1 00:00:00,000 --> 00:00:02,340 Intro: Hi, I'm Ed Slott, and I'm Jeff Levine. 2 00:00:02,430 --> 00:00:06,090 And we are two guys who just love to talk about retirement and taxes. 3 00:00:06,120 --> 00:00:10,050 Look, our mission is simple to educate you, the savers, so that you can make 4 00:00:10,050 --> 00:00:14,130 better decisions because better decisions on the whole lead to better outcomes. 5 00:00:14,190 --> 00:00:15,780 And here's how we're going to do that. 6 00:00:15,840 --> 00:00:20,610 Each week, Jeff and I will debate the pros and the cons of a particular retirement 7 00:00:21,200 --> 00:00:25,915 strategy or topic with the goal helping you keep more of your hard-earned money. 8 00:00:26,035 --> 00:00:29,485 Yeah, but we won't know which side of the debate we're taking until we flip a 9 00:00:29,485 --> 00:00:33,265 coin winner of the coin flip gets to pick which side of the debate they want to 10 00:00:33,265 --> 00:00:38,015 argue, and both of us will have to argue in favor of our respective positions, 11 00:00:38,185 --> 00:00:40,465 whether we agree with them or not. 12 00:00:40,525 --> 00:00:45,144 At the end of each debate, there's going to be one clear winner you, a more 13 00:00:45,144 --> 00:00:48,565 informed saver who can hopefully apply the merits of each side of the debate 14 00:00:48,864 --> 00:00:52,775 to your own personal situation to decide what's best for you and your family. 15 00:00:52,834 --> 00:00:53,675 So here we go. 16 00:00:53,675 --> 00:00:56,025 Welcome to the Great Retirement Debate. 17 00:01:02,100 --> 00:01:02,460 Jeffrey Levine: All right. 18 00:01:02,460 --> 00:01:04,500 Welcome back to the Great Retirement Debate. 19 00:01:04,500 --> 00:01:05,970 Ed, good to be with you again today. 20 00:01:06,210 --> 00:01:06,510 Ed Slott: Yep. 21 00:01:06,510 --> 00:01:11,940 We're back now on part two of Secure 2.0, that new tax law. 22 00:01:11,990 --> 00:01:19,274 Last version we did Part one, our Deal or No Deal on the RMD required minimum 23 00:01:19,765 --> 00:01:21,345 distribution provisions a lot there. 24 00:01:21,345 --> 00:01:27,765 Now, today we're going to switch to the Roth provisions, Roth IRAs and Roth 401ks. 25 00:01:28,024 --> 00:01:29,794 Jeffrey Levine: You know that old song, that kid song, like 26 00:01:29,794 --> 00:01:31,475 99 bottles of Beer on the Wall? 27 00:01:31,475 --> 00:01:35,494 I kind of feel like we're running through like 99 provisions and almost is 99 28 00:01:35,494 --> 00:01:37,264 provisions in this, uh, in this bill. 29 00:01:37,264 --> 00:01:39,064 All right, so we're gonna do Roth provisions today. 30 00:01:39,069 --> 00:01:39,544 Yes. 31 00:01:39,994 --> 00:01:40,564 Ed Slott: Yes. 32 00:01:40,569 --> 00:01:42,184 And we're going to follow suit. 33 00:01:42,189 --> 00:01:45,274 We flipped the coin last time and I picked no deal. 34 00:01:45,570 --> 00:01:49,559 Which was easier for me on those RMD provisions and you had a tough 35 00:01:49,559 --> 00:01:51,600 time, uh, defending some of that. 36 00:01:51,600 --> 00:01:55,710 So I'll stick with my no deal, uh, because it may be tougher for 37 00:01:55,710 --> 00:01:59,399 me on, on these Roth provisions, especially since I love everything 38 00:01:59,399 --> 00:02:02,009 about Roth IRAs cause I like tax free. 39 00:02:02,279 --> 00:02:02,820 So why don't.... 40 00:02:02,824 --> 00:02:03,389 Jeffrey Levine: You know what you are Ed? 41 00:02:04,079 --> 00:02:06,479 You are a Rothaphile, I just realized that. 42 00:02:06,699 --> 00:02:06,824 Ed Slott: Yeah. 43 00:02:06,829 --> 00:02:07,145 Okay. 44 00:02:07,274 --> 00:02:08,935 , Jeffrey Levine: You're you're a Rothaphile. 45 00:02:09,154 --> 00:02:09,724 Ed Slott: Uh, yeah. 46 00:02:10,144 --> 00:02:12,185 Whatever's tax free a file is what I am. 47 00:02:12,195 --> 00:02:13,545 Keep more of your hard-earned money. 48 00:02:13,550 --> 00:02:18,315 So let's start with the most recognizable actually has to do with RMDs. 49 00:02:18,315 --> 00:02:23,545 Where we left off last time in Roth 401Ks. 50 00:02:23,560 --> 00:02:29,390 Roth IRAs have never had required minimum distributions during your lifetime. 51 00:02:29,390 --> 00:02:30,410 That's all I'm talking about. 52 00:02:30,410 --> 00:02:36,650 Not beneficiaries, but when Roth 401ks came out, uh, for some reason, maybe 53 00:02:36,650 --> 00:02:38,180 it was an unintended consequence. 