Secure Act 2.0

[minnesotapaintlady]

Jul 29, 2022 12:04:19 GMT -5 Rukh O'Rorke said:

Apr 19, 2022 11:04:17 GMT -5 minnesotapaintlady said:

In your Vanguard account if you're looking at the "Balances and Holdings" page.  Under the Roth IRA by all the buttons for like "buy and sell" and "order status" and "transaction history", there is another one that says "Convert to Roth".  You won't see it now if you don't have a traditional IRA with them. 

Click that and it walks you right through it.

I'm more fuzzy on the 457 side of things.  I'm pretty certain you need to keep all your money in the 457 and not roll it all over into an IRA if you want to do conversions because the entire IRA has to be converted.  So you just make a withdrawal of say 10K, stick it in your IRA (you have 60 days to do this) and then convert that 10K.  Sometimes people roll their entire workplace plan over to an IRA when they quit/retire and then I think you're stuck not being able to do conversions.

so say you convert 5k to roth out of an ira.....then what happens? Do you need to pay income tax on it?

Yes, on the entire amount of the conversion, contribution and gain.

[tallguy]

Jul 29, 2022 12:04:19 GMT -5 Rukh O'Rorke said:

Apr 19, 2022 11:04:17 GMT -5 minnesotapaintlady said:

In your Vanguard account if you're looking at the "Balances and Holdings" page.  Under the Roth IRA by all the buttons for like "buy and sell" and "order status" and "transaction history", there is another one that says "Convert to Roth".  You won't see it now if you don't have a traditional IRA with them. 

Click that and it walks you right through it.

I'm more fuzzy on the 457 side of things.  I'm pretty certain you need to keep all your money in the 457 and not roll it all over into an IRA if you want to do conversions because the entire IRA has to be converted.  So you just make a withdrawal of say 10K, stick it in your IRA (you have 60 days to do this) and then convert that 10K.  Sometimes people roll their entire workplace plan over to an IRA when they quit/retire and then I think you're stuck not being able to do conversions.

so say you convert 5k to roth out of an ira.....then what happens? Do you need to pay income tax on it?

Any conversion of IRA to Roth is taxable in the year that you do the conversion.  Whether you actually pay tax on it depends on your other income.  For example, I have said here that I am limiting my income for tax purposes.  I can take a distribution or do a conversion from my IRA up to the $10-12,000 range and still not pay tax.  Yes, it is taxable.  No, I do not pay the tax.  More correctly, it is still in my 0% bracket so the tax is zero.     

[seriousthistime]

Apr 25, 2022 14:16:51 GMT -5 seriousthistime said:

After mulling over all this information, I'm trying to decide if I'm overlooking something between withdrawals from retirement accounts, conversions, and MAGI/IRMAA.

My tax filing status is single. 

I just sketched out my anticipated 2022 taxable income from all sources, which is from two different pensions, plus SS taxable at 85%, plus the interest earned, minus itemized deductions.  I fall squarely in the middle of a marginal tax bracket and am not remotely close to either the next lowest or next highest bracket.  This gives me some wiggle room.

I am not required to take RMDs yet.  I don't expect to have any earned income this year so I can't contribute to an IRA, and can't "backdoor" any of my existing IRAs into a Roth unless I have earned income.  But it seems that even without earned income I can convert some of my tIRA to a Roth IRA and pay the taxes on it this year, and there is no limit to the amount I can convert.  (Is all this correct?)

MAGI is also a concern, because I don't want to increase my income to a point where my IRMAA will increase. 

I've calculated my MAGI for 2022 will be about $8,500 less than the next highest IRMAA threshold.  That gives me some wiggle room to convert from tIRA to a Roth IRA this year, if the above is correct.  And hopefully reduce the RMDs I will have to start taking in 2024.  As it stands right now, the RMDs will push me over into the next highest IRMAA bracket.   And $8,500 converted this year and a similar amount next year will not make enough of a difference to get the income including the RMDs below the IRMAA threshold, but it would convert some money into tax free status now.  And that's a good thing. 

So once I'm required to take RMDs and am pushed into a higher IRMAA threshold because of that, it would seem the thing to do would be to not just take the RMDs but also take out more from the tIRAs to convert to the Roth to stay just under the next highest income tax bracket, because the IRMAA limit will have been exceeded anyway. 

