Questions? Thoughts? Send a Text to The Optometry Money Podcast!
Happy New Year! It's time to dive into the many 2024 financial updates, rule changes, and deadlines optometrists need to know about.
Evon discusses:
Have questions on anything discussed or want to have topics or questions featured on the show? Send Evon an email at evon@optometrywealth.com.
Check out www.optometrywealth.com to get to know more about Evon, his financial planning firm Optometry Wealth Advisors, and how he helps optometrists nationwide. From there, you can schedule a short Intro call to share what's on your mind and learn how Evon helps ODs master their cash flow and debt, build their net worth, and plan purposefully around their money and their practices.
Resources mentioned on this episode:
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
Questions? Thoughts? Send a Text to The Optometry Money Podcast!
Happy New Year! It's time to dive into the many 2024 financial updates, rule changes, and deadlines optometrists need to know about.
Evon discusses:
Have questions on anything discussed or want to have topics or questions featured on the show? Send Evon an email at evon@optometrywealth.com.
Check out www.optometrywealth.com to get to know more about Evon, his financial planning firm Optometry Wealth Advisors, and how he helps optometrists nationwide. From there, you can schedule a short Intro call to share what's on your mind and learn how Evon helps ODs master their cash flow and debt, build their net worth, and plan purposefully around their money and their practices.
Resources mentioned on this episode:
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
Hey, everybody. Welcome back to the Optometry money podcast, where we're helping ODs all over the country, make better and better decisions around their money, their careers, and the practices. I am your host, Evon Mendrin Certified Financial Planner(TM) professional and owner of Optometry Wealth Advisors in independent financial planning firm just four optometrists nationwide. And thank you so much for listening. Happy new year. This is the first episode of 2024. And hopefully you've enjoyed the holidays. You and your family enjoyed the holiday season. Hopefully you've taken time at the end of last year to think about. What you want to accomplish over the next year in terms of professionally your practice, if you own a practice. Personally, financially hopefully you've thought about some meaningful new years resolutions or goals that you want to accomplish over the next year. And even more important than that. Hopefully you've thought about habits that you want to create and systems that you want to create around those goals and news resolutions. And we can read so much about how bad we are. At keeping news resolutions, and just keeping to goals in general. And James clear if you've ever read the book atomic habits. He writes that goals are. Good for setting a direction. But it's systems that are best for making progress. And you don't rise to the level of your goals, but you fall to the level of your systems, meaning that it's, it's one thing to have a goal. That's giving you something to aim for giving you a direction, but it's really the actions that the steps and the habits that you take. Each and every day that make progress, that gets you there. And if you don't have systems in place, if you don't have the habits in place to execute on those actions, then you're never going to reach those goals. So as you think about the things you want to accomplish personally, professionally practice related business goals. Financially. Hopefully, you've also thought about the actions and the habits you want to build in order to get you there. Easy examples of that, of implementing systems and habits are you thinking about your savings rate, your savings rate, the amount that you are setting aside and investing towards the future. Out of your income. That may be one of the most important financial metrics you can track in your personal finances. And one of the best ways to build habits around savings and investing is simply to automate it right. Think about your target savings rate for the year? And how can you automate those deposits, automate those transactions. So you don't have to constantly think about moving dollars out of your checking account and into some investment account 401ks, make this really easy because it's just coming out of your paycheck. You really don't need to think about it. But if you are saving and investing outside of the 401k. Maybe for other goals, like saving for a house or preparing for a practice purchase or something like that. The more, you can start to think through the positive financial habits you want to have and automate those, keep those decisions out of your hands, keep the actions out of your brain. Right? Don't take up important brain power by having to think about these things. The more you can automate those transactions. The better off you'll be. So. Hopefully you've thought about your new year's resolutions, your goals for the upcoming quarter for you for the upcoming year, but more importantly, hopefully you're thinking about what actions you need to take in order to get you there and what systems