Year-End Planning: Tax Strategies To Maximize Your Accounts
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Year-End Planning: Tax Strategies To Maximize Your Account
OWAIZ DADABHOY: Good afternoon and welcome to our webinar on year-end tax strategies. We plan on giving tips about the following today: tax advantaged accounts, benefits of fully funding your accounts by year-end, incorporating automatic investing, charitable giving in a more tax advantaged way, and a review of wills and trusts. As you can see on the screen here, I’m on here as well as Sameer Sarmast who is a financial planner and a Regional Manager here at Saturna Capital and he is based on New Jersey. He has over a decade of experience in the financial arena and is studying for his Chartered Financial Planner certification. Sameer will join us for the second half of the presentation. So, some of what I’ll talk about today will definitely involve things that you need to consider, right? So, you have to consider the investment’s objectives, risks, charges, and expenses before investing. If you can’t take on those kinds of risks, then talk to us about alternatives. Maybe it’s cash. Maybe it’s investments. But you can still take some of the knowledge from here and apply it to advantage yourself by the year-end and then also for next year. So, we’ll talk about these kinds of accounts that we are showing here: IRAs, employer plans, HSAs, and Education Savings Accounts. And then, Sameer will go into estate planning, wills, trusts, and beneficiaries. We’ll do a recap at the end and then we’ll show you a way to make donations in a much more tax-advantaged way for yourself. So, with that, I want to talk to you about traditional IRAs. And we’re going to go through this fairly quickly. You may have seen some of this in previous webinars that we have conducted, so we won’t take too much of your time on this part but do take screenshots of whatever you would like. For 2021, the tax-deductible contribution limits are $6,000 for a traditional IRA and if you are 50 or above, you can put in an additional $1,000 per year. So, what is the benefit of getting it done this year instead of waiting until April 15 to put in money for 2021? Because you actually have time until April 15, Tax Day, to contribute for the previous year to get that into your IRA account or Education Savings Account or Health Savings Account. But the reason you want to get all of the money in now is because you want to also start up automatic contributions. It’s not a very fun and thrilling thing to do to put in $6,000, right? Write a check for $6,000 at the end of each year or in April. It’s a large chunk of money. So, what I would suggest is to go ahead and fill up your traditional IRA piggy bank and then, starting in January, start up automatic contributions of $500 per month. And what this will do for you is it will make sure you never miss your IRA contributions. Number two, it will also help you to dollar cost average, meaning that when the market or your funds that you are purchasing go down in value, you are buying more shares of that same particular fund. Right? So, if you’re buying a fund that’s $50 a share and you’re putting in $500, you just bought ten shares. But if it goes down to $40, you’re going to buy more shares. If it goes up to $60, you’re buying fewer shares. So, that is a best practice on any type of investment that you are trying to do. The next one is Roth IRA. The benefit of a Roth IRA is there is more flexibility. With a traditional IRA, you can take the tax deduction in that particular year if you qualify based on your income. But on a Roth IRA, you don’t take the tax benefit at that time. You’ll take it when you actually start to withdraw the money. And I’ll give you an example of that when I show you how you can grow your money for retirement. The other part of Roth IRAs that is beneficial to many is that whatever money you put into it, you’re allowed to take out without paying taxes or penalty. So, let’s say you put in $6,000, some major emergency comes up, and you need to pull out the $6,000. If your $6,000 in this assumption has gone up to $6,500. Purely an assumption... you would be able to pull out the $6,000 but the $500 would need to continue on until you turn 59 and a half, unless you want to pay tax and penalty on that. The difference between Roth IRAs and Roth 401(k)s is that a Roth IRA will allow you to take out the money before-hand. A Roth 401(k) will not. So, that’s a key distinction. Having that said all of that, I believe that you shouldn’t take out money from your retirement accounts unless absolutely necessary because retirement is going to head your way someday and you need to save up as much as possible and we will talk about why that is in a little bit. If you do have an employer plan, that is good news, because you can have the money that’s going to go into the retirement account come directly out of your payroll instead of out of your checking account. So, that does make it easier. What I suggest here is if you’re going to put in, let’s say, only $5,000 a year into your 401(k) or $6,000, let’s say, I would say instead of saying $500 a month or $250 per payroll, put in a percentage so that way, as your income rises, your $6,000 contribution will go up every year. But you’re able to put in $19,500 for 2021 and $20,500 for next year. So, if