Check out Jeremy’s latest podcast on retirement planning by listening on “Apple Podcasts” or “Google Podcasts” or read below for How The Secure Act 2.0 Affects Retirement.

[123] – Out with the old and in with the new! The new Secure Act 2.0 promises to bring changes to tax and retirement plans for those aged 50 and above.

In this episode, Jeremy Keil speaks to fellow financial advisor Jeffrey Levine who wrote a comprehensive 12,000-word summary of the Act. Jeffrey shares the most noteworthy changes that are sure to have an impact on individuals nearing retirement age as well as those who are already retired.

Jeffrey discusses:

With the original Secure Act 1.0, Congress still saw that more needed to be done to preserve Americans’ ability to save for retirement.

There has been a decline in pension plans where individuals were not responsible for making sure they had enough of their own assets to fund their own retirement since the 70s, and the Secure Act 2.0 has implemented some changes towards starting to reverse that decline.

It still has a long way to go, but it’s a starting point for change, and has over 100 changes!

A big one many people have asked about is the backdoor Roth IRA move, the ability for high earners to put money into a traditional IRA and then move it over to a Roth IRA. High earners can still do that.

The biggest thing that didn’t change is that the Secure Act 2.0 did not make the Secure Act any simpler.

Jeffrey Levine wrote a summary to help simplify the changes for other financial professionals and individuals alike. Some of the most important changes that were made are ones that can affect those who are 50 and up, and close to retirement or already in retirement. 

These changes include changes to the required minimum distributions, qualified charitable distributions, and catch up contributions.

The way required minimum distributions (RMD) work now is if you started taking them before 2023, there is no change for you. However, if you turn 72, basically for the next decade starting this year, you actually don’t have to start your required minimum distributions until you are 73. Ultimately, those who were born in 1960 or later will see their RMD pushed back further to age 75.

With your RMD pushed back, it gives you more time to start paying taxes on your traditional IRA and 401k accounts while you’re in a lower tax bracket before your required minimum distribution deadline. It’s always better to minimize the impact of taxes on your assets for retirement.

Another change for required minimum distributions in the Secure Act 2.0 is a reduction of the 50% penalty if you miss an RMD.

The reduction might seem like a good thing, but it means the IRS will be less likely to forgive the penalty than they were previously because it’s not so egregious now. So, in the end, if you miss an RMD, you’re more likely to have to pay the penalty now that it’s smaller.

A QCD, otherwise known as a qualified charitable distribution, is a special way for individuals who are 70 and a half or older to move money directly from their IRA to a charity.

Even though the RMD age is now higher at 72, 73 or 73 depending on when they were born, the age marker for a qualified charitable distribution is still 70 and a half.

This isn’t a big deal for people who do itemized deductions, but not many people are eligible for a benefit from doing itemized deductions. 

If you make a qualified charitable distribution, it allows you to keep that income going to charity off your tax return all together and in many instances helps you have a lower tax liability.

With the Secure Act 2.0, congress has made changes to catch up contributions for people with too high an income.

If your income is too high, you will have to use Roth accounts for catch up contributions beginning next year, in 2024. So, if your income is higher than $145,000, you won’t be able to make catch up contributions which are amounts you can put into a 401k, a 403b, or for individuals over 50, an IRA. Beginning next year, it will have to go to into Roth.

Additionally, there is a new catch up contribution limit beginning next year where individuals whoa re 60, 61, 62 or 63 years old will have an increased limit.

If you are 59 or 64, you won’t have an increased limit, but will still be able to make a regular catch up contribution.

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To learn more about the Secure Act 2.0, check out the resources below!

If you have any questions, feel free to contact us or our guest, Jeffrey Levine, using the contact information provided below!

Jeffrey Levine’s mission is simple; to never stop learning and to help simplify the complex for others so that they can apply cutting-edge strategies designed to help families keep more of their hard-earned money. Jeffrey had the incredible opportunity to help educate thousands of financial advisors, CPAs, attorneys, and consumers on IRA, tax and estate planning strategies. He shares his passion for tax-efficient retirement planning at national conferences, with professional associations, at CPA continuing education programs, through web-based conferences, as well as at universities, colleges and other educational institutions. Jeffrey is also the CEO and Director of Financial Planning of BluePrint Wealth Alliance, a registered investment advisor. Through our unique Four Walls Planning Process™, Jeffrey helps deliver easy-to-understand, yet thorough analyses – aka “blueprints” – to help clients make sense of their investment, tax, estate, and risk management goals.

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