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By Craig Manning

Between record-low pandemic-era interest rates and a massive swell of buying activity in northern Michigan, mortgage loan originators had plenty to keep them occupied a year ago.

• Beginning in 2024, employees will be required to automatically enroll in newly adopted 401(k) plans, unless they choose to opt out. (This requirement will most likely be mandatory for all plan participants in future legislation.)

“If we were at a 10 a year ago (in terms of mortgage loan activity), and somebody said, ‘Where are you right now?’ I’d say we’re probably at about a 3,” said Mike Nagy, vice president of mortgage lending for State Savings Bank. “In terms of business volume in our industry, it went from drinking water from a fire hose to trying to sip a frosty through a cocktail straw.” needed more living space; the explosion of remote work that unshackled countless people and families from major metropolitan areas; the seed of a housing inventory crisis, first planted during the as any I’ve ever seen,” said the lender, who has been in the mortgage business for more than 40 years. “The only other time that was close was in the ‘80s when we were still trying to come out of that into a corner – whether it’s work-related, personally, whatever – you get to address those things (when the market cools).” and will increase to 75 in 2033. still working for your employer, don’t own more than 5% of the company and are over the RMD age, you do not have to take RMDs from your 401(k).

• Higher catch-up contributions. Currently, those over age 50 can make an extra $7,500 in deferrals into a qualified plan, e.g., 401(k), 403(b) or 457. Starting in 2025, employees age 6063 will be able to contribute up to 1.5 times the regular catch-up contribution allowed at the time.

While the pandemic was a wild ride for most industries – and for the American economy in general – mortgage lenders were booming the entire time.

And cool the market has. Mortgage rates peaked at more than 7% in November 2022 and are sitting at about 6.5% right now – more than double where they were at the beginning of 2022.

• Mandatory Roth catch-up contributions. Starting in 2024, those who earn more than $145,000 (indexed for inflation) in the previous year and who wish to make an excess contribution (currently over $22,500) will be required to make a Roth contribution as long as the plan has a Roth option.

For one thing, record-low interest rates were driving a frenzy of refinancing activity. Rates were attractive throughout 2020 en route to an all-time low of 2.65% in January 2021 for a 30-year fixed mortgage.

• A Roth option for SIMPLE and SEP IRAs is available starting in 2023 as soon as practicable by the plan.

• The required minimum distribution (RMD) age increases to 73 this year

For another thing, as the economy came out of its initial pandemic-induced tailspin, buying activity hit a fever pitch. The record-low interest rates; the fact that people had just spent months at home discovering that they wanted or

Great Recession, that only worsened amidst stay-at-home orders; global supply chain kinks; and massive labor shortages.

All these factors and others combined to set the housing market on fire. And as bidding wars, skyrocketing prices, and record sales numbers made headlines in northern Michigan, local mortgage loan originators found themselves on the chaotic frontline.

• 529 Plan expansion to allow unused funds to be rolled into a Roth IRA. This provision is getting a lot of press as it allows beneficiaries of 529 plans to roll excess funds to a Roth taxfree. Several rules apply: The plan must have been in force 15 years, and the beneficiary can roll up to $35,000 over their lifetime provided they don’t transfer amounts above the annual contribution limit, which is currently $6,500. This provision may wind up being a real boon to those with other means to pay for all or a portion of their college expense. This rule also allows any leftover funds to be rolled over to a Roth, tax and penalty-free.

“I was never busier than I was in 2020 and 2021,” said Dave Durbin, a mortgage loan originator at West Shore Bank. “And I’ve been doing this for 18 years.” Nagy agreed.

• Starting in 2024, Roth 401(k) plan balances will no longer be subject to RMDs. This levels the playing field for Roth options between IRAs and qualified plans. Keep in mind that if you are

“That 2021 market was about as wild period of historic-high double-digit rates. When we finally broke under 10 and got into the 9s, and then the 8s, and then the 7s, you’d often be refinancing the same person three times in the space of two years.”

According to Durbin, every mortgage lender knows that their industry is cyclical – and that periods of feast are always followed by periods of famine.

• For those over age 70½, have an IRA and are charitably minded, qualified charitable contributions have been expanded to allow a one-time $50,000 charitable distribution to a charitable gift annuity, charitable remainder unitrust or charitable remainder annuity. In essence, this will allow you to transfer assets to these plans tax-free, draw income from this trust, and get a significant tax-advantaged income with this option. This is a relatively advanced strategy and you’ll want to get an illustration from the institution involved as well as understand the implications of such a gift before you proceed.

