1 00:00:00,000 --> 00:00:01,290 Intro: Hi, I'm Ed Slott. 2 00:00:01,320 --> 00:00:02,340 And I'm Jeff Levine. 3 00:00:02,430 --> 00:00:06,090 And we are two guys who just love to talk about retirement and taxes. 4 00:00:06,120 --> 00:00:10,050 Look, our mission is simple to educate you, the savers, so that you can make 5 00:00:10,050 --> 00:00:14,130 better decisions because better decisions on the whole lead to better outcomes. 6 00:00:14,190 --> 00:00:15,780 And here's how we're going to do that. 7 00:00:15,840 --> 00:00:20,610 Each week, Jeff and I will debate the pros and the cons of a particular retirement 8 00:00:21,200 --> 00:00:25,915 strategy or topic with the goal of helping you keep more of your hard-earned money. 9 00:00:26,035 --> 00:00:29,814 Yeah, but we won't know which side of the debate we're taking until we flip a coin. 10 00:00:30,175 --> 00:00:33,265 Winner of the coin flip gets to pick which side of the debate they want to 11 00:00:33,265 --> 00:00:37,975 argue, and both of us will have to argue in favor of our respective positions, 12 00:00:38,185 --> 00:00:40,215 whether we agree with them or not. 13 00:00:40,455 --> 00:00:45,135 At the end of each debate, there's going to be one clear winner, you, a more 14 00:00:45,135 --> 00:00:48,585 informed saver who can hopefully apply the merits of each side of the debate 15 00:00:48,885 --> 00:00:52,785 to your own personal situation to decide what's best for you and your family. 16 00:00:52,815 --> 00:00:53,685 So here we go. 17 00:00:53,685 --> 00:00:55,875 Welcome to the Great Retirement Debate. 18 00:01:02,040 --> 00:01:04,980 Ed Slott: Well, here we are, Jeff, Secure 2.0. 19 00:01:05,170 --> 00:01:09,220 A brand new tax law, lots of provisions affecting retirement accounts. 20 00:01:09,220 --> 00:01:09,850 What do you think? 21 00:01:10,120 --> 00:01:11,620 Jeffrey Levine: I think it's a lot of provisions. 22 00:01:11,625 --> 00:01:12,250 I think you're right. 23 00:01:12,255 --> 00:01:15,910 I mean, secure Act 1.0, the, the OG version for those 24 00:01:16,179 --> 00:01:17,179 young listeners out there. 25 00:01:17,179 --> 00:01:20,440 Ed Slott: You know, I was calling it that, I, I wasn't calling it that. 26 00:01:20,440 --> 00:01:22,240 I gotta admit somebody told me. 27 00:01:22,384 --> 00:01:26,315 If you wanna sound hip at a seminar call secure the OG. 28 00:01:26,315 --> 00:01:28,654 And I just used it at a seminar to say, oh, he's hip. 29 00:01:28,754 --> 00:01:29,204 Jeffrey Levine: Yeah, yeah. 30 00:01:29,204 --> 00:01:30,884 You know where that person got it from? 31 00:01:32,684 --> 00:01:36,734 So, yeah, that, you know, that version had like a dozen provisions and we thought 32 00:01:36,734 --> 00:01:39,914 it was monstrous and it, and admittedly like the death of the stretch, there 33 00:01:39,914 --> 00:01:45,254 was a, a bigger deal probably than any single provision of Secure Act 2.0. 34 00:01:45,434 --> 00:01:49,754 But Secure Act 2.0 has nearly 100 changes. 35 00:01:49,754 --> 00:01:50,344 So many. 36 00:01:50,934 --> 00:01:54,874 Ed Slott: All right, let's start with one and, uh, by the, on this podcast, 37 00:01:54,874 --> 00:01:56,614 we'll get through 90 of them probably. 38 00:01:56,644 --> 00:01:56,945 Jeffrey Levine: Right? 39 00:01:56,945 --> 00:01:57,695 That's a good goal. 40 00:01:57,695 --> 00:01:57,874 Yeah. 41 00:01:57,874 --> 00:02:01,174 Actually, we're gonna do something a little bit different today given the, the 42 00:02:01,174 --> 00:02:03,064 volume of the changes in the SECURE Act. 43 00:02:03,064 --> 00:02:07,024 And we obviously wanna include that in, uh, you know, in our discussions here. 44 00:02:07,255 --> 00:02:10,524 We're gonna break down the secure act in multiple episodes here. 45 00:02:10,524 --> 00:02:13,674 We're gonna start with the R M D related provisions, and instead 46 00:02:13,674 --> 00:02:17,815 of our normal pro or con, Ed, we're gonna go deal or no deal. 47 00:02:17,815 --> 00:02:20,964 And we're gonna go through all the RMD provisions, but we'll flip the coin. 48 00:02:21,380 --> 00:02:26,399 And you can choose, I'll, I'll flip the coin you choose, and whatever 49 00:02:26,399 --> 00:02:30,320 you decide, you have to take that side for every provision, right? 50 00:02:30,320 --> 00:02:34,959 So if you want deal, you gotta say everything is a big deal and explain why. 51 00:02:35,089 --> 00:02:37,249 And if I, and if you want no deal, you gotta explain why 52 00:02:37,249 --> 00:02:38,299 it's not really a big deal. 53 00:02:38,299 --> 00:02:38,630 All right? 54 00:02:38,630 --> 00:02:39,600 So let's flip the coin here. 55 00:02:39,829 --> 00:02:40,399 Here we go. 56 00:02:40,799 --> 00:02:43,635 Ed Slott: Remember, everybody listening, the listener, if you're 57 00:02:43,635 --> 00:02:44,924 listening, you are the winner. 58 00:02:45,105 --> 00:02:48,495 We, we may, we have to say, and I, I know, Jeff, you tell me not to 59 00:02:48,500 --> 00:02:52,905 say it on each one, but, we may be taking sides that you hear us in 60 00:02:52,910 --> 00:02:54,465 a seminar saying, never do that. 61 00:02:56,505 --> 00:02:58,275 Jeffrey Levine: Sorry, pay no attention to the man behind the curtain. 