Justin Martin
CEO & Senior Wealth Advisor
Justin Martin is CEO and a Senior Wealth Advisor for Legacy Wealth Management, with his office based in the Salt Lake City area. Justin works with small business owners and doctors throughout the United States and is passionate about helping individuals prepare for a robust financial future. Justin completed his Master of Business Administration (MBA) at Texas A&M University and completed his undergraduate studies at Brigham Young University. Justin is FINRA series 65 licensed, has been working as a Wealth Advisor since 2006, and is currently a board member with the International Association of Registered Financial Consultants. He also works as an adjunct professor of microeconomics and loves studying financial systems. Justin and his wife Megan have four kids and love all things active and musical.
Justin@legacywealthmg.com
Finding the Backdoor to Your Retirement
by Justin Martin
Did you know that there is a great option for high-income taxpayers to still be able to get the tax benefits of a Roth IRA without being subject to income limitations? A backdoor Roth IRA gives retirement planners the option of using Roth IRAs. This is an IRS-approved way of bypassing income restrictions and getting the benefits of Roth IRAs
In short, traditional IRA owners in all tax brackets have the option of converting these accounts into Roth IRAs with a portion of the converted amount being subject to income tax.
Here’s a breakdown on how to make a backdoor Roth IRA conversion work for you:
Put funds in a traditional IRA account. You can fund an existing or new traditional IRA for this first step.
Convert your traditional IRA money to a Roth IRA. With the guidance of an IRA administrator (or a financial advisor) you can complete this step and move money into a Roth IRA. You will receive the paperwork and instructions on this step from your financial advisor.
Know your taxes. You will be taxed when there is a taxable event, and your financial advisor will be able to help you estimate your tax bill. Only post-tax dollars move into Roth IRAs. When it comes time to file your tax return, be prepared to pay income tax on the money you converted to a Roth.
Prepare to pay taxes on the gains in your traditional IRA. This is where moving quickly from a traditional IRA to a Roth can be to your advantage. Money moves can occur as quickly as the following business day so that gains are not accumulated within the traditional IRA before they are converted to a Roth IRA. If the money in that traditional IRA has been there awhile and there are investment gains, you will owe tax on those gains at tax time.
In the end, by utilizing this backdoor entry into a Roth IRA, smart retirement planners can work towards having a healthy savings set aside in this key retirement account.
Key Takeaways
1. Using a backdoor Roth IRA removes income limitations to entry into this retirement savings tool.
2. With the help of a financial advisor, money can be moved from a traditional IRA to a Roth IRA.
A Gift That Keeps on Giving
by Justin Martin, CEO
Do you know that feeling that you get when you do something great for someone else? Wouldn’t it be nice if you knew you could also benefit your bottom line on Tax Day while helping a fantastic nonprofit or charity? We call that a win-win, my friends.
Charitable contributions are a fantastic thing to consider, especially toward the end of each year. There are several ways to find causes to support. If you know of a local nonprofit or charity in need, that is a great place to consider a donation. You may use online tools such as Charity Navigator, GuideStar, and Better Business Bureau’s Wise Giving Alliance to check organizations. Several groups like after-school programs and local arts organizations often fly under the radar but are incredibly grateful for every dollar they receive.
Once you have chosen a cause for your tax-exempt donation, what is the best way for you to give? The most straightforward method is a cash or cash-equivalent gift (many groups accept Venmo, etc.). Instead of contributing a simple donation, another option could be the gift of appreciated stock. If you itemize and own a stock for more than one year, you can deduct the stock’s value the date you gift it to a charity. If you do not itemize, you can also save using this route by avoiding long-term capital gains taxes on your profits (which could cost up to 20% if the stock sold first). Several charities can accept appreciated stock, but another option is utilizing a donor-advised fund to help with gifting.
Donor-advised funds offer several routes in addition to the donation of appreciated stock. Real estate, limited partnerships, privately held stock, and even assets like a pig farm can be donated through a donor-advised fund. When it comes to people who have highly appreciated non-cast assets, donor-advised funds can help to investigate if these assets could make good charitable donations (for both the giver and the receiver). If donating property other than cash to a qualified organization, you may generally deduct the property’s fair market value. Speaking with a financial advisor will help ensure that your Adjusted Gross Income (AGI) is as low as possible and help you look outside the box in exploring your giving options.
People above 70½ can donate up to $100,000 per year tax-free from their IRA to charity. This process, titled a Qualified Charitable Distribution (QCD), can significantly help both the taxpayer and the nonprofits on the receiving end. During 2020 there is another bonus in giving, as there is an incentive for a $300 charitable deduction on top of the standard deduction (no itemization required), which is $12,400 for single filers in the 2020 federal income tax year and $24,800 for those married and filing jointly. In most cases, the amount of charitable cash contributions taxpayers can deduct as an itemized deduction is limited to usually 50%-60% of an individual’s AGI.
If you think about all the good done in your community and around the world by nonprofits and charities, it is astounding. Several health and human service organizations, schools, shelters, theaters, and more operate as a nonprofit. According to the National Philanthropic Trust, during 2019, the largest source of charitable contributions came from individual donors. These donations equaled $309.66 billion and 69% of the total giving these organizations received. Why not help a commendable nonprofit breathe a little easier this holiday season while you help your bottom line as well? This gift might be even easier than trying to figure out something to give to your teenager this year.