54 00:02:39,475 --> 00:02:43,015 They did have lifetime RMDs for those people. 55 00:02:43,015 --> 00:02:47,845 Had Roth plans in their workplace plan like a Roth 401k, and that 56 00:02:47,845 --> 00:02:51,235 seemed to be a problem because they weren't treated the same. 57 00:02:51,235 --> 00:02:56,515 Now, uh, they will be treated the same starting next year, 2024. 58 00:02:56,815 --> 00:02:59,245 Why would I say there's no deal there? 59 00:02:59,305 --> 00:03:02,365 Uh, I wouldn't, I don't, I don't have anything on that one. 60 00:03:02,365 --> 00:03:03,685 I don't see anything negative. 61 00:03:03,685 --> 00:03:08,190 I think it's uh, that provision is great that, uh, they finally got around to it. 62 00:03:08,520 --> 00:03:10,080 You'll just have to wait till next year. 63 00:03:10,080 --> 00:03:12,990 If I had anything negative, uh, say no deal. 64 00:03:13,380 --> 00:03:19,050 Uh, most people in plans probably weren't subject to RMDs anyway, even 65 00:03:19,050 --> 00:03:22,830 when they were past the age if they were still working, because lots of 66 00:03:22,830 --> 00:03:27,600 companies have these still working exceptions where you can delay RMDs 67 00:03:27,605 --> 00:03:31,590 in a company plan, not an IRA if you're still working for that company. 68 00:03:31,950 --> 00:03:36,975 So, other than that, that's my only no deal part, that it's not as big a deal. 69 00:03:39,235 --> 00:03:42,160 Jeffrey Levine: Well, I think it's a pretty big deal because the fact of the 70 00:03:42,160 --> 00:03:46,360 matter is if you have money in a tax-free account, Ed, you know, you just said it. 71 00:03:46,360 --> 00:03:47,710 You love anything tax free. 72 00:03:47,770 --> 00:03:48,250 Ed Slott: That's right. 73 00:03:48,340 --> 00:03:51,160 Jeffrey Levine: So why would you take money from something that's tax free 74 00:03:51,160 --> 00:03:56,060 and move it to anything else unless you needed to spend those dollars. 75 00:03:56,329 --> 00:03:59,390 So the fact is that now individuals who have their hard-earned money 76 00:03:59,390 --> 00:04:04,760 in a 401k, but the Roth side of the 401k won't be forced to do that. 77 00:04:04,760 --> 00:04:08,060 They'll be able to continue to let that money compound for their entire 78 00:04:08,060 --> 00:04:11,209 lifetimes, 100% tax and penalty free. 79 00:04:11,209 --> 00:04:13,700 That means more for later in life when they really need it. 80 00:04:13,990 --> 00:04:18,604 That means more for spouses when they inherit that dollar, those 81 00:04:18,604 --> 00:04:21,364 dollars, that means more for beneficiaries if they get it. 82 00:04:21,635 --> 00:04:23,705 So all in all, this is a, a pretty big deal. 83 00:04:23,705 --> 00:04:26,945 And you know what, I'll say it's a big deal cuz it actually, 84 00:04:27,515 --> 00:04:32,284 in general, the Secure Act 2.0 does nothing for simplification. 85 00:04:32,284 --> 00:04:34,505 It just complicates matters absurdly. 86 00:04:34,724 --> 00:04:39,545 But this is one kind of corner of the universe where they actually did 87 00:04:39,545 --> 00:04:40,775 make things a little bit simpler. 88 00:04:40,775 --> 00:04:45,545 Now, if you have a Roth account, it has no required minimum distribution before, 89 00:04:45,550 --> 00:04:46,925 as you said, we had to keep track. 90 00:04:47,225 --> 00:04:48,485 Is it a Roth IRA? 91 00:04:48,485 --> 00:04:51,365 Is it a Roth 401k, or 403b etc. 92 00:04:51,575 --> 00:04:52,955 Now, I don't care. 93 00:04:53,045 --> 00:04:57,485 Your account is a Roth, and again, this is beginning next year in 2024. 94 00:04:58,075 --> 00:05:02,815 But I don't care now, it's just you don't have required minimum distributions. 95 00:05:02,815 --> 00:05:06,055 So anytime we can get any sort of simplification, Ed, 96 00:05:06,235 --> 00:05:07,195 it's gotta be a big deal. 97 00:05:07,285 --> 00:05:07,885 Ed Slott: I agree. 98 00:05:07,885 --> 00:05:10,405 I had a tough call on saying no deal on that. 99 00:05:10,705 --> 00:05:15,025 Uh, but like I said, some people may not, it may not affect as many people 100 00:05:15,025 --> 00:05:18,745 as you think because they, uh, may have had that still working exception. 