November 2024
““In a society of super-sophisticated communication, we often suffer from a shortage of listeners.”
-Erma Bombeck
The 2025 IRA Contribution Limits - On November 1st, the IRS announced the retirement plan limits for 2025.
- The 401(k) and 403(b) maximum annual elective deferral limit has increased to $23,500.
- For individuals aged 50 and over, the catch-up contribution limit remains at $7,500.
- For individuals aged 60-63, a new higher catch-up contribution limit of $11,250 applies.
- The annual IRA and Roth IRA limits remain at $7,000, same as 2024. Those age 50 and older can contribute an additional $1,000 as a catch-up contribution.
- For traditional IRAs, the phase-out range for single taxpayers covered by a workplace retirement plan is now $79,000 to $89,000. For Roth IRAs, the range is $150,000 to $165,000.
Many people ask, when is the best time to fund IRAs and retirement accounts? Right away! If the idea is to get as much money as possible growing in a tax-sheltered way, then why wait? Early in my career we saw people rush to make a “prior year contribution” before filing their taxes on April 15th. Wearing our financial planning hats, we teach investors that they are better off not waiting and making contributions in arrears but rather funding the accounts right away. Doing so they gain one more year of tax deferral and hopefully one more year of growth.
Why do we have these limits anyway? Anytime something is really good, there are usually limits. The idea of an account that grows and the government keeps their hands off it was entirely crazy when proposed in the 70’s. Imagine the debates on how people would move all their money into those accounts. The government could go broke! So of course they limited it. Fast forward fifty years and a majority of investors are not even taking advantage of this “too good to be true” opportunity. We pay income tax, death tax, capital gains tax also known as investment tax, property tax, city tax, gas tax, and sales tax. I’m sure I missed some. Taxes are everywhere. When there is an opportunity to escape that and literally pocket the difference, we must take full advantage. That place is your retirement accounts. Too many people shrug their shoulders like it’s no big deal. It’s huge! It’s the biggest deal! It is one of the best free lunches around and that is why the government limits it.
Recently I returned from Japan. This trip was very different not only because of the distance involved (still recovering from that) but also because of the culture. The Japanese culture seems so very different from all the other parts of the world I have been, from the Middle East and throughout Europe. This makes sense when you consider that the Far East was isolated for so long before Magellan figured out how to get there, and even then the Portuguese kept the passage secret for years.
Much like Europe, we did not see many American vehicles. The reason for that would be huge tariffs placed upon many American products. With the recent tariff talk and the “unbiased” economists who have commented on how damaging tariffs can be to international trade and relations, none of them have dared to explain that most other developed nations already have tariffs on US made products.
There are many great Japanese companies. The most impressive of these may be TOTO, makers of the fabulous toilets that are often joked about. Know this, they are no joke. They really are awesome toilets. We did not see a competing toilet by any other company, anywhere. There are many companies you would recognize, car companies and the electronics companies, and even industrial names you would recognize. Nippon Steel is trying to acquire U.S. Steel as I write this.
Many US companies were also doing good business in Japan. Everybody had an iPhone - everybody. They were using Google and Google maps, and other US software. Uber was well used and very efficient. They have incorporated their local taxi services into Uber, saving jobs and easing competition in the process.
They are focused on jobs and service. Businesses and restaurants were often overstaffed by American standards. At one quick service restaurant, four workers were trying to do the job of one. My American business mind, always looking for ways to make things more efficient and profitable, immediately wanted to cut the staffing and revamp the production line. My mind is focused on productivity and profitability. Japan has gone decades where they continue to evolve technologically, while not making any real gains in their economy or capital markets. Some great companies like Toyota, SONY, and Honda have not provided any real meaningful returns for their shareholders. These are great companies, but their focus has been geared more toward jobs, service, and the product itself, much less on profitability.
As a consumer and a beneficiary of their service, it was greatly pleasing when compared to the often understaffed businesses we see here. The other refreshing thing was that tipping is not allowed. It can be considered insulting if you try to tip. Instead, I simply gave them some advice, buy low, sell high. The only reply I ever got was “wakarimasu,” – I don’t understand.
Have a super day!
Sincerely,
Brien Krank
Financial Advisor, RJFS
Senior Portfolio Manager
Managing Partner – Collins and Krank
Hear me on the radio Wednesday mornings from 7:35 to 7:55 on 1100am The Flag and 970am WDAY.
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