longer. Clients are frustrated with their CPA.
Chelsea Jones (18:00)
Mm-hmm.
Nate Reineke (18:18)
CPAs are frustrated with their clients and everyone's throwing their hands up near like what do do about this? The answer is if you so desperately want to avoid TurboTax or what's the one you used last year? I've heard good things.
Chelsea Jones (18:32)
I used Free Tax USA, $15. Yeah.
Nate Reineke (18:34)
free tax USA 15 bucks. You know, it's
like, how do you compete with that as a business costs $15 you, you had to collect all of your tax documents and, you know, put them in the system. When you go to your CPA, guess what you got to collect all the tax documents to your halfway there. If you so desperately do not want to do that, which I totally get it takes several hours. I mean, at least for me, I go through every nook and cranny of my taxes, I do it through TurboTax.
It takes time. I want to get it just right. I want to make sure everything's above board. It's hard. It's hard to collect all those things, collect documents and submit it several hours. But if you don't want to do that, you unfortunately have to hate to say it, get bad service sometimes and pay more than you want to pay. That's just the reality. One little thing you could do is stop working with the CPA. CPAs don't want to do
Chelsea Jones (19:23)
Mm-hmm.
Nate Reineke (19:34)
simple stuff. They want complicated things that they're working with you over as the years go on. They're helping you with quarterly tax payments. They're helping you with bookkeeping. That's what keeps them afloat and allows them to run a business. But a thousand dollars a year. Imagine they have and they have support support staff to imagine how many clients you have to have that pay you a thousand bucks to pay a team of people. mean, it's a lot of clients, so they can't give you any service. This is a transactional engagement.
Chelsea Jones (19:35)
Yeah.
Nate Reineke (20:04)
you hand me your paperwork, it has to be really clean, or I'm going to send it back to you. And then I'll put it into TurboTax for you. And they don't use TurboTax, but it's essentially the same. So they're not going to be strategic with you. They're not going to give you a lot of emails back and forth. They just want the documents and they're doing it β for I don't know why. I don't know why they don't just tell you, hey, I don't want to work with you. But so should you do it on your own? Probably.
Chelsea Jones (20:15)
Mm-hmm.
pins. β
Nate Reineke (20:33)
probably kind of it kind
of depends. mean, if you're if you're itemizing your own taxes. I mean, maybe it's worth getting someone to help. But and when I say don't work with a CPA, I forgot to finish that you should be working potentially with an EA, an enrolled agent. A lot of enrolled agents will do this happily and they kind of run their own shop. It's just one person and they can have 100 clients and do make a reasonable amount of money.
Chelsea Jones (20:43)
Thank
Okay.
Nate Reineke (21:02)
but they didn't go to several years of school and go through the hell that it is to become a CPA and they don't expect to be compensated for it. So β it's up to you, but just if you want to work with them, I do not recommend negotiating fees. I recommend maybe shopping around, but they just get frustrated. Nobody likes the situation they're in when a W-2 β employee is trying to ask a CPA for high level of work. And here's the other thing.
Chelsea Jones (21:21)
Mm-hmm.
yet.
Nate Reineke (21:32)
So the way I'm talking about this sort of seems like the client is the problem. You could go to a CPA and just pay them a lot more and it would be fine. They could run a business off of it, but it's not worth it. At some point, it's just not worth it. mean, even a doctor doesn't want to pay someone β several hundred dollars an hour, right? β But.
Chelsea Jones (21:46)
Yeah.
Nate Reineke (21:59)
It's literally a cost benefit analysis. How many hours is it going to take me when I make more money at work? So it's a tough question.
Chelsea Jones (22:08)
Can you talk
a little bit about, because we talked about people who probably shouldn't work with CPA, what are the type of people that should hire a CPA?
Nate Reineke (22:19)
Yeah, 1099 employees definitely need a CPA. β There is just, I think it's worth it at that point. You are a partner and owner in a practice. Sometimes it's nice having a CPA. A lot of times owners in practices though, they have their own team at work. They're sort of do personal and business at the same time. β Those are no brainers to me. There's whole businesses that are started off of helping 1099 employees do their taxes.
and make quarterly payments and everything. β Essentially, if you're anything but a W-2 employee, it's a good idea to engage with somebody and figure out how complicated your taxes really are. β It's just that if you're a W-2 employee, there's not a ton of strategy that they're going to give you. Especially if you're a client of ours, the strategy that they're giving you, we've already done it.
