0:00:00 - Speaker 1

Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker-dealer member, finra, sipc Advisory Services through Cambridge Investment Research Advisors Inc. A registered investment advisor. Cambridge and Greenway Wealth Advisory are not affiliated. It's time to dive into some insider secrets of investing and retirement planning To make your retirement as smart and as elegant as possible. This is Money Chic with Sherry Rash.

0:00:31 - Speaker 2

Welcome into another edition of Money Chic Women in Retirement, with Sherry Rash and myself here to talk about the Secure Act 2.0. We're going to go over a couple of big items I guess some bullet point items, because there was a lot in the Secure Act 2.0. So we're just going to touch on some of the bigger ticket items that might affect folks along the way. And if you've got questions, as always, make sure you're reaching out to a qualified professional like Sherry to talk about how these changes may impact your journey. And, of course, sherry is a financial advisor and money coach at Greenway Wealth Advisory. Find her online at GreenwayWealthAdvisorycom. Sherry, how are you?

0:01:08 - Speaker 3

I'm good, I'm excited to talk about this. Actually, there's some really interesting pieces to this act that could be really beneficial to the population, so I'm excited to dig in, yeah, and there's a lot.

0:01:22 - Speaker 2

There was many, many, many, many pages to this thing. Like the government and lawyers tend to do right, they tend to get a little overzealous maybe I don't know, is that a good word?

0:01:35 - Speaker 3

That's a good word, yeah, so let's go over some big items.

0:01:38 - Speaker 2

Let's start with a big one. I guess we should probably set it up, sherry, with the Secure Act in general, passed at the end of 19. They did the same thing here, like literally days before Christmas, days before the final break, they passed the Secure Act I guess 1.0, for lack of a better term that kicked in in 2020. And then they just did this again at the very end of 2022, going into 2023. So and these things are staggered there's a lot of different dates when some of this stuff will start. So I guess we could kind of set that little preface us up. But the big thing in the initial one was they made it easy on the RMD age finally, after years. And now they've kind of made it weird again. So explain to us what they did with the RMD thing.

0:02:20 - Speaker 3

Yeah, so in the past RMD age was 70 and a half, so I don't know about your household mark, but we did celebrate half birthdays.

0:02:28 - Speaker 2

Oh yeah, like sometimes, like most people do, yeah.

0:02:32 - Speaker 3

Right, my Christmas baby in June, we would acknowledge her half birthday. So I was pretty good at calculating half birthdays for my clients when they were 70 and a half. But thankfully the Secure Act pushed RMD age back to 72. So we no longer had to figure out half birthdays.

0:02:50 - Speaker 2

Yeah.

0:02:50 - Speaker 3

But now 2.0, anyone born between 1951 and 1958, rmd age is now 73. And for those born 1959 and later, age is now 75. So it did push it back significantly for those born after 1959, which could be a good thing, because I often have the conversation with clients of why do I have to take this? I don't even need the money, what am I to deal with it? So for those that don't necessarily need the RMD to live or withdrawals from their qualified retirement accounts to live off of, this is welcome to news for many people.

0:03:34 - Speaker 2

Well, and it's an interesting conversation and we could get into some of the I don't know political or money ramifications if you want to.

But it's certainly one of those things where we know that we need we're spending money like crazy, we know that we're in serious debt, we need money. So people go and kind of go well, why would they push this back? Because it seems as though required minimum distribution, they finally get a chance to get their hands on some of this deferred tax money and I think, in my opinion, it's a win-win for them because pushing it back it allows the accounts to grow bigger. So if you don't do any planning or don't do anything, then when it is time to do those RMDs and I'm going to have you explain a little bit about how you pull money out and kind of what that looks like but if you go ahead and do Roth conversions, which has been on the table and very hot topic for the last, you know what 18, 24 months you're paying the taxes then too. So it's kind of a win-win for them. They get tax money one way, either now or a bigger one later. That's my thought anyway.

0:04:28 - Speaker 3

And also yes, and also one thing that's not clear is when to calculate your RMD. It's based on your age. So every age gets a factor and you take that factor and you divide your account value by that factor. So the factor when you're 72, the factor was a smaller number than 73. So one thing I'm not clear on but I think this could be beneficial for the government to collect their tax revenue, as you mentioned is that divide, that factor, going to be going to stay the same? So, if you look at the table, are we now just starting at 73 and that dividing factor number versus- Right, they kind of push in the whole scale.

0:05:17 - Speaker 2

Yeah, I got you.

0:05:18 - Speaker 3

So are you now, just although you're waiting, likely you're just going to end up withdrawing a greater amount at a later date?

0:05:27 - Speaker 2

Yeah, I would imagine they may. Just that would seem to be the easiest. But then again, when do they do anything? Easy, right? So they would just kind of shift it and say, okay, what was the table starting at the initial age is just pushed to the new age.

