7 Ways the Secure 2.0 Act Affects Retirement

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Episode Transcript

(00:00):
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(00:21):
fine financial planner Tracy Anton right hereon thirteen ten WIBA great website. I
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You can also schedule appointment right fromthe website at a time and a
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one fifteen forty nine. And speakingof certified financial planner, Tracy Anton,
she's with us now. Tracy,how you doing today? I'm great,

(01:07):
John, how about you doing reallyreally well? And we are going to
be talking about Secure two point zeroand of course there was a lot to
it, and we're going to specificallybreak down seven ways that Secure two point
oh maybe affecting your retirement and Tracy, what kind of brings this conversation about?
Well, I think some people havequestions about still about the R and

(01:29):
D age because that was one ofthe big things that happened with Secure two
point zero, and Secure two pointoh is just really a continuation of what
they started in two thousand and nineteenand how it's changed really how people save
for retirement and lots of other nuancesin it. So I thought, well,
we can just kind of refresh.This law actually came into effect in

(01:49):
December of twenty twenty two, andit has had a lot of impacts on
retirement planning and it will into thefuture as well. So these changes has
affect a lot of individual retirement accountsand it affects employer four ow and k
plans. It affects the young peopleas far as how they'll say, but
it also affects older folks with theirrequire minimum Distribution age. So a lot

(02:13):
of people are affected by this change. So I thought we could do kind
of a refresher and this article cameto my mind because I read it in
what's called the nerd Wallet and itis written by June Sham, So I
thought we could just regroup on it. Just a lot of rules and REGs,
but it's interesting. It's I hada chance to kind of preview the

(02:34):
show some of the notes before,and it's going to be a fascinating program.
And Tracy, is there one thingthat a lot of retirees have noticed
with the change? Well, theRMD age has changed from seventy two to
seventy three for people who turn seventytwo in or after twenty twenty three,
which is really a big deal forretirees since they can wait another year to

(02:54):
start withdrawing from their accounts. Alsonear retireation. Note that the age will
increase again in twenty thirty three toage seventy five. So a lot of
people are thinking. You know,a lot of people will ask me,
well, when you know, whendo I really have to start taking the
RMD And it's like, well,actually, for you, it's aged seventy

(03:14):
five. Obviously, the people whohad turned seventy two in twenty twenty two
were not affected by this rule unfortunately, and they still had to take out
their RMD by April first of twentytwenty three. So you know, the
thing we want to talk about there, though, Seawan, is you know
the penalty. The big deal too, was that the penalty for missed rmds

(03:35):
decreased from fifty percent to twenty fivepercent, so they've really lightened up on
that, and if it's corrected ina timely manner, it's only ten percent
penalty. So it's a that's akind of a big change from fifty percent
to potentially ten percent penalty, andI think that's good. It was a
little exorbitant. And in starting intwenty twenty four, RMD's will be eliminated

(03:59):
from all non IRA WRATH accounts,which includes RATH four oh one case,
so you no longer have to takeout any kind of R and D starting
in twenty twenty four from RATH fouroh one case. And these changes obviously
give people more time to grow theirfunds during retirement. The only caveat here,
Sean will be that you know youare pushing back your retirement withdrawals,

(04:25):
you know, so if you don'ttake money from those four oh one case
and those iras, you know you'reinstead you're waiting till potentially you're waiting till
age seventy five. Well, that'sa lot more years for those dollars to
grow. And I see a lotof people who have a lot of money
in pre tax vehicles and now you'retaking it over a much shorter timeline,

(04:46):
which could be obviously more expensive dependingon how much is in a certain bracket,
in your tax bracket and given whatthe potential rates could be in the
future. So it's not always thebest idea to not you know, take
the R and D. You canalways take out RM D, you can
always take out more and then whatthey say you have to take out.