Chelsea Jones (23:08)
Yeah.
Nate Reineke (23:16)
You know, we're getting all the tax breaks we can get. What are they going to do? Have a phone call with you and say, yes, you're getting all the tax breaks you can get. It's just everybody's sort of in a tough position there.
Chelsea Jones (23:28)
Okay, we'll have to think about that too. β Last question that we have here is from a nephrologist in Texas. He asked, how can I save more in a more tax advantaged way? This is very broad question. How can I save and save taxes?
Nate Reineke (23:42)
Mm-hmm.
Yeah.
Yeah. Yeah, so, β again, it's tax season is coming up, and everybody hates looking at their big tax bill. β Here's the thing, we tend to hear about this around tax season, and that is because of, honestly, advertising. There's a lot of advertising going around. β There's a lot of bad actors out there on social media talking about taxes.
Chelsea Jones (24:11)
Mm-hmm.
Nate Reineke (24:18)
Kind of a scary amount. I've seen people. I mean the other day I saw a tax person on social media driving around in a Lamborghini Saying I'm gonna save you You know, you won't pay any taxes this year. I just thought I don't think I want my CPA driving a Lamborghini Something's wrong here. So
Chelsea Jones (24:43)
No.
Yeah, that's
just the idea. Taxes are such a pain point for especially our clients and for people to take advantage of that in a bad way.
Nate Reineke (24:50)
Yes. Yes.
It is the one thing
I see people β it's a sometimes it can be a legitimate business, but the advertising for it can really you can really take advantage of people used to be, you know, whole life insurance policies, people would get taken advantage of. They see those less and less. But now it's taxes. It's like you pay six figures in taxes. You need to call me so I can wipe it clean. That doesn't exist.
Chelsea Jones (25:06)
Thank
You can't wipe it clean in a legitimate way.
Nate Reineke (25:22)
No,
no, that doesn't exist. And if it does, it's in a very nuanced way. I'll tell you one way you can get rid of your taxes. You can give all your money away. Is that better? Of course not. Now you have no money. Yeah. So β look, if you are maxing everything out at work, so you got a 401k, maybe you got a governmental 457 account. I mean, that's a good tax break.
Chelsea Jones (25:32)
Yeah. You don't pay taxes if you don't have money. Yeah.
Nate Reineke (25:50)
You can do backdoor Roth IRAs. It's not going to give you a tax break this year, but you're going to lower your lifetime tax bill, which we care a lot about here. If you're contributing to an HSA, that's a fantastic tax break. You can contribute to 529. Sometimes you have a state income tax break and it grows tax free. Once again, lowering your lifetime tax bill. If you're getting closer to retirement or even if your work just offers one and you're really high income, you can do a cash balance plan. And then
Don't forget that when you actually implement your investment strategy, there's a lot of tax efficient ways, I guess I should say tax inefficient ways to be investing. You can avoid all these things you can you can stop the bleeding if you invest in a tax efficient manner. And when you look at your returns, you're looking at after tax returns. Okay, who cares if you did an extra got an extra 1 % return on your on your portfolio?
but it costs you more than that in taxes. Okay, so you're doing all these things and I know it still feels like you pay a lot in taxes because you do. You do. And there's just only so much you can do. Okay, other than that, you can own a business, you can get more tax breaks there, you can make, you know, if you're doing this on the up and up, I wouldn't recommend bending the rules, but you get a CPA.
Chelsea Jones (26:53)
Thank
Nate Reineke (27:16)
You have an S Corp, you're making distributions to yourself rather than paying yourself all out in regular payroll. You you still have to pay taxes. You still have to make payroll to yourself. Otherwise, the IRS will you'll be zeroed in on by the IRS. But you're doing all these things. OK. And you still want more. And you're looking out there and you're saying these people are promising that they can get me more. But that promise and doing that, getting those tax breaks that these aggressive CPAs are offering.
Chelsea Jones (27:22)
and then.