101 00:05:19,045 --> 00:05:22,315 But the other thing, I'll have to take one other point on your side, some people 102 00:05:22,315 --> 00:05:27,235 may have wanted to keep, you know, uh, their money in a Roth 401k in the past. 103 00:05:27,530 --> 00:05:32,130 To, to avoid RMDs and the plans you would roll out to a Roth IRA, 104 00:05:32,599 --> 00:05:36,830 but for certain reasons, creditor protection, uh, investment of whatever. 105 00:05:36,890 --> 00:05:40,190 There could have been reasons you wanted to keep it in the 401k. 106 00:05:40,190 --> 00:05:46,430 Now you can in the Roth 401k and not be subject to lifetime RMDs for that money. 107 00:05:46,670 --> 00:05:48,980 All right, next provision deal or no deal? 108 00:05:49,190 --> 00:05:55,640 The 529 to Roth IRA rollovers, so I'm calling no deal on that 109 00:05:55,640 --> 00:05:57,440 even though I like the provision. 110 00:05:57,445 --> 00:06:02,390 I'll give you the basics of the provision for years people built up, uh, subs uh, 111 00:06:02,390 --> 00:06:08,540 some people built up substantial accounts in their 529 education funding accounts, 112 00:06:08,810 --> 00:06:10,610 and now they have too much in there. 113 00:06:10,615 --> 00:06:13,610 Maybe their child didn't go to school or they got a scholarship 114 00:06:13,615 --> 00:06:16,790 or something like that, and the money can't be used for education. 115 00:06:16,790 --> 00:06:20,510 If it's not used for education, uh, the earnings could be subject to 116 00:06:20,510 --> 00:06:24,800 tax and even a 10% penalty if it's not used for qualified education. 117 00:06:25,100 --> 00:06:29,705 This provision, if you just look at the headline, it sounded great, and all the 118 00:06:29,705 --> 00:06:34,505 advisors were jumping all over and say, wow, 529s to Roth, tax free rollovers. 119 00:06:34,505 --> 00:06:37,295 I have clients with 200,000, 300,000. 120 00:06:37,625 --> 00:06:41,495 In fact, uh, you had a piece in the New York Times and in one 121 00:06:41,735 --> 00:06:45,875 that re that, uh, we're going to link if we can to, that pro... 122 00:06:45,905 --> 00:06:48,875 that article linked to one of your articles talking about these, 123 00:06:48,965 --> 00:06:51,025 uh, these large accounts, right? 124 00:06:51,955 --> 00:06:52,645 Jeffrey Levine: Yeah, that's right. 125 00:06:52,645 --> 00:06:57,625 The, the so-called Dynasty 529 plan is what, what I, what I refer to it as. 126 00:06:57,625 --> 00:07:01,915 It just simply refers to the ability of basically to accumulate obscene 127 00:07:01,915 --> 00:07:06,895 amounts of, of money inside 529 plans, and then change your beneficiaries, 128 00:07:07,465 --> 00:07:11,065 for potentially generations in order to continue to use these dollars. 129 00:07:11,065 --> 00:07:14,485 So yeah, I appreciate the plug , Ed, and uh, I owe you one, I guess. 130 00:07:14,485 --> 00:07:16,225 So your case of brandy is on the way. 131 00:07:16,525 --> 00:07:17,235 Ed Slott: Yeah, yeah. 132 00:07:17,365 --> 00:07:21,985 Uh, meanwhile that's the deal part, but that's all a lot of advisors and even the 133 00:07:21,985 --> 00:07:24,355 public saw, they only saw the headlines. 134 00:07:24,715 --> 00:07:27,565 Uh, well now I may have to burst a few bubbles. 135 00:07:27,655 --> 00:07:31,045 If you're an advisor out there or a consumer and saying, wow, 136 00:07:31,045 --> 00:07:32,845 this is great, I have 200,000. 137 00:07:32,875 --> 00:07:34,915 Um, it'll never be used for education. 138 00:07:34,955 --> 00:07:36,325 I, I, I can't see how. 139 00:07:36,565 --> 00:07:37,075 Wow. 140 00:07:37,075 --> 00:07:41,425 I could roll it to a Roth and, uh, tax free and now build it up in a 141 00:07:41,430 --> 00:07:42,955 Roth or with all the Roth rules. 142 00:07:42,985 --> 00:07:43,735 No. 143 00:07:44,120 --> 00:07:46,880 There are severe limitations. 144 00:07:46,880 --> 00:07:49,130 It's not all it was cracked up to be. 145 00:07:49,370 --> 00:07:53,270 Uh, and I'll tell you number one, it has to go to the beneficiaries. 146 00:07:53,300 --> 00:07:54,770 Roth IRA, this rollover. 147 00:07:54,770 --> 00:07:55,880 All right, not a big deal. 148 00:07:55,885 --> 00:07:57,980 Like you said, change beneficiaries. 149 00:07:58,310 --> 00:07:59,150 That's no big deal. 150 00:07:59,150 --> 00:08:01,100 Not available till 2024. 151 00:08:01,160 --> 00:08:01,880 Not a big deal. 152 00:08:01,880 --> 00:08:02,480 You can wait. 153 00:08:02,750 --> 00:08:04,490 Here are the big deal limitations. 