Olson Wealth Group

Should I Contribute to a Roth 401(k) instead of a Traditional 401(k)? Roth 401(k)s offer a post-tax alternative to traditional 401(k) plans. Contributions to a Roth 401(k) are taxed upfront, allowing for tax-free withdrawals during retirement. In contrast, traditional 401(k) contributions are tax-deductible, but withdrawals in retirement are taxed as income. Conventional wisdom suggests Roth 401(k)s are ideal for early-career workers in lower tax brackets, enabling them to pay taxes now and avoid them later. However, high-income earners should also consider Roth 401(k)s. Given the historically low current income-tax rates, paying taxes now could be advantageous for wealthier investors. One significant advantage of Roth 401(k)s is the absence of income restrictions for contributions. This feature is particularly appealing to high-income earners who are ineligible to contribute to a Roth IRA. For 2024, individuals earning over $161,000 and married couples filing jointly earning over $240,000 are prohibited from contributing to a Roth IRA. However, Roth conversions are not subject to these limits. Recent changes in tax law have made Roth 401(k)s even more attractive. Previously, retirees had to take required minimum distributions (RMDs) from their Roth 401(k)s starting in their early 70s. The Secure 2.0 Act of 2022 eliminated this requirement, effective in 2024. Now, Roth 401(k) owners are not required to take RMDs, aligning the rules with those for Roth IRAs. This allows the account balance to grow uninterrupted, preserving more of the investment for heirs. Another benefit of Roth 401(k)s is the clarity regarding withdrawals for heirs. Non-spouse heirs have up to ten years to withdraw the full balance after the original owner's death, while spouses have a longer timeframe. In contrast, the rules for inherited IRAs and traditional 401(k)s are currently less clear. In summary, Roth 401(k)s can accumulate more gains without tax consequences, providing substantial benefits for both account holders and their heirs. We are here to help you and your family. If you have any questions, please reach out to our team. sharonolson@olsonwealthgroup.com 952-835-1797 #Roth401(k) #401(k) #WealthManagement #FinancialPlanning #EstatePlanning #OlsonWealthGroup #InspiredLifeFamilyOffice #InspiredLife

How Can I Prepare the Next Generation to Run the Family Business? Introduce children to the business environment early. A “Bring Your Children to Work” day can start this tradition for all employees, not just owners. Pair this with a picnic to help children and grandchildren of owners feel comfortable meeting employees and their families. As they grow, teenagers can explore different roles or departments, leading to formal internships and apprenticeships. Progressive exposure to different areas of the business allows family members to gain comprehensive knowledge. As they develop technical skills, they can also manage various work groups, learning business mechanics and general management simultaneously. Some family-operated organizations encourage children to work elsewhere first, developing an independent perspective. Participation in industry associations can provide additional mentors, nuanced industry insights, and personal networks. Tailor explanations about the business’s goals and operations to the age and understanding of each generation. Start with simple discussions about the business’s goods and services, then expand to include the company’s mission and its impact on employees’ livelihoods. Share the company’s history of successes and crises, the lessons learned, and how to approach risk and risk mitigation. Address any negative behaviors early, as these can translate into business issues later. For example, if a child is dishonest or overly competitive, these traits can harm the business. Parents should confront these tendencies early to prevent future problems. Define long-term intentions for the business to guide career development for the next generation. If the plan is to sell the business, teach children about managing their own portfolios and roles that equip them to work elsewhere. This approach ensures financial stability post-sale and prepares them for independent careers. Proper estate planning can secure a comfortable lifestyle for multiple generations and prevent issues where owners’ children feel unqualified to sustain themselves financially after a sale. Even if not all children will work in the business, family members who might become shareholders should understand the business’s impact on their lives. A Family Council can keep the family connected to the business and each other. Often supported by outside experts, the council discusses mission and governance principles and helps family members from different branches connect. Family business leaders should continually assess the skills, talents, and desires of their children, providing opportunities to learn about the business. These approaches help build stronger family bonds and support the business’s success, even if not all children join the business. We are here to help you and your family. If you have any questions, please reach out to our team. sharonolson@olsonwealthgroup.com 952-835-1797 #FamilyBusinesses #NextGeneration #InspiredLifeFamilyOffice