and habits can you create in order to move you forward. And maybe one of the most important and helpful things that my firm provides to clients and the families we serve is that. We create a framework and a system of reviewing the health of their finances and just reviewing all the different parts of their finances throughout the year and making sure that things are getting done. Changes are made proactively things are reviewed proactively, and they know that someone's, as they're working, as they're spending time with their family, as they're working to build their businesses. They know someone's in their corner, reviewing these things on a system. So that nothing's getting missed, but happy new year to all of you. And I'm excited to talk about 2024. In this episode, I want to talk about all of the changes and important financial news and deadlines. And. Rule changes that you as an optometrist need to know about in 2024. And we're going to talk about the SECURE Act, we're going to talk about all the changes that are applying in 2024 from the SECURE Act 2.0. We're going to talk about student loans we're going to talk about changes in contribution amounts, and then we'll talk about, an important new requirement to the Corporate Transparency Act. So knowing we've got a lot to dive into, let's go ahead and dive in. First thing I want to talk about is the SECURE Act 2.0 and all of the rule changes that are coming into effect in 2024. If you remember the SECURE Act 2.0 was a part of a larger bill that was passed in 2022, right at the end of the year. And it was a massive bill with this, just a huge behemoth substantial list of rule changes that were being implemented over a set of years. As some of them are implemented right away. Some of them were implemented last year in 2023, and many of them are going to become live, are going to come into effect in 2024 this year. So let's talk about some of the, the most important parts of those roles that are going to come into effect in this year, 2024. First we'll talk about SIMPLE IRA plans. One change that's going to happen with SIMPLE IRAs is that starting this year, you can swap a SIMPLE IRA plan, meaning you can terminate his SIMPLE IRA plan and switch over to a safe Harbor 401k plan at any point in the year. And I love this change because in the past, before the SECURE Act 2.0, or really before this year, in order to change from a SIMPLE IRA plan to a 401k plan, you had to wait until the next calendar year. You could not have a, another retirement plan in the practice in the same year, you had a SIMPLE IRA plan, the same calendar year. And you had to abide by very specific deadlines to, to notify employees. So there was a really hard deadline in the fall to get that process started. So that you can get the 401k plan up and running by January 1st of the next calendar year. Fortunately that has all been put aside and now you can swap. You can change your SIMPLE IRA plant at any point in the year with a safe Harbor 401k. So, this is fantastic. Because a lot of times, because I see a lot where optometrists open, SIMPLE IRA plans, because it was the cheapest thing at the time, but are quickly limited by the, by the lower maximum, in the SIMPLE IRA and just simply the lack of features and additional layers that are in the SIMPLE IRA versus the 401k. So now, if you find yourself at that point where you need to make a switch, you can do that at any point in the year. What you do want to keep an eye on is the combined limit that you can put in as an employee. Between the two plans. The maximum amount that you're going to be able to put in between the two plans is going to be prorated by the amount of days that you were in the SIMPLE IRA plan and the amount of days that you were in the 401k plan, because they have two different maximums. So there's going to be sort of a prorated calculation to tell you what is the maximum amount that you can put in between the two plans in that year that you make the switch. So it gets a little complicated, obviously the cleanest way to do it was to, to have the switch happen. By January 1st, but at least you have the option to do that as the time is right. Another thing that came out of this as well as that in specific cases. The SECURE Act 2.0, created an exemption to the two year rule. For SIMPLE IRA rollovers. If you recall the SIMPLE IRA plan has a two year rule. Where, if you wanted to roll those dollars out of the SIMPLE IRA plan and into. Anything else that's not a SIMPLE IRA, you had to wait two years for that account to be open and funded, right. So you had to look at that first deposit and count two years, basically from that deposit on. If you rolled those dollars out of that SIMPLE IRA account into anything else, but another SIMPLE IRA within those two years, within those first two years, there is a substantial penalty that you have to face. The SECURE Act 2.0, created an exemption, a specific exemption to this two-year rule where after terminating this SIMPLE IRA plan, if you roll those dollars into a 401k plan, and those dollars were limited to all of the regular limitations of getting dollars out of a 401k plan then you avoid this two year rule and its penalties. So. If you're in that situation, talk