Welcome back to the Plan Your Federal Retirement podcast. I’m your host, Micah Shilanski and today we are gonna dive into year-end things. Yes, we’re squeaking in year-end at the very last second. What things do you need to know to go through? Make sure you stay tuned to the end of this podcast when we’re not only talking about year-end things, but what January things that are around the corner that you need to make sure you’re capitalizing on to take care of your retirement planning. And as we go through this, mean, one of the things that I just love to do

is talk about real life experiences we have working with clients just like you, federal employees preparing to retire and the challenges that they’re going through, the things we’re able to help them with and how they’re able to improve their life. And those are the things we’re going to go through today. And since those are the things we’re gonna talk about, I invited a great advisor to join our podcast today. It’s inside of our office, Luke Eberly. Luke, thanks for joining us today.

Yeah, happy to be here, Micah.

Yeah, so we were kind of pre-gaming a little bit as we were going through this and.

I would have sounded is one thing I’m excited about as you you put together a list. got a little bit of a list together and we’re talking about, know, these things we need to do is so many of these things, you know, not only just today, we’ve been in meetings for a little while, but not only the meetings today, but he also the meetings yesterday that I was in. So many of these things were just real life things we needed to deal with for clients for year end planning.

Yeah, totally.

am writing down this list. I was making it after we met with all these clients this week and yeah, themes every day.

we’re hitting on most of these action items for most of our clients.

So as we go through this, that’s the reason we’re sharing this with you is these are like real life practical things. We’re not going to give you a list of things that don’t apply to anybody as fun as Luke and I love to dive in the tax code of these weird anomalies that apply to like absolutely nobody, but are so fun to talk about. They’re just not practical. So we’re going to dive in today a little bit on 2025 last minute things to make sure you are covered. Then we’re going to dive into again,

2026, how do we hit this year running and set up for your financial success? So Luke, kick it off for us for 2025. What are some last minute things that we’re checking on for clients, making sure it gets done, maybe last minute questions that are coming up that how we want to make sure clients are taken care of? Yeah, great question, Micah. So I would say the most important thing that I am double checking for clients

that are of RMD age required minimum distribution age, 73 or older at this point, there is a requirement that you have to withdraw a proportion, a small portion of your tax deferred retirement accounts. If you’re not still working, if you’ve got these accounts that are in there, you’ve got a requirement that you’ve got to pull some amount out from these accounts and it needs to be done by year end.

So I am double checking my clients that are of that age, have they done this? Because if you do not pull them out by 12-31, there is a steep penalty assessed. So that I would say is probably number one, unless you disagree and there’s another top of the mind priority before 12-31. I would say RMDs for people of that age, number one priority. Let’s get those done.

Yeah, RMDs, anything to avoid penalties, think it definitely makes the cut. Now, this is not just your accounts. This could be an inherited IRA account. This could be an inherited Roth IRA account. Depending on how you got money, you might have to start taking those distributions out. Now, if it’s an inherited account in any way, keep in mind with before Secure act, Secure act 1.0, and Secure act 2.0, all change the rules on how distributions and RMDs work.

because that’s not fun enough, right? So now when Luke and I are working with clients with an inherited account, it’s okay, when was the date of the decedent? When did they die? And they could be a completely different rule set. So why am I bringing this up? It’s not just enough to say, I inherited account, the distribution is X. We really got to dive into some of these complex rules. Luke, I’m going to add to your RMD flavor, if I can. In addition to making sure RMD is clear, we also use QCDs a lot, Qualified

charitable distributions. This is a phenomenal tool. Our clients absolutely love it. And this is a way that we get to give to charity for, I’m going to call it an extra tax deduction. here’s the way that it works is, well, let’s just step back. Like right now under the, the 0BBBA, right? The one big, beautiful bill act, which is continuation of the TCJA tax cuts and job act that’s in there. We have a pretty high standard deduction, right? What, is it going to be look like $30,000 in change. Yeah. For 2025. So

