NEW TAX PLANNING IDEAS WITH SECURE ACT 2.0

BY YVONNE MARSH, CFP ® , CPA

YOU’VE PROBABLY been reading about the retirement savings changes brought about by the passage of the Secure Act 2.0 in late December, so I won’t recap them all again here. Instead, let’s look for tax planning opportunities. How can we put this new law to your best use?

First, the easy one is that the Required Minimum Distribution (RMD) age was increased to age 73 if you’re born in the years of 19511959 and to age 75 if you’re born in 1960 or later. (If you were already subject to RMDs, having been born in 1950 or before, there are no changes for you.) How does this help? More time for systematic multi-year Roth IRA conversions, of course! Remember, Roth conversions are how you move money from IRA to a Roth IRA, paying tax on the conversion, but then forever shielding the amount moved in a tax-free Roth account. Roth IRAs insulate you from future tax increases and provide a tax-free legacy for your heirs.

Second, a new beneficiary strategy is available that is advantageous if the surviving spouse is older than the deceased spouse. Starting in 2024, a spouse who inherits an IRA as a primary beneficiary will have the option to be treated AS the deceased spouse. Huh? Usually, most surviving spouses roll over the IRA and take RMDs based on his/her own age. But by electing to be treated AS the deceased (younger) spouse, it creates a longer delay before RMDs have to start, and when they do, they’ll be a smaller dollar amount. This could be a major tax savings.

There are more tax planning opportunities that are embedded in the Secure Act 2.0, and this is important stuff, so I’m hosting a Zoom call on Thursday, February 9th, at 10 am. We’ll delve deeper into these ideas, plus other features such as further “rothification” of 401(k)s and an interesting twist on unused college 529 plan money rolling into Roth IRAs. Join me for a lively conversation about the Secure Act 2.0, and I’ll leave time for questions, too. I promise I’ll make it fun. Call or email our office and ask to have the Zoom link emailed to you to register.

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