Speaker 1: Welcome to How the Money. I'm Joel on Matt and
Speaker 1: today we're discussing the massive retirement account changes that impact you.
Speaker 1: That's right, Joel, the massive changes, the specific changes that
Speaker 1: took place at the end of last year and lots
Speaker 1: of them, well not the changes. What it's kind of
Speaker 1: like caval cascading arrangement of changes. So we're gonna talk
Speaker 1: about this like when they're going to be implemented, how
Speaker 1: they're going to be implemented past, but it may not
Speaker 1: actually be implemented for years, even a decade, uh from now.
Speaker 1: Some started beginning of this year someone until seven's We
Speaker 1: thought about calling this episode working Towards a more Secure
Speaker 1: retirement because it's the secure two point oh secure active point. Yeah,
Speaker 1: but we feel like we're burying the topic a little
Speaker 1: bit because this truly is, it's really important. It actually
Speaker 1: so it kind of makes me think of instruction manuals.
Speaker 1: A lot of folks may have gotten some electronics or
Speaker 1: like a new toy. In my case, I got a
Speaker 1: trigger grill for Christmas and it comes with with like
Speaker 1: this fat instruction manual, And essentially what we're doing is
Speaker 1: we're sitting down and we are reading that instruction manual,
Speaker 1: and we're making sure that you know how to properly
Speaker 1: run your retirement accounts. A lot of times you can
Speaker 1: kind of throw that instruction manual to the side and think,
Speaker 1: I just kind of figure this out, but we think
Speaker 1: this is truly important. We're the kind of nerds who
Speaker 1: sit down and uh read page after page and make
Speaker 1: sure that that you are going to be able to
Speaker 1: say for retirement in correct way. And the truth is
Speaker 1: there there are a lot of changes, some of which
Speaker 1: might not impact you, but we're gonna kind of highlight
Speaker 1: the most important ones, the ones that we think are
Speaker 1: going to impact the biggest swath of our listeners, and
Speaker 1: a lot of them will. I mean we're talking, we're
Speaker 1: gonna talk a lot about RATH accounts, but also accounts.
Speaker 1: There are new retirement accounts out there for the self employed.
Speaker 1: There's quite an array of changes that took place, and
Speaker 1: sure we're going to cover all of those today. Before
Speaker 1: we get to that, I wanted to mention one other account,
Speaker 1: just to money the waters a little more, and that
Speaker 1: is donor advice funds. And we've talked about those. We
Speaker 1: talked about those in November when we talked about giving,
Speaker 1: and we think giving your money away is really important.
Speaker 1: But if you're the kind of money nerd who wants
Speaker 1: to suck money aside and give it in future years,
Speaker 1: a donor avice fund can can help you do that,
Speaker 1: and it can actually help you grow the dollars that
Speaker 1: you want to give. And we've talked about how Daffy
Speaker 1: is a really cool website daffy dot org to do that.
Speaker 1: D a f f y and listener Jared apparently heard
Speaker 1: us talk about a couple of years ago and he
Speaker 1: opened up an account with Daffy. But he he emailed
Speaker 1: us Matt and this is so cool. I thought this
Speaker 1: was awesome because he won a ten thousand dollar prize
Speaker 1: that Daffy was giving away dollars so that he could
Speaker 1: then give that money away, so that he has extra
Speaker 1: ammunition now in his giving arsenal, all because he participated
Speaker 1: in this, in this Daffy giveaway to give away the
Speaker 1: charity is and nonprofits of his choice of this designation.
Speaker 1: And on top of that, on top of that, Daffy
Speaker 1: has uh this way that you can allow other people
Speaker 1: to give your money away too. So he gave some
Speaker 1: of his money away that he are that he won
Speaker 1: in this ship stakes to his co workers. He said,
Speaker 1: he listen, you've got a hunter Bucks. You've got a
Speaker 1: hunter Bucks. You've got a hunter Bucks. Where do you
Speaker 1: want it to go to? And they were able to
Speaker 1: decide which nonprofits to donate that money too. So that's
Speaker 1: kind of fun, Like, that's a really cool way to
Speaker 1: incorporate people around you into the giving mindset too. But
Speaker 1: just how that was fun to highlight love donor advised funds,
Speaker 1: love Daffy and the fact that Jared won ten thousand
Speaker 1: bucks because he so that's a lot of money, a
Speaker 1: lot of money, and real quick, it's worth mentioning that
Speaker 1: donor advice funds they're not just for those out there
Speaker 1: who are completely crushing it. It's not for the ultra rich.
Speaker 1: And so there are ways that you clump your donations
Speaker 1: so that way you get the tax credit for those
Speaker 1: the tax deduction for those donations as opposed to just
Speaker 1: taking the standard deduction. And so this truly is something
Speaker 1: for for everyone out there who is giving them money.
Speaker 1: Should we should ride about that in an upcoming How
Speaker 1: the Money newsletter, which, by the way, if you're not
Speaker 1: signed up how to Money dot Com slash newsletter, and
Speaker 1: Matt just one other cool thing about Daffy. I love
Speaker 1: that you can donate with a credit card and not
Speaker 1: pay any fees. That's a cool way to like. Obviously,
Speaker 1: we don't want you to go in debt to give,
Speaker 1: but if you're using a credit card strategically to meet
Speaker 1: a sign up bonus or something like that, then I
Speaker 1: think that's really I love that Daffy allows users the
Speaker 1: ability to do that. And if you're wondering which credit
Speaker 1: card has the best sign up bonuses, how to money
Speaker 1: dot com slash credit cards. That's right, man. Let's mention
Speaker 1: the beer we're having on this episode. It's an Imperial
Speaker 1: Strawberry White Ale by Tennessee Brewerks. We'll give our thoughts
Speaker 1: on it at the end of the episode, but let's
Speaker 1: get onto the subject in hand. We are talking about
Speaker 1: the massive retirement account changes that impact you. And we've
Speaker 1: always said that the basics of personal finance aren't terribly
Speaker 1: difficult to comprehend. They're not impossible to wrap your mind around,
Speaker 1: and in fact, most people understand them quite clearly. Even
Speaker 1: my three year old she don't understand some of the
Speaker 1: basics right. The general principles are fairly easy to understand,
Speaker 1: like don't spend more than you make like that. It
Speaker 1: doesn't take a rocket scientist really understand that. But incentives
Speaker 1: change everything and might even get you to do something
Speaker 1: that you're not terribly keen on doing. It makes me
Speaker 1: think of Matt You remember the TV show Fear Factor?
Speaker 1: I do. Okay, I never watched it. Okay, Well, I
Speaker 1: remember people used to eat really weird stuff. They used
Speaker 1: to lie down in glass coffins with spiders crawling over them. Ystian. Yeah,
Speaker 1: you had to overcome your fears. You had to do
Speaker 1: crazy stuff. And the fact is most of us wouldn't
Speaker 1: choose to do any of those stunts if it weren't
Speaker 1: connected to the possibility of winning a lot of money, right,
Speaker 1: But people were like, listen, okay, I'm gonna win thousands
Speaker 1: of dollars or potentially million dollars for letting spiders crawl
Speaker 1: over me. All right, I guess I'm in right. So
Speaker 1: then incentive kind of changes someone's mindset and their decision making.
Speaker 1: You know what, I'm going to go on that show
Speaker 1: and I'm gonna do that crazy stunt because I might
Speaker 1: make some money at the end. Of the day. And
Speaker 1: and that's true. For like, if you asked me to
Speaker 1: get into a coffin of spiders or something, I would
Speaker 1: say no, Like I wouldn't do it unless there was
Speaker 1: like a million bucks at the end of the rainbow.
Speaker 1: But these are the kind of things like that. There
Speaker 1: are things in this bill that are going to change
Speaker 1: the incentives for how and where you invest in the future.
