Changing Retirement Rules
Will this latest legislation help secure YOUR retirement?
Happy New Year!
And a good Wednesday morning to you.
Maybe in another 2-3 years, we’ll have Secure Act version 3.0 to decipher…
But for now, let’s take a moment to cover some of the highlights of the latest Federal legislation intended to make retirement easier for Americans.
Back in 2019, we got the Secure Act.
And of course, our government isn’t going to miss an opportunity to come up with an acronym. In this instance, “SECURE” stands for Setting Every Community Up for Retirement Enhancement.
And now we have version 2.0 of this legislation.
The original 2019 Act raised the beginning age for Required Minimum Distributions (RMDs) from 70 1/2 to 72.
It also effectively killed the “stretch” IRA, among other things.
This latest 2.0 version of the Secure Act does a few things of note:
RMDs are now getting pushed back to age 73
And in 2033 they’ll be pushed back to age 75
Also related to RMDs, the penalty for missing an RMD is being reduced from 50% to 25%, and if the RMD is corrected in a “timely fashion” the penalty is further reduced to 10%
New retirement savings opportunities
New workplace 401k and 403b plans will automatically enroll new employees
Additional “catch-up” savings amounts for age 60-63
IRA catch-up contributions will now be indexed for inflation
New Roth IRA opportunity
You’ll now be able roll money from a 529 college savings plan into a Roth IRA without tax or penalty in certain circumstances (this is the most interesting part of the legislation to me)
There are some additional provisions to more easily access your retirement funds penalty-free in extreme or emergency situations
This “Act” is just a small piece of a much larger bill. If you suffer from insomnia, you can read all 4,155 pages here.
And for a 19-page “summary” of the personal financial and tax implications of this act, click here.
There are a lot of details and moving parts to this legislation. If you’re interested in digging further into this, here’s a good overview article from Humble Dollar.
But is this type of legislation REALLY “setting up every community up for retirement enhancement”?
I’m skeptical.
You don’t have to look far to find that most Americans have a pretty bleak retirement outlook.
Will legislation help here?
While I’d love to think so, I’m not holding my breath.
Everyone agrees that smoking is bad for you. But people - including some nurses and doctors - still smoke.
Even thought they know it’s bad for them.
Especially the doctors and nurses, right?
Preparing for retirement is the same in many respects.
I’d like to believe that many, if not most, people know they should save for short-term needs and long-term security, but clearly not everyone is saving enough.
Or saving anything.
Even though they know (I hope) it’s good for them and the people they care about.
There are those of you reading this who are taking personal responsibility - regardless of the legislative landscape - to prepare for a secure financial future.
You’ve been doing it for years. Or for decades.
But there are those who can’t seem to save for the future in any meaningful way.
I wish this weren’t the case, yet here we are.
For those of you who are on track for a comfortable and confident retirement, congrats!
Some of this new legislation will likely impact you to some degree - now or down the road - but I suspect it won’t fundamentally change your desire or willingness to continue preparing for an uncertain future as best you can.
What do you think?
Anything above jump out at you as a meaningful step to help more Americans prepare for a more secure retirement?
If you have questions or comments, simply hit reply or leave a comment here on the website.
Links & things
Not only is this the season for New Year’s resolutions, it’s also when the analysts, economists, and other talking heads emerge from their Wall Street offices to regale us with their predictions for what will happen in 2023. But be warned, they’re awful at making predictions. For more:
However, all is not lost in the prediction department. Rubin Miller shares his 2023 predictions and I couldn’t have said it any better:
And here’s my latest “planning in public” video where we continue to look at Lillian Lifestyle and the choices and considerations she faces:
Thank you, as always, for reading.
And if you have any questions or an idea for a future newsletter or YouTube video, I'd love your input.
Just hit reply - I read (and appreciate) every email you send.
Until next Wednesday,
Russ