Episode #7

“In this world, nothing can be said to be certain, except death and taxes” – Benjamin Franklin
“What is the difference between a taxidermist and a tax collector? The taxidermist takes only your skin.” -Mark Twain

Hello and welcome to the “Get There On Purpose Retirement Podcast”. I’m your host Dustin Hunter. With me is our co-host and podcast engineer Caleb Crane. The goal of this show is to help you be intentional with your retirement planning, so you can retire “on purpose” and just as importantly “with purpose”!

– Caleb, how are you today? 

– I’m doing great. How are you?

– Yeah, great thanks! With April behind us, I’m guessing that you are feeling extra Patriotic after paying your fair share to Uncle Sam. 

– Definitely, very patriotic!

– Is it safe to say that you would still like to find ways to reduce your taxes for next year and not leave Uncle Sam a tip? 

– Absolutely!

With Tax Season 2023 in the books, but still fresh on the minds of most folks, we thought it would be a good time to review some new tax law changes & updates – and proactively plan ahead for 2024. A lot of people put conversations about taxes and strategies in the same category as getting a root canal… So, we’ll share a few examples, and see if any of our listeners might identify with them.

Yeah, so on today’s podcast, we’re going to first cover a few examples of using tax strategies to your advantage. Next, we’ll cover a few of the recent changes that may affect you going forward. And finally, we’ll give you some takeaways & Action Steps to help you “Get There On Purpose”. Dustin, could you give us some examples of how our listeners might use some Tax Strategies to their Advantage?

Sure! Let’s start with George and Sally, both age 54. They’re a typical hard working midwestern couple. They have 2 kids and the youngest is now in college. Sally was a stay at home mom, but is starting a second career as a dental hygienist. George has a successful management role in the auto industry. Like many Americans, they thought retirement was a long way off – and they’d plan to go ‘cold turkey’, completely stopping work at one of the social security milestones . Either full retirement age at 67 or max benefit at age 70.

However, George had a mild heart attack about a year ago – and that has prompted them to look for strategies to move up the retirement timeline. They’d like to have the flexibility to take a couple extended vacations throughout the year and spend about a month in Florida each year. So, let’s apply a few strategies for George and Sally.

First, avoid early withdrawal penalties! If you withdraw from a traditional IRA before you turn 59-½, you’ll be facing a 10% early withdrawal penalty on top of the taxes on the distribution.  

But, when George turns 55, he’ll be able to ‘retire’ from his current job and access funds in his 401k retirement plan penalty free. (This is a feature of many company retirement plans.)  So, he’ll leave a certain amount there to cover cash flow through age 59-½. 

Second, avoid withholding and tax related issues that can occur with IRA Rollovers. “Indirect Rollovers” where the account owner receives the funds will trigger 20% of the funds to be withheld by the plan custodian. The account owner will be on the hook to come up with the additional 20% out of pocket so they can roll over all of the funds to the new account and they have a 60 day time frame to do that. Otherwise, any amount not rolled in that window will be taxed as ordinary income and be assessed an early withdrawal penalty in George’s case. So use a tax-free direct ‘custodian to custodian’ transfer to move the rest of the funds to a Rollover IRA invested for moderate growth – which he can then access for income at age 59-½. 

Third, optimize the location of assets and investments based on the type of account. For instance, you might put growth oriented longer term holdings that pay low or no dividends in your taxable accounts. Conversely, you might want to put tax ‘ineffiecient’ holdings that pay regular income such as bonds, partnerships, or Real Estate Investment Trusts (REITs) in your IRA accounts to defer any taxes due.

Fourth, play the ‘Long Game’. George’s retirement plan funds are all ‘pretax’, so he’ll have to pay income taxes at his marginal tax rate on any distributions. At a certain age (for George, it will be age 75), the IRS and “Required Minimum Distributions” (or RMDs) enter the picture. This means that George will be ‘required’ to take a certain portion of those pretax IRA funds as income each year thereafter whether he needs it or not – and the percentage increases each year. Between retirement and RMD age, consider micro Roth Conversions, systematically moving a small amount of pretax money into an ‘after tax’ Roth Account. The benefit is that there is no RMD for that Roth Account. If Social Security is deferred, say until 67 or 70, they’ll receive a bigger Social Security benefit – and may not need as much IRA income. By moving more funds to the Roth Bucket may help lower unwanted or unneeded RMDs later.

Thanks Dustin, those are really helpful! Could you also cover a few of the recent tax law changes and what the impact may be for people listening?

Yes!. The Enhancing American Retirement Now Act or EARN Act, more commonly referred to as the SECURE ACT 2.0, was voted into law as 2022 closed. So a few of the changes and outcomes from that are:

Starting in 2023, the age at which owners of retirement accounts must start taking RMDs will increase to age 73 and that’s taking effect right now in 2023 and age 75 in 2033. For those turning 73 in 2023, be aware that you will have to take your first RMD by tax day in 2024. The penalty for failing to take an RMD will be reduced to 25% from 50% (or actually even 10% if corrected in a timely manner). ROTH SEP IRAs and ROTH SIMPLE IRAs will be allowed so that provides some more flexibility for folks.

