Tyler Capitano, CFP ®

After admiring the work of a lot of great financial planners on this platform from afar, I have decided give the Twitter world a try. (I will not be calling it “X”) More about me in this long-winded thread: 🧵

Song of the summer just dropped

@mbontrager5 Where can I hire a “Licensed Roth Rescue Advisor - Rescue Advisor”, or LRRA-RA for short?

The latest made-up financial title I’ve seen: Roth Rescue Advisor #how-it-works" target="_blank" rel="nofollow noopener">myrothrescue.com/?#how-it-works

@piperNcedar Well since they are both named “black(insert form of rubble)”, you can argue there’s no difference

@TylerCapitano44 Yeah but but but Blackstone is probably part of BlackRock, right!?

One of my favorite online discourses is that Blackrock is buying up all of the single and multi family housing in the U.S. Google/ChatGPT is your friend, and it’s free.

@NxtGenPlanning 😂can’t argue that

Here are links to referenced sites: Google.com ChatGPT.com

@camp_wealth Whenever my imposter syndrome creeps in, I remind myself that there are “sales managers” or “MDs” in their 40-50’s whose sole job is to recruit 22 year olds and train them to sell Whole Life insurance to young people with zero dependents.

Whenever my imposter syndrome creeps in, I remind myself that there are people out there selling whole life insurance to young people with zero dependents.

Overlooked Planning Opportunity: Roth Conversions During Low-Income Years: Most people only think about saving into Roth accounts, but converting to Roth during low-income years is where the magic often happens. A Roth conversion means moving money from a pre-tax account (like a traditional IRA or 401(k)) to a Roth IRA. You’ll pay taxes on the converted amount now, but it grows tax-free forever, with no RMDs. So why do it in low-income years? Because the tax bracket you’re in when you convert is usually much lower than the one you’ll be in later when forced to take RMDs. You’re essentially buying out Uncle Sam at a discount. Here are common low-income windows that create golden Roth conversion opportunities: - Early retirement (before Social Security + RMDs kick in) - Sabbaticals or career changes - Business losses - Years with heavy deductions (charitable giving, large write-offs) - After a layoff, before the next job - Post-college/pre-grad school transitions Example: Let’s say you retire at 53 with $2M in your traditional IRA and no other income. This leaves you with 20 years before you need to pay the RMDs. You may consider systematically converting portions of your retirement accounts into Roth dollars, at a lower income bracket (since you no longer have employment income.) Your Roth dollars will grow tax-free, and you will mitigate RMDs while reducing the tax burden on heirs. I will note, poorly timed Roth conversions can increase taxes, push you into higher brackets, or mess with other benefits, so I wouldn't recommend doing this alone. This is where working with a CFP® and/or CPA pays off.

TL; DR If you own company stock in a 401(k), consider an NUA before you roll it into an IRA. NUA may be one of the few legal ways to convert future income tax into long-term capital gains tax. But it requires careful planning, and once missed, it cannot be undone.

Net Unrealized Appreciation (NUA) is a niche, yet effective strategy when exercised properly. If you own company stock in your 401(k), you may be able to reduce your lifetime tax bill by using a little-known rule called Net Unrealized Appreciation (NUA). Most people miss it. And once you roll your 401(k) into an IRA, you've missed the boat. If you are unfamiliar, NUA is the difference between the cost basis of your company stock (what you paid or what was reported when it was contributed) and its market value today. When you retire or leave your job, the IRS allows you to move the company stock out of your 401(k) and into a taxable brokerage account. You pay ordinary income tax only on the cost basis, and the growth is taxed later at long-term capital gains rates when you sell. This is important because ordinary income tax rates can reach 37%, while long-term capital gains rates top out at 20%. Therefore NUA lets you shift part of your retirement savings from higher to lower tax treatment. Example: You own $1,00,000 of company stock in your 401(k) and the cost basis is $200,000. With NUA, you pay income tax on $200,000 now, and the remaining $800,000 is taxed later at favorable capital gains rates. Rolling to an IRA instead? You would eventually pay income tax on the full $1,00,000. This strategy works best if: - You have a low cost basis in your company stock - You can pay the tax bill on the cost basis out-of-pocket - You are retiring or separating from service - You intend to sell the stock over time in retirement - You are not planning to donate the stock to charity When NUA may not make sense: - High cost basis and minimal capital gain - You want to defer all taxes as long as possible - You are not doing a full lump-sum distribution (required for NUA) - You plan to hold the stock for life and leave it to heirs (because NUA stock does not receive a step-up in basis at death) *This is not personal advice. Talk to a financial advisor or tax professional before making any moves.*

@NFinTX That is certainly more diversified

@TylerCapitano44 VT?

If your portfolio is only QQQ-VOO-SCHD, you are not diversified

There is a lesson in persistency here..

TL;DR: A well-timed Roth conversion is one of the most effective tax planning tools out there. You’re not just saving money, you are buying future tax freedom at today’s tax brackets.

@samhfinance Definitely

@TylerCapitano44 aslo geographic diversification might be the bigger gap for most people

@Rawk_FI More diversified than VOO-SPY-IVV

@TylerCapitano44 Yea not as diversified as people think. But more diversified ish than other set ups I’ve seen on here lol

@Gloriya_rose01 @ChairmansCouncl Haha that’s a funny analogy

@TylerCapitano44 @ChairmansCouncl Exactly! It feels diversified, but under the hood it’s mostly the same party just wearing different outfits.

A portfolio with 33% SCHD, 33% QQQ, 34% VOO has a .99% correlation to the S&P500. You would get nearly identical returns to the S&P500, with an added layer of complexity (owning 3 funds). Put simply, the stocks in SCHD and QQQ are also in the S&P 500, so you are not truly “diversifying”, you’re buying the same stocks in a different fund

@TylerCapitano44 Explain for the people! 🤔

@bartholomatt @financeguy725 Few understand this.

@TylerCapitano44 @financeguy725 Yes but imagine how hard it would be not spending 4/5 of your income on consultim calls

I did a consulting call today with a 33 year old guy who makes $150k a year at a fully remote job. 40 hrs a week. 2 kids + wife. Spends $10k per month on consulting calls. This is a really tough spot to be in. Zero chance at long term wealth but too easy and profitable to leave. Golden handcuffs.