you have not reviewed your 401(k) in a while, go back to that and see if you can increase how much you put in. Because a traditional 401(k) reduces your tax income. I mean your taxable income. So, that means you pay less tax in that particular year. You will pay tax on the withdrawals when you pull it out later. If you select a Roth 401(k), it does not reduce your taxable income today, but you’ll be able to pull out all of the money tax-free at 59 and a half or later. I’m going to show you that graph that I mentioned which will really illustrate the difference between a traditional and a Roth 401(k) or a traditional and a Roth IRA. A Health Savings Account... if you have a high deductible health insurance plan, you’re allowed to put money into an account that you can then use for different medical costs. So, if you have a Health Savings Account, you can put up to $7,200 this year and you can use that money, you can grow it. First of all, you can put it into investments, and you can try to grow your money, but as you’re pulling it out, if you have a receipt for medical care, for dental, for vision, you can pull out the money tax-free. Now, the benefit of this is... there are three different ones, right? One is that when you put the money into a Health Savings Account, you’re able to deduct that on your taxes. Along the way, as the money that you put in is growing and you’re receiving dividends, there is capital gains... you don’t pay any taxes. So, it’s tax-deferral, and then also, there’s a third component which means that, you know, you’re able to get a third tax benefit when you’re withdrawing the money. So, as long as you have a receipt that shows the medical cost, vision, dental, you can pull out the money for your family cost and you will not pay any taxes on the withdrawal. Hence it is the only triple-tax-advantaged account out there. So, if you’re struggling to find other tax deductions, you did well on your income this year and you know that you’re going to have a large tax liability in April when you run your taxes, this would be something to consider. If you don’t know if you’re qualified for a Health Savings Account, you can contact your health insurance plan and just let them know that you want to find out whether you’re HSA qualified. And if you are, if you’re a couple or a family, you can put up to $7,200. If you’re an individual, you can put in $3,600 and you can take a tax deduction on that. If you’re over 55, on this particular one, you can put in an additional $1,000. So, for IRA accounts, if you’re over 50, you can put in an additional $1,000, or 50 and above. On an HSA, if you’re 55 or above, you can put in an additional $1,000. The final one is the Education Savings Account. This one, you’re allowed to put in $2,000 per child but keep in mind the fourth bullet point there which says deductibility phases are, you know, starting at $190,000 up to $220,000. The reality is, if you’re making over $190,000... let’s say you’re making $200,000, there’s a complicated table on the IRS website that tells you exactly how much you can put in, which is less than $2,000. In my opinion, it’s so complicated that you may want to stay away from this and instead put money into minor account. Muslims, you know, that are investing with us, through the Amana Mutual Funds, because they’re Islamically-based and Islamically-principled, they are typically buying the Education Savings Account instead of the 529 plan because the 529 plan does not have any halal choices or Islamically-based choices within it. So, if you want to keep it in that way, then either go with the Education Savings Account or open up a minor account. The tax advantages are not as great on the minor account. The Education Savings Account, if you put in $2,000 per year you can grow this over time. There’s no deductibility right now, so you won’t get something back now, but as the money is growing over time, you would be able to pull out the money without incurring any taxes just as long as you have receipts for college or even pre-college costs if your child is going to a private school. So, this is another account that will help you plan for your taxes. And again, if you qualify for this, try to put all of it in this year in 2021 so that next year you can start off and put in $166 a month instead of writing a $2,000 check. $166 over 12 months is $2,000 and you can automate that here at Saturna and buy the Amana Mutual Funds. If you do put in $5,500 a year into a 401(k) or into any investment, right? We will get into talking about 401(k)s and IRAs. If you put in $5,500 a year, which is much less than the $19,500 you’re allowed in the 401(k) and is even less than the $6,000 you’re allowed to put into an IRA... but this is our calculation. At a 7% rate of return, you will have achieved $1.2 million by the time you’re 65. So, if you start at age 25 and you go all the way until 65—40 years of putting money into this retirement account—you will have saved up $1.2 million if you have this 7% average annual rate of return. So, just how much is $5,500 in 40 years? That’s $220,000, but it grew to $1.2 million because you started early and used the power of compounding. If you wait until you’re the age of 35 and you put in that same amount each year, you will have put in just $55,000 less than the first person but you will end up with less than $560,000. That’s less than half what the first person would have been able to put in. And get to. The final person waited until they are 45 and they achieved $238,000, according to this particular calculation. The good news is that if you’re 45 versus 25, you’re most likely making more income now, which means you can put in more than $5,500. The 25-year-old might be struggling to do that. The 45-year-old can potentially put in a lot more money, so instead of using time on your side, now you’re using the power of your increased income and your increased contribution. Let’s take a look at this from the view of Roth versus traditional. On a Roth 401(k) or a Roth IRA, if you got to $1.2 million, or the $559,000, any dollar that you withdraw at that point would not be taxed. So, you would have a tax-free bucket of money, which is very rare. Right? But if you had a traditional one, you took tax benefits along the way because maybe you were in a high tax bracket and you just wanted to save year after year. You wanted to save a little bit on your taxes. Once you get to retirement, you have this $1.2 million. That $1.2 million... any dollar that you take out will be counted as income. So, you’ll be taxed at whatever your income rate is at that time. So, you can make your decision how you want to go about this. The other thing that you can look at is maybe you started a traditional 401(k) many years ago. You never knew about the Roth. You could start to put in money into the Roth instead and have two buckets of money. So, when you get to retirement and you have a particular year that your income is not as high and you know you’re not going to be taxed as much, you can pull out money from your traditional 401(k) bucket and then in those years that you have a lot of income, perhaps, and you still need to pull out money, you can pull out from your Roth 401(k) so it won’t increase your income. Same thing for IRA, traditional or Roth, same principles apply there. This example here just tells you that if you have somebody that, you know, started at age 25 putting in $1,000 a year for ten years, so they saved up $10,000 at an average rate of assumed rate of return of 7%. By the time they are 65 they will have gotten to $112,000. But the second graph shows that somebody waited until they were 35 and they put in that same $1,000 but they did it for 30 years. So, they saved on their own $30,000 versus the first person that saved only $10,000 but started earlier. Both of them, at the age of 65, would end up with $112,000 and $101,000 respectively. So, you can see the power of compounding goes a long way. If you have not started already on your financial planning, you want to start today. You don’t want to wait for another year because you’re going to experience the same issue and it’s just going to compound itself and become more of an issue over time. Before we give you the final page on this, the reason why you want to save money for retirement... the reason why you want to save money for retirement on your own is that there are three legs to the retirement calculator. If you’ve heard a previous webinar of ours, you’ve probably heard this before. In the past, many people had pension plans that the company was paying for them. Nowadays it’s mostly government officials or high-level executives that get a pension pan paid by their company. The second part of the retirement is social security. And the third part is your own savings. Most of you do not have a pension plan. I don’t have a pension plan. What I have is a 401(k) that I have to save on my own and then I have... maybe I’ll get social security at the end... and the average social security check in America right now... 40 million people are receiving social security by the way, social security retirement. The average check is $1,558. That’s not enough for rent for a one to two bedroom apartment in most places in the country and you know, the cost or the amount that social security department will give you does go up, but sometimes it may not really make enough of a difference for you to be able to lead the kind of retirement life that you wanted to, which is why many people end up working in retirement. So, what you can do is you can solve some of these things by starting up an IRA account, Roth or traditional. You can go online to AmanaFunds.com, open up an account online. Or you can start one up at your company, a 401(k) if you haven’t done it already. And ask them if they have a brokerage account option within the 401(k) so you can buy the Amana Funds there. You can open up a Health Savings Account with us online, an Education Savings Account. The UGMA is a minor account. If you wanted to do any kind of stock purchasing, you can open up a brokerage account and then, our guest speaker today conducts financial planning. He along with Haitham Al-Sayed. And so, they can put together a plan for you, if you don’t know how to do this on your own right now. So, we have the investment advisory services and then we also have trust services, which we will touch on in just a moment. As I mentioned early on, we do have a guest today. Our Regional Manager for Saturna Manager and Financial Planner, Sameer Sarmast, who will take over for the next few minutes for us. He’s going to take over and then I’ll come back to wrap it up at the end. Alright, with that, Sameer, it’s all yours.