What that means is you gotta have so many itemized deductions in excess of 30,000 before it makes sense to itemize, which is charitable deductions, taxes, interest, a few other things. But most people don’t hit that $30,000 number. So a lot of clients that still give to charity, there’s no additional deduction for them. know great news in 26, that’s actually gonna change just a little bit, but in 25, there’s no additional tax deduction for them. But so our clients that are over 70 and a half,

You can actually be very careful on how you do this. Like the mechanism matters here, but you can actually take money from an IRA account, send it directly to a charity. Not only does it count as an RMD, your required minimum distribution, it also comes out 100 % tax free. Now that’s a huge difference. If I pulled money out of my IRA account and I put it in my bank account, then I gave the money to the charity. Okay, the charity still got money.

But I got taxed when I pulled that money out and no deduction when I gave it to the charity because of my standard deduction. But because we have these qualified charitable distributions and there’s a special way you can send them directly from the custodian to a charity. No, not your TSP, by the way. So sorry to be the bearer of bad news on that one. Write them an astigram, have them change that. But in IRA, we can totally do this. In an IRA, you can do these QCD accounts. It’s a great way our clients love them. But you got to make sure the check is cleared.

Right? This is the really important part is sometimes charities at year end, they’ll get checks, they’ll hold onto them. They won’t cash them until January gets a little confusing at that point. Yes, definitely agree. If you’re writing these checks, you would think that charities would cash those checks immediately after getting them because they’ve got the money. They want the money. But in practicality, I’ve seen checks be up to a month before being cashed So I would highly recommend if you are out there,

70 and half years young or older and you’re making these qualified charitable distributions, make sure to do those by November. That’s what I tell my clients. I know some clients want to make some Christmas gifting, but pushing the envelope for 12-31, I highly recommend just writing those a little bit earlier, sending, having your IRA distribute those earlier than later. It’ll just save you a lot of headache for when tax prep comes around.

Certainly. A hundred percent. Luke, what’s the next one we’re going to make sure for 2025 is taken care of for our clients? Ooh, you know, I was just discussing this with a client that they did some Roth conversions and didn’t have some tax withheld from that Roth conversion. So what do they have to do, Micah? They have to make an estimated tax payment. Why do they have to make one? I mean, couldn’t they just pay it all the tax liability in the spring? Well, they could.

But the unfortunate thing is, is the IRS requires that you make payments throughout the year in line with the income that you’re taking. And if you don’t pay enough by certain quarterly dates, they assess a penalty for not doing so. for example, we’re going to be talking about the Roth conversions that can happen within the TSP next year. There is a, which is a great new thing for the Roth TSP, but

Unfortunately, you can’t withhold as far as we know, you can’t withhold taxes when doing those Roth conversions within the TSP. So what you’ll have to do is you’ll have to make some estimated tax payments throughout the year for those Roth conversions. So for this client, they made a big Roth conversion. They didn’t withhold taxes at the time. They have to make an estimated tax payment by January 15th. Now, Micah, you and I are on board with this.

What do we tell clients? Make that quarterly payment for that Q4 payment in December. Let’s just keep it really slick. Anything, because it’s 2025, right? It’s a 2025 taxable income that you’re paying this estimated payment for. Make it in December. Don’t wait until January because in your mind and the CPAs might, who knows, they could say, oh, let’s apply this to 2026. I’ve seen it happen before. If it

If it comes out in December, it usually gets applied to 2025. There’s nothing to worry about. So that is certainly something that I’m looking at for a lot of our clients.

Luke, there’s a couple of things there. Make sure your Roth conversions are done. You’re paying the taxes on those and estimated tax payments. I totally agree. One of the things that we do with our clients when we’re making estimated tax payments, and Luke, I know you know this. I just want to share with our listeners, is whenever we’re making a quarterly tax payment, we always use the last dollar of the tax payment to identify what

quarters payment it is. Now, if you’re only making one quarterly payment, it’s a little bit less important for this. But a lot of our retirees, ⁓ they have to make quarterly payments for, well, they choose to make quarterly payments would be a better way of saying this, right? Just because of the way things are withheld. But they’re making quarterly payments. But the problem is, if your CPA says withhold $1,000 a quarter or $5,000 a quarter, whatever it is, and every single quarter you’re sending off a $5,000 check, you pay 20 grand throughout the year, the IRS comes back and says, hey, we got three out of the four of the payments. Where’s the other one?