How can I use Health Savings Accounts (HSAs) as a part of a long-term wealth building strategy? HSAs offer a triple tax advantage: 1. Tax-Free Contributions: Contributions to an HSA are made pre-tax. If contributions are made through payroll deductions, they are also exempt from Social Security and Medicare taxes. 2. Tax-Free Growth: The money in your HSA can be invested, allowing it to grow without being subject to taxes. 3. Tax-Free Withdrawals: Withdrawals used for qualified health expenses are not taxed. According to IRS rules, you can open and contribute to an HSA only if you are enrolled in a high-deductible health plan (HDHP). Recently, more employers have started offering high-deductible plans, with about one-third of employers providing this option. These plans usually have lower premiums but higher out-of-pocket costs, which the HSA can help mitigate. If you have already maximized your 401(k) contributions, an HSA can serve as an additional retirement savings vehicle. Originally intended to help manage high insurance deductibles, HSAs also offer a means for long-term savings. Unlike Flexible Spending Accounts (FSAs), HSA funds roll over year-to-year and remain yours even if you change jobs or health plans. This allows investment earnings in your HSA to grow for decades, creating a supplementary tax-advantaged retirement fund. For the 2024 tax year, contributions to an HSA can be made until Tax Day 2025. The limits are $4,150 for individuals and $8,300 for families. Individuals aged 55 or older can contribute an additional $1,000 per year as a catch-up contribution. HSAs can be invested with a long-term horizon, similar to retirement accounts. By covering medical expenses out-of-pocket before retirement, the HSA balance can compound tax-free. For example, investing $4,150 annually from age 30 to 65, with an 8% annual growth rate, could result in approximately $500,000 available for tax-free use on medical expenses in retirement. HSAs are an excellent way to save, especially for those with sufficient cash flow to cover current medical costs while allowing the account balance to grow. However, this strategy requires discipline to maximize contributions and invest for the long term. Additionally, the HSA must offer access to investment options beyond simple deposit accounts. One potential concern is the treatment of unspent HSA funds upon the account holder's death. The balance transfers to a surviving spouse tax-free, but any remaining funds are considered taxable income for other beneficiaries after the spouse's death. By understanding and using the benefits of HSAs, you can effectively manage healthcare costs and enhance your retirement savings strategy. We are here to help you and your family. If you have any questions, please reach out to our team. sharonolson@olsonwealthgroup.com 952-835-1797 #HSAs #MedicalIRAs #FinancialPlanning #OlsonWealthGroup #InspiredLifeFamilyOffice #InspiredLife

Under current tax laws, ‘Superfunding’ a 529 college saving account allows you to make five years of contribution (5 x $18,000 = $90,000) (for couples, 5 x $36,000 = $180,000) at one time, while still qualifying for the annual gift tax exclusion. While superfunding can make sense for some, there are a few things to consider. Continue reading more about this strategy in our recent trending topic. #inspiredlife https://lnkd.in/ghj7iVbx

