Episode 206 – Navigating Secure Act 2.0 Provisions

This week on On the Money with Secure Money, Brian Quaranta provides valuable insights for planning retirement under the new provisions for the Secure Act 2.0.

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*A Roth conversion may not be suitable for your situation. The primary goal in converting retirement assets into a Roth IRA is to reduce the future tax liability on the distributions you take in retirement, or on the distributions of your beneficiaries. The information provided is to help you determine whether or not a Roth IRA conversion may be appropriate for your particular circumstances. Please review your retirement savings, tax, and legacy planning strategies with your legal/tax advisor to be sure a Roth IRA conversion fits into your planning strategies. All rights reserved.


Radio Show Transcript

Announcer 00:00

Investment advisory services are offered through Foundation Investment Advisors, LLC. an SEC registered investment advisor. Brian Quaranta and his guests provide general information not individually targeted, personalized advice, they’re not liable for the usage of information discussed. Exposure to ideas and financial vehicles should not be considered investment advice or recommendation to buy or sell any of these financial vehicles. This information should also not be considered tax or legal advice. Past performance is not a guarantee of future results, investments will fluctuate and when were deemed to be worth more or less than when originally invested. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products, they did not refer in any way to securities or investment advisory products, fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company.


Steve 00:39

Hey, Brian, what’s happening?


Brian Quaranta 00:41

Some of these new secure act 2.0 provisions are already live. And we’re going to talk about them when we come right back with On the Money with Secure Money.


Announcer 00:53

And now On the Money.


Brian Quaranta 00:55

Any good retirement plan starts with the foundation,


Announcer 00:59

Asset protection, tax reduction, holistic planning,


Brian Quaranta 01:02

These are the things that start to move you towards having a retirement plan.


Announcer 01:06

Retirement doesn’t have to be complicated. You


Brian Quaranta 01:10

You think that’s the difficult part. That’s just getting started.


Announcer 01:14

And now On the Money with Secure Money.


Steve 01:20

And welcome everybody this On the Money with Secure Money. I’m consumer advocate Steve, Brian Quaranta is here. Brian is he’s an author. He’s president and CEO of Secure Money Advisors. He’s an author of a great little book called Right Track Your Retirement, a Simple Planning Strategy to Help You Reduce Risk, Build Income, and Provide Peace of Mind. And you can learn more about that book at righttrackyourretirement.com. Hi, Brian.


Brian Quaranta 01:44

Hi, Steve. Yeah, I’ll tell you what, righttrackyourretirement.com. Folks, I’m telling you right now I’ve laid out a very, very simple guide to help you really manage your retirement in a way that’s going to give you a lot of clarity. And it’s not a book that has a bunch of fluff in it, it really gets right down to the meat and potatoes of how to go about building a really great retirement strategy. A lot of our clients are probably a lot like you where they’ve worked a very long time, 3540 years, they’re at a point in their life where they can’t really afford to take another big market loss. They want some ideas on a better and safer way to build retirement. And these are the strategies that I talked about in the book to make your life much more simpler and allow you to do what you want in retirement. And that’s spend the time with your family, spend the time doing your hobbies, spend your time traveling, not spending your time worrying about what the new, new cycle is going to be or what Wall Street’s doing. But let’s get to this secure act 2.0. Because provisions are already live in there are more on the horizon. Sure, there are the big idea behind all of them really is to amp up retirement readiness for folks in the US by making it easier for them to get in on employer sponsored retirement benefits. So, let’s talk about the first one.


Steve 03:03

Sure. Well, Roth contributions, I mean, I like that, that now you can contribute to a Roth in a SEP or a simple IRA. That’s new.


Brian Quaranta 03:11

Yeah, so, so, for those of you entrepreneurs out there, typically, a very easy way to save for retirement is in a SEP or simple IRA. When I was a smaller firm, you personally use a SEP IRA. And this is just a self-employment type of retirement account, where you can put up to about $50,000 away into this account every year and defer it however, you’re allowed to now do a Roth version of this. So only employ, employers make contributions with SEP. So, while with simples, both employees and employers make contributions. So, remember, if you’re an entrepreneur, remember, you are the employee and you are the employer. So, you actually get to contribute on both sides. Don’t forget that one. That’s a big one, Steve,


Steve 04:02

That is a big one.