154 00:08:04,730 --> 00:08:08,750 You must to qualify for the rollover from the 529 to the Roth. 155 00:08:09,020 --> 00:08:14,240 The account must, the 529 must have been in existence for 15 years. 156 00:08:14,450 --> 00:08:17,870 That could throw off a lot of people, even if you met that. 157 00:08:17,875 --> 00:08:21,320 It's like each hurdle, each time you get past a hurdle, there's another 158 00:08:21,320 --> 00:08:22,700 one that may be tougher to hit. 159 00:08:23,480 --> 00:08:27,470 So let's say you got past that, then any contributions that were made in 160 00:08:27,470 --> 00:08:29,510 the last five years don't qualify. 161 00:08:29,750 --> 00:08:30,170 All right. 162 00:08:30,170 --> 00:08:31,760 Maybe you got past that one. 163 00:08:31,850 --> 00:08:35,630 And now the big one where people, where everybody was licking their chops. 164 00:08:35,630 --> 00:08:37,220 Wow, look at all this money. 165 00:08:37,220 --> 00:08:38,329 I can get into a roth. 166 00:08:38,609 --> 00:08:40,684 No, there's a limitation. 167 00:08:40,684 --> 00:08:47,194 A $35,000 lifetime, $35,000 lifetime limitation. 168 00:08:47,194 --> 00:08:49,954 So you say, all right, I can move 35,000. 169 00:08:49,960 --> 00:08:50,645 No, you can't. 170 00:08:51,005 --> 00:08:57,125 The , the, uh, 35,000 can only be moved in increments of whatever the 171 00:08:57,185 --> 00:08:59,734 annual contribution is for that year. 172 00:08:59,734 --> 00:09:02,045 Now, this is not available till 24. 173 00:09:02,315 --> 00:09:06,335 We don't know what the annual IRA or Roth IRA contribution limit will 174 00:09:06,335 --> 00:09:11,335 be next year, but, For arguement say now it's 6,500 without the catch up. 175 00:09:11,335 --> 00:09:14,995 Let's say, uh, it went up to 7,000 just to make the math easy. 176 00:09:14,995 --> 00:09:15,895 7,000. 177 00:09:15,895 --> 00:09:19,435 It would take five years to get that 35,000 out. 178 00:09:19,675 --> 00:09:22,825 But even then, if you say, all right, I'll wait the five years and use 179 00:09:22,825 --> 00:09:27,865 the 35,000, it only works if the beneficiary would otherwise have 180 00:09:27,865 --> 00:09:32,859 qualified for his or her own IRA or Roth IRA contribution by having, 181 00:09:32,950 --> 00:09:34,930 uh, wages or self-employment income. 182 00:09:35,290 --> 00:09:40,990 So as we get down the ladder of all these, uh, of all these limitations, you're 183 00:09:40,995 --> 00:09:45,250 going to see, yes, it can help with some small balances and the ideas good, or 184 00:09:45,250 --> 00:09:47,620 to chip away at some larger balances. 185 00:09:47,890 --> 00:09:52,960 Uh, if there's, uh, any way to expand it, it might be that it's, 186 00:09:53,170 --> 00:09:55,270 we believe it's per beneficiary. 187 00:09:55,694 --> 00:09:56,115 Jeffrey Levine: That's right. 188 00:09:56,115 --> 00:09:56,415 Yeah. 189 00:09:56,444 --> 00:09:59,655 And I think it's a pretty big deal, Ed, because you know, right now 190 00:09:59,655 --> 00:10:02,865 retirement accounts are kind of like, they're on their own island. 191 00:10:03,285 --> 00:10:06,975 They basically can only transfer money from retirement 192 00:10:06,975 --> 00:10:09,015 account to retirement account. 193 00:10:09,495 --> 00:10:12,375 And you know, there are just things that happen. 194 00:10:12,375 --> 00:10:14,745 And, and by the way, not only can they only transfer money from 195 00:10:14,745 --> 00:10:17,235 retirement account, retirement account, but they can only take 196 00:10:17,235 --> 00:10:19,875 money from other retirement accounts. 197 00:10:19,875 --> 00:10:23,565 You know, you can't decide like, Ooh, my HSA, I wanna move it in there. 198 00:10:23,565 --> 00:10:28,275 There is a one-time ability to go from your IRA to an HSA, but it's very limited. 199 00:10:28,704 --> 00:10:31,875 Probably most people on here have never even heard of it, something called a 200 00:10:32,115 --> 00:10:34,935 qualified HSA funding distribution. 201 00:10:34,935 --> 00:10:39,715 That's an ability, once in a lifetime to take one year's worth of contributions, 202 00:10:39,985 --> 00:10:42,955 uh, from your IRA and move it into an HSA. 203 00:10:43,045 --> 00:10:46,015 But in, in general, we're talking about isolating money 204 00:10:46,015 --> 00:10:47,575 in their own respective buckets. 