to your financial professionals, talks to your plan administrator. But, this is a nice carve-out that I think solves some of the headaches of making the switch from a SIMPLE IRA plan over to a 401k plan. The next rule that's coming into effect in 2024, is that SIMPLE IRA contribution limits increase for many businesses. So for businesses with 25 employees or less, which is going to be most, or maybe all private practices listening to this podcast. Your contribution limits, including the catch-up for SIMPLE IRAs are increased by 10%. So it's 110% of whatever the usual maximum is. Practices with 26 to a hundred employees have a specific rule in order for your employees to be able to do this, basically. You have to increase the match matching percentage by a percent. But for those with 25 employees or less, your maximum amount that you could put in is going to increase by 10%. Now it's going to be interesting to see how a SIMPLE IRA plan. Providers allow you to account for all this and track all this. I've not yet seen into practice, so we'll see, we'll see how this is going to go. But nice to see there's a small bump there with SIMPLE IRA contributions. The next rule changes that SIMPLE IRA employers can now make non-elective contributions. And what that means is that you as employers, so if you own a practice, you as the practice, you, as the practice owner can now make additional contributions to employees, SIMPLE IRA counts above and beyond just the employer match in the past. All you can basically do was whatever amount you can put in as an employee plus the required match in the SIMPLE IRA, whether it was the 3% match or the 2% contribution, regardless of whether your employees contributed. But now you can add an additional amount, similar to the profit sharing abilities in a 401k account. Now there's some rules here, so it must be, so the amount that you're contributing in as these additional amounts. Must be the same percentage to all employees. So you can't do some percentage to one versus another. Or to yourself versus the others. And they may not exceed 10% of employees compensation. So the most you can do is 10%. Up to a maximum dollar amount of$5,000 in 2024 per employee. So basically anyone who is earning over$50,000 the max you can do is 5,000, right? That's basically how the math is going to shape up. But, this is going to allow you to put in an additional amount to your own account, as well as to employees, of course, unlike profit sharing contribution calculations, there's no way to change or adjust the method of calculating the amount you're putting in. And there's no way to weight it more towards your own account versus the, the employees as a whole. So it's pretty again, plain vanilla as as much of the SIMPLE IRA, but it's something extra that you can do. The next rule is that Roth 401k accounts will now no longer have required minimum distributions. Before the SECURE Act, Roth IRAs, when you get to your seventies, do not have required minimum distributions, they don't have a required amount. Pre-tax traditional IRAs, pre-tax 401k accounts. Do indeed have a required amount that once you get to a certain age in your seventies, there's a specific dollar amount that you need to pull out of your account by the end of the year, each and every year. Now, Roth IRAs do not have that required distribution. However, Roth 401ks for whatever reason did. So as part of the decision-making of whether to roll the funds out of that 401k. Or keep it in the 401k was those required distributions. Well now now fortunately, Roth 401k accounts no longer have a required minimum distribution. You don't have to worry about that. So in terms of rollover decisions, now it's just about costs in the 401k plan, investment options in the plan withdrawal needs, if you're retiring early and liability or credit or protections in, in both types of accounts. Next step is that 2024 is the first year for 529 rollovers to Roth IRA accounts. As a way to expand the flexibility for unused funds in 529 accounts the SECURE Act 2.0 allows for tax and penalty free rollovers from 529 accounts to a Roth IRA, in the name of the same beneficiary as the 529. And there's a lot of caveats and, and rules to follow. So it's a lifetime maximum of$35,000 per beneficiary. The 529 has to have been maintained, so opened and used for at least 15 years. The funds in the accounts that you're going to do the roll over for those funds have to have been in the 529 account for at least five years. The beneficiary that you're doing this for has to have earned income. And you can't roll over into the Roth IRA an amount that's more than the annual IRA contribution limits. So the IRA contribution limits factor into the amount that you're rolling over from, from this 529 account into the Roth IRA. You know, essentially you're replacing out of pocket contributions to a Roth IRA with these rollovers from the 529 plan. So there's a lot of rules and caveats. It's not so straightforward as you'd like. And there's a lot more to clarify too, because it's, it's based on the beneficiary of your 529, meaning that if you are not the beneficiary, you cannot roll the funds into your own Roth IRA for yourself. So there's more to