Or, hey, did I actually make this payment? I thought I made this payment, but the payment was due in June and September. So didn’t I already make this payment? Or when’s the next one due in January? Like, how does this work? And we start getting confused by it. And it sounds silly, but this happens all the time. So we change it. And so now the first quarter payment is always ends in a one. So $5,001. Second quarter, $5,002. Third quarter, $5,003. Fourth quarter.

5,004. If I have to make a payment with my extension, it’s 5,005. It ends at a five, right with that extension payment. Now what happens is I can quickly go back and look at the checks and see which quarter payment did I make. So really important in there, these little hacks that are there will save you a ton of time when you ever have an issue with the IRS. And the other thing, Luke, I wanted to add in there is when clients are doing a Roth conversion and they’re making an estimated tax payment,

especially those that do TurboTax or CPAs who aren’t proactive. I’m to put both those categories together, right? Taxes are owed when income is earned and you’re allowed on a quarterly basis to make that, which is why they have quarterly tax payments right now. Most of the time as W2 workers, when we get paid, taxes are withheld from our paycheck automatically. So we don’t really think about it that context. But

whether we have a large capital gain at some point in time, or we do a Roth conversion in Q4, here’s what’s gonna happen. We do a $50,000, $100,000 Roth conversion in Q4, have no taxes withheld because we want more money in the Roth IRA. Love it, great idea if we can cashflow it. And then we make a fourth quarter estimated tax payment. Let’s say we did $100,000 Roth conversion, we send off a $20,000 tax payment. So it’s $20,000, $4 we sent off for a Q4 payment.

when they go to file their taxes, it’s gonna come with a penalty. And you’re like, what the heck? Why do I have a penalty? I sent up $20,000 on this stinking conversion. What do you mean there’s a penalty? Well, what the IRS doesn’t know is that they don’t know how you earned that income over time. They assumed you got that $100,000 Roth conversion equally throughout the year, but you waited till December to make the payment.

So we have to file a form 2210 that says, hey, this income came out in December. This Roth conversion happened in December. I made my quarterly payment on time. Avoid the penalty. So if you’re doing Roth conversions or last minute withdrawals from your IRA, et cetera, without taxes withheld, super critical that you’re filing this 2210 or talking to your CPA about it, because we find clients…

all the time when reviewing a tax return. Their CPAs don’t even ask the questions. The penalty automatically comes off through the software and the clients get stuck paying a penalty they don’t actually owe. Your

should be the most exciting next chapter of your life. But that doesn’t happen by accident. That happens with you taking the careful time, consideration and planning to make sure you get all of your retirement. And I say, that’s one of the things I love about my job is being able to sit down with federal employees, be able to look out in the future with them, find out what that ideal life is gonna look like.

And then how do we plan for that today? What are the tweaks we need to make in your life to make sure you’re getting the most out of your benefits? Whether it’s understanding your federal pension and making sure you get paid for all the years you’re supposed to. When do we turn on social security? 62, FRA, 70 and change. How do RMDs affect our taxes? What’s the best way to maximize our TSP so we never outlive our money but enjoy a great lifestyle along the way?

These are just about a handful of the questions that you need to make sure you’re answering as you’re preparing for your retirement. Our team specializes in helping one-on-one federal employees achieve their retirement goals and answering those questions and so much more. So if you’ve ever wondered what the answers to those questions are, then now is the time to make your appointment to meet with one of our specialists today. The best way to do that is go to planyourfederalretirement.com slash call.

