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Retirement Rules Could Change Soon – Ready?

If you work with our team, you know we follow our RetireSimply process to give folks confidence in their retirement plan. But we know that including flexibility is important. The rules of retirement are always subject to change, and we plan to adapt!

The last few years, we’ve seen new retirement legislation and we could see more soon. It’s important to understand how you could be affected and think about how you might respond.

The End of the “Stretch IRA”

Passed in 2019, the first SECURE Act changed the rules for inherited retirement accounts. Before, if you inherited 401(k)s or IRAs, you were allowed to “stretch” distributions from those accounts over their lifetime. However, now beneficiaries must completely withdraw the balance of the account within 10 years of the original owner’s death.

According to the proposed regulations the Treasury Department has reinstated annual required minimum distributions for most folks.1 There are some exceptions, including spouses who inherit accounts.

If you have an inherited retirement account, this change could mean adjusting your plan. We should also look over your estate plan.

The SECURE Act 2.0

We could see a SECURE Act 2.0 pass soon. It would include several changes like:
• Raising the catch-up contribution limit for retirement accounts. Folks between 62 and 64 could contribute an additional $10,000 to their 401(k) and 403(b), and an extra $5,000 to a SIMPLE plan.
• Indexing the IRA contribution limit to inflation.
• Increasing the age at which Required Minimum Distributions (RMDs) start from 72 to 75 by 2032.
• 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.

Expiration of the Tax Cuts and Jobs Act

Estimating the taxes you pay 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

If you’ve been to a RetireSimply workshop or met with our team, you know we believe that we could see higher taxes in the coming years. We even ask people what they think at our workshops and most people tell us they think their taxes are less NOW than they will be in the future.

We know that retirement has changed and will continue to change. Just make sure you have structured flexibility in your plan.

[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/

Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified tax professional for guidance before making any purchasing decisions. Compass Retirement is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Compass Retirement are not affiliated companies.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. 

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