Posted on 06/14/2019 6:28:50 AM PDT by Diana in Wisconsin
The House of Representatives recently passed a bill that may complicate retirement planning options for Americans.
The House passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 on May 23. If enacted into law, it could be tricky for Americans who are not financially savvy investors.
Some of the changes could benefit consumers: The law encourages more small employers to offer 401(k) plans and raises the age for required minimum distributions (RMDs) from retirement accounts to 72 from 70.5, a nod to longer life expectancies and later retirements.
However, there are some changes that consumers should be wary of, experts say.
For example, one change in the law would shorten the amount of time that someone who inherits an Individual Retirement Account (IRA) can hold onto the funds, potentially causing them to lose money.
"If you inherited my IRA before I'd be able to stretch the distribution over your lifetime, which is more time for dollars to grow tax deferred. Now you have to drain that inherited IRA over 10 years, which gives you less time to grow the money on a tax-deferred basis," Dave OBrien, chair elect of the National Association of Personal Financial Advisors (NAPFA), told ABC News.
Another change that American workers should be wary of, according to consumer advocates, is adding annuities complex financial tools offered by insurance companies to 401(k) plans.
*SNIP*
(Excerpt) Read more at msn.com ...
raises the age for required minimum distributions
Standard Rat tactic. Coat the poison with candy.
NEVER!
An expensive way to get a poor return.
Example: "Patient Protection and Affordable Care Act"
How about Beagle8u’s plan for fixing retirement plans?
In MY plan hourly workers would pay NO income tax on overtime hours, with the option to put the extra earnings in a Roth IRA.
Work a extra 8 hours tax free and get an extra 8 hours pay on your paycheck, and the 4 hours of 1 1/2 time pay goes in your Roth IRA, again, tax free!
That would benefit the guys that work their @$$es off and give them retirement money when they are older.
When my dad passed away (22 years ago now), we 5 siblings each got a little from his IRA, and I think we had to take it in 5 years or less (not lifetime, not 10 years). Since it was fully taxable, the main goal was to spread out the tax burden over some time period.
Unless a huge amount of money, I would probably try to get the funds out in a somewhat shorter period of time. The main reason for this (having worked in financial services for 43 years and seeing what commonly happens), is that issues like this become so much more complicated over time. If one of the original beneficiaries dies, not having taken out his/her share, then what happens? Does it end up going to his/her spouse? Kids? Back to the other siblings? By the time some of these situations are unwound, people can spend thousands of dollars on attorneys to “help” them track it down and obtain the actual inheritance distribution.
I do have 2 annuities. One is a very small ROTH IRA, and the other is an IRA, which is about 30% of my retirement savings. Both are variable annuities. The larger one was purchased about 20 years ago, as a rollover from an employer’s retirement plan. The issuing company was offering a “bonus” of (IIRC) 10% they would add to the account during a short time period window, and that was very attractive to me at that time. It has more than doubled in value over the years, and I have added to it a little at a time, when I both had some cash and could avail myself of additional deductible IRA contributions.
One advantage of annuities, is that they offer a guaranteed rate at which the funds can be converted to monthly income at the elected maturity date. I don’t know whether the mortality tables have changed since I got my larger annuity, but they would have been based on mortality assumption from a past time (so, the actuarial calculations would have been based on possibly shorter life expectancies than are predicted now, hence larger payout per $1 of annuity value at maturity).
Another good option (IMO) for PART of one’s retirement savings, to take at retirement or when needed, is a single premium immediate annuity. While this may not offer the best potential growth or returns, it is a way to KNOW that a certain guaranteed income will be coming over one’s remaining lifetime (and can be guaranteed for 10 or 20 years, etc.).
I am also of the school of thought, to not postpone taking social security benefits until “full retirement age” or later. If you DIE before starting benefits, you get ZERO. Let’s say you start taking at age 65, and it is a little less than you would get at 66.67 or 70. But, you will have gotten the benefits for months, if not years, instead of zero dollars while waiting. My strategy (which is not very sophisticated, admittedly), is to use the SS money FIRST, then supplement, if needed, with my personal savings/annuities/etc.
That provides the best opportunity to leave some of MY money (hard-earned!!) to my kids and grandchildren. If I were to start using my money and postponing SS, then die at 70 or before, that money is GONE, and my kids are not going to get anything from my SS.
Just a few thoughts....
Just like the government is securing the border
by giving the country away to Mexico. Yay!!!
Government security is wonderful!
We now know the government loves us.
All I know is my hub has said...NEVER get an Annuity!! If something happens to him.
But, O’Brien said, “your 401(k) is already a tax-deferred vehicle. It kills me when we see an annuity in a tax-deferred IRA because you doubled up.” “
Annuities inside 401ks do not make sense.
I inherited a 36,000 IRA from my Mom and Dad. I bought an Annuity with it that pays a guaranteed 1300 a year for life. If I live to 85 they win. If I live to 95 I win. I wonder if I will have to liquidate that annuity?
[[the Setting Every Community Up for Retirement Enhancement (SECURE) Act]]
In other words, it does the opposite.
My parents adopted a “Die broke” retirement philosophy. It’s predicated on spending down your assets such that you leave as little estate as possible when you exit.
We kids saw to it that they were comfortable and protected.
My inheritance (such as it was) came in the form of an annuity. I know that it is there but there isn’t much that I can do with it. It doesn’t pay enough in dividends to do much more than go out to dinner once a quarter.
I regard it like a Christmas Club account - eventually I will cash it out as I draw down my own assets. At least I know that it never loses value.
“Might be better to invest in brass, lead, copper, and gunpowder”
Actually, very good advice from a financial standpoint. Guns, in good condition, appreciate faster than inflation and really good guns (color that expensive) appreciate even faster, so buy the very best that you can afford and keep it clean.
Too late.
I be retired.
Nancy and her girls can come make me a sammich. And that racist senator from HI, Mazie can get me a cold beer.
5.56mm
The first half of that title is accurate.
An IRA is for personal retirement. Leaving it as an inheritance should be treated the same as leaving cash - no reason why preferential tax treatment should extend beyond the grave.
Why? Are you planning on robbing people at gunpoint for your retirement?
Point two - annuities: I'm just about to kick off my retirement, so I've been looking at the whole range of investment options. As for me and my house, we will not be using any annuities. Here's the deal. All annuities have two values at any point in time, their selling price and their Net Asset Value (NAV). You receive the selling price at the time of the annuity's maturity date. If that is less than the NAV, too bad, that's all you get. So, you have to guess the state of the market 5 or 7 years from now. My crystal ball isn't that clear. So, we are going a different route.
Point three - the fixed income bond route: I'm going to be putting about half of my total IRA accounts into a collection of corporate and municipal bonds (investment grade only) that will provide semi-annual dividends that can be pulled out as taxable income, or plowed back into the account to grow the principal. My broker and I are selecting a group of bonds with maturity dates ranging from 2022 to 2034; I will replace the nearest ones with another of similar characteristics as they mature, and keep rolling them over in that order. The other half of my IRAs will be used for more aggressive/active trading in equities, and will be where my RMDs come from.
Point four - YMMV.
Work until You Die,,,,
I’m having second thoughts
On that Program and I may
be able to pull it off.
.
Living in a Van,
Down by the River!
Suze Orman has bad mouthed annuities for years now. Used to be a regular on CNBC. Me? I purchased an annuity back in the 80s. Cashed in a few months back. Disappointed in return. No where near what I thought it would pay. And a very reputable company. NY Life.
A Reason to Wake up???
Coffee,
Marlboro and maybe
A Small Dog that needs a walk.
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