SAMEER SARMAST: As-salamu alaykum. Welcome. Hello, everybody. Thanks for having me, Owaiz. Thanks for sharing with us those important points. I’m sure all of you found something beneficial. Also, part of financial planning is not just investing your money, growing your money. Also, we must look at what is going to happen near the end of our life, whenever that is. It could be, you know, of course Allah only knows when we’re going to go. So, I’m going to get into wills and I’m going to quote the Quran here. Making a will is a duty incumbent upon a Muslim. Okay, that’s from the Holy Quran. And then, there’s a hadith that says, “It is not right for a Muslim who has property to bequeath, that he should pass two nights without have a written will with him.” Okay? So, that’s a hadith and it’s also something that’s important in our Deen, to make sure we are not only making our wealth but also spending it in a halal manner, spending it in a way that’s going to benefit our family and obviously our future, too. So, but then, what happens to that wealth when we pass on? So, the next slide will get into kind of what we can do. So, some other estate planning techniques are Donor Advised Funds. Now, these are charitable giving vehicles that are set up under the tax umbrella of a public charity which acts as a sponsor to many funds. So, what does that mean? Basically, you sign up for a Donor Advised Fund, you basically make a donation in the current year and then you get a tax receipt for it, but then you could actually spread that money that you donated through different charities as long as that fund participates in those. So, you could donate now and decide the charity later, right? And the investments are flexible, so you could choose, you know, most of the investments with us, obviously, are Sharia compliant and there are others out there. But that’s a choice you have to put it in a halal manner, invest it in a halal manner, and give to the charity when you feel like it. Okay? The other important thing is IRA beneficiaries. A lot of times, we open accounts—IRA accounts—and it always asks, “Who do you want to name a beneficiary?” Right? So, it’s very important to do that. And if you haven’t done it, normally what would happen is the beneficiary becomes the estate of the individual, okay? So, the issue with the estate is now you’re putting it in the court’s hands to decide how that money is going to be divided up. So, now, assuming you don’t have a will, or have a will, the beneficiaries will supersede the will, okay? So, for instance, Ahmed puts his wife down, his spouse, and then his kids, the money, however you divide it, and you can select the percentages... you know, you want to give your wife whatever, 50%, and then let’s say you have two kids, 25% and 25% you could split it amongst those two kids. So, it’s very important to do that, that way that retirement money goes to your family members or whoever you decide, then. You could also put a charity. Required minimum distributions. This is something that when you hit 72—it used to be 70 and a half but due to the CARES Act recently—that has changed to 72. So, what you should do is keep an eye out on that and what a required minimum distribution is it’s a minimum amount that you need to take out from your qualified retirement accounts. If you don’t take it out, there will be a penalty so just keep that in mind. If you are 72 and above, you just want to speak to your financial advisor, speak to the company you’re working with that has your investments and figure out what that amount is. Why do we have to do that? Why does someone need to do that? It’s because Uncle Sam needs to get paid. Uncle Sam needs his tax money. So, it would be nice if you could just let that money keep growing tax-free or tax-deferred, right? But they want their money so that’s very important to pay attention to that. So, we are going to talk a little bit about trusts. What I recommend everyone do is, you know, if you have a family attorney or if there is somebody that handles trusts in your community, to have a discussion with them. The most popular is the living trust. It could be revokable or irrevocable but there are many different kinds of trusts, and the best kind of trust will depend on your situation, your family structure, what decisions you want to make in that. Okay? There’s a charitable one. There’s a remainder, lead, and annuity. And I’ll have some information if you email me. I can send you, obviously, also the lawyers that work with this in a Sharia compliant manner. Also, minor trusts. So, why do people set up trusts, right? They are good for asset protection. If something happens to you, you don’t want, again, the courts deciding what happens to your assets. Right? You don’t want that. You want it to be directed the way you wish for so that’s