62 00:02:58,280 --> 00:02:58,965 All right, Ed. 63 00:02:59,204 --> 00:03:03,685 Uh, you know, I, you know, we're, how many episodes in, I forgot to ask still, 64 00:03:03,704 --> 00:03:05,295 What would you like heads or tails? 65 00:03:05,625 --> 00:03:08,834 Ed Slott: Uh, well, uh, alright, uh, heads, I have the coin here. 66 00:03:08,865 --> 00:03:09,435 Wait a minute. 67 00:03:09,674 --> 00:03:10,649 I have a real coin. 68 00:03:11,720 --> 00:03:13,850 Jeffrey Levine: And the answer is, 69 00:03:14,209 --> 00:03:15,049 Alright, tails. 70 00:03:15,079 --> 00:03:16,519 I'm gonna say it's a big deal. 71 00:03:16,519 --> 00:03:18,019 I'm gonna go Big deal on this, Ed. 72 00:03:18,079 --> 00:03:21,019 Ed Slott: I knew you were gonna do that cause that's the opposite approach. 73 00:03:21,019 --> 00:03:22,010 And you're a good debater. 74 00:03:22,010 --> 00:03:23,420 You like the opposite side. 75 00:03:23,424 --> 00:03:24,200 Jeffrey Levine: I, I like it again. 76 00:03:24,200 --> 00:03:25,399 Give me, gimme, gimme some meat. 77 00:03:25,399 --> 00:03:25,939 Let me argue , yeah. 78 00:03:25,939 --> 00:03:26,820 Ed Slott: All right, so I have. 79 00:03:27,340 --> 00:03:28,180 You have deal. 80 00:03:28,180 --> 00:03:29,109 I have no deal. 81 00:03:29,170 --> 00:03:30,060 Jeffrey Levine: Yeah, no big deal for you. 82 00:03:30,470 --> 00:03:31,510 Ed Slott: Alright, let's start right at the beginning. 83 00:03:31,510 --> 00:03:35,859 The one that everybody's citing, RMDs, required minimum distributions. 84 00:03:36,040 --> 00:03:43,420 The age has been increased from 72 to 73, and then way later till 75. 85 00:03:43,600 --> 00:03:45,400 And you're going to say, that's a deal. 86 00:03:45,579 --> 00:03:46,480 Jeffrey Levine: That's a big deal. 87 00:03:46,480 --> 00:03:47,200 Of course it is. 88 00:03:47,200 --> 00:03:48,549 And first off, I have to argue that. 89 00:03:48,549 --> 00:03:50,079 So yeah, that's a big deal. 90 00:03:50,290 --> 00:03:51,220 I mean, think about it. 91 00:03:51,220 --> 00:03:53,290 If, let's say, you know, someone... 92 00:03:53,519 --> 00:03:57,599 let's say average life expectancy for someone starting to take RMDs is 93 00:03:57,599 --> 00:04:01,920 somewhere around, you know, 88 or so, somewhere in that range, late eighties. 94 00:04:01,920 --> 00:04:06,779 If you live to to be 72, you probably live to be about, you know, 95 00:04:07,019 --> 00:04:12,089 86, 87, 88, depending upon what socioeconomic factors we wanna apply. 96 00:04:12,094 --> 00:04:16,500 And you're talking about limiting, you know, maybe 10% now, if you go to, 97 00:04:16,500 --> 00:04:21,750 from 72 to 75, 10% of the time you're, you're, you're getting rid of RMDs. 98 00:04:21,750 --> 00:04:24,780 Not only that, Ed, that's a big deal because we're talking another 99 00:04:24,780 --> 00:04:29,100 year, another three years potentially for some to do tax efficient Roth 100 00:04:29,100 --> 00:04:31,500 conversions to have the option. 101 00:04:31,500 --> 00:04:35,970 Remember the required minimum is just that it's a minimum distribution, but 102 00:04:35,975 --> 00:04:40,380 we're giving now people the option for three more years in a decade, of course. 103 00:04:40,385 --> 00:04:42,150 So we've gotta wait a little bit while for that. 104 00:04:42,150 --> 00:04:47,265 But already this year people have another year, from where they were previously, and 105 00:04:47,385 --> 00:04:51,765 that's three years for some from where it was just a few years ago when you could 106 00:04:51,765 --> 00:04:56,655 combine secure act one, which took us from 70 and a half to 72 and secure act 107 00:04:56,659 --> 00:04:59,655 two, which took us now from 72 to 73. 108 00:04:59,659 --> 00:05:01,424 So of course that has to be a big deal. 109 00:05:01,709 --> 00:05:02,159 Ed Slott: All right. 110 00:05:02,159 --> 00:05:07,199 I have to say no deal on that and especially no deal on that age 75 thing. 111 00:05:07,559 --> 00:05:09,449 Uh, look at, you know, I've seen headlines. 112 00:05:09,449 --> 00:05:14,459 I've seen stories that say RMD age increase to 75 in 10 years. 113 00:05:14,669 --> 00:05:16,709 Who knows where anybody will be in 10 years? 114 00:05:16,709 --> 00:05:18,630 So that's not even an issue. 115 00:05:18,635 --> 00:05:20,850 That doesn't happen till 2033. 116 00:05:20,939 --> 00:05:25,145 Now, I agree with one point that you made, sure, nobody likes 117 00:05:25,145 --> 00:05:26,704 to be forced to do anything. 118 00:05:26,710 --> 00:05:31,355 So the further you could push back the RMD age, even if it's one year. 119 00:05:31,534 --> 00:05:34,684 That's more freedom you have to do other things, like you said, with the Roth 120 00:05:34,684 --> 00:05:41,140 conversions, but one year now you have to explain to everybody the transition 121 00:05:41,140 --> 00:05:46,990 from 72 to 73, you saw the confusion, uh, when it went from 70 and a half. 122 00:05:46,990 --> 00:05:51,250 And by the way, the Secure Act, that was the best single part of the whole OG 123 00:05:51,250 --> 00:05:53,679 Secure Act, getting rid of that half year. 124 00:05:53,949 --> 00:05:57,010 People didn't know what age they were, 70 am I 71? 