Just as an example, the first IRMAA threshold is $91,000, and the next one is $114,000. Assume retirement and interest income of $85,500, and RMD of $6,000, so income would be $91,500, past the first IRMAA threshold.  The marginal tax bracket for that income (24%) goes up to $170,500 (32%).  Wouldn't it be best to take the RMD of $6,000 plus an additional $22,500 from the tIRA, to keep my income under $114,000?  It would still be well under the 32% income tax bracket.  Or if I wanted to completely blow a whole year (or two) of IRMAA thresholds, I could take the RMD of $6,000 plus $79,000 to reach $170,500 in income, all taxed at the marginal 24% rate, and the IRMAA would increase but not for two years, and only for that year (or two). That would keep subsequent years' RMDs low enough to not be bumped past an IRMAA threshold. 

It would have to be done with a keen eye to the exact amounts.  The IRMAA thresholds are cliffs, whereas income tax is a marginal rate.  

Thoughts/advice?

   

There was a response to this, and a follow-up post from me.  I don't know how to quote more than one in a single message.  (Anyone with any guidance on this board/tech issue?)

I'm doing a 2022 close-to-year-end review of my taxable income.  I would like to do a Roth conversion of some of my tax deferred investments (IRAs/TSP).  I was looking at the IRMAA bracket thresholds for 2023, which for a single person are $97K (below which there is no IRMAA), then $123K and $153K.  There will be an RMD which I will take sometime in 2023. 

The IRMAA income brackets are increasing in 2023.  In 2022, the first bracket increased at $91K for a single person, so it's increased $6K for 2023. I suppose there will be another bracket increase in 2024, but just to play it safe, it would seem to be no lower than the 2023 brackets, and certainly no lower than the 2022 brackets. 

I have a couple of questions. 

For 2024, it seems they will look at 2022 MAGI, correct? If so, it seems that the figure I should not exceed with my 2022 income is the 2024 bracket, but that's a guessing game.  To be safe, maybe I should plan on doing a 2022 Roth conversion according to the 2023 IRMAA brackets?  Would they ever decrease if we are in a deflationary period?  If so, I should stick with the 2022 thresholds.

 ETA: tagging tallguy here since he responded to my initial post.

[jerseygirl]

serious this time, that’s my question also about 2022AGI limits are for 2024?
I’m planning to donate RMD from my biggest IRA directly to a charity(I’m on board). If the 2024 brackets are used then I don’t need to direct donate entire amount
By directly donating that RMD isn’t included in our AGI
IRMAAs would be high for both of us

[tallguy]

Oct 24, 2022 9:31:38 GMT -5 seriousthistime said:

Apr 25, 2022 14:16:51 GMT -5 seriousthistime said:

After mulling over all this information, I'm trying to decide if I'm overlooking something between withdrawals from retirement accounts, conversions, and MAGI/IRMAA.

My tax filing status is single. 

I just sketched out my anticipated 2022 taxable income from all sources, which is from two different pensions, plus SS taxable at 85%, plus the interest earned, minus itemized deductions.  I fall squarely in the middle of a marginal tax bracket and am not remotely close to either the next lowest or next highest bracket.  This gives me some wiggle room.

I am not required to take RMDs yet.  I don't expect to have any earned income this year so I can't contribute to an IRA, and can't "backdoor" any of my existing IRAs into a Roth unless I have earned income.  But it seems that even without earned income I can convert some of my tIRA to a Roth IRA and pay the taxes on it this year, and there is no limit to the amount I can convert.  (Is all this correct?)

MAGI is also a concern, because I don't want to increase my income to a point where my IRMAA will increase. 

I've calculated my MAGI for 2022 will be about $8,500 less than the next highest IRMAA threshold.  That gives me some wiggle room to convert from tIRA to a Roth IRA this year, if the above is correct.  And hopefully reduce the RMDs I will have to start taking in 2024.  As it stands right now, the RMDs will push me over into the next highest IRMAA bracket.   And $8,500 converted this year and a similar amount next year will not make enough of a difference to get the income including the RMDs below the IRMAA threshold, but it would convert some money into tax free status now.  And that's a good thing. 

So once I'm required to take RMDs and am pushed into a higher IRMAA threshold because of that, it would seem the thing to do would be to not just take the RMDs but also take out more from the tIRAs to convert to the Roth to stay just under the next highest income tax bracket, because the IRMAA limit will have been exceeded anyway. 

