In My Day...

Tax Season

March 07, 2023 Season 2 Episode 1
Tax Season
In My Day...
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In My Day...
Tax Season
Mar 07, 2023 Season 2 Episode 1

Ryan and Dave are back! And we're making some exciting changes to the Podcast. We will be shifting to a longer monthly podcast format and will be featuring guests on our show. 

This month's episode is all about taxes and we're answering the most commonly asked questions around lowering federal taxes, contributing to retirement funds, and what to do with your tax refund money. 

Tax and/or legal advice is not offered by Family Financial Partners.  Please consult with your tax professional for additional guidance regarding tax-related matters.   A distribution from a Roth IRA is tax-free and penalty-free, provided the five-year holding requirement has been satisfied and one of the following conditions is met: age 59½, disability, qualified first-time home purchase, or death.  Retirement accounts are subject to eligibility and contribution, deduction and income limits may apply. Prior to making a decision to rollover retirement plan assets be sure to consider factors such as differences in investment related expenses, plan or account fees, available investment options, distribution options, legal and creditor protections, the availability of loan provisions, tax treatment, and other concerns specific to your individual circumstances.  For advice appropriate to your individual situation, the services of a financial professional should be sought.

David Smyth and Ryan Petrunyak talk about family, finances and fun. Learn more about Family Financial Partners at

Securities offered through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794. David Smyth is an Investment Advisor Representative offering Investment Advisory services through O.N. Investment Management Company. Estate planning services provided in conjunction with your licensed legal advisor.

Show Notes Transcript Chapter Markers

Ryan and Dave are back! And we're making some exciting changes to the Podcast. We will be shifting to a longer monthly podcast format and will be featuring guests on our show. 

This month's episode is all about taxes and we're answering the most commonly asked questions around lowering federal taxes, contributing to retirement funds, and what to do with your tax refund money. 

Tax and/or legal advice is not offered by Family Financial Partners.  Please consult with your tax professional for additional guidance regarding tax-related matters.   A distribution from a Roth IRA is tax-free and penalty-free, provided the five-year holding requirement has been satisfied and one of the following conditions is met: age 59½, disability, qualified first-time home purchase, or death.  Retirement accounts are subject to eligibility and contribution, deduction and income limits may apply. Prior to making a decision to rollover retirement plan assets be sure to consider factors such as differences in investment related expenses, plan or account fees, available investment options, distribution options, legal and creditor protections, the availability of loan provisions, tax treatment, and other concerns specific to your individual circumstances.  For advice appropriate to your individual situation, the services of a financial professional should be sought.

David Smyth and Ryan Petrunyak talk about family, finances and fun. Learn more about Family Financial Partners at

Securities offered through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794. David Smyth is an Investment Advisor Representative offering Investment Advisory services through O.N. Investment Management Company. Estate planning services provided in conjunction with your licensed legal advisor.

Ryan Petrunyak: Hi, everybody. Welcome back to In My Day, and it's been a while, Dave. How you doing? 

Dave Smyth: Well, Ryan, it certainly has. I haven't seen your smiley face in quite some time. Not, not in this context at least. I mean, what happened? 

Ryan Petrunyak: I mean, I kept putting it on the calendar and. Dave kept going to lunch and I don't know where else he went, but he just wasn't here for the podcast. So now, now we're ready for it. 

Dave Smyth: You know what, I think the biggest thing actually happened over the last few months is, here we were recording this podcast and we we're trying a different bourbon, every podcast.

And then I decided to go on this health kick and I really haven't been having anything to drink, and so every time I think of the podcast, I think of trying a bourbon. And so, we're sitting here for the first time with a couple waters and it's kind of a weird feeling, honestly, Ryan, we got confused on how to do it.

Ryan Petrunyak: But we are back and we did make some changes, so we are gonna start doing it a little differently now. Instead of doing a weekly podcast, we're gonna do a monthly podcast, but they're gonna be a little longer. So if you want to listen weekly, then just cut each podcast in a quarter and listen to a little bit each week.

Dave Smyth: Just little tidbits of happiness. There you go. But on the other hand, if you're one that likes to just motor through things, we're gonna have a nice long episode once a month for you. And one of the things I'm really excited about, Ryan, is it's not just gonna be us. We're also gonna invite some guests. I'm excited too, and if you want to be a guest, we're open to suggestions.

Ryan Petrunyak: There's no guarantees that you'll be in.

Dave Smyth: Absolutely no guarantee we're gonna allow you on this show, but we really do appreciate the heads up if you know of somebody around the Lexington, Kentucky area that is doing something unique, something different that we might find interesting that would entertain us for a few minutes, then we might check 'em out. 

Ryan Petrunyak: So, for today's episode, since it's March and taxes are on the front of everyone's mind. 