125 00:05:57,015 --> 00:05:58,240 When am I 70 and a half? 126 00:05:58,240 --> 00:05:59,470 Which table should I use? 127 00:05:59,470 --> 00:05:59,760 Which age? 128 00:05:59,760 --> 00:06:01,419 They didn't know what they were doing. 129 00:06:01,419 --> 00:06:02,679 This went on for like 30 years. 130 00:06:02,709 --> 00:06:04,000 All right, so we got rid of that. 131 00:06:04,419 --> 00:06:05,949 Then it moved to 72. 132 00:06:05,980 --> 00:06:08,319 But you had some problems with the transition. 133 00:06:08,319 --> 00:06:09,699 Who gets 72? 134 00:06:09,880 --> 00:06:12,220 And we had that half year thing, if you remember. 135 00:06:12,620 --> 00:06:13,705 Jeffrey Levine: Now we're practiced at that, ed. 136 00:06:13,710 --> 00:06:15,925 Now we know what to do, we've been through it once already. 137 00:06:16,255 --> 00:06:16,256 . Ed Slott: Yeah. 138 00:06:16,345 --> 00:06:19,945 Alright, so now people have to see, do I get 73? 139 00:06:20,185 --> 00:06:20,455 All right. 140 00:06:20,455 --> 00:06:21,505 So here are the rules. 141 00:06:21,595 --> 00:06:26,425 If you are already at 72 already taking distributions, this doesn't apply to you. 142 00:06:26,425 --> 00:06:27,320 Jeffrey Levine: No soup for you! 143 00:06:27,735 --> 00:06:28,785 Ed Slott: Yeah, no soup for you. 144 00:06:28,785 --> 00:06:30,555 Once you start, you can't stop. 145 00:06:30,765 --> 00:06:33,525 That's kind of the theme of the IRS regulations. 146 00:06:33,525 --> 00:06:37,965 Once RMDs start, start, they can't be stopped, so you don't get a, a break. 147 00:06:38,415 --> 00:06:43,905 Uh, but one year after all of that one year, and the other problem I have 148 00:06:43,905 --> 00:06:49,385 with this, it encourages people to procrastinate, to delay distributions. 149 00:06:49,615 --> 00:06:53,820 When you are looking at the, the original SECURE Act gave us an 150 00:06:53,869 --> 00:06:55,830 ending date for the beneficiaries. 151 00:06:55,830 --> 00:07:00,585 Before secure, there was the stretch IRA beneficiaries could go out 20, 30, 152 00:07:00,585 --> 00:07:03,060 50, 80 years for a young grandchild. 153 00:07:03,330 --> 00:07:06,690 Now we know there's a finite, there's an end date. 154 00:07:06,870 --> 00:07:09,570 By 10 years after death, most beneficiaries will 155 00:07:09,575 --> 00:07:10,980 have to end that account. 156 00:07:11,250 --> 00:07:16,020 So the shorter you make the overall window, more tax is gonna have to be 157 00:07:16,020 --> 00:07:20,970 paid more of those distributions probably fall more no deal I would say for 158 00:07:20,970 --> 00:07:26,450 the beneficiaries because the longer, say the parents delay because the tax 159 00:07:26,450 --> 00:07:31,640 law says they can delay, uh, the more income, the more of that IRA, remember 160 00:07:31,645 --> 00:07:36,260 the whole IRA or 401k has to come out by the end of 10 years after death. 161 00:07:36,560 --> 00:07:40,130 Jeffrey Levine: You are totally right and and in fact, you know, it's, I'm glad you 162 00:07:40,130 --> 00:07:44,300 brought that up because I think that's another reason why this is a big deal. 163 00:07:44,840 --> 00:07:49,070 It increases the likelihood that people will experience what I've started to 164 00:07:49,070 --> 00:07:55,460 call the big tax crunch, which is fewer years of forced distributions, plus 165 00:07:55,460 --> 00:08:00,380 fewer years of possible distributions means a lot more income may be 166 00:08:00,380 --> 00:08:02,330 compressed into a shorter amount of time. 167 00:08:02,335 --> 00:08:02,419 Ed Slott: Right. 168 00:08:02,419 --> 00:08:03,134 That's what I'm talking about! 169 00:08:03,134 --> 00:08:04,940 Jeffrey Levine: You know, listeners to this program who are 170 00:08:04,940 --> 00:08:06,680 probably more proactive than most. 171 00:08:06,890 --> 00:08:09,289 Hopefully they'll, they'll get the idea that we've gotta look 172 00:08:09,380 --> 00:08:12,140 proactively, maybe look at Roth conversions or things like that. 173 00:08:12,349 --> 00:08:14,860 But a lot of people who just kind of look at the default and 174 00:08:14,860 --> 00:08:16,615 say I don't have to take this. 175 00:08:16,615 --> 00:08:19,585 This is now further back that they're pushing those RMDs. 176 00:08:19,854 --> 00:08:23,275 They're gonna have more tax in their lifetime, and as you talked about, 177 00:08:23,275 --> 00:08:26,515 Ed, they're gonna have a lot more tax potentially for their heirs because 178 00:08:26,755 --> 00:08:30,865 we're taking what used to be starting at 70 a half, we're making that 179 00:08:30,955 --> 00:08:36,235 somewhere between 3, 4, 5 years for some shorter of, of forced distributions 180 00:08:36,235 --> 00:08:39,595 during life, and we're taking what was decades and we're shortening it down 181 00:08:39,595 --> 00:08:41,485 to 10 years from most after death. 182 00:08:41,905 --> 00:08:43,284 That's a big deal. 183 00:08:43,850 --> 00:08:46,460 Ed Slott: And wouldn't you agree that most people, if they hear 184 00:08:46,460 --> 00:08:50,450 the word minimum, everybody likes I, it's such a popular provision. 185 00:08:50,910 --> 00:08:51,350 Congress loves it. 186 00:08:51,350 --> 00:08:53,300 People, they say, oh good, I don't have to do it. 187 00:08:53,300 --> 00:08:57,350 But you are just creating a huge tax bill at some point during your 188 00:08:57,790 --> 00:08:59,000 lifetime and the beneficiaries. 