Services

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? Retirement Foreshadowing The story of our camping trip to Voyageurs National Park is likely foreshadowing for me. It helps me realize some traits about ourselves. Its a fun analogy for me because I’ve used the image with clients. It’s the idea of filling a giant water balloon up with water – saving for retirement. Then the game changes in retirement. All of the sudden we’re left to determine where to place a pinprick in that balloon so that water flows for you to live off of. It’s an intimidating concept. Have you ever poked a hole in a balloon accidentally? It pops! In the case of a water balloon, the water bursts out. All you’re left with are the remnants of a balloon. Investment & insurance companies have caught on. Have you noticed your employers 401(k) statement describing how much income you might expect when you retire? (Observe the disclaimers!) This is in part because of folks studying what should guide your decisions and behavior as you prepare for retirement. So maybe it’s worth another look at positioning your assets within your retirement portfolio so that we can strive to secure lifelong income from it? Dear Clients, I think its also important to bring this thought into social security claims. When is it the right time to claim social security? We don’t need to reinvent the wheel. We need to acknowledge potential challenges and select reasonably reliable solutions. Living in retirement brings many changes. It’s natural to wonder what it will be like. After a long road I wish for you to feel well informed and financially prepared. Camping and water analogies aside, retirement is a life to look forward to. Don’t strive to reinvent the wheel. Strive for a comfortable retirement by becoming an informed investor. *** Benartzi, Previtero, and Thaler. “Annuitization Puzzles.” Journal of Economic Perspectives. Fall 2011. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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