Dave Smyth: And let's be honest, we're really not that excited about March Madness.

Ryan Petrunyak: Yeah. Not at all. I mean that not after, as we record this Cason Wallace got hurt last night. So hopefully by the time this goes out, he'll be back and healthy and ready to roll for UK's run, but I don't want to talk about March Madness today. So, we're stuck with taxes. 

Dave Smyth: So we're back to taxes. So on the topic of taxes, one thing that we know is on everybody's mind is, gosh, I'm trying to get my taxes, my folder of stuff pulled together and to my accountant and get them to file this stuff.

But the number one thing that we have clients coming into our office and asking about and so we'll just paraphrase this as a question is, and they always ask us this question, this time of year, right? How can I lower my federal taxes? And the reality is that everybody asks about lowering their federal taxes when they're just about ready to file their taxes, right?

Typically by the time we get to the point of them filing their taxes, there's literally nothing that you can do. 

Ryan Petrunyak: It's already done. 

Dave Smyth: There's a few things, but you've pretty much made all your choices tax wise in the previous calendar year. So today we will talk a little bit about how you can lower your taxes and you know, we've got some, some good thoughts there.

Ryan Petrunyak: Absolutely. Absolutely. Dave, what would be the first way if someone just filed their taxes or getting ready to file their taxes for 2022 and they're starting to think, man, I don't wanna pay as much in 2023. What's something they can do the rest of this year? What would be the first thing on your list over there?

Dave Smyth: Oh, I mean, I would definitely go out and have as many children as you can. I mean, because you get a child, you get literally money for having children. 

Ryan Petrunyak: Is that how that works? You, you save money by having kids, each kid. How, how much does each kid cost you? 

Dave Smyth: Well, I mean, in the long run, let's not get into the minutiae here, Ryan.

Ryan Petrunyak: Well, let's start with the tax. How much are you gonna save? 

Dave Smyth: You know, in the long run, let's really stick with the long run here. Okay. It's not about, you know, a thousand dollars here or there. It's about the quarter million that you're gonna get to spend over the lifetime of that child just to get them hopefully out of the house. 

Ryan Petrunyak: Huh? Okay. 

Dave Smyth: So actually in, in retrospect, that may not actually be the best way to save money on taxes. So let's, if you already started to take our advice, you started down that path. Let's, let's stop, Focus, refocus. Okay. That's not an option. All right. Ryan, what would be another option to, you know, for 2023 to look at lowering taxes?

Ryan Petrunyak: Well, the first thing that most people look at, and obviously it depends on your individual situation for what's gonna be best for you but one thing that we see a lot of people have the option to do is take a look at your employer retirement plan. Now that looks a little different for everybody.

Some people are gonna have a 401k, some are gonna have a 403b, and some are gonna have a simple IRA. It just depends on your employer. If you work for a nonprofit, it'll fall into that 403b category. If you work for a bigger company, it might be a 401k. The reason you want to take a look at those is you can get what's called a tax deferral.

So if you put, let's say the maximum this year for a 401k, 403b, 457, whatever it might be, is $22,500. So, if you put that $22,500 in, let's just say for the sake of easy math, your income would be a hundred thousand dollars. You can just subtract that 22,500 off of your gross income for the year.

Dave Smyth: You know, the other thing is, is remember if there's someone listening, and let's say they're 50 and up, they not only can put in the the 22,500 you mentioned, there's also what they call a catch up provision.

And that allows individuals 50 and over, right? For all those types of plans to put an additional $7,500 in out of their paycheck. So suddenly, like your scenario, you're now removing $7,500 more rom federal taxation for this tax year to be pushed towards taxation. When you take that money out in retirement.

Ryan Petrunyak: Yep. So that's a great option for most people. Like I said, none of these solutions fit all situations, but for most people, when the employers offering you something that there might give you some kind of match on, and it gives you an option to invest with a tax deferral, it's a great option for a lot of people.

Dave Smyth: But what about the people, Ryan, that like, they're like, I'm listening to this Ryan, and now that's great and all for these really well off people that work for a big corporation that have all these great benefits. But, you know, Ryan, I'm not there yet. In fact, my employer that I work for, they don't offer any type of retirement plan benefit. What's open to them? 

Ryan Petrunyak: Yeah, so there are also individual retirement accounts and a traditional individual retirement account or IRA is going to be very similar to a 401k. They're gonna have the same tax treatment. The only difference is there's gonna be more investment options for you. That is definitely an option for all those people.

