Stephanie McCullough (00:06):

Welcome to Take Back Retirement, the show for women 50 and better, facing a financial future on their own. I’m Stephanie McCullough, and along with my fellow financial planner, Kevin Gaines, we’re going to tackle the myths and mysteries of “Retirement,” so you can make wise decisions toward a sustainable financial future. Through conversations and interviews, you’ll get the information and motivation you need, to move forward with confidence. And we’ll be sure to have some fun along the way. We’re so glad you’re here. Let’s dive in.

Kevin Gaines (00:35):

So, in The Christmas Story, little Ralphie has to write a Christmas theme about what he wants for Christmas. My Christmas theme was, I want a whole new federal tax law that’s going to completely change and upend retirement plan saving strategies. Guess what? Santa came, and this boy is happy.

Stephanie McCullough (01:06):

Coming to you semi-live from the beautiful Westlakes Office Park in suburban Philadelphia, this is Stephanie McCullough and Kevin Gaines of Sofia Financial and American Financial Management Group. Say hello, Kevin.

Kevin Gaines (01:17):

Hello, Kevin.

Stephanie McCullough (01:19):

So, there has been this new law that affects retirement accounts, and we do want to give you the highlights, in the context of the same, old message that we always hit you with about how to save for retirement, the questions to ask, whenever you’re making an investment or saving decision, and the ways to think about this. We want to reinforce, you don’t have to remember the provisions of this law. Please do not be like Kevin and print out hundreds of pages to take home excitedly, one night, to read. Literally, he did that last month.

Kevin Gaines (01:58):

It was a good Christmas. What can I say? But seriously, yeah. The federal government, the IRS, they want you to save for retirement, so they’re always trying to come up with new rules to encourage you to be able to get more use from your retirement savings, for you to get more money into your retirement savings.

Stephanie McCullough (02:25):

And really, this stems from the fact that the government, Congress, we know that Social Security is not going to be enough for most people to live on. How does the government try to incent behavior? Very often it uses tax incentives. So, any of these retirement accounts that we’re going to talk about today, and we have talked about on the podcast previously, there are tax breaks of varying flavors and shapes and sizes, to try to incent this behavior, put money away for your future.

Kevin Gaines (02:57):

Right. Or to set up the parameters of these different products, so you use them, the “right way.” Simplest thing, if you take money out of a retirement account before you’re 59-and-a-half, in most cases, you pay a 10% penalty. That’s the government saying, “We don’t want you spending your retirement money while you’re still working, in most cases.”

Stephanie McCullough (03:21):

Yeah. One of the big themes we want you to remember is that anytime there’s a tax break involved, there’s some kind of quid pro quo. There’s some kind of rules about how you actually get the tax break, and if you follow the rules, fabulous. If you break the rules, there will be some sort of penalty or a consequence, in some sense. So, a lot of what this new law, called Secure Act 2.0, covers are changes to these rules and parameters.

(03:52):

So, what we want to try to do is give you a few of the highlights, again, reinforcing, you don’t have to remember all the details. What we’d like you to remember is that these rules exist. We’re going to mention a few flavors of rules, so you remember to ask about them before you take action. “Hold on. I remember there’s these things called required minimum distributions. Is that hitting me yet?” Just remembering that these things exist is the key.

Kevin Gaines (04:18):

Right. So, here’s the thing about Secure Act 2.0, which for those of you interested, it’s titled Division T Secure Act 2.0 of the Congressional Omnibus Spending Bill that was passed on December 20th, I believe. Anyway, one of the big themes that came out of this is they’re increasing access to Roth accounts, for a lot of people, and different ways to get money in a Roth treatment, which means, when you take the money out, you don’t have to pay taxes.

Stephanie McCullough (04:57):

Because you did not get a tax break on the way in.

Kevin Gaines (05:02):

Yes. And why would Congress want to do this? Because Congress gets the tax dollars today, and that’s how congressional budget math works. They want the tax dollars today. They don’t care about the tax dollars 20, 30 years down the road. So, quick little aside on that. And the other thing is, there’s over 90 provisions listed in this act. There’s a lot of stuff to go through. Chill. We’re not going to cover 90 different conversations here. No, we’re just going to hit on a couple things. But you’re having to have the opportunity to hear lots of different things, and you may ask, “Why didn’t Kevin and Stephanie talk about this?” This is why. We just don’t have that much time.

