2023 Important Dates, BIG Retirement Plan Changes

Happy 2023!

We are so excited to start this New Year and celebrate our 40^th Anniversary year as an independent investment advisory firm!  We are looking forward to the next 40 years and continued service to you and your families.

MyWeatlh Data Updates:

As many of you are aware, the daily portfolio values from AXOS Advisor Services have not been updating since December 15^th on the MyWealth website. Axos changed the file format they now use for these updates, and MyWealth is currently in the final phase of testing and updating the new file format for accuracy. We expect the portfolio values to be updated soon. We are keeping abreast of the situation and feel free to call or email us if you need your current portfolio values or have any questions.

Reminder for Distribution Requests:

Just a reminder that if you request a distribution from any of your AXOS Advisor Services accounts be sure to plan on 10 business days for funds to be sent to your bank of record. This will allow for any holidays, purchases/sales in the account, and time for trades to settle to cash.

January 2023 Required Minimum Distribution Date:

For those of you that are set to receive your Minimum Required Distribution (RMD) automatically from your IRA each year in January, funds will be distributed this year on January 31^st.  This will be the date moving forward for automatic RMD’s in January.  The actual RMD amount for 2023 will be available for all accounts by January 20, 2023.

Important Dates for your 2022 Income Tax Reporting:

January 31^st:   1099-R forms will be mailed for anyone that received a distribution from their retirement account in 2022.

February 15^th: 1099-DIV and 1099-B forms will be mailed to account owners reporting all transactions for non-retirement accounts. This is also the date tax data imports will be available for TurboTax and H&R Block.

As always, we can provide the data directly to your tax preparer when it is available. Simply let us know you would like us to do this for you and also provide the email address of your tax preparer.

Secure Act 2.0: Congress Delivers Retirement Plan Changes and Some Holiday Cheer as Part of the Year-End Spending Bill

The Setting Every Community Up for Retirement Enhancement Act of 2019, popularly known as the “SECURE Act”, was signed into law in late 2019. Now called SECURE Act 1.0, it included provisions that raised the requirement for mandatory distributions from retirement accounts and increased access to retirement accounts. But it didn’t take long for Congress to enhance the landmark bill that was enacted barely three years ago.

Tucked inside the just-passed 4,155-page, $1.7 trillion spending bill are plenty of goodies, including another overhaul of the nation’s retirement laws.

[[https://images.thinkadvisor.com/contrib/content/uploads/documents/415/479719/GA_SECURE-2.0-Act-of-2022_Section-by-Section-Summary-FINAL.pdf

Dubbed SECURE Act 2.0, the bill enjoys widespread bipartisan support and builds on SECURE Act 1.0 by strengthening the financial safety net by encouraging Americans to save for retirement.

Key takeaways on SECURE Act 2.0

Changing the age of the required minimum distributions from retirement accounts.  Three years ago, 1.0 increased the age for taking the required minimum distribution, or RMD, to 72 years from 70½. If you turn 72 this year, the age required for taking your RMD rises to 73 with 2.0. If you turned 72 in 2022, you’ll remain on the prior schedule.

If you turn 72 in 2023, you may delay your RMD until 2024, when you turn 73. Or you may push back your first RMD to April 1, 2025. Just be aware that if you do, you will be required to take two RMDs in 2025, one no later than April 1 and the second no later than December 31.

Starting in 2033, the age for the RMD will rise to 75.

Employees enrolled in a Roth 401(k) won’t be required to take RMDs from their Roth 401(k). That begins in 2024.

RMD penalty relief. Beginning this year, the penalty for missing an RMD is reduced to 25% from 50%. And 2.0 goes one step further. If the RMD that was missed is taken in a timely manner and the IRA account holder files an updated tax return, the penalty is reduced to 10%. Just to be clear, while the penalty has been reduced, you’ll still pay a penalty for missing your RMD.

A shot in the arm for employer-sponsored plans. Too many Americans do not have access to employer plans or simply don’t participate.

Starting in 2025, companies that set up new 401(k) or 403(b) plans will be required to automatically enroll employees at a rate between 3% and 10% of their salary.

The new legislation also allows for automatic portability, which will encourage employees in low-balance plans to transfer their retirement account to a new employer-sponsored account rather than cash out.

Employees may still opt out of the employer-sponsored plan.

 Increased catchup provisions. In 2025, 2.0 increases the catch-up provision for those between 60 and 63 from $6,500 in 2022 ($7,500 in 2023 if 50 or older) to $10,000, (the greater of $10,000 or 50% more than the regular catch-up amount). The amount is indexed to inflation.

Charitable contributions. Starting in 2023, 2.0 allows a one-time, $50,000 distribution to charities through charitable gift annuities, charitable remainder unitrusts, and charitable remainder annuity trusts. One must be 70½ or older to take advantage of this provision. The $50,000 limit counts toward the year’s RMD.

It also indexes an annual IRA charitable distribution limit of $100,000, known as a qualified charitable distribution, or QCD, beginning in 2023.

Back-door student loan relief. Starting next year, employers are allowed to match student loan payments made by their employees. The employer’s match must be directed into a retirement account, but it is an added incentive to sock away funds for retirement.

Additional provisions:

Disaster relief. You may withdraw up to $22,000 penalty-free from an IRA or an employer-sponsored plan for federally declared disasters. Withdrawals can be repaid to the retirement account.

Help for survivors. Victims of abuse may need funds for various reasons, including cash to extricate themselves from a difficult situation. 2.0 allows a victim of domestic violence to withdraw the lesser of 50% of an account or $10,000 penalty-free.

Rollover of 529 College plans. Starting in 2024 and subject to annual Roth contribution limits, assets in a 529 plan can be rolled into a Roth IRA, with a maximum lifetime limit of $35,000. The rollover must be in the name of the plan’s beneficiary. The 529 plan must be at least 15 years old.

In the past, families may have hesitated in fully funding 529s amid fears the plan could wind up being overfunded and withdrawals would be subject to a penalty. Though there is a $35,000 cap, the provision helps alleviate some of these concerns.

What we have provided here is a high-level overview of the SECURE Act 2.0. Keep in mind that it is not all-inclusive. As always, don’t hesitate to call us if you have any questions.

We appreciate the privilege to be of service and please don’t hesitate to call or email if you have any questions, or if we can be of additional service in any way.

God Bless,

Your TEAM at F.I.G. Financial Advisory Services, Inc.

 

This update expresses the views of the author(s) as of the date indicated and such views are subject to change without notice. F.I.G. Financial Advisory Services, Inc. (F.I.G.) has no duty or obligation to update the information contained herein. Further, no representation has been made, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. This information is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. F.I.G. believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. F.I.G. made attempts to show sources and links to that data, when possible. However, F.I.G. cannot guarantee or be held liable when accessing those links, as it is not the property of or maintained by the author(s). This update, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of F.I.G.