Speaker 1: We're gonna discuss that. We're talking about some of our
Speaker 1: favorite changes in this bill. We're gonna talk about how
Speaker 1: you should react to these changes based on your situation
Speaker 1: in today's episode. That's right, man, When the rules of
Speaker 1: the game have changed, we need to adjust our behavior accordingly.
Speaker 1: And at the end of last year, the Consolidated Appropriations
Speaker 1: Act of three that was as signed into law, all
Speaker 1: of it. Would you write every single page it's I
Speaker 1: will I will say. Folks were only talking about how
Speaker 1: you know how big it was, But like it's definitely
Speaker 1: the margin, the margins are pretty are pretty fat, and
Speaker 1: it's like there's definitely double spacing going on. It's kind
Speaker 1: of like what you used to do in high school
Speaker 1: just to get that page paper up the length exactly. Yeah,
Speaker 1: but you know, Luckily, we're we're mostly concerned with just
Speaker 1: a portion of it, the Secure Act two point oh,
Speaker 1: which is it's all about saving for retirement. But even
Speaker 1: just that portion, it's nearly four pages long. But yeah,
Speaker 1: lucky for you, we are into this kind of stuff.
Speaker 1: So let's let's parse out what you need to pay
Speaker 1: attention to. And one of the changes that will affect
Speaker 1: a ton of folks, most folks out there, is that
Speaker 1: the bill al allows you to withdraw one tho dollars
Speaker 1: for quote unquote family and personal emergency expenses from retirement
Speaker 1: accounts like a like a four win K or an
Speaker 1: IRA without incurring a ten percent penalty. There are other
Speaker 1: stipulations as well, other rules, but here's the thing, We're
Speaker 1: not even gonna cover those because we don't want you
Speaker 1: touching your retirement accounts. That is what your emergency fund
Speaker 1: is for. So if you hear folks that work, if
Speaker 1: you hear you know, water cooler talk being discussed, how
Speaker 1: hey you can talk tap a thousand bucks of that
Speaker 1: that pesky money that keeps getting siphon out of your paycheck,
Speaker 1: that is something to bring it back into your own
Speaker 1: know how to think about that is not money? That
Speaker 1: we want you touching, even though Congress has has left
Speaker 1: a pretty broad I mean literally it's just family and
Speaker 1: personal emergency expenses. So it seems like a very wide
Speaker 1: swath of explanations that you could give for tapping that money.
Speaker 1: That is not money that we want you tapping. That
Speaker 1: is money that we want you to leave in your accounts.
Speaker 1: That way it can continue to grow into even more
Speaker 1: are future dollars for your future self. Yeah, it's it's
Speaker 1: one of those things where it seems like a benefit,
Speaker 1: it seems like a nice thing. It's like, hey, yeah,
Speaker 1: if you need this money for any reason, go ahead,
Speaker 1: tap it, pull it out, and guess what, We're not
Speaker 1: going to charge you that penalty on top. And it
Speaker 1: seems like great. Not makes this money more accessible, But
Speaker 1: that's exactly what we don't want is this money to
Speaker 1: be more accessible. This is money we want you to
Speaker 1: lock away for your future. And there are some extreme
Speaker 1: circumstances where it makes sense to take money out of
Speaker 1: a retirement account, but that's what emergency savings is for,
Speaker 1: and that's what building up that de fund and having
Speaker 1: more money on hand in your savings account is for.
Speaker 1: We we don't want you to have to ever pull
Speaker 1: out money from a retirement account. That's not the goal.
Speaker 1: But if it comes down to, like you selling a
Speaker 1: kidney or or tapping kid you know, well, go ahead
Speaker 1: and kidney, go into the thousand bucks, hang on to
Speaker 1: the kidney. Yeah, I mean exactly that, And that's what
Speaker 1: that's what I think Congress is trying to say people
Speaker 1: kidneys if they don't, they don't want a black market
Speaker 1: for that. They don't want you on Craigslist selling your
Speaker 1: body parts. But it's one of those things where I
Speaker 1: get why they're going in this direction, and but how
Speaker 1: the money listeners like that. Hopefully this this is going
Speaker 1: to apply to you don't care about that part of
Speaker 1: it exactly, But let's talk about a bunch of other stuff,
Speaker 1: Matt that does is going to impact a lot of
Speaker 1: our listeners, and automatic enrollment into employee retirement plans is
Speaker 1: one of them. It's one of the major changes from
Speaker 1: this bill, and it's a money psychology move that's going
Speaker 1: to impact millions of folks positively who aren't currently saving
Speaker 1: for their own retirement. Again, though that might not be
Speaker 1: a whole lot of our listeners, most of our of
Speaker 1: the how the money community is putting money in a
Speaker 1: workplace retirement account if they have access. I hope so. Yeah,
Speaker 1: But starting five, a bunch of employers who have at
Speaker 1: least ten employees. Churches and nonprofits are exempt from this rule.
Speaker 1: They're now required, though, to automatically opt in employees by
Speaker 1: stashing away at least three percent and up to ten percent.
Speaker 1: Like if you had like an employer who was like, no,
Speaker 1: we want and investing so much, they could automatically enroll
Speaker 1: you at ten percent of your your paycheck into that
Speaker 1: workplace retirement account. That's what we would do. Yeah, that's
Speaker 1: probably we would force it default and make you change
Speaker 1: it exactly. No, no no, no, you started in present and
Speaker 1: you go up from there. That's right. Yeah, we're not
Speaker 1: gonna messing with that pitally three percent, and if you
Speaker 1: want to take it, you know, take the burden in
Speaker 1: your own hand and go change that setting and move
Speaker 1: it back down to three, that's on you. Yeah, but
Speaker 1: but we know that that's probably you know, not many
Speaker 1: of the folks listening right now, they're on it. They're
Speaker 1: saving for their own retirement. But let's say you mosey
Speaker 1: on down the road to a new job. Your employer
Speaker 1: is now going to be automatically in rolling you into
Speaker 1: their four one K plan or four or three V
Speaker 1: plan or whatever. And also employers are now able to
Speaker 1: offer incentives for you to sign up and start contributing
Speaker 1: to your four one K, which I thought was cool.
Speaker 1: Maybe like a free water bottle or a small gift
Speaker 1: card which shouldn't be what you need to get signed
Speaker 1: up a free pizzas sort of like the old school
Speaker 1: credit card signed up, right, except for this is a
Speaker 1: much better thing they're signing up for. But now this
Speaker 1: is a legal approach employers can take to encourage employees
Speaker 1: to invest, which which I think is cool. Let's keep
Speaker 1: talking about the different incentives that are being dangled in
Speaker 1: front of us. Savers who have a wrath four oh
Speaker 1: win K they can now choose to have their match
Speaker 1: go into their wraths as well. Oh now, this is
Speaker 1: especially advantageous for everyone out there who is just starting
Speaker 1: out in the career and who is likely to earn
Speaker 1: substantially more money down the road. You want to pay
Speaker 1: those taxes now, not in future years decades down the road,
Speaker 1: when you are likely going to be earning more money
Speaker 1: where you'll be in a higher tax bracket. Before, if
Speaker 1: your employer offered a ROTH four one K option, you
Speaker 1: could definitely stock that money away into the ROTH four
Speaker 1: o K, but then the match that your employer offered
Speaker 1: that would go into a traditional four O one K,
Speaker 1: which obviously is it's not the worst thing in the world.
Speaker 1: You're still getting the free money, but for a lot
Speaker 1: of folks, that makes sense to get all that money,
Speaker 1: including the match in the form of RATH funds if
Speaker 1: you could, and now you can, and so this is
Speaker 1: definitely one that you want to keep on your radar.