189 00:08:59,240 --> 00:09:03,770 So I, I think it encourages people to delay distributions when maybe they 190 00:09:03,770 --> 00:09:09,050 should take more out while rates are low now in 23, 24, 25, and get that out. 191 00:09:09,050 --> 00:09:09,500 But another, 192 00:09:09,500 --> 00:09:11,030 Jeffrey Levine: So you agree, it's a big deal then. 193 00:09:11,510 --> 00:09:12,890 Ed Slott: No, it's not a big deal. 194 00:09:13,190 --> 00:09:16,410 Uh, the reason it's not a big deal, another big reason I'll give you cause 195 00:09:16,430 --> 00:09:19,100 it only affects maybe 20% of the people. 196 00:09:19,400 --> 00:09:24,680 Uh, under the treasury's own statistics, 80% of the people take more that are 197 00:09:24,680 --> 00:09:28,490 subject to RMDs take more than the amount because they need the money. 198 00:09:28,490 --> 00:09:31,520 So telling them, well, if you need the money, you don't have to take it. 199 00:09:31,550 --> 00:09:32,600 Well, I need the money! 200 00:09:32,750 --> 00:09:36,140 Jeffrey Levine: That's true, and that, and that was before when it was 70 and a half. 201 00:09:36,140 --> 00:09:36,890 Ed Slott: Yeah, that was true. 202 00:09:36,939 --> 00:09:39,969 Jeffrey Levine: And certainly more people take it now voluntarily and before a bear 203 00:09:39,969 --> 00:09:45,189 market in 2022 that uh, you know, probably hurt some people's finances as well. 204 00:09:45,194 --> 00:09:45,550 Yeah. 205 00:09:45,819 --> 00:09:48,939 Ed Slott: So it only helps the people that don't need the money, they can delay. 206 00:09:48,944 --> 00:09:53,000 But like I just said, if they delay, they're probably the ones gonna get 207 00:09:53,000 --> 00:09:54,680 hit with a, uh, bigger tax bill. 208 00:09:54,680 --> 00:09:55,939 Them and their beneficiaries. 209 00:09:55,939 --> 00:09:57,290 We have other provisions. 210 00:09:57,290 --> 00:10:00,310 Anyway, that's our deal or no deal on RMDs. 211 00:10:00,380 --> 00:10:02,600 What about deal or, uh, no deal. 212 00:10:02,930 --> 00:10:07,490 Uh, on the 50, former 50%, one of the biggest penalties 213 00:10:07,490 --> 00:10:09,560 in the tax code, the 50%... 214 00:10:10,230 --> 00:10:15,630 I said former, the 50% penalty for not taking an RMD, one of the harshest 215 00:10:15,630 --> 00:10:17,790 provisions in, in the whole tax code. 216 00:10:18,000 --> 00:10:19,260 And now it's gone. 217 00:10:19,470 --> 00:10:22,770 It's gone and replaced with a 25% penalty. 218 00:10:22,770 --> 00:10:23,699 Oh, what a deal. 219 00:10:23,939 --> 00:10:27,630 Uh, and even 10% if you make up the missed distribution. 220 00:10:27,709 --> 00:10:29,900 I call no deal on that. 221 00:10:30,259 --> 00:10:32,839 Uh, but, uh, do you want me to tell you why first, or you 222 00:10:32,839 --> 00:10:34,189 wanna say why it's a big deal? 223 00:10:34,280 --> 00:10:35,479 Jeffrey Levine: I'll say why it's a big deal. 224 00:10:35,479 --> 00:10:38,400 I mean, you just said it's one of the biggest, uh, biggest penalties in the tax 225 00:10:38,400 --> 00:10:41,969 code if it's going from 50 down to 10. 226 00:10:41,999 --> 00:10:45,500 I mean, that's a reduction of 80%. 227 00:10:45,530 --> 00:10:48,600 I mean that quantitatively, that has to be a big deal, right? 228 00:10:48,670 --> 00:10:50,000 Ed Slott: All right, I'll cut you down on that. 229 00:10:50,030 --> 00:10:53,960 I'd rather pay 50% of nothing than 10% of something. 230 00:10:54,290 --> 00:10:59,115 I may be a little cynical here, but as you would agree, I know you would agree. 231 00:10:59,115 --> 00:11:02,535 Almost nobody ever paid the 50% penalty. 232 00:11:02,535 --> 00:11:05,895 If you had the dog ate my homework, whatever you said, that 233 00:11:05,895 --> 00:11:10,065 penalty IRS was very generous and liberal waiving the penalty. 234 00:11:10,395 --> 00:11:14,235 I worry at 10% now, will they be as generous? 235 00:11:14,240 --> 00:11:16,785 Will more people end up paying 10% now? 236 00:11:17,205 --> 00:11:21,495 Uh, so it behooves every advisor and everybody watching this to 237 00:11:21,495 --> 00:11:23,565 make sure you take your RMD. 238 00:11:23,565 --> 00:11:24,795 So I say it's no deal. 239 00:11:25,165 --> 00:11:28,224 Only because you could end up with a higher penalty than you 240 00:11:28,224 --> 00:11:30,714 would've had under the 50% regime. 241 00:11:30,925 --> 00:11:32,785 Jeffrey Levine: Well, I think that's a good point, Ed. 242 00:11:32,785 --> 00:11:35,785 But one of the other provisions of the SECURE Act that we can talk about, 243 00:11:36,115 --> 00:11:41,035 uh, related to RMDs is the fact that they're looking to shift how they provide 244 00:11:41,035 --> 00:11:43,735 relief about this penalty in general. 245 00:11:44,120 --> 00:11:49,880 So I don't know if they were going to be shifting the way they give relief to 246 00:11:49,880 --> 00:11:55,469 something called EPCRS, which is just a, a obnoxious acronym for employee 247 00:11:55,474 --> 00:11:57,709 plans compliance Resolution system. 248 00:11:57,949 --> 00:12:03,050 Uh, traditionally this was reserved for if a 401k or a 403b or similar 249 00:12:03,050 --> 00:12:04,880 type of plan made a boo boo, right? 