The other option that we're gonna see, and this is gonna be more common with the younger folks, but it can be good for everybody. It just depends on where you're at, is a Roth IRA. The only difference between a Roth IRA and a traditional IRA, and it works the same with 401ks, traditional 401k versus Roth 401k is if you put the money in the traditional IRA, it saves you money this year on your taxes. If you put the money, let's say for this year, the maximum that you can put in if you're under 50 years old is $6,500 into your Roth IRA. That's not gonna save you money on this year's taxes. Where it will save you money is once the money is in that Roth IRA. It can grow tax free for the duration of the account. And after you're 59 and a half, you can take the money out tax free. So that'll save you money long run, because down the road, someday when you're in retirement and you may be in a high tax bracket, you may not be, you will have a tax-free bucket of money sitting there that you can utilize.

So, other comments on the individual retirement account, Dave? 

Dave Smyth: Yeah. Well, I know for a lot of people, like if you're sitting there and you're listening and you're like, I don't even have a retirement, and I'm young and I just want to set up something that I can automate some savings into. Let's say for example you're single, right? And you're making as just an example, less than $73,000 a year, right? Then you could fund a Roth IRA for $6,500. But even if you say, well, Dave, that's crazy. I don't even have 6,500. you could literally start automating a hundred bucks a month right into a Roth IRA. And then perhaps maybe your goal might be that every time I get a raise with my employer, I'm gonna take a portion of that raise and increase my Roth contribution.

So maybe a year later, maybe you can put an extra 50 bucks in. You know, and just keep doing that. And eventually you get to the point that you're maximizing that $6,500. But the idea is the earlier you can start saving, and the longer you can compound that money, it can grow. There's all kinds of charts. We're not gonna get into those numbers, but there's all kinds of charts that everybody sees at like a hundred dollars, 30 years from now is a million dollars, right? Or a hundred dollars 40 years from now is a gazillion dollars, right? And there's all kinds of charts you can, you can Google search and look if you wanna try to figure out how compounding might work for you, and you can put in rates of return, all this.

But the bottom line is that if you think of the money you're saving on a monthly basis, no matter how small it starts, it's like a snowball rolling downhill and it starts really small. Just like imagine making a snowball, right? Just staying on the end of the cliff and just rolling that snowball off, and as it starts to gather speed and stickiness, if you will, it's gonna start picking up additional snow, picking up additional snow. And as you start looking down that mountain and that snowball grows, eventually it might become an avalanche. And you might be surprised, you're like, how in the world did it start this small?

It started a hundred dollars a month and grow, you know, into this giant amount of money, regardless of what the amount is. Well, the only way it's gonna grow to that giant amount of money, you're not gonna wake up and win the lottery every single day. Right, and very few of us are gonna win the lottery, if at all.

So the easiest way to, to create that bucket of money when you want to start, stop working right, is to start contributing a small amount when you're young. 

Ryan Petrunyak: Yeah, it, you kind of hit on a good point there too. I think a big fear of a lot of people is they just don't know how to get started. And I was talking to a friend just the other day, who in his early thirties and he goes, this is gonna sound crazy and this has nothing to do with finance. But he goes, this is gonna sound crazy, but I don't know how to make just a normal doctor's appointment if I'm not sick, how do I do that? And I think, and it got me thinking, but we were talking about it. We were kind of making fun of him. And then once we got done messing with him, we were like, it kind of got me thinking. I was like, a lot of people probably think that about the financial world too. Like, I don't know where to get started. So, that's why we're here. And if you ever do have questions on that, you know, we kind of are looking at this all from a mile high view as far as saving money on taxes by saving for retirement.

But what I would say is we're only going into 5% of what we can go into here. So if you have more questions on your individual situation, just let us know and we'd be happy to help you with that. 

Dave Smyth: But there's truly no shame in calling us up at the office 859-219-1006 and literally saying, Ryan, Dave, or anybody else here, I've never invested a penny in my life. And I just have a question. You mentioned something about IRAs or Roth IRAs. I'm just wondering like how I could set one up and I've got a hundred bucks, or maybe you have $500 bucks a month. I have no idea, but the idea is, is that we can work with that.

We can help you because half of the reason there, there's, you know, there's two reasons I'm in this business, right? I mean, the first one is I absolutely love helping people. I love educating people, and I've loved my career that started in the late nineties, right? So multiple decades now, and change.

I love educating people. 

Ryan Petrunyak: Your day was a long time ago. I'd just like to interrupt. 

Dave Smyth: My day was a long time ago. In fact, some of your listening probably weren't even born until like after I started my first job, you know, as a financial advisor. 

Ryan Petrunyak: What year was that? Just to date you a little bit. 

Dave Smyth: First firm was ‘96. So long time ago was when I first started talking to a firm. I think I joined them officially in 97. So, but it's been a while. But that said, you know, the first side is we love helping people educate people, help them under, explain to people how, you know, just financial stuff works, right?

