My Take: The 4% Retirement Income Rule

Peter Mullin, a financial advisor at Mullin Wealth Management in Central Minnesota, today announced that his achievements have been recognized with inclusion in LPL Financial’s Ascent Club* for 2024. This distinction celebrates a select group of advisors on ambitious growth trajectories, who have achieved excellence in financial guidance.

5 Oversights of High Income Earners

In the final days of 2022, Congress passed a new set of retirement rules designed to facilitate contribution to retirement plans and access to those funds earmarked for retirement. The law is called SECURE 2.0, and it is a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act passed in 2019. The sweeping legislation has dozens of significant provisions; here are the major provisions of the new law. New Distribution Rules Required minimum distribution (RMD) age will rise to 73 years in 2023. By far, one of the most critical changes was increasing the age at which owners of retirement accounts must begin taking RMDs. Further, starting in 2033, RMDs may begin at age 75. If you have already turned 72, you must continue taking distributions. However, if you are turning 72 this year and have already scheduled your withdrawal, we may want to revisit your approach.1 Access to funds. Plan participants can use retirement funds in an emergency without penalty or fees. For example, 2024 onward, an employee can take up to $1,000 from a retirement account for personal or family emergencies. Other emergency provisions exist for terminal illnesses and survivors of domestic abuse.2 Reduced penalty. Starting in 2023, if you miss an RMD for some reason, the penalty tax drops to 25 percent from 50 percent. If you promptly fix the mistake, the penalty may drop to 10 percent.3 New Accumulation Rules Catch-up contributions. From January 1, 2025, investors aged 60 through 63 years can make annual catch-up contributions of up to $10,000 to workplace retirement plans. The catch-up amount for people aged 50 and older in 2023 is $7,500. However, the law applies certain stipulations to individuals with annual earnings more than $145,000.4 Automatic enrollment. In 2025, the Act requires employers to automatically enroll employees into workplace plans. However, employees can choose to opt-out.5 Student loan matching. In 2024, companies can match employee student loan payments with retirement contributions. The rule change offers workers an extra incentive to save for retirement while paying off student loans.6 Revised Roth Rules 529 to a Roth. Starting in 2024, pending certain conditions, individuals can roll a 529 education savings plan into a Roth individual retirement account (IRA). Therefore, if your child receives a scholarship, goes to a less expensive school, or does not go to school, the money can get repositioned into a retirement account. However, rollovers are subject to the annual Roth IRA contribution limit. Roth IRA distributions must meet a five-year holding requirement and occur after age 591⁄2 to qualify for the tax-free and penalty- free withdrawal of earnings. Tax-free and penalty-free withdrawals are also allowed under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.7 SIMPLE and SEP. 2023 onward, employers can make Roth contributions to savings incentive match plans for employees (SIMPLE) or simplified employee pension (SEP).8 Roth 401(k)s and Roth 403(b)s. The new legislation aligns the rules for Roth 401(k)s and Roth 401(b)s with Roth IRA rules. From 2024, the legislation no longer requires minimum distributions from Roth accounts in employer retirement plans.9 More Highlights Support for small businesses. In 2023, the new law will increase the credit to help with the administrative costs of setting up a retirement plan. The credit increases to 100 percent from 50 percent for businesses with less than 50 employees. By boosting the credit, lawmakers hope to remove one of the most significant barriers for small businesses offering a workplace plan.10 Qualified charitable donations (QCDs). 2023 onward, QCDs will adjust for inflation. The limit applies on an individual basis; therefore, for a married couple, each person who is 701⁄2 years and older can make a QCD as long as it remains under the limit.11 The change in retirement rules does not mean adjusting your current strategy is appropriate. Each of your retirement assets plays a specific role in your overall financial strategy, so a change to one may require changes to another. Moreover, retirement rules can change without notice, and there is no guarantee that the treatment of specific rules will remain the same. This article intends to give you a broad overview of SECURE 2.0. It is not intended as a substitute for real-life advice. If changes are appropriate, your trusted financial professional can outline an approach and work with your tax and legal professionals, if applicable. 1. Fidelity.com, December 23, 2022
 2. CNBC.com, December 22, 2022
 3. Fidelity.com, December 22, 2022
 4. Fidelity.com, December 22, 2022
 5. Paychex.com, December 30, 2022
 6. PlanSponsor.com, December 27, 2022
 7. CNBC.com, December 23, 2022
 8. Forbes.com, January 5, 2023
 9. Forbes.com, January 5, 2023
 10. Paychex.com, December 30, 2022
 11. FidelityCharitable.org, December 29, 2022 The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2023 FMG Suite. 1-05355879

