Today I want to talk about the “un-secure act.” Technically, the name is the Secure Act 2.0. I call it the “un-secure act” because our government may be fabulously good at acronyms, but frequently when they give you an acronym, the outcome is the opposite. The inflation protection act is a great example.
This act has changed the game with retirement planning. One change is to required distributions. The Secure Act 2.0 pushes the age back by one year, in 2023, and over time, by several more.
Another interesting change has to do with 529 plans. I like 529 plans. Sometimes, parents use them to save college money for their children or grandparents for their grandchildren. These are often terrific plans for saving for college. One of the challenges is if the child decides not to go to college. The child can cash out the money, but they will have to pay taxes. Instead of giving the money to that child, you could move it to another child, but what happens if there are no other children?
One of my favorite stories is one of my clients, a couple, who put money in a 529 for their child’s college. The child went to college but ended up receiving a scholarship. By the time the child graduated, there was still around $50,000 left in that account, and they had no other children. The wife in this situation had always wanted to go to cooking school, so I suggested she take that $50,000 and use it for an accredited cooking school. She found one and was able to use the money. She even made a cake and brought it in for me. I appreciated that little loophole. This act will now allow you to transfer up to $35,000 of unused 529 money into a Roth IRA for the child’s benefit.
Another change will be if you are going through financial hardship, you can now pull out a certain amount of money from your IRA or 401K. You don’t have to prove the hardship to anyone, so you can essentially do this for any reason. The decision is up to you whether your situation qualifies as a hardship. This feature impacts a demographic we don’t typically deal with, like those paying student loans.
There are other little changes throughout this new law, but the big ones are that you can save more money for retirement and that it pushes out the RMD age a bit.
Are you worried about what the market is doing? Are you 100% sure that you will have a steady stream of income when you retire? Do you have questions about healthcare or taxes? If you answered yes to any of those questions, you owe it to yourself to talk to someone who focuses on these areas. Big-box financial firms may not be well-equipped to help you. They may be able to help you invest your money to grow and accumulate, but retirement planning requires a whole different set of goals and strategies.
At Centennial Advisors, we help people over fifty prepare for retirement. If you want to get 30% returns every year, we’re not the people to talk to, but if you want consistency, peace of mind, and comfort in retirement, you need to call us so we can help you. Out of every ten families to call us about three end up working with us. Not everyone is a great fit for us. We’re not a great fit for everyone, but about three families out of ten work out.
The Secure Act 2.0 highlights the importance of tax planning. If you need help with your tax planning or you’re not sure that your money is structured the right way, I want you to call us. If you have at least $500,000 saved for retirement, we will put together a free, no-obligation Retire Right Report for you. These are the steps you should be taking right now. Please reach out to us at 512-886-5850.
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