Click Here To Listen To The Retirement Tax Services Podcast
Are you trying to learn how to deliver massive tax value to your clients? Then look no further. Retirement Tax Services Podcast, Financial Professional’s Edition is a show hosted by Steven Jarvis, CPA. Steven aims to bridge the gap between tax professionals, financial advisors and their mutual clients in their quest for reducing tax expenses in retirement.
Sean Mullaney is a financial planner and the President of Mullaney Financial & Tax, where he offers fiduciary, fee-only, and advice-only financial planning. Sean established Mullaney Financial & Tax after a lengthy career in public accounting, and as a CPA himself, he understands the need for tax planning when preparing financial plans for clients. In this episode, Sean explains the importance of education and communication with your clients to ensure they never miss out on tax planning opportunities.
Listen in as he describes the contribution limits inside of a 401(k) plan versus outside of a 401(k) plan, as well as whether there are income limitations within a Roth 401(k). You will learn why one plan will not suit every single situation, why you should always educate yourself on your personal retirement savings options, and what you should be aware of if you have a side hustle.
Steven and his guests share more tax-planning insights in today’s Retirement Tax Services Podcast. Feedback, unusual tax-planning stories, and suggestions for future guests can be sent to email@example.com.
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We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.
Steven Jarvis: Hello everyone, and welcome to the next episode of the Retirement Tax Services Podcast, financial professionals’ edition. I am your host, Steven Jarvis, CPA, and with me on the show today, I have a financial advisor who loves taxes.
Go figure that’s who I’d find for my guest; Sean Mullaney joins me today, who is a financial planner and regular content creator and author of a book on solo 401(k)s. Sean, welcome to the show.
Sean Mullaney: Steven, thanks so much for having me.
Steven Jarvis: Yeah, I’m excited to have this discussion with you today to hear about how you incorporate tax planning within your practice as you serve clients. We’re going to talk a little bit about solo 401(k)s, and give the audience the full name of your book because I won’t get it right, but I want to make sure they know what it is.
Sean Mullaney: So, my book is Solo 401(k): The Solopreneurs Retirement Account. It’s available from Amazon, Barnes & Noble, and other online outlets.
Steven Jarvis: Awesome. And as we’re recording this, it hasn’t quite released yet, it’s out now as the episode is airing. So, I will make sure I get my copy and read it as well. But that’s why I’m talking about it as a hypothetical thing and not something I’ve read already. So, really excited to dive into that between us recording this and the episode releasing.
So, Sean as we get started, I would love it if you’d talk first about why the commitment to tax. I mean, there’s so many different areas of a client’s financial life; why is this part of what you lead with?
Sean Mullaney: Yeah, so I like to say I’m a tax-focused financial planner, and I just think there’s a lot of value in tax planning when we’re doing financial planning. And I will say my background, I’m a career changer.
So, the first part of my career was in corporate taxation, and obviously, corporate taxation doesn’t apply to individual clients, but you develop sort of the analytical skills and framework to then apply that when you move over to personal finance.
And even while I was developing my career in Big Four accounting, I had a spell with the IRS. Even while I was doing that, I always had that sort of itch to scratch on the personal finance side. And so, I eventually made this shift from W-2 worker Big Four accounting, to now, I’m on my own. I’m a solo entrepreneur with my own solo financial planning practice.
And then, so I have a natural affinity for tax. I sort of have that background. I have an LLM in taxation from Georgetown University Law Center. I just have a lot of background in it and a lot of interest in it. So, it’s sort of my interests and client needs in terms of tax planning very much intersect. And so, that’s why I often lead on the tax side, and a lot of the content creation I do is tax-focused. Not all of it, but most of it is.
Steven Jarvis: Well, you certainly have the credentials to be a certified tax nerd, which I say proudly. I also will claim being a huge tax nerd.
But talk about what this actually looks like in practice. Because even though I’m sure you know the tax code very well, I’ve heard you speak, I’m confident that you don’t sit down and start reading the tax code to your clients.