Just as an example, the first IRMAA threshold is $91,000, and the next one is $114,000. Assume retirement and interest income of $85,500, and RMD of $6,000, so income would be $91,500, past the first IRMAA threshold.  The marginal tax bracket for that income (24%) goes up to $170,500 (32%).  Wouldn't it be best to take the RMD of $6,000 plus an additional $22,500 from the tIRA, to keep my income under $114,000?  It would still be well under the 32% income tax bracket.  Or if I wanted to completely blow a whole year (or two) of IRMAA thresholds, I could take the RMD of $6,000 plus $79,000 to reach $170,500 in income, all taxed at the marginal 24% rate, and the IRMAA would increase but not for two years, and only for that year (or two). That would keep subsequent years' RMDs low enough to not be bumped past an IRMAA threshold. 

It would have to be done with a keen eye to the exact amounts.  The IRMAA thresholds are cliffs, whereas income tax is a marginal rate.  

Thoughts/advice?

   

There was a response to this, and a follow-up post from me.  I don't know how to quote more than one in a single message.  (Anyone with any guidance on this board/tech issue?)

I'm doing a 2022 close-to-year-end review of my taxable income.  I would like to do a Roth conversion of some of my tax deferred investments (IRAs/TSP).  I was looking at the IRMAA bracket thresholds for 2023, which for a single person are $97K (below which there is no IRMAA), then $123K and $153K.  There will be an RMD which I will take sometime in 2023. 

The IRMAA income brackets are increasing in 2023.  In 2022, the first bracket increased at $91K for a single person, so it's increased $6K for 2023. I suppose there will be another bracket increase in 2024, but just to play it safe, it would seem to be no lower than the 2023 brackets, and certainly no lower than the 2022 brackets. 

I have a couple of questions. 

For 2024, it seems they will look at 2022 MAGI, correct? If so, it seems that the figure I should not exceed with my 2022 income is the 2024 bracket, but that's a guessing game.  To be safe, maybe I should plan on doing a 2022 Roth conversion according to the 2023 IRMAA brackets?  Would they ever decrease if we are in a deflationary period?  If so, I should stick with the 2022 thresholds.

 ETA: tagging tallguy here since he responded to my initial post.

I have never actually looked into the specifics of that question.  To be safe you could use the 2022 bracket amount.  If it is true that the 2024 surcharge is based on the 2024 bracket amount then you may end up with a lower surcharge amount than you thought.  It is as you say a guessing game as to planning, but the cliffs are steep.  I will never be subject to IRMAA but would not want to play it that closely.  Yes, the bracket amount could theoretically go down in a deflationary environment, but it is very unlikely to happen anytime soon.  Also, just because you exceed the limit and are subject to IRMAA surcharges does not necessarily mean that you will have to ultimately pay them.  There are several qualifying events that may allow you to appeal.  Some may be applicable to you while others won't, but I will list them anyway in case anyone reading has the same concerns:  
1. Marriage
2. Divorce or annulment
3. Death of a spouse
4. Reduction in work
5. Cessation of work
6. Loss or reduction of pension income
7. Loss of income from an income-generating property

[jerseygirl]

Ah! I can use cessation of work! I just filled out the form to terminate my consulting LLC

I’ve successfully used reduction of work previously using end of a contract but kept the LLC for future contracts

So I’ll take my RMD instead of direct donation ( it’s a lot more than I wanted to donate)
Thanks for posing and (sort of) answering question!

[seriousthistime]

I poked around the bogleheads forum and found a few threads about this, although they are a year or so old.  There could be more current ones.  But it seems that yes, when we're trying to figure out how to adjust our taxable income so as not to exceed the IRMAA thresholds, we are looking at adjusting 2022 income so as not to exceed the 2024 IRMAA thresholds.

Here is one link: 

www.bogleheads.org/forum/viewtopic.php?p=6376503 

It seems the people who post there put a lot of faith in this website, and here's current info/guesstimates on that site:

thefinancebuff.com/medicare-irmaa-income-brackets.html#htoc-2024-irmaa-brackets

What do you think?  

[teen persuasion]

Oct 24, 2022 13:25:41 GMT -5 seriousthistime said:

I poked around the bogleheads forum and found a few threads about this, although they are a year or so old.  There could be more current ones.  But it seems that yes, when we're trying to figure out how to adjust our taxable income so as not to exceed the IRMAA thresholds, we are looking at adjusting 2022 income so as not to exceed the 2024 IRMAA thresholds.

