Purpose Driven Planning – End of Year Conversations

As 2025 comes to a close I can’t help but think about how much I enjoy trying to improve on my routines heading into the next year. I can still remember growing up – it didn’t matter what sport I was playing, but I remember thinking – if I can improve the way I prepare – I think I am going to give myself a good chance to be successful heading into the next year. The sport I played the longest was baseball, so I’ll quickly run through how I approached my baseball off seasons to see what areas I could improve.

For the offseason – I knew I wanted to be intentional with the actions I took, I wanted to have a purpose for what I was doing, and I wanted to be a part of a team that helped me to execute on those routines. Some of the areas I would focus on are below.

Baseball Offseason Evaluations:

• Speed (sled pushes, sled pulls, band resistance training)
• Strength (core lifts, functional strength, explosive movements)
• Offense (cage routine, on field routines, off speed/ machines)
• Defense (defensive footwork, throwing, better reads)
• Mindset (breathing, on deck, centering routine)
• Nutrition (meal plans, snacks, supplements)
• Recovery (sports chiropractors, ice bath, flexibility, etc)

I loved thinking through (and learning) ways to improve in each area heading into the next year. It helped to improve overall confidence and gave me a process to go back through regardless of the outcomes I was seeing in the short term.

Taking inventory of your financial life and planning for what is ahead is not much different, but it can be very nice to have a team of people helping walk you through what those conversations should be focused on.

There are a handful of areas in our financial lives that are worth revisiting at the end of each year, to see if there are any areas we can improve in. Which I know Trevor and I would be happy to do a part B to this podcast if we want to cover any more material.

End of Year Planning:

• Financial Planning
• Tax Planning
• Charitable Giving

There are many other areas of our financial lives that may not be included in this short list, but we will start with many of the main areas we focus on at The Bahnsen Group.

Financial Planning

Financial Planning can be one of the most impactful elements of private wealth management. It’s the scenario planning, the ideation phase, the team component that can usually help to iterate to a favorable outcome for a client.

Let’s talk through some practical financial planning tools that are available to most investors.

Practical applications

**I need to give a big thank you to Matt Gregory our financial planning director who deserves credit for many of these suggestions

One of the most common ways our financial planning team helps our clients is not only through building out a long-term financial plan, but also through year-to-year scenario planning.

Sometimes major life changes occur, a son/ daughter is getting married, retirement is approaching, we take a new job, a spouse gets ill, we decide to take a big trip, we want to buy a new home, or we want to do the home improvement project we’ve been waiting for – for a couple of years. Regardless of the goal, our team can come along side you and make recommendations.

There is also proactive planning opportunities each year that our team may suggest. Some of those financial planning opportunities are best considered at the end of each year (when we have the most clarity on how the tax year has gone). Not everyone of these is going to directly apply to your situation, but it’s good to have these on your radar.

If you anticipate income will increase in the future consider:

• Roth contributions
  • Many times these happen inside of workplace retirement plans
• Roth conversions
  • Simply moving funds from qualified assets to a Roth IRA (most commonly Traditional IRA assets to Roth IRA)
  • If you are of RMD age (required minimum distributions), many times your custodian – Fidelity or Schwab for TBG clients – will make you take your RMD before doing a conversion in that year
• Explore backdoor Roth conversions
  • Make sure no other qualified account balances exist here (Traditional IRAs, SEP IRAs, etc) – tracking each conversion can become tricky
  • Most typically a non-deductible Traditional IRA contribution – that immediately gets converted over to a Roth IRA
• Mega Backdoor Roth
  • Possible if your workplace retirement plan allows for in-plan conversions or if you are over age 59 ½ and your plan allows for after-tax contributions
    • Make sure you have the liquidity (cash set aside) to do this each year
  • Workplace plan needs to have three buckets, Pre-Tax contributions, Roth contributions, and after-tax contributions
  • The combined total for Pre-Tax and Roth contributions is 23.5k for those under 50 and 31.5k for those individuals over 50
  • If your plan allows for “After-Tax” contributions this is a bucket where you can contribute funds over and above the typical 401k limit up to 70k for those under 50 and up to 77.5k for those over 50. Only about 1 in 4 plans offer this and we always recommend consulting with a tax professional before considering this strategy.
  • Your employer can also make after-tax contributions for you if your plan allows

If you anticipate income will decrease in the future consider:

• Maximize Traditional IRA contributions
  • Deductibility of the contributions is income-dependent, so consult with your advisor on what works best for your financial plan
• Traditional 401k contributions
  • Many advisors like “tax-diversification” by investment account when an investor is fully retired to take advantage of low-income years in your financial plan
• Good note for 2025 – this is the final year that catch-up contributions to employer plans can be in pre-tax dollars

Good questions to ask:

• What major changes are happening in my life next year?
• Do I expect my income to increase in the future or decrease in the future?
• Is there a new lifestyle goal I want to set for my family?

Our financial planning team can help discern which one of these avenues is best for you depending on the need.

Tax Planning

Tax planning is a great value add for those that are looking to improve from one year to the next.

Many times this starts with understanding all the different pieces that are at play with your current tax situation and then seeing where the opportunities arise.

The previous year’s tax return can be a great place to start when it comes to year end planning, because many times this year will tell a similar story.

Some reoccurring factors to review each year:

• Current income (wages) for this year
• Expected or current realized gains for this year (will this effect quarterly estimated payments for next year?)
• Charitable intent for this year (giving goals)
• What new tax planning opportunities are available this year?
• Does it make sense to spread out my tax burden into multiple years (typical for taxable accounts with a large amount of unrealized gains)?