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Now that's what tax planning goes intothis, as far as what makes the
best sense for you. How muchare you willing to pay the tax today,
what kind of brackets would you bepaying tax in, and then in
the future, what's the numbers goingto be. So I love doing financial
plans for people because you can reallysee how the money changes over time.
And it's kind of it's eye poppingat some point because it's like, you

(05:31):
know, it's like you're saying tome that my RMD is going to be
one hundred and fifty thousand, andit's like, hey, these are the
numbers. These are the estimates.You know, it's not guaranteed, but
these are you know, this isa conservative way to return. So what
it's showing me, you know,so it's surprising at some point and good
and bad. You know, youhave to decide if you want to pay

(05:53):
that tax now or later. Andsometimes even if you're taking out a certain
amount from the era, it canbe you know, a drop in a
bucket, and so you know,how much how much do you really have
to take out in order to makea difference in how many years you have
to do that in order to reallymake a dent in that pretext number.
It really highlights the importance of planningand of course the different implications depending on

(06:17):
when you do certain things, andreally enlightening this morning as always with Certified
Financial Planet Tracy Anton here on thirteenten WIBA. Don't forget about the website.
T Anton Investmenthouse dot com. That'st A N t o N investment
House dot com. The number sixeight five zero one fifteen forty nine.
That's six O eight five zero onefifteen forty nine. Tracy. What's changing

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them with four oh one K plans? Well, previously, employees would not
would have to opt in to participatefor a retirement plan, but starting in
twenty twenty five, once employees areeligible, employers will automatically enroll them in
a retirement savings plan. Now,some plans already had this in place,
but I guess they're making it mannedtory. So with this plan, the

(07:01):
initial contribution must be at least threepercent of the pretext earnings, but not
more than ten percent. And oncethis takes effect, Yeah, it's interesting,
employees will have to really opt outif they don't want to participate in
their company's retirement plan. So obviouslythe goal is to have people saving earlier

(07:23):
for retirement, and this is theway they're they're doing it. And you
know, again they're really trying toget to people who you know, they
keep thinking they're going to do it, and you know, time just kind
of ticks away, or they justdon't know much about this, so they
keep kind of kicking it down theroad. And they're just trying to get
the younger people to I think,to invest earlier, and you know,

(07:44):
obviously everyone. So they had anexample in this nerd wallet that I thought
was pretty interesting. They said,let's say your age twenty five, you
make sixty thousand a year. Athree percent contribution is one hundred and fifty
per month or eighteen hundred per year. You know, if that grows until
your age sixty seven, they said, that could be worth as much as

(08:05):
four hundred and twenty thousand. Nowthey didn't give us, give me the
rate of return, and I didn'thave time to calculate it, but you
know, it's obviously not enough toretire, but a great start. You
know, you already have four twentythousand just because your employer made you right,
you know, put in put inthree percent. And then let's say
the employer matches the contribution by threepercent, which is often because of just

(08:28):
safe harbor rules that employers match threepercent. Now you have eight hundred and
thirty thousand at age sixty seven.Again, maybe not enough to retire on
you know, by in forty twoyears from now. But the one thing
that the law does is it alsoincreases it automatically, which really surprised me
when I started digging into this,that it automatically contributes, increases the contribution

(08:52):
by one percent per year up tofifteen percent. Now that seems really crazy
to me. You know, noteverybody wants to do fifteen percent, So
I don't know. But will peopledo go along with it because it's more
work to opt out of something?Will they notice? I mean, will
people just you know, learn tolike live on last and they don't think

(09:15):
about it? I mean, we'llsee how this plays out. That is
pretty amazing too. And you mentionedwill people just just do it? I
think for a lot of times humannature is just go along and it's like
all right, and it's it's andwe talk about the other side. The
benefits is is huge and it's reallyinteresting as we talk about some of these
changes, awesome changes too. Tocatch up contributions and some things to understand
there. We'll get the details fromTracy on that in just a moment.