So, what are areas that you focus on or what does this look like in practice? Are you doing everything from here is a strategy to consider, to here let’s prep your tax return. Which pieces of that do you handle?
Sean Mullaney: So, I focus on the tax planning aspects of it. And the reason I do that is I feel like that is where the most value is added.
So, my practice is advice-only and mostly project-based. So, what I mean by that is my financial planning process is a 90-day financial planning process where we go over current strategy and then setting up a withdrawal strategy and retirement.
And there can always be add-ons. Oh, maybe the client’s charity-inclined. So, we talk about things like donor-advised fund, qualified charitable distributions and whatnot. So, in the planning process, I take a look at where the client is today, what are the tax tactics today to minimize total lifetime taxation.
I’m not big on, hey, let’s just get this really big juicy deduction one time and move on. I would prefer to look at it from a total lifetime taxation perspective. And when you do that, you naturally orient around retirement accounts.
A lot of retirement account planning is also tax arbitrage planning. So, when we think about clients’ retirement accounts, we first want to think about sufficiency. It’s great to think about tax planning, but we got to get to sufficiency.
Once we’re at sufficiency in terms of where are we today, where could we be tomorrow, do we have a good chance of getting to sufficiency — then we start cooking with gas with some of the retirement and account planning.
Steven Jarvis: Oh that’s great. So, do you take it all the way to … I mean, you said it’s primarily project-based, so I’m assuming that you’re not doing the actual detailed tax preparation. So, how do you help make sure that this planning that you’re doing is getting reflected and reports to the IRS correctly?
Sean Mullaney: Great question, Steven. So, a few things on that. So, I focus on the tax planning and I try to lay out the traps to the unwary.
Things like the pro-rata rule, which I know you’ve talked about a lot on your podcast. So, we always talk about, “Hey, December 31st, do we have the right balances in our traditional IRA, SEP IRA, SIMPLE IRA?” Which the right balance is zero. So, I try to provide education around those sorts of things.
And then I also do content creation around these things. So, if you look at my blog, fitaxguy.com, you’ll see way too much ink on the pro-rata rule. And look, that’s not personalized advice, but I’m trying to get advice both to advisors and to retail users. Where it’s like, hey, this pro-rata rule is not rocket science, but it’s not intuitive either.
So, it’s, hey, can we get some advice and education out there — advice when we’re working with clients, and then education when we’re working with people who are not our clients.
As Cody Garrett likes to say, one to many. So, if we can work a little bit one to many, we can demystify some of this stuff. As terrible as the pro-rata rule is, I hope it goes away at some point in the future, we’ll see.
So, I do it that way. I try to like, hey, what are the traps to the unwary, and then hey, let’s do some education one to many if we can as well.
Steven Jarvis: Yeah, that makes a lot of sense. That education piece is huge. It’s unfortunate to see those instances of, “Hey, we had a great plan, but it all got botched when we got to the actual tax forms.”
Sean Mullaney: Oh yeah. There’s always a risk. Now, one thing I’ll remind everyone though, there’s always the amended return. Now, you usually have to act within three years. But I’ve been down that road where, hey, the Backdoor Roth IRA has not been properly reported on a client’s tax return.
They paid tax when they should not have. Those things can be amended, and refunds can be obtained. You got to act within three years. But that’s something I think too many people are not aware of, that ability to file an amended tax return and correct those errors. That’s out there as well.
Steven Jarvis: Yeah, absolutely. I mean a lot of times when the calendar year turns over, we’ve missed our chance for a lot of planning opportunities, but really, what we’ve missed is our chance to do it right the first time. And in some cases, there are things we can’t go back and amend or say that we did in a prior year.
But you’re absolutely right, there are issues that we can correct, especially if those issues are identified, whether it’s a financial advisor or a tax preparer who happens to have that planning focus, which unfortunately, isn’t very common. There are definitely things that we can go back and do.
So, Sean, you talked about you personally being a solo entrepreneur and then I know that that’s an area of interest for you working with clients.