What strategies can I use for protecting and diversifying highly concentrated equity holdings? If you have spent your professional career with a publicly traded company, much of your net worth may be in your employer’s company stock, leaving you with highly valuable, but highly concentrated equity holdings. Below are a few possible options which you can consider for protecting and diversifying highly concentrated equity holdings. Exchange Funds An exchange fund can be a viable vehicle for diversification without having to sell shares outright. With an exchange fund, you contribute shares of your concentrated stock into a broadly diversified fund and receive a pro rata share of ownership in the fund. A major benefit of exchange funds, in addition to increased diversification, is that contributions are not treated as a sale, and you do not incur capital gains taxes. However, you still face the risk of loss should the other stocks in the pool decline in value, so be aware that diversification does not ensure a profit or protect against a loss. Also note that exchange funds are offered as private placements and are not registered under the Investment Company Act of 1940. Therefore, they have strict net-worth requirements that must be met. Charitable Remainder Trusts A charitable remainder trust (“CRT”) allows for the donation of an asset – in this case, a portion of your concentrated stock position – to a donor-controlled trust. The trustee can then sell the stock and reinvest the proceeds in a diversified portfolio, and you will continue to receive a stream of income for the duration of your lifetime or a set number of years. When this period expires, the remaining assets in the trust become the property of the selected charity. Because this charitable trust is itself a tax-exempt entity, donating shares to a CRT enables you to avoid capital gains taxes on the sale of the shares you gift. Plus, the transaction may result in a charitable income and estate tax deduction. Charitable Gift Annuities These programs provide the benefits of establishing a CRT without the upfront cost, ongoing management responsibilities or owner control. You deposit the stock into a charitable fund, receive an income tax deduction and receive a fixed or variable stream of income over your lifetime. The principal is left to the qualifying charity of your choice. We are here to help you and your family. If you have any questions, please reach out to our team. sharonolson@olsonwealthgroup.com 952-835-1797 #ConcentratedStock #RiskDiversification #ExchangeFunds #CharitableRemainderTrusts #CharitableGiftAnnuities #WealthManagement #FinancialPlanning #EstatePlanning #OlsonWealthGroup #InspiredLifeFamilyOffice #InspiredLife

How can I leverage technology to teach my children about wealth? Navigating the intricacies of wealth with children can be challenging but essential. Open and Clear Communication Children must learn not just financial management but also how money shapes their lives, purpose, and growth. Money can serve as a catalyst for learning and fulfillment, encompassing budgeting, saving, investing, career paths, family dynamics, and philanthropy. Starting conversations about finances and family wealth early, in age-appropriate ways, fosters gradual understanding. Engaging children consistently allows for ample time to process information, avoiding sudden shocks. Encouraging thought-provoking questions, like hypothetical money scenarios, sparks critical thinking and financial awareness. As children mature, discussing complex financial mechanisms like trusts enriches their understanding. Embracing Technology for Financial Literacy Today’s technology offers innovative ways for parents and teens to engage with money beyond traditional methods. Platforms like Greenlight, BusyKid, and GoHenry provide personalized debit cards and intuitive apps, fostering financial management skills from a young age. Introducing digital transactions early aligns with modern financial practices, preparing children for future responsibilities. However, parental guidance remains crucial for effectively integrating fintech tools into financial education. Fostering Responsible Financial Behavior Concerns about inherited wealth affecting children’s motivation are valid. Parents must communicate effectively, instilling values of responsibility and diligence while avoiding messages that may foster entitlement. Promoting virtues like hard work and resilience cultivates a sense of ownership and accountability. Emphasizing education within family values reinforces stewardship and societal contribution. Strategic Approaches to Financial Education Incorporating financial lessons into everyday experiences, such as family trip planning, offers practical insights into budgeting and decision-making. Involving children instills a sense of responsibility, preparing them for prudent financial management. Anticipating future needs and imparting relevant skills ensures children are prepared for life’s milestones. Whether discussing car ownership or independent living, parents play a pivotal role in equipping children with essential life skills. Parental Guidance: A Fundamental Component Despite technological advancements, parental involvement remains indispensable in shaping children’s holistic development. Beyond financial literacy, parents must nurture intellectual, physical, and emotional growth, fostering values of empathy, resilience, and social responsibility. We are here to help you and your family. If you have any questions, please reach out to our team. sharonolson@olsonwealthgroup.com 952-835-1797 #FinTech #NextGeneration #FinancialLiteracy

Sharon Olson, CFP®, CEPA from Olson Wealth Group and Inspired Life Family Office® is recognized by STEP, the global professional association for trust and estate advisors.