So I guess, to kind of clarify and keep it simple for folks, if you were turning so we're in 2023 here, this is late February that we're doing this podcast, sherry if you were turning 72, let's say in March or April or May, and you were getting geared up for your RMD, you do get the reprieve now of not having to do that until next year because you're for turning 73. If you're not, the easiest way to look at it is if you're already doing RMDs, you got to keep doing them, right, and if you are turning 72 this year, you get to wait till you're 73. And then after that, it's just, you know, whatever, your birthday falls under 73 or 75. So you and I fall in the 75 category, so we won't have to do that until 75. But who knows, they may have the security 3.0.

0:06:22 - Speaker 3

Who knows what it's going to be at that point, right Exactly.

0:06:25 - Speaker 2

Exactly so. That's the first thing. So just you know. If you're unsure about the RMD double check, again, easiest way to do it is if you're already taking them, you already have to pull them out. Then you got to keep doing them anyway. But if not, talk with your advisor, make sure or reach out to Sherry if you need some help understanding the changes. And they also added some stuff to the catch up contribution. So again, kind of the idea behind the Secure Act is setting every community up for retirement enhancement. That's what it stands for. Whoever has that job coming up with those things. And they're very serious about this right, like all the stuff and the changes that they've made in these two acts certainly say we want people to get serious about saving for retirement. So they added some more wrinkles, like the special catch up contribution. Talk to me about that.

0:07:09 - Speaker 3

Right. So right now, for anyone over 50, you can catch up to your retirement account. So contribute an additional $7,500 to your 401k 403b.

0:07:23 - Speaker 2

And we've had that in place for years. Like what you turn, 50, the number changes a little bit every year, but that's been there for a while.

0:07:29 - Speaker 3

Yeah, so we've had that for a while. So the current 401k 403b contributions is 22,500. They index it for inflation so they, you know, make it a little bit larger each year. So right now the total, with the catch up that you can contribute if you're over 50 is $30,000.

0:07:48 - Speaker 2

That's a big chunk of money. It is. It is, I mean what? 50 to 60, you did that for 10 years. I mean that's 300 grand.

0:07:55 - Speaker 3

Yeah, yeah, so that's a really great way to catch up your retirement savings. But anyone between 60 and 63 starting in 2025, don't quite know where they came with that.

0:08:10 - Speaker 2

They have some different. Some of these started right away. Some of these roll out at different times. So yeah, yeah.

0:08:15 - Speaker 3

But for anyone that's between 60 and 63, starting in 2025, your catch up contribution can actually now be $10,000. That $7,500.

0:08:28 - Speaker 2

And back to the weirdness. Why just the 60 to 63? Why not just go 60 to 65?, Like when Medicare starts or something?

0:08:36 - Speaker 3

Right or for as long as you're working, why yeah?

0:08:41 - Speaker 2

So it's, but again another $10,000 on top of you know, I mean again, whatever the max out is Right, yeah, I mean it's a nice way to, especially for many folks who do walk into financial advisors office. A lot of us don't get serious, we don't start thinking truly about retirement until we cross the 50 threshold, Right. A lot of us do that, and so it is nice to have these options there so that you can, when you're sitting down with someone like yourself, Sherry, and you say, okay, the kids are off the payroll, you know this, that and the other were in pretty good shape or making the most we've ever made it does, it is a good time to start sucking extra away. So it is nice to have these options.

0:09:17 - Speaker 3

It's nice that they allow it. It reduces your taxable income, so that's also a help if you're you know if you're able to contribute more. So that it's. It's a good thing all around. But yeah, some of these ages and dates and when this all starts, you kind of wonder. But that's all right, it's very weird. It's available.

0:09:35 - Speaker 2

Well, you know a lot of what you do and we talk often here on the show it's money, chic, women and retirement. Well, a lot of focus sometimes is obviously going to be around kids and legacy planning or college planning or, you know, things just around the family, right? And so a nice option that they put in, which I think surprised a lot of financial professionals, is this 529 to Roth transfer option that was added in there. How did you feel about this and can you explain this? This is great.

0:10:04 - Speaker 3

I'm shocked at this. To be shocked in a good way, this was actually quite exciting.

0:10:09 - Speaker 2

Right.

0:10:10 - Speaker 3

So what this section allows is if you have a 529 for a child, grandchild, a beneficiary, and let's say they don't go to college or you don't use all of the money that you saved in the 529, you can roll that money into a Roth IRA in there for that same beneficiary. That's huge, because that is a conversation that comes up every time we talk about 529s with my clients. Well, what happens if I don't use all the money?

0:10:44 - Speaker 2

Right, little Johnny or little Susie, you start to set up the account form. When they're I don't know, when they're growing right, you fund it and then either they don't go or they don't use it all you had to what? Pull it out and pay the penalties, right?