(09:39):
In the meantime, you've been tothe website t Anton Investment House dot com.
Head on over there right now,that's t A N t O N
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(10:00):
teen forty nine. More of straighttalk from the house is next right here
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on the website t Anton Investmenthouse dotcom. That's t A N t O
N investment House dot com. Fromthe website. Not only can gets no

(10:22):
tracing in the team. Also ifyou're looking for money management portfolio management,
you can of course schedule appointment anytimeright online t Anton Investment House dot com,
or pick up a phone called theoffice right in middle ten six eight
five zero one fifteen forty nine.That's six O eight five zero one,
fifteen forty nine. Talking this weekabout some of the ways that there's a
here two point zero act affect yourretirement and some really great information in that

(10:43):
first segment. Don't forget if youmissed part of the program, you can
also listen back at t Anton investmentHouse dot com. So catch up contributions
important in our retirement planning? Correct? Oh, yeah, super important.
A lot of people take advantage ofbeing age fifty and older and being able
to contribute more to their retirement plan. So starting in twenty twenty five,

(11:05):
sean catchup contribution limits for retirement planswill increase from seventy five hundred to ten
thousand per year. And again thelimit will be indexed for inflation, so
that can be a very large numberbecause that's in addition to the normal contribution.
Well, that is excellent. Andthen we talk about other little places
and ways that folks save education,savings, loan debt. Some changes made

(11:28):
there as well, Yes, exactly, So regarding that for parents that have
been saving toward their child's college fund, they will now be more flexibility with
the five two nine plans. Soafter fifteen years, funds from the five
two nine can be rolled into aroth iro ray account for the beneficiary.
The accounts can be worth up tothirty five thousand of leftover funds. But

(11:54):
the thing is is you can't justlike in the last few years, start
funneling money into it. There's alimit on that and you can only do
I think like sixty five hundred peryear. You can only transfer, So
there are certain rules that you haveto double check on that. But another
incentive of the Secure two point zeroAct is related to college funds, and

(12:18):
it aims to balance saving for retirementand repaying student loans. So this is
really interesting. So instead of choosingone of the other, according to this
article, when you make a qualifiedstudent loan repayment, your employer actually may
match that amount into your four Oone K. This will take effect next
year, in twenty twenty four.So I wonder if employers will do that.

(12:41):
I suppose, you know, itdepends on whether or not, you
know, they want to make thatas another incentive. But what's nice about
it is, you know, thenthe employee would not have to forego it
probably wouldn't be the same amount intothe four one K, but they wouldn't
be able to They wouldn't have toforego actually contributing to the former line k.
That is absolutely fascinating, as wehear. Of course, not a

(13:05):
day goes by in the news questionsabout student loan and that type of stuff.
So really great tools, really greatvehicles. And as we talk with
certified financial planner Tracy Anton this morning, don't forget Tracy would love to get
to know you, love to talkwith you. All I gotta do is
send up an appointment right online att Anton Investmenthouse dot com. That's t
A N t O N investment Housedot com. Great website to learn more

(13:26):
about Tracy and the team as mentionedas well, you can make an appointment
right there at t Anton Investment Housedot com. Dolphin number for the office
in Middleton SIXZ eight five zero onefifteen forty nine at six oz eight five
zero one fifteen fourty nine. SaversTax Credit? What is it and what
has been affected in it? Whenthis here two point zerk with details from
Tracy, we will do that.Next. Straight Talk from the House continues

(13:48):
right here on thirteen ten dollars WIB. This is straight talk from the House
with certified financial planner Tracy Anton righthere on thirteen ten WIBA. Not only
is it a lot of wanted totalk with Tracy each and everywhere week.
There's a ton of great information aswell in the program, and of course
if you missed part of the show, you can always listen back at t
Anton investment House dot com. Youcan abscribe to the podcast as well.