250 00:12:04,880 --> 00:12:08,300 And it was about to, to lose its qualified tax preference status. 251 00:12:08,305 --> 00:12:12,120 You could go to the IRS, do a mea culpa, ask how how you should 252 00:12:12,194 --> 00:12:15,974 fix, you know what, what step you should take to rectify your plan. 253 00:12:16,334 --> 00:12:19,244 And the IRS would tell you, and you did it, and they blessed it, 254 00:12:19,244 --> 00:12:20,175 and they said, okay, you're good. 255 00:12:20,175 --> 00:12:21,285 You're back in our good graces. 256 00:12:21,285 --> 00:12:28,064 Well, they're now gonna apply the same group to RMD forgiveness, and I wonder 257 00:12:28,064 --> 00:12:30,464 if that group will be as beneficial. 258 00:12:30,464 --> 00:12:34,545 So without a change from the 50% to the 10%, maybe that group 259 00:12:34,545 --> 00:12:35,444 would just say, you know what? 260 00:12:35,444 --> 00:12:36,555 You're paying 50%. 261 00:12:36,555 --> 00:12:37,504 And not only that Ed. 262 00:12:37,724 --> 00:12:42,564 I believe very recently, you know, the IRS got a big infusion of cash, 263 00:12:42,564 --> 00:12:47,694 something like 80 billion above and beyond what was their, uh, their 264 00:12:47,699 --> 00:12:49,104 normal funding and part of that... 265 00:12:49,104 --> 00:12:50,125 Ed Slott: Yeah, lemme stop you there. 266 00:12:50,185 --> 00:12:53,964 Uh, I doubt any of that was directed to RMD relief. 267 00:12:55,550 --> 00:12:58,340 Jeffrey Levine: Well, I think a little bit of it is gonna go to modernize.. 268 00:12:58,410 --> 00:13:00,890 Ed Slott: Maybe like 5 or 10 dollars. 269 00:13:01,100 --> 00:13:01,880 Jeffrey Levine: Well, you know what? 270 00:13:01,880 --> 00:13:06,590 They're gonna modernize their systems and modernizing their systems might make it, 271 00:13:06,590 --> 00:13:08,420 you know, the IRS knows how old you are. 272 00:13:08,420 --> 00:13:09,980 They have your social security number. 273 00:13:10,070 --> 00:13:13,280 Ed Slott: I always said that, they're one keystroke away from knowing everything. 274 00:13:13,310 --> 00:13:13,910 Jeffrey Levine: That's right. 275 00:13:13,910 --> 00:13:16,460 And so if they were on keystroke, if they actually modernize their 276 00:13:16,460 --> 00:13:22,180 system, you know, right now I think my, uh, my, uh, my pocket calculator 277 00:13:22,195 --> 00:13:25,855 that I used in sixth grade has more power than the IRS computers. 278 00:13:26,095 --> 00:13:28,375 If they actually go ahead and use some of that money to modernize 279 00:13:28,375 --> 00:13:31,405 their systems, maybe they're actually able to pull that and match 280 00:13:31,564 --> 00:13:33,855 1099Rs and start asking questions. 281 00:13:33,860 --> 00:13:37,275 You know, I think it's something like 80% of the audits today are 282 00:13:37,280 --> 00:13:38,955 done as correspondence audits. 283 00:13:38,955 --> 00:13:42,425 Where they basically send you a, a question in the mail and say, prove it. 284 00:13:42,785 --> 00:13:47,075 Uh, and you know, maybe we see more of those correspondence audits popping 285 00:13:47,075 --> 00:13:52,064 up soon where they say, hey, you're 74, we see that you have a 5498, 286 00:13:52,085 --> 00:13:55,805 which the IRS already has saying what your fair market value is. 287 00:13:55,810 --> 00:13:57,395 You know, your RMD age. 288 00:13:57,715 --> 00:13:59,335 Why didn't you take enough? 289 00:13:59,335 --> 00:14:02,605 It doesn't like, it wouldn't take a particularly powerful computer 290 00:14:02,605 --> 00:14:04,175 system to be able to identify that. 291 00:14:04,175 --> 00:14:06,155 Ed Slott: Not only that, there's a checkbox on the form. 292 00:14:06,155 --> 00:14:08,135 It's subject to RMDs. 293 00:14:08,615 --> 00:14:11,795 Jeffrey Levine: It's almost like they have all the information there. 294 00:14:11,945 --> 00:14:16,205 So I think this could be a big deal if we do see those systems modernized 295 00:14:16,205 --> 00:14:18,635 and we do see more people having the otherwise, even though it's a big deal, 296 00:14:18,635 --> 00:14:20,015 Ed, it's just the numbers game, right? 297 00:14:20,285 --> 00:14:23,075 Like we talk about 10,000 baby boomers turning. 298 00:14:23,285 --> 00:14:24,905 Were retiring every year. 299 00:14:25,145 --> 00:14:27,815 But the reality is, it it, that's kind of an average over 300 00:14:27,815 --> 00:14:29,105 the baby boomer demographic. 301 00:14:29,105 --> 00:14:32,555 It started with five and 6,000, but now we're, we're kind of 302 00:14:32,675 --> 00:14:34,505 seeing the crest of that wave. 303 00:14:34,655 --> 00:14:38,795 So more people are going to be getting coming into RMD age than we have ever 304 00:14:38,795 --> 00:14:41,735 had in the history of the country. 305 00:14:42,005 --> 00:14:42,815 And so just. 306 00:14:43,340 --> 00:14:47,660 If we just extrapolate out the amount of people who make mistakes today based on 307 00:14:47,660 --> 00:14:50,900 how many people there are today versus the amount of like, even if it's on a 308 00:14:50,900 --> 00:14:55,490 relatively constant basis, that's a heck of a lot more people having a heck of a 309 00:14:55,490 --> 00:15:01,200 lot more mistakes that now at worst, they will see 25 or 10% if they timely fix it. 310 00:15:01,260 --> 00:15:01,950 So big deal. 311 00:15:01,950 --> 00:15:04,031 Ed Slott: Including beneficiaries and their RMDs are very 312 00:15:04,036 --> 00:15:05,880 complicated with the 10 year rules. 