For those of you in the Required Minimum Distribution (RMD) taking stage, who are also charitably inclined, there is a new option, appropriately nicknamed “legacy IRA”. As always, the rules are complicated and the answer to most questions is “well that depends” but have a read here and then call if you want to learn more. We will phone a friend if needed!

What is a Legacy IRA?

A Legacy IRA is also known as a Qualified Charitable Distribution Charitable Gift Annuity (QCD CGA). Under certain conditions (this is the “it depends” part) a donor can make a

1. one-time per tax-payer
2. tax-free
3. charitable distribution up to $53,000 in 2024
4. across multiple charities if desired and allowed by charities

This donation is in exchange for an income stream for a period of years. Yes, this is an annuity of sorts.

1. This distribution counts toward your RMD in the year the donation is executed.
2. A standard charitable contribution (QCD) can also be made in the same year for the additional allowable amount (which is an additional $52,000 in 2024).
3. The annuity payments can be made to the donor or spouse
4. All annuity payments are taxable as ordinary income in the years received
5. Minimum annuity pay-out is 5% annually.
6. Charity must have capability to do since the charity is responsible for the documentation

Why do?

1. No tax bill on the distribution
2. Income stream for life (annuity-like)
3. Proceeds on death go to your designated charity

There is also an option to make this one-time contribution to a Charitable Remainder Trust (CRT) rather than to a Charitable Gift Annuity. That is equally as complicated so call on that too.

Happy 2024!

For 2024, there are plenty of changes which impact IRA’s and 401K’s. There could be additional changes later in the year of course with some big changes expected for 2025.

For 401K/403B/457:

• The maximum employee contribution has been increased from $22,500 to $23,000. The catch-up contribution for employees age 50 and over remains at $7,500 for a total of $30,500. NOTE: in 2025, employers must put the employee catch-up contribution into a Roth 401K. Some employers are offering the option to do that in 2024 so check with your employer or plan administrator if you are interested in doing this. We can call with you as needed.

For Traditional IRA’s:

• Contribution limit has been increased to $7,000 from $6,500. The catch-up contribution for those age 50 and over is $1,000 for a total of $8,000. The income tax deductibility level has also been increased. We will review with you individually as needed.

For ROTH IRA’s:

• Contribution limit increased to lower of earned income or $7,000 for each spouse. Catch-up contribution of additional $1,000 for age 50 and over.
• Contribution eligibility has increased:
  • Full contribution with Adjusted Gross Income (AGI) less than $146,00,000 for a single taxpayer. Phase-out between $146,000 and $161,000. We can help with the phase-out math.
  • Full contribution for each with total Adjusted Gross Income (AGI) less than $230,000 for married/filing jointly taxpayers. Phase-out between $230,000 and $240,000. We can help with the phase-out math.
• 2023 contributions (of $6,500 or $7,500 if age 50 or over) can be made until April 15, 2024. Let us know if you plan to do this so we can ensure the deposit gets applied to the correct year.

Call with questions or if we can help get these changes made for you.

It’s hard to believe that we have never actually written a BLOG or talked with most of you about investment tax loss harvesting but now, unfortunately, is the time. This is a very complicated topic so we will attempt to keep this overview simple and then we will talk to you individually, where applicable, over the next 4 – 6 weeks.

Quite simply, investment tax loss harvesting is selling an investment in a taxable account when you have a tax loss (on paper) and then using that tax loss to offset capital gains from other investments and/or to offset ordinary income. Sounds quite straightforward, but there are guidelines to ensure that the process is done in accordance with both IRS guidelines and your individual long term investment plan.

Just what is it?

• As a reminder, the investment capital gain or loss is defined as the difference between the market value on the day the investment is sold and what you paid for it, a.k.a the cost basis. This cost basis includes any dividends or capital gains which have been re-invested in the security while you owned it.
• After the tax harvesting loss is applied against capital gains, any additional loss can be applied against ordinary income up to $3K per tax return per year ($1500 per return if married, filing separately) But any excess tax losses can be carried over to future years with no expiration date on the carry-over amount.
• The resulting tax benefit applies only to Federal income taxes.
• Tax loss harvesting is only done in taxable accounts. In IRA’s, we apply many of the same principles when we rebalance but there is no immediate income tax impact.

What’s the Biggest Watch-out?

• The most complicated piece of tax loss harvesting is compliance with the IRS “Wash Sale” rule. Your CPA can provide a lot more information here, but basically the Wash Sale rule says
• An investor cannot buy back a security which has been sold with a tax loss or buy a “substantially identical” security for 30 days before or after the tax loss sale, in any account associated with the investor. The IRS will disallow the tax loss if this happens.
• The “substantially identical” requirement is quite gray. We tend to be very conservative here. So for example, if an investor sells Home Depot with a tax loss in a taxable account, we recommend waiting 31 days before buying Lowes, even in a different account.

