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SECURE 2.0 passes the House

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  • #16
    Originally posted by JBME View Post

    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.
    I agree with the part about most people in their 50s not being FI. I disagree that these people who have undersaved for retirement are somehow going to reverse 25 years of their previous behaviors and stuff >$30k a year in their 401k. The people doing that are most likely going to be you and me, who if we’re not already retired are multimillionaires. That’s not whom the provision is targeting.

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    • #17
      Originally posted by spiritrider View Post
      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.
      wow..only three years? That's kind of really specific criteria.

      Weird on RMD extension yet enforcement upon inheritance to ten years in secure 1.0.

      As for government spending/budget. I think the last tax cut and $3trillion covid spree will cost us all dearly ...and people wonder why inflation is hitting

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      • #18
        Originally posted by Lordosis View Post

        I might be mistaken but I thought working deferred RMDs.
        Hmm you are right for 401ks. I googled it and the only exception is if you own more than 5% of the company you work for.

        For IRAs it doesn’t.

        https://www.forbes.com/sites/julieja...h=ae67fe04a11c

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        • #19
          Originally posted by zlandar View Post
          Hmm you are right for 401ks. I googled it and the only exception is if you own more than 5% of the company you work for.
          Unfortunately, the exception applies to all WCI forum members with one-participant 401k plans.

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          • #20
            Either way it is kinda dumb. If you are 72 and need to keep working in order to afford retirement the tax savings from a 401k is just a drop in the bucket.

            Unless you have a spouse several decades younger than you I cannot think of a reason this can help the common worker. Any ideas?

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            • #21
              Originally posted by Lordosis View Post
              Either way it is kinda dumb. If you are 72 and need to keep working in order to afford retirement the tax savings from a 401k is just a drop in the bucket.

              Unless you have a spouse several decades younger than you I cannot think of a reason this can help the common worker. Any ideas?
              The delay in RMD's benefit who? The government? The purchaser's of annuities? Those that have lower balance and need the money (like the 10% withdrawal to pay for a vacation). YORO (you only retire once). Yes they reserve the right to change the maximum allowed.
              Might pessimistic take is that the retirement saving changes are actually funded by the insurance lobby. The goal is the changing landscape creates risk and doubt.
              "Lock in the rates, take the safe money." It is working, get the money out of tax protected accounts, convert as much as possible and pay the tax or by an annuity with an uncertain regulation. Does anyone think this is aimed at stability? It could actually be a diversion, create uncertainty.

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              • #22
                Originally posted by JBME View Post
                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?
                This would give you more time to do Roth conversions after retirement and before RMDs kick in, potentially decreasing the likelihood of having an RMD problem.

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                • #23
                  Originally posted by PhysicianOnFIRE View Post

                  This would give you more time to do Roth conversions after retirement and before RMDs kick in, potentially decreasing the likelihood of having an RMD problem.
                  So the goal is for the government to collect taxes sooner rather than later "voluntarily" and redistribute to the insurance companies selling annuities.
                  I see what they did. The "rich folk" pay more taxes sooner rather than later. Counter intuitive. That is how the game is being played. Level the taxes and collect sooner than later. Brilliant!

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                  • #24
                    Originally posted by JBME View Post
                    https://finance.yahoo.com/news/retir...212156910.html

                    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.
                    this is great for kids starting out. a lot can't afford to save for retirement but do make their mandatory student loan payment. this program means they will have a retirement account started and growing much more quickly than otherwise.

                    this bill will delay govt from getting revenue for quite a while so not sure if it will pass in its current form. most of the benefit goes to the highest earners so may not be terribly popular with bernie and warren

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                    • #25
                      Originally posted by Tim View Post

                      So the goal is for the government to collect taxes sooner rather than later "voluntarily" and redistribute to the insurance companies selling annuities.
                      I see what they did. The "rich folk" pay more taxes sooner rather than later. Counter intuitive. That is how the game is being played. Level the taxes and collect sooner than later. Brilliant!
                      And just to make sure, SECURE 3.0 or 4.0 changes the tIRA/401k inheritance rules to match that of HSAs, taxable at death. Unfortunately there's just no way to know what new rules are coming in the future, good or bad. While it may not provide the largest future portfolio, I'm seeing the wisdom of Johanna's recommendation to balance your taxable, pre-tax and Roth asset buckets. You don't know which account future rule changes will favor (or disfavor) so multiple buckets allows flexibility to adjust as needed to new circumstances.

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                      • #26
                        GasFIRE
                        It would change the math. Pretax accounts would avoid the yearly tax on unrealized gains annually at a high marginal tax rate. This just an attempt at wealth redistribution , with a flavor of the month.
                        I agree with the concept of a balance.

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                        • #27
                          Originally posted by triad View Post
                          this is great for kids starting out. a lot can't afford to save for retirement but do make their mandatory student loan payment. this program means they will have a retirement account started and growing much more quickly than otherwise.
                          I agree, that is a very worthwhile change, and one that benefits average (as opposed to wealthy) people. Anything that can help young people start saving for retirement is a change I favor!

                          I can see myself benefitting personally from the RMD age being pushed back from 72 to 75, as it could give me 10 years to do partial Roth conversions assuming I retire at age 65 (especially if I elect to have my non-governmental 457b pay out over 10 years as opposed to 5, which will keep me in a lower tax bracket). But (like delaying SS to age 70) it's not a benefit most people will ever be in a position to take advantage of. They start drawing from their 401k before RMDs go into effect, because they need the money. This change is definitely a bone tossed to the already-well-off, and I wouldn't be surprised to see this part of the bill being modified.

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                          • #28
                            Originally posted by spiritrider View Post
                            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.
                            CNN saying that the catch up provisions are now after tax (Roth like). Unclear if this refers just to the bonus catch up of $3500 between 62-64 or ALL catch up, it's confusing. Do you have confirmation?

                            https://www.cnn.com/2022/04/06/inves...ira/index.html

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                            • #29
                              it's interesting that the article notes that the penalty for not taking out your RMD goes from 50% to 25%. You still obviously want to take your RMD. As yo answer your question, the article states "Under the new plan, the catch-up contribution will be raised, but employees must pay taxes before they contribute." This will create confusion for sure, but it'll force tax diversification which can be a good thing

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                              • #30
                                Originally posted by FIREshrink View Post
                                CNN saying that the catch up provisions are now after tax (Roth like). Unclear if this refers just to the bonus catch up of $3500 between 62-64 or ALL catch up, it's confusing. Do you have confirmation?

                                https://www.cnn.com/2022/04/06/inves...ira/index.html
                                There have been different iterations of the House and Senate bills which themselves are different.

                                While I have seen several online SECURE Act 2.0 articles talking about mandatory Roth catch-up contributions. I see nothing in Section 108 of the House SECURE Act 2.0 bill passed last week dealing with mandatory Roth catch-up contributions.

                                However, I see changes to allow Roth employer contributions as a revenue raising measure to help fund other changes.

                                ​​​​​​Their is no guarantee than any particular provision will survive House/Senate reconciliation.

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