Next Generation Trust will close early at 3:30 PM on Christmas Eve (12/24) and New Year’s Eve (12/31) and will be closed all day on Christmas Day (12/25) and New Year’s Day (1/1).

Gen Z Is Guessing What They’ll Need For Retirement (In The Wrong Direction)

Gen Z Is Guessing What They’ll Need For Retirement (In The Wrong Direction)

Is Generation Z saving enough for retirement? The answer is complicated. According to a new survey from Northwestern Mutual, people in their 20s expect to need just $1.2 million to retire comfortably versus $1.56 million for people in their 50s. Gen Zers (born between the mid-1990s and mid-2010s) believe they will retire earlier (age 60) compared to millennials and Gen Xers, who plan to work until age 63 and 65, respectively. Despite all this, Gen Z members believe they will be financially prepared for retirement.

How much do people need to save for retirement?  Of course, that depends on how much one needs for monthly living expenses and lifestyle preferences. “If someone wanted to live off $4,000 a month after taxes for 40 years—taking into account 3% inflation and a return on invested retirement funds of 6%—they would need somewhere closer to $4 million,” said Linda Farinola, founder of Princeton Financial Group. This is far above what the Gen Z cohort expects to need.

 

Why is Gen Z underestimating retirement savings?

Age and lack of financial education are essential factors. So are major life events, such as marriage, starting a family, or buying a home, which they have yet to pursue.

Also, for many Gen Zers, money is not a driving factor in their careers. Nearly two-thirds (64%) said personal fulfillment is more important in a job than money (36%). It makes sense that this attitude about money and the workplace crosses into their retirement savings plans.

So what’s the key to encouraging Gen Zers to save for retirement?

Remember that this generation has different values, financial goals, and life experiences (and expectations), so alternative options for retirement savings speak to their interests. That includes saving for retirement with a self-directed IRA.

 

Gen Z: Enhance your retirement readiness with a self-directed IRA

A self-directed IRA can help younger workers build a diverse retirement portfolio beyond stocks, bonds, and mutual funds by including alternative assets such as real estate, precious metals, royalties, natural resources, NFTs, and other nontraditional investments. Gen Zers will be happy to know that these alternatives enable them to invest over the long term in assets they know and understand, and that support their eclectic interests.

Because those assets’ performance is not correlated with the stock market, they’re shielded against market volatility. This is especially important in our current financial environment. Plus, self-directed IRAs enjoy the same tax advantages as their regular counterparts (with lots more investment flexibility).

A note to young investors: self-direction means you’re taking control of your investment decisions. So do your homework, research your investments, and be sure you are making informed decisions. Another note: tap into the resources and guidance available from the team at Next Generation.

Next Generation provides comprehensive account administration, transaction support, and asset custody for our clients’ self-directed IRAs. We also offer many educational materials for investors to learn at their own pace with our webinars and white papers. You can also schedule a complimentary educational session with a Next Generation representative who will answer your questions about the many options available through these plans, tailored to your specific interest(s). You can always reach us directly by calling us at 888.857.8058 or emailing NewAccounts@NextGenerationTrust.com.

How Prepared is Gen X for Retirement? Not so much.

The generation right behind the baby boomers, Generation X, is between 43 and 58 years old (born between 1965 and 1980). Therefore, the oldest Gen Xers are near retirees while the younger cohort still has lots of time to save, invest, and plan for retirement.

However, Northwestern Mutual’s 2023 Planning & Progress* study revealed that a little more than half (55%) of Gen X predict they will not be financially prepared for retirement—more than any other age group. They were also more likely to resist retirement planning than the other age groups; 38% of Generation X members shared that they had not looked for retirement information at all nor spoken to a financial advisor. They rated their financial security an average of 5.6 out of 10.

Gen X needs to save more. A lot more.

The figures Gen X provided to Northwest Mutual about what they need for retirement vs. what they’ve saved also reflect this lack of preparation.

According to the study, Generation X respondents plan to work until age 65 (71 for baby boomers). The youngest workers, Gen Z, expressed the most confidence that they will be financially prepared when the time comes to retire. They also plan to retire by age 60. We admire that confidence!

More sobering statistics about Gen X’s retirement readiness

Prudential Financial, Inc.’s research survey, Gen X: Retirement Revised** also points to fears among Gen X that they won’t have enough saved for retirement, and haven’t done retirement planning.

