Page 33 - BusinessWest April 15, 2024

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Planning
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businesses adopting new 401(k) and 403(b) plans must automatically enroll eligible employees at a contribution rate of at least 3%. We’ve found that inertia is the enemy when it comes to saving for retirement. Getting younger workers started on the habit of saving and investing is critical to reaping the benefits of tax-deferred growth over the long term.
• Student-loan debt and payments are often cited as a reason for not con- tributing to a workplace retirement plan. Starting in 2024, employers will be able to match employee student- loan payments with matching pay- ments to a retirement account.
• For 529 college savings plans that have been open for at least 15 years, ‘unspent’ plan assets can be rolled over into a Roth IRA for the benefi- ciary (subject to a lifetime limit of $35,000).
These selected highlights repre- sent a small sample of the changes brought about by Secure Act 2.0. On balance, we believe the changes pro- vide enhancements to the ability of investors and savers to provide for a prosperous retirement.
As planners, these changes often prompt investigating alternative ways to pass on wealth earlier to heirs, including layering in additional diver- sification with investments spread between retirement accounts, Roth IRA/401(k) plans, and non-retirement assets.
Eliminating the stretch IRA is inducing non-spouse beneficiaries to take mandatory distributions out over a five- or 10-year period versus over their lifetimes. This can significantly increase the beneficiary’s tax bracket, which may not have been the inten- tion of the financial/estate plan.
Here are just a few options your financial planner can help you look at to navigate these changes:
• Depending upon your own per- sonal tax bracket, you may want to take larger IRA distributions and gift funds to your children before you pass.
• Convert pre-tax retirement assets to Roth IRAs.
• Diversify your savings between qualified and non-qualified accounts.
• If you give to charities, you can donate directly from your retirement accounts once you hit age 70. These gifts and distributions are tax-free to you and have zero tax implications on your income
• Take larger retirement-plan dis- tributions (speak with your accoun- tant and your financial advisor first to ensure this may be a good option, as taking larger distributions may also impact your Medicare premiums), and make annual gifts to your children
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“Depending upon your own personal tax bracket, you may want to take larger IRA distributions and gift funds to your children before you pass.”
for informational purposes only and should not be construed as advice. St. Germain Investment Management does not offer any tax or legal advice. BW
Patricia M. Matty is senior vice president, financial advisor, and financial advisory director for St. Germain Investment Management.
while you are alive. If you are married, you have a higher AGI than if you are single in later years.
As is always the case, consult your
financial professional or tax preparer to see how the changes in the Secure Act 2.0 affect your individual circum- stances. This information is provided
Risk & Insurance | Employee Benefits | Retirement & Private Wealth
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