Here is one link: 

www.bogleheads.org/forum/viewtopic.php?p=6376503 

It seems the people who post there put a lot of faith in this website, and here's current info/guesstimates on that site:

thefinancebuff.com/medicare-irmaa-income-brackets.html#htoc-2024-irmaa-brackets

What do you think?  

Harry Sit, (I think he posts on bogleheads as TBF), is very good at his calculations of upcoming inflation adjustments for other tax stuff like IRA and 401k contribution limits - he's using the actual formulas and goalposts, so it's not just guess work.  The guess work here is what inflation will be going forward.  I like his explanation of how the average will remain higher even if things plateau in the future.

[minnesotapaintlady]

It's sooooo close now. 

www.forbes.com/sites/kristinmckenna/2022/12/20/secure-act-20-to-bring-sweeping-changes-to-retirement-rules/?sh=1e623ef62672

And the final version only requires Roth for catch up for incomes over 145K and includes a 529 to Roth rollover option which is super exciting! (to geeks like me).

[bean29]

Dec 21, 2022 11:11:26 GMT -5 minnesotapaintlady said:

It's sooooo close now. 

www.forbes.com/sites/kristinmckenna/2022/12/20/secure-act-20-to-bring-sweeping-changes-to-retirement-rules/?sh=1e623ef62672

And the final version only requires Roth for catch up for incomes over 145K and includes a 529 to Roth rollover option which is super exciting! (to geeks like me).

When with the requirement to use Roth for Catch up contributions go into effect?  2022 I have $22,150 401K and $4,850 Roth, so stepping up to $7,500 not a huge difference.  I just haven't decided yet if I want to reduce retirement contributions to pay down my one Mortgage on the rentals that has a $40,000 balance and a 6%+ interest rate.

I am glad to see the auto enrollment in 401K's going into effect.  I have one or two employees that are eligible for the 401K but have not enrolled b/c they don't know what funds to choose.  I tell them to choose the Index Fund for S&P500, but still don't get the forms back.

[minnesotapaintlady]

Dec 21, 2022 11:55:50 GMT -5 bean29 said:

Dec 21, 2022 11:11:26 GMT -5 minnesotapaintlady said:

It's sooooo close now. 

www.forbes.com/sites/kristinmckenna/2022/12/20/secure-act-20-to-bring-sweeping-changes-to-retirement-rules/?sh=1e623ef62672

And the final version only requires Roth for catch up for incomes over 145K and includes a 529 to Roth rollover option which is super exciting! (to geeks like me).

When with the requirement to use Roth for Catch up contributions go into effect?  2022 I have $22,150 401K and $4,850 Roth, so stepping up to $7,500 not a huge difference.  I just haven't decided yet if I want to reduce retirement contributions to pay down my one Mortgage on the rentals that has a $40,000 balance and a 6%+ interest rate.

I am glad to see the auto enrollment in 401K's going into effect.  I have one or two employees that are eligible for the 401K but have not enrolled b/c they don't know what funds to choose.  I tell them to choose the Index Fund for S&P500, but still don't get the forms back.

The bill would also require participants to make catch-up contributions to a Roth account in 401(a), 403(b), and 457(b) plans starting in 2024. There is an exception for workers earning less than $145,000 (indexed).

[saveinla]

Dec 21, 2022 12:00:05 GMT -5 minnesotapaintlady said:

Dec 21, 2022 11:55:50 GMT -5 bean29 said:

When with the requirement to use Roth for Catch up contributions go into effect?  2022 I have $22,150 401K and $4,850 Roth, so stepping up to $7,500 not a huge difference.  I just haven't decided yet if I want to reduce retirement contributions to pay down my one Mortgage on the rentals that has a $40,000 balance and a 6%+ interest rate.

I am glad to see the auto enrollment in 401K's going into effect.  I have one or two employees that are eligible for the 401K but have not enrolled b/c they don't know what funds to choose.  I tell them to choose the Index Fund for S&P500, but still don't get the forms back.

The bill would also require participants to make catch-up contributions to a Roth account in 401(a), 403(b), and 457(b) plans starting in 2024. There is an exception for workers earning less than $145,000 (indexed).

Is the 145000 individual's MAGI mpl? 