Before we jump straight to the solo 401(k) that you’ve literally written the book on, what are some tax planning areas for you personally that you’ve seen value in spending time on?
Sean Mullaney: I would say retirement account optimization in general. Because folks 401(k), Backdoor Roth IRA, what is all this stuff, and what’s the opportunity on the out end? A lot of the clients I work with are financial independence minded. And so, that means in many cases in early retirement (not always by the way), but we can achieve some real good tax rate arbitrage if we max out our retirement accounts while we’re working.
And then, in early retirement, we do strategic Roth conversions, and that opportunity may still be available even for our later retirees. You could still do Roth conversions after age 70 and after age 72. Sometimes folks don’t realize that you got to navigate that RMD rule, you got to take the RMD first. Folks forget that sometimes, but there still may be strategic opportunities there.
So, I’d say, both in my own life and in the context of working with clients, I think the retirement account optimization could be critical when we think about where are we today, and where might we be tomorrow. That’s to my mind, where we can have some real impact.
Where we’re both building wealth and getting some tax rate arbitrage, getting some good tax deductions while we’re working.
One other thing, Steven; for a lot of Americans, I think there’s this sort of dynamic duo out there. There’s the workplace 401(k), where we may want to maximize our traditional deductible contributions, but then we think about IRA, traditional IRA, Roth IRA, what are we going to do there?
And often, I think either a Backdoor Roth IRA or simply a regular annual Roth IRA contribution makes sense there — the reason being is opportunity cost. Roth 401(k), I like Roth 401(k). I myself have one, but there’s an opportunity cost whenever we contribute to a Roth 401(k).
It’s we put a dollar in that Roth 401(k), we could have put it in the traditional deductible 401(k), and we could have reaped some tax savings this year, so that’s a tradeoff.
Doesn’t mean you shouldn’t do a Roth 401(k), look at your own circumstances, but that could be a real downside to the Roth 401(k). Roth IRA for most Americans, not all, does not have that drawback. Many Americans out there do not qualify to deduct a contribution to a traditional IRA.
That means if we’re going to do Roth dollars, maybe we do that in the Roth IRA because we’re not foregoing a tax deduction at that point. Where at work, hey, maybe we are foregoing a tax deduction regardless of our income, we could be making a billion dollar, Roth 401(k), traditional 401(k).
So, I think that’s one planning point that some folks are a little confused about. So, that’s why I sometimes say that the traditional 401(k) and the regular Roth IRA can be like the dynamic duo of tax planning.
Steven Jarvis: Yeah, some really great reminders in there. The way I look at this is that really, anybody who’s talking to clients about where they should be contributing for retirement, there has to be kind of a checklist that’s like an order of operations. Because you’re right, it’s all choices, it’s all tradeoffs. We can’t max fund all of these, but so few great reminders in there.
The contribution limits inside of a 401(k) plan versus outside of a 401(k) plan are completely independent. So, that’s one that we’ve always got to remember. And within the 401(k) plan, doing the Roth option has no income limitations, whereas outside of it, we’ve got these income limitations on the deductibility of IRA contributions and whether or not we can put it directly into Roth.
And so, as we kind of go through that list of here are the potential options, and then, depending on the client’s circumstances, they find themselves in; what’s going to be our first priority, our second priority, our third priority.
And a lot of times, it’s not going to be, “Hey, we need to max out the first one before we move on to the second one.” Maybe we’re doing this kind of in tiers and thresholds of what makes the most sense.
But at the end of the day, tax planning comes down to the choices we make, whether that’s the retirement accounts we’re putting funds into, the timing of doing conversions, the order in which we’re pulling things back out of those accounts.
The only way we get ahead with the IRS over our lifetime or the lifetime of our wealth is understanding when those decisions can come in and what decision is best for our situation.
Sean Mullaney: Absolutely, Steven. I do hesitate to say there’s any one-size-fits-all. I think you sort of start with a couple things.
One, some general principles like I laid out, but then two polls. So, in my book, The Solo 401(k): The Solopreneur’s Retirement Account, I talk a little bit about the traditional versus Roth conversation, and I’m not here to resolve that. But I lay out two polls.
