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2023 planner

Time flies! I was reminded of that saying this week as my wife began prepping for her 5th season of coaching high school girls' basketball. Girls she coached when she started in jr. high are now entering their senior year. Time doesn’t slow down. In the financial planning world, that means for a limited time; you have opportunities to take advantage of some deadline “deals,” if you will, regarding financial planning. Below are a few that we think you should consider.

Bunching Charitable Contributions

The Jobs and Tax Act of 2017 was my career's single most significant tax change. It nearly doubled the standard deduction, and many itemized deductions were capped or eliminated. However, charitable giving is still deductible for those that itemize and don’t take the standard deduction. In 2022 the standard deduction is $25,900 (married) and $12,900 for those filing a single tax return or married filing separately. With the standard deduction jumping to $27,700 (married) and $13,850 (single) in 2023, this may be the year to bunch charitable contributions. Bunching charitable contributions means: making your entire 2023 charitable contribution in tax year 2022 to make your charitable giving (along with any other itemized deductions) exceed $12,900 (single or married filing separately) or $25,900 (married filing jointly).

Let’s use a quick example. Take a look at this chart.

Susan and William Jones are happily married and filing their returns together. They make $120,000 / year combined and tithe $12,000 to their church, pay $4,600 in state and local taxes, and $3,000 in mortgage interest. As you can see from the example here, if this client were to bunch their contributions, meaning contribute for 2022 and 2023 in one year, it would provide them an extra $1,254 in tax savings. Let’s say they bunch 2022, 2023, and 2024 charitable contributions into one tax year, 2022. Now they create an extra $3,894 in tax savings, and in 2023 and 2024, they take advantage of the higher standard deduction rates.

One additional item to high is that you could give appreciated securities held longer than a year to a charity. This allows a deduction up to the fair market value of the investment. This can be a great way to eliminate a concentrated company position, either because of company stock options or an excellent investment into a company like Apple, Amazon, or another stock that has appreciated.

Evaluate Emergency Fund

In light of the massive interest rate increases the Federal Reserve has punished the bond and mortgage markets with this year, it has provided savers a better option for their emergency fund. However, many big banks, already flush with liquidity, have not increased their interest rates accordingly. I looked at a top 5 bank in the US that I spent half my career with, and they are only paying 0.04% on their savings account, and The Fed has moved rates up about 3% already this year! That isn't nice of that big bank.

We recommend our clients consider the Schwab Money Market Fund as an alternative. This liquid account provides clients with a 2.92% current yield (as of 10/18/2022) and has no minimum investment sizes and required investment periods. If my $30,000 emergency fund were earning 2.92%, I would have made $876 in interest as opposed to my bank savings, which at .04% would have earned $12.

In terms of your emergency fund. Now could be a great time to determine if inflation has warranted a larger emergency fund. Typically, people have avoided increasing their emergency funds, even if they needed to, because rates have been so awful. Now that you can earn a respectable speed on these deposits, you should ensure that your emergency fund is adequate. The Wall Street Journal, just this last weekend, informed us that more than half their economist surveyed expect a recession in 2023. If one does come, you should ensure your “rainy day fund” is ready because it may rain.

Roth IRA Conversions

This is something you’ll find in every single year-end planning article. But this year, it is essential to consider. Why? As of the writing of this article, the S&P 500 is down in the range of 25%. The Nasdaq (more tech-heavy stocks) is down about 35%, and if you were risky (think ARK investors), you are down 70% YTD. During every bear market, you typically see the full recovery happen within 1.7 years. Please read my article Bear Markets, Normal Not Fun, for a more detailed explanation. But if this is the case, your Roth IRA conversion is now at least 25% cheaper than it would have been otherwise.

Let’s use Susan Jones again as our poxy. Susan Jones had an IRA worth $100,000 on January 1st, 2022. She now opens her statements and see’s that it’s worth $75,000 in October of 2022. Since we know Susan and her husband make $120,000 / year, we could assume that she is in the 22% Federal Tax Bracket. If she had converted her entire IRA on January 1st, Susan would have paid $22,000 in federal income taxes to make the conversion happen. If she converts today, it will only cost $16,500. That’s a savings of $5,500, and based on historical results, it may only take a year and a half for her to see that recovery happen, all in under the benefits of tax-free growth and tax-free withdrawals of a Roth IRA.

Become a Better You

Goal setting can be such an intimidating task. There may be hurdles you don’t think you can overcome to achieve a goal, maybe the time to complete the task doesn’t seem possible, or perhaps Eeyore is your spirit animal, and you think too negatively. Well, my friends at Ramsey Solutions, Rachel Cruze, Dr. John Delony, and George Kammel, have teamed up to put together an incredible planner for 2023 to help you achieve your goals in three critical areas of your life: financial, relational, and spiritual.

What are the things you want the most in your career? Your relationships? In your walk with Christ? What if I told you I would be happy to give those things to you for Christmas this year? You’d reply, John-Mark, are you, Joel Osteen? Are you the prosperity Gospel guy? No – I am the sowing and reaping guy. I am a guy who believes with hard work, anything is achievable. I am the guy the believes Galatians 6:7 – Do not be deceived: God is not mocked, for whatever one sows, that he will reap. To bring this full circle, I am the guy that watched his wife and her team, through hard work, go from 3-18 to 20–4 in two short seasons. Hard work is not a 100% guarantee of success, but it is the main ingredient.

This year, if you have dreams of improving those three areas: financial, relational, and spiritual, then consider purchasing or asking to be gifted the 2023 Goal Planner from Ramsey Solutions. You’ll learn the five essential guidelines for goal setting so you can determine your goals in those three critical areas, and once you apply these guidelines, you’ll be amazed at how attainable your goals are. The reality, this is so much more than a planner. This will inspire and encourage you to focus on the most critical areas of your life.

2023 is Almost Here

There are only two months left in 2022. The time will fly with Thanksgiving and Christmas but spend some time planning. If you would like to discuss any of the ideas discussed above with any of our Financial Planners and Advisors, please don’t hesitate to reach out and schedule a meeting with us here or call the office at 330-345-5000 or 419-524-4562.


October 19, 2022

John-Mark Young

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