SECURE Act 2.0 | 7 Important Changes That You Need to Know

[@prairiemark4084]

I have monkeyed around with a lot of different kinds of retirement accounts. The complexity and number of changes over time is mind-numbing. Simplicity is important in retirement planning. After our death those who inherit accounts with restrictions often will not understand all the tax implications and might not harvest all the benefits anyway. So I say to plan rationally and use the tools we are given. But keep it simple to keep track of and simple to transfer on our deaths. And always remember the government will complicate your life if you let them do it.

[@desmondtiedemann7714]

OMG I just watched a video that meant absolutely nothing to me, I live in a different country. I was impressed by how it was presented, pace, articulation, gestures how it came across as very genuine. Good work taking on board a subject that means so much to so many and I'm assuming those planning for retirement in the USA. You seem like a decent character keep it up, I will check out a couple of your other videos, all the best for 2023.

[@Gargamoth]

It means they're screwing you over by not allowing you to have deductions until later in life. Look into IUL Roth accounts are taxable either taxed before deposit or tax after withdrawal. It's defrauding you out of your earned income. How? You spend you whole life working and they say "We allow you to take deductions" after you too old to enjoy it and you will never realize your full investment.

[@RootFP]

You're welcome!

[@dryheatjenn23]

Thank you, James! My husband and I just watched your video, very enlightening and helpful.

[@RootFP]

Wonderful!

[@truthsayer9534]

Rule 7 is ridiculous. Why? Because $145k is a lot less in California, NY or pretty much anywhere on the West Coast or Northeast than it is in places like Iowa where it goes a lot farther.

[@lhoward62]

Well presented and articulated. Thank you.

[@RootFP]

You're very welcome!

[@toreckman8899]

Brilliant presentation James. I’m sure I haven’t thought this through but my wife rmd age is now 75 whilst mine is now 73. There is a significant difference in our respective account balances as my wife did not work outside the home. Even though I’m postponing SS and making as many Roth conversions to reduce rmds, What’s to stop me from transferring my trad ira assets to hers? I’m sure it’s taxable, but technically there has been no distribution of funds. 🤔

[@CGAZ66]

Glad to see changes to the RMD to 75 now. More time to make planning after you retire before the RMD kicks in. (new subscriber) Great info !

[@coast_into_retirement]

I am very interested in the employer match going into my Roth as I currently cannot do a Roth conversion through our plan. Thanks for the great news.

[@dforrest4503]

Thanks for the very detailed description of the changes. I knew of some of them, but not a lot of them.

[@RootFP]

Glad it was helpful!

[@toreckman8899]

This is proof politicians (lawyers) are clueless regarding financial planning. This is all about mitigating the mistake of deferred tax programs (Eg 401k).

[@TravelingTheWorld1993]

I contribute to a Roth 401K. I understand that now I can elect for my employer matching contributions to go into my roth account. Will the taxes be taken out right away , before it goes into my Roth 401K account?

[@lseh4720]

You’re very knowledgeable. I like your voice and patience. You should advertise at your daughter’s school, maybe the newspaper or school directory. I bet you’ll get lots of business.

[@jtran3652]

Excellent video! Very detailed. Thank you!👏

[@HaiTran-uv4en]

Thank you for these value information !

[@RootFP]

Glad it was helpful!

[@tkosse]

Good explanation on the 529/Roth conversion.

[@RootFP]

Thank you!

[@aj1918]

This was extremely informative…..thank you!!!

[@RootFP]

Thank you!

[@autobotdiva9268]

the 529 plan sounds good until you read the fine print.

[@minhjan7477]

Thank you for great information! One like to you and I subcribed!

[@RootFP]

Thanks for the sub!

[@gotUpdated]

What is the reason/benefit justification for #7? If you are 50, you still might be in the higher tax bracket as a worker than when you are retired. I would want pre-tax contributions now vs post-tax contributions.

[@alrocky]

12:55 Catchup as Roth 401(K)? Federal government wants your tax money: $7,500 / 0.76 (24% Fed tax) = $9,868.42 pretax income so $2,368.42 Fed tax. $7,500 t-401(k) defers ($7,500 * 0.24=) $1,800 fed tax.

[@virginiamoss7045]

It would be helpful to note the exact dates for both 1.0 and 2.0. When in 2020 did it change from 71.5 to 72?