While these new rules may appear rather complex at first, all of these changes will become much more

“Even when you get that busy, you know it’s not going to last forever,” he explained. “That’s just how it works. So, for all those 14-hour days and seven-day weeks you worked in 2020 and 2021, and into 2022, everything that you pushed familiar in due time. The effect of compounding using tax deferrals to jump-start retirement success has never been this liberal in terms of withdrawals and accumulation. The rules are expanding, allowing anyone with earned income who can save for the future a wide array of options to enhance and make much more competitive the realm of accumulating savings to assist with your increased well-being. The benefits for long-term savers are now extremely advantageous and really can help secure your future whether you are young, nearing retirement or are retired.

That shift has essentially stalled refinancing activity and has slowed buying and selling, too – with northern Michigan’s small inventory of available homes exacerbating the latter issue.

The result, for mortgage lending professionals, is that the past three to six months have been a relatively “boring” time.

“I’m definitely taking this time to educate myself on different products, and on what’s coming down the pike that we think customers are going to be looking for,” Durbin said.

Durbin predicts that the construction loan will become a component, due to the country’s awareness of northern Michigan and the subsequent shrinking of existing home inventory.

“We’re already seeing that, actually, and with the purchases of vacant land, people are applying for construction loans,” he said. “That seems to be a higher percentage of business. Those loans

Dennis Prout, CFP®, CPWA®, has been in the retirement planning industry for more than 30 years. Securities offered through Geneos Wealth Management, Inc., member FINRA/SIPC. Advisory Services offered through Capital Asset Advisory Services, LLC, a registered investment advisor.

By Rick Garner, columnist

There’s concern among industry experts about whether the popular 4% withdrawal rule can provide enough income during retirement, but little discussion on the important role taxes play. Building a tax- smart strategy isn’t something that should wait until you retire. With tax-smart guidance, you can structure your accounts to potentially maximize your assets in both the accumulation and withdrawal stages.

The 4% rule stated simply: withdraw 4% of your retirement savings the first year and then increase that amount 1% to 2% each year to adjust for inflation. It is an easy strategy to apply, but can it keep up with inflation or offer a predictable amount of income for retirees?

Which accounts you draw from can make all the difference. While most agree that diversifying retirement savings across accounts, with different tax treatments is ideal, the consensus often stops there.

If accumulating retirement assets is a priority, one could withdraw from taxable investments first. Doing so allows more time for assets to accumulate in your 401(k) and IRA accounts, taking advantage of tax- free compound earnings as long as possible. Note: Required Minimum Distributions (RMDs) from these tax-deferred retirement accounts may be mandated at age 73 per IRS regulations (increased from 72 in 2023). These RMDs are taxed as ordinary income in the year of distribution. If you have substantial funds in these taxable accounts, RMDs have the potential of pushing you into a higher tax bracket resulting in higher taxes.

One can look to avoid an unexpected tax bill by withdrawing a portion of income from both taxable investments and tax-deferred traditional IRAs and 401(k) accounts while leaving any ROTH IRA accounts for later. This approach helps avoid a potentially higher tax bill during the middle years of retirement when RMDs hit, spreading taxes more evenly across your retirement years for a more predictable budgeting process.

When your current tax bracket is high, pull from tax-free accounts when you are in your highest anticipated bracket and from tax-deferred accounts when you are in your lowest bracket. Much like the previous strategy, the goal is to minimize your tax liability and balance tax payments over a longer period of time.

Planning to leave a legacy? If you’re worried about the impact of taxes on heirs, take distributions from Traditional IRAs and 401(k)s first. Leave your ROTH IRA to loved ones to minimize their taxes.

Applying tax-smart strategies can help build wealth and safeguard your retirement no matter what type of withdrawal method you use. Talking with a Financial Professional with tax knowledge should be a critical part of your wealth management strategy. Doing so - sooner than later - could lead to more financial confidence with ways to build wealth and minimize taxes so you can pursue the lifestyle you envision — both now and in retirement.

Rick Garner, CFP® is the Director of Wealth Management and a CERTIFIED FINANCIAL PROFESSIONAL™ at DGN Wealthcare, LLC. Contact him at RGarner@DGNCPA.com.

Securities offered through Avantax Investment ServicesSM, Member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM. Avantax affiliated financial professionals may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.