Speaker 1: You'll probably hear about this one at work, but if not,
Speaker 1: make sure to ask around and see when that might
Speaker 1: be available for you. Yeah, and then again, a lot
Speaker 1: of these things this was past at the very end
Speaker 1: of last year, and if you reach out to your
Speaker 1: HR department right now, they might be like, sorry, just
Speaker 1: just got back from a holiday trip. I have no
Speaker 1: idea what you're talking about. It's gonna take a while. Well,
Speaker 1: first off, some of these things aren't supposed to be
Speaker 1: implemented for years down the road. Like we talked about
Speaker 1: that employer match thing that starts in so it doesn't
Speaker 1: start this year, they don't even start next year. Some
Speaker 1: of these other things that the start date is different,
Speaker 1: but when you reach out to HR, it might take
Speaker 1: the time to implement some of these things. So just
Speaker 1: understand that and be cognizant of that before you start
Speaker 1: jumping down the throat right and start apparently on the
Speaker 1: door demanding that they make those changes. Now want that?
Speaker 1: I heard my Joe talking about it on the body.
Speaker 1: What's your problem to get with it? Well? So, yeah,
Speaker 1: and again, this is a four thousand page bill and
Speaker 1: it's gonna take it's gonna take a while for the
Speaker 1: implementation to to happen. But let's talk about one other
Speaker 1: thing that's really interesting on the four oh one k front,
Speaker 1: and a lot of organizations are are going to be
Speaker 1: implementing this as well. Something else on that match front
Speaker 1: is that's starting in four next year, if you're paying
Speaker 1: down your student loans and you're therefore unable to invest
Speaker 1: in your workplace retirement account because so much of your
Speaker 1: income is going to pay off that that college debt,
Speaker 1: you're not going to be eligible for the match that
Speaker 1: you previously wouldn't have qualified for. So that match from
Speaker 1: your employer is going to go into a retirement account,
Speaker 1: so she'll still be investing even though you're not actually investing.
Speaker 1: So yeah, even if you can't afford to put any
Speaker 1: your paycheck towards like even three right towards that four
Speaker 1: ohn K, because the student loan bill is so demanding,
Speaker 1: your employer is going to be able to invest on
Speaker 1: your behalf with the match. So I think that's kind
Speaker 1: of cool because there are people in that sort of scenario, Matt,
Speaker 1: and they want to be investing. But student loans obviously
Speaker 1: a massive burden for a whole lot of people. So
Speaker 1: and and student loan forgiveness still up in the air.
Speaker 1: But I think this is a really interesting change. Is
Speaker 1: going to help a lot of a lot of people
Speaker 1: who otherwise wouldn't be investing anything at least be investing
Speaker 1: something thanks to their employer. And this new law change exactly,
Speaker 1: it's basically treating the student loan payments as if you
Speaker 1: were contributing that money into your four o K. Your
Speaker 1: employer is viewing it like, essentially, you're giving getting the
Speaker 1: same benefit that somebody who's investing their money. You would
Speaker 1: also receive that benefit, but you are paying down debt instead.
Speaker 1: And how's this going to play out in the specifics
Speaker 1: in actuality. I don't know, but we have time to
Speaker 1: kind of see how because this this one again doesn't
Speaker 1: start until next year. But I'm sure there's gonna be
Speaker 1: a way that you report your loan payments to your
Speaker 1: employer so they can then you know, make that match happen.
Speaker 1: But um, yeah, what does it look like on the ground.
Speaker 1: Not sure yet exactly. Yeah, so we've kind of talked
Speaker 1: about some matches from your employer. There's some news on
Speaker 1: the essentially matches from the government as well. There are
Speaker 1: now expanded tax credits available a match from the federal
Speaker 1: government on at least a portion of the money that
Speaker 1: you invest in. This is for folks who have an
Speaker 1: adjusted gross income of less than seventy three tho dollars. Interestingly,
Speaker 1: this one doesn't start until start dates of all this stuff.
Speaker 1: It's just kind of it's kind of annoying that kind
Speaker 1: of all over this one. This one starts now, this
Speaker 1: one starts, but the the Savers tax credit will a
Speaker 1: few years from now it will become the Savers Match,
Speaker 1: And so there's some semantic change they're going on. But
Speaker 1: that's gonna allow more individuals, it's gonna allow more families
Speaker 1: who aren't making bank to get an additional government match
Speaker 1: so's they're no longer cutting your tax bill. It will
Speaker 1: now actually be the government literally making a matching deposit
Speaker 1: to a traditional IRA for you. Uh. And it's going
Speaker 1: to be up to one thousand dollars for individuals, it's
Speaker 1: gonna be two thousand dollars for married folks, and the
Speaker 1: specific amounts and it's actually based on how much you
Speaker 1: are able to contribute to that ira a yourself. And man,
Speaker 1: this is just another one of those incentives for young
Speaker 1: folks who are just at the beginning of their career
Speaker 1: and for folks who perpetually just make less. It's gonna
Speaker 1: allow them to find a way to start investing even
Speaker 1: if they're not making a ton of money. Now. I
Speaker 1: I kind of like that the government, even though I
Speaker 1: hate that is so complicated. I hate that all the
Speaker 1: laws governing these different tax advantage work sponsored retirement accounts,
Speaker 1: individual tax advantage retirement accounts, it can all be so
Speaker 1: stinking confusing. I hate that part of it, But I
Speaker 1: do like that the government is essentially pushing some of
Speaker 1: the responsibility on us as individuals, right like we're gonna
Speaker 1: be We're gonna be your buddy and help you out.
Speaker 1: We're gonna come alongside you, exactly. I love like. I
Speaker 1: love that as opposed to like Social Security, where it's
Speaker 1: just six percent of your paycheckto automatically getting siphoned off
Speaker 1: and you don't even think about that money. You're not
Speaker 1: thinking about how that money is gonna necessarily grow for you.
Speaker 1: There is an active step that's taking place here, as
Speaker 1: individuals are setting that money aside there, like you said,
Speaker 1: they're kind of coming alongside you. We're buddies, We're partnering
Speaker 1: in this together. Because this is exactly how like when
Speaker 1: my kids get old enough to purchase a car, Like,
Speaker 1: cars are really expensive, but that doesn't mean I'm going
Speaker 1: to just buy a car for my kid. I'm gonna say, hey,
Speaker 1: cars are expensive, you should start saving now. And for
Speaker 1: every dollar you set aside for that car, guess what
Speaker 1: that like, I'm gonna pitch in. I'm gonna meet you,
Speaker 1: I'm gonna come alongside you. This is something that we
Speaker 1: can do together. I love that some of the Yeah,
Speaker 1: just more the responsibility is being placed on us as individuals.
Speaker 1: I want to see more of that and less dependence
Speaker 1: on the government. And by then used rivians are going
Speaker 1: to cost all that much. Oh my gosh. But but
Speaker 1: will they still carry the charge? That's you know, I
Speaker 1: need a new battery at that point. But yeah, no,
Speaker 1: I I like this one too. I think it's a
Speaker 1: good one. And again it starts in seven. But it's
Speaker 1: gonna help a lot of people. It's gonna incentivize a
Speaker 1: lot of people, to say, for retirement, who otherwise wouldn't
Speaker 1: because it's like I'm getting a percent match on my dollars.
Speaker 1: Depending on your income level, that might be the case
Speaker 1: for you. All right, but let's talk about in just
Speaker 1: a second one of my favorite changes to this, and
Speaker 1: it's very nuanced. There, so much that goes into how
Speaker 1: much better five plans have become thanks to the passage
Speaker 1: of the Secure Act two point oh. We'll get to
Speaker 1: our thoughts on that. We'll talk about the intricacies and
Speaker 1: how it can actually benefit your child's financial future in
Speaker 1: a much bigger way than used to be possible. We
Speaker 1: get to that right after this. All right, man, let's
Speaker 1: keep on trucking, and specifically we're talking about five nine accounts.
