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The Retirement Rules Could Change Soon – Have a Response

The Retirement Rules Could Change Soon – Have a Response EGSI Financial

If you have a financial plan in place, you may think you’re set. However, the rules of retirement are always subject to change. We’ve seen new retirement legislation in the last few years and could see more soon. It’s important to understand how you could be affected and think about how you will respond.

The End of the “Stretch IRA”

The first SECURE Act, passed in 2019, changed the rules for inherited retirement accounts: Instead of allowing those who inherit 401(k)s or IRAs to “stretch” distributions over their lifetime, they now must empty the account within 10 years of the original owner’s death. There are some exceptions, including spouses who inherit accounts. Recently, the rule was clarified to state that those who inherit accounts must take out a required amount each year, as opposed to waiting until year 10.[1] The end of the stretch IRA and this latest requirement could mean that you need to revise your financial plan if you have an inherited retirement account, as well as your estate plan if you want to pass on a retirement account.

The SECURE Act 2.0

We could see a SECURE Act 2.0 pass in Congress soon. It would include many changes, such as raising the catch-up contribution limit for retirement accounts. Those between 62 and 64 would be able to contribute an additional $10,000 to their 401(k) and 403(b), and an extra $5,000 to a SIMPLE plan. It would also index the IRA contribution limit to inflation and increase the age at which Required Minimum Distributions (RMDs) start from 72 to 75 by 2032. It would make it easier to buy annuities by easing technical RMD requirements for annuity options.[2] If we see this legislation passed, it will be important to know how you’re affected and what opportunities you may be able to take advantage of. 

The Expiration of the Tax Cuts and Jobs Act

Estimating your tax burden in retirement can be difficult when the tax code is always subject to change. When the Tax Cuts and Jobs Act expires at the end of 2025, your tax situation could change significantly. Unless new legislation is enacted, the standard deduction will return to $6,350 for individuals and $12,700 for married couples filing jointly. Many rules regarding itemized deductions will change back to what they were before the Tax Cuts and Jobs Act was passed.[3] We could see higher taxes in the coming years, so be prepared to plan for the tax rates of the future.

There’s no telling exactly what the future holds in terms of inflation, new technologies, interest rates, or market ups and downs. However, that doesn’t mean that you can’t create a plan for the future. Your retirement doesn’t have to be held hostage by the market or inflation. There are ways to help protect what you’ve earned and help make it last for the rest of your life. Sign up for a time to speak with us about your biggest retirement concerns, and how we can create a path forward.

[1] https://www.forbes.com/sites/ashleaebeling/2022/03/04/irs-nixes-10-year-stretch-for-most-inherited-iras/?sh=3240ccb06ac3
[2] https://www.kiplinger.com/retirement/retirement-plans/602821/secure-act-2
[3] https://www.investopedia.com/taxes/trumps-tax-reform-plan-explained/

Advisory services offered through EGSI Investment Management, Inc., a Registered Investment Advisor with the State of Ohio. Insurance services offered through EGSI Financial, Inc. Guarantees offered with insurance products are based on the claims paying ability of the issuing company. Investing may involve risk and may result in the loss of principal. Ohio Insurance License # 619337. Please contact EGSI Investment Management if there are any changes in your financial situation or investment objectives, or if you wish to impose, add, or modify any reasonable restrictions to the management of your account, EGSI Investment Management Form ADV Part 2A&B is available for your review upon request.

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