They are also concerned about how inflation is affecting their savings goals and almost three-quarters of respondents said the current economic environment makes it hard to plan financially beyond their daily needs. Almost one-third (29%) fear being replaced by younger workers.

This lack of a retirement strategy and retirement savings for projected long-term expenses lays out a dicey financial landscape.

Gen X—take control of your future with a self-directed IRA!

There’s time to catch up on retirement savings—and give those savings a boost by opening a self-directed Traditional or Roth IRA. Thanks to a provision in the SECURE Act of 2019, there is no longer an age restriction to open one of these retirement accounts. You can fund your new retirement plan with a relatively small amount to get started . . . or roll funds over from an existing IRA or eligible employer-sponsored retirement plan. As long as you have earned income, you can contribute to your self-directed IRA (before the passage of the SECURE Act, the age limit for contributions was 70 ½).

Plus, self-directed IRAs are ideal for people who know and understand alternative assets such as real estate, precious metals, commodities, tax liens, private equity funding, and many more. If that sounds like you, you can put the power of your investing knowledge into growing your retirement savings through a tax-advantaged self-directed IRA. You do your due diligence about the alternative assets you wish to include, develop a more diverse retirement portfolio, and control your investments as a self-directed investor.

As a full-service self-directed retirement plan administrator, Next Generation Trust Company handles all the account administration and holds the assets. Our team will vet your transactions to ensure they meet IRS guidelines for these accounts, and we provide excellent client education about the many options and benefits of self-direction as a retirement strategy.

Whether you’re 25, 35, 45, or 55, it’s always the right age for individuals with earned income to take control of their future with a self-directed IRA. Need to learn more? Sign up for a complimentary education session or check out our on-demand webinars at your convenience. You can always contact us with questions at NewAccounts@NextGenerationTrust.com or 888.857.8058.

 

 

 

*Northwest Mutual’s annual research study explores U.S. adults’ attitudes and behaviors toward money, financial decision-making, and issues concerning their long-term financial security. The 2023 study gathered data online from 2,740 adults which included 640 Gen Xers. https://news.northwesternmutual.com/planning-and-progress-study-2023

** The Prudential Pulse survey was among 2,000 pre-retiree U.S. Gen Xers. The sample includes 1,717 occupied/working Gen Xers, those currently working full- or part-time, seeking work, or studying. The interviews were conducted online, and quotas were set to reflect a nationally representative population based on age, gender, race/ethnicity, educational attainment, and region. https://news.prudential.com/generation-x-confronts-harsh-new-reality-retirement-unreadiness.htm

 

 

Jaime Raskulinecz, CEO of Next Generation Services, Shares SECURE Act 2.0 Changes That Affect Retirement Plans

Provisions Concern Required Minimum Distributions and Opportunities for Roth Features in Workplace Retirement Plans, Including Self-Directed SEP IRAs and SIMPLE IRAs

ROSELAND, NJ, September 15, 2023 /24-7PressRelease/ — Provisions in the SECURE Act 2.0, signed into law late last year, affect retirement plans in several ways, including required minimum distributions (RMDs). As Jaime Raskulinecz, CEO of Next Generation Services pointed out, these changes affect owners of self-directed IRAs the same as they do investors with traditional retirement plans.

“Among the big changes is the higher age at which retirement plan account owners must begin taking required minimum distributions from their IRAs,” noted Raskulinecz, whose firm administers self-directed retirement plans. “The SECURE Act of 2019 increased that age to 72 and SECURE 2.0 upped it to 73. This is good news for taxpayers who do not yet need to pull that retirement income from their accounts, as they can let the investments grow in value in tax-advantaged accounts.”

Additional changes involve returning erroneous RMDs in 2023 that could have been delayed until next year, reduced penalties for a missed RMD, and some penalty waivers for certain beneficiaries of inherited IRAs.

Self-directed IRAs allow investors to include investments in many alternative assets—such as real estate, precious metals, private equity funding, and royalties—within their tax-advantaged plans. Next Generation provides comprehensive account administration and asset custody for its clients who self-direct their retirement portfolios. Account owners may self-direct Traditional and Roth IRAs, SEP and SIMPLE IRAS, education savings accounts, and health savings accounts. Self-directed solo(k) plans are another option for business owners.