Nate Reineke (27:44)
What they don't tell you is that it comes with a price. It all comes with a price. know, people talk about real estate. Well, in order to get those tax breaks, you have to be an active real estate investor. You have to they call it a real estate professional. And I don't know any any physicians that have become real estate professionals while they're practicing medicine. And so one way you could do it is to have your spouse become a real estate professional. I also don't know any spouses that at least at our the clients that we serve.
Chelsea Jones (27:47)
Yep.
Nate Reineke (28:14)
Either spouses of physicians have jobs or they're home with their children. You know, I don't know any of them that want to spend a thousand hours to become a real estate professional every year. But the point is, let's say, you know, if you want to do that and you're good at it, more power to you. The point is it comes with a price. You have to be a real estate professional. Then there's just the risk. The price is the risk. I see really aggressive real CPAs
Chelsea Jones (28:25)
Yeah.
Nate Reineke (28:43)
offer things like oil and gas investments. And I have actually have clients who have said yes, and they've, and they've done it. And the other day, I was talking to them, they were on the phone with an attorney. And it was all part of the plan. We know we might get sued and, you know, but but we have we have, you know, backstops for that. It's like, do really want to spend your time as a physician? Getting into that type of business? It just Yeah, after you just got
Chelsea Jones (28:57)
you
Yeah, on the phone with an attorney.
Nate Reineke (29:13)
done with your day job, right? And then the other one is opportunity cost. So there will be CPAs out there that will pound their fists on the table. You need a cash balance plan because it's going to save you in taxes. But in cash balance plans, you don't get as good of a return naturally, just by the nature of how they work. You're not going to take as much risk. Okay. And so if you're not taking as much risk, you don't get a bigger return. And you compound that over 30 years.
Chelsea Jones (29:16)
Yeah.
Mm-hmm.
Nate Reineke (29:43)
A lot of times the tax break isn't worth it. So there's nuance to all this. β You need to be aware of your total lifetime tax bill. You need to be aware of the tax breaks you have for this year. And you need to probably focus on something else once you get what you can and stop searching for the one guy that's telling you he can crack the IRS tax code because it just isn't real. Now,
Chelsea Jones (30:12)
Yeah, IRS
is not giving out tax breaks for free.
Nate Reineke (30:15)
No, in fact, you just described a way that they are trying to collect more taxes, which is, β you know, catch up contributions going into Roth. Now, I do have a new one. OK, and this is a lifetime tax bill. This isn't you're not going to get a tax break this year, but β all of these things working together in harmony lower your lower your bill over time, which is β we talked to I think.
maybe last episode, but anyways, we have discussed the after tax contributions into your 401k that can be converted into a Roth β 401k. So this is called the mega backdoor Roth and it's sort of this thing we hear about all the time, β but not a lot of people offer it. I have seen more and more every year that employers are starting to offer it. It's open enrollment. You check for this tax. It's not a break this year, but this tax strategy.
in your β open enrollment packet this year and see are they now offering this because it would be better to do that than to be contributing to a brokerage account with after-tax dollars.
Chelsea Jones (31:23)
Yeah, and I want to be very clear here because
if your employer offers this, you want to make sure you're still deferring as much as you can. You want to make the most pre-tax contributions that you can. Once your pre-tax bucket is full, that's when the mega backdoor Roth strategy comes in. It's not a replacement for your 401k contributions. It's just an opportunity to save more.
Nate Reineke (31:43)
Mm-hmm, that's
Save more, yes. And really, you... Some people have such great benefits at work, they're not contributing a lot to a brokerage account, but this would be in replacement of that. it's not to... You wouldn't want to stop contributing to pre-tax accounts in order to get it. And if you're a client of ours...
β You can send your open enrollment packet to Chelsea or me and we can check that out for you. I have a few sitting in my email inbox right now. I'm about to dive into later today. So send it our way and we'll see if that new opportunity is there for you. And if not, you just keep moving forward. So that's it for today. Thank you for listening. If you liked this episode, be sure to subscribe so you don't miss when a new episode gets released every Wednesday. You can also leave us a rating wherever you're listening.
And if you're not ready for that, you can send us a question at podcast at physicianfamily.com. We'll answer it even if it doesn't make it on the podcast. And until next time, remember, you're not just making a living, you're making a life.