clarify. For example, if you change the beneficiary of your 529, from one of your children to yourself, does that change in beneficiary reset these 15 year clocks. Do you need to open up a 529 in your own name to get that 15 year clock started? Maybe that's the easiest or, more conservative way to approach that. So there's still some unknowns. There's still some things to clarify around how exactly this is going to be handled, but 2024 is the first year that this is possible. Next up is that employers can now make matching contributions for employees based on student loan payments. As if those student loan payments were employee contributions to the retirement plan. So this impacts 401k accounts, 403b accounts, SIMPLE IRA accounts. Pretty broad here. So if you have employees who are choosing not to contribute to your retirement account, because they can't afford to, because they're making student loan payments, well this is now a way for you to still contribute the company match for those employees but based on their student loan payments and all of the regular contribution max amounts still apply. So it's not as if this is infinite, but, this is a way to do that. And, and to help those employees. The IRA catch-up limit. So if. Next up the IRA catch-up limit will start increasing with inflation from this year and beyond in$100 increments. So your traditional and Roth IRAs, you have a$1,000 bump in the amount you can put in each year if you're age 50 or older. And it's never been indexed or, or adjust for inflation. Starting this year and beyond it will start to increase with inflation in a hundred dollars increments. There are other provisions as well in terms of getting access to 401k accounts for, for different reasons. But these are some of the highlights of things you need to keep in mind and look forward to for 2024. And. One thing that was supposed to go live this year. If you've listened to last year's episode on the SECURE Act and kind of listen to all of the different highlights there, one thing that was supposed to go live this year is that for high earners, meaning anyone earning over$145,000 in the last year. Those higher earners over age 50 would be required to make catch-up contributions in employer retirement accounts, like 401ks to Roth accounts, instead of pre-tax meaning they wouldn't be able to get the deduction for those catch-up contributions specifically, they would have to go to the Roth accounts now. This has been postponed to 2026. So this is no longer going to be active this year. This is postponed a couple of years. So just something for you to keep in mind in all this talk to your own, financial professionals. Talk to your. Third party administrator on your 401k plan or qualified plan in your practice. Talk to them about what changes are coming up this year and what needs to be adjusted for your practice to, to account for that. So those are the SECURE Act changes. Let's talk about just in general, the. Let's talk about the changes in contribution limits for different retirement accounts. So the IRA accounts, traditional and Roth IRA, the maximum you can put in this year. Has bumped up to$7,000. Remember, that's a maximum between the two types of IRAs, right? So you can't put 7,000 into a Roth and 7,000 into a traditional it's one maximum for all IRAs. And that's$8,000 if you're 50 or older, you get that thousand dollar bump for a catch-up. SIMPLE IRAs that's gone up to$16,000 for employees. If you are 50 or older, you can put in an extra 3,500, but of course, remember if you are 25 employees or below or if you meet the rules for for 26 through a hundred employees. You are eligible for that 10% bump. So if you are that's 17,600 for SIMPLE IRA employees contributions, and that's an extra 3,850 for the catch-up. 401k accounts the, the maximum that an employee can put in this year. Is 23,000. If you are 50 or older, that's 7,500 increase as well. So an extra bump there. The total maximum amount that you can put into a qualified retirement account. In total, including your employee contributions, the employer match. Profit sharing contributions is 69,000 this year, before the catch-up. So that amounts in total has increased. Keep that in mind as well for SEP IRAs basically, that's your limit. As well as keeping in mind that 20 to 25% of your net income limitation, solo 401k is if you're self-employed or have a side business and you have a solo 401k, keep that maximum in mind. HSA health savings accounts. If you are covered by an eligible, an HSA eligible high deductible plan, meaning you have a high enough deductible and you have a up to the maximum out of pocket limit. If you are the only one covered under that plan as an individual. Your maximum as your maximum amount is 4,150. But if you or a family member, if you have family coverage under that high deductible health plan, the total amount that you can put in as a family is 8,300. And that's between you and your spouse. And there's a 1000 catch-up for each of you if you're over age 55. And there's other inflation increases to other tax phase outs in brackets as well. The tax bracket. Amounts have increased for each marginal tax rate, a Roth IRA income limits for contributing directly to Roth IRA have