One little bit more advanced strategy. People who are age 70 1⁄2 and older can elect as part of their Qualified Charitable Distribution (QCD) limit to make a one-time gift up to $50,000, adjusted for inflation, to a charitable remainder trust. An expansion of the type of charity, or charities, that can now receive a QCD. This amount counts toward the annual RMD requirement and can be tax efficient for people who are charitably minded. Please note, for gifts to count, they must come directly from your IRA by the end of the calendar year. QCDs cannot be made to all charities so you certainly want to check with the charity and your tax preparer.

Now starting in 2024, after 15 years, any unused 529 plan assets can be rolled over to a ROTH IRA for the beneficiary. This is a big one. Subject to the annual ROTH contribution limits and an aggregate lifetime limit of $35,000. This rollover will be treated as a contribution towards the annual ROTH IRA contribution limit. Employers will be able to “match” employee student loan payments with matching payments to a retirement account, giving workers an extra incentive to save while paying off educational loans. RMD’s will no longer be required from Roth accounts in employer plans.

And another one. Starting on January 1, 2025, there will be higher catch-up contributions. Individuals ages 60 through 63 years old will be able to make catch-up contributions up to $10,000 annually to a workplace plan, and that amount will be indexed to inflation. (The catch-up amount for people 50 and older in 2023 is currently $7,500.)  One caveat to be aware of. If you earn more than $145,000 in the prior calendar year, all catch-up contributions at age 50 and over will need to be made to a Roth account in after-tax dollars. Individuals earning $145,000 or less, adjusted for inflation going forward, will be exempt from the Roth requirement.  IRAs currently have a $1,000 catch-up contribution limit for people 50 and over. Starting in 2024, that limit will be indexed to inflation, meaning it could increase every year, based on federally determined cost-of-living [adjustment] (COLA) increases.

So as we start to wrap up the show, we always want to give people some key takeaways and action steps. So Dustin, could you go through a few of those for our listeners today?

Yeah, thanks Caleb. Here are Five Tax Planning action steps that you can implement right now to start saving on your taxes. 

1. Family Tax Bracket Management

If you have retirement assets that are not in a ROTH IRA, when and who takes distributions can make a huge financial difference from a tax standpoint.

Simply put, if you are in a higher tax bracket than your beneficiaries, it might make sense to let them take distributions in their tax bracket rather than you in yours.

However, if your beneficiaries are in a higher tax bracket, then it might make sense to take distributions in your bracket, convert those accounts to Roth IRAs and leave them an account that still must be taken out in 10 years after your death, but can grow tax free for up to the full ten years.

A key step that we like to start with to help clients look at tax minimizing is to compare your marginal tax rate with your beneficiaries marginal tax rate(s) each year. 

2. Income Shifting: 

You might want to examine taking advantage of annual exclusion gifts. For 2023, the maximum amount of gift tax exemption is now $17,000 per person, which means $34,000 for a couple. For example, you can give up to that amount to a family member without having to pay a gift tax.

3. Maximum Contributions to Retirement Plans: 

Contributing to retirement plans in order to lower Modified Adjusted Gross Income (MAGI) below the applicable threshold amount, thereby you can try to avoid the Net Investment Income tax (NIIT) of 3.8%.

4. Tax Efficient Investing: 

1. Increasing investments in tax-favored assets.

2. Deferring capital gain recognition so you don’t have to worry about that in a particular year.

3. Tax-sensitive asset location in the most efficient account.

4. Managing income, gains, losses and tax brackets from year-to-year-to-year.


5. Roth IRA Conversions: 

Especially now with the SECURE Act’s  10-year rule (which means in most cases, IRA Account beneficiaries are required to distribute the entire account within 10 years), for some people, exploring a ROTH IRA Conversion could be helpful. Some benefits from Roth IRA Conversions include:

– They could lower your overall taxable income long-term.

– ROTH IRAs enjoy tax-free compounding.

– ROTH IRAs have no RMDs. 

– ROTH IRAS allow tax-free withdrawals for beneficiaries.



Remember, a qualified tax professional should be able to help you with a tax projection for 2023, and remember it is always wise to consult a tax preparer before filing. Another thing to remember is the IRS.gov could be very valuable as a source of information related to these topics.

Thank you so much for tuning in to this week’s episode of the “Get There On Purpose Podcast”. Remember, you can reach out to us at getthereonpurposeretirement.com and submit your questions by clicking the “Submit a Question” tab. If you like our content, share our podcast with a friend so that we can help others on their retirement journey as well. Our mission is to help you get where you want to be in retirement “on purpose and with purpose”. We’ll see you on the next episode!


Remember, we don’t know the details of your unique situation, so don’t make decisions solely based on this podcast. Consult with a financial advisor familiar with your unique financial situation prior to making any financial decisions. Nothing in this podcast constitutes a solicitation of the sale or purchase of any security or financial product and should not be construed as investment advice. Any rates of return are historical or hypothetical in nature and are not a guarantee of future results. 

Dustin Hunter is an Investment Advisor Representative of Sunrift Capital Partners, a registered investment advisor in Indiana, Ohio, Michigan, Florida, Georgia, North Carolina, and Arizona. Insurance and annuities are offered through Dustin Hunter. Dustin and Sunrift are affiliated.