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SECURE 2.0 passes the House

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  • SECURE 2.0 passes the House

    https://finance.yahoo.com/news/retir...212156910.html

    The vote was 414-5 so I'd say there's a decent chance this passes the Senate and moves to the president.

    Some good things I see from just a glance at a non-detailed article:
    1) Catch up contributions will be $10k/yr rather than $6k
    2) Age for RMDs is set to steadily increase from 72 to 75
    3) There's something in the bill that would push employers to auto-enroll their employees in a retirement plan
    4) Small businesses get a tax credit for matching worker contributions

    Neutral:
    Instead of an employer matching retirement contributions, it will allow employers to match student loan payments with retirement contributions. Instead of you putting $100 in your 401k and getting another $100 in employer match, you pay $100 towards student loans and then your employer puts $100 in your 401k. Interesting idea but that $100 towards student loans could have gone to retirement instead. Fine idea but neutral as money is fungible.

    Bad:
    1) Makes annuities or other lifetime income options more accessible. Obviously a bone thrown to insurance companies and a lot of people will be scared into taking an annuity within a 401k instead of learning to "create" their own annuity.

    So overall this seems like a good bill.

    Also the congressman quoted is retiring but he notes he'd love to do away with RMDs for good. Now that would be interesting! I know a lot of people here subscribe to the mantra that once a government program dependency starts, or they start taxing (or even talk of taxing) billionaires that means inevitably they'll heavily tax millionaires. In that same vein, treat this is a good thing. They're talking about getting rid of RMDs. Maybe it'll happen some day. I would say that the great majority of why people here save and strategize is precisely because of RMDs and the taxes around them. So it'll be interesting if the strategy has been wrong all this time if RMDs go away.

  • #2
    Well if RMDs go away then I need a big tax refund. Good news about age going up to 75.

    Comment


    • #3
      RMD going to 75 means more time to compound!
      Another reason for me to take more risk in my IRAs.

      Comment


      • #4
        I'm 40 and thought by the time I got to 75 that would be the RMD age. At this rate it might even be 80 or 85 when I get to that age. So if I think this through, I'm someone who believes an RMD "problem" will happen to us. It's one reason why in one retirement account we're making Roth contributions rather than traditional. But if the RMD age continues to go up and yet our retirement age stays the same, that means even more years for the roth conversions and thus I really should be doing traditional contributions now rather than Roth, right?

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        • #5
          Pushing back the RMD age helps me personally but I do not understand why they are doing it? The only people who really benefit are people like us who squirrel away money and want to keep it tax protected as long as possible. Most normal people are taking from their 401K as soon as they can without penalty if not sooner. the vast majority of people who have anything saved up at all it is usually in a 401K and there is little taxable to live on.

          Comment


          • #6
            Good news. Higher chance now that mbdr and other poison pills not so prevelant in this bill.

            Supercharge bdr in fact with the 10k bump,.lol.

            So for the Roth vs traditional. Really comes back again to your current vs future tax bracket and reading the tea leaves of future taxation.

            My take... If you're above the 24% and high state tax, you probably will be better off traditional for now. ....maybe.

            We stopped our pretax around age 47 and moved solely mbdr since passed FI at that time and ramped spending up.

            Comment


            • #7
              Originally posted by Lordosis View Post
              Pushing back the RMD age helps me personally but I do not understand why they are doing it? The only people who really benefit are people like us who squirrel away money and want to keep it tax protected as long as possible. Most normal people are taking from their 401K as soon as they can without penalty if not sooner. the vast majority of people who have anything saved up at all it is usually in a 401K and there is little taxable to live on.
              totally agree with you on this but I can tell you why they are doing it (they being the Republicans). It's because the RMD is basically a government mandate. And they are the party that hates mandates and doesn't want the government telling people what to do with their money. Getting rid of the RMD is a way to let people have the freedom to do what they want. However, given that this just passed overwhelmingly in a Democratic House, clearly the other party also believe it's popular to weaken that mandate, if not get rid of it entirely

              Comment


              • #8
                Originally posted by StarTrekDoc View Post
                Good news. Higher chance now that mbdr and other poison pills not so prevelant in this bill.

                Supercharge bdr in fact with the 10k bump,.lol.

                So for the Roth vs traditional. Really comes back again to your current vs future tax bracket and reading the tea leaves of future taxation.

                My take... If you're above the 24% and high state tax, you probably will be better off traditional for now. ....maybe.

