SECURE Act 2.0 on the way from Congress?
LEXINGTON, Ky. (WKYT) - In what may be a rare bipartisan bill coming together before year’s end, the SECURE Act 2.0 is picking up steam to be agreed upon by both sides to help retirement programs be expanded. Retirement planning advisor Josh Smith of Strategic Wealth Designers joined the newscast to discuss what’s in the new bill and how much could it help those in retirement or considering retiring soon. He says the proposal contains additional retirement options currently not available that could be great as the population continues to live longer.
“A lot of retirement planning structure currently is like a 5-year-old computer, a 5-year-old computer is light years behind in the ability to the modern model and that’s what we see with many retirement plans out there today,” Smith says. “When Social Security was created and investment planning started developing people weren’t living deep into their 80′s and 90′s. We have tens of thousands of centenarians alive today. Every investor’s fear is that they will outlive their money. On top of that, we have millions upon millions who haven’t even saved properly for retirement and they are retirement age right now. We are looking at a big problem if we as a country don’t make changes to how we save.”
Smith says a required minimum distribution or RMD is when the government says when you have to start pulling money out of your retirement accounts. Last year the age that had to start occurring was 70.5 but the SECURE ACT raised it to 72. The proposed SECURE ACT 2.0 would raise it again to 75. He says that the extra 4.5 years between 2019 and 2021′s potential SECURE ACT 2.0 can make a huge difference from a tax planning standpoint.
“If you have been saving properly throughout your career, funding a ROTH IRA, matching the employer 401K plan the whole way, using an HSA then you should be positioned pretty well from an asset standpoint,” Smith says. “Where you run into trouble is if you haven’t planned for taxes. We often refer to RMD’s starting as ‘tax-mageden’. It doesn’t have to be that way if you solidify a tax planning strategy early but far too often people haven’t done it and the RMD period sneaks upon them. The extra years proposed here could really help.”
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