Enhancing Your Retirement Plan through the SECURE 2.0 Act

By Steven Rabin

e newly enacted SECURE 2.0 Act contains signi cant changes that may a ect how you plan for retirement. e bill, passed by Congress and signed into law by President Biden in late 2022, could help you bolster your retirement savings and income strategy.

Here are some of the key provisions included in the new law, which are being phased in over the next several years:

New rules now in effect

Required minimum distributions (RMDs) start after age 73 Until recently, RMDs from traditional IRAs and workplace retirement savings plans, such as 401(k) or 403(b) accounts, had to begin after reaching age 72. Now individuals can wait until reaching age 73, extending the bene t of tax-deferred growth of earnings. Distributions must commence by April 1 of the year after turning 73.

New rules in effect in 2024

Matching contributions for those paying student loans

Employers will have the ability to o er contributions to workplace retirement savings plans that match the amount of student loan debt repaid by an individual employee in a given year.

Rollovers of 529 education savings plan balances to Roth IRAs is provision may alleviate a parent’s potential concern that they are over-funding a 529 plan. For example, if a child quali es for scholarships, or school expenses are less than anticipated, leftover 529 amounts could be transferred to the bene ciary’s Roth IRA.

Bene ciaries of 529 plans that have been in place for 15 years or more can transfer assets from the 529 plan to a Roth IRA. e transfer is subject to the bene ciary’s annual contribution limit and up to a lifetime maximum of $35,000.

Requires catch-up contributions to be made as Roth contributions using after-tax dollars

Catch-up contributions for participants aged 50 or older must be made on a Roth basis under 401(k), 403(b), and governmental 457(b) plans. However, the requirement applies only if the employee’s prior-year wages from the employer sponsoring the plan exceed $145,000 in the previous taxable year. e option to make pre-tax catch-up contributions will continue in 2023. When deciding whether to make pre-tax or Roth contributions for 2023, consider that your future catchup contributions will have to be Roth contributions if you earn more than $145,000.

No RMDs for Roth workplace plans

Under current law, those with Roth 401(k)s or Roth 403(b) plans are subject to the same required distribution rules as standard workplace plans. However, the new law will eliminate RMDs for workplace-based Roth savings plans, comparable to current rules for Roth IRAs.

Emergency savings

New emergency savings accounts, associated with an employer’s retirement plan, can be established for many employees. It will allow them to accumulate up to $2,500 in the account, with penalty-free access to the funds allowed once a month, to meet current needs.

Other key changes beyond 2024

Other provisions of the SECURE 2.0 Act that will take e ect in 2025 include:

• e ability of workers ages 60 to 63 to make catch-up contributions of $10,000 per year above the standard limit for workplace retirement plans.

• A requirement that employers with 401(k) or 403(b) plans automatically enroll eligible employees in a workplace savings plan, starting at a contribution rate of at least 3% (workers can choose to opt out of the plan).

• e ability of part-time workers to participate in a workplace retirement plan once they’ve worked at least 500 hours for two consecutive years, rather than the current three-year threshold.

What does it mean for you?

How can these changes enhance your own retirement savings plan? It may be bene cial to talk to your nancial advisor to determine how you might be able to leverage the new rules listed here and others to help secure your retirement savings plan.

Steven M. Rabin, CFP, CRPC, APMA, CDFA, ChFC, is Managing Director of Rabin, Barkat and Associates Wealth Advisors

Rabin, Barkat & Associates Wealth Advisors, a private wealth advisory practice of Ameriprise Financial Services, LLC in Gilbert, AZ. We specialize in fee-based nancial planning and asset management strategies and have been in practice for a combined 42 years. Contact us at, www.rabinbarkat.com, 480-396-6040, 161 E Rivulon Blvd. Ste. 108 Gilbert, AZ 85297 or 16220 N Scottsdale Rd. Scottsdale, AZ 85254.

Ameriprise Financial and its a liates do not o er tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their speci c situation. Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any nancial institution, and involve investment risks including possible loss of principal and uctuation in value.