Why Now?

Besides the obvious market downturn which means there are some tax losses to take, there are other reasons for this to be a priority as we head into the last two months of the year.

• The security sale with the tax loss must be done by 12.31.2022 to be helpful for your 2022 Federal tax filing.
• As bad as the market has been in 2022, after a pretty darn good bull market for the last 15 years, not all of you will actually have a tax loss in a taxable account. In some cases though, we would like to take the opportunity to re-position or re-balance portfolios with more tax-efficient investments while we have the opportunity to do it without creating a large tax bill for you. For example, we might replace a not very tax-efficient mutual fund with a tax loss (or with only a small gain) with a much more long term tax-efficient exchange traded fund. After 30 days of course.
• And this is the complicated piece – many mutual funds distribute capital gains at the end of the calendar year. As you know, this distribution is a taxable event, with absolutely no value to the shareholder, so it makes sense to avoid paying taxes on those capital gains if the plan is to sell the fund anyway.

We are usually in favor of KNOWING more, so we are sharing what little we have learned about AI in our investment advisory and personal investing world.

First of all, just what is AI? The simple definition is that AI is the ability of a computer to do tasks which are commonly done by (intelligent?) people. It combines computer analysis with huge data sets to solve problems. Got it?

Which begs the “so why should I care” question.

We have all experienced very simple forms of AI when we have purchased from Amazon and seen the “people who purchased what you bought also bought xxx”. Or when you have searched a vacation spot on GOOGLE and then started getting ads for that location on Facebook. We can debate how useful any of that is, but it’s certainly there. Some experts believe that AI will be the most disruptive influence of our lifetimes!

AI is used today in the financial advisor and retail investor space, although LFS is not currently using AI for anything related to our advisory business. We did try ChatGPT – more on that below. Large financial services firms are using AI to analyze historical market/company date to build portfolios for clients or for their own managed funds. Some brokers are using it to automatically buy and sell stocks. And some are using it to enhance fraud detection capability – which is a great application in our minds.

Outside our world, there is work to use AI to improve cybersecurity, to enhance self-driving vehicles and to aid drug research and manufacturing scale-up. And of course, to deliver increasingly tailored recommendations to us on Amazon, whether we want them or not.

Now let’s talk about ChatGPT which is one of the most visible signs of AI in our everyday lives. ChatGPT is a “chatbot” or digital assistant which is capable of conversing with people. It follows directions given in a prompt and provides a detailed response. If you have used SIRI or Alexa or a customer service online chat feature, you have interacted with a digital assistant. The promise is that the technology is evolving rapidly and that these experiences will improve quickly too.

For those of you that are curious about ChatGPT, I want to share our experience, albeit limited.

If you are a faithful Bernie’s Blog reader, you may remember that April was Financial Literacy Month and as usual, we provided questions designed to test our collective financial literacy and have a little fun. We do actually write Bernie’s Blog – it’s not a ChatGPT creation – but I thought it would be interesting to ask ChatGPT to provide some financial literacy questions for us to consider. What I discovered is that the detail provided in the prompt is critical and it took me three tries to get anything even remotely usable. See attached. You can see that by the third try, I requested multiple choice questions and answers although I did not use the answers ChatGPT gave me since ChatGPT doesn’t do fun. Apparently.

For those of you who are interested in investing in AI, there are ways to do that. In many cases, you probably already have some exposure via ownership of Amazon, Microsoft, NVIDIA, Alphabet, or any of the numerous funds which own these stocks. There are no “pure play” AI companies today BUT there are some ETF’s designed to give investors more concentrated exposure. We can help!

ALPHARETTA April 18, 2023 — Linder Financial Services has been selected for the 2023 Best of Alpharetta Award in the Financial Advisor category by the Alpharetta Award Program.

Each year, the Alpharetta Award Program identifies companies that we believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and our community. These exceptional companies help make the Alpharetta area a great place to live, work and play.

Various sources of information were gathered and analyzed to choose the winners in each category. The 2023 Alpharetta Award Program focuses on quality, not quantity. Winners are determined based on the information gathered both internally by the Alpharetta Award Program and data provided by third parties.

About Alpharetta Award Program

The Alpharetta Award Program is an annual awards program honoring the achievements and accomplishments of local businesses throughout the Alpharetta area. Recognition is given to those companies that have shown the ability to use their best practices and implemented programs to generate competitive advantages and long-term value.

The Alpharetta Award Program was established to recognize the best of local businesses in our community. Our organization works exclusively with local business owners, trade groups, professional associations and other business advertising and marketing groups. Our mission is to recognize the small business community’s contributions to the U.S. economy.