205 00:10:47,845 --> 00:10:50,875 This is a, a change to that philosophy. 206 00:10:51,175 --> 00:10:54,055 And you know, a lot of times Congress is, you know, they're like 207 00:10:54,055 --> 00:10:55,315 a little kid going to the beach. 208 00:10:55,555 --> 00:10:57,865 They don't just run in, they dip their toe in the water and 209 00:10:57,865 --> 00:10:59,285 they see how it goes first. 210 00:10:59,285 --> 00:11:03,565 And, uh, this might be Congress starting to dip its toe in the 211 00:11:03,565 --> 00:11:04,885 water and saying, you know what? 212 00:11:04,885 --> 00:11:11,935 We're gonna give people, uh, the ability to redirect or change the 213 00:11:11,935 --> 00:11:16,165 reason, the purpose that they were saving for tax preference money. 214 00:11:16,165 --> 00:11:17,815 And right now there are a number of reasons, right? 215 00:11:17,815 --> 00:11:18,475 It could be. 216 00:11:18,725 --> 00:11:23,105 For, uh, you have health, you have education, you have retirement. 217 00:11:23,105 --> 00:11:25,745 Right now, they're largely siloed in their own buckets. 218 00:11:26,135 --> 00:11:30,365 Maybe this is the beginning of, uh, of a, of a, of a new trend 219 00:11:30,370 --> 00:11:36,440 for Congress to just allow almost universal style tax preferenced 220 00:11:36,665 --> 00:11:39,685 savings accounts, which a lot of people have been clamoring for, for years. 221 00:11:40,020 --> 00:11:44,610 Ed Slott: Yeah, the 35,000 limit though is a kind of a killer and you may even 222 00:11:44,610 --> 00:11:48,840 be the blame for it, if I had to blame somebody probably that times article. 223 00:11:49,050 --> 00:11:49,560 Jeffrey Levine: Thank you. 224 00:11:49,560 --> 00:11:49,980 Thank you. 225 00:11:49,980 --> 00:11:51,900 I appreciate all the hate mail I'm gonna get now. 226 00:11:51,900 --> 00:11:52,080 Ed. 227 00:11:52,085 --> 00:11:52,350 Thank you. 228 00:11:52,630 --> 00:11:52,870 Yes. 229 00:11:53,115 --> 00:11:54,900 Ed Slott: Oh, probably Congress was reading that. 230 00:11:54,900 --> 00:11:58,575 It was a full page, you know, top, uh, front page in the New 231 00:11:58,575 --> 00:12:00,210 York Times business section. 232 00:12:00,300 --> 00:12:02,400 I could see Congress in there, what? 233 00:12:02,990 --> 00:12:04,395 Uh, no, no, no. 234 00:12:04,725 --> 00:12:05,505 We're not doing that. 235 00:12:05,814 --> 00:12:08,655 Jeffrey Levine: Well, that's, uh, Hey, great. 236 00:12:08,655 --> 00:12:11,235 My mailbox is gonna be, uh, stocked full of.. 237 00:12:11,325 --> 00:12:11,926 Ed Slott: Well, you know what? 238 00:12:11,955 --> 00:12:13,155 Maybe they read your stuff. 239 00:12:13,160 --> 00:12:13,845 I don't know. 240 00:12:14,085 --> 00:12:17,245 Jeffrey Levine: Alright, well hopefully they read somebody's stuff, something 241 00:12:17,245 --> 00:12:18,555 because they don't read the bill. 242 00:12:18,565 --> 00:12:19,345 That's for sure. 243 00:12:19,375 --> 00:12:19,525 Ed Slott: Yeah. 244 00:12:19,525 --> 00:12:20,575 Right, right, right. 245 00:12:20,635 --> 00:12:25,045 Uh, about 350 pages of the 4,000 page bill. 246 00:12:25,405 --> 00:12:28,165 All right, so there, there's another provision on the Roth. 247 00:12:28,255 --> 00:12:33,745 Uh, one more, the plan this is the 401k catchup contributions. 248 00:12:34,345 --> 00:12:39,435 Can only go in certain instances to a Roth 401k. 249 00:12:39,625 --> 00:12:44,065 This is a special provision in secure 2.0 for high income people, 250 00:12:44,365 --> 00:12:50,115 and the provision says, the catch up contribution, if your wages from the 251 00:12:50,115 --> 00:12:56,895 company you're working for are in excess of 145,000, you must, uh, you can, 252 00:12:56,955 --> 00:12:59,775 the catch up must go to the Roth 401k. 253 00:12:59,835 --> 00:13:05,595 I like the idea of a catchup, uh, you know, loading up a Roth 401k, but it 254 00:13:05,595 --> 00:13:07,665 must go because you're high income. 