very important, especially let’s say, if you have a lot of assets like properties, right? A lot of real estate, maybe. You have money here and there that you want to direct and again, you can name, obviously, family. There’s an executor that’s involved in a trust. The executor decides kind of where things go, okay? And the trustees in the trust. So, there’s also capital gains tax involved but setting up a trust doesn’t avoid estate taxes or any other taxes, but there are strategies there within a trust that could help minimize that, right? There are also foundations, special interests, controlling assets. Essentially, it’s controlling assets from the grave. So, you’re giving direction while you have passed on. It does avoid probate but not like I mentioned here, state or inheritance tax. Probate meaning the courts. Now, there are three parties involved in a trust. The grantor, the trustee, and the beneficiary. And so, right here, we have an average of $1,500 as a cost. Unfortunately, I don’t think that’s the case with any trust these days. Trusts can range anywhere from I would say $2,000 to $5,000 depending on how complex it is. So, definitely, again, we have a list of attorneys that we can refer you to throughout the country that deal with Islamic inheritance and trusts. Okay. So, touching back on wills. Wills do not avoid probate or taxes. Okay? When would you choose a will? What is good for you? A will or a trust? Again, that’s going to depend on the size of your assets, what assets you have, and how you want to distribute those assets. So, what I tell folks is, when they ask me, “You know, should I do a will or trust?” We look at the overall picture, right? We want to see what they have. You would choose a will when you, you know, you don’t have much. Maybe your assets are small. Maybe you have a few accounts. IRA, 401(k) accounts. You know, you probably could do a will in that case. But let’s say you have properties, rental properties, a vacation home, and then you are blessed with many children. That would be a reason why you should consider a trust, I think. Wills should always be used for guardianship of children and durable power of attorneys. And power of attorneys are there to help you... Let’s say you’re unable to make decisions. Maybe you’re in the hospital or something or maybe you’re incarcerated. Things like that. That’s where you would get a power of attorney. Just know that a power of attorney ceases upon death. So, if you set up a power of attorney and then, God forbid, something happens, you pass away, whoever your power of attorney is, that person you appointed cannot use that once you pass away. So that’s why the trusts and the wills are very important. So, durable power of attorney is while you’re alive. There are Islamic wills available. If you don’t have one, you can check out ISNA.net. There are other ones out there. There are attorneys that do it. Most of the attorneys that we work with will do a will. They do have, like, online resources for Islamic wills. Okay? If you haven’t done this, I would recommend you do this at a minimum. And then, some states may accept handwritten wills. For the most part, you need them signed and notarized by somebody so something should keep that in mind. Again, consult an attorney about that. A trust attorney. Okay, so other estate planning techniques. Making gifts, rights? So, there’s... when you do give a gift, there’s some tax write-offs that come with that. Children, grandchildren, or anybody. You can do up to $15,000 per person or $30,000 per couple. And then they do have, for minors, the UGMA and UTMA accounts. So, this is another type of account you can use. Let’s say—and Owaiz mentioned Roth IRA and he mentioned ESA—but let’s say your income is above that limit. This is a kind of an account that you could set up. Now, some of you might be familiar with this structure because, you know, when you have young children and you open a bank account, usually it’s this kind of account that you open. Let’s say you’ve saved up some money from a birthday or aqiqah or something. You’re normally opening up an UTMA or a UGMA account. So, the structure is very similar. And then, the property, the money becomes the property of the children at the age of majority. Right? So, each state has a different age. It could be 18. It could be 19. It could be 21. You just have to check with your state. So, that becomes their property, okay? So, that has to be retitled in their individual names. And then they have a reduced tax rate. So, when it comes out of the account, right? Let’s say you saved up some money and now they want to buy a car. They want to use it for college. The tax rate is taxed at the kiddie tax rate. And that tax rate could be zero. It could be 10%. Around that. I would say between 0% and 15% is the tax rate.