Speaker 1: This is the aspects of the Secure Act that we
Speaker 1: are Secure Act two point oh got got to mention
Speaker 1: that we're most excited about I mean mostly because you
Speaker 1: and I both have You've got three kids, I got
Speaker 1: four kids. These are all kids who may or may
Speaker 1: not go to college, and the may not part of
Speaker 1: it is why these changes are so important. Exactly, Yeah,
Speaker 1: this is the This is actually in section of the
Speaker 1: secure actor, your favorite part. You read it with with
Speaker 1: bated breath. I will say the sections they start at
Speaker 1: like I think it started at one on one, so
Speaker 1: it's not like, you know, they make it seem way bigger,
Speaker 1: like a much bigger deal than it is. So really
Speaker 1: this is just section six um And when you say
Speaker 1: it that way actually sounds super boring. So we're not
Speaker 1: gonna do that. But we've always said that five nine
Speaker 1: accounts they can be a solid place to say for
Speaker 1: your child's future, but not until you've invested significantly for
Speaker 1: your own retirement, because there are a lot more ways
Speaker 1: to pay for college than there are to pay for retirement.
Speaker 1: But the bill you know, that passed up the tail
Speaker 1: end of last year, it has made five twenty nine
Speaker 1: plans significantly more attractive. You can now roll funds from
Speaker 1: a five nine account into a roth ira, a penalty free,
Speaker 1: and uh, honestly, that's that's the biggest reason why we
Speaker 1: were why we just didn't like five account so that much.
Speaker 1: You were essentially siloing that money into a five account
Speaker 1: only to be used for higher education, and if you
Speaker 1: wanted to take that money out, you're gonna get hit
Speaker 1: with a ten percent penalty. Makes me think of one
Speaker 1: of those home renovation shows Matt and how you might
Speaker 1: find a house with good bones and then you clean
Speaker 1: it up and you you put in a new kitchen
Speaker 1: and you're like, man, this thing is really attractive. And
Speaker 1: that's exactly what happened to five nine counts. They had
Speaker 1: some good bones, there were there were some good there
Speaker 1: was for a lot of people. Five twenty nine accounts
Speaker 1: made sense, but they're also they also didn't make sense
Speaker 1: for a whole super people. But now those good bones
Speaker 1: been brought to life and five accounts make more sense
Speaker 1: for a lot of folks. Bad analogy out it, Maybe
Speaker 1: it works. Yeah, we just found a way to blow
Speaker 1: out a wall in the five account and all of
Speaker 1: a sudden, now we've linked the dining and the entertainment space.
Speaker 1: All of a sudden, this is gonna be my modern
Speaker 1: day family needs. So maybe it's more like that Thai
Speaker 1: Penning can show back in the day where they added
Speaker 1: on like a whole wing to the house and it's like,
Speaker 1: now now this has moved my bus. It's like okay, yeah,
Speaker 1: and that's kind of what happened, my fun because it
Speaker 1: made this account just doubly effective. It changed your ability
Speaker 1: for how you use but you know, wild if I's
Speaker 1: went an account like it's still is not sexier than
Speaker 1: your roth ira A. The added flexibility you know that
Speaker 1: they now have they allow you to not just pay
Speaker 1: for a private school right or college from this account,
Speaker 1: but it can help your child start to invest for
Speaker 1: their own future in a meaningful way. It allows them
Speaker 1: to start, you know, building up their own wealth to say,
Speaker 1: for their own retirement, which is sort of a nice
Speaker 1: side effect and a nice additional benefit that comes with
Speaker 1: these changes. And if you and I we've been kind
Speaker 1: of giddy on this one. We've been talking about this
Speaker 1: change because a lot of money nerds certainly have tease
Speaker 1: to this one the most over the past. Well because
Speaker 1: I'm most excited about this because I think that this
Speaker 1: impacts a whole lot of how to money listeners who
Speaker 1: want to get the next generation of personal finance nerds
Speaker 1: started out on the right path. And we're not the
Speaker 1: only one with kids. No, we're not the only ones
Speaker 1: with kids, and we're not the only ones who are like,
Speaker 1: I don't know if I makes sense for me, because
Speaker 1: you know, they're not sure if their kids are gonna
Speaker 1: go to college, or even if they do, there's scholarship opportunities,
Speaker 1: and so they just it's it's hard to know whether
Speaker 1: or not to prioritize that account, and these changes make
Speaker 1: it easier to stock money away into one of those accounts,
Speaker 1: even if you're not sure about what the particulars of
Speaker 1: college are going to look like for your Kiddoh, but
Speaker 1: I also want to Yeah, like you said that, your
Speaker 1: own retirement accounts still take priority. Here here's how we're
Speaker 1: thinking about it. If you're already doing a fantastic job
Speaker 1: saving for your own future and you want to help
Speaker 1: your kids get started off on the right foot for
Speaker 1: there's two, then this provision is going to help you
Speaker 1: do just that. But we want to make sure that
Speaker 1: you're maxing a ROTH, you're contributing a significant amount of
Speaker 1: your workplace retirement account before you start to help your
Speaker 1: child a crew of retirement dollars. And again, now with
Speaker 1: these changes, that is what account can do for them.
Speaker 1: It can turn into retirement dollars, which is really cool
Speaker 1: because before it was like use it or lose it,
Speaker 1: pay the don'tee if it doesn't get spent on college.
Speaker 1: And now there's another uh, use case scenario for these
Speaker 1: five nine funds. But it still doesn't mean that they're
Speaker 1: more important than saving for your own retirement first, that's right.
Speaker 1: The purpose of these changes is to make sure that
Speaker 1: essentially they're alleviating stress that you might have for putting
Speaker 1: money into a five twenty nine account that may not
Speaker 1: be used for higher education. And there are a lot
Speaker 1: of people who already have money stocked into a five
Speaker 1: twenty nine account and their their their kids are graduated,
Speaker 1: and I don't know what to do with this money.
Speaker 1: And so now there's like something to do with this money,
Speaker 1: which is great. Hopefully they didn't pull it out last
Speaker 1: year and percent penalty. But let's talk about the stipulations
Speaker 1: associated with these changes and how you might be able
Speaker 1: to take full advantage um. A couple of things to know.
Speaker 1: First of all, you can only transfer thirty dollars total
Speaker 1: into a raw fire a for your kids from the
Speaker 1: five twenty nine account with their name on it over
Speaker 1: the years. And that's for each kid, right each and
Speaker 1: so the kid has to be listed as the beneficiary.
Speaker 1: You own the account, but the money can be transferred
Speaker 1: out of that account into a roth ira in their name.
Speaker 1: And so, for instance, let's say you have a hundred
Speaker 1: thousand dollars in one of those five accounts over two decades,
Speaker 1: that's something you've saved up. Well, know that this means
Speaker 1: that basically only about a third of that money would
Speaker 1: ever be eligible for wrath transfers. The rest would need
Speaker 1: to be spent for education or you pull that out
Speaker 1: and get hit with that timbercent penalty. And again, this
Speaker 1: is what five nine accounts were designed for. They were
Speaker 1: meant for higher education. This is probably fine. This is
Speaker 1: probably the major reason why you likely open the account,
Speaker 1: or that you plan on opening one in the future.
Speaker 1: That's still a good reason and honestly the primary reason
Speaker 1: to use the five pan It's like that, it's just
Speaker 1: a backup, right, It's sort of like going skydiving and
Speaker 1: counting on using your second shoot, like like your emergency parachute,
Speaker 1: like don't they have. I think they have to U
Speaker 1: two parachutes. I probably want three if I went. But
Speaker 1: it's basically saying, hey, I'm gonna jump out of this
Speaker 1: plane and I'm looking forward to using that second second
Speaker 1: para shotes like no, no, no, that's not really what
Speaker 1: it was intended for. You can do that, but hopefully
Speaker 1: you are using it for its primary purpose first. But
Speaker 1: now you just know that you've got that secondary justin camps.