Brian Quaranta 04:03

It is a big one.


Steve 04:04

Folks, if you want to know some more, it’s 800-656-8616. And one of the other things I like about this is now if you are if you have a 401 K and it has a Roth option, you can now have an end you have a match, you can now at the employer’s discretion, contribute that match to the Roth.


Brian Quaranta 04:25

Yeah, how about that? So, most people don’t realize that, first off, most people don’t realize that there is even a Roth component to their 401k, of course, which is great. I mean, so if you don’t know whether or not your 401k has a Roth component to it, I would definitely ask your employer or call your 401k company and find out because, folks, this is truly game changing for retirement because remember, when you are contributing money to a 401k if it’s a traditional 401k, You’re getting a tax deduction for are contributing that money. But when that money grows, all of it grows tax deferred, which means that every dollar you take out of that account in the future is all taxable to you. And whatever the income tax rates are. Now, keep in mind, the IRS can change the rules at any point in time they want on taxes. So most likely with the debt that America is in, you’re probably going to see an increase in tax brackets as time goes on. So, if you haven’t done any tax planning, like Roth conversions, or contributing to a Roth 401 K, think, again, folks, because the greatest gift from the IRS is the ability to put money into a Roth 401 K, and every dollar that it gains, every bit of growth that it has is all tax free. Oh, and by the way, when you pull the money out, it’s 100%. Tax Free means that makes any impact you at all in retirement, you take $1,000 out, you get $1,000. If you’re in a traditional 401 K, you take $1,000 out, you’re not netting $1,000, if you’re in a 20%, tax bracket, you’re only going to get $100, you’re in a 30% tax bracket, you’re only going to get $700. If the tax brackets change, your net amount is going to change. So, these are great things to know about. And again, I write about these things and types, these types of tax planning strategies in my book Right Track Your Retirement, which you can go to righttrackyourretirement.com, get a copy, we send that book to you absolutely free, I make it very easy for you to hold it as book, I pay for the shipping and handling. I couldn’t make it any easier. All you have to do is go to righttrackyourretirement.com. Sign up, get a copy of the book, we’ll ship it to you’ll have it within a week. Absolutely.


Steve 06:47

And, again, one of the other changes that that’s actually taking place next year, or in 2024. Is has to do with 529 education savings account. Brian, why is this a big deal?


Brian Quaranta 06:59

Yeah, this is a big one Steve. Beneficiaries. Listen to this, beneficiaries of 529, education savings accounts, can roll over up to $35,000 of leftover funds to a Roth IRA in the name of the 529 beneficiary.


Steve 07:18

And again, well on that note, Brian, we are already out of time. In this segment, let’s, let’s remind folks how to reach out and touch.


Brian Quaranta 07:24

Yeah folks, again, go to righttrackyourretirement.com get a copy of my book, again, it’s absolutely free, we pay for the shipping and handling, I want to get these books into your hand, because it lays out a roadmap for you on how to approach retirement, how to get through retirement, how to do it with peace of mind, and security. And that’s what I want you to have, I want you to have a strategy. What I don’t want you to do is what most people do. And that’s when they retire, they rollover the 401k. They keep it a diversified portfolio of investments. And they hope and pray that everything’s going to work out folks, that is not a strategy. If your strategy is relying on the uncertainty of the market to bring you through retirement, I want you to think again about it, there’s better ways to do it. And again, if you go to right track your retirement.com, you can get a copy of the book. And we’ll I’ll show you in the book exactly how to do this, or just call the 800 number that Steve gives you and come in for a right track retirement review where we’ll go over five key areas with the, your income, your taxes, your investment strategy, your health care strategy, and your estate planning strategy. That appointment folks, is absolutely free. There’s no catch. Nobody from my team is going to try to sell you anything. Nobody’s going to press you to do anything. We’re truly here to help you identify if there’s problems. We’ll teach you how to solve those problems, and we’ll show you some better avenues that might potentially put you in a better situation.