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By Ken Weinstock CPA, Leisure World resident

A brief reminder: the due date for ling 2022 tax returns is coming up soon on Tuesday, April 18, 2023. If you need more time, you can get a six-month extension to le but the extension application must also be led by April 18. Don’t forget that you can get an extension to le, but not an extension to pay. Any taxes owed for 2022 must be paid by April 18.

is month I want to highlight some of the di erences between federal income tax law and Arizona tax law. Some of the di erences deal with income which is included on tax returns led with the Internal Revenue Service, but which is excluded from Arizona taxation. Likewise, some expenses which are not deductible on IRS Form 1040 may be deducted on Arizona Form 140.

Income taxed by the IRS but not by Arizona

• Up to 85% of social security bene ts received may be includable in federal taxable income. Arizona does not tax social security bene ts.

• Military retirement pay is generally taxable by the IRS. Arizona excludes 100% of pension income received related to uniformed services to the United States.

• Armed forces, reserves and national guard activeduty pay is generally taxable to the IRS but is excluded from Arizona tax although combat pay may be exempt from both federal and Arizona tax.

• Arizona allows you to exclude up to $2,500 from taxable income for public pensions received from the U.S. Government Service Retirement and Disability Fund as well as from Arizona state, county or city retirement plans. Note: public retirement pensions received from states other than Arizona are taxable on your Arizona tax return.

• You can take a subtraction on your Arizona tax return of 25% of your net long-term capital gain for the sale of assets which were acquired in 2012 or later. ere is no corresponding federal deduction, however, the IRS uses a reduced rate to calculate tax on long-term capital gains. e federal capital gains tax rate begins at zero percent and increases to a maximum of 20%. e maximum federal income tax bracket for ordinary income is currently 37%. Arizona’s maximum tax bracket is 4.5%.

IRS and Arizona differences for certain deductions

• For both federal and Arizona purposes you can deduct the higher of your itemized deductions or your standard deduction. e 2022 standard deduction is $12,950 for single individuals and $25,900 if you le a married joint return. Although the IRS increases the standard deduction by $1,750 for single ler and $1,400 for married joint lers if you’re over 65, Arizona doesn’t. However, Arizona allows a $2,100 exemption deduction if you’re over 65 which the IRS doesn’t.

• If your itemized deductions exceed the standard deduction, you can claim deductions for the following in your tax return: medical, taxes, interest and gifts to charity. Although the IRS limits your medical deduction to amounts in excess 7.5% of your adjusted gross income, Arizona does not have such a limitation. Because of this, Arizona medical deductions generally exceed federal medical deductions. If they do, your federal itemized deductions may be less than your federal standard deduction, but your Arizona itemized deductions may exceed your Arizona standard deduction.

• Arizona also allows a deduction for long-term care insurance premiums for non-itemizers which the IRS does not.

• In prior years the IRS allowed a limited deduction for charitable contributions even if you took the standard deduction. e was eliminated for 2022. Arizona, however, still allows a deduction for contributions to charities for those who claim the standard deduction. In fact, the deduction increased this year to 27% of the gifts to charity, up from 25% last year.

• Arizona allows a tax credit is for certain charitable contributions. You can get a credit on your 2022 Arizona tax return of up to $400 on a single tax return or $800 on a married joint tax return if you make a qualifying contribution by April 18th, 2023, to a Qualifying Charitable Organization. ere is no comparable federal tax credit.

I’ve mentioned only some of the many di erences between federal and Arizona taxation. Please remember that e Tax Corner provides information regarding taxes, however, none of this is tax advice. Because tax law is complex, please consult with your tax advisor for help with your speci c situation.

By Matilda Charles

I got a shock the other day when I went to the pharmacy to pick up the latest re ll of my three drugs and realized that the pharmacy assistant had neglected to run it through GoodRx, the program that helps reduce the price of our drugs. Once he did that, the cost dropped signi cantly.

It made me realize just how much other seniors are paying for the drugs we need to stay healthy. ere are ways to cut those costs. It just takes a little work and a lot of monitoring on our part to make sure it happens.

As mentioned, there’s GoodRx (www.goodrx.com), which I’ve used for several years. eir website isn’t the easiest to use, but after you try it once, you’ll appreciate being able to cut the costs of your drugs every time you need a re ll.