In addition to the provisions regarding RMDs, SECURE 2.0 has expanded opportunities for Roth features in workplace retirement plans, including SEP IRAs and SIMPLE IRAs; 529 plans; and Roth contributions for certain 401(k) plans.

“These Roth features affect annual contribution limits and catch-up contributions, which account owners must be aware of. Plus, given the prevailing inflation rates, the IRS has increased the contribution limits for IRAs and qualified workplace retirement plans, which includes solo(k) and other self-directed retirement plans.”

You can read about these and other SECURE 2.0 provisions affecting retirement plans at https://bit.ly/46aEoq5. For more information about self-direction as a retirement savings strategy, visit www.NextGenerationTrust.com.

About Next Generation Services, LLC
Founded on the philosophy that every person should have control over their retirement plans, Next Generation educates consumers and professionals about self-directed retirement plans and nontraditional investments, a strategy at one time reserved only for the very wealthy. Next Generation Services provides comprehensive account administration and transaction support, and its sister company, Next Generation Trust Company, acts as custodian for all accounts. The neutral third-party professionals at Next Generation expertly guide clients and their trusted advisors as part of their white glove, personalized service for a seamless transaction experience from start to finish. For more information, visit www.NextGenerationTrust.com, or contact Next Generation at 888.857.8058 or NewAccounts@NextGenerationTrust.com.

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SECURE Act Changes for Retirement Plans You Need to Know Now

SECURE 2.0 Has Made Updates to Prior Changes That Affect IRAs and Other Plans in 2023 and Later

Provisions in the SECURE Act 2.0, signed into law late last year, affect retirement plans in several ways, including required minimum distributions (RMDs). We are sharing some of the new rules here, as they may affect your tax planning as well as your retirement savings goals.

Age at which to start taking RMDs

Among the big changes is the higher age at which retirement plan account owners must begin taking required minimum distributions (RMDs) from their accounts.

NOTE: If you have a Roth account in your employer’s 401(k) plan, there will be no RMDs for those designated accounts starting in 2024.

Returning erroneous RMDs

Given the confusion about when to start taking required minimum distributions (2022, 2023 or later), there is a way to correct that—but the deadline is fast approaching.

RMD penalty waivers

Thanks to SECURE 2.0, the penalty for a missed RMD is now cut in half, reduced to 25% of the amount not taken. If you correct that error quickly (in whatever way the IRS deems “quickly”) that penalty may be reduced to 10%.

Inherited IRAs

Before the original SECURE Act, beneficiaries were allowed to stretch their inherited IRA distributions over their lifetimes. However, most qualified beneficiaries who inherited IRAs on or after January 1, 2020 fall under the SECURE Act provision that requires they withdraw those funds completely over a 10-year period. (There are some exceptions such as surviving spouses.)

After some changes by the IRS in the RMD rule for inherited IRAs, there will be no penalties for RMDs that were not taken in 2021 or 2022 and the IRS has waived the RMD requirement for beneficiaries of inherited IRAs subject to the 10-year rule. However, the beneficiaries are still required to take full distribution of the inherited IRA account within 10 years.

If you are among those beneficiaries required to withdraw the funds over the 10-year period, you should consult with your trusted advisor to map out your distribution schedule and amounts that work best for your financial circumstances. If the retirement account is a Roth IRA and the original owner did not meet the five-year rule prior to death, be aware that this will affect that distribution timeline.

New Roth IRA opportunities

SECURE Act 2.0 expanded the types of workplace retirement plans that can use Roth features.

Increased contribution limits for 2023

With inflation in mind, the IRS has increased the contribution limits for IRAs and qualified workplace retirement plans. This includes solo(k) and other self-directed retirement plans. You’ll find all the figures, income ranges, and deductibility guidelines on the IRS website.

Contact Next Generation to discuss your self-directed IRA

With all the updates, it’s no wonder taxpayers are wondering which of these apply to them and how. If you have a self-directed IRA or solo(k), ESA, or HSA with Next Generation, please contact us to discuss how these changes may affect your retirement plan. We’re available via email at NewAccounts@NextGenerationTrust.com or by phone at 888.857.8058.