And get them started on a course. But the second side is I'm also a capitalist, right? So I wouldn't be in this business if I wasn't a capitalist. So the way I look at it is if I can start someone off on a course and they save that money, 20, it may not be a big number. But I look down at my career and people that I started with 25 years ago, roughly, right?

Uh, those, those a hundred dollar a month accounts have really added up to be something. And it's really impressive. Despite all the craziness that's happened in the last two and a half decades in the world, they've actually grown significantly. And I'm just pleased as punch that I not only believe the math side of it, but I believe it in the real world application of you can go through all kinds of world crisis’s and all kinds of wars and all kinds of, you know, pandemics and going back to, you know, crazy market crisis’s and mortgage crisis’s and unemployment issues.

Ryan Petrunyak: And 9/11 since then. I mean, crazy stuff. 

Dave Smyth: 9/11, I mean, just, you name it. I won't even search to name all the presidents we've gone through right over that time. 

Ryan Petrunyak: We're not getting into that. 

Dave Smyth: We're not going into that. We're not gonna do that. But it, it does bring a lot of thoughts up. But the point is, is that through all of that, right, people have invested money and that money has compounded and done very well for 'em.

And I can look him in the face now 25 years later and be like, well done. I didn't do that. You did it. Well done. So I think my thought on that is just don't be ashamed of getting started. That's actually the hardest step. It's the hardest thing with anything.

Ryan Petrunyak: Same thing as dieting. First day is the hardest. Right? 

Dave Smyth: 100% . 

Ryan Petrunyak: All right. What was the next tax question we had? That was our common tax question that we heard.

Dave Smyth: So the other thing that we got in the inbox is we had a question from someone that said, “Hey, I've got a retirement plan at an old employer, and I'm just wondering, what are my options? What should I be looking at?” What would you say to that person, Ryan? 

Ryan Petrunyak: Whew. Well that's a loaded question cuz there are a lot of options. And again, it's gonna depend on who the employer was, what you're doing now, are you retired now or if they have a new job? Any of the above.

There are still a bunch of options. So for those of you guys who don't know, when you are at your current job, you're usually, unless you're over a certain age, you're usually not allowed to pull that money out without tax consequences. You usually have to leave it in that 401k. Not always, but that's how a lot of those work.

But once you leave, you have a lot more options. So the first option is you can just leave it in your current 401k. So one, when you leave it in the current 401k, you are restricted to invest in the options that your former employer gave you. So usually it's a basket of mutual funds or index funds, that your former employer chose.

Dave Smyth: So in other words, they leave the employer and they have their 401k or whatever retirement account it is, and they could basically just do nothing and. Just as they had been when they were saving into that account.

 Ryan Petrunyak: Absolutely. Okay. And just leave it there. So that's, that's really it. And nothing changes.

Dave Smyth: So that's the lazy approach, right? 

Ryan Petrunyak: Yeah, that's definitely the easiest thing to do. The easiest path. No work, no path of resistance. Absolutely. Then I'll let you speak. What, what is the next thing they could do?

Dave Smyth: Well, assuming you move to a new employer, let's take that as this person, they move to a new employer and they've got a new job and they're happy that if that employer has a retirement plan there, you could elect just simply to transfer, right? Then, your retirement account from the old employer to the new employer, so that it would basically be the, you know, just kind of fill up that new bucket and as you put contributions in from your paychecks, right? Into that new retirement account. They just continued to grow, but everything would be kind of consolidated and together. And those investment options would again, be what the new employer gave you. So you'd be a little restricted on that. And so the thought there is if they're doing that, you'd want to obviously look at what the previous employer plan options are, and then you'd wanna look at the new plan options.

And you'd want to compare not only your fund choices, but you obviously want to compare the cost of those plans. So the third thing you could do, this is always the fun one that everybody wants to do when they leave their employer, right? 

Ryan Petrunyak: You can cash it out and go to Cabo, vacation wherever you want to go, or, cash it out and buy a boat.

Dave Smyth: But what's the downside to that? 

Ryan Petrunyak: So if you cash it out, You're gonna pay a lot in taxes. So let's say the old 401k, let's just make it a nice round number, a hundred thousand dollars. Or if it was a hundred thousand dollars and your current tax rate was 24%, then those a hundred thousand dollars would be taxed at that current tax rate, and they may even bump you into a new tax bracket.

Dave Smyth: You're gonna have federal taxes, you're gonna have state taxes. And, we don't want to fail to mention if you're under 59 and a half, you could also get hit with a 10% penalty for early withdrawal from that account. So for, for the average person out there, if they're like, let's say you're 24% tax bracket, you know, your state has some taxables round you up to around 30 10% penalty. By the time it's all said and done, you might be looking at around just approximately 40% Coming out of that a hundred. Give or take, right? So essentially you may take out your hundred thousand and only have around 60.

