SECURE Act 2.0

[SecondCor521]

SECURE Act 2.0 coming maybe.

https://finance.yahoo.com/news/wash...anges-to-the-retirement-system-150553724.html

Highlights (from article):

• Automatic enrollment in retirement plans at work.
  
• Raise RMD age to 75.
  
• Improvements to Retirement Saver's credit.
  
• National database for employees to find left behind retirement plans from switching jobs.

Overall I like it a lot.

 

[Dtail]

Having the choice of RMD's go to 75 is a nice touch. Not sure if it will matter then, but nice to have the choice and a little more Roth conversion headroom.

 

[ivinsfan]

I'm in favor of improving the Retirement Saver's Credit..

 

[CardsFan]

The automatic enrollment at work is the biggest plus for this.

 

[aaronc879]

Seems pretty worthless to me although it doesn't specify the changes to the Saver's Credit. That is the only part that matters at all IMO and even that is pretty minimal.

 

[Montecfo]

I also like it a lot!

 

[Dash man]

If they raise the RMD to 75, I wonder how high the distributions will be?

 

[audreyh1]

If they raise the RMD to 75, I wonder how high the distributions will be?

At that age it should start at 4.4% or slightly less if the updated table is adopted.

 

[Dash man]

At that age it should start at 4.4% or slightly less if the updated table is adopted.

I’m sure there will be a lot of debate on that. I can see it being even higher.

 

[audreyh1]

I’m sure there will be a lot of debate on that. I can see it being even higher.

Why? It’s based on life expectancy and the RMD table wasn’t changed when the age was raised to 72. In fact the percentages are supposed to be lowered slightly when the table is updated as the IRS recommended. Due to slightly increased longevity.

 

[Dash man]

Why? It’s based on life expectancy and the RMD table wasn’t changed when the age was raised to 72. In fact the percentages are supposed to be lowered slightly when the table is updated as the IRS recommended. Due to slightly increased longevity.

Why? Because I skeptical with anything that comes from Congress. [emoji13]

 

[target2019]

As with most acts of congress and executive branch, there is not equal benefit given to all concerned.

For example, delaying RMD a total of 5 years from the original age 70 may help us a bit on taxes. But it also creates a larger tax bounty for the next generation.

 

[CardsFan]

As with most acts of congress and executive branch, there is not equal benefit given to all concerned.

For example, delaying RMD a total of 5 years from the original age 70 may help us a bit on taxes. But it also creates a larger tax bounty for the next generation.

Which is the reason we would likely just Roth convert an amount similar to what the RMD would have been, but try to stay below the IRMAA cliff.

 

[Montecfo]

As with most acts of congress and executive branch, there is not equal benefit given to all concerned.

For example, delaying RMD a total of 5 years from the original age 70 may help us a bit on taxes. But it also creates a larger tax bounty for the next generation.

But we can easily solve that problem if desired. Simply take distributions starting at 70.5 or 72 based on the current table, even though they are not "required".

 

[target2019]

Which is the reason we would likely just Roth convert an amount similar to what the RMD would have been, but try to stay below the IRMAA cliff.

But we can easily solve that problem if desired. Simply take distributions starting at 70.5 or 72 based on the current table, even though they are not "required".

Good advice.

Our 10-year plan includes converting to Roth in the coming years as taxable income from work declines. This year we dropped down to the 12% Fed bracket, and we have plenty of space to convert a chunk over the next 3 years, maybe longer. So, converting much more than an RMD.

It's surprising how many financial pieces fit together in retirement.

 

[Gumby]

This thread was a very deep dive into managing Roth conversions in order to manage overall tax burden, including RMDs. I recommend it to those who have not previously read it.

https://www.early-retirement.org/forums/f28/roth-conversion-taxes-perspective-i-needed-102073.html

 

[VanWinkle]

Raising the RMD age to 75 may be the first step to raise the full retirement age for Social Security which is needed to keep the program solvent. It won't matter to those of us already retired, but may make early retirement a little more difficult for the younger generations.