COLA and Social Security

The cost-of-living adjustment for 2024 is projected to be around 3%

Given the high rate of inflation that Americans contended with last year, the cost-of-living adjustment (COLA) for Social Security benefits in 2023 was set at a near-record 8.7%. This annual adjustment, based on consumer price index data, is meant to help retirees and others who are collecting Social Security keep up with expenses. The average inflation rate in 2022 was 8% so this higher-than-usual COLA made sense, given the economic environment.

This year, we’re glad to see that high inflation is becoming a thing of the past. Statistics released by the U.S. Department of Labor in July show the annual inflation rate for the United States was 3.0% for the 12 months ended June 2023. Big difference!

COLA projection for 2024

The Senior Citizens League—an independent citizens’ action and education non-profit organization— estimates the Social Security COLA for 2024 will be 3.1%. It derives its estimate from changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This is the same index the Social Security Administration uses, but it calculates its benefit adjustment for the following year based on average inflation in the third quarter (reflected in the CPI-W). Therefore, we won’t know the exact percentage rate of the 2024 COLA until October.

For those interested in some COLA history, the Senior Citizens League noted that over the past 23 years (January 2000 to February 2023), Social Security COLAs increased benefits by 78% with an average annual increase of 3.4%.

Where We See Inflation Right Now

This spring (April figures), Americans saw the biggest price increases in housing, gasoline, motor vehicle insurance rates, and used vehicles. Food prices (food at home) went down a little between March and April (reduced by 0.2%); food “away from home” rose slightly, 0.4%.

For those of you who love statistics and charts, CNBC has published a chart of May 2023 price changes (year-over-year), by expense category. Gasoline and health insurance prices dropped by around 20% but at the top of the increase pile are motor vehicle repair at 19.7% and motor vehicle insurance at 17.1%. So, it appears it is less expensive to fuel a vehicle but more expensive to own one this year.

How COLA and Inflation Affect Retirees

The Senior Citizens League has new research about the buying power of Social Security benefits. It’s no secret that Americans are dealing with higher prices on many items. This can hit retirees especially hard when they are relying strongly on their Social Security benefits for retirement income. The study revealed that:


Plan for a More Comfortable Retirement with a Self-Directed IRA

Social Security was never meant to represent a person’s entire or majority of retirement income, but it has become that way for too many Americans facing high costs of living and low rates of savings. Even the more diligent savers among us may come up short in terms of the amount of money they’ll need for a comfortable retirement.

But taxpayers who take a long-term, proactive approach to their retirement and are comfortable making their own investment decisions can design a different future–even while building their careers and/or raising a family.

That approach is funding a self-directed IRA and including alternative assets within their plan. It’s a strategy for investors who know and understand certain assets that typical retirement plans don’t allow—and they may already be investing in outside of their existing retirement plan. Self-direction also enables account owners to build a more diverse portfolio that creates a hedge against stock market volatility (and haven’t we seen enough of that since 2000?).

For example, if you are already investing in vacation properties or hedge funds outside of your existing retirement plan, you could open a self-directed IRA and include those assets within a tax-advantaged retirement plan. If investing in royalties or commodities excites you, you can make those investments within a self-directed IRA as well—with the potential to build more lucrative retirement savings over time.

Next Generation is Here to Help

The team at Next Generation is committed to client education and service. We invite you to watch our on-demand webinars about various asset classes, schedule a complimentary education session, or sign up for our newsletter (look for the link at the top of each website page).

On social media, you can follow us on LinkedIn, Twitter, Instagram, and Facebook, where we share information about the nontraditional investments allowed in self-directed IRAs, HSAs, and Coverdell education savings accounts.

Need help by phone or email? Call us at 888-857-8058 or email NewAccounts@NextGenerationTrust.com.

Are You Accurately Assessing Your Retirement Readiness? Even wealthy taxpayers can be off the mark about their retirement savings.

The Center for Retirement Research (Boston College) reported recently that more than 25% of all U.S. households are confident that they will maintain their current standard of living when their retire. However, as the Center discovered, they are at risk of not having enough savings. Even affluent Americans are overly confident about their financial preparedness for their retirement years—even more so than other households.