I lay out somebody who is 25-years-old, just graduated from graduate school, is only going to work for maybe October through December, because they just graduated, and now, they’re just starting their first job and they’ve got low income because they’re just a rookie, but their career has high upside potential. So, that person, because they’re going to make very little income this year, might want to do a Roth contribution, 401(k), Roth IRA, whatever it might be.
Then I contrast that to someone who is maybe mid-career at their highest earning years doing really well, and they’re thinking about an early retirement. Where they’re going to have years of artificially low taxable income.
That person at the highest end of their salary in terms of their working years, probably wants to think about those traditional deductible 401(k) contributions as opposed to a Roth 401(k) contribution.
So, one of the ways I try to look at it when I start my analysis is polls. Am I in this poll where boy, that Roth looks really good, or am I at this poll where this might be the best tax deduction I’ll ever get in my life. So, maybe I take the tax deduction now and do Roth conversions later. And not that that resolves every analysis, but at least, can begin the analysis.
Steven Jarvis: Yeah, that’s great points in there. So, Sean talk about why you decided to commit to writing a book, specifically on solo 401(k). I mean, as we’re having this conversation, there’s clearly so many different areas that can be considered that should be considered in making retirement planning decisions, but you took this really narrow focus and said, “Here’s what I want to do.”
Sean Mullaney: Yes, Steven. So, it’s two things. One is need. Think about today’s world, it’s tech-enabled. A lot of folks are realizing I could go work for myself. Okay, and what would that mean for my retirement plan contributions?
There’s a lot more folks who are working for themselves, side hustles are going through the roof right now. So, I think we have this need where the world’s changing.
When I went to college, I thought I’m going to get out of here and I’m going to work for a Big Four accounting firm for the rest of my life. Back then, it was actually big five in all honesty.
But it was like, “Alright, I’m going to be W-2 or partner at a big firm or something like that.” The world’s changing, and I just don’t know that we’re going to have a whole lot of careers where folks are spending 20, 30 years in W-2 employment.
I think folks are going to be working for themselves, whether it’s full-time self-employment or side hustles. I just think that this is an area that is underappreciated. Folks need to know about retirement savings options when you are working for yourself. So, many of us did not go to school for that, but it’s so important.
And then I like to say I’m both a pusher and a user of the solo 401(k). So, I’m somebody who’s been through that process of leaving W-2 work, going to work for myself, and thinking about tax optimization and building up tax advantage wealth. And I also see this in my client base and prospective clients, there’s a lot of confusion out there about the solo 401(k). Who went to school to learn about a solo 401(k)?
So, we have this emerging self-employment trend in our country in a tech-enabled world, and we just have confusion out there. Folks don’t know about the limits, about how do you qualify, do I qualify for a solo 401(k)?
And so, what I try to do is break it down in an educational format in the book where I’m trying to empower the reader to make their own decisions about how do they maximize retirement savings, potentially tax deductions as well, while they’re working for themselves.
Steven Jarvis: Sean, what are kind of the biggest misconceptions that you come across as you’re working with clients?
I mean, it’s just kind of, it can feel, it’s just across the board of where people’s knowledge is at. Because, like you said, this doesn’t get taught in school. Taxes in general don’t get taught in school, let alone, hey, someday you’re going to have your own business or your own side hustle or whatever it might be.
So, what are the first misconceptions you’re kind of knocking down with a new client?
Sean Mullaney: Okay, so one misconception is, “Hey, I’ll just do a SEP IRA when I file my tax return.” So, the SEP IRA has been great and a lot of folks have built up tax advantage savings with a SEP IRA over the years, but the opportunity for many Americans is so much greater with a solo 401(k) than it is with a SEP IRA.
And there’s one main reason for that. The ability to make employee contributions to a solo 401(k), that does not exist with a SEP IRA. Second thing about that is the SEP IRA was great because, hey, we could just do it when we’re filing the tax return.