Speaker 1: I kind of like though the secondary shoot on this one.
Speaker 1: I think it's for people who are really with it.
Speaker 1: It's a very nice secondary shoe. Yeah, and they want
Speaker 1: their kids to be millionaires, let's say by the time
Speaker 1: they reach retirementas without having to do anything on their own. Granted,
Speaker 1: I want to teach my kids how to do the
Speaker 1: right things and how to invest in their future and
Speaker 1: to be and to care about investing from a personal standpoint,
Speaker 1: but if you want to get them started on the
Speaker 1: right path, this account you don't even have to think about.
Speaker 1: You can now think about it purely as a retirement
Speaker 1: account if you wanted to for your kids future, although
Speaker 1: I think you still want to think about it primarily
Speaker 1: as an education funding tool. But let's talk about I've
Speaker 1: got mixed feelings about saving for your kids retirement because
Speaker 1: like it's one thing to save on. Yeah, yeah, exactly.
Speaker 1: I think funding different experiences or extracurriculars are just different
Speaker 1: things that you can do together as a family. But
Speaker 1: I'm still super just I'm mixed essentially on whether or
Speaker 1: not I feel comfortable setting aside retirement dollars for my
Speaker 1: kids because I feel like it just does something mentally
Speaker 1: you almost don't want to tell them about it, like
Speaker 1: if you are doing it, except that you're talking. We're
Speaker 1: talking about it right now on a podcast that everyone
Speaker 1: turn this podcast off right now if you're listening, they're
Speaker 1: gonna go dig in dy account that has to do
Speaker 1: with kids accounts or five nine, and like, all right,
Speaker 1: what did what did Mr Joel? What did Daddy do?
Speaker 1: What did Joel do? What did I do? Like, I
Speaker 1: guess I'm more interested in the fact that you can
Speaker 1: then transfer that account into your own name and note
Speaker 1: me knowing that I can then with that five nine,
Speaker 1: with me being named as the beneficiary, can then transfer
Speaker 1: that into a roth eyra that is also in my name.
Speaker 1: That is something that you can also do it for me.
Speaker 1: That feels more like the backstop. That's the to me,
Speaker 1: that's the secondary. Shoot. Yeah, well, interestingly enough on that front,
Speaker 1: like we don't really have the details on how it
Speaker 1: works when you change beneficiaries. That's one of those things
Speaker 1: that that hasn't been completely spelled out. And so I'm
Speaker 1: actually gonna talk about this right now. Let's talk about
Speaker 1: seasoning the account. If you rename the ben a fishery,
Speaker 1: that might mean that you have to season the account again,
Speaker 1: which could make it really hard for for the person
Speaker 1: who becomes the new beneficiary to actually get that money
Speaker 1: or at least prolonging the timeline. But there's this fifteen
Speaker 1: year rule that's massively important to understand if you want
Speaker 1: to utilize the new abilities of plans, And basically, this
Speaker 1: plan needs to be open for at least fifteen years
Speaker 1: in order to reach the age of eligibility to where
Speaker 1: you're allowed to roll over some of those funds into
Speaker 1: a roth. And that makes me that that makes I
Speaker 1: would say, opening that five plan early a really critical step.
Speaker 1: So even if you're you're not sure that you'll want
Speaker 1: the fund to retirement account like a wroth for your kid,
Speaker 1: or that you're gonna have enough money to contribute like
Speaker 1: you'd like to. You might say like, yeah, this is
Speaker 1: pie in the sky, but I don't make enough money
Speaker 1: to even consider a maneuver like this. Well, that might
Speaker 1: be true right now, but it might not always be true.
Speaker 1: Your income mike skyrocket in the coming years, and you
Speaker 1: might say you might be a ball I wish I
Speaker 1: had done something at least started the ball rolling on that.
Speaker 1: And so we would say it's worth opening up a
Speaker 1: account in each of your kiddo's names, even just with
Speaker 1: the bare minimum. Let's say it's twenty five a minimum
Speaker 1: to open the account. Do that and get that clock
Speaker 1: taking your your income and your goals might change, like
Speaker 1: we said, And and it would be nice to have
Speaker 1: the option to contribute more into funnel money into your
Speaker 1: child's rath down the road. Let's say you don't use
Speaker 1: that money for education, and then you can start to
Speaker 1: jump start their retirement with it. But there's just more
Speaker 1: opportunity if you open the account in their first year
Speaker 1: or two of life. So I would say, like, you
Speaker 1: have a kid, you get their social Security number, open
Speaker 1: up a five account now, boom, even if it's with
Speaker 1: ten twenty bucks, and yeah, get that clock taking, because
Speaker 1: that is one of these one of these major sticking
Speaker 1: points in this new bill exactly. And if you think
Speaker 1: you might be transferring that money again into your own
Speaker 1: name and naming yourself as the beneficiary, maybe it wouldn't
Speaker 1: hurt to open a five nine account and your own
Speaker 1: name and even your partner's name as well, to be
Speaker 1: able to potentially again we don't know the specifics and
Speaker 1: how this is all going to play out, but to
Speaker 1: potentially spread that money out, I mean you might have
Speaker 1: the assuming it stays at dude, I mean, that's a
Speaker 1: total of thirteen thousand dollars that you might be able
Speaker 1: to essentially funnel back into your own roth iras well.
Speaker 1: We've had a fount for my wife for a couple
Speaker 1: of years now because she's in graduates, she's already got
Speaker 1: We're funny that you've got both of those and in
Speaker 1: fifteen years, even if even if the clock does reset
Speaker 1: and the seasoning of the account is beneficiary specific than
Speaker 1: just like having opened your your kids five and accounts
Speaker 1: that clock would have been taking fifteen years ago as well.
Speaker 1: But not only do you need a season the account,
Speaker 1: you have to season the money that goes into the
Speaker 1: account as well. This is the five year rules, So
Speaker 1: there's a fifteen year rule. In the five year uld,
Speaker 1: the account has to been open for more than fifteen years,
Speaker 1: but tell us about the money. It has to have
Speaker 1: been in that account for at least five years. And
Speaker 1: so that means that you you can't roll over five
Speaker 1: twenty nine dollars that you've stalked away within the most
Speaker 1: recent five years. So say if you're fourteen years in
Speaker 1: and you still just got that twenty five dollars hanging
Speaker 1: out in an account and then you decide to max
Speaker 1: out your contribution right before you're fifteen, well, those funds
Speaker 1: will need to then season four an additional five years
Speaker 1: before being able to be eligible for RATH conversions. And
Speaker 1: so yeah, keep that in mind as well. Essentially, just
Speaker 1: like if I feel we might be getting into the
Speaker 1: weeks here, but just like if you're doing a backdoor
Speaker 1: rath I r A, that money has to season for
Speaker 1: five years. I'm assuming this is exactly where they got
Speaker 1: this information from, so that it mirrors that backdoor wrath.
Speaker 1: I can't imagine that that there's gonna be you know,
Speaker 1: millions of folks out there who are gonna need to
Speaker 1: be able to maximize this new rule, you know, funnel
Speaker 1: a full thirty five dollars into a wrath for their child.
Speaker 1: But if that's your goal, you're gonna need to plan accordingly,
Speaker 1: which for most folks this means regular contributions in those
Speaker 1: early years in order to grow that balance. Yeah, and
Speaker 1: I think that is where some folks might get hung up.
Speaker 1: They might be so excited about the if they're like talking,
Speaker 1: if they care about generational wealth building, and they say,
Speaker 1: unlike Matt and Joel, and I am funding my five
Speaker 1: nine accounts with more bigger now because of this law change,
Speaker 1: because there's more ability for me to pass that money
Speaker 1: down to my kids in an awesome retirement account for
Speaker 1: their future, and of course not telling them about it.