Every three years, the Center for Retirement Research constructs the National Retirement Risk Index (NRRI) based on assets such as Social Security, retirement plans, and home equity. In its most recent NRRI, 40% of households are “in good shape and know it,” 20% are in bad shape and know it, and 28% were “not worried enough.”

Of note is that among high-income households, 32% of that cohort were “not worried enough” regarding retirement risk. Therefore, in spite of being among the most financially comfortable, they might not be saving enough during their working years for their future retirement. That could spell trouble for people who expect to maintain current spending levels and lifestyle choices; they may have to curtail spending or lower their expectations for those golden years.

The authors of the Center report concluded that a strong housing market (and before 2022, a strong stock market) may have created an illusion of wealth for affluent households who disproportionately own those financial assets,

 

Factors Affecting Retirement Readiness

Americans’ longevity is forcing us to stretch retirement savings over a longer time horizon. Plus, the gradual rise in the full retirement age for Social Security has put a crimp in many people’s ability to cover their usual expenses more easily.

Traditional employer-sponsored pension plans are being replaced by 401(k) and other qualified retirement plans that require employees to contribute as well.

Millions of other workers have no access to a workplace retirement plan (although of course, they could open an IRA any time if their income level and monthly budget allows for periodic contributions). Therefore, the convenience of the automatic payroll deduction for retirement savings is not available to them.

Competing priorities for hard-earned money means putting money aside for children’s college, paying off one’s student loans, or saving to buy a house. Saving for future health-related costs is also a factor.

 

Ready or not: The Wealthy Underestimate Their Retirement Risk

The Center for Retirement Research found that nearly one-quarter of affluent households that underestimated their retirement risk are carrying a large amount of housing debt relative to the equity in their homes—three times more than what middle- and lower-income earners are saddled with. And given that Social Security will replace a smaller portion of their annual income than those in lower income ranges, they will have less proportionally to rely on in retirement; therefore, they must save a lot more to maintain their standard of living.

 

Get Prepared With a Self-Directed IRA

Just ask Sen. Mitt Romney, who built enormous wealth through his self-directed IRA: including alternative assets in a self-directed retirement plan enables savvy investors to build more diverse portfolios, with the potential for more lucrative savings. And, you needn’t be a well-connected public figure, or a wealthy person, to self-direct your retirement plan—just confident in your investment knowledge about the different alternative assets these plans allow.

The investment strategy involved in some self-directed transactions (such as Senator Romney’s initial investments) can be quite complex; others are as simple as researching and understanding what it takes to include precious metals or real estate in a self-directed IRA. Many people include private equity funding, unsecured and secured loans, royalties, mineral rights, and many more alternative assets.

In addition to Traditional and Roth IRAs, you may open a SEP IRA, SIMPLE IRA, or solo(k) for small-business owners. You can also self-direct a health savings account or Coverdell education savings account.

 

Self-Directed IRAs at Next Generation

At Next Generation, we’ve found that self-directed investors are generally a confident bunch, but there are always questions that arise about nontraditional investments allowed in self-directed IRAs. That’s why we invite you to schedule a complimentary education session with one of our helpful professionals, who can answer your questions about the broad array of alternative assets that can be included in a self-directed plan. You’ll find information about all the documentation you’ll need to open and fund your account in our starter kits. Or you can watch a webinar or download one of our white papers.
Of course, if you prefer, feel free to contact us by email at NewAccounts@NextGenerationTrust.com or call (888) 857-8058 during business hours. We’re always ready to help!

Planning a Retirement Spending Spree? Be Sure to Plan on Having Ample Retirement Savings!

Retirees and those collecting Social Security enjoyed a significant boost in the cost of living adjustment (COLA) in 2022 and 2023. The 2023 COLA of 8.7% was the largest in 40 years.

It appears that older Americans have also been enjoying something of a spending spree, according to Bank of America Institute’s Consumer Checkpoint. Based on data from debit and credit card transactions, the publication reported that the spending growth among baby boomers (ages 59 to 77 today) and the traditionalist generation before them (78 to 95 years old) surpassed the spending of younger generations—tied partially to that bump in Social Security benefits. And that spending was happening across income levels.

Other factors in the intergenerational spending disparity include lower housing costs and lower debt for retirees than for Generation X and millennials, who are challenged by high rent and high mortgage rates, and student loan repayments.