So, in 2022, we make a hundred thousand dollars. 2023, we file an extension for our tax return. In early October, 2023, hey, SEP IRA put 18,500 in there, I max it out. I get my deduction, great.
Well, that same person with a hundred thousand of Schedule C self-employment income in 2022 with a solo 401(k), they can make $39,000 worth of retirement plan contributions if they have a solo 401(k).
One thing the solo 401(k) requires to make all $39,000 of those juicy contributions these days is upfront planning. You got to plant the flag. October, November’s a great time to be thinking about this.
You got to set up that solo 401(k) before December 31st in order to get that employee contribution done. And oh, by the way, you don’t want to be that person calling a large financial institution on December 28th, 29th, 30th, 31st, trying to set up a solo 401(k). It’s probably not going to happen.
Not rocket science, but it requires some advanced planning. The fourth quarter’s actually a really good time to be thinking about this stuff up front and maxing out those deductions.
So, I would say there’s a lot of history behind the SEP IRA, folks love them, but in some cases, you’re forgoing some big tax savings by going the SEP IRA route as opposed to the solo 401(k) route.
Steven Jarvis: Definitely, a huge proponent of planning early and planning often. And so, yes, as this releases in October, now is when you need to be thinking about this stuff. Now, is when you need to be planning ahead for these things, especially if you haven’t set up a plan yet. If you have a new business or it’s just not something you’ve done in the past.
It’s important to make the distinction. A lot of our listeners are probably aware, but part of the reason that there’s such a big discrepancy in that situation, you’re describing between what we can contribute to a solo 401(k) and a SEP IRA, is not that the max contribution limits are different. In fact, the very high-end of what the IRS says, you can’t go above this level, they’re the exact same, but it’s how we get there.
You mentioned that on the solo 401(k) side, essentially, we can make discretionary employee contributions and this becomes a cash flow question, not a profit question. Whereas on the SEP side, right out of the gate, it’s a percentage of profit that we’re allowed to contribute.
And so, while when we get to a certain level of profitability in the company, the amount we can contribute to a solo 401(k) versus a SEP IRA is identical, that’s typically a little ways down the road for most businesses. That’s not year 1 or maybe even year 2 or 3 or 5 or 10.
And so, in some of those earlier years, yes, it’s a very different answer of how much can I contribute to a solo 401(k) versus how much can I contribute to a SEP IRA.
Sean Mullaney: Absolutely, Steven. And I think about this also for the side hustlers out there. So, let’s say you’ve got a side hustle and you make $20,000 in Schedule C income with that side hustle.
A SEP IRA for the side hustle is going to yield something like 4,800 bucks. Double check my math on that but it’s going to be less … it’s actually, no, it’s less than $4,000 actually because it’s about 18%, give or take 18.5%.
Where a solo 401(k) for that $20,000 side hustle could be $20,000 because of the employee contribution. Like you made a great point, Steven. The employer contribution to both a SEP and a solo, to be fair, is based on a percentage of profits and, in many cases, it hovers around 18.5%. But here’s the cool thing about the employee contribution, it’s dollar for dollar.
So, if you make $20,000 in your side hustle, you might have $20,000 of runway to do a solo 401(k) employee contribution. Now, one big caveat to that though, you do need to coordinate any workplace W-2 401(k)s with your solo 401(k) for any side hustles. Because Americans have in 2022, a $20,500 annual 401(k) contribution limit $27,000 if you’re 50 or older. But that’s shared across all plans.
So, if you have a big W-2 job and then you have separate side hustle, that $20,500 or $27,000 needs to be allocated between both of them. But maybe, it’s, “Hey, I don’t like my W-2 401(k), my big employer 401(k) plan, I’ll contribute up to the match over there. I got to secure that match.” That’s the best … if it’s a 50% match, that’s going to be a lot better than any investment advisor can get you because it’s an instantaneous 50% match.
But then maybe what I do is separately on my side hustle, maybe I max out to the difference, $20,500 total. Maybe I put $5,000 in the W-2 big job 401(k). Maybe that’s $15,500 in Roth contributions to my side hustle solo 401(k).