Speaker 1: But it's it's it's one of those things where some
Speaker 1: people might get so excited about this and creating this
Speaker 1: generational wealth opportunity that they might fail, or at least
Speaker 1: not to the same degree, invest for their own future
Speaker 1: or like you said, Matt too, even invest in things
Speaker 1: that help grow your family dynamic and and trips that
Speaker 1: might pay off from a cultural standpoint or from just
Speaker 1: a knowledge standpoint. I think those things are massively important.
Speaker 1: And if you're funding a five plan but you're skipping
Speaker 1: out on those other things, that's not I wouldn't say
Speaker 1: that smart. I wouldn't say that is creating a well
Speaker 1: rounded family and well rounded kids. So yeah, food and analogy.
Speaker 1: It makes me think that you're serving up the perfect
Speaker 1: amount of vegetables, protein, dairy, whatever for for each meal,
Speaker 1: but you're like, you're not adding any seasoning to it
Speaker 1: at all, and you're just like, well, no, no, these
Speaker 1: are the building blocks to uh healthy, fully balanced diet.
Speaker 1: Who cares about flavor well, flavor is really important. That's
Speaker 1: what actually gets you to do the thing. And if
Speaker 1: you've lost sight as to why it is that you
Speaker 1: are funding these accounts, it's to and enrich the lives
Speaker 1: of you know, your of your kids in the future.
Speaker 1: It's important to keep that in mind as well. You
Speaker 1: don't want to lose sight. You don't want to focus
Speaker 1: so much on the long term that you lose sight
Speaker 1: of what's here right now, right in front of you.
Speaker 1: You gotta have that both and approach for sure. And
Speaker 1: and one more thing that it's important to mention when
Speaker 1: it comes to the changes to five plans, in this
Speaker 1: Secure Act two point oh section, annual contribution limits still apply.
Speaker 1: And so those contribution limits they're going to go up
Speaker 1: over time. They just went up this year from six
Speaker 1: thousand dollars last year to sixty. What you can stock
Speaker 1: away in in IRA at this point, I can't predict
Speaker 1: what they're going to be in let's say nine, But
Speaker 1: let's just say the annual limit is still at six,
Speaker 1: even though it won't be at that point. The account
Speaker 1: in question has been open for at least five fifteen years, Matt,
Speaker 1: like you just discussed, with at least sixty dollars of
Speaker 1: those having been stocked away at least five years ago.
Speaker 1: You can then roll over that's sixty from the five
Speaker 1: nine account into a roth I array that is in
Speaker 1: your kiddo's name, and you can do the same thing
Speaker 1: in the following years. To one. Thing you you can't
Speaker 1: do is roll over sixty five hundred and then contribute
Speaker 1: sixty additional dollars like the traditional way. In the normal way,
Speaker 1: you can't say you can't fund thirteen dollars into a
Speaker 1: ROTH in one year, half from the half from just
Speaker 1: other earned income. The total annual max of six still applies.
Speaker 1: You can do half and a half. You could do
Speaker 1: three thousand, two hundred and fifty dollars from as a
Speaker 1: rollover and then the same amount as a traditional contribution.
Speaker 1: But yeah, you can't double up those limits. Those contribution
Speaker 1: limits still apply. And okay, so that's a lot of
Speaker 1: new information on how five plans have changed. Hopefully we
Speaker 1: didn't bore you with too many details. But how parents
Speaker 1: can best take advantage of this for their kids, This
Speaker 1: gets a bit complicated and the reality, honestly, it's it's
Speaker 1: that most folks will have something to do now with
Speaker 1: those unused fights one and nine funds that that don't
Speaker 1: involve a penalty. That is the great news here. But
Speaker 1: if you are inclined to take advantage of this, if
Speaker 1: you want to prime the pump for your child's future retirement,
Speaker 1: then we want to make sure that you do it properly,
Speaker 1: that you're thinking about it the right way. Again, even
Speaker 1: though five nine plans they're they're way cooler, they're way
Speaker 1: more flexible than they were, that still doesn't mean that
Speaker 1: it takes priority over the other retirement accounts that you
Speaker 1: have access to. But if you're willing, if you're able
Speaker 1: to do both more power to you. And that being said,
Speaker 1: we've covered a lot of details. If you have questions,
Speaker 1: this is an excellent time for us to bring this up.
Speaker 1: Submit a question to how the Money dot Com forward
Speaker 1: slash ask. You can send us a voice memo if
Speaker 1: you have a particular situation. If you have if you've
Speaker 1: come across a nuance of the law that you want
Speaker 1: us to talk about, you can ask a question so
Speaker 1: that you're just like, Man, I in my specifics, should
Speaker 1: I be contributing to a five nine plan for my kids?
Speaker 1: Like we love to throw out a few of your particulars.
Speaker 1: We love to tackle it. Yeah. Or if you've got
Speaker 1: a frugal or cheap and you're like, is it cheap
Speaker 1: to think that I will designate this money for my
Speaker 1: kids for their college only, but I am not link
Speaker 1: to give it to them within the retirement account. That's
Speaker 1: something I'm personally wrestling with as we speak into your question. Man.
Speaker 1: But all right, we've we've got more changes to retirement
Speaker 1: accounts that we need to discuss, including new RATH four
Speaker 1: owen K rules, and we'll get to all that right
Speaker 1: after this. All right, let's keep going. Let's keep talking
Speaker 1: about retirement account changes thanks to the new Secure Act
Speaker 1: two point oh, which was past basically the very end
Speaker 1: of last year. I can't wait for the upgrade, the
Speaker 1: Secure Act two point two point one update. Yeah, well,
Speaker 1: that's the thing is, like, we do need clarification on
Speaker 1: a lot of the changes that are that are happening.
Speaker 1: Hopefully we'll get those in the coming weeks and months,
Speaker 1: and we will share as new information comes along. But
Speaker 1: there's just a lot worth covering. In specifically, we wanted
Speaker 1: to dedicate a whole section of five plans because there's
Speaker 1: massive changes there, like we said, kind of like a
Speaker 1: new wing being added onto the house, and it's worth
Speaker 1: covering and discussing in depth how that impacts folks who
Speaker 1: are saving for the kids college, or folks who hadn't
Speaker 1: considered saving for their their kids college but who do
Speaker 1: want to invest for their child's future. This now gives
Speaker 1: them another account to consider and that secondary Shoot, yeah,
Speaker 1: you can always, you can always. There's always money in
Speaker 1: the banana send exactly what I was thinking when you
Speaker 1: said that. And if any of you don't watch Arrested Development,
Speaker 1: go back and watch it tonight because it's one of
Speaker 1: the greatest shows on television. Or yeah on streaming. But
Speaker 1: now let's talk about some other changing elements of retirement accounts.
Speaker 1: Thanks to what the Secure Act two point has brought about,
Speaker 1: and we've got a few more things we want to
Speaker 1: get to. Four own K hardship savings are now a reality,
Speaker 1: and so a good chunk of folks are not gonna
Speaker 1: be able to save for a rainy day inside of
Speaker 1: their workplace retirement account, whether it's their four or three
Speaker 1: B four oh one K, which whichever workplace retirement account
Speaker 1: they have access to, if they have access to one.