Stephanie McCullough (05:50):

And we have particular themes that we want to focus on in this podcast. And Kevin, I do want to point out that, unlike you, most of our listeners and me are not going to spend the next month listening to podcasts and reading articles about Secure Act 2.0.

Kevin Gaines (06:08):

You guys just don’t know how to party. That’s your problem.

Stephanie McCullough (06:12):

This might be the only info they get, and thus we want to hit on the things that we think are most relevant to you. But you know what we’ll do is link to a couple other good articles, in the show notes, that have summaries of highlights that might highlight different things than we do, so we will provide that resource to you, as well. One of the first things we want to talk about today, though, is this topic of required minimum distributions around retirement plans. And really, the big question to ask, again, with any of these things, is when do I have to pay Uncle Sam? Kevin, we always have to pay Uncle Sam, right?

Kevin Gaines (06:52):

Pretty much. Uncle Sam’s in the business to get paid, other than maybe HSAs, health savings accounts, which we did an episode on. That’s probably about the only free lunch out there that most people can take advantage of. But yes, RMDs is one way Uncle Sam makes sure he gets paid because, on a regular or traditional, as we call it, traditional IRA, traditional 401(k) pre-tax dollars goes into the account. Uncle Sam hasn’t got paid yet, wants to make sure he gets paid, so they have mandatory distributions, once you reach a certain age, so that they can start collecting taxes. That’s really what this is all about.

Stephanie McCullough (07:43):

Maybe you remember, when you were first working, and you signed up for that first 401(k) or 403(b) plan, and they told you, “You’re going to get a tax deduction for the money you put in here.” So again, as Kevin mentioned, this is what we call a traditional retirement plan, retirement account. You get a tax break if you put in $100 per pay into your 401(k), the traditional one, your take-home pay does not go down by $100. It goes down by something less because the money comes out, and then you’re taxed on the remainder.

(08:15):

Likewise, with a traditional IRA contribution, a lot of the reasons people want to do that is they want to get that tax deduction. “I want to put my 6,000 in my IRA,” or whatever the limit might be. “That means I won’t pay income tax on that 6,000.” So, that’s what we mean when we say pre-tax money, which means the IRS has not yet gotten their pound of flesh. They will postpone it. They’ll defer it, but only for so long. So, required minimum distributions are the term for when the IRS says you have to start taking money out of these tax-deferred plans so that you pay taxes. Now, Secure Act 1.0 came, what, in the end of 2019, right, Kevin?

Kevin Gaines (08:58):

Correct. So, yes, starting for 2020.

Stephanie McCullough (09:01):

So, you might remember required minimum distributions, in most cases, had to start at age 70-and-a-half. Why they came up with a half, I’ll never know. But Secure Act 1.0 changed that to 72. So, what happened in Secure Act 2.0?

Kevin Gaines (09:20):

They said, “You know what? Yeah, 72, still too young. Maybe 73, that sounds like a good age to go with.” So, starting in 2024, if you are not yet 73, you do not have to take money out of your IRA or 401(k) or, you get, any type of retirement account. And then, just for fun, just to make life even more confusing, they said, “Yeah, somewhere down the road, we’re going to make it 75, but just telling everybody now, it’s going to be 73.”

Stephanie McCullough (09:59):

Starting in 2024, 73, and then it will creep up from there, right?

Kevin Gaines (10:06):

Yeah, it’s actually a cliff. It just goes 73 for, I think, about 10 years, and then, boom, it jumps to 75. There was an earlier provision of the Secure Act in which they were going to gradually increase it from 73 to 75, like they’ve been doing with Social Security since 1983, ’86, and it’s still creeping up. They were going to do something along those lines with the RMDH, but the final version does not have that. It’s 73, and then, boom, it goes to 75.

Stephanie McCullough (10:46):

But Kevin, what if I’m over that age already, and I’ve already started my distributions?

Kevin Gaines (10:50):

You still take your distributions. If you’re already required to take it, it doesn’t stop.

Stephanie McCullough (11:00):

Yeah.

Kevin Gaines (11:00):

You’re under whatever rule it was when you had their required beginning date, which is the IRS term. So, yeah. Once that starts, you can’t turn it off.