This year also presented some timely tax planning opportunities that our own Matt Gregory covered in his Thoughts on Money article about the One Big Beautiful Bill. We will cover a few of these below.

My major takeaways from the One Big Beautiful Bill (OBBB) are:

**For exact timelines on these tax planning opportunities (how long they will last), please refer to Matt’s article above

• US Seniors above the age of 65 have the opportunity for a 6k per person above the line deduction (12k for married filing jointly), but this opportunity does phase out with higher earners (phased out with MAGI above 150k)
• Families also have the opportunity for a 2k above the line charitable giving deduction (1k for single filers) even if you take the standard deduction
• Child Tax Credit is now 2.2k per child (but also can be phased out with household income for a family married filing jointly above 400k)
• SALT deduction increases from 10k to 40k but also has income phaseouts for those with income above 500k-600k
• Federal Estate Tax exemption per person raises to 15 mil per person (30 mil for MFJ)
• There are also benefits for auto loans on newly purchased US based cars, mortgage interest deductions, and another above-the-line deduction opportunity for those who earn tips or overtime income.

Practical Applications (not including giving goals):

• Tax Loss Harvesting
  • Selling investments intentionally at a loss to offset gains for the year
  • Selling investments intentionally at a loss to offset gains for the year
  • You must wait at least 31 days to purchase the investment you sold back (if you want to purchase it again)
  • You can swap into a similar replacement for that company (TBG can do this automatically for clients)
• SALT deductions
  • Opportunity to deduct state income taxes, local income taxes, state and local property taxes, and sales taxes (opportunity increases with OBBB)
• IRMAA thresholds (applies to Medicare Part B and Part D)
  • Income related monthly adjustment amounts to your Medicare is based on your income from two years prior. If you have a sudden increase in income, expect your Medicare premiums to increase two years following the increase.
  • Married filing jointly income tax thresholds are below for Medicare Part B only

**Medicare Part D premiums also increase but only by roughly $20 increments for each next tier

Medicare Part B Premium increases by MAGI (price per month)

**There are ranges for these thresholds, but to simplify I listed the beginning of each range

2025 IRMAA Income Thresholds (Married Filing Jointly)

**Divide by two for single filers

• Less than $212k – $185
• Above $212k – $259
• Above $266k – $370
• Above $334k – $480.90
• Above $400k – $591.90
• Above $750k – $628.90

Good questions to ask:

• Have I ever had my tax return reviewed?
• Am I aware of the areas of my tax situation that can be improved?
• Would I benefit from having a team evaluate my current tax situation?

Since our advisors are not CPA’s we cannot provide specific tax advice, but we can resource our TBG tax team if the client decides to work with TBG tax.

Giving Goals

Giving is the last aspect of our overall comprehensive wealth management that we will discuss today.

We did save the best for last, because for some families this can be the most meaningful and impactful.

Practical applications:

**If It’s possible to gift in Oct/November – that does help your donation to be processed quicker. Don’t wait too late in the year, there can be times where gifts don’t get processed if sent too late in the year

• Donor Advised Fund Giving (also known as a DAF)(limited to 30% of AGI)
  • Investment account designed specifically for Charitable Giving. Most effective when highly appreciated stock (needs to be a long-term capital gain) is donated from a taxable brokerage account. You can also combo giving highly appreciated stock with giving cash. A CPA can help to make an official recommendation here.
  • The investor has the opportunity to avoid the capital gain and receive an itemized duction for the donation. If donation is substantial enough, it can exceed the standard deduction
  • These funds can then be re-invested inside of the charitable account but must be used for charitable purposes. You receive the tax benefit in the year you make the donation into the DAF and there is no specific timeline for when you need to give the funds.
  • Charitable bunching strategies can also be very effective
• Qualified Charitable Distributions
  • Giving directly from your Traditional IRA account – after age 70 ½ to specific churches or charities (this helps to effectively give, while controlling tax brackets for those interested)
  • Can help reduce taxable required minimum distributions (RMD’s) for family’s who already plan on giving
  • We recommend doing these in October or November if possible (also if you are writing a check, get these in as early as possible so the organization you donating to cashes the check before Dec 31st

**Get proof of donations from the organizations for your records in case you ever need it. IRA’s just process a distribution, they don’t always have the proof one needs to show that that the QCD was a charitable donation

• Interfamily giving (or giving to a friend or neighbor in need)
  • Giving up to the Federal exemption limit each year can be a very effective way to give and not owe taxes on the gift (19k per recipient for single givers or 38k per recipient for a married couple that wants to gift)

Good questions to ask:

1. Is there a more effective way I can be giving? Do I have highly appreciated stock in a taxable account and have I considered a donor advised fund?
2. Do I have any significant tax loss harvesting opportunities in my portfolio?
3. What church am I apart of, what organization do I believe in, or what family member (s) can I bless with what I’ve built?

If you have all of your other financial pieces in place – this can be one of the most fun aspects of your plan to keep coming back to each year. Helping investors give is one of my favorite aspects of working in private wealth management.

Please let us know how The Bahnsen Group could be helpful with any one of these end of year planning opportunities.

A good way to think these through opportunities above is asking yourself or your advisor – how many of these opportunities apply to my current situation this year, or could improve my financial plan in the next few years ahead?

Thanks for reading,

Sean Ullrich
Private Wealth Advisor

Trevor Cummings
PWA Group Director, Partner