[minnesotapaintlady]

Dec 21, 2022 12:08:53 GMT -5 saveinla said:

Dec 21, 2022 12:00:05 GMT -5 minnesotapaintlady said:

The bill would also require participants to make catch-up contributions to a Roth account in 401(a), 403(b), and 457(b) plans starting in 2024. There is an exception for workers earning less than $145,000 (indexed).

Is the 145000 individual's MAGI mpl? 

It doesn't say, but I'm guessing AGI or MAGI as they never use gross or taxable for setting limits on anything.

[teen persuasion]

Dec 21, 2022 11:11:26 GMT -5 minnesotapaintlady said:

It's sooooo close now. 

www.forbes.com/sites/kristinmckenna/2022/12/20/secure-act-20-to-bring-sweeping-changes-to-retirement-rules/?sh=1e623ef62672

And the final version only requires Roth for catch up for incomes over 145K and includes a 529 to Roth rollover option which is super exciting! (to geeks like me).

Whoa, they are talking about employER matching going to Roth instead of pre-tax!

Under current law, SEP and SIMPLE retirement plans cannot have a designated Roth IRA account. In the Secure Act 2.0, participants of these plans could have the option for contributions/employer funding to be treated as Roth starting in 2023.

The bill would also require participants to make catch-up contributions to a Roth account in 401(a), 403(b), and 457(b) plans starting in 2024. There is an exception for workers earning less than $145,000 (indexed).

The bill also enables employers to allow employees to elect matching contributions in a Roth account versus pre-tax, effective immediately.

I'm just not clear on whether that opt/elect employer funds to be treated as Roth is just "yes, put it in the Roth side" (duh, why wouldn't you), or the matching goes to Roth ONLY if your contributions go to Roth, too.

[minnesotapaintlady]

Dec 21, 2022 23:20:45 GMT -5 teen persuasion said:

I'm just not clear on whether that opt/elect employer funds to be treated as Roth is just "yes, put it in the Roth side" (duh, why wouldn't you), or the matching goes to Roth ONLY if your contributions go to Roth, too.

The actual wording of that part of the bill starts on page 2371 if you want to try and figure it out.  The legalese was making my head spin.

www.napa-net.org/sites/napa-net.org/files/SECURE%20Act%202.0%20Final%20Text_122022.PDF

I kind of lost all excitement over the "allows" the employer instead of requires.  My employer is not quick to jump on new.  And I'm assuming if they make the match as Roth that they lose some kind of tax break on their side?

[teen persuasion]

Dec 22, 2022 7:48:56 GMT -5 minnesotapaintlady said:

Dec 21, 2022 23:20:45 GMT -5 teen persuasion said:

I'm just not clear on whether that opt/elect employer funds to be treated as Roth is just "yes, put it in the Roth side" (duh, why wouldn't you), or the matching goes to Roth ONLY if your contributions go to Roth, too.

The actual wording of that part of the bill starts on page 2371 if you want to try and figure it out.  The legalese was making my head spin.

www.napa-net.org/sites/napa-net.org/files/SECURE%20Act%202.0%20Final%20Text_122022.PDF

I kind of lost all excitement over the "allows" the employer instead of requires.  My employer is not quick to jump on new.  And I'm assuming if they make the match as Roth that they lose some kind of tax break on their side?

Thanks for the link & location.
It sounds like it becomes taxable income, included in your AGI.  Makes sense, just never thought about how it would be implemented before, because never considered they'd make it an option.  Hmm, might be interesting for payroll and IRS implementation, though!

But, oh yeah, reading the legalese is  .  It's like reading COBOL.  I get that they are changing the wording of legal documents, but describing the changes is too much.  It would be so much clearer to use the current document and add the changes in a different color for insertions and strikethroughs for deletions/changes.  Then you could read the entire thing in context, not just the changes, and visually compare the new vs struck parts.

[minnesotapaintlady]

Well, it's a done deal now.  Now we just have to figure out everything that's in it!  So much to unpack...

 

And this article is stating that the 145K limit for catch up contributions going into Roth is based on how much you already have in a Roth and not income! 

www.forbes.com/sites/jamiehopkins/2022/12/22/the-secure-20-acts-impact-on-roth-iras/?sh=6ac600e45170

Section 603: Catch-up Contributions are Roth Contributions

Currently catch-up contributions can be a Roth or pre-tax depending on what the plan allows. The new provision would require that all catch-up contributions would be subject to Roth tax treatment. There is an exception for employees with $145,000 or less in their Roth the previous year, indexed for inflation, who would still be able to opt into a pre-tax account.