255 00:13:07,675 --> 00:13:10,855 And, and what if the plan doesn't have a, a Roth 401k? 256 00:13:10,855 --> 00:13:14,985 Then you have no catch up, so it takes some of your choices away and some 257 00:13:15,135 --> 00:13:19,665 higher income people might want to keep it in the 401, the tax deferred side. 258 00:13:20,025 --> 00:13:22,275 So, uh, I call no deal on that. 259 00:13:22,275 --> 00:13:26,805 The idea is good, but, uh, to me personally, I like to see more 260 00:13:26,805 --> 00:13:29,405 people load up on Roth 401ks. 261 00:13:29,410 --> 00:13:31,185 But what's, say you on the big deal? 262 00:13:31,765 --> 00:13:35,505 Jeffrey Levine: Ed, you know, I'm gonna have to take this, uh, to say it's a, it's 263 00:13:35,505 --> 00:13:37,395 a big deal, but for a negative reason. 264 00:13:37,395 --> 00:13:41,565 Precisely, uh, for some of the reasons you stated and, and I'd start with 265 00:13:41,570 --> 00:13:46,125 the fact that this only applies to individuals who have wages of more 266 00:13:46,125 --> 00:13:50,145 than $145,000 in the previous year. 267 00:13:50,325 --> 00:13:54,435 So we're talking about people with relatively high incomes, at least compared 268 00:13:54,435 --> 00:13:57,825 to, you know, the American public at large and American taxpayers at large. 269 00:13:58,155 --> 00:14:01,185 And if you have high income and you think you might be in a lower tax 270 00:14:01,185 --> 00:14:03,465 bracket later on, maybe when you retire. 271 00:14:03,995 --> 00:14:07,175 You may be better off going into the pre-tax account now and then 272 00:14:07,175 --> 00:14:11,285 converting maybe in a gap year in between when you retire and when you 273 00:14:11,285 --> 00:14:15,005 start taking social security and start taking required minimum distributions. 274 00:14:15,245 --> 00:14:16,475 But now you can't do that. 275 00:14:16,745 --> 00:14:18,035 So I think it's a big deal there. 276 00:14:18,035 --> 00:14:23,315 And perhaps the even bigger deal is that not every plan has a Roth option today. 277 00:14:23,645 --> 00:14:30,905 And if there's one person who makes more than $145,000, uh, $45,000 in wages in the 278 00:14:31,385 --> 00:14:35,150 previous year, and they are 50 or above. 279 00:14:35,150 --> 00:14:39,680 So basically like one eligible person to make a catch up, who can't make 280 00:14:40,275 --> 00:14:46,335 because of the fact that there is no Roth option in the plan, no one in the plan 281 00:14:46,335 --> 00:14:48,105 gets to make a catch up contribution. 282 00:14:48,180 --> 00:14:50,055 That's high income, low income. 283 00:14:50,055 --> 00:14:51,255 Roth, not Roth. 284 00:14:51,585 --> 00:14:54,855 Uh, so there's one, and I got one other big deal for you, Ed. 285 00:14:54,975 --> 00:14:57,615 Um, and that is, I think it'll get fixed. 286 00:14:57,645 --> 00:15:03,495 I, I do think it'll get fixed before, but as it stands now, Congress made a mistake. 287 00:15:04,890 --> 00:15:05,190 Portion. 288 00:15:05,330 --> 00:15:09,290 They accidentally deleted the section of the law that allows for 289 00:15:09,290 --> 00:15:11,300 catch up contributions, period. 290 00:15:11,300 --> 00:15:15,590 So, although I think it'd be fixed eventually, or IRS will just ignore 291 00:15:15,595 --> 00:15:20,000 it, uh, it's a kind of a big deal that Congress, you know, they they, they, 292 00:15:20,090 --> 00:15:23,960 they put this thing together between the Senate and the House version so quickly 293 00:15:24,230 --> 00:15:28,280 that they ended up in a scenario where they accidentally deleted the entire 294 00:15:28,610 --> 00:15:30,560 portion of the catch up contribution law. 295 00:15:30,590 --> 00:15:30,830 Ed Slott: Yeah. 296 00:15:30,835 --> 00:15:32,330 It's called cut and paste. 297 00:15:33,020 --> 00:15:34,550 Pretty much, except they forgot to paste. 298 00:15:34,550 --> 00:15:35,960 Jeffrey Levine: They, I was, I was gonna say, there's too much 299 00:15:35,960 --> 00:15:37,400 cutting and not enough pasting here. 300 00:15:37,400 --> 00:15:38,090 Yeah, indeed. 301 00:15:38,150 --> 00:15:40,460 Ed Slott: All right, there's a couple other miscellaneous things, 302 00:15:40,520 --> 00:15:45,830 uh, just so we cover the, the Roth provisions or as many as we can. 303 00:15:46,400 --> 00:15:52,630 New beginning of SEP and simple Roth IRAs and even matching contributions 304 00:15:52,635 --> 00:15:57,290 to Roth, uh, 401ks, which none of these were allowed before. 