OWAIZ DADABHOY: Okay. So, I think we are going to get to the recap in a second.
SAMEER SARMAST: Okay.
OWAIZ DADABHOY: Thank you for that, Sameer. Just a quick note to everybody is to definitely consult with your tax professional. Search it up on your favorite... like Google or Yahoo or whatever... to make sure that you understand this fully before taking the first steps. You can also ask us questions. We will send you information. Actually, we will provide the last slide which will show you our contact information. You can just call Saturna, as well. We will provide that number in a second. I’m going to answer some questions. Let me pull up the questions here and before I do that, you know, Sameer also mentioned about getting a trust. Right? A trust or a will. And in many cases, you’re going to need a trust and he outlined the reasons for that. We do have some attorneys that specialize in setting up trusts according to Islamic principles because it’s very specific. It’s actually in the Quran. It talks about how much a spouse would get, how much the children would get, and if there are any other inheritors as well. The money is well spent. I had mine done a few years ago and it did cost a bit of money. A little bit more than what Sameer quoted locally here in Southern California. But as soon as I did it, I felt so much better because my children were maybe five or six years younger than they are now. And so, it talked about who would take care of them if both spouses were to pass away at the same time. Also, you know, what would happen if there are any health issues, you know, directives for that. And also, puts in trustees. Right? So, who is going to actually have the kids? Who is going to take care of the finances? So, we set up two different people for that. Saturna Trust Company also has a service. I’m actually now the President of the Saturna Trust Company. And so, what we do is if you have a trust set up already and you have a family member as the trustee but really, they are having difficulties, you know, maybe understanding financial services. Instead of having them as the only trustee, you could have Saturna Trust Company also become a trustee and so at the triggering point of death in the family, Saturna Trust would be there to help you and actually administer the trust at that point, according to your wishes. So, we are going to take a few questions here. We had a good number of them. The first question is if you have a 401(k) can you still have a traditional or a Roth IRA? Is there a maximum income limit to set up IRA accounts? Yes, you may have both. You could have a 401(k). Let’s say you have a traditional 401(k) a qualified for a Roth IRA as well, you can have both at the same time and that’s according to the limits for each one. $19,500 for the 401(k) and $6,000 for the IRA. Again, if you’re 50 or above on an IRA or on a 401(k), you can put in more money. In an IRA, you can put in an additional $1,000. On a 401(k), you can put an additional $6,500 both this year and next year. There are income limits. On a Roth IRA, I believe the number is somewhere in the $200,000 range and on a traditional IRA it’s between $66,000 for a single and $105,000 for a joint. But you need to check these numbers because it would say, for example, if you have access to a 401(k) at work, then you could only deduct the traditional IRA if your income is lower than this. If you don’t have a 401(k) option at work, then your income can be higher or maybe no limit at all to still get the traditional IRA deduction. So, please check that either with your tax professional or search yourself. And then the Roth IRA, they have limits on there because they don’t want everyone to benefit with the great option that it is. The great option, again, is that you can pull out whatever you put in without any tax or penalty at any time. And then also when you’re growing this money over time and you have—let’s say—a large nest egg, you won’t pay any tax on that whatsoever. I addressed the second question which was, “What is the catch-up contribution for 2021?” On a 401(k) it’s $6,500. So, if you’re 50 or above, you can do that. Can we use a minor account or a UGMA to contribute to an ESA? And can Amana or Saturna facilitate this? That’s a good question. I haven’t gotten that question before. That means that if you have, let’s say, a minor account at a bank, can you use that for an Education Savings Account? I don’t see a reason that you cannot because we’re just going to ask you, you know, to pull the money out, right? So, you give us the account number, we pull it out for the Education Savings Account. For the person that asked that question, if you call (360) 734-9900, again (360) 734-9900. You can ask that question and they’ll either give you the answer or get back to you on that one.