In short, it appears from this report that many retirees are spending relatively freely right now. But with all the chatter about the Social Security trust fund’s shaky future, and the cost-of-living adjustment predicted to be much lower next year (around 3% according to the Senior Citizens League), are you prepared to be a spendthrift retiree?

Enhance your retirement readiness with a self-directed IRA

Whether you are just starting your career or are in those pre-retirement years, you can open a self-directed IRA and set your savings goals differently—with a comfortable budget during your retirement years. A self-directed IRA enables you to diversify your portfolio with alternative assets that are not allowed in typical retirement accounts.

Those assets’ performance is not correlated with the stock market, so they create a hedge against the market volatility we’ve been experiencing for years. And you can take advantage of investment opportunities in more creative ways, using what you already know and understand to build your retirement savings.

Invest in alternative assets to build retirement savings

You can include investment properties, royalties, precious metals, private equity funding, and many more alternative assets in a self-directed retirement plan, with the same tax advantages of traditional retirement accounts. Taking a long-term investment view, you can get off the stock-and-bond roller coaster and continue to build retirement savings that can help you reach your retirement income goal.

Taking control of your investing through self-direction is empowering—and can better prepare you for a lifestyle that is not solely dependent on Social Security benefits or the whims of stock market returns. Before you map out that future spending spree, we invite you to schedule a complimentary education session with one of our self-direction experts at Next Generation. You can also learn more from our on-demand webinars and other blog articles that cover the many options and benefits of self-direction as a retirement wealth-building strategy.

Jaime Raskulinecz, CEO of Next Generation Services, Shares Views on Investing in Alternative Assets Through Self-Direction to Avoid Continuing Interest-Rate Fluctuations

Forbes Finance Council Article Talks About Challenges for Borrowers and Savers Regarding Interest Rates, Inflation Woes, and the Benefits of Taking a Long-Term Approach to Retirement Savings with a Self-Directed IRA

ROSELAND, NJ, July 28, 2023 /24-7PressRelease/ — Jaime Raskulinecz, founder and CEO of Next Generation Services, LLC, has published an article in the Forbes Finance Council column titled, “How Alternatives Help Investors Avoid the Interest-Rate Roller Coaster.” In it, she shared the challenges of recent interest rate fluctuations on both sides of financial transactions, concerns about inflation, and how investments in alternative assets help account owners adopt a long-term investing strategy through a self-directed IRA.

Raskulinecz—an official member of the Forbes Finance Council—noted the downsides of chasing attractive short-term interest rates and dealing with an unpredictable stock market.

“Alternative assets do not correlate directly with the stock market, so their value tends not to fluctuate with every market disruption the way stocks do. Including them in a self-directed individual retirement account enables investors to create a hedge against ongoing market volatility, diversify their portfolios, and take advantage of investing opportunities that arise or align with the account owner’s values or interests.”

You can read the full article at https://bit.ly/3rOcily.

Self-direction allows investors to include many alternative assets—such as real estate, precious metals, private equity funding, and royalties—within their plans. Next Generation provides comprehensive account administration and asset custody for its clients who self-direct their retirement portfolios. As such, Next Generation’s transaction support team ensures that clients’ investments comply with IRA guidelines and executes the transactions.

To learn more about Next Generation Services or self-direction as a retirement strategy, visit www.NextGenerationTrust.com.

About Next Generation Services, LLC

Founded on the philosophy that every person should have control over their retirement plans, Next Generation educates consumers and professionals about self-directed retirement plans and nontraditional investments, a strategy at one time reserved only for the very wealthy. Next Generation Services provides comprehensive account administration and transaction support, and its sister company, Next Generation Trust Company, acts as custodian for all accounts. The neutral third-party professionals at Next Generation expertly guide clients and their trusted advisors as part of their white glove, personalized service for a seamless transaction experience from start to finish. For more information, visit www.NextGenerationTrust.com, or contact Next Generation at 888.857.8058 or NewAccounts@NextGenerationTrust.com.

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Provisions that Affect Retirement Plans

The SECURE Act 2.0 was signed into law in late December 2022. Out of the 100+ provisions contained in the bill, many have a direct effect on retirement plans (both IRAs and employer-sponsored retirement plans). In this article, we outline some of the provisions that affect retirement plan contributions and in turn, affect account owners’ or plan participants’ retirement savings strategies.