[@straitjacketstudios]

While the RMD age change sounds good on the surface, I still have not seen the new RMD annual factor matrix. Curious if they will be ramping the RMD increases quicker than in the past (since IRS now also has less time to collect). Meaning we have more time until we start drawing RMD, but we may be paying for it on the back end with higher withdrawal requirements.

[@MichaelCarpio-vd1dh]

You mentioned about the $35,000 lifetime limit for 529 transfers to a Roth IRA for the designee. Could a strategy be that you then transfer the designee to another person like another kid, spouse, etc. and then get a fresh $35,000? Seems like a loophole

[@planner23899]

Great video James thanks very informative

[@RootFP]

You’re welcome!

[@maxshiraz3447]

The 529 to Roth IRA rollover as written in section 126 of Secure 2.0 is short on detail, but does not explicitly say that a beneficiary has to have earned income. It explicitly mentions annual limits, lifetime limits and the 15 year rule, but nothing about earned income. It uses the word "rollover". In other instances of rolling money over from one account to another, there isn't the concept of the rollover amount having to be "earned income", that would not make any sense, so I am questioning that. Is there is more explicit information somewhere?

[@whysoserious8666]

Wow, sounds like theses changes might impact a couple of dozen people.

[@laurice8056]

All of these rules are enough to make your head spin!😵‍💫💫💸

[@jeshurunroshan]

Brilliant presentations, have a query about the emergency savings fund treated as a roth. Functionally speaking, do we maintain the same (capped annually at 2500 usd) as a normal savings account or as a Roth source within a plan ?

[@jacobkowski7705]

If incomes are over $145k, catch up contributions automatically go to Roth 401K. Is $145k a regular income or W2 income (after 401k contributions) or AGI or MAGI?

[@cpsullivan69]

I also wonder if, by 2024, ALL 401k plans will offer Roth401k? Right now, mine does not...so in 2024 where would my catch up contribs go, if I'm not offered a Roth401?

[@alrocky]

@@cpsullivan69 Employer is not required to offer traditional 401(k) or Roth 401(k) now or next year. 2024 employer has _option to offer_ company *Roth* 401(k) match but you'll pay tax on that Roth 401(k) match.

[@johngill2853]

Great information, Thank you

[@RootFP]

Thanks for watching!

[@thomasjaszewski6898]

Can’t transfer from 529 to Roth in 2023, not available until 2024

[@RootFP]

Right!

[@Longjohnsilver58]

And there are so many restrictions it is almost useless. Most people will not be able to use it in most situations. They took a good idea and messed it up with nonsense.

[@mhuggi]

@@Longjohnsilver58 What is an example of the restrictions that make it almost useless?

[@delliott777]

Are you CFA / CFP or similar? Great info, thank you.

[@RootFP]

Yes.

[@crispycookie9739]

Thanks for the great information

[@NancyGarcia-op2kg]

What i know is that at the rate we are going we will not be able to retire😢

[@billyraibourn758]

Wonderful video James. One thing you mentioned is the 529, I would like to open an account for my granddaughter but not in a 529 format what can you suggest? Thanks

[@WallaceDunn]

Another great video sir. New subscriber.

[@ralpht1034]

Does a Roth conversion satisfy an RMD or does the distribution need to go to a taxable account? Also, is there ANY way to contribute to a Roth IRA with NO earned income for either spouse?

[@larryjones9773]

RMD withdrawals can't be rolled to a Roth. Earned income is a requirement for contributing to a Roth.

[@johngill2853]

You can't use the Roth conversion to convert money but you can use it to pay the taxes and convert other money

[@RootFP]

No you can’t do a Roth conversion with your RMD amount. You could reinvest the conversion proceeds into a taxable account, but you can’t convert the funds and have it count towards your RMD.

[@prasadyalamanchi5499]

Very very good information.

[@tcbridges]

I'm 75 and all my expenses and some are paid with my SS and 401k. I have $300k cash and want to make good yearly money on it with knowing I will only live to 82. Anyone have a suggestions on where to put it. Iv been putting it it a 12mo. CD at 4% but that ties it up and locks you in the cd. I want to be able to grab it if I decide to go buy a Lambo or Corvette.