So, these things can happen. I talk about that a lot in the book. So, there’s a just a lot of opportunity to be thinking about if you’re working for yourself.
Steven Jarvis: And for our real advanced level tax nerds out there, you’ll of course, know that those limits across different employees or plans actually even get a little bit more nuanced than that if they’re unrelated types of work.
Because I’ve seen situations where you have your W-2 job or you have a 401(k) available to you, and then your side hustle is something completely unrelated, and then those limits get a little bit more interesting.
But that’s certainly something … if you want to dive into that, you need to be working with a tax professional. That’s not something to do as a hobby if you’re a DIY-er.
Sean Mullaney: Oh yeah. So, it’s interesting Steven, you bring up a great point about when is it time to DIY versus when is it time to work with a professional. And I will say, for those with substantial business interests, I do think from a compliance perspective, from a planning perspective, it often makes some sense to work with a professional.
That said, I do think the most successful clients are going to be the educated clients. Where not that they are the expert, but they can bring in a level of self-awareness and knowledge that could be very helpful when they are working with a tax professional.
Steven Jarvis: Absolutely. Whether it’s a tax professional or financial advisor, clients being educated will make a huge difference on the ultimate outcome.
Now, Sean, earlier you mentioned the pro-rata rule several times. You talked about Backdoor Roth contributions. I have to imagine that there’s some place in your book to talk about the value of the solo 401(k) and dealing with that pro-rata rule.
Sean Mullaney: Exactly right, Steven. So, what Steven you’re referencing is the pro-rata rule that locks some folks out of tax-efficient Backdoor Roth IRAs.
So, I have an example in the book where I think it’s Jane and Jill. And I’m not going to remember which one has which. So, let’s just say Jane has $100,000 in a SEP IRA, and she wants to do the Backdoor Roth for $6,000.
Well, guess what, if she does that and doesn’t clean up that SEP IRA by yearend, over $5,600 of that 6,000 backdoor Roth IRA is fully taxable to her. So, depending on the state, it could be $2,000 of additional income tax. So, that’s one example.
Now, let’s think about Jill. Jill doesn’t have a SEP IRA. She has a $100,000 solo 401(k) and no other traditional IRAs, SEP IRAs, or simple IRAs. She goes to do the Backdoor Roth IRA at year end and guess what? The only tax she pays on her Backdoor Roth IRA is on any incremental growth.
So, maybe she invested in a money market fund, waited a month or two, and then did the Roth conversion. Maybe there’s a dollar or two of interest income. Okay, great. She reports a dollar or two of interest income, no appreciable increase in taxation.
So, housing the retirement plan contributions in that solo 401(k) absolutely can open the door to the Backdoor Roth IRA.
Steven Jarvis: Yeah, we talk about it a lot as separating the cream from the coffee as dealing with that pro-rata rule. And you mentioned all there in your explanation, but as far as the IRS is concerned, traditional, SIMPLE, and SEP IRA dollars all may as well be in the same bucket. There’s no distinction from the IRS’s standpoint.
And so, you get to the end of the year, you’ve made an after-tax IRA or non-deductible IRA contribution. In theory, if that was the only funds you had, if you only had $6,000 in theory, you contributed it without a tax benefit, so you should be able to put it into a Roth account without a tax impact.
But if you’ve got SIMPLE, SEP or traditional IRA dollars, that’s where this pro-rata rule comes in. And this comes as a nasty surprise to many people if they’re not familiar with it because they’re going to think, “Well, hold on a second, I didn’t get a tax deduction, why am I now paying taxes on this distribution” is what it gets considered as.
And so, solo 401(k) is a great way to draw that really hard line for the IRS to say, “Oh wait, nope, that’s a different bucket. We’re not going to intermix that with all this other calculation that we’re doing.”
Sean Mullaney: Yeah, it’s so interesting, Steven. Sometimes folks think like, “Oh, I had basis in this particular old traditional IRA but this other traditional IRA, I didn’t have any basis in, so I could do the Roth conversion there.”