Stephanie McCullough (11:15):

Okay. Okay. Now, there’s one thing that was not covered in Secure Act 2.0, but we do want to mention it because it is relevant to a lot of our clients, to a lot of our listeners. And that is the question of inherited IRAs or often called beneficiary IRAs. So, the first Secure Act, in 2019, changed those rules. If I inherit an IRA from my great-aunt Myrtle, I’ve got to take money out of it. And it used to be over my life expectancy, and Secure Act 1.0 changed it to within 10 years.

Kevin Gaines (11:50):

Yes, that is correct.

Stephanie McCullough (11:54):

However, Secure Act 1.0 just said that that account had to be empty by year 10, and then there was this back and forth and questions and uncertainty about, what do I have to do in years one through nine? So, Kevin, what’s the current rule? If you have inherited an IRA in 2020 or after, what do you have to do for required distributions in years one through nine?

Kevin Gaines (12:15):

So, this is the beauty of the IRS. They had the latitude to sit there, look at legislation, and say, “Yeah, that might be what you guys are trying to say, but this is how we interpret the rule. And we’re the IRS, so if we interpreted the rule this way, this is going to be the rule.” And in this particular case, it surprised a hell of a lot of us advisors because we thought it was as written, which is, you have 10 years to empty the account, but what you do not have is an annual distribution requirement. Under the old rules, 2019 and earlier, you had to take money out every year. The new rule implied that, no, as long as you take it out within 10 years, you can take the money out however you want.

(13:10):

In the spring of 2022, IRS came out and said, “Yeah, to quote Inigo Montoya, I do not think that means what you think it means. Yes, you do still have to take an annual distribution on top of having to empty it within 10 years.” A few of us were hoping that Congress would put something in Secure Act 2.0, saying, “No, you don’t have to take an annual distribution. You just have to empty it within 10 years.” It didn’t happen. I don’t think a lot of us were holding our breath, but we were hopeful.

(13:50):

And it gets back to the basic premise of tax legislation and Congress. They want their tax dollars now. I’m sure they all looked at us like, “Why the hell are we going to reduce tax revenues? No, no, no, no, no. Yeah, if the IRS wants to be the heavy on this, let them go with it.” So, that’s where we stand on inherited IRAs. Regardless of when you inherit, you do have an annual distribution, and if you’ve inherited since 2020, you have to empty it within 10 years, in most cases.

Stephanie McCullough (14:23):

And if you didn’t take your distribution in ’21 or ’22, actually, don’t panic because there were waivers during the pandemic, and then in 2022, they decided that they were going to waive the penalty if you didn’t take out your RMD. So, just focus on 2023, going forward.

Kevin Gaines (14:43):

Right.

Stephanie McCullough (14:44):

Fair.

Kevin Gaines (14:45):

Fair. And since you mentioned penalty-

Stephanie McCullough (14:50):

Since I mentioned it.

Kevin Gaines (14:51):

… let’s go to Secure Act 2.0 and RMD penalties. So, one of the more onerous tax penalties out there is missed RMDs. If you do not take your RMD, the IRS charges you a 50% tax on the amount that you missed. So, if you’re supposed to take out $20,000, and you didn’t take out $20,000, took out zero-

Stephanie McCullough (15:20):

In the calendar year of which you were supposed to take it.

Kevin Gaines (15:22):

… the penalty would be $10,000.

Stephanie McCullough (15:25):

Dang, that’s a lot.

Kevin Gaines (15:29):

And what’s even better, it also applies to Roth accounts. So, if you inherit a Roth account, Roth IRA, Roth 401(k), or you have your own Roth 401(k), which do have RMDs, unlike Roth IRAs, you miss the RMD, you still have to pay the tax.

Stephanie McCullough (15:54):

Now, just to be clear, as we said before, in a Roth account, you don’t pay income tax when you take money out of it.

Kevin Gaines (16:00):

Correct. So, $20,000 RMD out of an inherited Roth IRA you were supposed to take, all right?

Stephanie McCullough (16:10):

Yeah.

Kevin Gaines (16:11):

You know what? You take out the 20,000, you don’t have to pay any tax, but you didn’t do it, you now have to pay $10,000 to the IRS for having not taken that money.