SAMEER SARMAST: Now, I would also say, I mean, the limit is $2,000, right? So, as long as it falls below the $2,000 or under for that, per child, and also the income limit.
OWAIZ DADABHOY: Yeah. And the reason I didn’t give a complete straight answer on that is because, remember, the UTMA money or the minor account money is the property of the child and so, we’re talking about pulling it from an UTMA to go to an ESA. It should not be an issue because both are for the children, but for added, you know, secure reasons, for myself, I’m asking you to make that call so we can give you a definitive answer on that. Is the Education Savings Account phase-out amount of $190,000 gross or adjusted income? That is modified adjusted gross income.
SAMEER SARMAST: MAGI.
OWAIZ DADABHOY: Yes, modified adjusted gross income. A traditional IRA and Roth IRA have income limits, correct? Yes, they do. You can do a simple search for the kind of IRA that you want. Just put in “traditional IRA contribution limits 2021” on Google and you’ll get the answer for that because there are a number of different answers to this, so it’s better if you look at the chart that you’ll find on Schwab and AARP and, I mean, there’s a bunch of them that will have this very good information in a chart. The Health Savings Account, is it only for high deductible plans and not for HMOs? That is correct, any high deductible health insurance plan that reaches a certain amount of deductibility, or excuse me, not deductibility... the actual amount that you have to contribute for the plan, right? So, let’s say first $3,000 you have to pay. So, once it hits the number that is qualified, then you qualify. So, if you go to your health insurance provider and simply ask them, “Am I HSA qualified?” they will tell you. Is there a way to set up a 403(b) through Saturna using Amana Mutual Funds? We offer a 401(k) for employers. So, employers large and small, we currently manage north of 250 of them throughout the country. And a 401(k) and a 403(b) are not vastly different. The reason people used to start up 403(b)s for their entities is because historically, the pricing was better. But we have eliminated that issue because our pricing is typically better than anyone else’s on 401(k)s. So, talk to us about that. We’re going to give you the contact information. You can ask us more questions on that. The last question that I see here is if one currently has a taxable Amana Mutual Funds account, can they change it to another type such as a Roth IRA? What you could do is you could sell some of your funds and then take the money into your checking account and then from your checking account you could contribute to a Roth IRA. You can absolutely do that. You know, you would take the tax consequence now, if you have a gain, but you know, if you’re early on, that may make sense. If you have a traditional IRA, you can actually convert that into a Roth, but there are tax implications. But if you’re early enough on this, it may make sense. So, that’s math that you have to figure out. We’d be happy to answer some questions on that, as well. Okay. Another question came up and then I’m going to give you a recap and I’ll answer the question about Donor Advised Funds as well. Alright, so can you tell us a little about defined benefit plans? Can we have a Saturna account for this? We do have a solution there. So, on the last page, it’ll have our contact information and I’ll point out who you should contact for that. Alright, so I’m going to give you a quick recap here. We talked about IRAs, Education Savings Accounts, Health Savings Accounts. And again, the recap here is that we say to cap out all of your contribution limits. $6,000 for IRA, $2,000 for ESA, $7,200 for family plan HSA by the end of this year so next year you can start up automatic contributions for each one and not have to write one big check every year. On the trust side, we said to contact us if you need the names of trust attorneys. It is extremely vital that the Muslim community start to take this seriously because in some cases, people are passing away and then the court system has to determine who will get the money. And it takes time so then the children go to uncles and aunts’ houses. They don’t have money and the money doesn’t come to them. The house is in limbo. Take care of this before it’s too late. Make the intention now. Let me talk really quickly about charitable donations made in a tax-efficient matter. And we’ll talk about the Donor Advised Fund here, as well. We work with an organization called American Muslim Community Foundation. Now, what you can do is... let’s say you want to give $10,000 to your favorite charity. You’re going to either write a check or you’re going to send over stock. So, let’s say you had this company stock called Acme. And you bought it for $5,000 a couple of years ago and now it’s worth $10,000 and you happen to want to give $10,000 to a charity. What you can do is you can transfer the shares of Acme to the charity if they have a brokerage account. Many of them do now, through Saturna, actually. So, if you transfer the shares to them, to your favorite charity, they will