Ryan Petrunyak: Now, here's a question that some people are probably thinking, Dave, if the money's in the IRA, I gotta pay the taxes eventually anyway. Right?

Dave Smyth: Right? Of course. 

Ryan Petrunyak: So why, what's the difference between just paying that all in one year or spreading it out and, and doing something different with it? What, what? Why does it hurt me to cash it out? . 

Dave Smyth: Yeah. So of course everyone's situation's always different, right? But let's just take in this person's situation where they're moving from one employer to the next employer.So they're fully employed, right? And, and they have their paycheck, and let's just say they got a little pay raise going to that employer. Well, whatever they take out of that, with a cash out, that 401k, right? When you cash that money out, it may put you in what's called a higher tax bracket. So as just an example. and by the way, as we go through this, we have sheets that we can offer you. If you want it, just call us at the office. You can email us, you can find our emails on the website at But, we have a key financial data sheet with all these numbers on it that you can take a look at.

But let's say you're single out there. Let's just say you're making, as just an example, $44,000 a year, right? We’ll call it $44,000-45,000 a year, right? So what that does is that means for a single person at that, there's tax step ups, and think of them as like steps on a staircase. So, for the first $11,000 you make, that's gonna be taxed at 10%, and then that next step is taxed at 12% up to 44,725. Now, let's say you go in and suddenly decide, well, I'm gonna pull out that a hundred thousand dollars, right? And so suddenly you're raising your tax step and it could take you most likely, all the way. The next step from 12% would be 22%, and the next step would be 24%.

So suddenly you could get into a really high tax bracket. As a one-time thing and pay a lot more tax on that money by pulling it out all at once, year one, not to mention the penalty. So, what we try to do, even if a person has retired, is we typically don't pull it out all at once again, because it may be that by the time they retire, their 401k retirement account is so much larger, right?

It could be in the hundreds of hundreds of thousands. It could be in the millions. And so if a person actually took out all that money at once, it could propel them, up into the 37% tax bracket, which is the highest tax bracket. So that's something that just on a case-by-case basis, we look at, but the idea is everyone hates paying taxes.

But then when we see people oftentimes cash out their retirement account because they're like, well, it's just a small amount. It doesn't matter. Well, it actually does matter if you're having to pay more taxes. and penalties then by just leaving it alone, letting it grow and work for you. 

Ryan Petrunyak: Well, the one other option you have, so like you said, you can leave it alone. You can leave it alone in your current employer, you can leave it alone with your new employer, or you can cash out. That's the third option. The fourth option is you can roll it over into what's called an IRA, which we touched on a little earlier on how those work tax wise.

It’s structurally the same thing as a 401k. The only difference between the IRA and the 401k in the 401k, like we talked about earlier, you're restricted to the investment options that your employer gives you when you put it into the IRA. The world's your oyster. You can invest in any kind of stocks or bonds that you want, any kind of index funds, mutual funds, anything like that.

The important thing to consider there obviously is the fees on the 401kversus the fees on the IRA if you're moving to an account that has fees and what are the investments in there. But tax wise, it's structurally the same thing. So any other comments on that, Dave, on moving over to the IRA? 

Dave Smyth: Yeah, so we always wanna look at, from a 401k role, a retirement plan role to an IRA, what are investment options? The IRA tends to be more open chassis, right? So people can pick a lot more selection. We also wanna look at those, at those fees. The other thing we wanna look at before we make that role is if you are, let's say 55 right or older, and you're leaving your job or you've been laid off from your, your job and you may need to actually pull some money out, there are provisions in 401ks that allow people to take the funds out of their 401k without penalty if they are 55 year old years and older if they have certain things happen to them. So, those are things that obviously is on a case by case basis, but it is something that you would want to have a talk with your financial planner with. And that's something we could certainly help you with before making the decision of even trying to look at the roll.

Many times we see retirement plan companies are really in the business of gathering assets and of allowing employees to fund their retirement vehicles through kind of a, we'll call it like chocolate and vanilla investment plan. And that's perfectly fine for people that like chocolate and vanilla shakes.

But you know, if you're someone likes to go to Dairy Queen and you're like, well, I don't really feel like a chocolate or vanilla shake. I feel like a blizzard today and I want …

Ryan Petrunyak: You’re living dangerously.

Dave Smyth: Doesn't that sound good? I mean, I haven't had a blizzard in forever, Ryan, but let me just tell you, that sounds awesome.

Ryan Petrunyak: Those cookie dough ones that they flip. 