Sharon Olson, CFP®, CEPA, President and Founder of Olson Wealth Group and Inspired Life Family Office®, has been recognized as a Trust and Estate Practitioner (TEP) by the Society of Trust & Estate Practitioners (STEP), the global professional body for trust and estate advisors. #InspiredLife #InspiredLifeFamilyOffice #OlsonWealthGroup #MultiFamilyOffice #FamilyOffice #EstatePlanning #Trusts Continue reading more below: https://lnkd.in/g-8hTcJg

How can I teach my young children about family wealth?   Children are incredibly observant! They watch and learn from your actions. It can start with simple questions when a child is in kindergarten such as what did you do today mom? You might explain that you went to work and that is how you earn money to pay for food and toys. In turn, this might lead to conversations about the importance of earning, saving, and delayed gratification. How you speak, act, and communicate about wealth conveys not only points of learning, but also instills values, such as the importance of a strong work ethic, taking care of others, and loving your family. When a child is old enough to do chores around the house, a child can begin to learn through action that hard work can lead to economic value. In later years, when your son or daughter wants a cell phone, you can ask them to contribute to the cost of the cell phone plan from their hard-earned allowance. All of the foregoing builds financial literacy and places wealth and money in a broader life context grounded in values and ethics such that when a child is in their teen and young adult years they can be better prepared for the realities of the world when they are on their own, as well as deeper conversations you might have with them about your family wealth, mission, and values.   We are here to help you and your family. If you have any questions, please reach out to our team.   sharonolson@olsonwealthgroup.com 952-835-1797   #FamilyWealth #OlsonWealthGroup #InspiredLifeFamilyOffice #InspiredLife

How can I optimize my charitable contributions while maximizing my tax benefits?   The 2017 Tax Cuts and Jobs Act (“TCJA”) expanded the standard deduction, leading to fewer taxpayers itemizing charitable deductions on Schedule A. The standard deduction for a married couple filing jointly was $27,700 for 2023 and has increased to $29,200 for 2024; the standard deduction had previously jumped from $12,700 in 2017 to $24,000 in 2018.   Given the expanded standard deduction, it is important to explore strategies to maximize your deductions for charitable giving. A few approaches to consider include:   Consolidate Donations into Specific Years: Consider consolidating donations into specific years to go over the standard deduction threshold. For example, instead of donating $18,000 annually, donate $36,000 every two years to exceed the standard deduction.   Donate Appreciated Investments: Another effective strategy is to donate appreciated investments, such as stocks held for over a year in a taxable account. By doing so, you can receive a deduction for the asset’s fair market value without incurring taxes on the appreciation, subject to certain conditions.   Consider Donor-Advised Funds (DAFs): DAFs allow donors to bunch smaller gifts into a larger amount and take a deduction in the year of the gift. Subsequently, donors can recommend which charities receive grants from the fund, while the assets within the DAF can grow tax-free. Bear in mind that there can be potential fees associated with DAF accounts.   Qualified Charitable Distributions (QCDs): Individuals aged 70 ½ or older with traditional IRAs can benefit from QCDs. These allow direct contributions of up to $105,000 from an IRA to one or more eligible charities. While QCDs do not count as deductions on Schedule A, they are tax-free withdrawals that do not increase adjusted gross income (AGI), offering various benefits such as reducing Medicare premium surcharges and investment-income tax.   IRA Charitable Gift Annuities: Beginning in 2023, IRA owners aged 70 ½ or older were able to contribute traditional IRA funds tax-free to an IRA charitable gift annuity, providing taxable income for life while benefiting a nonprofit organization. This option was subject to a limit of $50,000 for 2023 and is subject to a limit of $53,000 for 2024. A contribution from a traditional IRA into an IRA charitable gift annuity counts toward the donor’s QCD limit for the year.   These strategies can help optimize your charitable contributions while maximizing tax benefits.   We are here to help you and your family. If you have any questions, please reach out to our team.   sharonolson@olsonwealthgroup.com 952-835-1797   #CharitableGiving #DonorAdvisedFunds #QCDs #FinancialPlanning #OlsonWealthGroup #InspiredLifeFamilyOffice #InspiredLife