0:10:56 - Speaker 3

Right, pull it out, pay that. You essentially had a tax deferred investment for however many years.

But then, you pull it out, pay the taxes and the penalties on it, but now you can roll this over to a Roth, which I just think is. And the fact that it's a Roth too is so interesting because, as a reminder, roths are funded with after-tax dollars but then grow tax deferred and then are withdrawn tax-free. So it's not even as if the government is going to get tax revenue from this, this account that's growing so I mean, it's a great way to get started right.

0:11:32 - Speaker 2

It's a nice leg up for them.

0:11:34 - Speaker 3

Yeah, so some of the rules with it is that the 529 has to be in place for 15 years, so it's not as if you can open one up today and roll it over to a Roth tomorrow.

0:11:44 - Speaker 2

And that might sound daunting, sherry, but I mean again, most people start these like with a kid or a grand kid, when they're fairly young anyway. So 15, I mean kind of get the clock ticking, so to speak. Right, if you're going to start one, start one when they're born, or four or five or whatever, and by the time they're college age you're there anyway.

0:12:00 - Speaker 3

And they have to have earned income in order for you to contribute to the Roth.

0:12:05 - Speaker 2

So they have to have a job at some point right, they have to have, they have to have. Basically, they have to have skin in the game. Right, they have to have a job.

0:12:12 - Speaker 3

They have to have a job, and that's not necessarily a career. It's a job. So let's say you opened one up for little Johnny when they were born right. And now he's working in the pizza shop and he's earning some money with that, and maybe it's likely he's getting a scholarship or maybe not going to college. Hey well, he's working in the pizza shop, he's has earned income. Let's start rolling some of this Roth out now, because it doesn't look likely we're going to use this 529 in full anyway.

0:12:42 - Speaker 2

Yeah, and there's some money limitations and things too. There's some nuances, like they typically do, right.

0:12:48 - Speaker 3

There's some nuance. So you can only roll over each year the max contribution amount, which is $6,000. So you can't roll 100 grand out of the 529 into a Roth in one year. It's $6,000. And it's only up to $35,000. So still not that I mean it's $35,000 of potential tax-free money for growing for retirement. I'll take that all day. Yeah, it's fantastic.

0:13:18 - Speaker 2

Think about that time of the life, of your life, right? So let's say, this is for your kid or grand kid, right, they go to college. Maybe they don't do, you know, whatever the case is going to be and things are different. Well, now they've got a retirement account already built and they're in their what 20s, right? So they possibly have up to $35,000 in a retirement account, and so you can kind of plant that seed, and I think that, again, that's the idea I think behind a lot of these pieces of the Secure Act is get that seed planted to say look, start preparing for your future self, right, you know we got to do these, but do this thing because it's just only going to get harder. I think that definitely a signal from the government that we've got to take care of ourselves in the future.

0:13:59 - Speaker 3

Yeah, so maybe not rely on necessarily the government programs and social security and all of that. We're going to give you some more opportunities to save for retirement. So you're not as dependent on us. So, yeah, that might be a bit of a warning signal to us. A little bit, a little bit, that's all right, it's still good. This is still great. I think that's some good stuff in there.

0:14:18 - Speaker 2

Yeah, there was a lot really around Roth in general too. Right, there seemed to be a lot with company Quite a bit, it seemed to, in bringing company sponsored plans into alignment A lot of things there with allowing companies to do more on the Roth side.

0:14:34 - Speaker 3

Yeah, I was on a webinar going through the Secure Act in detail and the presenter and I love this called it the Rothification of America. So the Rothification of America. There was a lot about Roths in this Secure Act. So now many employers offer Roth 401ks. So, instead of contributing to your 401k with pre-tax dollars, grow tax deferred. Then when you withdraw, you pay taxes.

You can take advantage of the Roth 401k, which is contribute with after tax dollars, grow tax deferred and potentially withdraw tax-free. But before the employer contributions or the employer match was still going into pre-tax. Now the employer can contribute to the Roth, which is so awesome because it's free money coming to you from your employer that is going to grow, tax deferred and potentially withdrawn tax-free in retirement. So I think that is so awesome.

0:15:37 - Speaker 2

Yeah, another nice little win. And along those same lines with company stuff they also did. And I think this, maybe this is going to go towards the whole settling the back and forth of the student loan, forgiveness and the polarization that comes with that and so on and so forth. So they add a little wrinkle in there as well. For let's say again, we'll just use little Johnny or little Susie and they get out of college and they're working and they're paying back a sizable student loan, but they can't afford to pay the loan and also save for retirement, they can't afford to contribute to their account. Well, they've made an option in that for companies that if they would like to, they can do a company match, which is kind of interesting.

