As we continue to grow and continue to be Loud, will always appreciate you for taking 5-10min of your day to read what I have to say, thank you!

This week I have a humble brag, that brag being I was named to the Top 100 Financial Advisor list by Investopedia!

I want to thank all of you, as educating you and having you either as a reader or a client is what makes all of this happen, so thank you!!

No More RMDs for Roth Accounts!!

Have you heard the great news? SECURE Act 2.0 eliminates required minimum distributions (RMDs) for your Roth accounts in qualified employer plans, starting in 2024. While Roth IRAs have already enjoyed RMD-free benefits, employer plan Roth accounts were subject to regular RMD rules, forcing distributions to begin at age 72. But no more!

It's common sense that withdrawing money from tax-free-growing Roth accounts would only make sense if you truly need it. To bridge the gap between the rules for Roth accounts in qualified employer plans and Roth IRAs, many individuals have historically rolled over their plan Roth account assets into Roth IRAs, where RMDs were not required. This difference in rules led to imbalances and plan leakage, which providers of employer-sponsored retirement plans didn't appreciate.

With SECURE Act 2.0, the landscape changes. Plan Roth accounts and Roth IRAs will be on a more level playing field. Deciding whether to roll over a plan Roth account to a Roth IRA won't be as straightforward anymore. It will require careful consideration, similar to the factors used by advisors when deciding whether to roll over a pre-tax plan into a traditional IRA.

But here's the exciting part: SECURE Act 2.0 seems to completely eliminate RMDs from plan Roth accounts starting in 2024. This means that individuals who have been taking RMDs from their plan Roth accounts can simply stop taking them from 2024 onwards. Isn't that a relief?

Introducing SEPs and SIMPLE Roth Accounts

Get ready for more ways to supercharge your wealth with Roth contributions! Thanks to SECURE Act 2.0, taxpayers now have the opportunity to create both SIMPLE Roth accounts and SEP Roth IRAs for 2023 and beyond. It's like adding rocket fuel to your financial journey.

But hold on, there's a small catch. Although you legally have the ability to create and contribute to Roth SIMPLE and SEP IRA accounts from January 1, 2023, it may take some time for employers, custodians, and the IRS to implement the necessary procedures and policies. Don't worry, it's not too complicated! Similar requirements already exist for designating Roth deferrals into 401(k) and similar plans. The key is to wait for official approvals, document updates, and employer education on the new options available.

Remember, when you make a Roth election and deposit amounts into a SIMPLE Roth IRA or SEP Roth IRA, those contributions will be included in your taxable income. It's important to consider the tax implications, but keep in mind that these Roth accounts offer the potential for tax-free growth and withdrawals in the future.

Catch-Up and Employer Contribution Changes

SECURE Act 2.0 brings more exciting changes to catch-up contributions and employer contributions. Let's break them down:

Additional Employer Contributions: Under Section 604 of SECURE Act 2.0, employers are now permitted to deposit matching and/or nonelective contributions to employees' designated Roth accounts in 401(k) and 403(b) plans. These contributions will be included in the employee's income in the year of contribution. However, it's important to note that employers and plan administrators will need time to update systems and procedures to accommodate this change. Patience is key!

Mandatory Roth Option for Catch-Up Contributions: Section 603 of SECURE Act 2.0 introduces a mandatory "Rothification" of catch-up contributions for high-income taxpayers starting in 2024. This means that catch-up contributions in 401(k), 403(b), and governmental 457(b) plans will be required to be made as Roth contributions. While this aims to increase revenue and align with the traditional versus Roth decision, the language of the provision has quirks that may have unintended consequences for some individuals.

Let's explore an example to shed light on the possibilities:

Imagine Alice, a 55-year-old advertising executive earning $200,000 per year. With her current salary, she wouldn't be eligible to make a pre-tax catch-up contribution to her employer's 401(k) plan starting in 2024. However, in early 2024, Alice receives a job offer from a competing advertising company, with an annualized salary of $250,000. Exciting, right?

Here's where it gets intriguing. Alice's total wages for 2023 exceed the $145,000 cap set by SECURE Act 2.0. But since she switches employers mid-year and her new employer's plan allows it, Alice becomes eligible to make pre-tax contributions to her new employer's plan in 2024. In 2025 and beyond, she can continue to make pre-tax catch-up contributions without having to contribute them to a Roth account.

This example showcases the planning opportunities provided by SECURE Act 2.0. By strategically managing employment changes and understanding the rules, individuals like Alice can optimize their retirement savings and take full advantage of pre-tax contributions to employer-sponsored retirement plans.

Keep in mind that not all employer plans include a Roth option. If your employer's plan doesn't offer a Roth catch-up contribution option, the catch-up contribution rules won't apply to that plan, regardless of your previous-year wages.

Supercharge Your 529 Plan with Roth IRA Transfers

Hold on to your hats! SECURE Act 2.0 introduces an exciting new option starting in 2024: the ability to transfer funds directly from your 529 plan to a Roth IRA. This can be a game-changer for growing your wealth, but let's delve into the details.

To take advantage of this provision, certain conditions must be met:

• The Roth IRA receiving the funds must be in the name of the beneficiary of the 529 plan.

• The 529 plan must have been maintained for 15 years or longer, ensuring a reasonable period of time for growth.

• Contributions made within the last 5 years, along with their earnings, are ineligible for transfer to a Roth IRA. This prevents abuse of the provision.

• The annual limit for the transfer is the IRA contribution limit for the year, reduced by any regular contributions made to traditional or Roth IRAs outside of the 529 plan.

• The maximum lifetime transfer limit from a 529 plan to a Roth IRA is $35,000.

Let's paint a picture with an example:

Imagine Helena, who has a 529 plan account that has been open for over 15 years. In 2024, she contributes $4,000 of her own earned income to a Roth IRA. Assuming the IRA contribution limit remains at $6,500, the owner of Helena's 529 plan could transfer up to $2,500 into her Roth IRA for the year.

While there are some uncertainties in the legislative text, such as whether changing the beneficiary triggers a new 15-year seasoning period, initial indications suggest the 15-year period remains unaffected. We'll eagerly await written guidance from Congress or the IRS to confirm this assumption.

The provision for 529 plan-to-Roth IRA transfers offers an advantage over regular Roth IRA contributions. Individuals are generally limited in making Roth IRA contributions once their income exceeds a certain threshold. However, transfers from 529 plans to Roth IRAs, authorized by SECURE Act 2.0, are not subject to the same income limitations. It's an opportunity you won't want to miss!

In summary, SECURE Act 2.0 brings a wave of changes that empower you to grow your wealth, make strategic decisions, and secure a brighter financial future. Stay informed, seek advice from a knowledgeable financial advisor, and embrace these opportunities with confidence.

Remember, understanding the rules and making informed decisions is key to unlocking the full potential of SECURE Act 2.0. Educate yourself, explore the possibilities, and embark on your wealth-building journey with excitement.

Next Week’s Issue

Emergency Savings Accounts and your ability to link them with retirement?! Wait what, Stoy I am confused, no worries next week we dive deep!

Hottest Post of the Week…

#NoBSWealth Clip of The Week

Cannot wait until next week or just want more, check out our podcast @nobswealth and catch us on Youtube. You can always follow me on Instagram and Twitter as well! Or just email me, [email protected].

Most importantly come check out our Website and give us some feedback. Make sure to subscribe to this newsletter and if you are wanting time to chat with me 1on1 you can schedule that here!