That’s plan your federal retirement backslash call and you can book your consultation to sit down with one of our specialists in your federal employee benefits and financial planning to make sure you’re getting the most out of your benefits. This is the time that you have to make sure you’re dotting the I’s and crossing the T’s to get all of the money that you’ve earned for your retirement. So take that action today, sit down with someone that understands what you need, what you want.

and can help you achieve those goals. Until then, happy planning. You got it. That 1099R that you get from your IRA just says the dollar amount and it says the withholding, if any, on there and it does not say the timing. So, that is on you to communicate with your CPA and make sure that that is clear. I love that, Micah. That’s something that has happened definitely more than once to clients and I get that nasty phone call. You said, no, no. ⁓

Whoa, whoa, whoa. Okay, we’ve got this form for you. Okay. Yeah. Love it. Great tidbit. So on 25 things, right? Cause this is last, last minute. This is really last quarter, last second, right? Making sure these things are done that, that are kind of penalty proof. There’s a few other things we could be talking about, but are kind of hard to pull off at year end. So let’s kind of focus where we would like to live, Luke, proactive versus reactive, right? The last couple of days in the year that’s reactive.

looking forward and saying, what should we do in 26? Now here’s a good way to gauge what you should be doing. If you’re like, hey, the last two weeks of the year, what should I be doing to save on taxes this year? And you’re super focused on it. Awesome. Take that enthusiasm, double down in January with that enthusiasm. Cause in January, now all of a sudden we can do a lot of cool things cause we have 12 months to implement it, but don’t fall into the trap. And Luke, you know what this trap is, right? The trap is, well, it’s January.

I got 12 months to do it. I’ll get around to it later. And now that we’re having the same conversation in 2026, two days before the end of the year, all the stuff we didn’t get done. So if we didn’t get stuff done in 25, start now, get it in place so it’s not an issue. Totally.

couldn’t agree more. I mean, a lot of our clients too that are in retirement, we can start kind of mapping out an idea of what their income, their taxable income is going to look like in 2026 pretty early on.

We can say, hey, this is what we’re making for distributions. We get those social security adjustment letters and the FERS adjustment letters, and we can start projecting what they’re going to have for income and start even working a little earlier in the year just to understand what kind of strategies are we going to do this year? Can we already implement early on? So I love that, getting proactive earlier than later in the year. Nobody ever regrets that. Fabulous.

We’re going to be respectful of everyone’s time as we go through this because wrapping up 25 is important. We have time to talk about things in 26 and 26, but Luke, kind of rapid fire. What are two or three things? And then we’ll kind of go back and forth on this, but just a couple of things you think we need to be thinking about in January for workers as well as retirees. Love it. So for workers, let’s start with you. So there is an update to why you can contribute to your TSP and

I don’t know if you know this Micah, they’re not going to automatically increase deductions, contributions to the 401 or to your TSP, excuse me, automatically now that the contribution limits have gone up. So you have to go in and make these adjustments. Here’s what’s important. $24,500 is what you can contribute to your TSP under 50. 50 to 60, you can do an extra 8,000.

But Micah, there’s this weird thing too. If you’re 60 to 63, you’ve got this super catch up. Instead of doing 8,000 additional for being over 50, you can do an $11,250 additional contribution to your TSP. But just 60 to 63, mind you, that’s the sweet spot. If you’re 70 and you’re still working and want to make contributions, you can do the 24,500 base plus 8,000 as well.

But those are the contributions. Question real quick, on the contributions though, that’s the year you turn that age. So you don’t have to wait till that age to turn it on, right? So if you’re gonna be that age in 2026. Yeah, no, if you’re turning 50 in December, you are good. If you’re turning 60 in December, you are good to go. Also HSA, they’re going up a little bit, 4,400 individuals, 8,750 for a family HSA contribution.

And then if you’re over 55, you can do an additional $1,000 HSA contribution on top of that. So that’s if you’re still working and if you have a high deductible plan that you can contribute to an HSA. Now, if you listen to the channel for a while, you know we’re huge fans of those high deductible plans for certain people. But the best way to use them, I was talking to a client about this today, is I keep in cash what my deductible or what my out of pocket potentially is going to be. Everything else I stick in there, I’m trying to treat this as a super Roth IRA.