313 00:15:05,880 --> 00:15:11,280 So we'll have to see that EPCRS, uh, that correction system, we won't know. 314 00:15:11,280 --> 00:15:14,160 Uh, IRS according to this law, has two years to write the 315 00:15:14,160 --> 00:15:15,630 rules on that and the guidance. 316 00:15:15,630 --> 00:15:18,810 But let's move on while we're talking to about RMDs. 317 00:15:19,110 --> 00:15:24,025 Deal or no deal, the QCD, qualified charitable distributions, 318 00:15:24,385 --> 00:15:28,314 uh, the change there is the a hundred thousand is the limit. 319 00:15:28,675 --> 00:15:33,115 Uh, what you can do per person, not per IRA, per person, per year. 320 00:15:33,115 --> 00:15:37,324 For IRA owners who are 70 and a half years older or older, or IRA 321 00:15:37,344 --> 00:15:39,415 beneficiaries have to be 70 and a half. 322 00:15:39,444 --> 00:15:45,474 Even though the age, the RMD age, is now 73 and maybe one day 75, it's still 323 00:15:45,474 --> 00:15:50,969 a 70 and a half age and it's uh, only for IRAs, just to make that clear. 324 00:15:51,209 --> 00:15:54,660 So the hundred thousand, I always thought that was enough for most people. 325 00:15:54,660 --> 00:15:56,160 How many people give that much? 326 00:15:56,160 --> 00:15:57,420 But apparently it wasn't. 327 00:15:57,689 --> 00:16:00,300 So that's going to be index for inflation. 328 00:16:00,480 --> 00:16:01,680 So that's one thing. 329 00:16:01,770 --> 00:16:05,130 I don't think it's a big deal cause I don't think unless you have the, the big, 330 00:16:05,180 --> 00:16:08,600 the heavy hitters, I don't think that's gonna make that much of a difference. 331 00:16:08,750 --> 00:16:12,930 And then the other provision, a, a one time $50,000 QCD. 332 00:16:13,194 --> 00:16:17,395 To split interest in entities like, uh, charitable gift annuities 333 00:16:17,395 --> 00:16:19,405 or charitable remainder trust. 334 00:16:19,734 --> 00:16:23,314 I don't think that's a big deal because it's only 50,000. 335 00:16:23,319 --> 00:16:25,824 You're gonna set up a whole trust and the, the whole, uh, 336 00:16:25,854 --> 00:16:28,224 infrastructure on that for one item. 337 00:16:28,224 --> 00:16:31,374 So I, I, that's my no big deal on that. 338 00:16:31,405 --> 00:16:32,725 Why do you say it's a big deal? 339 00:16:32,960 --> 00:16:34,250 Jeffrey Levine: No, this one's tough, Ed. 340 00:16:34,250 --> 00:16:34,760 Ed Slott: I know! 341 00:16:35,510 --> 00:16:37,640 Jeffrey Levine: I almost wanna concede, but I can't do that. 342 00:16:37,640 --> 00:16:38,960 My pride won't let me do it. 343 00:16:38,960 --> 00:16:40,940 I have to argue that it's a big deal. 344 00:16:40,940 --> 00:16:43,310 I guess I'm gonna go with a big deal because people have 345 00:16:43,315 --> 00:16:45,140 been asking for a long time. 346 00:16:45,440 --> 00:16:50,450 Can we allow our QCDs to be made to other types of charitable organizations? 347 00:16:50,455 --> 00:16:53,600 And the big one that people have asked for is, can I put 348 00:16:53,600 --> 00:16:55,760 this into my donor advised fund? 349 00:16:55,760 --> 00:16:59,795 And now the law, just to be clear, SECURE Act 2.0 does not do that. 350 00:16:59,925 --> 00:17:00,075 Ed Slott: Right. 351 00:17:00,075 --> 00:17:02,765 Jeffrey Levine: Donor advised funds are still not allowed, but maybe 352 00:17:02,765 --> 00:17:05,135 this cracks the door a little bit. 353 00:17:05,135 --> 00:17:10,115 So I'm gonna say big deal, because maybe this is the first crack in 354 00:17:10,625 --> 00:17:14,865 Congress's position that this money has to go right to charity directly, 355 00:17:14,869 --> 00:17:18,545 immediately, and exclusively the split interest you're talking about. 356 00:17:19,070 --> 00:17:22,790 You know, these things are, this allows you to still benefit a 357 00:17:22,790 --> 00:17:26,600 portion of those dollars, but also still have charity benefit. 358 00:17:26,600 --> 00:17:29,930 And I think the biggest deal there is gonna be on the charitable gift annuities, 359 00:17:30,260 --> 00:17:34,760 the charitable remainder trust, and the charitable, uh, remainder and the, 360 00:17:34,765 --> 00:17:36,500 the unit trust and the annuity trust. 361 00:17:37,685 --> 00:17:38,315 I think... 362 00:17:38,675 --> 00:17:40,025 Ed Slott: You have to concede on that. 363 00:17:40,075 --> 00:17:41,455 Jeffrey Levine: I, I, I just, I got nothing. 364 00:17:41,455 --> 00:17:44,125 I mean, I, I can't, it's hard to imagine a scenario where I could 365 00:17:44,125 --> 00:17:47,095 do that, but the charitable gift annuity, you know, the big difference 366 00:17:47,095 --> 00:17:49,645 is no setup cost in general, right? 367 00:17:49,650 --> 00:17:53,935 Because the charity is typically operating that, and you have no ongoing cost 368 00:17:53,935 --> 00:17:57,575 like you would have with a, an ongoing trust, with a trust tax return, etc. 369 00:17:57,745 --> 00:18:01,285 So the charitable gift annuity is a great way for someone to still 370 00:18:01,290 --> 00:18:04,985 benefit in part from the dollars that they had in their IRA, but 371 00:18:04,985 --> 00:18:06,365 support their charitable endeavor. 