Dave Smyth: So let's say you go through and you're like, I want to get a cookie dough blizzard. Right? If it was me, now, scratch that. I want to get a Reese’s ieces Blizzard. So, in my old retirement account, right? My old employer plan, they'll be like, no, you got two options. This is our tool belt. Our tool belt is a chocolate shake, vanilla shake. Well, maybe the new IRA is like, well, you like cookie dough? You can have a cookie dough blizzard, like, Ryan, if you're a back in my day, kind of real man, and you want Reese's Pieces, a legitimate Blizzard, then, yeah, you can also have a legitimate Reese's Pieces Blizzard. Or maybe you're not like either of us, and you're like, honestly, guys, mint chocolate chip is my flavor. Well, there's also mint chocolate chip Blizzard for you. So that's what I kind of toss in there. 

But the idea being before you just jump to a conclusion if you change employers, I really do think it's a good reminder to call someone like us and say, could you review my options with me?

To add, we actually have to walk you through what all of your options are and inform you of your various decisions. So, in my opinion, that's very important because if, if you haven't worked with us before, it's like we're instantly within a way that we can do you no harm. We have to act in your best interest and I think that's really, really healthy. And I'm glad they have that there for advisors to work with their clients that way. And it allows people to really know what their options are.

It's great for their side too. It goes back to the 50% of why I'm in this business. Right? Which is I love to educate people, help solve problems. And at the end of the day, if you can solve a financial problem, sometimes we're talking to people and you literally in the middle of a conversation, see a light bulb.

Ryan Petrunyak: The light, I was about to say that.

Dave Smyth: Like you see the light bulb, but you're like, they figured it out. It's the same thing when you're working with a fifth grader doing math, and then all of a sudden they get it. It's the yes, it's awesome. And it's the best feeling. It's the, it is the reason people teach, right?

They don't teach for the snotty noses. It's for that light bulb. And it's awesome. So, when we get that light bulb, that’s a reward right there. All right. Our next question, Ryan, before I get into your thoughts on this, I took this one a little personally. Well because it was a question, but it was previewed with a statement.

It said, “I'm more on top of things than David and Ryan. I already have my taxes filed this year.” 

Ryan Petrunyak: Someone actually sent that in?

Dave Smyth: Yea!

Ryan Petrunyak: All right. 

Dave Smyth: I mean, that's a little, uh, I guess it's not passive. They're not aggressive. 

Ryan Petrunyak: They're not wrong. 

Dave Smyth: I mean, they're calling us out like cobblers whose kids have no shoes. Right? I mean, it's like accountants where you say the accountant gets everyone else's taxes filed, right? And they file late. Well, I mean, I'm guilty of that because I always file an extension. But, mainly it's because we're helping everybody else get their tax documents in.

But wow. Call us out like that. Wish you had put your name on it. 

So the question was, “I've already filed and I've received a tax refund. What should I do with it?” Good question. 

Ryan Petrunyak: We could have some fun with this one. Cabo comes back up again. 

Dave Smyth: You know, the question is, they really didn't tell us how much they got as a refund. Because if it was like $500 bucks, I mean, that's one option. But let's say it was $50,000. Now let's go with the $5,000. Not to put you on the spot here, Ryan, but you get $5,000 big smackers deposited into your bank account, federal tax refund. What are you doing with it? Well, and first, do you tell your wife?

Ryan Petrunyak: I was gonna say take the wife to dinner with the first part. 

Dave Smyth: Would she know though, or would you just be like?

Ryan Petrunyak: Oh yeah. Open book. We're celebrating our greatness. We're celebrating our tax return. It's a tax return steak dinner kind of thing. So that'd be our fun thing. Let's do that first. But investing wise, again, depends where you're at, but with where we're at right now, you know, income, age. Being in our twenties, we're probably gonna go ahead and fund our Roth IRAs, like we talked about earlier, just because it has so much time to grow and compound.

I would definitely lean towards doing that with a big chunk of cash first. Make sure there's no credit card balances or anything first. That would be for step one. But if there's any credit cards or anything like that floating around, I'd probably knock those out. And then after that I would knock out the Roth IRA.

Dave Smyth: So, because you don't to be paying high percentage interest rates on things when you actually have cash sitting right there. 

Ryan Petrunyak: Yeah. I mean, if anyone out there gets a refund for $5,000 and they've got a $2,000 credit card balance and high interest debt of some kind, I would say knock those out before you invest. Because if you're sitting there paying 22% interest, then you're just gonna be like a dog chasing its tail if you're trying to invest at the same time. So I always recommend knocking out those high interest debts first before you start loading up the retirement accounts.

You know, it, again, it depends on your situation, depends on the kind of debt. So are there any kind of debts, Dave, that you would tell people not to go throw the tax refund at right away? 