Steve 08:42

Sounds fantastic, Brian, that’s the goal of the show here is to really help you make the best decision for you. So, if you’ve got questions about what we’re talking about today, or how it might apply in your own situation, Call now and get your Right Track Retirement Review no cost no obligation. 800-656-8616 800-656-8616 Quick break we’re back with more On the Money with Secure Money and Brian Quaranta.


Brian Quaranta 09:06

Retirement planning can feel complicated and overwhelming for many we’ve got answers to these questions coming up when we come right back with On the Money with Secure Money.


Announcer 09:23

And now On the Money with Secure Money.


Steve 09:29

And we are back On the Money with Secure Money. Brian Quaranta here I’m consumer advocate Steve, you can find out more about Brian and his team at securemoneyadvisors.com securemoneyadvisors.com. And then don’t forget, righttrackyourretirement.com as well. And, you know these are some great questions Brian and these are questions that I think you probably deal with on a on a regular basis. And you know, they seem simple, but again, the answers are always you know, they can be a little more complicated. For example, the first question here How much do I really need to retire Brian how much?


Brian Quaranta 10:00

Yeah, this is this is a great question. And I’m going to teach you right now how to do this, I’m gonna put this to rest once and for all. So, here’s how you do this, folks, what you have to do is you got to first figure out how much income you’re going to need above and beyond what you’re going to get from Social Security and pensions. So, let’s suppose that between your Social Security and your pension or maybe you don’t even have a pension, maybe you’re going to just get $60,000, you know, husband and wife between social security. And you need $100,000 A year to live off of, well, how do you figure this out. So that means that you’re getting 60,000 from Social Security. So that means you’re going to need $40,000 A year from your investments. So, let’s take 40,000 And let’s divide it by 4%. And I’ll explain that in a minute. And that comes out to $1 million. So, if you needed $50,000 a year, in additional income, you would take 50,000 divided by 4%. And that will tell you need 1.2 million. So, the reason why you divide it by 4% is because the rule of thumb for taking money out of retirement accounts has always been you can take no more than 4% a year, if you take any more than 4% a year, you now run the risk of running out of the money. So, this is how you first figure out how much money you need. Now, once you figure that out, now you can start to figure out okay, is there a better way to leverage this situation than just having 1.2 million? Because let’s say you need $40,000 A year, but you don’t have a million dollars, right? What are the next? Well, that’s when you go to right track your retirement.com, you get a copy of my book, and I’ll teach you exactly what to do. But let me give you an A great example of how you would solve this problem if you had less money. So, I had a husband and wife come in, they had about $700,000. And they needed about $40,000 a year in income. So, I said, okay, first off, you don’t have enough money to retire if we were to just build a diversified portfolio of stocks and bonds. Because if we start taking 4% out of that account out of out of $700,000, you’re not going to be getting $40,000 a year. Just 4% of 700,000 isn’t 40,000. So how do we solve this problem? Okay, well, do we go out and buy high risk stocks to try to get a better rate of return?


Steve 12:09

I wouldn’t think so, too.


