March 18, 2019
Sarah D. Buenger, MPAS®, MSPFP, CFP®
Director of Financial Planning
 
Should you convert to a Roth IRA?  Although this seems to be a straightforward question, the answer is anything but.  Two articles this time address some of the points about a Roth IRA conversion.  Ultimately the planning behind deciding on whether to convert is a little more complex including:

• An evaluation of the impact of the Roth IRA conversion on your current tax bill.  The goal is to convert an amount that would maximize your current income tax bracket without spilling over into the next higher rate bracket.
• A determination for how the conversion will impact your income for purposes of the potential higher Medicare Part B/D Premiums.
• An analysis to be sure that a Roth conversion makes sense in your overall plan.

 
Assuming a conversion makes sense, the next step is to figure out the most beneficial time to complete the conversion.  Ideally earlier in the year is best since all the (assumed) growth in the investments will occur in the tax-free Roth IRA instead of in the tax-deferred IRA.  However, beginning in 2018, recharacterization of conversion amounts is no longer possible, meaning that there are no “do overs” regarding the amount converted.  Translated, it is now more important than ever to ensure that the amount converted is the right amount.  How do we do that?
 
First and foremost, we work with you to project the taxable income for the year.  Using the projection, it is possible to calculate the minimum Roth conversion that will work best for your situation to keep you in the desired tax bracket.  Finally, we look at timing of the conversion to see what the most beneficial strategy for you would be, given the expectations in the market, and given the certainty or uncertainty of expected income and deductions.
 
If you have questions about Roth IRA conversions or any other planning matters, please give me a call at (866) 694-9100 or email sarah@traditionswealthadvisors.com.

Brien, president of the Aggie Quarterback Club, presented Coach Jimbo with a donation to his son's charity, Kidz 1st Fund. Kidz 1st raises awareness and funds for research for Fanconi anemia. Thank you to all of the Quarterback Club Members for your support all football season! Gig'em! 

Check out our February e-newsletter! Click on this link to learn more about our newest employee, Kellie 'Smith' Adams.

February 20, 2019
Sarah D. Buenger, MPAS®, MSPFP, CFP®
Director of Financial Planning

The true impact of tax reform varies by family and will continue to be revealed through the 2019 tax filing deadlines.  At first glance, some families do not experience a tax reduction at all, but rather, an increase under the new laws. For example, a family of 5 with $14,000 in itemized deductions will lose $20,250 in personal exemptions and the $14,000 in itemized deductions while picking up $24,000 in standard deduction and $6,000 in new child tax credits for a net INCREASE to taxable income upon which the credit is taken.  The overall impact is a tax increase, not tax savings as is broadly publicized.

The Fidelity article referenced in our newsletter does provide a nice summary of the actual impact of tax reform for retirees, age 65 or older, who are already drawing Social Security.  Notably, the overall impact to retirees will be an increase in the use of the standard deduction. However, instead of blindly taking the standard deduction, it is still well worth the effort to utilize tax strategies like bunching itemized deductions every other year.  
Carrying on with example two from the Fidelity article, if the fictional couple with itemized deductions worth $18,000 were to implement a bunching strategy, they could essentially shift the timing of their itemized deductions so that they can do standard in 2018, itemized in 2019, standard in 2020, and so on.  Examples of ways to do this follow:

• Reserve elective procedures like lasik eye surgery or braces for an itemized year to see if total medical expenses will surpass the 10% of AGI threshold for 2019.
• Pay two years’ worth of property taxes in the same calendar year.  Property tax statements are mailed out around October. Reading the fine print on the statement reveals that no penalty is due as long as payment is received before the end of January.  Thus, a taxpayer can pay property tax in January 2019 and also October, November or December of 2019, doubling the property tax deductible. Unfortunately, property taxes fall into what is referred to as the SALT taxes or State and Local Taxes.  There is a new overall cap of $10,000 on all SALT taxes from now to December 2025. For those residing in Texas, this would be your property tax and your local sales tax.
• Reserve charitable intentions for itemized years.  Although not ideal for the charity, a taxpayer could reasonably give double the gift amount to their chosen charities during an itemized deduction year and nothing during a standard deduction year.  This is not to be confused with a Qualified Charitable Distribution (QCD) which is available to taxpayers over the age of 70.5. A QCD allows a gift of the required minimum distribution from a retirement account directly to the charity.  Gifts through a QCD are excluded from income already therefore no additional deduction is allowed in the itemized deductions.
• Interest on a mortgage up to $750,000 is still deductible through 2025 for those who itemize.  Although you can’t feasibly alter when mortgage interest is paid, if you plan to sell or purchase a principal residence, reserve the transaction for an itemized year when possible since some of the costs of closing are deductible.  Of course, if circumstances dictate, then don’t let the tax tail wag the dog. In other words, if saving the transaction for an itemized year would be financially detrimental in other ways, don’t do it.

​These are just a few examples that could allow our fictional couple to take the standard deduction for $26,600 in one year then potentially as much as $36,000 itemized deductions in the bunching year.  In summary, it is still worth the tax planning to try to itemize. Before implementing any of the methods discussed above it is recommended that you have a conversation with your tax professional and financial advisor to be sure the strategies are beneficial to your specific situation.

In case you missed the e-mail, check out our TWA January E-Newsletter featuring a spotlight on our team member, Sarah Buenger and personal finance resolution tips!

Brien, Kathy, Kellie, Chris, Katie, and baby Jack attended the In My Shoes charity trivia night on February 2nd. Unfortunately, their team did not win this year (they won last year!). A good time was had by all for a good cause. To find out more about In My Shoes, a home for homeless pregnant women, visit www.liveinmyshoes.org

Brien and 2 student interns, Raoul and Spencer, represented Traditions Wealth Advisors at the Business Student Center Career Fair at Texas A&M University on January 30th. They spoke with many Aggies and collected resumes for student intern position opening for the 2019-2020 school year.

Now hiring 3 financial analyst interns for the 2019-2020 school year! For more details on this position, please click on this job description.

We are also hiring 1 accounting student for a summer internship. For more details, click here.

Resumes can be sent to Michael@TraditionsWealthAdvisors.com

​Brian Prescott and Spencer Fredericks (current Financial Analyst Interns at Traditions Wealth Advisors) pitch the internships to candidates for next year at the recent BSC Career Fair.