Dave Smyth: Yeah, absolutely. I mean, obviously if you have a student loan, I certainly wouldn't prepay that because the way it's going, you're not gonna have to pay any of 'em.

I mean, back in my day, let me just say we actually took out student loans and we were required to pay them. Monthly. Well, and no one gave us a timeout. 

Ryan Petrunyak: Well, back in your day, what did college cost you? Like a Snickers bar and 48 bucks, or… 

I'll be honest, for a semester, I may have gave, gave plasma a few times to so I could buy my books.

[00:32:17] Dave Smyth: I'll be honest, for a semester, I may have gave plasma a few times to so I could buy my books.

It was a little cheaper back then. A little different. But yeah, the mortgage crisis hit, unemployment was like a zillion percent, we got no timeout on our student loan. You know, we had to pay those payments. So, you know, I'm not gonna go into …

Ryan Petrunyak: How do you really feel about it, Dave?

Dave Smyth: I think it's ridiculous. Personally. Like, I mean, my view, and you may totally disagree with me, and if so, let's talk on the street. But if you went to school and you got a degree in something that does not pay you enough to pay the student loans that you took out, that's actually on you for not looking at it before you decided what to.

And I'm not saying the world doesn't need people in all sorts of service things, but like, if you're in a service major, then you've gotta take a slightly different approach to school. Some schools are just completely out of price range if you want to go into some types of service work.

We have people come to us all the time on that, right? Where they're like, we're both teachers and we both owe $110,000 on our student loans. And we're thinking about going back to get more education so we can get more money. And I'm like, well, more education will give you more money and it will defer your loan payments. But why did you take out $110,000 if you're starting job is like 35 or $40,000? Then they say, well, and we also want to buy a house. And I'm like, well, you owe $220,000 on student loans at 6%, whatnot. I'm like, you already have your house. You have a $220,000 house already. And so, it is not that I don't feel for people, I do, but there's gotta be, whether you put common sense right into the schools to educate people. If you go into this occupation, this is what the average person makes in this occupation. So should you really be going to this school or should you be going to like a community college. 

Just as people progress in their majors, encouraging people maybe to take some time off and work or do something. Because it's setting people up for a lot of, I feel terrible for people that have huge, huge loans that they certainly can't pay back and they're not being able pursue careers that they really wanted to. Instead they're being forced in areas that they never wanted to be.. But that said, I would not prepay a student loan if I had it, because we want to see how this whole, Biden administration with Supreme Court consideration plays out as far as how that's gonna work for repayments and, there may be some things that do benefit you where it does spread out that loan payment over a longer period of time, which then allows you a little bit more flexibility in your budget. 

Other things I wouldn't pay off, I wouldn't, if I did have a mortgage and let's say that mortgage was 5% or lower, I don't think I'd prepay that. If it's a mortgage that's like 7%, I'd probably start making payments on it. But for a lot of people out there that maybe took mortgages, within the last 18 to 24 months, you're probably in the four and under range. I don't know if we'll ever see those rates again. I'm sure we will because history repeats itself. It's always changing. History repeats itself. For now it's a really good rate and there's most likely something else you could do with that money or some other debt, whether it's a medical bill, credit card, a car loan that might be at a higher rate that you could pay off or worst case, so that you don't have to take on credit card debt. If an emergency happens, take that money and may have put it in an emergency fund. Save that emergency fund money. If you already have an emergency fund, you could always rotate back to the Roth IRAs. If you qualify for 'em, like we talked about or increasing your work retirement.

Ryan Petrunyak: Yeah. So the thing I picked up from what you were just saying, besides the, besides the student loan tangent … 

Dave Smyth: It was a tangent, wasn't it?

Ryan Petrunyak: What gets Gen X fired up? What'll piss off someone in Gen X? We get 'em going on student loans. 

Dave Smyth: Luckily, we're  a small generation, so no one really cares about us. We care about the boomers, right? They care about the millennials. Which, by the way, millennials are now old. They're being made fun of, right? 

Ryan Petrunyak: Yeah. I just found out about this that we're getting made fun of. 

Dave Smyth: Now there there's memes of millennials now right by Gen Z and apparently they ran ran outta alphabet, so they had to restart at Gen A, which is anyone born 2010 Forward. Okay. Gen A and Gen A and Gen Z are actually making memes and making fun of ready for this old millennials. They don't even care about me. I've been put out past, 

Ryan Petrunyak: You're just forgotten. You're really just …

Dave Smyth: I'm a pasture. It's like an old horse. Like, oh, look at him up on the hillside. Look at him grazing. Isn't he pretty? Let's go pet him. I mean, it's, it's, yeah, it's sad. Here, let's give him a carrot or two. And I do eat a lot of carrots, so maybe there is something to that maybe, so were you wondering what I would do with $5,000? 

