Retirement Will Never Be The Same

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Let's get into today's piece. 🤝

Quote

"The question isn't at what age I want to retire, it's at what income." - George Foreman

What Got Secured?

Let me begin by saying most articles covering legislation are more boring than reading the definition section of a textbook. The goal of this piece is to give you the retirement account changes from the SECURE 2.0 Act without putting you into hibernation.

The 401k, and other retirement accounts, play a major role in when people cut the cord on their careers.

While not recognizing these changes won't destroy your retirement plans, they are good to skim over and keep in mind as you navigate the world of 401ks, 529 plans, RMDs, blah, blah, blah.

Please remember, I'm not a registered advisor, didn't work on Wall Street, and didn't attend an Ivy League school. I'm just a dude who spent a couple of hours reading brain-numbing articles and listening to podcasts so I could explain the main points to you in the next 3 min.

Since we have a pretty balanced group of readers from ages 18-70 (shoutout to those who filled out the survey) I'm going to break down the changes in sections.

• The first section: For the young bucks with decades till retirement.

• The second section: For the seasoned vets in or close to retirement.

Scroll accordingly, or read it all.

Young Bucks

Welcome. You are not considered a senior citizen (yet). Here is a quick rundown of the changes you might want to keep in mind.

Auto Enrollment in 401k Plans

Starting in 2025 employers will have the option to auto-enroll employees in a 401k plan. The starting contribution for companies who implement this will be 3%. Don't worry, you can always opt out.

I think this is a significant change that encourages retirement savings. Especially, since just 41% of Americans contribute to a 401k, according to the U.S. Census Bureau.

Emergency Savings Accounts

To be offered by some retirement plans in 2024, individuals will have a special Roth account for emergency savings limited to $2,500 per year. The first 4 withdrawals from the account will be tax and penalty-free.

Note, this will be for "non-highly compensated employees." So if you are raking in the dough already, you just have to save on your own. Sorry baller.

Student Loan Match

Beginning in 2024 participating companies will deem student loan paydown eligible for their usual 401k match. This is awesome for students and graduates that might be coming out of school with loans. Pay down your debt, or invest? How about both?

Hint hint, for upcoming graduates this might be something to ask your future employer about.

529 Plans

If you don't know what a 529 plan is, I'll cover it in a future post, but here is a quick 2-minute breakdown.

If you have leftover funds from a college 529 plan these can now be rolled over into a Roth IRA for the beneficiary. Normal contribution limits still apply and a lifetime limit of $35k also exists.

That's all for the young bucks, feel free to skim the seasoned vets section, or scroll down for the best memes.

Seasoned Vets

Welcome boomer, and congrats on being close to not punching that clock for another 30 years.

RMDs

Effective in January 2023, the age at which those invested in traditional IRAs have to start taking required minimum distributions increased from 72 to 73. Also, for the bad grandpas out there, the penalty for not taking RMDs has been reduced to 25% from 50%.

If you have a Roth account within your employer's plan it will be exempt from RMDs requirements in 2024.

Catch Up Contributions

Hitting in January 2023, for those 50 and older, the maximum catch up amount one can contribute to a workplace plan is going from $6,500 a year to $7,500. (60 to 63 can add $10,000 more above the standard limit starting in 2025)

Also, catch-up contributions for IRAs will be adjusted with inflation and increase from the current limit of $1,000 per year.

I know this is getting dry, we're almost to the end grasshopper.

Matching for Roth Accounts

This is one I tried to write but ended up making it more confusing than it is (whoops). So here is a quick quote from one of the articles I read to summarize.

Conclusion

Hopefully you read something in this piece that made you think "oh I need to keep that in mind." If not, at least you have the memes below to check out.

As I said, please don't take this post and argue with your financial advisor about what I said. Chances are, they probably know more than me.

The goal of this piece was to bring to attention *some* of the changes that are coming to retirement plans. As always thanks for reading.

Till next time baller, Cade.

Cade's Finds

9 AI Tools That Will Blow Your Mind - Cool video showcasing some new and upcoming AI tools that are available to use.

Will The SECURE Act 2.0 Negatively Impact Your Finances - If you want more in-depth information on the topics in this email, here is a great podcast (by professionals) covering the changes.

Reminder to check out the Cash Flow University one-week free trial offer ending tomorrow if you are interested.

Best Memes Of The Week

As one who eats 4 eggs almost every morning, can confirm.

We really had it made.

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Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email send me a DM on twitter. See you soon!