                We stopped our pretax around age 47 and moved solely mbdr since passed FI at that time and ramped spending up.
                The Mbdr and bdr were part of BBB, and never part of Secure 2.0. In other words, apples to oranges comparison in my view. That said, I think BBB is dead for now and so is killing the mdbr and bdr. But killing them was never part of this particular bill, which passed out of committee 11 months ago (in other words, before we even got word of the death of mbdr and bdr which was during the summer if I remember)

                Comment


                • #9
                  It just sounds like the AARP is writing this bill. This is a pretty big yawner for those of us who are under 50. The people actually using the so called $10k catch up most likely are already FI and aren’t behind on retirement savings at all. When are the “pay fors” going to be released?

                  it is pretty hard to follow any consistent logic with the bills coming through Congress. I can’t tell if they want us to have more access and control of retirement accounts or not.

                  Comment


                  • #10
                    Originally posted by Lordosis View Post
                    Pushing back the RMD age helps me personally but I do not understand why they are doing it? The only people who really benefit are people like us who squirrel away money and want to keep it tax protected as long as possible. Most normal people are taking from their 401K as soon as they can without penalty if not sooner. the vast majority of people who have anything saved up at all it is usually in a 401K and there is little taxable to live on.
                    Supposedly so older workers still working can save more:

                    https://www.wsj.com/articles/401k-se...22-11648583270

                    “The legislation would gradually increase the age at which savers must start taking withdrawals from 401(k)-type accounts and traditional individual retirement accounts to 73 next year, rising to 74 in 2030 and 75 in 2033. Currently, people who save money in those accounts must begin withdrawing money—and paying any taxes due on it—at 72. These required withdrawals can be a source of frustration for taxpayers who are still working or are trying to make their savings last in retirement.

                    While the law, if enacted, would help people who can afford to leave their money untouched, it could expose them to higher tax bills in future years. When required distributions kick in, they would be withdrawing more money annually over a smaller time period, said Ed Slott, an IRA specialist.

                    The increase in the age for required withdrawals “sounds better than it is,” he said.

                    About 80% of people subject to mandatory retirement account distributions withdraw more than the required minimum because they need the money, said Mr. Slott.”



                    Comment


                    • #11
                      Originally posted by Lithium View Post
                      IThe people actually using the so called $10k catch up most likely are already FI and aren’t behind on retirement savings at all.
                      I'm not so sure about this. Most people aren't FI. I know many people in their 50s who haven't saved enough and their kids are just finishing college now and the person in their 50s is making decent money just b/c they've been working a long time and they look up and think "shoot, retirement is 10-15 years away! I need to save more" and I think this could really help a lot of them. Now that they are done with helping college, their mortgage might be gone soon, and they're making enough money, they can get serious on their saving. Sure they could have done it better in there 30s and 40s to not need to save the extra $4k, but most didn't save enough and now they have the money to.

                      Comment


                      • #12
                        Originally posted by Lithium View Post

                        it is pretty hard to follow any consistent logic with the bills coming through Congress. I can’t tell if they want us to have more access and control of retirement accounts or not.
                        Barring retirement, every single one of those Congresspeople who voted for this act are up for election in in 7 months. This what they want is to be reelected. Does this make enough constituents happy to further that aim?

                        Comment


                        • #13
                          Originally posted by zlandar View Post

                          Supposedly so older workers still working can save more:

                          https://www.wsj.com/articles/401k-se...22-11648583270

                          “The legislation would gradually increase the age at which savers must start taking withdrawals from 401(k)-type accounts and traditional individual retirement accounts to 73 next year, rising to 74 in 2030 and 75 in 2033. Currently, people who save money in those accounts must begin withdrawing money—and paying any taxes due on it—at 72. These required withdrawals can be a source of frustration for taxpayers who are still working or are trying to make their savings last in retirement.

                          While the law, if enacted, would help people who can afford to leave their money untouched, it could expose them to higher tax bills in future years. When required distributions kick in, they would be withdrawing more money annually over a smaller time period, said Ed Slott, an IRA specialist.

                          The increase in the age for required withdrawals “sounds better than it is,” he said.

                          About 80% of people subject to mandatory retirement account distributions withdraw more than the required minimum because they need the money, said Mr. Slott.”


                          I might be mistaken but I thought working deferred RMDs.

                          Comment


                          • #14
                            Originally posted by JBME View Post
                            Some good things I see from just a glance at a non-detailed article:
                            1) Catch up contributions will be $10k/yr rather than $6k
                            2) Age for RMDs is set to steadily increase from 72 to 75
                            The $10K catch-up only applies to tax years you turn age 62, 63 and 64.

                            The RMD extensions including the current age 72, only benefit people who don't need it. I.e. WCI forum members. It is fiscally irresponsible given the size of current and future deficits.

                            Comment


                            • #15
                              I could understand the objective of SECURE 1. Give some retirement benefits and pay for them by accelerating tax collections.
                              SECURE 2.0 I don't. Give some retirement benefits and allow delaying of tax collections.

                              Both seem to be pushed by the insurance lobby selling more annuities. Brighter minds, please educate me.

                              Comment

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