Brian Quaranta 12:10

I mean, do we go out and buy, you know, high yielding junk bonds? No, I don’t think that’s an idea either. No, we, we go out and we utilize the leverage of an income annuity. Why do we do that? Because I can put $400,000 of their 700,000 into an income annuity. And then when they need income, I can get them over $41,000 a year off of $400,000. So, of a $400,000 that get them over $41,000 A year guaranteed for the rest of his life, if he dies, guaranteed for the rest of his wife’s life. And if she dies, any balance in the account is paid out to the children. But what happens if they’re taking that $40,000 a year? And that $400,000 slowly starts to go down? Because we’re taking money out? And what happens when that account balance hits zero? Well, this is why you buy the income annuity, because the insurance component of the annuity kicks in and it continues to pay them the $41,000. So, if we only put 400,000 of the 700,000 into the annuity, what did we do with the other 300,000? Well, that’s what that money that you keep in the stock market. You keep that in the stock market, because that’s truly long-term money. Now, the only way to be successful in the market, in my opinion, and many experts’ opinions is to have a long-term time horizon. Well, how can you have a long-term time horizon if you need your money right now to live off of like most retirees do, the only way you can do that is to have a phase one and phase two strategy of retirement phase one is creating the current income you need from the income annuity. Phase two is having a long-term approach on the other money so that you can keep pace with inflation. So, let’s just suppose that the other money that’s in the market, the 300,000, goes up 10%. So that’s $30,000 that it earns in one year. What can I do with that $30,000? Well, I can roll it back into the account, and it can compound its interest and grow more. Or I could take that $30,000 out and I could set it aside. And I can use that to offset inflation. For the next year for the next two years. Every time the account grows, I can continue to use that money to offset inflation. Or I could just let it compound within the account. I write about all of this in depth in my book, Right Track Your Retirement, which again, if you go to righttrackyourretirement.com, you’ll get a copy there while you’re there. You can also schedule a time to come in and sit down with the team and go over your situation to see if you’re on the right track and see if you’re doing the right things. And if you’re not on the right track, we’ll share with you some simple strategies that can help get you on the right track and give you the peace of mind and confidence you want going into retirement and through retirement.


Steve 14:41

Sure. So again, that’s how much how much you need. And then how do we fund that and how do we know where that money is coming from and how do we know it’s going to grow in your last example, I get it 400,000 In an income annuity. That’s a that’s a big part of it.


Brian Quaranta 14:55

Yeah, it’s a big part of it, but the stock market plays a big part to it. So, but in order to in order to fund that correctly, okay? Number one, you’ve got to do a really good job in making sure that you’re disciplined in your savings goals every single year while you’re working. And that’s when you’re going to take full advantage of contributing to a 401k. If you’re working for an employer, if you’re self-employed, you might use a SEP or a simple. But then if you qualify, not only can you contribute to your 401 K, but you also may qualify to continue to contribute to an IRA, an individual IRA or an individual Roth IRA. So, you can have some additional savings. And all of this needs to be worked out so that you can reach that savings goal. Again, how do you reach that savings goal, you work backwards, how much income you’re going to need, divided by 4%. That’s going to tell you exactly what the dollar amount or lump sum amount that you need to achieve. For retirement savings.


Steve 15:53

That sounds great Brian and the folks if you want to get in 800-656-8616 play, we’re up against the clock, Brian, let’s go ahead and remind folks how to call and then we’ll jump right back in here.


Brian Quaranta 16:03

Folks go to righttrackyourretirement.com get a copy of the book again, I write about everything that I’m talking about in detail within the book. I want you to read the one chapter I want you to read when you get into chapter three, in chapter three is called Think like a pensioner, not a gambler. Think like a pension or not a gambler. That’s how you want to think about your money. Think about 3540 years’ worth of work, would you just roll into the casino and throw all of that on, on read or start playing blackjack with it or start playing poker with it? No, you absolutely would not. Why would you gamble with your entire life savings in the stock market? It just doesn’t make sense. I’m not saying the stock market’s not a good place. I’m just telling you people are risking money they cannot afford to lose. And you have to have a well thought out strategy. Wall Street for the longest time has told us we’ll be fine if we just invest in a diversified portfolio. I respectfully disagree. And I want you to understand why righttrackyourretirement.com get a copy of the book. And while you’re there, you can schedule a time to come in for a Right Track Retirement Review, where we can help you get on the right track and get you a strategy that works for you in retirement.


Steve 17:04

Sounds great, Brian, there’s no cost, no obligation and no better time to get a better handle on your financial situation. Find out what your investments are really costing you from high fees or commissions. What about tax implications? We’re just talking about that and how much income you can securely generate once you move into retirement all important pieces. 800-656-8616 give Brian a call right now. 800-656-8616 quick break. We’re back. Lots more to talk about here On the Money with Secure Money and Brian Quaranta.


