2nd Quarter 2023 Newsletter
SECURE 2.0 Brings A Little Confusion And
A Lot of Opportunity
In the twilight of 2022, while you were doing some last-second Christmas
shopping and loosely starting to form your New Year’s resolutions,
Congress passed the largest piece of retirement legislation since 2006.
The Secure Act 2.0 brought about 92 separate provisions that each affect
an individual’s retirement planning. Here are some of the provisions that
you can (should) take advantage of:
The RMD Age Is Now 73
An RMD is the required minimum distribution age. This is the age at which
you are required to begin taking a minimum distribution from your tax-
deferred retirement accounts. That is also the age at which you must start
paying taxes on those distributions. The previous RMD age was 72, under
the new provisions, your money can spend an additional year growing tax-
deferred before you are required to start withdrawals. The legislation also
dictates that the RMD age will be 75 by 2033 but does not provide
guidance on how or when that change will occur.
Penalties For Not Taking an RMD Decrease
Prior to Secure 2.0, individuals not taking an RMD at age 72 were
assessed a 50% penalty. Under the new legislation, the penalty is half at
25%. For individuals with a traditional IRA, the penalty falls to 10% if they
withdraw the required amount and submit the appropriate tax forms in a
timely manner.
New Rules for Using RMDs For Charitable Giving
Secure Act 2.0 allows for a $50,000 contribution for individuals who use
charitable gift annuities, charitable remainder unitrusts, and charitable
remainder annuities to make donations. The current $100,000 limit on
qualified charitable distributions will also now be indexed for inflation.
Larger Catch-Up Contributions Are Becoming Available
Only roughly 40% of Americans are saving enough for retirement. As a
result of Secure 2.0, individuals over the age of 50 can catch up on their
lost savings with a contribution maximum of $7,500. Beginning in 2025,
individuals between the age of 60 and 63 will be able to make catch-up
contributions of up to $10,000, or 50% more than the standard catch-up
amount; whichever is greater.
While Secure 2.0 provides a lot for investors to celebrate, the 92
provisions also provide enough obscure guidance and uncertainty to
cause anxiety for even the savviest investors. By far, the best way to fight
uncertainty is through proactive planning. If the provisions of the latest
retirement legislation have you feeling uncertain, here are some things
you may want to consider in your comprehensive financial plan that will
prevent you from even having to consider the new provisions.
- Begin taking withdrawals from your IRA as early as age 59 ½
- Convert your traditional IRA into a Roth IRA
- Make a qualified charitable distribution at age 70 ½. Transfer money
from your IRA to the charity of your choice, tax free!
The changes listed and the potential proactive strategies listed above may
all provide benefit to you in your retirement planning. But it is important to
remember that all financial changes have taxable considerations. If you
are interested in making a change or just want some clarity around the
new provisions, contact a wealth advisor at Anchor to discuss how the new
provisions can benefit your comprehensive financial plan.
A New 529 Strategy You Should Take
Advantage Of
A 529 plan has been an excellent vehicle to provide tax-deferred growth
and make withdrawals for qualified school expenses on a tax-free basis for
your children and grandchildren. The interpretations of the new SECURE
2.0 legislation have helped remove one of the costly drawbacks of a 529.
Previously, the earnings on a 529 were assessed a 10% penalty upon
withdrawal. Starting in 2024, unused funds can be rolled over into a Roth
IRA and avoid a penalty altogether! We all know that life changes and
plans can shift so if a 529 is overfunded based on actual need, the rollover
option is a great one. Another strategy that may fit into a plan is
intentionally overfunding a 529 with the intent to use the overage as seed
money for a Roth IRA for your child or grandchildren. If you have a 529
plan, let’s talk about the options available to you coming as soon as 2024!
Disclosure: Investors should carefully
consider investment objectives, risks, charges and expenses. This and
other important information is contained in the fund prospectuses,
summary prospectuses and 529 Product Program Description, which can
be obtained from a financial professional and should be read carefully
before investing. Depending on your state of residence, there may be an
in-state plan that offers tax and other benefits which may include financial
aid, scholarship funds, and protection from creditors. Before investing in
any state’s 529 plan, investors should consult a tax professional. If
withdrawals from 529 plans are used for purposes other than qualified
education, the earnings will be subject to a 10% federal tax penalty in
addition to federal and, if applicable, state income tax.
Adam’s Nightstand
Our CEO, Adam Ludwig, has always been a teacher at heart. He knows
that the best way to be a great teacher is to be a lifelong learner. In our
newest newsletter feature, Adam will share what he is currently reading.
This month, Adam is reading Raising Grateful Kids in an Entitled World:
How One Family Learned That Saying No Can Lead to Life’s Biggest Yes
by Kristen Welch. Gratitude is a core belief for Anchor and this book
provides some great insights on how to instill these values into your
children and combat the world’s competing beliefs.
Anchor Gives Back
In partnership with Rockford Mass Transit District and B103FM, the
Anchor team volunteered for the 2nd Annual “Stuff the Bus.” Benefitting
the Children’s Home & Aid MotherHouse Crisis Nursery.
MotherHouse provides support for families in crisis. In addition to crisis
care, the program provides parent education classes, parent support
groups, individual therapy, crisis counseling, and access to after-care
services. Through these combined services, the MotherHouse Crisis
Nursery program helps to stabilize families in crisis, preventing abuse and
neglect. The doors are open 24/7, and services are free of charge.
The Rockford Mass Transit District parked a bus in front of Sam’s Club in
Rockford and challenged the community to “stuff the bus” full of items for
the MotherHouse Crisis Nursery.
Chris DeSchepper, Anchor’s Business Development and Marketing
Director serves on the board for the crisis nursery. If you would like more
information about how to donate items or how you can help children in
need, contact Chris at (815) 501-2011 Ext. 1020.