[@1st1shot]

Maybe a money market within a brokerage account?

[@travis1240]

Just buy the Lambo, problem solved.

[@hanselbermudez7604]

Ladder some of that money. $100k in CDs just in case you decide on the corvette. The other 200k into something that can match your tolerance risk. (Annuities, bonds, or even stocks)

[@danfarris135]

Life has taught me an important lesson. People like to tell you taxes will be less when you are older. Funny, seems taxes go higher every year. Just an observation.

[@RootFP]

Glad it was helpful!

[@Jack51971]

Social security was not taxed until 1983. Although I do not like Bernie Sanders he wants it that way as it was before 1983. Joe Biden was a sponsor to tax SS back then and opposed Obama's raid into Afghanistan to get Bin Laden.😮

[@garywagner7476]

Does the 529 provision apply to 529A ABLE accounts?

[@jenniferbach2159]

Can you write down the form required for back door Roth conversion. Thanks

[@alrocky]

Tax Form 8606

[@MrKOREA7]

Question: How and where do you indicate RMD withdraws?

[@RootFP]

Your Custodian Can Help!

[@michaelblazin4093]

I had thought about the idea of constructing a group of 529 plans for family members. The idea was use the accounts as pass throughs to fund separate beneficiaries. It looked good until I read the the rule about the 529 plan being open for 15 years before the conversion. It still works, but likely long after the retired person is gone. It seems that the rule wants you to set up 529 plans, with contributions right away to get the clock kicking. Also (if you have the disposable cash) can a person set up to give to the 529 plan $35k (using the $75k limit for 529 contributions) at the 15 year point (maybe via trust?) to replaced the “aged” cash that will go into the Roth? It is the second infusion of 35k plus other money that will fund college. It takes 15 years but it is a way to supplement Roth and college savings, bypassing gift exclusion and income requirements. Why did Congress do this? 😮

[@darwinjina]

Interesting idea. I create a 529 account to fund the kids college but finding that he will not spend it all. So, now trying to figure out if he can use it for his own children in the future without tax implications.

[@andreal2625]

I figure that you go with the way that helps you sleep at night. Don’t worry so much about the kids unless they are disabled.

[@chrisj5443]

Isn't there an intermediate step in 2029 to age 74, for RMD? Or was that taken out of the final version of the bill?

[@dannydoan3695]

Great presentation! I have a question about the catch up contribution. If I put my max catch up contribution to the Roth 401K, can I still contribution the max to my Roth IRA?

[@alrocky]

You may contribute $30,000 to Roth 401(k) and $7,500 to Roth IRA.

[@PH-md8xp]

Good explanation as always James. However, I just want to say that the mind numbing complexity and intricacy of all these rules is indicative of the muddled minds of those that make up these rules. 😅 it’s the same thing with our tax laws. Just makes it harder to see a clear path forward sometimes.

[@taloweryus]

I'm 66 and my spouse is about 10 years younger. Under current law and / or secure act 2.0, if I die before her and she inherits my conventional IRA, will she have to deal with the 10 year withdrawal limit, or will RMDs start when she turns 75?

[@hott9053]

Thanks James! Curious how Secure Act 2.0 effects potential inheritance?

[@danielspangler8358]

Work the majority of your life, try to be responsible with what you earn. All the while the federal government keeps changing the rules. This shit is ridiculous. We are not free. What a joke.

[@RootFP]

Thank you!

[@TollHammer]

HOW DO WE OPT OUT??????????????

[@gregmoses8708]

My question, James, is now that I can elect to have my 401k matches go towards the Roth portion of my account, and I now pay income tax on those dollars, does this also mean I pay FICA on those dollars? And what does that potentially mean to my SS payments when I retire? They’d increase, right?

[@michaelblazin4093]

I recollect that you always paid the social security tax and Medicare tax on your 401 contributions. My pay stub used to have three running totals of income. 401K, SS, and Medicare. The 40/K reflected income not seen because of the contributions. Medicare was the true salary without reductions. SS would be the same until you hit the threshold. Same thing appears on your annual SS statement. You can easily identify when you hit the threshold for the year when SS income is under Medicare income, if keeping score on how many of your 35 hit the cap. Consequently, no tax impact.