Ryan Petrunyak: I was wondering with what you would do with $5,000. : Yeah, that's my curiosity.

Dave Smyth: Well, let me tell you this, I would not go out to a steak dinner. Because now that you've got me on this little Gen X tantrum, I'm life of the party. What could I do to relive my youth? Right? Because I don't want to sit in the pasture the rest of my life.

I'm thinking that that money would go towards two things. One, I'm thinking I would buy some plane tickets. To do something. And I don't think I'd take my kids, because my kids are Gen Z and I've got one that's Gen A. 

Ryan Petrunyak: So did the kids forget about you in the pasture two, or is that just in general?

Dave Smyth:  I truly believe my teenagers, as soon as they have gotten their driver's license, have literally forgotten how to answer a phone call from. Answer a text from me. The only time I hear from them is literally like, dad, can I stop by and get a gas card?

Or Dad, do you have an extra 20 bucks to drive my brother somewhere for you? 

Ryan Petrunyak: I'd just like to throw out there that in this very show you said the goal was to get the kids out and you just said you got the kids out and now you're not happy that the kids are out. 

Dave Smyth: No, I certainly, I've done my job. They've left home. 

Ryan Petrunyak: Okay. So, you did hit the goal, but you just want 'em to answer your call. 

Dave Smyth: I'm an old man in a pasture that's been abandoned by my children. And I know I can't have it both ways. And feelings aren't facts, right? So the facts are they're actually out, they're actually doing things, they're moving forward.

That's exactly what I want: get out of my house. Right. But the other side is the other side of me. I do like my children. I do like that interaction. And so I think I'd buy a couple plane tickets. Wife and I would go somewhere fun. I'm trying to think, maybe New York, depending on how much money.

Ryan Petrunyak: The big city or upstate?

Dave Smyth: I think the big city. I'd do the big city maybe for this upcoming Christmas or something, and then, maybe a trip to Italy. But, if Kerri’s listening to this, she's just getting ideas. It's just, she's getting all kinds of ideas. But it would be fun to go, like, make fresh pasta, drink fresh Italian wine and olive oils and olives.

I mean, that would just be an absolutely blast. But if we didn't make Italy and we're just looking for something short term, and now that you've brought up my youthfulness, right? I think I would actually get two tickets… two VIP tickets no less, right? So this actually maybe a thousand dollars.

Ryan Petrunyak: You might need a $10,000. 

Dave Smyth: I would get VIP tickets to go see the Remember the Nineties Tour and I'd go see my peeps. I'd go see Salt N Peppa. 

Ryan Petrunyak: I don't even know what this is.

Dave Smyth: So I would see Julio, I would see, this is all of all of the musicians that were big in the nineties. That are now my age. They can barely move around stage. They gotta put BenGay and all kinds of other body rubs and things just to get on stage and be able to do a little dance and a little tweak. A little jig. Right, but, I went to a concert like that one time and it brought back my youth and I walked outta there feeling so good.

And then I heard somebody to my side that was like, “dad, did you have fun Dad?” Like, no joke. He had no idea who any of the musicians were. But that said, for a couple hours I'd feel young again. And there's nothing like that. So that's what I would do with the money.

Ryan Petrunyak: Okay. I'm gonna change my answer beacuse that concert one… Taylor Swift tour. Do the full millennial take Katie to the Taylor Swift thing. 

Dave Smyth: Is she, is she someone big now? 

Ryan Petrunyak: Taylor Swift? On that note, we're gonna move on. 

Dave Smyth: I really don't know. 

Ryan Petrunyak: Yeah, she's, she's pretty big. A little bit. The swifties are gonna be after you. 

Dave Smyth: This has been a great show. This has been a great show. I'm glad we're able to take people through the topic of what to do at tax time. And the other thing I think wrapping it up is just the idea of if you did listen to this and you do have a few questions and you're like, Hey, I've got a couple questions for you guys, or I do want to do some 2023 planning and try to figure out what I could do to lower my taxes in 2023, please give us a call. We'll have a conversation with you from a financial planning side, but we can also, if you don't have one, give you a great referral to a CPA out there in the community, a tax preparer out there in the community who could really help you, and they can sit down with you past our conversations and actually truly put some of these numbers on paper and really show you how down to the penny, it will really truly change the taxes that you're gonna owe, as you go back around to next April. 

Ryan Petrunyak: So that's it for today's show. I do want to give you all a little sneak peek for next month. We're gonna have a guest on the show. A lot of you all know McKellar in our office and she is actually gonna teach myself and Dave about women. So we are very much looking forward to this and I hope you'll tune in for that.

Changes to Our Podcast
Tax Season Intro
Lowering Federal Taxes
Retirement Plan Options
Tax Refunds

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