0:16:18 - Speaker 3

So explain that a little bit. It is. This is very clever. So for, like you said, young people graduating college or even people in their career, depending on how much education they received, they may not be able to contribute or as much as they'd like, or at all, to their employer retirement plan.

0:16:37 - Speaker 2

Yeah, it's like you got like a $300, let's say, student loan payment or something, right?

0:16:41 - Speaker 3

Yeah, yeah. So with those sizable student loans you can now, if you show your employer that you are contributing to your student loans, that can actually count as a retirement account contribution for the purpose of getting your employer match. So you say, hey, employer, I'm, in lieu of contributing to my retirement, I'm paying off my student loans. They'll say okay, great, and then they use the match calculation to then contribute to your 401k on your behalf.

0:17:13 - Speaker 2

On your behalf. Yeah, so you don't get both money. You don't get, obviously, what you would have been putting in there plus the match, but at least you're getting something.

0:17:20 - Speaker 3

You're getting something and you know that's a great. Employee benefit is a 401k match. But if you're not participating in the 401k in order to get the match is a benefit you're not able to take advantage of. So now you can have that employer benefit. I will say from what I've heard, just because that these rules have are in effect via the secure act.

It does take some time in order for companies and financial institutions to catch up with this. So it might not, you know. You could approach your HR and ask them like what's your plan for this or how are we going to go about it? This is news to them as well. So they're figuring it out on their back end. How are we going to do this and provide these benefits? So, although it is available via law, it may not be available yet through your employer, your 401k.

0:18:13 - Speaker 2

Yeah, that's a great point and a lot of these there's again. There were what like a thousand pages. You know this was part of that omnibus bill thing that they passed again at the end of 22 that 4,000 page, whatever $1.7 trillion deal. But there's a lot of stuff in there and there is a lot of rollout date. Some of the stuff is effective immediately in 2023. Some, as we mentioned earlier, some kicking in 24, some 25, some 26, some all the way up to 2033. So there's a lot of little nuance in there. So it's certainly worth, you know, having a conversation with your financial professional, your HR, your tax professional, whatever it is, to see how the Secure Act may affect what you've got going in, whatever stage of life you're in.

0:18:57 - Speaker 3

That's right. Yeah, it's understanding what's available now. Working with your professionals and how this can positively benefit you is definitely a smart thing to do.

0:19:07 - Speaker 2

Yeah, so a lot of good stuff in there and we'll wrap it up with this. The first Secure Act. A lot of financial advisors were annoyed. I guess the gotcha was the removal of the stretch IRA, which we've talked about here on the podcast before, and so that one and there's, and they oddly enough they didn't provide any more clarity to that rule, which is now three years old from a tax side of things, than they did before. But overall, any gotchas on this version, anything that you feel. Overall this is a pretty good, you know new wrinkle. What's your take?

0:19:42 - Speaker 3

In general, I like a lot of these changes, I think, especially with the student loans and the company. That's pretty creative thinking on behalf of our lawmakers, which we can't always say that I love the Roth, I love the 529 to Roth.

I think that is so cool because that again, like I said, that comes up a lot whenever I'm opening up a 529. So I think that that's fantastic. So a lot of this I like. But you know it's a big bill, so we still need to dive into it deeper to know exactly what's in it.

0:20:17 - Speaker 2

Yeah, and I think a lot of advisors do like more time on the RMD side for many retirees because you, like you said, many of them say, hey, I don't need the money. There's some changes, a few changes with the QCDs. It's still in place. I think they raise some limits, things of that nature in case you're charitable minded, but there's a lot of little nuance. So, if nothing else, it just gives you more time to plan right. So from the RMD age, from that required minimum distribution age, if nothing else, it gives you more time to strategize with your advisor on how to be efficient with these accounts, especially if you've got, you know, these large, you know million dollar 401ks or whatever the case is, how to get more tax efficient with. That gives you time.

0:20:56 - Speaker 3

Exactly Yep.

0:20:58 - Speaker 2

All right. Well, thanks for hanging out and explaining some of the secure act with us, Sherry. We always appreciate it and we'll be back with more of the podcast. As always, we do a couple of these a month, so feel free to subscribe to us on whatever podcasting platform app you like and just type in money, chic, women and retirement in the search box of you know Apple podcast or Google podcast or Spotify. You can find it that way. You can also just stop by Sherry's website A lot of good tools, tips and resources there and, of course, you can subscribe to the podcast that way. At greenwaywealthadvisorycom, get yourself on your calendar, ask some questions, whatever the case might be. Again, greenwaywealthadvisorycom For Sherry Rash. I'm your host, mark Killian, we'll see you next time right here on Money Chic Women in Retirement.

0:21:45 - Speaker 1

Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker-dealer member, finra SIPC advisory services through Cambridge Investment Research Advisors Inc. A registered investment advisor Cambridge and Greenway Wealth Advisory are not affiliated.

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