My rating of this provision, which goes into effect in 2024, is negative. This is a tax revenue raising provision. Increasing the catch-up contribution amounts earlier and requiring high income catch-up contributing participants to do Roth will push revenue forward into a higher tax year.

People who can use catch-up contributions are over age 50 and often in the highest earning and tax years of their lives. This shifts money into a high tax year as opposed to allowing it to be deferred into the future in a lower tax rate year.

This is viewed as a tax revenue generator to offset some of the other tax cuts or tax benefit extensions in the bill. Lastly, this creates a good deal of complexity for plan providers as many companies are not set up for Roth accounts and there was no grandfathering out older plans. There will likely be some needed changes or regulations in the next year to help out existing plans.

[minnesotapaintlady]

I also agree with this quote on the raising of the RMD age and why I've never worried about them personally.

My rating on this provision, which goes into effect in 2023 and 2033, is neutral. Most people will not be impacted by it because most people are already taking out more than their RMD at 72. Nearly 80% of people took out more than their RMD at age 70.5 and it’s likely that fewer than 20% that take RMD only at 72. This number would drop even more by age 73 and even further by age 75. This provision mostly impacts people with wealth who don’t need their RMD and can leave the money to grow.

[teen persuasion]

Dec 22, 2022 16:00:06 GMT -5 minnesotapaintlady said:

Well, it's a done deal now.  Now we just have to figure out everything that's in it!  So much to unpack...

 

And this article is stating that the 145K limit for catch up contributions going into Roth is based on how much you already have in a Roth and not income! 

www.forbes.com/sites/jamiehopkins/2022/12/22/the-secure-20-acts-impact-on-roth-iras/?sh=6ac600e45170

Section 603: Catch-up Contributions are Roth Contributions

Currently catch-up contributions can be a Roth or pre-tax depending on what the plan allows. The new provision would require that all catch-up contributions would be subject to Roth tax treatment. There is an exception for employees with $145,000 or less in their Roth the previous year, indexed for inflation, who would still be able to opt into a pre-tax account.

My rating of this provision, which goes into effect in 2024, is negative. This is a tax revenue raising provision. Increasing the catch-up contribution amounts earlier and requiring high income catch-up contributing participants to do Roth will push revenue forward into a higher tax year.

People who can use catch-up contributions are over age 50 and often in the highest earning and tax years of their lives. This shifts money into a high tax year as opposed to allowing it to be deferred into the future in a lower tax rate year.

This is viewed as a tax revenue generator to offset some of the other tax cuts or tax benefit extensions in the bill. Lastly, this creates a good deal of complexity for plan providers as many companies are not set up for Roth accounts and there was no grandfathering out older plans. There will likely be some needed changes or regulations in the next year to help out existing plans.

That's not what I'd want!

I have much more in Roth IRA than in my SIMPLE IRA because I had no employer plan until recently.  I'm trying to catch up to DH's much bigger 401k/403b/rollover tIRA balances (he had employer plans much longer than I did - he was sole breadwinner many years, plus years I worked with no option) - due to the way our state will tax IRA withdrawals in retirement.  We each get our own annual $20k of state tax free IRA withdrawals, but we can't share - I have to withdraw $20k from MY accounts, and he do the same from HIS.  So I want my traditional accounts to get big enough to throw off that $20k annually without depleting them - so I'm madly scrambling to stuff as much as I can in them in the few years I have before I retire.  Forcing some to go to Roth is counter productive for me!

Again, not sure how implementation will work.  The article mentioned adding a Roth option for SIMPLE IRAs, not automatic, so might be up to the employer to choose to add, or not (SIMPLE currently has no Roth choice, to keep it, well, simple to implement).  But if the catch up contributions must go to Roth, then Roth would HAVE to be added, right?  And the article doesn't mention Roth for matching as an option for SIMPLE, just 401k 403b 457b governmental plans.


They are really making things much more complex, there's going to be tons of unintended consequences.  Just fold everything into TSP accounts for everyone, one set of rules, period.  Then tinker with that, if you must.

[MN-Investor]

Dec 22, 2022 16:00:06 GMT -5 minnesotapaintlady said:

Well, it's a done deal now.  Now we just have to figure out everything that's in it!  So much to unpack...

No, not quite. It's part of the massive budget bill which just passed the Senate and is set to be debated on? voted on? by the House on Friday. So it may be a done deal by the end of Friday.