305 00:15:57,290 --> 00:15:58,790 And, and they're allowed now. 306 00:15:59,090 --> 00:16:01,610 Uh, what's the downside of that? 307 00:16:01,790 --> 00:16:07,210 Well, I think it'll gonna take a while to get into the system because the law 308 00:16:07,210 --> 00:16:13,445 was enacted December 29th, so SEP and Simple Roth IRAs became effective a few 309 00:16:13,445 --> 00:16:15,965 days later, even if you wanted to do it. 310 00:16:16,025 --> 00:16:19,085 I don't think any custodians going to have the paperwork, the 311 00:16:19,090 --> 00:16:22,595 administrative headaches of, of getting these up and running. 312 00:16:22,595 --> 00:16:26,815 Eventually it'll smooth out, but for right now, it might be a rocky road on those. 313 00:16:27,795 --> 00:16:30,915 Jeffrey Levine: Yeah, I, I think this is also a big deal and I've gotta argue that. 314 00:16:30,915 --> 00:16:35,910 So I have to think that and, and, uh, you know that right now, It 315 00:16:35,910 --> 00:16:40,830 is not everybody has the ability to get money into a Roth early on. 316 00:16:40,830 --> 00:16:45,060 For instance, you know, simple IRA owners, they've had no ability to 317 00:16:45,060 --> 00:16:48,570 get money into a Roth account for the first two years of their plan because 318 00:16:48,570 --> 00:16:52,660 they are stuck in the simple for two years, you can't move it anywhere else. 319 00:16:53,350 --> 00:16:56,440 So the fact that you're able to do this now, this is a, you 320 00:16:56,440 --> 00:16:57,730 know, that's a pretty big deal. 321 00:16:57,910 --> 00:17:02,700 The fact that you are able to get your employer to put money directly 322 00:17:02,705 --> 00:17:06,400 into the Roth, now, yes, today, practically speaking, it's not there, 323 00:17:06,400 --> 00:17:07,690 but it'll be there soon enough. 324 00:17:08,020 --> 00:17:10,090 And that eliminates a step. 325 00:17:10,090 --> 00:17:13,630 And as we know, Ed, any time there are steps involved in something, 326 00:17:13,630 --> 00:17:17,320 anytime it, it takes, if it takes three steps to do something, instead 327 00:17:17,320 --> 00:17:20,335 of two, fewer people will do it even if it's, it's in their best interest. 328 00:17:20,695 --> 00:17:23,185 So re reducing friction here. 329 00:17:23,425 --> 00:17:26,935 You know, one of the greatest inventions for retirement security 330 00:17:26,935 --> 00:17:32,215 over the last, uh, you know, last 25, 30 years has been auto enrollment. 331 00:17:32,220 --> 00:17:32,665 Why? 332 00:17:32,815 --> 00:17:36,625 Not because it allows people to get into a plan where they weren't before, 333 00:17:36,625 --> 00:17:40,730 but because it removes friction, it takes away a step for them to do it. 334 00:17:40,910 --> 00:17:44,360 So now the fact that people will be able to have money go right into a Roth 335 00:17:44,360 --> 00:17:48,500 from their employer means more of them will probably get that money in there. 336 00:17:48,500 --> 00:17:51,410 And that could be a very good thing for a lot of people down the road. 337 00:17:51,530 --> 00:17:51,890 Big deal. 338 00:17:51,890 --> 00:17:53,210 Ed Slott: Maybe it's a start of something. 339 00:17:53,210 --> 00:17:55,130 They're opening up the spigots for the Roth. 340 00:17:55,130 --> 00:17:55,430 Why? 341 00:17:55,435 --> 00:17:56,780 Because they need revenue. 342 00:17:56,780 --> 00:18:00,290 And that's where all these Roth provisions are in secure 2.0 in 343 00:18:00,290 --> 00:18:03,640 the revenue provisions because it brings in money up front. 344 00:18:03,640 --> 00:18:05,115 So I say take advantage. 345 00:18:05,115 --> 00:18:06,285 I'm a big Roth fan. 346 00:18:06,525 --> 00:18:08,955 There're just a couple of bumps in the road and hopefully we'll 347 00:18:08,955 --> 00:18:13,155 get over a lot of these things, including that one on the catch up. 348 00:18:13,160 --> 00:18:16,155 But I, I don't even really address that cause you know they're gonna fix that. 349 00:18:16,455 --> 00:18:16,815 Jeffrey Levine: Yeah. 350 00:18:16,820 --> 00:18:17,985 I think at some point they will. 351 00:18:17,990 --> 00:18:18,435 I agree. 352 00:18:18,440 --> 00:18:21,225 And, and Ed, I, I think, you know, we agree on the fact that. 353 00:18:21,635 --> 00:18:25,055 This is, you know, the Roth is something that the government loves 354 00:18:25,055 --> 00:18:26,915 because it brings in money today. 