Quick Tips | Week of January 19th | SECURE 2.0 Act Updates
Welcome to this weeks quick tips. Use these ideas to improve your financial situation. Reach out to me to dig deeper into these topics.
With the passing of the SECURE 2.0 act, I felt it necessary to give some highlights that I see benefitting my type of planning client. Enjoy!
Required minimum distributions
RMDs are government mandated distributions that must come out of your retirement savings each year once you reach a certain age. The major benefit of a retirement account is the tax-deferred status of contributions and earnings so clearly the longer they stay in the account earning, the better. In an effort to support younger savers, the changes allow for the RMDs to be pushed further back to the ages of 73 if born between 1951 and 1959, and 75 if born in 1960 or later. Good news for tax-deferred savings.
529 to Roth IRA
529 college savings plans were introduced back in 1996. Since then there have been many savers stashing money into these tax advantaged accounts. As the balances of these accounts grew, the educational horizon started to change a bit. The cost of going to college, even at the state level, started to become to expensive so new generations, armed with YouTube educations, are starting to abandon the idea of an institutional education and instead use the money to start a business. To be honest, who can blame them. Well, their parents who have be socking away money into 529 for starters. 529s come with penalties if the funds are not used for qualified education expenses so there is a greater chance that much of these funds will be stuck for a long time. Due to this, the SECURE 2.0 act is allowing up to $35,000 to be moved to a Roth IRA, benefiting the would be student, if certain obligations are met. Hopefully this is a trend that will continue to snowball so more trapped 529 funds can be moved to benefit future generations in need of retirement income.
Roth 401k RMDs
If it makes sense tax-wise (consult your financial professional), you should be utilizing your employers Roth 401k option. The SECURE 2.0 act has also just given us another reason to participate in the Roth option by removing the RMD from Roth 401k plans. This is a great way to create tax flexibility while in retirement and can be a strategy for legacy planning.
Pay your student loans, get an employer contribution!
This one is amazing. The act opened the ability to have employers provide matching contributions to specific types of retirement plans (401(k), 403(b), 457(b) and SIMPLE IRA) when you pay down your loans in lieu of contributing to the plan. This will help people focus on two financial goals at the same time.
Fiduciary Mission
At Integritas Financial, we are committed to providing fee-only, fiduciary financial planning services that are tailored to the unique needs of young professionals, particularly millennials. Our experienced planners work with you to develop customized financial plans that address key areas such as estate planning, trusts and wills, retirement, workplace benefits, education funding, student debt, and buying a house.
We believe in transparent, client-focused service that puts your financial goals at the center of everything we do. As a fiduciary firm, we are dedicated to acting in your best interests, and we never sell products that charge commissions to clients.
Our goal is to help you achieve a stable and prosperous financial future by providing comprehensive financial planning services that are tailored to your individual needs. Whether you're just starting out in your career or you're already well-established, we can help you navigate the complexities of financial planning and create a roadmap for success.