give you a donation receipt for $10,000 and you will not pay capital gains on that $5,000 gain that you had. We said that $5,000 became $10,000. You don’t pay a dime in taxes so you’re saving, you know, at least $1,000 in taxes there. And you don’t have to account for it. It goes completely off your books. Let’s say that you love Acme shares, and you just don’t want to give up on them. Right? You can still transfer those shares out to your favorite charity and you can buy the shares again at the higher dollar amount. So, if you bought it at $20 a share and now it’s $40, you can go in and buy it at $40 so when you do sell it in the future, you have a higher tax basis. Let’s say, for example... we actually get questions from people, a lot of times business owners or people who had large bonuses in a particular year and they know that they are going to have to pay more taxes in April. They say, “What else can I do to avoid taxes? I don’t want to give so much of this to Uncle Sam.” One thing you can do is open up a Donor Advised Fund. Let’s say you’re giving out $25,000 in zakat or other charity every year and that’s what you need to give this year, but you need to get that tax receipt this year? You can open up a Donor Advised Fund, the organization we happen to work pretty closely with is American Muslim Community Foundation based out of Northern California. And you can transfer the $50,000 there. You can write a check or transfer cryptocurrency or transfer stocks or mutual funds there. And as Sameer mentioned, you don’t have to spend that money right away. Right? On giving to charities. You can spend your $25,000 out of that account to charities this year if you want to and then the rest of it next year or the year after or what not. It’s really going to depend on what you want to do just as long as you’re making sure to pay enough zakat each year, that should not be a problem. And then, lastly, we talked about once-a-year funding versus automatic monthly investing. Automatic monthly investing is definitely the preferred choice and that’s because you are dollar cost averaging into the market or into any fund that you’re buying. And also, you’re not having to write one big check every year so it kind of evens out your finances. If you don’t know which funds to purchase, you can go to amanafunds.com and take a very short quiz and the Amana Fund Selector will tell you what kind of investor you are. And then you can make a decision after that for which funds to put money into and how much. So, as you know there are risks on any kind of investments. I’m going to take a few questions here at the end, but there is risk with any type of investment. Even if they’ve all done well this year, you never know what the future holds and there’s also, you know, this disclosure here about rollovers. I’m just going to read the first part of it. While there are no account or transfer fees for IRA accounts invested in Saturna’s affiliated mutual funds, ongoing investments in mutual funds are subject to expenses. So, definitely check out the prospectus and rollovers are not right for everyone so just make sure what you’re doing when you’re making that transfer or contact us. And how do you contact us? You have the names and phone numbers and email addresses here. You can call Amana Funds directly at 800-728-8762 or the number I gave you previously. Or, if you want to have a financial planner, you can contact Sameer, who is on the Zoom meeting, or Haitham Al-Sayed who’s in Southern California. If you want to talk about 401(k)s, you can call Amjad Quadri or send him an email and he can help to get you started and answer your questions. And let’s see, I have a couple of questions here. I thought you cannot take advantage of donations when dealing with taxes. They moved to standard deductions. So, if you are already taking that standard deduction... this year they moved up the amount from three hundred to six hundred. However, some people do itemize their deductions and so those are the people that are really going to be advantaged through giving more money through a Donor Advised Fund or directly to a charity by transferring stock. At the very least, if you’re transferring stock, you’re not going to pay taxes on that money. Right? On the gain. Even if you can’t itemize it, you are still saving money on the taxes that you would have paid on the gain. Keep in mind, if you do give enough of a donation this year or next year, it might take you out of standard deduction. It might take you to itemized deduction. And so that could be more advantageous to you. Consult a tax person. These are some of the things that you want to accomplish. Get some tax benefits. Consult with them because the added time that you’ll spend with them on that could be very rewarding to you. So, we thank you all for being on. Sameer, do you have any final notes to mention here before we end the call?
SAMEER SARMAST: No. That said, I just want to wish everyone a happy and health holiday and new year, a prosperous new year to everybody. If you do have questions specific to your situation, just reach out to me.
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