[@Pipping-Hot]

The SS payments in retirement stay the same. You pay FICA taxes no matter how you contribute to a 401k.

[@dr.markevers8331]

No, company matches inside a 401k are not subjected to payroll taxes. Only your contributions.

[@alrocky]

"now that I can elect to have my 401k matches go towards the Roth" It's more likely that your 401(k) plan decides whether or not to allow employer match go toward Roth 401(k).

[@genwe1894]

Can I still backdoor Roth ?

[@alrocky]

Are you over the income limit and do you have any existing traditional IRA balance?

[@justinbaker2883]

God there are so many hoops to jump through with this 529 transfer. Wonder how much lobbying came in from 529 plan companies to give us this new "benefit"

[@delliott777]

This “benefit” is a Good thing. Previously, unused money in 529’s often ended up distributed, taxed and possibly penalized. Now, unused 529 money can be a “head start” retirement fund without penalty or tax implications. The so called “529 companies” (lol) are the same as “401k, 403b, IRA, etc etc” companies. These are generally called brokerages. Such a transfer would likely be a simple administrative action, unless you’re changing brokerages. Brokerages, by law, have Fiduciary responsibility to their clients. If you don’t want to bother with so many “hoops”, then just distribute your unused 529, pay the penalties, pay the taxes, move on with life and be glad that someone cared enough to fund a 529.

[@rosavola]

Secure act... More like taxation perpetuation act.

[@Satjr35031]

Secure Act 2.0 there is a difference

[@jasonbroom7147]

Tons of complex changes. Most of which are targeted at high earners. The biggest change in this "2.0" legislation is that advisors are no longer required to act as fiduciaries, meaning they are free to do what is in THEIR best financial interest, not yours! The original Secure Act made that the emphasis and now this administration has removed that requirement. So much for protecting the little guy.

[@stevevet3652]

You forgot to mention one very important change in the secure act. After ten years, if your beneficiary does not withdraw all the funds in your IRA or your Roth, the government will take all the remaining funds and your beneficiary looses out.

[@RootFP]

Good point!

[@tinainnca]

Please elaborate. I’m the beneficiary of my fathers IRA. I’ve been collecting the RMD for 12 years set up by my financial planner. What are you speaking of in that all must be pulled in 10 yrs?

[@AL-ns5jc]

Is the income for IRA catch up of 145,000 AGI or flat out your salary pre AGI?

[@Gargamoth]

Secure Act Sucks!! 60 is too old. This give power to the Social Security Administration who was never meant yo have life long control of our Social Security Trust Account. This is criminal.

[@sabrinab9991]

No. What it enacts is ensuring people never retire. I’m 46 I don’t want to work until I’m 75. I’m ready to get out of there now. It makes me think why I’m I putting my money into retirement accounts if I may never get to retire. I don’t have children to pass it on to.

[@tinainnca]

What does the mandatory withdrawal date have to do with when you retire?

[@princetonscholar5723]

Then don’t fund these accounts. Secure 2.0 has no impact on when you retire, that’s your choice .

[@truthsayer9534]

Why do politicians have to make everything so complicated? Answer: Because it makes it easier to hide how much they are taxing you.

[@chrisvolk106]

Government wants thier taxes right now.

[@Jack51971]

Pay the tax now or pay it later? Government is going to get their cut either way. I vote Republican because generally it is the party of less taxes, less government, less control over our lives. 😊

[@TollHammer]

As someone poor lets be real we will work until we die which will be before retirement age for a lot of us! How do we opt out of secure 2.0??? Just another way for the richers to rob the poor!!!

[@mikevi33023]

no clue to what you're talking about ,which means neither do you, DON'T USE ACRONYMS WITHOUT DEFINING THEM

[@Krunch2020]

The RMD on your IRA in your back door 529 Roth 401K is 75. Got it?

[@Pipping-Hot]

Use as many acronyms as you like. Not everyone wants to be spoon fed by their mommy for their whole life.

[@prairiemark4084]

@@Pipping-Hot I am glad you are never confused by TLAs.

[@angielee8901]

Those acronyms James use should be common sense to Most people. If you don't know, please make the effort to look them up. The knowledge gained will be good for you. James has done a great job of explaining complex ideas into simple concepts.

[@jomitchus]

Great Video, clearly explained!! Thank you.