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Just head on over to t Antoninvestment House dot com. While you're there
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number six O eight five zero onefifteen forty nine. That's six O eight
five zero one fifteen forty nine,talking about seven waves that you can secure

(14:33):
that Secure two point zero may affectyour retirement In Tracy, I'd mentioned the
term the tax credit and Savers taxcredit specifically before the break. What exactly
is the Savers tax credit in Securetwo point zero? Well, the Savers
tax credit is intended to help lowerincome earners get an extra boost toward their
retirement savings. So when people makecontributions to their retirement account, the federal

(14:58):
government actually will match that contribution insteadof giving an immediate tax break. So
this doesn't mean you'll receive a taxbreak obviously, but it is still a
great way to increase your retirement savings, and obviously hopefully that'll be worth quite
a bit more down the road.Hopefully economy grows, the markets grow,
and those dollars will be worth more. So again, this is only for

(15:20):
lower income, but it's interesting howthe federal government's trying to match really their
contributions. Such an important thing therefor folks that need in a great option
for them, and Tracy as wekind of work our way through some of
these different ways that SCARE two pointzero may affect someone's retirement. Any provisions
about emergency savings obviously a very importantthing to have. Are there any things

(15:41):
people need to know there? Well? Beginning in twenty twenty four, employers
that provide a defined contribution plan,which is basically a four one K could
be a four three B may alsooffer a pension linked emergency savings account for
employees who are not highly compensated withwith Basically employees automatically opted in at about

(16:03):
three percent of salary, but thebalance of the account would be capped then
at twenty five hundred. So Ithink they're just trying to do a small
catch all there. I don't knowthat that's going to be really popular with
employers because the pension linked emergency savingsaccount. I don't know how many other
rules you know are associated with that, But again they're giving the employer more

(16:27):
options to do to help, whichI think is a good thing. Yeah,
And I know when talking with youover the years, regardless of what
the you know, I think,even when we talk about fore own case
and roths, think you'll talk aboutthe importance of having options as we work
through some of this stuff. Theseare certain areas where there are options to
you and decisions to be made,and it highlights the important with importance of

(16:47):
working with someone like Tracy, andof course Stracy would love to work with
you. I gonna do his headon over to the website te Anton investment
House dot com. From there youcan schedule an appointment at a time and
a date that's convenient to you.Again, the website te Anton investment House
dot com. That's t A NT O N investment House dot com.
TELF number six O eight five zeroone, fifteen forty nine. That's six
eight five zero one, fifteen fortynine. And Tracy, I know for

(17:11):
some what we've gone through is kindof hit hard. Are there hardship withdrawals
or anything new in that area thatfolks need to be aware of. So
in twenty twenty four, account holderswill be able to withdraw from their four
oh one K plans or I raisewithout a ten percent early withdrawal penalty.
They only they are only allowed onedistribution of up to one thousand per year

(17:32):
and the funds must be repaid withinthree years. So if the funds are
not replayed within three years, seanno additional hardship withdrawals can be made.
So it's basically just for really bademergency situations. Yeah, and that's important
to know. And we talked,you know, we've talked about compounding interests
and other things. When you takethat money out, you're losing some other
yea. And I mean, andI think in along these lines, it's

(17:56):
really would be better about just education, right, learning, learning how to
have your own emergency cash savings instead. You know, sometimes the government is
far reaching. I think, youknow, no, no hate mail,
but I don't think you're alone inthat, Tracy. I think, yeah,
I mean, you know, youknow they're well intentioned at some point,

(18:17):
but you know, there's there's betterways to do these kinds of things
and less costly for employers and employees. I think in a little bit of
education goes a long way. Reallygreat stuff speaking of education, a lot
of great information this week and everyweek in the program Don't Forget. You
can listen back to this show aswell as previous programs podcasts just at on
over the station's website or t AntonInvestment House dot com. That's t A

(18:40):
N t O N investment House dotcom. Also, while you're there,
you can learn more about Tracy andthe team. You can also schedule appointment
at a time and a date that'sconvenient to you. If you're looking for
money management report, folio management tracing. The team at t Anton Investment House
would love to work with you,love to get to know you again.
It all starts with a stop atthe website t Anton Investment House dot com.
Schedule appointment right online and a timeand a date that's convenient to you.

(19:02):
And the telephone number six O eightfive zero one fifteen forty nine.
That's six eight five zero one fifteenforty nine. Tracy, time always flies
and we chat each morning. It'sgreat to talk with you and enjoy this
beautiful day. Thanks Sean YouTube