Nurturing Financial Freedom

SECURE ACT 2.0: The Cavalry Isn’t Coming

Episode Notes

Recently, Congress passed the "SECURE 2.0" Act, building on the first SECURE Act it had passed previously.  Today, Alex Cabot will break down what these new changes mean for your retirement, and Ed Lambert will explain why the cavalry is not coming - and the bulk of the responsibility for retirement planning falls to individual investors.

SECURE 2.0 will do the following:

• Raise the RMD age to 73, and will raise it again to 75 in 2033.
• Cut the Penalty for Missing an RMD from 50% to 25%
• Exempt Roth accounts in employer retirement plans from RMD requirements
• Raise limits on "catch up" retirement contributions
• Allow employer match contributions to go into a Roth account
• Provide more flexibility with Qualified Charitable Distributions (QCD's)
• Make changes to rules around Qualified Longevity Annuity Contracts, or QLACs

Younger listeners who aren't as close to retirement will want to take note of the following:

• Automatic enrollment and plan portability
• An emergency savings plan that is Roth eligible will be available  in defined contribution retirement plans, in 2024
• Also starting in 2024, employers will be able to "match" student loan payments of employees
• 529 plans, after 15 years, can be rolled into an IRA for the beneficiary

What does Ed mean when he says "The Cavalry isn't coming?"   While these new rules are designed to help Americans save for retirement (we've got some scary numbers about how much help we need ), this won't fix everything.   SECURE 2.0 won't automatically provide enough of a nest egg for investors to live off of when they're done working.   The keys to a successful retirement haven't changed.

Pensions are largely gone from employee benefit plans, and 46% of workers don't even have a defined contribution plan.  And what about social security? In roughly 10 years, payroll taxes will only cover 75% of the government's obligations.  That could mean higher payroll taxes, cuts to social security  benefits, or both.  

Start saving early - compound interest is a powerful tool.   And if you want to work with a professional, Alex and Ed, along with their team at Birch Run Financial, are here to help.   They are always happy to have an initial conversation free of charge.

You can always email Alex and Ed at info@birchrunfinancial.com or give them a call at 484-395-2190.

Or visit them on the web at https://www.birchrunfinancial.com/

Alex and Ed's Book: Mastering The Money Mind: https://www.amazon.com/Mastering-Money-Mind-Thinking-Personal/dp/1544530536

Sources for information in today's show: 

Pensions are largely gone from employee benefit plans, and 46%[1] of workers don't even have a defined contribution plan.  And what about social security? In roughly 10 years, payroll taxes will only cover 75%[2] of the government's obligations.  That could mean higher payroll taxes, cuts to social security benefits, or both.  

[1] Source: Bureau of Labor Statistics

[2] Source: Social Security Administration