372 00:18:06,365 --> 00:18:08,014 So I think that could be a big deal. 373 00:18:08,014 --> 00:18:09,754 If I have to go with one, I'm gonna go with that. 374 00:18:10,024 --> 00:18:14,645 And again, I think the biggest thing is this is the first crack in that kind of... 375 00:18:14,649 --> 00:18:15,529 Ed Slott: That's true. 376 00:18:15,534 --> 00:18:16,659 One more item. 377 00:18:16,919 --> 00:18:17,659 One more item. 378 00:18:17,659 --> 00:18:18,219 Jeffrey Levine: All right, one more. 379 00:18:18,499 --> 00:18:22,099 Ed Slott: QLACs, Qualified Longevity Annuity Contract. 380 00:18:22,099 --> 00:18:22,879 Jeffrey Levine: Oh, big deal, Ed. 381 00:18:22,879 --> 00:18:23,609 Big, big deal. 382 00:18:26,014 --> 00:18:26,914 Ed Slott: I would agree. 383 00:18:26,914 --> 00:18:27,754 It's a big deal. 384 00:18:27,784 --> 00:18:32,104 Uh, let me, these are these, uh, longevity annuities where they kick in generally 385 00:18:32,109 --> 00:18:34,864 at 85, and the idea of them is great. 386 00:18:35,164 --> 00:18:39,754 Uh, that, you know, you hit 85, you're not outta money, and whatever amount 387 00:18:39,754 --> 00:18:43,754 you apportion to that within your IRA, comes off the calculate - the 388 00:18:43,754 --> 00:18:47,975 amount that's used to calculate the RMD so it can lower your RMD. 389 00:18:48,134 --> 00:18:49,544 Here's why I say no big deal. 390 00:18:49,544 --> 00:18:50,414 I mean, it is a big deal. 391 00:18:50,419 --> 00:18:51,404 They just raised it. 392 00:18:51,404 --> 00:18:56,564 They got rid of the 25% limitation, great, and they raise it to 200,000. 393 00:18:56,564 --> 00:18:57,584 That's a big deal. 394 00:18:57,794 --> 00:18:59,174 Here's why I say no big deal. 395 00:18:59,205 --> 00:19:00,164 Nobody uses it. 396 00:19:00,614 --> 00:19:02,534 I don't see anybody who uses it. 397 00:19:02,659 --> 00:19:06,169 We were at, uh, one of our training programs and we have hundreds of 398 00:19:06,169 --> 00:19:08,300 advisors that are really into this stuff. 399 00:19:08,509 --> 00:19:11,040 I said, how many of you are using the QLACs? 400 00:19:11,060 --> 00:19:12,529 And not even one hand. 401 00:19:12,769 --> 00:19:13,699 I don't know why. 402 00:19:13,699 --> 00:19:14,899 I think the idea is good. 403 00:19:14,899 --> 00:19:16,969 So that's why I say no big deal on this. 404 00:19:17,090 --> 00:19:17,540 Jeffrey Levine: Yeah. 405 00:19:17,540 --> 00:19:20,959 You know, it is one of those, uh, things where it even has a 406 00:19:20,965 --> 00:19:25,359 name, the annuity paradox where academically, these types of annuities. 407 00:19:25,359 --> 00:19:29,029 And Ed, we should just make clear, you and I are CPAs. 408 00:19:29,409 --> 00:19:32,739 Uh, you, neither one of us has an insurance license. 409 00:19:32,769 --> 00:19:33,399 Ed Slott: Oh, right, right. 410 00:19:33,609 --> 00:19:37,809 Jeffrey Levine: Uh, and you know, I I, you don't, you don't do anything in terms of 411 00:19:37,814 --> 00:19:40,989 advising and I work for a fee only RIA. 412 00:19:41,349 --> 00:19:42,759 We don't, you know, we don't take commission. 413 00:19:42,759 --> 00:19:46,449 So we are like your poster childs for, or poster children, I should 414 00:19:46,449 --> 00:19:49,989 say, for the people who are supposed to hate anything called annuities. 415 00:19:50,319 --> 00:19:54,149 But the reality is, were, we are fact-based, right? 416 00:19:54,149 --> 00:19:57,389 We're evidence-driven human beings, first and foremost. 417 00:19:57,629 --> 00:20:01,829 And the evidence supports income style annuities. 418 00:20:01,829 --> 00:20:02,909 Longevity annuities. 419 00:20:02,909 --> 00:20:07,349 Now there's, I, I don't, you know, there's a, a famous ad out there, Ed, I, you 420 00:20:07,349 --> 00:20:09,029 know, I hate annuities and you should too. 421 00:20:09,389 --> 00:20:12,119 And I don't, I don't hate, I have them. 422 00:20:12,824 --> 00:20:13,394 I know. 423 00:20:13,399 --> 00:20:14,804 I know, but you know what? 424 00:20:14,804 --> 00:20:19,064 I hate the word annuity, and I think you should too because the word 425 00:20:19,064 --> 00:20:21,104 annuity means so many different things. 426 00:20:21,104 --> 00:20:26,654 In some cases it's very high fee, uh, products that allow you to invest, 427 00:20:26,654 --> 00:20:28,274 but take your money back over times. 428 00:20:28,274 --> 00:20:32,914 In some cases, it's a, almost like a CD offered by an insurance company, 429 00:20:32,914 --> 00:20:34,445 so-called Migas multi-year annuities. 430 00:20:34,445 --> 00:20:35,235 Ed Slott: I have those! 431 00:20:35,304 --> 00:20:35,995 Jeffrey Levine: Right, right. 432 00:20:35,995 --> 00:20:39,175 And then in other cases, we're talking about these income style annuities. 433 00:20:39,175 --> 00:20:43,465 And so I think the problem is when people hear annuity, they just shut 434 00:20:43,465 --> 00:20:46,915 down cause they've heard all these quote unquote bad things or terrible things. 435 00:20:46,915 --> 00:20:50,784 And the reality is like most things, there are good products and bad 436 00:20:50,784 --> 00:20:54,235 products, and more importantly, good things for you and bad things for you. 437 00:20:54,235 --> 00:20:58,429 And from an academic perspective, these so-called income and 438 00:20:58,429 --> 00:21:00,710 particularly longevity annuities. 