Right. I’m maxing out the Roth IRA, maxing out the TSP Roth. And now I get this HSA that I can put money into and it can grow. Now I know we talked about another podcast, a lot of rules associated with that, but it is a cool way to do that. I’m also on the Roth contributions. I’m also going to focus on those, right? Let’s make sure we capped out 2025. Now, granted we’re planning in 26, but remember Roth IRA or IRA contributions, have

up until April 15th or when you file your taxes, whichever is sooner in order to make that contribution into your IRA account. So if you want to make an IRA account or, I’m sorry, IRA contribution or a Roth IRA contribution, presuming your income is below the limit, you don’t make quote too much money in 2025, I would be looking at maxing out 2025 first. Then I would be looking at going to 2026 and maxing out that contribution.

Now, if you income earners that make, too much money, Luke, I don’t know about you, I’ve looked around my house, I have never seen too much money, but supposedly the IRS has. So if you make, quote, too much money and you cannot put money into a Roth IRA, which is what, about $242,000 is what the cap’s gonna be for 2026, 2025, things like 240,000? Yes. So right around, thank you, right around those dollar amounts. So if you make over that, then you have this really cool thing called a backdoor Roth IRA contribution.

This is where the warning flag goes up. This is where it says seek expert advice, seek people who understand they know what they’re doing with this. It’s a great strategy, but you can mess it up. The concept of it behind here is, hey, I can’t directly put money into a Roth IRA because I make too much money. I’m gonna backdoor it. I’m gonna make a non-deductible IRA contribution. So I don’t get to deduct it, but I put money into an IRA. Then I get it as cool conversion. I get to convert that money over.

But if you have pre-tax money already, other IRA money, SEP money, et cetera, it of muddies the waters a little bit. Now there’s a way to get around that, but it gets a little too complex to talk about on a podcast. So proceed with caution. It’s a great strategy if done correctly. Yeah, totally agree. And you don’t want to get that wrong. So like Micah has said, seek an expert. Get an expert to help walk through that process if you are a high income earner and want to defer.

an additional amount into a IRA. And again, that is above and beyond what you can contribute to your TSP. You can max out a TSP contribution. This is a separate contribution to a Roth IRA account. You can make a 24,500 Roth TSP contribution throughout the year and you can make this Roth IRA contribution within the income and guidelines of Micah share.

You know, I think another thing that we should talk about real quick with this 0BBBA rate, the one big, beautiful bill act, the new tax law that we have is this new super senior deduction that we’re able to have, right? So now we have this, we talked about the standard deduction before, but it went into effect in 2025. So clients are going to be seeing it on their 25 tax return, but it’s also in effect for the next several years. So look, walk me through what this extra senior or senior deduction is that we now get.

Yeah, above 65, if you’re a taxpayer above 65, you get an additional amount to your standard deduction. So we mentioned about that $30,000 deduction if you’re married filing jointly. Well, if you’re both over 65, you each get an additional $6,000 on top of that standard deduction to deduct your taxable income, which is fantastic. But Micah, if your income, taxable income is above

Above $150,000, now this is AGI, adjusted gross income. So it’s really important to work with a financial professional, CPA, to understand this. above $150,000, that extra deduction slowly phases out all the way to, if you make more than $250,000 as a married filing jointly couple, you get none of this additional deduction. So it’s something to weigh, something to consider.

as you’re looking at these Roth conversions, that’s why it’s so important to take all these factors into account before making that decision. on the Roth conversions, we’re huge fans of them. We talked about in the podcast a whole bunch. It’s a great planning tool. It’s what I plan with in January. I rarely execute in January, right? So be cautious of executing a Roth conversion too quickly throughout the year.

because what I don’t want to see happen is someone execute a Roth conversion, can we get excited about, hey, the TSP now allows Roth conversions, we’re going to execute on this. then something happens where you make more money throughout the year, you have to take more money out, et cetera. And now all of a sudden you get kicked into a higher tax bracket. Maybe you get an inheritance that comes in and now you’re kicked into a higher tax bracket and this proactive planning now became punitive, right? So we got to.