355 00:18:26,915 --> 00:18:30,665 And so, while normally I'm hesitant to say you can trust the government to 356 00:18:30,665 --> 00:18:34,595 keep its word about anything because the laws get changed so quickly and one 357 00:18:34,600 --> 00:18:37,895 party comes in and changes the rules, the other one may, this is one thing 358 00:18:37,895 --> 00:18:41,705 that everybody really likes because it looks really good on a budget report 359 00:18:41,705 --> 00:18:43,365 when you bring in those dollars today. 360 00:18:43,855 --> 00:18:44,390 Ed Slott: That's right. 361 00:18:44,390 --> 00:18:47,870 Short-term thinking, take advantage of it for long-term planning. 362 00:18:48,080 --> 00:18:48,710 Jeffrey Levine: That's right. 363 00:18:48,740 --> 00:18:50,300 Well, so we agree on that. 364 00:18:50,300 --> 00:18:53,210 And Ed, one thing, the other, you know, one other thing we always agree on is 365 00:18:53,210 --> 00:18:58,430 the fact that while, uh, there are two sides to every argument, to every coin. 366 00:18:59,105 --> 00:19:02,825 Your life and your decisions are too important to leave up to a coin flip, and 367 00:19:02,825 --> 00:19:08,045 that's why one thing that we always agree on is making sure that you talk through 368 00:19:08,045 --> 00:19:13,005 any big decision with a knowledgeable financial advisor or tax professional 369 00:19:13,005 --> 00:19:16,715 so that you can weigh the pros and the cons of different decisions against 370 00:19:16,745 --> 00:19:20,165 your specific goals and your objectives. 371 00:19:20,165 --> 00:19:24,790 It's too big of a deal not to take advantage of that option. 372 00:19:24,790 --> 00:19:27,490 And so if you'd like to continue the discussion with Ed and I, we'd 373 00:19:27,490 --> 00:19:31,480 love to hear what you think of the Secure Act 2.0 Roth provisions. 374 00:19:31,480 --> 00:19:33,760 Are they a big deal or are they not a big deal? 375 00:19:33,760 --> 00:19:37,540 Which one do you think will have the greatest impact on you and your family? 376 00:19:37,750 --> 00:19:42,340 You can reach out to us, uh, Ed on Twitter @TheSlottReport that's 377 00:19:42,340 --> 00:19:46,870 @TheSlottReport or myself, @CPAPlanner. 378 00:19:46,895 --> 00:19:52,745 Again, that's @CPAPlanner, Ed and I look forward to hearing your thoughts and Ed, I 379 00:19:52,745 --> 00:19:54,725 certainly look forward to our next debate. 380 00:19:55,205 --> 00:19:56,165 Ed Slott: Oh yeah, me too. 381 00:19:56,165 --> 00:19:59,705 And there may even be more to come on secure 2.0 when we find out what 382 00:19:59,705 --> 00:20:04,265 Congress really meant or what I, what we, what IRS thinks Congress really meant. 383 00:20:04,295 --> 00:20:04,905 Jeffrey Levine: Indeed. 384 00:20:05,135 --> 00:20:06,575 We're gonna wait for those regulations. 385 00:20:06,635 --> 00:20:09,875 And Ed, I think one last thing that you can, I you and I can agree on 386 00:20:09,875 --> 00:20:12,935 is the fact that we could be glad we don't have to be the ones writing the 387 00:20:12,935 --> 00:20:14,585 regulations for a hundred new rules. 388 00:20:15,060 --> 00:20:15,215 Ed Slott: Oh yeah. 389 00:20:15,455 --> 00:20:16,325 Can you imagine? 390 00:20:16,625 --> 00:20:20,225 But we'll give them, what you get here is the debate in English 391 00:20:20,285 --> 00:20:21,935 on what we think they mean. 392 00:20:22,595 --> 00:20:23,255 Jeffrey Levine: Fair enough. 393 00:20:23,345 --> 00:20:27,395 And we'll give you some more debate next time here on the Great Retirement Debate. 394 00:20:27,400 --> 00:20:27,725 See you soon. 395 00:20:28,790 --> 00:20:32,030 Outro: Jeffrey Levine is Chief Planning Officer for Buckingham Wealth Partners. 396 00:20:32,090 --> 00:20:35,270 This podcast is for informational and educational purposes only, and should 397 00:20:35,270 --> 00:20:38,540 not be construed as specific investment accounting, legal or tax advice. 398 00:20:38,600 --> 00:20:41,510 Certain information mentioned may be based on third party information, 399 00:20:41,510 --> 00:20:44,360 which may become outdated or otherwise superseded without notice. 400 00:20:44,390 --> 00:20:47,630 Third party information is deemed to be reliable, but it's accuracy and 401 00:20:47,630 --> 00:20:49,070 completeness cannot be guaranteed. 402 00:20:49,220 --> 00:20:52,220 The topic discussed in corresponding arguments are those of the speakers 403 00:20:52,400 --> 00:20:55,190 and may not accurately reflect those of Buckingham Wealth partners.