Speaker 1: And the goal here is so that employers can basically
Speaker 1: help lower income workers out by allowing them to also
Speaker 1: qualify for the company match, but just on savings, at
Speaker 1: least until a certain point when the account achieves a
Speaker 1: sum of two thousand dollars, which is early close to
Speaker 1: our two thousand, four hundred and sixty seven dollar recommendation
Speaker 1: of what folks should hapen an emergency fund. The right
Speaker 1: read the same report by the same economists that we
Speaker 1: got our number form exactly so to our listeners, they
Speaker 1: might see an hr email hit their inbox at some
Speaker 1: point this spring outlining their new ability to save for
Speaker 1: a rainy day inside of their retirement account. And this
Speaker 1: is kind of this just isn't terribly exciting in our books,
Speaker 1: because yet saving that much money in a savings account
Speaker 1: is literally our first money gear, Like that's what we
Speaker 1: want people to do from the outset, when it's like,
Speaker 1: what's what'sh your My my first goal with money be
Speaker 1: get that much money set aside in the same mus
Speaker 1: account that you have. So but if you've had trouble
Speaker 1: just getting to that point, this new provision it might
Speaker 1: do a bit of good helping more folks to get there,
Speaker 1: which which is going to be, let's be honest, a
Speaker 1: massive step for a whole lot of folks who are
Speaker 1: living paycheck to paycheck. If you have that much money
Speaker 1: in savings, whether it's inside of this new hardship savings
Speaker 1: inside of a four one K or four or three B,
Speaker 1: this will probabably lead to a lot of folks who
Speaker 1: needed the most to achieve a greater level of financial
Speaker 1: security to get established lay that foundation. Yeah, this does
Speaker 1: not apply though to all employees. There are some stipulations,
Speaker 1: the main one being that you can't take advantage of
Speaker 1: this if your income is over five thousand dollars which
Speaker 1: it kind of makes sense because high income earners, they
Speaker 1: should at least be able to find a little bit
Speaker 1: of wiggle room in their budget to be able to
Speaker 1: fund that emergency fund without this additional boost. And because
Speaker 1: of that new option rule that we talked about earlier,
Speaker 1: if an employee doesn't opt out, they actually actually might
Speaker 1: be saving up money, uh, without having to do anything
Speaker 1: at all, because employers can also auto enroll employees into
Speaker 1: one of these emergency savings accounts and establish a contribution
Speaker 1: percentage of up to three on their behalf. So that's
Speaker 1: kind of important to keep in mind. Uh. Something else,
Speaker 1: what happens when they reach that threshold, Well, then the
Speaker 1: employer could just either stop those contributions altogether, or they
Speaker 1: could deviate those dollars. They can fundel them towards the
Speaker 1: workplace retirement account instead. So know that that's an option
Speaker 1: that your employer now has the ability to do that
Speaker 1: on your behalf. And we've talked about over the years, Matt,
Speaker 1: the different psychological things that money is so in our brain,
Speaker 1: and often we don't take the actions that we want
Speaker 1: to that we know are in our best interests. And
Speaker 1: so some of these automatic contributions from employers, not like
Speaker 1: that's just gonna help people do the right thing without
Speaker 1: having to think about it, without even choosing to do it.
Speaker 1: Some might say that's like nanny state, big brother or
Speaker 1: something like that. But you can you can always change it,
Speaker 1: you know, as long as you still have the option,
Speaker 1: which you do. There's nothing wrong with a little notes.
Speaker 1: You go back in there the very next day and
Speaker 1: be like, psych, thanks for thanks for trying. I want
Speaker 1: to spend all the dollars that I that I that
Speaker 1: I make. I don't want to say anything for my future.
Speaker 1: You still have that choice. But let's talk about some
Speaker 1: other changes that The rm D pushback is another one
Speaker 1: that happened in this bill. This one applies to fewer
Speaker 1: how the money listeners because we have a younger audience.
Speaker 1: But here's the scoot for individuals who turned seventy two.
Speaker 1: This might have ramplications for your parents. By the way,
Speaker 1: r m d s will be pushed back by one
Speaker 1: year compared to the current rules, and they're gonna begin
Speaker 1: at age seventy three. Age seventy three will continue to
Speaker 1: be the age at which rm ds need to be
Speaker 1: taken for the next decade through two. Then beginning in
Speaker 1: twenty three, r m D s are gonna be pushed
Speaker 1: back even further to age seventy five. So for most
Speaker 1: of our listeners who are still decades from retirement, there's
Speaker 1: still a long ways off. This means that you won't
Speaker 1: be forced to take money out of your four one
Speaker 1: K or traditional I array until you turn seventy five,
Speaker 1: that's right, which is good news, Like you have more
Speaker 1: choice over when you take those funds out, and nobody's
Speaker 1: telling you earlier on in your retirement years that you
Speaker 1: have to you have to grab those that money and
Speaker 1: pay the tax piper. You you can let it continue
Speaker 1: to grow, that's right. Yeah, I mean, and with folks
Speaker 1: living longer and with a desire to continue to want
Speaker 1: to work at a job some somehow, maybe it's not
Speaker 1: maybe you're not making nearly as much as you used
Speaker 1: to make. But what that means is you often times
Speaker 1: don't need to take that money out of the account
Speaker 1: and you can let it grow. But some other good
Speaker 1: news on this front though, is that RATH four ohwen
Speaker 1: K accounts, which by the way, there are favorite choice
Speaker 1: for most folks because most folks are going to be
Speaker 1: earning more money in the future, and tax rates are
Speaker 1: likely to go up to they're likely gonna go up
Speaker 1: after five. But if you have a RATH four W
Speaker 1: four oh one K account, this also means that you
Speaker 1: won't have any R and D s attached to them
Speaker 1: starting in and moving forward either. So in our minds,
Speaker 1: this makes a ton of sense because RATH accounts, regardless,
Speaker 1: they are funded with after tax dollars, whether we're talking
Speaker 1: about roth iras or RATH four own case, but roth
Speaker 1: iras they already had no mandatory required minimum distributions and
Speaker 1: so now they're sister accounts, they won't have any forced
Speaker 1: withdrawals associated with them either. It makes sense. I mean,
Speaker 1: more of the the language in this bill is pushing
Speaker 1: folks towards the expansion of what some writers have called
Speaker 1: like the rathification of retirement accounts. More accounts now have
Speaker 1: the option and to not only pay the taxes up
Speaker 1: front and let that money grow tax free, but also
Speaker 1: to avoid those R m D s. Yeah. One of
Speaker 1: the thing on the WRATH front too, is that it's
Speaker 1: good news really for self employed folks out there. Starting
Speaker 1: this year, you're gonna be able to contribute to a
Speaker 1: WRATH simple IRA and a Wrath set IRA. Those accounts
Speaker 1: previously only allowed for pre tax contributions, but that changes
Speaker 1: in this year, and so it might take a minute
Speaker 1: for the brokerage company you work with to get everything
Speaker 1: up and running on their end, but look for that
Speaker 1: option soon. And for again, given kind of where things
Speaker 1: stand from attack standpoint in this country, and depending on
Speaker 1: your income, depending on your goals, depending on you know,
Speaker 1: what you're likely income is going to be in the future.
Speaker 1: It's it's hard to give a blanket statement for every
Speaker 1: single person, but Rath Rath accounts makes sense for a
Speaker 1: lot of folks. And yeah, that the fact that Rath
Speaker 1: simples and Roth steps are going to be available now
Speaker 1: starting this year is a good thing, that's right. But
Speaker 1: before we wrap this thing up, some additional news and
Speaker 1: information for our older listeners. Catch up contribution amounts are
Speaker 1: going up for folks who are in their early sixties,
Speaker 1: and that catch up amount is going to be indexed
Speaker 1: to inflation. What about the mustard amount? Such a nerd, no, sir,
Speaker 1: But what this means is that since it's going to
Speaker 1: be indexed inflation, is gonna gonna be essentially pegged to inflation.
Speaker 1: That it means it's going to automatically change over the years.
Speaker 1: But for folks who are getting closer to retirement age
Speaker 1: and they haven't been able to sock as much as
Speaker 1: they'd like to away into the retirement accounts of the decades,
Speaker 1: they will now have a greater ability to put more
Speaker 1: into those accounts, at least for a few years, specifically
Speaker 1: between the ages of sixty and sixty three. And believe
Speaker 1: it or not, there's even more in the Secure Act
Speaker 1: two point o that passed. Much of it is arcane
Speaker 1: and gets even more into the weeds than we've done
Speaker 1: on this episode. So we're going to um try to
Speaker 1: maintain listeners and not be just completely boring and uh
Speaker 1: and and tell you stuff that you don't care about.