Stephanie McCullough (16:20):

Pricey.

Kevin Gaines (16:22):

That’s just brutal, having to pay-

Stephanie McCullough (16:25):

That’s just brutal.

Kevin Gaines (16:26):

… the tax penalty on something that isn’t even taxed.

Stephanie McCullough (16:28):

Yeah, that’s insane. Seems like an oversight on some congressional staffer’s part, but anyway, what are the new rules, Kevin, around RMD penalties?

Kevin Gaines (16:35):

So, good news, we think, is they’ve reduced the penalty from 50% to 25%. All right, hey. If you miss an RMD, trust me, you appreciate it being cut in half. And there’s more. If you correct it within a timely fashion, as they say in the bill, essentially, they go into the details of what actually it’s defined as, but basically within a year or two, if you miss the RMD, discover you missed it, and you go ahead and take it and say, “Hey, IRS, I missed this RMD. I’ve now taken it. I’ve made the corrective actions.” The penalty’s only 10%, so they got fairly generous there.

Stephanie McCullough (17:20):

I remember, years ago, when I had first started in the industry, we had a client, and we had his mother’s IRA account, which was inherited, I think, from her husband or something.

Kevin Gaines (17:33):

Yes, from her husband.

Stephanie McCullough (17:35):

There was something going on, and there was an RMD. And there was miscommunication and confusion, and it didn’t happen by December 31st. I think it happened in January, but still, there was a penalty. It was ugly.

Kevin Gaines (17:45):

Absolutely, and it can get hefty.

Stephanie McCullough (17:48):

Yeah. Yeah.

Kevin Gaines (17:50):

It can get real hefty. So, yeah. So, they’ve reduced that. So, I made the comment earlier that it seems like it’s a good deal. Allow me to speculate. I haven’t really seen this or heard anybody talk about this, but let me pontificate for a moment or speculate. The thing about that 50% penalty was the IRS was fairly liberal in forgiving. As long as you made the correction as soon as you discovered the error, and you wrote the IRS basically a letter and say, “Listen, I’m sorry. I didn’t take the RMD, or I didn’t take enough of the RMD because of this, that, or the other reason,” the IRS was actually pretty good about forgiving and saying, “Okay, fine. You don’t have to pay the 50% penalty.”

(18:40):

It actually happened with my mother, when my father died. We missed that first RMD, and she just wrote the letter and said, “Hey, my husband just died, and with all the confusion, that’s why we missed the RMD.” And the IRS said, “Okay, that’s good. No penalty.” What I’m curious to see, down the road, is now that the penalty is less, if the IRS is going to be less forgiving. So, the big takeaway is, don’t say, “Who cares? It’s only a 10% penalty. IRS will probably forgive it anyway.” Yeah, I wouldn’t necessarily count on that. End of the day, know the rules, follow the rules, keep the IRS out of your life as much as you can. It makes everybody happier.

Stephanie McCullough (19:28):

So, again, the questions to ask yourself, what are the rules around this account? When do I have to pay taxes? Do I have to take out distributions at a certain time? When does it start? All those kinds of things.

Kevin Gaines (19:40):

One more quick thing about RMDs. I wasn’t going to bring this up, but since I referenced it already, I probably should. Also included in Secure Act 2.0, they’ve now eliminated the RMDs from Roth 401(k)s.

Stephanie McCullough (20:00):

Hallelujah.

Kevin Gaines (20:00):

Yes. That was confusion. Why not have one for a Roth IRA, but you have one for a Roth 401(k)? It made no sense. Gone.

Stephanie McCullough (20:09):

That’s a good thing. We’re getting a little bit more rational, even among all the complexity.

Kevin Gaines (20:15):

Occasionally happening.

Stephanie McCullough (20:16):

Okay, so next topic that we want to hit on, which has some interesting things, catch-up contributions. So, one of the restrictions and rules around retirement accounts is that there’s a limit on how much you’re allowed to put into them in any given year. And again, remember the government thinking on this. If I’m going to let you deduct from your taxes the amount you put into your 401(k), for example, or your IRA in the traditional kind, I’m going to limit how much you can do. I don’t want you, for example, putting it all into your retirement account and then paying no income tax, to be dramatic about it.