Brian Quaranta 17:33

Preparing for retirement can feel overwhelming at times, especially for folks who have many questions about the matter. To help clear up the confusion. We’re going to be answering the final five frequently asked retirement planning questions when we come right back with On the Money with Secure Money.


Announcer 17:51

We believe in better a better way to invest a better way to serve you. And a better result. We can help you determine how much risk you’re taking red flags that could be potential problems for you how much you’re paying in fees or commissions, potential tax liability, or even how to address social security call Brian Quaranta and his team at Secure Money Advisors at 800-656-8616, or text key word Brian Q to 800-656-8616. We’ve made it easy, folks, all you have to do is call or text the keyword Brian Q to 800-656-8616.


Announcer 18:35

And now On the Money with Secure Money.


Steve 18:41

And we are back On the Money with Secure Money at segment four. That means we’ve got questions from listeners, and I know Brian, this is one of your favorite parts. And it does. It’s, it is fun for me as well, just because you we look at these questions and there are so many similarities, and we try to put you know the ones that are the most popular the ones that are the most asked out there for folks.


Brian Quaranta 19:01

Exactly. Steven, that’s why we want to do these question answer sessions because lot people have lots of questions when it comes to retirement planning.


Steve 19:08

Sure. All right. Well, let’s jump into some questions before we run out of time. Bonny’s up first. She’s wondering I’m 65 years old and not yet retired. I’m considering purchasing an immediate annuity using all the funds in my 403 B plan upon retirement. Would the annuity distributions satisfy required minimum distributions? How will placing the entire amount in an annuity be taxed? And how will the monthly payments be taxed? She’s got some questions.


Brian Quaranta 19:38

Oh, okay. Well, let’s break this down because I think there’s three questions in here. So first off, how will placing the entire amount in the annuity be taxed? So first off, Bonny, when you’re rolling money from a 403 b into an annuity? The annuity is going to be set up as an individual retirement count an IRA. So that means that the 403 B can go directly from the 403 B right into the annuity IRA. When that happens, there’s no taxes, no penalties. By the way, folks, you can rollover a 401k into an annuity IRA, you can roll over an IRA into an annuity IRA. So, keep in mind, as long as it goes to a qualified retirement account, there’s no taxes and there’s no penalties. Alright, the next question she had was, would the annuity distributions satisfy required minimum distributions? The answer on that, by the way, for those that you don’t know, what required minimum distributions are, the IRS says that now at the age of 73, you are going to be required to take monthly distributions out of your retirement account. And you don’t have a choice. As a matter of fact, if you do not take those distributions, it’s up to a 25% penalty. So, if you were required to take out $10,000, you’re looking at a $2,500 mistake that you’re making there, because that would be the penalty for not taking that out. So, it’s a big penalty. So obviously, they want you to take it, but the annuity would be generating monthly income for her with the monthly income that the annuity is generating, the IRS is more than happy to count that as a required minimum distribution. Therefore, it satisfies the required minimum distribution. Wow. Rule. So, so of course, as long as the payment is high enough, which typically most annuities are going to pay you more than what your RMD is going to be. You’ll be fine. Okay. But you always want to make sure that the monthly or the annual distributions from the annuity is higher than the required minimum distribution, which in most cases, it typically is, but you always want to double check. Yeah, and the last one was, how will the monthly payments be taxed? Well, the monthly payments are going to be taxed the same way, whether this was coming out of a stock account, a bond account, or an annuity. Why? Because it’s all within an individual retirement account. So individual retirement accounts, it doesn’t matter how they’re invested, they could be invested in cash, bank CDs, individual stocks, individual bonds, when we take money out of those accounts, it’s all taxable at your income tax level. So, whatever your income tax rate is, is what you’re going to pay on that money. Now, keep in mind, too, and one of the things you got to deal with in retirement, depending on how much income you make is that it’d be careful that you’re not taking so much money out that you cause your Medicare premiums to go up, you got to be careful that you’re not pushing yourself into another tax bracket or having your Social Security get taxed. Because your Social Security can be taxed up to 85 85% of your Social Security could be taxed at whatever your income tax level is, depending on how much income you’re making. So, these are all things you want to take into consideration when you’re building an income strategy and retirement.