[teen persuasion]

From discussion on MMM: Section by section summary

Section 603, Elective deferrals generally limited to regular contribution limit. Under current
law, catch-up contributions to a qualified retirement plan can be made on a pre-tax or Roth basis
(if permitted by the plan sponsor). Section 603 provides all catch-up contributions to qualified
retirement plans are subject to Roth tax treatment, effective for taxable years beginning after
December 31, 2023. An exception is provided for employees with compensation of $145,000 or
less (indexed).

Not sure where that Forbes author got the idea the exception was based on your Roth balance.

[teen persuasion]

I'm intrigued by the Saver's Match replacing the Saver's credit. No more useless nonrefundable credit, instead it gets deposited IN your retirement account.

But not starting until 2027!

[minnesotapaintlady]

Dec 23, 2022 0:40:55 GMT -5 MN-Investor said:

Dec 22, 2022 16:00:06 GMT -5 minnesotapaintlady said:

Well, it's a done deal now.  Now we just have to figure out everything that's in it!  So much to unpack...

No, not quite. It's part of the massive budget bill which just passed the Senate and is set to be debated on? voted on? by the House on Friday. So it may be a done deal by the end of Friday.

I jumped the gun when I saw it passed.  I'm not seeing the House holding it up the day before they break for Christmas though. 

[minnesotapaintlady]

Dec 23, 2022 1:16:00 GMT -5 teen persuasion said:

I'm intrigued by the Saver's Match replacing the Saver's credit. No more useless nonrefundable credit, instead it gets deposited IN your retirement account.

But not starting until 2027!

I'm wondering how they're going to do that if you already have your account maxed?  Bonus funds?  But yeah, 2027.  I'm tentatively retiring in 2028, so it might not do me much good!  The EIC and Saver's Match might be enough to convince me to stay on part time a smidge longer. 

[minnesotapaintlady]

Dec 23, 2022 1:16:00 GMT -5 teen persuasion said:

I'm intrigued by the Saver's Match replacing the Saver's credit. No more useless nonrefundable credit, instead it gets deposited IN your retirement account.

But not starting until 2027!

Yeah, 2027!  What the heck?  It can't possibly take that long to get set up?  Might not do me much good since I tentatively plan on retiring in 2028.  If my youngest goes to college the EIC and Saver's Match might be enough to convince me to stay on part time for a while longer.

[teen persuasion]

That's exactly the boat I'm in - DH retired a year ago, but EITC while DS5 finishes HS/college AND opportunity to stick more in my puny SIMPLE for a few years is too good to pass up. Until I get tired of it. OMY at a time.

[teen persuasion]

Kitces' blog has a guest post about lots of the Secure Act 2.0 details.

link

He mentioned the Saver's Match has to go into a non-Roth account.  What if Roth is your only account?  Open a tIRA just for the match?   Had to look up the nitty gritty details in the bill (p 2064 for not-a-Roth reference).

But further reading brought up the part I always forget about - other withdrawals in the year or 2 before by either spouse wipeout your eligible contributions.  By 2027, we are pretty likely to have made some withdrawals, so it still might be moot! 

[minnesotapaintlady]

Dec 31, 2022 16:21:23 GMT -5 teen persuasion said:

He mentioned the Saver's Match has to go into a non-Roth account.

I suppose.  Otherwise they'd also have to add the match to your AGI and make it taxable.

I'm hoping to take advantage of it at least for a couple years.  After all those years of that fake "Saver's Credit" that looked great on paper, but didn't really help anyone it will be nice to have an ACTUAL match.

[minnesotapaintlady]

Just a little update.  The catch up contributions having to be Roth if over a certain AGI has been delayed until 2026.

www.irs.gov/pub/irs-drop/n-23-62.pdf

[Rukh O'Rorke]

Aug 25, 2023 19:40:46 GMT -5 minnesotapaintlady said:

Just a little update.  The catch up contributions having to be Roth if over a certain AGI has been delayed until 2026.

www.irs.gov/pub/irs-drop/n-23-62.pdf

oooo - thanks for this! This was a real worry for me - assuming I can still do the catch up part after student loans payments come back on line....which....I guess I probably won't! But you never know.....

It looked like I'd be paying 29% taxes (fed+state) for that roth part, and I prefer the tax deduction now....will see where I'm at in 2026 I guess!

Hoping for a huge wild bull market between now and then and I'm retired  ......