The TERRIBLE 2023 Secure Act 2.0 Impacts Those Turning 72

It’s an exciting time here at Centennial Advisors! We have some news that could potentially affect all of you facing retirement.

 

Our new news comes right at the start of a new year, and I am thankful for that. It is 2023, and the ugly year of 2022 is behind us. Markets got crushed in 2022. Large companies saw stock drop 20%, and small companies lost a third of their value. Amazon lost half its value, Tesla got crushed, and almost every major company got crushed. It was rough! Already in 2023, everyone is talking about a recession that will hurt the markets even more.

 

Thankfully, we’re not here to talk about doom and gloom. We have some potential solutions for you. If you’re reading this and the markets are affecting your retirement security, that means your portfolio isn’t structured the right way. If you’re worried about what the markets are doing, you have a strategy problem. You may be doing all the right things, but you’re still at risk if your retirement savings are not set up correctly, and the financial media is not giving you good advice. My pet peeve is seeing people give terrible financial advice. Our goal here is to give you solid steps that you can take to get yourself to a good place. We’re going to focus on a specific problem today and give you solutions for how to deal with it.

 

If you were paying attention, which you may not have been, because it was a busy holiday season, our government passed a budget at the end of the year. It was a slimy affair; they passed a 5,000-page document that nobody had time to read, about how they want to spend billions and billions of dollars. If anyone had taken the time to read that budget, they probably would have thrown up. That budget sums up everything wrong with our government. As part of that budget, they decided they were going to pass the SECURE Act 2.0.

 

The SECURE Act 2.0 has to do with retirement, and there are some changes they made that look good on the surface. Some of it could be good if you use it the right way! But what we’re going to talk about is bad, plain and simple.

 

When it comes to your retirement planning, taxes are a big issue. The cool thing is you have the power to control that issue!

 

Let’s go through some of the changes that this SECURE Act made. We really should be calling it the “UnSECURE Act” instead. The biggest change, and the one you’ve probably heard about if you were following the new budget, is required minimum distributions (RMDs). RMDs used to start a little past age seventy and in the SECURE Act 1.0, they bumped it up to seventy-two. Now, with the SECURE Act 2.0, starting in 2023, RMDs don’t start until you’re seventy-three.

 

So far, this only affects people who are turning seventy-two in 2023. If you were born in 1951, this affects you, because you were expecting to get your first RMD this year, and you won’t have that anymore. Now, your first distribution will happen next year, when you turn seventy-three. That’s not the worst part of it. The other bad news is that, in 2033, they’re going to increase the age again, this time to seventy-five. They’re trying to spread it out, as though people won’t notice, but they just keep moving that age up.

 

What’s the problem with having RMDs deferred to later in life? The problem is that people will rely on that and keep their money where it is, thinking that once they hit seventy-five, they will have even more money if things go well. People may think it benefits them to wait so long for RMDs. Any time the government gives you a default action on your tax return, does that benefit you? No, it to benefits the IRS. It does not benefit you. Letting the government hang on to your money is never going to be a benefit for you. It’s just a false sense of security.

 

For years, we’ve been talking about how, even when the age for RMDs was lower, the dumbest thing anyone could do was to just take RMDs from their retirement accounts. If you take your required distributions every year, you will end up paying maximum taxes. You might as well give your money away to the IRS.

 

If you don’t like that idea, you need to be more proactive with your tax planning. If you have $500,000 sitting in your IRAs or 401Ks, you may have hundreds of thousands of dollars you can save if you take action. That’s a huge amount of money! But if you sit back and take RMDs, you give that same amount of money to the IRS. And when they push the age back to seventy-three or seventy-five, that means more money for them. The flip side of that is that, if you are proactive, it gives you one more year to take steps to save your money before RMDs kick in.

 

What steps are you going to take? The very first thing you need to do is to educate yourself about your options. Something we talk about almost every week is the free Retire Right Report we offer.

 

Recently, we’ve had to make some changes to the free Right Report offer. We had so many people calling us last year that we had trouble handling them all. We’ve now changed it so it’s only free if you have over $500,000 saved for retirement. If that’s you, and you’ve been saving for retirement, and you’ve been trying to do everything right, but you’re still worried about the stock market and your taxes, and you want someone to take a second look, we’re here to help. A Right Report looks at your investing, your income planning, your tax planning, and your healthcare, everything that you should know for your retirement plan. If you call us at 512-886-5850 to set up a free, no-obligation consultation, we can help you to feel secure and enjoy your retirement.

 

 

 

 

 

 

 

Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and Centennial Advisors, LLC makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investmentdecision. Information contained on third party websites that Centennial Advisors, LLC may link to are not reviewed in their entirety for accuracy and Centennial Advisors, LLC assumes no liability for the information contained on these websites. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Centennial Advisors, LLC. For more information about Centennial Advisors, LLC, including our Form ADV brochures, please visit https://adviserinfo.sec.govor contact us at 512.265.5000.

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