 

[CRLLS]

But we can easily solve that problem if desired. Simply take distributions starting at 70.5 or 72 based on the current table, even though they are not "required".

Nothing prevents you from taking distributions even earlier than 70.5.

If they were really to revamp the required distributions, they would rewrite the RMD table's age/multiplier to reflect today's longer life expectancies. This would actually lower the annual RMD amount for any given age.

I am 68 and don't expect the extension to 75 will significantly change our current plans either up to, or after age 72 or 75 as we are doing Roth conversions well above what would be an RMD at our age.

 

[Montecfo]

Raising the RMD age to 75 may be the first step to raise the full retirement age for Social Security which is needed to keep the program solvent. It won't matter to those of us already retired, but may make early retirement a little more difficult for the younger generations.

yes this needs to be done for sure. The concept of "early" would just be pushed back a bit which is appropriate given life expectancy increases.

 

[Midpack]

My first impulse with the Secure Act, and now Secure 2.0, was to get ready to slow Roth conversions to spread them until age 72, now 75 (yes, I realize 2.0 hasn't been passed/enacted). But I'm still convinced it's only a matter of time until tax rates and/or capital gains rates become more confiscatory, so I'm going to stay on my original schedule to fill to the 22% bracket until age 70, and then two more years at 22% converting DW's TIRA. YMMV, as there's no way any of us can know what will actually come...

 

[CRLLS]

My first impulse with the Secure Act, and now Secure 2.0, was to get ready to slow Roth conversions to spread them until age 72, now 75 (yes, I realize neither has been passed/enacted). But I'm still convinced it's only a matter of time until tax rates and/or capital gains rates become more confiscatory, so I'm going to stay on my original schedule to fill to the 22% bracket until age 70, and then two more years at 22% converting DW's TIRA. YMMV, as there's no way any of us can know what will actually come...

Are you saying the Secure Act was not passed? Is was signed by Pres. Trump on December 20, 2019. Maybe I misread your comment?

 

[Midpack]

Are you saying the Secure Act was not passed? Is was signed by Pres. Trump on December 20, 2019. Maybe I misread your comment?

My bad. I was conflating the fact there are still no IRS published RMD tables reflecting the age change in the original Secure Act with "passage" in Dec 2019 - unless I missed it. Not sure what the holdup is there, all discussed in an earlier thread. But that doesn't change my plans for the reasons I provided.

 

[CRLLS]

I don't think the rates vs age changed, just the minimum age. When you think about it, the multiplier is the inverse of number of years left to live (statistically). The Secure act didn't take away or add years above ground to anyone's real life. I know life expectancy tables could be updated to today's actuarial life expectancies. But that hasn't happened yet to my knowledge.

 

[Midpack]

I don't think the rates vs age changed, just the minimum age. When you think about it, the multiplier is the inverse of number of years left to live (statistically). The Secure act didn't take away or add years above ground to anyone's real life. I know life expectancy tables could be updated to today's actuarial life expectancies. But that hasn't happened yet to my knowledge.

It appears we’re both right in a sense. I’ve seen the tables will be updated, but not necessarily as a result of the Secure Act as I assumed.

While the same life expectancy factors will continue to be used with no change under the SECURE Act, the IRS has recently (and separately) proposed to update the current life expectancy tables to adjust for longer expected lifespans. The IRS proposal has not yet been finalized, but is largely expected to be effective for RMDs calculated for 2021, and beyond.

https://www.kitces.com/blog/secure-act-age-72-required-minimum-distribution-rmd-age-70-1-2-qcd-2020/

 

[cathy63]

I don't think the rates vs age changed, just the minimum age. When you think about it, the multiplier is the inverse of number of years left to live (statistically). The Secure act didn't take away or add years above ground to anyone's real life. I know life expectancy tables could be updated to today's actuarial life expectancies. But that hasn't happened yet to my knowledge.

Actually, a week ago the IRS published new life expectancy tables to be effective in 2022. https://www.currentfederaltaxdevelo...or-computing-rmds-effective-beginning-in-2022