(21:33):

So, there are limits on how much you can put in, but then, at a certain point, and I don’t know when. Kevin probably remembers when it happened. But they decided, you know what? Maybe older folks who didn’t start saving when they could have, or at the beginning of their careers, maybe we should let them put in some extra. So, there’s something, starting at age 50, called a catch-up contribution. So, whatever the maximum contribution is for everybody else in a given year, if you’re 50 or over, you could do a catch-up contribution, so there’s some new rules around those in Secure 2.0

Kevin Gaines (21:25):

For the record, I think it was, and I’m not sure on this, but I think it was one of the tax bills under Bush 43, in which the catch-up provision came into existence, just to try to prove Stephanie’s point. Anyway.

Stephanie McCullough (21:40):

All right.

Kevin Gaines (21:42):

So, couple things with the catch-up provision. First of all, there’s two catch-up provisions, currently, which is one for IRAs and one for retirement accounts.

Stephanie McCullough (21:55):

Meaning 401(k)s, 403(b)s.

Kevin Gaines (21:57):

401(K)s, 403(b)s, exactly. In governmental 457s, as well. Anyway, for IRAs, it was $1000, and when they wrote the law, all it ever said was $1000 catch-up once you reached aged 50. However, for retirement plans, your employer retirement plans, the number was higher initially because they have higher limits. You’re allowed to contribute more from day one into a retirement plan than an IRA, so they made the catch-up bigger.

(22:36):

But when they wrote the rule for retirement plans, they indexed it for inflation, so every year, when the IRS comes out, says, “Inflation was whatever,” they adjust a whole rash of numbers out there, tax brackets, deductible amounts, and stuff like that. All increase with inflation, one of which is the catch-up provision for retirement plans, 401(k)s, 403(b)s.

(23:03):

Under Secure 2.0, Congress finally said, “We probably should index it for the IRA catch-up, as well.” So, they did. Hey, imagine that. So, now, going forward, it won’t be just $1000 catch-up. It’ll be $1000 plus whatever the IRS increases it for that year, onward and upward. That’s the first change for catch-ups. Now, the next big thing is, if you’re lucky enough to be in your late 50s-

Stephanie McCullough (23:44):

Yes.

Kevin Gaines (23:45):

… and I’ll explain why in a moment, you’ll be able to contribute a larger amount once you hit 60, until you hit the age 64, so ages 60, 61, 62, 63. But here’s the catch. That doesn’t start until 2025, so if you’re, what, 62 now or … Yeah, 62. I don’t think 61 will still have to bridge it. If you’re 62, you’re going to completely miss this.

Stephanie McCullough (24:12):

So, it’s a short window of time. For some reason, they’re allowing people in those four years, age 60, 61, 62, 63, their catch-up amount will be 150% of whatever the regular catch-up amount is. Right?

Kevin Gaines (24:27):

Correct.

Stephanie McCullough (24:28):

So, today, the regular catch-up amount in 2022 was 6,500, so that would’ve been 10,000. But since it’s not taking place until 2025, it’ll be something else because these are indexed for inflation.

Kevin Gaines (24:40):

Exactly. And like we said, it doesn’t start until 2025, so if you age out before that, you’re not going to be able to do this. Sorry. So, basically, so the sweet spot is for people who would be, what, 58 or younger, Stephanie? Is that how the math works? Say just … Yeah. Yeah, 2023, 2024, you can’t do it. So, yeah. So, basically, if you’re 57, 58 years old or younger, you’re going to be able to do all four years of this super catch-up.

Stephanie McCullough (25:15):

Here’s my feeling on catch-ups. Yes, it’s lovely that you can put some extra in there, but don’t wait until you catch up. Or I encounter many people who think, “I’ve maxed out my 401(k). I’ve put in as much as I’m allowed to. That’s the only thing I can save for retirement.” That’s not true. You can absolutely save more for retirement, just not in a tax-favored plan.

(25:44):

You can absolutely open an investment account any day of the week, any day of the year, because you’re not getting a tax break on it. You can save as much as you like, invest for retirement. So, waiting until you have the catch-up to put more into retirement, yeah, it’s great to get more of a tax break, but if you are able to put in the maximum to your 401(k) and still have money to save for retirement, do it. Do it, do it, do it.

