Page 46 - Investment Advisor June 2021

RETIREMENT PLANNING

the Secure Act 2.0 “is a mini-Rothification, “But that isn’t going to fly right now becomes law. “That’s a nice feature that
and it’s about testing the waters.” Catch- because such a move produces a revenue will be welcome,” Cox said. “That higher
up contributions are generally made by loss to the government which has to be penalty has been incredibly steep.”
those who’ve already put in the maximum covered,” according to Cox.
tax-deferred contribution, he points out. The bill that’s being built right now IRA, 403(B) CHANGES
“This [measure] that involves the Roth aims “to get to the results they’re looking Additional shifts that are significant for
will capture some tax money. That’s a for” in terms of revenue targets and the advisors and their clients concern the
pretty big departure from what we’ve ability to clear both the House and Senate. ability of savers “to make SIMPLE and
seen,” Cox said. “This is the beginning of Another shift that’s happened to the SEP IRA contributions on a Roth basis,”
something bigger, and there’s going to be bill is that individuals with retirement he said, referring to Savings Incentive
an ever-growing fraction Match Plan for Employees
of retirement planning “[Secure Act 2.0] is the beginning and Simplified Employee
contributions that will be Pension Plan Individual
required to be Roth.” of something bigger, and there’s Retirement Accounts.
At the same time, of going to be an ever-growing “That’s an improve-
course, “It’s possible that ment. There are lots of
tax-deferred options will fraction of retirement planning people who would like to
be increasingly disallowed make retirement plan con-
in retirement plans” as contributions that will be tributions in their SEP or
Congress looks to find other [account] without
more tax dollars, he said. required to be Roth.” having to do so through
For some people, this a 401(k). Being able — in
approach can be “a good —Jamie Cox, Harris Financial Group SEPs and SIMPLEs — to
thing, because there’s a lot have Roth contributions
of people who would otherwise not do accounts of less than $100,000 cannot is brilliant. That’s very much needed,”
any [savings in] Roth accounts,” Cox take tax-exempt RMDs. “This provision according to Cox.
points out. These accounts allow retir- is no longer part of this legislation for In addition, the current Secure Act
ees to withdraw money tax-free. the same reason — the revenue loss,” the bill “harmonizes the hardship rules for
“On the other hand, if you’re the type advisor said. “It’s a feature that should the 403(b) and the 401(k).” There are a
of person who wants to defer taxes, this have been in the new Secure Act … but is lot of challenges with 403(b) plans “that
move works against you,” he added. not now in place.” are well known and well established,”
“What I fear is that it will become easy, “Still, there’s a little horse trading the advisor states. “So this change is
the next time [Congress] wants to raise that’s been going on,” he points out. really important” as a means to help the
revenue, to start diminishing the regular One result of this political process is a educators, nurses and other employees
contribution to an IRA … and make it Roth reduced tax penalty for those who fail who use these plans. “Their plan should
only,” Cox said. “They tried to do that in to take an RMD. It would drop to 25% of be as good as if not better than the
the Trump tax bill. This is the second bite the RMD from the current 50% if the bill 401(k). This is a good first step.”
of the apple.” A provision in the Tax Cuts
and Jobs Act 2017 would have required
Roth treatment of catch-up contributions; Milevsky: Advisors Should Charge
it was eliminated before the bill’s passage.
More for Retirement Spending Advice
RMD SHIFTS
In addition to the Rothification trend, oshe Milevsky is on fire when dis- more complicated. Therefore, it should
Secure Act 2.0 also “indexes” the push- Mcussing his most recent project: be more expensive to clients.
back of the beginning date of RMDs, explaining what decumulation really Milevsky is a tenured professor at
so that it will move from 72 to 75 over means and outlining how it applies to the York University Schulich School
a decade rather than immediately. The clients, advisors and the financial servic- of Business in Toronto and a manag-
original bill that Congress worked on es industry in general. Here’s a hint: It’s ing director of PI Longevity Extension
last year made the switch at one time. not retirement planning, but something Corp., a fintech company that develops

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