Steve 23:01

Sure. Well, and again, there you go, Bonny 800-656-8616. Herman’s got a question. He says I was automatically enrolled in my company’s 401k years ago. I’m 55. Now plan to retire at 65. Is there anything I should be doing now to help me get to retirement? I like this question.


Brian Quaranta 23:22

Well, yeah, there’s a big one here is that you know, Herman, when you turn 59 and a half, it’s actually a really big day for you. Matter of fact, most people don’t realize this. But if you’re investing your company 401k, when you turn 59 and a half, it’s a really special day, because this now is a legal age, which you are able to roll money out of your 401k. While you’re still working, let me say that again, you’re able to roll money out of your IRA or your or your 401k. While you’re still working. How is this done, it’s called an in-service rollover. That means the IRS is allowing you to take money out of your company plan while you’re still working and roll it to an individual retirement account so that you can properly start to strategize for retirement. This is huge because it doesn’t shut down your 401k. It doesn’t prevent you from getting future matching. But what it does do is allows you to strategically position your money in potentially better places than what’s available inside of your 401k. Remember, 401 k’s are designed to grow your money. They’re not designed to protect or provide distribution of income. So, this allows you to now set things up for what most people need in that some type of income strategy.


Steve 24:35

All right, boy, you make sense. Brian? 800-656-8616. That’s Herman, give us a call. We’d love to hear from you. We got to wrap it up, Brian. This is a final opportunity for folks. That’s it.


Brian Quaranta 24:44

That’s the end of the day and the end of the show. And folks, we’ll see you again next week. But before that, don’t forget, go to righttrackyourretirement.com get a copy of the book while you’re there schedule a time to come in for a Right Track Retirement Review where my team and I can help you get on the right track. We’ll look at a number of things When you come in, we’ll look at the risk that you’re taking the fees that you might be paying, we’ll look at that tax strategy help you potentially maximize and get into a better tax situation in retirement. But we’ll also look at the five key areas of what a good retirement plan is made of. That’s your income, your tax strategy, your, your investment strategy, your healthcare strategy and your estate planning strategy. Folks, if you don’t have all five of those areas handled, you don’t have a retirement plan. If all you’re doing is talking to your advisor about performance, you don’t have a retirement plan, I highly recommend that if that’s what you’re doing. And that’s the type of advice you’re getting. Get a second opinion come on in to Secure Money Advisors, nobody from my team is here to pressure you to do anything or sell you anything. As a fiduciary firm. We’re there to help you solve a problem. And if we can help you do that, we’ll let you know. And if you’re already doing the right things, we’ll let you know that too. So again, we’ll see you again next week with On the Money with Secure Money.


Steve 25:50

You know, that’s the goal of the show here is to help you make the best decisions for you. So, if you’ve got questions about what we’re talking about how it might apply in your situation, it is a phone call away. 800-656-8616 800-656-8616. And you know what’s coming, Brian?


Brian Quaranta 26:05

That’s right. That’d be turkey day. Right? Exactly. Steve, great seeing you this week. And folks, we’ll see you again next week with On the Money with Secure Money.


Announcer 26:20

Investment Advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment advisor. The content provided is intended for informational and educational purposes only the views statements and opinions expressed herein are those of the individual speakers and not necessarily those of foundations and its affiliates. The information contained herein does not constitute an offer to sell any securities or represent an express or implied opinion or endorsement of any specific opportunity offering or issuer. Any discussion of performance or returns is not indicative of future results. Each individual investor situation is different, and any ideas provided may not be appropriate for your particular circumstances. Foundations only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration as an investment advisor is not an endorsement of the firm by securities regulators and does not mean the advisor has achieved a specific level of skill or ability. No legal or tax advice is provided. Always consult with a tax professional. All rights reserved.

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