Good News to End the Year!
It's my last video of the year, so I figured I'd end on some good news. This is Laura Rotter of True Abundance Advisors, and the good news I'm talking about is on the tax front, specifically with the passage of Secure Act 2.0. Now, the most important change, and there are many in this Act, for my clients, I believe is the pushing out the age at which you are required to take minimum distributions.
Required Minimum Distributions, or RMDs, are the way the government knocks on your door and says, well, while you were working, you deferred taxes when you put money pre-tax into qualified retirement accounts, and that's all well and good, but now we wanna get paid. And they do that by requiring minimum distributions.
Used to be at age 70 and a half. Until three years ago, an act passed, pushing that age to 72. Well, this new act pushes that age to 73. For those of us who turn 72 this year or next, that age now is 73 at which you're required to take minimum distributions. And then in 2033, the age is pushed back further to 75
if you are born in 1960 or later. Now, of course, if you need to take money out of your retirement accounts to pay for your expenses, this is all a moot point, but many of us do not actually need to take money out, and by being forced by the government to take money out, we can be pushed into higher tax brackets and that also can make the premiums that we paid on Medicare higher.
So, as I said, good news. Another piece of good news to help our retirement savings is enhanced Catchup contributions. In 2023, the amount, the maximum amount you can put away tax deferred in your employer sponsored qualified plans such as 401(k)s or 403(b)s is $22,500. If you're 50 years old or older. , some of the good news about being older, that's pushed an additional $7,500 to 30,000 in total that you can put away tax deferred in 2023.
But now this act comes along and says, well, we're gonna reward you if you are 60 years old or older and still in the workforce, that catchup contribution is going to be enhanced. So if you're working to sock away more money before you actually retire, this is good news for you. There are many other changes in this act.
I'm not going to go through all of them in detail, but I will mention: they've expanded access to retirement accounts without penalty if you are younger than 59 and a half; they've expanded the ability to open Roth accounts in a simple IRA or a SEP IRA, before you could only open pre-tax accounts.
They've added the ability of employers to match Roth contributions within qualified employer plans. They've leveled the playing field, in the past Roth IRAs had no Required Minimum Distributions, but Roth 401ks did. Now there's no longer required minimum distributions from Roth 401ks. There's a reduction in the penalty if you don't pay the right amount towards your required minimum distributions.
And I could go on and on, but I think you've already heard enough.. I'm happy to talk to you in more detail about how this affects your particular situation. Please feel free to reach out to me at email@example.com. I hope this is helpful and have a happy new year.