adjusted. Qualified business income phase out amounts have increased sub. So just keep in mind, all the little limitations and phase outs that impact you have probably been adjusted in 2024 due to inflation. Let's move on to student loan deadlines for 2024. And it feels like we should be done talking about important student loan changes, but. The student loan landscape continues to evolve. And there's two major things to keep in mind in regards to student loans in 2024. The first one is the one time IDR account adjustment for federal loans. And this is a program that was announced a couple of years ago. It gives pretty broad credit towards both taxable forgiveness and PSLF. Specifically gives you credit towards any months in repayment status, regardless of payments made loan, loan amounts or repayment plan, whether you are in a standard plan, whether you're in an IDR plan, they're going to give you credit towards those months. If you have 12 or more months of consecutive forbearance, or if you have 36 months of total or cumulative forbearance, you'll get credit towards those months of forbearance. Any months spent in economic hardship deferment in 2013 or later. Any months spent in any deferment except in school deferment before 2013. Any time in repayment. Or any time meeting the other points I just mentioned before a consolidation, which is important because in the past. If you consolidated, you essentially lost all that payment history. As a part of this payment adjustment, they're going to give you credit towards all those different things I mentioned. It's really broad. And it's, it's helping to essentially fix all of the ways that historically you can accidentally lose or miss out on credited months towards forgiveness. However, if you have F F E L loans, FFEL loans. And not Direct loans you needed to have consolidated those loans into Direct consolidation loans in order to benefit from this adjustment. Also, if you have a loans with different lengths of payment history, maybe you have one loan with much earlier payment history, and then later on you take out additional loans. Consolidation would have given you credit for all of the loans included in that consolidation, based on the loan with the longest payment history. So you could potentially get a longer payment history on all of your loans by consolidation. The deadline for this was 12/31 of 2023. Which you can imagine with all of that the services were going through and all of the confusion. And with, you know, how many borrowers that didn't know that this was the thing, or didn't even know this existed or whether they benefited from it. You can imagine the mad rush to try to consolidate loans before the end of last year. But fortunately it has been extended into the summer of this year. And it's specifically, if you go to the Department of Ed website, which I'll link to, you should start the consolidation process, if you need to, if you need to consolidate, you should start the consolidation process by April 30th, 2024 so that it's completed by July 1st. I've seen clients that have benefited from this will get several years of credit towards forgiveness that were erased essentially after consolidation. I've seen people get instant forgiveness as a part of this because they now have enough credit towards longterm forgiveness. I've seen people get PSLF as a part of this. So. For those that it benefits for those that will be impacted by this account adjustment. It's huge. It's huge that this was pushed back into the summer. So take a look, see if you benefit from this and take action where needed. If you have questions, please talk with your, your financial professional. Hopefully you'll have a CFP. In your corner that is knowledgeable about student loans. If you have questions, please reach out to me. We can talk about that as well. The next thing about student loans is that July 1st of this year is the deadline to be on the Pay As You Earn payment plan. After July 1st, you will no longer have access to Pay As You Earn. Unless, you are already on the plan. You're not going to be removed from it if you're on the plan already. But after that deadline, you're no longer going to be able to switch from another repayment plan onto Pay As You Earn. And this is an important deadline because many student loans decisions that I've been seeing are whether it makes sense to go for 20 or forgiveness under Pay As You Earn or IBR. Versus 20 five-year forgiveness versus 25 year forgiveness under the new safe plan. So we're reviewing the math, talking about the pros and cons. So this is an important deadline. If you're planning to, or if it's going to benefit you to go for 25. To go for 20 year forgiveness under Pay As You Earn. And this is really most important for borrowers that. Took their first loans between 2007 and 2014, because to be eligible for Pay As You Earn, you had to have been a new borrower as of October 1st, 2007. And then you had to have taken more loans after October 1st of 2011. However, if you were a new borrower as of, July 1st, 2014. Meaning you had no federal loans as of 7/1/2014. You are eligible for the new version of income based repayment of IBR, which is nearly identical to Pay As You Earn. So the window