Kevin Gaines (26:15):

Yeah. Yeah. Nobody’s saying that you can only save X amount of dollars. If you’ve got the budget that allows for it, why not?

Stephanie McCullough (26:25):

Yep. I think a lot of people see the limits on plans and think that’s all they’re allowed to save for retirement. No, that’s the only thing you’re allowed to get a tax break on.

Kevin Gaines (26:30):

The other danger of seeing those limits is people think, “If I save that amount, that’s all I need to save, and I’ll have a good retirement.”

Stephanie McCullough (26:45):

Correct. I’ll have plenty. Yeah.

Kevin Gaines (26:46):

Maybe, maybe not. Depends on what you want to do, but chances are, you’re probably going to want to do more than those limits.

Stephanie McCullough (26:50):

So, the last provision we wanted to hit on is different. It doesn’t necessarily fit in with the other themes we’re hitting, but we think it might apply to some of our listeners. It involves 529 plans, which are college savings plans that get tax breaks, and Roth IRAs interestingly. So, sometimes, I hear people say, “Okay, I’m going to put some money in a 529, a college savings plan, for my kid, for my grandkid, but I’m a little bit worried what happens if they don’t need it all? Or if they end up getting a scholarship, and they don’t need as much as with think?” They’re worried about over-funding, but people do have this worry, if I’ve got money left over in my 529 plan for the child, for college student, after their need for education funding is over.

(27:40):

And what the rules said before Secure Act 2.0 was that, if you had money that was not used for higher education expenses, you would pay a 10% penalty on the growth of those dollars if you were going to take it out and use it for something else. Now, you can move it to a different beneficiary. You can move it to a sibling or a cousin. Heck, you can have a 529 plan for yourself. You can be the beneficiary taking higher education classes. But there was always this issue that, if you had money that was used for anything other than higher education, it was a 10% penalty on the growth.

Kevin Gaines (28:18):

Right. We know from experience, having these conversations with clients, one of the pushbacks on 529, there was the legitimate concern about contributing. It’s like, “Yeah, I want to say for college, but I don’t want to use a 529. I’ll just put it in a savings account, forego the tax deferrals and the benefits there, and not have to run the risk of, if little Johnny doesn’t go to college or if Jane gets a full ride, then the money is stuck, or I got to pay extra tax.” What they’ve done now is said, “Listen, if you got a 529, and you’re done using the money for whatever reason, you can take, the beneficiary of the 529, want to be clear on this, can take that money and use that as contribution dollars into their IRA.

Stephanie McCullough (29:24):

Roth IRA.

Kevin Gaines (29:25):

Roth IRA. So, please note, we said the beneficiary, so grandma, dad, whoever putting the money in, you’re not going to be able to use it for your Roth contributions, but the beneficiary of the account will. And you’re constrained by the annual contribution limits, so if you have $30,000 in your 529 plan, you can still only put in whatever the annual limit is each year.

Stephanie McCullough (30:00):

6,500 for 2023.

Kevin Gaines (30:02):

For this year. Yeah.

Stephanie McCullough (30:03):

So, you can’t put all 30,000 into a Roth, in one year, is what you’re saying.

Kevin Gaines (30:05):

So, you can’t put all 30,000 in at once. You still have to have the annual constraint, and you also have to have the income. One of the other things about contributing to retirement accounts is you have to have earned income in order to do that, in most cases.

Stephanie McCullough (30:21):

So, if the beneficiary, the child, is working, has earned income, and has the ability to contribute to a Roth, you can move the 6500 in 2023, for example, over to the Roth, and they don’t have to come up with the dollars from somewhere else. And there’s nothing saying the money can’t sit in the 529 and then just annually fund the Roth, right?

Kevin Gaines (30:41):

Correct.

Stephanie McCullough (30:42):

You don’t have to close down the 529 by any means.

Kevin Gaines (30:47):

Two limits on this is 15 years. That 529 has to be in existence for at least 15 years before you can start moving it into a Roth account.

Stephanie McCullough (30:58):

Okay, interesting.

Kevin Gaines (31:00):

So, you can’t turn around and open a 529, put it into as your kid’s a senior in college, and expect to be able to start rolling the money immediately into a Roth. No, the 529 has to be around for 15 years before you can start moving that money, and there’s also a $35,000 lifetime limit on how much can be moved. So, a couple constraints, but yes, suffice to say that, yes, you can open your own 529 plan, name yourself as beneficiary, and then use that if you want eventually.

