4 Spring Check-in Conversation Starters

It’s springtime: the feeling of a fresh start.

Many clients have already filed their personal income taxes for 2023 and have completed forms they can show you. Others may have filed for extensions or have business-related filing deadlines later in the year.

Though most of us don’t get excited about preparing and filing our taxes, it can be a good time to review a client’s financial strategy.

1. Secure 2.0 Act: Key 2024 Provisions

There are many provisions in the Secure 2.0 Act, but let’s focus on a couple that may broadly apply to the client population, effective this year.

The ability to roll over any unused 529 money into a Roth IRA: This money must be moved directly from the 529 to the Roth IRA.

The 529 beneficiary must have compensation, and the 529 account must have been maintained for 15 years or longer.

The rollover amount is subject to the annual IRA contribution limit, less regular traditional or Roth IRA contributions.

In addition, there is a maximum lifetime transfer to the beneficiary of $35,000.

Relaxation of the 72(t) rules: This new rule allows partial rollovers or transfers from a 72(t) account to be made. As long as the total required minimum distribution payments are being made, it won’t create a modification.

2. Tax Cuts and Jobs Act: Sunrise, Sunset

The sunsetting of the Tax Cuts and Jobs Act at the end of 2025 could increase the tax liability for some of your clients.

While we don’t know if some or all of the TCJA will be extended after 2025, it may be appropriate to discuss what the potential expiration could mean to your clients’ strategy.

Every client is unique, and needs will vary. But, as you talk with your clients about possible effects, here are some topics that may be of interest:

Tax-gain harvesting: Tax-gain harvesting is when you sell out of non-qualified assets that are producing capital gains and move the money to assets or investment vehicles that could be more tax-efficient.

While the client will experience a taxable event, this allows the client to reposition non-qualified assets into tax-efficient financial vehicles.

If your client believes tax rates will increase, paying the taxes now rather than in the future could be helpful.

A partial or complete Roth conversion: If the client believes tax rates are going up, the client may want to take steps to avoid dealing with future RMDs or the taxes on other types of future withdrawals.

3. The Presidential Elections

With the noise surrounding the upcoming 2024 elections, clients may be concerned about what election outcomes could mean for their financial strategies.