Speaker 1: But for instance, you can now offer your cleaning person
Speaker 1: or your nanny a step by array. Let's say you're
Speaker 1: in that boat and you're like, you want to give
Speaker 1: them a retirement account. You're trying to steal your neighbors,
Speaker 1: your friends. You're like, I offer retirement benefits. Right, Well,
Speaker 1: that's kind of interesting, but it's not necessarily applicable to
Speaker 1: a bunch of folks there as right. There also changes
Speaker 1: to able accounts for disabled folks, which which are going
Speaker 1: to be helpful, but those don't go into effect. Until
Speaker 1: that being said, we'll link to some of the best
Speaker 1: resources to help you understand the full scope of changes
Speaker 1: that this law creates in the show notes. If you're
Speaker 1: like listen, I want to read like dozens and dozens
Speaker 1: and dozens of pages of arcane legislative language, then boom
Speaker 1: if that's your If that's your jam, will link to
Speaker 1: some of that stuff in the show notes so you
Speaker 1: can dig into the details yourself. Well, we'll link to
Speaker 1: the actual omnibus bill and tell you what pages to
Speaker 1: start on if you want to read all four pages
Speaker 1: of the Secure Act, if you really want to dive
Speaker 1: into a dozen pairs of how the money stocks for
Speaker 1: the first listener that reads the entire bill, we want
Speaker 1: a book report in two weeks. Obviously, we would still
Speaker 1: like to see more simplicity, right, like when it comes
Speaker 1: to retirement accounts, they're still massively confusing to a slew
Speaker 1: of folks. We we totally get that there's like an
Speaker 1: alphabet soup of different account names, the income limits and
Speaker 1: the slighting scales time periods like in different years that
Speaker 1: they're getting implemented all of these they put h they
Speaker 1: put up a bit of a wall for a lot
Speaker 1: of folks who would otherwise be interested in investing. But still,
Speaker 1: even though it might feel like you're you're cramming, cramming
Speaker 1: for an exam, if you learn how these accounts work,
Speaker 1: if you use them to your advantage, we think that
Speaker 1: you're going to be able to change your financial future
Speaker 1: in a massive way. And of course we know that
Speaker 1: financial futures lead to your actual futures. And it's not
Speaker 1: just about money, it's about what you can then do
Speaker 1: without money. These changes will quite literally allow you to
Speaker 1: make some serious changes to your life in the future. Yeah,
Speaker 1: we talked about at the very beginning of this episode,
Speaker 1: we talked about incentives and incentives drive us, like whether
Speaker 1: we know it or not, Like why do we get
Speaker 1: up and go to work every morning? It's it's typically
Speaker 1: not because we'd rather be there than sleeping in our
Speaker 1: bed or hanging out with our kids or or there
Speaker 1: signific another like extrasophosmory. Yeah, it's it's for other reasons, right,
Speaker 1: And it's the incentives that matter. And so it's because
Speaker 1: we get health care and we will like maybe hopefully
Speaker 1: we like what we do, but it's because we we
Speaker 1: get a paycheck from that job, and incentives drive what
Speaker 1: we do every single day. And the incentive changes inside
Speaker 1: of this Secure Act two point oh which was passed
Speaker 1: in this omnious spending bill, are going to impact our
Speaker 1: decisions moving forward. And so hopefully, yeah, you know a
Speaker 1: little bit of the lay of the land, some of
Speaker 1: the major changes that occurred in this in this bill,
Speaker 1: and how you can use so changes to your advantage
Speaker 1: in the future as you're saving investing in your building wealth.
Speaker 1: That's right. And again, if there is a part of
Speaker 1: the Secure Act that passed that you did not hear
Speaker 1: us talk about, or you want us to talk about,
Speaker 1: talk about it in a specific way, send us a question.
Speaker 1: Go to how do money dot Com forward slash ask Joel.
Speaker 1: Speaking of incentive is one of the reasons that you
Speaker 1: and I that we come to work is that we're
Speaker 1: able to sip a craft beer while we record these episodes.
Speaker 1: So during this episode, enjoyed an Imperial Strawberry White ale.
Speaker 1: That's the only reason I showed up tonight for this beer. Uh.
Speaker 1: It is like a nice little park, you know. The
Speaker 1: ability for us to I mean literally, we don't repeat beers,
Speaker 1: and so part of it is a mission to explore
Speaker 1: all the many different breweries and different awesome beers that
Speaker 1: are out there. This is why Tennessee brew Works out
Speaker 1: of Nashville in collaboration. I guess with Cascade Moon, I
Speaker 1: think they were a distiller. They used their their whiskey barrels.
Speaker 1: But yeah, what your thoughts on this one? Yeah, so
Speaker 1: because they were in this beer was Asian and whiskey barrels.
Speaker 1: It was a little boozy. You had a little bit
Speaker 1: of strawberry all on that white ale base. So to me,
Speaker 1: this is crazy. This was unique and interesting. Like it was,
Speaker 1: it was different than any other beer have had, and
Speaker 1: I love a good beer agent and whiskey barrels. Like
Speaker 1: I'm hoping in Secure Act three point out they actually
Speaker 1: mandate all beers be Agian whiskey barrels, because that would
Speaker 1: make my day. But I thought this one was was fun,
Speaker 1: It was different, and it wasn't necessarily one of my favorites,
Speaker 1: but it was also it was also really tasty. Did
Speaker 1: you not like the had like a Belgian aspect to
Speaker 1: it more so than I mean it's we should have
Speaker 1: known that it's a white ale, so it's like some
Speaker 1: of the spice Belgian white in white ales aren't. They're
Speaker 1: not always my favorite, although we had one recently from
Speaker 1: Sapernartists that was delicious that I love, but this one
Speaker 1: has because it had fewer of those spies exactly. Yeah, yeah,
Speaker 1: but I I still I still really like yeah it definitely.
Speaker 1: It kind of had immediately you taste like the fruity
Speaker 1: floral action going on, but I obviously it had notes
Speaker 1: of strawberry, um, but it also had like a peachy
Speaker 1: mango sort of fruitiness going on, like a very kind
Speaker 1: of white, light colored fruit or or strawberry that it's like, yes, yes,
Speaker 1: it's like a strawberry that has maybe more white and
Speaker 1: green on it than actual deep red. Kind of had
Speaker 1: some of that tartness going on, which I enjoyed. It
Speaker 1: was a way to balance out some of the deeper
Speaker 1: notes that you get when you ate something in some
Speaker 1: oak barrels. But I agree with you, any beer that
Speaker 1: has aged in oak just takes it up another notch.
Speaker 1: And I'm glad this is one that you and I
Speaker 1: could enjoy today, buddy, But that's gonna be it for
Speaker 1: this episode. This was. This was a little more of
Speaker 1: an academic, nerdy, sit down textbook kind of episode. Uh.
Speaker 1: Often times we're talking maybe a little bit more about lifestyle,
Speaker 1: or we're talking about things in a slightly more fun manner,
Speaker 1: but this one was. This one deserves the seriousness. You know.
Speaker 1: This was like a stoic type of financial episode. And
Speaker 1: now you can look forward to Matt spinoff podcast where
Speaker 1: he reads the Encyclopedia Britannica each and every week. Not
Speaker 1: gonna do it, but we hope that you did enjoy
Speaker 1: this episode though, and that you're able to glean a
Speaker 1: bunch of value out of it. If you liked it
Speaker 1: and you haven't left us of review, head over to
Speaker 1: Apple Podcasts or wherever you listen to your podcast. But Joel,
Speaker 1: that's gonna be it. It It takes two seconds, just five
Speaker 1: stars for this episode. It made me feel good until
Speaker 1: next time. Best Friends Out, Best Friends Out,