I keep a magic 8-ball near me at the office, and I pass them out to clients as a lighthearted reminder to embrace uncertainty. The price we pay as investors is uncertainty. Over time, prudent solutions, and pragmatic optimism just seem to work. I think the biggest risk this year will actually be geopolitical; that being the potential for a broader war in the Middle East. Some facts I follow have had me anticipating some short-term portfolio turbulence. Though nothing to be surprised by. The Presidential election year is upon us. Scroll below to find a chart that shows how the stock market did under different presidents. Major historical events seem to drive markets more than the president sitting in office. Think globally when it comes to investing.

2017 (Republished 2023) This past summer we went on a camping trip in Voyageurs National Park. It was only a two night trip. We had several means of cleaning lake water so it was safe to drink. But we brought a large bladder of water and 5-gallons of tap water from home, just for comfort. We canoed in and camped for two nights. Even after the two nights and hours of canoeing we still had half of the 5-gallons of tap water left. That last morning before we packed out, we were generous with the water we used for drinking and cleaning. The end of our trip was near and we’d soon be around tap water, again, anyway. The current retired generation tends to have the “Camping with Tap Water,” mentality. According to “Annuitization Puzzles”, Journal of Economic Perspectives, this fear of running out can lead to not spending enough on yourself! This can be due to trying to save enough for your late retirement years when you need more for healthcare or because there’s a strong desire to leave a legacy with forthcoming generations (Benartzi, Previtero, and Thaler, 2011).  Perhaps you have senior parents who have amassed good relative wealth? Yet you can’t coach them to spend much on themselves. The habits that help you develop wealth likely follow you into retirement. It’s this concept that I share with my clients. Then of course there’s the virtue of moderation. Funny how some of the same habits like persistent saving & prudent spending suddenly become a problem when you retire, huh?

Financially Savvy at Six Figures

My family just returned from a week of fishing and lake life along idyllic northern pine shores. The treasured mornings and nights came with a view of a picturesque reflection of the trees on the calm and clear lake. We have taken a trip like this the past few summers. And this year the fish were biting! We had sunnies, perch, and bass a plenty. I grew up with trips to Crow Wing Lake #2 at my grandparents cabin near Park Rapids. But we never caught much for fish. To catch fish you need to know a bit about them. Take the myth that fish are inactive during the afternoon, for example. Fish tend to go deep and hide in the hot summer afternoons. So a good angler should go fish deeper in the hot afternoon. But some avoid fishing midafternoon. Or maybe they give up too easily when the fish “aren’t biting.” So that is my personal summer update, which serves as a good foundation for reminding folks like us to keep at this investing business. Not in decades has our style of investing ever been "broken." What happens is people decide the ideas are not working and quit. Be humble. Do not quit.

What Smart Investors Know How do you make investment choices? Are your decisions based on rational analysis? Or are they driven by emotion? Conventional wisdom would assume that people make rational choices to increase their own financial well-being by careful investing. In the real world however, people often behave irrationally. Consider how many people purchase lottery tickets in the hope of hitting a big jackpot. From a purely logical standpoint, it does not make sense to buy a lottery ticket when the odds of winning are overwhelmingly against the ticket holder. Despite this, millions of people buy lottery tickets every year . In the same way, many investment decisions are driven by a desire to win big rather than by a long term diversified strategy. Your investment decisions may have a significant impact on the quality of life you enjoy in the future. Call today, and let\'s discuss how to make sound choices as you pursue your objectives. 1011 2ND ST N STE 110, SAINT CLOUD, MN, 56303. Mailing Address - PO Box 159 Dayton, MN 55327 Saint Cloud, MN 56303 Check the background of your financial professional on FINRA's BrokerCheck . The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. We take protecting your data and privacy very seriously. As of January 1, 2020 the California Consumer Privacy Act (CCPA) suggests the following link as an extra measure to safeguard your data: Do not sell my personal information . Copyright 2023 FMG Suite. Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA & SIPC . The LPL Financial representatives associated with this website may discuss and/or transact securities business only with residents of the following states: AL, AZ, AR, CA, CO, FL, ID, IL, IA, MN, MO, NM, TX, WA, WI.