439 00:21:00,710 --> 00:21:04,760 Annuities that don't start income until much later in life. 440 00:21:04,760 --> 00:21:08,899 But because they're not starting until much later in life, tend to provide 441 00:21:08,899 --> 00:21:13,220 much higher levels of guaranteed income for that remainder period are 442 00:21:13,220 --> 00:21:18,520 shown as one of the best, if not the best way to mitigate longevity risk. 443 00:21:18,524 --> 00:21:22,350 And Ed, you as I, uh, you, as know, as well as I do, most people when 444 00:21:22,350 --> 00:21:26,580 they walk into an office of an advisor or a tax professional, like their 445 00:21:26,580 --> 00:21:29,999 biggest risk is, I don't wanna, or biggest concern is I don't wanna run 446 00:21:29,999 --> 00:21:32,580 out of money before I run out of life. 447 00:21:32,909 --> 00:21:36,840 And so if that's your biggest concern, you should start, not to say that you 448 00:21:36,840 --> 00:21:39,749 should run out and buy these things right away, but you should at least 449 00:21:39,749 --> 00:21:45,459 explore the things that are most likely to help you manage your biggest risk. 450 00:21:45,939 --> 00:21:47,635 Ed Slott: And that would include QLACs. 451 00:21:47,655 --> 00:21:50,754 I'm trying to get you back from this negative thing you just did too. 452 00:21:50,965 --> 00:21:52,014 This is a big deal. 453 00:21:52,014 --> 00:21:54,084 You're supposed to be on the big deal side. 454 00:21:54,084 --> 00:21:54,445 It didn't.. 455 00:21:54,445 --> 00:21:55,854 Jeffrey Levine: Well, it's a big deal because they're, they're, 456 00:21:55,860 --> 00:21:56,995 they're helpful in this regard. 457 00:21:56,995 --> 00:22:00,425 Ed Slott: They're great products, I'm saying no big deal cause nobody uses it. 458 00:22:00,430 --> 00:22:02,465 Even though we, I think we agree they should. 459 00:22:02,585 --> 00:22:04,985 Jeffrey Levine: Well, after listening to this Ed, everybody's gonna be 460 00:22:04,985 --> 00:22:06,395 out there thinking about them, so. 461 00:22:06,790 --> 00:22:08,379 Ed Slott: Well, 200,000 now. 462 00:22:08,860 --> 00:22:10,480 Jeffrey Levine: Big deal. 463 00:22:11,070 --> 00:22:15,230 Ed Slott: Alright, that's it for our RMD, uh, deal, or no deal, uh, 464 00:22:15,260 --> 00:22:19,190 section of secure 2.0, but there's lots of other provisions we'll 465 00:22:19,190 --> 00:22:21,020 cover in, uh, future episodes. 466 00:22:21,140 --> 00:22:24,320 Jeffrey Levine: Yeah, certainly we've got Roth related provisions and a ton more. 467 00:22:24,320 --> 00:22:26,370 Remember, there are almost a hundred provisions in this. 468 00:22:26,370 --> 00:22:29,990 So Ed, you know, like we always say, you know, there are two sides to every coin, 469 00:22:29,990 --> 00:22:35,574 today our two sides were deal or no deal, but you know, your retirement and your 470 00:22:36,004 --> 00:22:39,355 decisions are too important to leave up to a coin flip, and that's why the one 471 00:22:39,355 --> 00:22:45,475 thing Ed and I always agree on is making sure that you run by any big decision with 472 00:22:45,475 --> 00:22:49,375 a knowledgeable financial advisor or tax professional so that you can weigh the 473 00:22:49,375 --> 00:22:55,135 pros and the cons or whether something for you is a deal or no deal against your 474 00:22:55,685 --> 00:22:57,155 specific set of goals and objectives. 475 00:22:57,855 --> 00:23:01,790 If you'd like to continue the discussion with Ed and I, we'd love to hear from you. 476 00:23:01,940 --> 00:23:06,590 You can reach out to Ed using the handle @TheSlottReport on Twitter 477 00:23:06,590 --> 00:23:12,420 that's @TheSlottReport on Twitter or myself on Twitter @CPAPlanner. 478 00:23:12,440 --> 00:23:14,750 Again, that's @CPAPlanner. 479 00:23:15,050 --> 00:23:17,420 Ed, this was fun, but I know we've got a lot left, right? 480 00:23:17,770 --> 00:23:21,400 Ed Slott: Yeah, we still have more provisions on 2.0 coming up in 481 00:23:21,400 --> 00:23:24,250 our deal or no deal on Secure 2.0. 482 00:23:24,580 --> 00:23:26,260 Jeffrey Levine: All right, so we'll see you next time on 483 00:23:26,265 --> 00:23:27,790 the Great Retirement Debate. 484 00:23:28,420 --> 00:23:31,660 Outro: Jeffrey Levine is Chief Planning Officer for Buckingham Wealth Partners. 485 00:23:31,720 --> 00:23:34,900 This podcast is for informational and educational purposes only, and should 486 00:23:34,900 --> 00:23:38,190 not be construed as specific investment accounting, legal or tax advice. 487 00:23:38,190 --> 00:23:41,110 Certain information mentioned may be based on third party information, 488 00:23:41,110 --> 00:23:43,960 which may become outdated or otherwise superseded without notice. 489 00:23:44,050 --> 00:23:46,330 Third party information is deemed to be reliable, but it's. 490 00:23:47,060 --> 00:23:48,710 And completeness cannot be guaranteed. 491 00:23:48,830 --> 00:23:51,830 The topic discussed in corresponding arguments are those of the speakers 492 00:23:52,010 --> 00:23:54,800 and may not accurately reflect those of Buckingham Wealth Partners