Stephanie McCullough (31:40):

But just be aware of the rules on qualified higher education expenses.

Kevin Gaines (31:44):

Correct.

Stephanie McCullough (31:45):

So, with any of these things, as we start to wrap up here, the questions you should ask yourself, whenever you’re looking at some kind of financial vehicle, one is what am I hoping this thing will do for me? What is this designed to do? And to be clear, everything we’re talking about today is types of accounts. People sometimes mix up the type of account with the actual investment, so I can say it like, “What do you have invested?” “I have an IRA.”

(32:17):

That’s nice. That only tells me the tax rules around the account. It doesn’t tell me what’s in that bucket. It tells me what color bucket and what shape bucket, but it doesn’t tell me what’s in the bucket. So, the investment itself is a whole different question we’re not addressing here today, at all. But when you’re looking at these types of accounts and deciding what’s right for you, you want to be aware of how you’re intending to use it and make sure that the IRS rules line up with those intentions. And anytime you’re getting a tax break, remember there’s incentives involved. Figure out when you have to pay Uncle Sam and what the guidelines around that are.

Kevin Gaines (32:57):

Yeah, I think that sums it up nice. Yeah, really just because neat tax rules exist, for one particular product or another, doesn’t mean it fits in your overall strategy, and therefore, as neat, as fun as it might be to say, “I can do this,” or, “I’m doing that,” if it doesn’t fit in your plan, then you’re just wasting time and money.

Stephanie McCullough (33:20):

Taxes should never be the driver.

Kevin Gaines (33:21):

Exactly. Yeah. Keep your overall objectives foremost in your thoughts, and then, working with financial advisors like us, of course, we can help figure out what are the best tools to achieve those goals. But we never start the conversation of, “Hey, let’s use this really neat strategy, whether it works for you or not.” This is just really cool and fun to talk about, for me.

Stephanie McCullough (33:48):

Yeah. Yeah. Everything starts with your values, your priorities, what you’re trying to create in this world and what you need dollars to do for you. And like Kevin said, these are all just tools in the quiver, arrows in the quiver that we can pull out and use when appropriate.

Kevin Gaines (34:06):

Right. So, I think that pretty much sums up everything that Stephanie’s allowing me to cover, just because-

Stephanie McCullough (34:15):

He could go on and on, folks. He could talk for three days,

Kevin Gaines (34:18):

Hey, I’m not going to lie-

Stephanie McCullough (34:20):

I’m saving you.

Kevin Gaines (34:22):

… this could easily turn into the longest podcast episode in history of mankind. What can I say? Yeah, there’s a lot more to talk about and a lot more nuance that we could go into, but we don’t want to. We just want to give you the flavor of, hey, some things are changing. Be aware that there are changes and be aware that not everything changed immediately. Just because they passed this law doesn’t mean, starting January 1, 2023, all these rules come into effect. Stuff is staggered over several years, so don’t latch onto too many headlines and assume that that is the end all to be all of the comment. No, there’s a lot of details that’ll trip even the best of advisors up if they’re not careful.

Stephanie McCullough (35:14):

Yeah, that’s a good question to ask. How does this affect me? Do I need to care about it? And when does it actually take effect?

Kevin Gaines (35:20):

Absolutely.

Stephanie McCullough (35:21):

All right, everyone, thanks so much for being with us. We’ll talk to you next time. It’s goodbye from me.

Kevin Gaines (35:25):

And it’s goodbye from her.

Stephanie McCullough (35:28):

Be sure to subscribe to the show and please share it with your friends. Show notes and more information available at takebackretirement.com. Huge thanks for the original music by the one and only, Raymond Loewy through New Math in New York. See you next time.

Disclaimer (35:42):

Investment advice offered through Private Advisor Group, LLC, a registered investment advisor. Private Advisor Group, American Financial Management Group, and Sofia Financial are separate entities. The opinions voiced in this material, are for general information only and are not intended to provide specific advice, or recommendations for any individual security. To determine which investments may be appropriate for you, consult your financial advisor, prior to investing. This information is not intended to be substitute for individualized tax advice. Please consult your tax advisor regarding your specific situation.