You touched on a great point; the IRS believes … this is the rules in the Internal Revenue Code. So, they don’t even have any discretion on this.
The Internal Revenue Code says that all traditional IRAs, SEP IRAs, SIMPLE IRAs, whether it’s six, nine, a hundred or one, they’re all one. There’s one and only one for each American individual when it comes to the pro-rata rule.
So, you can’t hermetically seal within a SEP IRA. Well, SEP IRAs don’t generally have basis, but they essentially do once you have a traditional IRA with basis. You can’t hermetically seal this.
The only way to do it is there’s some sophisticated plan that could be done. It’s a little up field maybe from today’s conversation where you roll earnings from a traditional IRA or SEP IRA into a 401(k), and leave the basis behind. That can be done. That’s a little up field from today’s conversation.
Steven Jarvis: Yeah, that’s a hundred percent separating the cream from the coffee. For RTS members, we’ve done a whole webinar on that. We have a whole newsletter on it, so go back and look for those.
Send Jennifer on our team and email if you need help finding that because there are some really critical steps in how you separate that cream from the coffee, and it can get botched pretty easily if you don’t have your checklist of hoops to jump through.
Sean, before we dive into action items based on this conversation we’re having, make sure the audience knows where they can learn about your book or learn more about the content that you put out.
Sean Mullaney: Yeah, so my book, Solo 401(k): The Solopreneur’s Retirement Account is available from Amazon, Barnes & Noble, other online outlets. You can follow my content creation and my blog, fitaxguy.com.
I also have a YouTube channel, just search Sean Mullaney videos. And I usually post once a week there. And then my financial planning firm is mullaneyfinancial.com.
Steven Jarvis: Alright. We always love to make sure that the information we’re sharing is valuable, which means that it can be action-oriented. And so, we want to talk about action steps that listeners can take based on this conversation we’re having.
The first thing that comes to mind for me, if you already have this, make sure you update it. But every advisor should absolutely have some kind of order of operations type checklist that they can go through anytime a client is asking, “Hey, where should I be setting aside retirement fund? What types of accounts should I be using?”
Because you mentioned earlier, Sean, this can’t be a one-size-fits-all. It can’t be everyone should do Roth all the time, no exceptions, or everyone should do traditional all of the time, no exceptions. Making sure you have a process for that of here are the things we’re going to consider, here’s how we’re going to learn about your situation.
But don’t leave this up to memory. Don’t just assume that one client’s going to be like the next. Make sure this is process-driven. Make sure you have a checklist.
Sean, from your experience working, whether with clients in general are specifically solo 401(k)s, what’s an action item you would recommend to listeners?
Sean Mullaney: So, for those who are self-employed, I think the fourth quarter, especially October, November, is just a great time to think about your retirement savings for the year. Because you have three plus quarters of income and expense data available, you have at least some insight into what November and December are going to look like.
And you may need to set up, depending on your circumstances, the solo 401(k) might be a great option. You got to get that thing established by December 31st. You may have to make an election before December 31st in terms of employee contributions.
So, now, is just the time to be doing that planning exercise to be thinking about what’s the best way considering my cash flow needs, my tax planning needs, what’s the best way to do my retirement savings for this year?
Steven Jarvis: Yeah, absolutely. Such a great reminder of things to be looking at before the end of the year. Sean, really appreciate you coming on today. Definitely value your time and your willingness to contribute to this conversation we’re having.
Sean Mullaney: Thanks so much, Steven. Great conversation. Thanks so much for having me on the podcast.
Steven Jarvis: Yeah, for everyone listening, if you’ve made it this far, clearly there’s something of value here. So, take a minute to give us a five-star review and leave a comment. We love hearing from our listeners.
Until next time, good luck out there. And remember to tip your server, not the IRS.
We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.
The information on this site is for education only and should not be considered tax advice. Retirement Tax Services is not affiliated with Shilanski & Associates, Jarvis Financial Services or any other financial services firms.
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