of borrowers between 2007 and 2014 don't have the flexibility to hop onto IBR after this July 1st deadline. If you, if you're eligible for the new IBR payment plan, you have more flexibility because you can use that plan. But it's really that window borrowers between 2007 and 2014, that aren't eligible for IBR, that really only have Pay As You Earn that this is a really important deadline for. So if this is you, you have some important decisions to make between now and really in June and to take action. The last thing I want to bring up is a new reporting requirement under the Corporate Transparency Act called the beneficial owner information reporting. And this is a new reporting requirement. The goal it appears, is to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, other illegal or illicit activity, stuff like that. That's the, that's what appears to be trying to do. You can come to your own conclusions around, additional reporting requirements by the federal government, but that's sort of the aim of what it's trying to do. And Corporate Transparency Act requires corporations, limited liability companies, LLCs, and other similar entities formed or registered to do business in the U S to report beneficial ownership information. To the financial crimes enforcement network, otherwise known as FinCEN, which works under the department of treasury. And this includes, basically disclosing to them, information about the entity and its owners. So there's quite a bit of information that's going to be reported here. And there's some deadlines that you need to keep in mind. And those with business entities that have been formed. Before January 1st, 2024. So basically if your business existed before January 1st of this year, you have 12 months. So you have up until January 1st, 2025, to file your beneficial ownership information filing. You have through this year to basically do this. And this includes private practice owners, this includes if you open a side business and have a business entity for that and LLC even. It includes if you own real estate under an LLC or potentially a partnership. If you formed an entity this is something you need to keep in mind and any business entity. Opened or formed after the first of this year. And before January, first of next year, you have 90 days, 90 calendar days. From the date of formation to file that initial report. After January 1st of next year of 2025, the deadline goes to 30 days. So I probably will plan to have a separate podcast if I can get an attorney to come on and talk about this riveting topic. And the do's and don'ts and rules and regulations about this. But one thing I'll leave with you is just that you need to keep this in mind for this year and beyond. What professionals can help? Well from watching the back and forth in the tax professional community. It's unclear to me whether your CPAs or enrolled agents or EAs. or other tax professionals can do this reporting for clients. I would say, certainly talk to your business attorney, definitely about the reporting. If you need help and getting help as needed, getting this reporting done. Especially, if you have multiple entities or entities layered together, for example, you might find that you own an S corporation and your S corporation owns part of the partnership that your practice is under, right? So some, some practices will have these layered entities. Talk with your professionals, and bring it up to your tax professional. Try to get the best advice around it as he can. The government has a small business guide. So I'll link to that in the show notes, as well as the frequently asked questions, but this is something you need to keep in mind for 2024 and beyond. So. Those are some of the things you need to keep in mind for this year and beyond. Of course, there's still some actions that I'll probably talk about in future episodes that you can take for, for last tax year. Still some things you can do, and another thing to keep in mind is in 2024, we are one year closer to the sunsetting or the ending of many of the provisions of the Tax Cuts and Jobs Act. After 2025, there are quite a bit of those. Tax rules that will go back to old rules. Unless they're extended by Congress, which can very well happen. So we've got a couple more years under the TCJA that law to, to do some tax planning and then we'll have to think about what the future looks like from that point and beyond. But other than that, hopefully this has been helpful. If you have any questions, any concerns. Anything you want clarified, if you just want help around your finances for the new year and beyond reach out to me. My email address is Evon, E V O N, at OptometryWealth.Com. Go to my website. You can check out all of the show notes to this episode. There. Www.optometrywealth.com, at the education section. You can reach out to me for a short introduction call. We can talk about what's on your mind in the new year, financially and in your practice professionally. And we can talk about how we serve optometrists all over the country solving those biggest issues as well. So, with that, we'll catch you on the next episode. I wish you a happy, healthy, successful just fantastic 2024. Happy new year and to take care.