Secure Act 2.0 (What Retirees Should Know)

Secure Act 2.0 – a grand retirement bill with over 4000 pages is set to pass and this includes raising the required minimum distribution age for retirees.

In this video we discuss:

1. The new age bands for RMDs.

2. Other significant changes including retirement plan “catch-up” contributions.

3. And, a surprise addition that would allow transferring 529 college plans for your children or grandchildren to Roth IRAs.

Secure Act 2.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Click here to watch:

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Full transcript:

SPEAKERS

Alex Okugawa & Anthony Saffer

Alex Okugawa 0:00
Secure act 2.0 A grand retirement bill with over 4000 pages is set to pass in. This includes raising the required minimum distribution age. Today we’re going to discuss what pre-retirees and retirees should know about this bill, including the new age bands for required minimum distributions, additional catch-up contributions into retirement accounts for your last push into retirement, and a new surprise, which is the ability to convert some 529 College account money into a Roth IRA potentially for your children or grandchildren. Stay tuned. Hey, there, it’s Alex and Anthony from One Degree Advisors, and we help you gain confidence in your retirement. So Anthony secure 2.0 is set to pass before year-end. And it’s been in the works for many, many months. We published a video of the potential changes back in April earlier this year, but now we’re going to provide some of the latest updates on what may be important for retirement planning. And there is a lot in this bill. I mean, I think you put here it is 4155 pages. So some nice light bedtime reading for folks. And we’ll post the link down below if people really would like to read it. And honestly, it’s likely your congress rep has not read it yet. So you can be the expert in your district. If you do choose to read it.

Anthony Saffer 1:21
Yeah, absolutely. Well, hit on three highlights really. So RMDs. Currently, if you’re age 72, or when you hit 72, you need to take out a distribution from your IRAs, that age is changing. The second thing with retirement contributions is there’s currently a way for as you get past age 50, then you can make catch-up contributions, that is changing as well. And then the newest addition, which was a surprise, is 529 college plans can be converted into Roth IRAs, perhaps our viewers have those for their children or grandchildren could be a valuable strategy.

Alex Okugawa 1:54
Yeah, that could be a valuable strategy for folks that have these 529 accounts for their children or grandchildren, children, but let’s start with the RMD age increase.

Anthony Saffer 2:04
Yeah, so most immediate is if our viewers are turning age 72 next year and expecting to start their RMD, you actually have a year’s reprieve starting at age 73. This will continue the age of 73 for 10 years. So those born from 1951 to 1959. The starting age will be age 73. Now there is some discrepancy in the text from what we’ve read where people were born in 1959. Specifically, it’s a little bit unclear. So I would make sure to pay attention to that as the laws passed. And for those born later than 1959, the age will actually go up to age 75. Now, if you’ve already hit your RMD, beginning age, you’ve already started it already, there’s no change to that.

Alex Okugawa 2:48
Okay, let’s go. Now, there are some additional changes that we’ve written down here. So if you have money, like in a Roth 401K, you do not need to take the required minimum distributions. So I mean, I think this makes a lot of sense. This matches the current Roth IRA rules, which again, the previous rule, just kind of, I think, confused people, they also decrease the penalty for missing an RMD, in half. So it was a whopping 50%. And now it’s a less whopping 25% and potentially reduced to 10%. If the mistake is fixed, in a, quote, timely manner. The other thing is qualified charitable distributions. And again, a qualified charitable distribution is the ability to give money directly out of your IRA to charity, it’s a great tool that we recommend a lot to our folks who do give, the current limit is $100,000 per person, and this amount is going to start receiving increases as well.

Anthony Saffer 3:46
That’s right. So let’s go on to number two, which is which has to do with retirement plan contributions. And specifically, let’s start with catchup contributions, age 50. And above there is that ability to kind of supersize your contributions. Those catch-up contributions for IRAs and 401K’s will start receiving yearly increases, that’s a good thing. People specifically in the age bracket of age 60 to 63 would actually be allowed to contribute a bit more. The way it’s written is $10,000 or 150,000, of whatever the typical catch-up contribution amount would be. Catch-up contributions also must go in as Roth contributions above a certain income limit. So if you’re earnings in 2024, for more than $145,000, they must be Roth contributions. And then lastly, SIMPLE IRAs and SEP IRAs. If someone’s involved in contributing to those you’re allowed to now make Roth contributions. Do pay attention to when these start some things start at 23, some at 24 and 25.

Alex Okugawa 4:49
Now, I know one of the most interesting dynamics where we’ve seen in this bill so far is the ability to convert some of the 529 College Savings money into a Roth IRA, this is really a brand new idea and something we haven’t seen before.

Anthony Saffer 5:03
That’s right. So this could be a good strategy because with a 529 college savings plan you’re contributing to get the tax-free benefit, when you go to take it out the Roth is basically similar. So adding money to a college plan, and then being able to basically continue that compounding growth into a Roth IRA. If the money’s not needed for your children or grandchildren can be a great retirement benefit. We’ll go ahead and put it up on the screen here. There are some restrictions. It’s not just an unlimited type of thing. So you really want to pay attention, there are limits. There are some look-back periods where the account has to be set up by at least 15 years, definitely want to pay attention to these restrictions.

Alex Okugawa 5:42
And we posted a previous video of three strategies for an RMD that you don’t need, we’ll link that post above especially again, this is becoming very important with all these changes to arm these coming down the road. Once again, this is Alex Ogawa from One Degree Advisors. And if you’d like to learn more about how we can help you with your retirement, visit our website at onedegreeadvisors.com/getstarted.

Transcribed by https://otter.ai

The One Degree Blog

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