balance that a little bit. I’m not saying never do it, but just proceed in caution if you’re going to do a Roth conversion early in the year. Some of the exceptions that I would potentially apply to that were, if all of a sudden, let’s say when tariffs were going off last year, right in 2025, the markets were down 30%. That was a good time for clients that we really knew what their income was. We had a lot of options to control their income. That was a great time to look at some Roth conversions. Now, in those times, no one wants to do them.

because the market’s falling apart. Right now we look back and be like, oh, that would have been a great time. Right. But at the time you’re like, it’s going to keep going down. It’s going to zero. What’s this guy doing? Right. All the tariffs, like all of this panic was happening. So when there’s panic, there’s a great opportunity out there. If we can call martyrs, pick our head up and say, hey, we’ve been here before. Sure. It looks a little different, but we’ve been here before and we’re going to get through this. Love it. I can’t agree more.

I like when the market drops. We get to do these different planning things. Most people don’t. I love to do these different planning, these different strategies that clients can really benefit from long-term. Perfect. Luke, it is always great going through this. One of the things that I am just excited about as we go through, how this affects people’s lives at the end of the day. One of the things that I would ask is, what is something that is starting in January, somebody

should start off doing? What should we start looking at? What’s an action item our users, our listeners can take away and implement this week? Ooh, I love that question. I would say start looking at this Roth IRA contribution. I really think it makes such a big deal when we meet with these clients getting ready for retirement and they’ve got a large Roth IRA balance built up. They’ve got a large Roth balance to offset some of that tax defer.

The tax planning and strategies and things that we can do because of the balance of those assets is just incredible. They have this tax-free bucket that has grown by leaps and bounds. And guess what? All those earnings are tax-free. So I really recommend this Roth IRA concept. Taking a look at this Roth TSP, looking at your assets and getting them to a more balanced place is so important for planning for the future.

And I just love to see, like I said, those tax free earnings in those accounts just get started, get started earlier than later. Think about setting them up for your kids, making Roth contribution once they get earned income, setting them up for your kids, getting them used to it. Nobody regrets it that I’ve ever met, has ever regretted doing those things. know, the only advisor I’ve ever talked to that’s regretted Roth conversions, right, is he worked with somebody and they converted.

100%, 100 % of their assets into Roth. And as soon as he said it, it was like then he realized what happened. It’s not negligence, it’s not poor planning. It’s not a decision I would have made because you give up some benefit of lower tax brackets into longevity. So Luke, you said the key thing, find the balance, right? There’s not a perfect number. The tax laws change, they move up and down, right? Who knows what’s gonna happen with all these things, but.

But there is a balance that we can strive for inside of this where it’s not the perfect number, but it’s a good number, right? That gives you flexibility into retirement. And that’s what we’re shooting for. The other thing that I’m going to say, a homework item, action item, boy, as lame as this sounds, as this sounds like something you never want to do is something that’s going to be ridiculous. I can’t believe they spent this time going through this amazing episode with all these great ideas. And Micah comes up with the lame action item at the end. This is something that will transform your life.

This is the thing that is the key cornerstone for making sure you’re financially independent. You guys probably already figured it out. I’m baiting you into cashflow planning. Yes, cashflow planning is the thing to do. Know where your money goes. I’m not saying you have to build a budget with 73 different line items. Gosh knows I don’t want to do that, but I want to know where my money goes. I want to be aware as I’m getting into this year, how much money I’m spending. Where am I spending my money? How does all of this come together?

That’s what I want to be focused on. Because if you master the fundamentals of cashflow planning, every other piece of financial planning becomes a little bit easier. it. That’s great advice, Micah. Fantastic. Luke, it’s been great having you on the podcast to all of our listeners. Our goal is to help another 1 million federal employees with retirement. So get this information out. Share this information with other federal employees. Let them know about this podcast so we can keep growing it. Until next time, happy planning.

The content in Planner Federal Retirement is for general informational purposes only and should not be considered individualized advice. Investing involves risk, including possible loss of principal and past performance does not guarantee future results. Guests are not affiliated with Carson Wealth Management, LLC. Investment Advisory Services offered through Carson Wealth Management, LLC and SEC Registered Investment Advisor.