Congress is working on legislation that will change retirement account rules yet again. The bill dubbed “Secure Act 2.0” passed the house this week. Many of the proposed changes have broad bipartisan support and are expected to be reconciled with a Senate bill this year. I won’t dive into all the details because some will change through the reconciliation process.

I am confident that the bill that is passed will include provisions moving the age for required minimum distributions (RMDs) from retirement accounts (IRA/401k/403b) to age 75 over the next decade. That’s good news. It offers retirees a few more years to do advanced planning moves like Roth conversions.

Of course, you can do Roth conversions after your RMDs start. It’s just that normally pushes people’s income into higher tax brackets than they would like. Doing so before you hit RMDs allows you to keep your income lower.
Roth conversions in the pre-RMD years are especially valuable because they reduce the amount of traditional IRA assets subject to RMDs down the road. They also reduce traditional IRA assets that the next generation has only 10 years to withdraw.

You can look forward to more information as this bill moves through congress. Each situation is unique. A comparison of your expected tax rates through retirement and your heirs expected tax rates can help determine if this strategy is right for you. Do you need help with that?

About the Author:

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2020.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.