Changes to RMDs

The age for taking required minimum distributions (RMDs) had already been raised in the original SECURE Act to 72. Secure 2.0 raises the RMD age to 73 this year and starting in 2033, this will go up to age 75. SECURE 2.0 also reduces the penalty for individuals who fail to take an RMD, from 50% to 25%.

SECURE 2.0 eliminates RMDs for qualified employer Roth plan accounts beginning in 2024.

NOTE: For employees in workplace 401(k), 403(b), and 457(b) plans, designated Roth account assets will no longer be subject to pre-death RMD rules starting in 2024.

Increased Catch-up Contribution Limits

Taxpayers ages 50+

Taxpayers ages 60-63

Starting in 2025, taxpayers who are 60-63 years old will be able to contribute more to their retirement plans as follows:

High-earning taxpayers

For employees with more than $145,000 in wages, SECURE 2.0 now requires them to make catch-up contributions only to Roth accounts. This applies to 401(k), 403(b), and 457(b) government plans (excluding “special catch-up” contributions to 403(b) or 457(b) plans). Therefore, some employees who are 60-63 years old and are eligible to make larger catch-up contributions must make them to a Roth account. Those funds will be contributed with after-tax dollars but will be tax-free upon withdrawal. This rule becomes effective in 2024. 

SEP and SIMPLE IRAs, Qualified Plans: New Roth Feature

Employees may choose to treat employer contributions to these plans as Roth contributions if the employer permits. This is effective for 2023 and later taxable years.

The same goes for qualified 401(k) defined contribution plans, 403(b) plans, and governmental 457(b) plans; participants in these workplace retirement plans may treat employer matching and nonelective contributions as designated Roth contributions if this option is permitted by the plan design. 

Student Loan Payments and Employer Contributions

Effective in 2024, employees who are making student loan payments can also save for retirement. That’s because they may qualify for matching employer contributions in an employer-sponsored retirement plan (without having to make the contributions themselves).

In addition, matching contributions made on qualified student loan payments may be designated as Roth contributions. There are certain conditions regarding employer contributions, so we recommend you consult your plan administrator for guidance on this provision.

Hardship Withdrawals for 401(k) and 403(b) Plans

Employees will be permitted to take emergency distributions from their retirement account of up to $1000 once a year, starting in 2024. These withdrawals are to cover immediate financial needs or unforeseeable emergencies. Examples of these (for which the employee may self-certify with the plan administrator) are medical care, funeral, tuition, and home purchase or certain home repair expenses. The 10% early withdrawal tax will not apply to these distributions. Taxpayers who do not repay the distribution within a certain amount of time will be prohibited from taking another emergency withdrawal for three years. 

529-to-Roth Rollovers

Effective in 2024, some taxpayers will be allowed to roll over a 529 plan they have maintained for at least 15 years to a Roth IRA. There are many requirements and limited circumstances to qualify for this transaction. The lifetime limit on what may be rolled to the Roth IRA will be $35,000. 

401(k) Lost & Found

It is not unusual for employees to lose track of their 401(k) account when changing jobs; nor is it unusual for employers to end up with missing participants—former employees they cannot locate to distribute retirement benefits. The federal Department of Labor will be creating a searchable database within the next two years to help reconnect millions of 401(k) accounts with the individuals who are missing out on their unclaimed benefits.

Qualified Charitable Distributions

A qualified charitable distribution (QCD) is a transaction available to individuals ages 70-1/2 and older who wish to direct funds from a Traditional IRA to a qualified 501(c)3 charitable organization. Currently, the maximum contribution amount allowed is $100,000. This will change in 2024 when the maximum QCD amount will increase based on the inflation rate.

SECURE 2.0 broadens the charitable distribution field this year, with a one-time opportunity to distribute up to $50,000 (indexed for inflation) to fund a charitable remainder unit trust, charitable remainder annuity trust, or a charitable gift annuity.

Contact Next Generation with Questions About Your Self-Directed IRA

Whether your retirement savings are in a self-directed IRA, solo K, or other self-directed retirement plan, the team at Next Generation is here to help. If you have questions about how any of the SECURE Act 2.0 provisions may affect your self-directed plan, contact us at 888.857.8058 or NewAccounts@NextGenerationTrust.com.