Debt Management
Rebekah Eason
Holiday Cash for Students

By: Becky Eason, CFP®

The holidays are upon us and although 2020 isn’t a traditional year people are still getting into the holiday spirits. Gifts have become a huge part of the holidays, which we all know can add a lot of additional stress. This year there is the added stress of what is the best way to get gifts to loved ones? Shipping can be expensive and you risk packages getting delayed, lost, or broken so I wouldn’t be surprised to see more monetary gifts be given.


Holiday Cash for Students

Secure Act 2.0

January 9, 2023

Happy New Year, Happy New Legislation!


On December 23, 2022, Congress passed the Consolidated Appropriations Act of 2023, which included the SECURE Act 2.0, which was part of the 2023 Omnibus Spending Bill.  It made for good reading over the past week.  For those inquiring minds that want to know what “SECURE” stands for, it is “Setting Every Community Up for Retirement Enhancement.”

This is going to focus only on the SECURE Act provisions, but there is soooooo much more!  Here is a link to the actual bill if you have trouble sleeping some night: BILLS-117hr2617enr.pdf (congress.gov)


RMD’s

  • If you were born before 1951 = No Impact

  • If you were born between 1951 - 1959 = RMD age is now 73 - for those turning 73 between 2023 - 2032 (I know if you were born in 1951, you would be 72 this year, so you wouldn’t turn 73 in 2023.  I’m just giving you the language in the bill here)

  • If you were born after 1960 = RMD age will be 75 starting in 2033 (yes, again the math seems odd here because 1960 + 75 = 2035;  it is believed this may be an error in the legislation)

  • Exciting News…If you are supposed to start RMD’s this year, you get a pass - you can wait until next year!

Correction of RMD’s Missed

  • If for some reason you miss an RMD in the future, they are changing the penalties.   We’ll detail this in future quicktips.

Qualified Charitable Distributions (QCD)

  • You can still take Qualified Charitable Distributions at age 70.5!  No change to connect this “feature” to the actual RMD age.  We see this as a planning opportunity!  

  • Also, effective in 2024, the maximum amount will be indexed for inflation.  There are other changes to QCD’s that are too complex to explain in this summary, but more will be coming.

  • Beyond the changes to RMD’s, I’ve picked the items I think will affect the majority of our clients, readers, and their families.

Effective 2023

  • Effective 2023 - One that we are extremely excited about…Roth SEP and SIMPLE IRAs!  I did a happy dance when I read this provision.  Now we need to get the custodian’s on board for this, but I feel this is real progress.

  • More cool Roth related news - employer contributions can be made to the “Roth” side of the plan!  This applies only to matching and nonelective contributions (NOT Profit-Sharing).  Important Note: these contributions need to be 100% vested when contributed, no vesting schedule or forfeit provisions can be applicable.

  • You will be able to move 529 funds to a Roth IRA - it appears it will need to go to the beneficiary…but wait, it’s not as good as it sounds.

    • The 529 needs to be open at least 15-years 

    • Beneficiaries will have to have some sort of compensation, but we don’t know how much, so more to come and there is a limit equal to the IRA contribution limit in the year it is transferred, and there is a lifetime cap of $35,000

    • Any contributions to the 529 in the past 5-years can’t be moved

  • Hardship Distributions have some big changes (we will provide more details in the future)

  • There is a new terminal illness distribution rule that allows for penalty free distributions (we will provide more details in the future)

  • 72(t) Rules has some interesting changes that we will share in the future

  • Qualified Longevity Annuity Contract (QLAC) increase to $200,000 (from $135,000); in the past this hasn’t been an overly helpful tool, but with the limit increasing, it is something that we will be taking a closer look at.

  • One of my favorite little nuggets is the Military Spouse Eligibility Credit!  If an employer has more than 100 employees, they can adopt provisions for military spouses to get access to the plan entry sooner.

Effective 2024 

  • If your company sponsored retirement plan has a Roth provision, you will not be required to take a minimum distribution from the plan (in the past this was true only for IRAs)

  • If you have been required to take them, you will be able to stop in 2024 (this is only for “designated” Roth accounts in your company sponsored retirement plan)

  • Just a reminder, designated Roth Accounts (retirement plans) have prorated distributions (earnings and contributions), whereas Roth IRAs allow for contributions first distributions.

  • This is a big one!  For anyone who makes more than $145,000 in 2023, any catch up contributions will automatically be contributed to a designated Roth Account - meaning, they aren’t allowed to be pre-tax

    • If your employer doesn’t have a Roth provision, then you can’t make catch up contributions.  Calling all my Corning Inc. clients…start working on your employer now to add this provision.

  • IRA Catch-up contributions will be indexed for inflation

  • Victims of domestic abuse will be able to take penalty free distributions of 50% of the balance up to a maximum of $10,000

  • There is a $1,000 hardship distribution per year that is an exception to the 10% penalty (there are some other restrictions on this, so it’s not as flexible as it sounds).

  • There is a creation of “Emergency Savings Accounts” as part of your employer-plan account.  The maximum balance is $2,500.  We feel that for some folks, this will give them the comfort to save, we are not clear on how this is going to work yet.

  • It appears the 72(t) Rules were amended to allow you to have an IRA that you establish a 72(t) distribution on and one that you do not.  The one that you do not have the 72(t) distribution set up on would not be held to the 5-years or age 59.5 rule.  We are awaiting further IRS interpretations on this one.

  • Calling all Employers that offer a SIMPLE IRA with less than 25 employees…

    • You will be able to make additional contributions of up to 10% of employees compensation (max at $5,000)

    • Contributions limits will increase too!  

    • We are very excited about this because it allows for more small employers to offer retirement plans, contribute more and not have the complexity of a full 401k plan.

    • More to come on this provision

  • If you have a student loan, your employer may elect to contribute a “matching” contribution equal to your student loan payment.  

Effective 2025

  • If you are between the ages of 60 - 63, you will be able to make an even bigger catch-up contribution than the “normal” catch-up contributions.  Remember though, catch up contributions must go in the designated Roth accounts.

  • A qualified long-term care distribution exception is effective December 29, 2025.  You will be able to take the lesser of the $2,500 or 10% of our vested balance toward your long-term care insurance. This is for you and your spouse.  This will be interesting to see how we are going to be able to get these distributions processed in the final three days of a tax year!  

Effective 2026

  • ABLE account eligibility expanded to include persons disabled prior to age 46 (currently requires you to be disabled prior to age 26)

Phew!  We hope you found this helpful, and we will be rolling out some of the other items as we learn more about them.


Happy New Year!



Market & Economic Report - 2022 in Review

January 3, 2023

Happy New Year!

In this edition of our monthly Market & Economic Report, Amy presents a review of 2022.

For those that want the very high level, we’ve created a 2-minute Summary, and for those that want a bit more detail, we’ve created extended version.

Click on the links below for the reports on YouTube and make sure you subscribe to get future notifications!

2-minute summary - 2022 Year End Market and Economic Report

10-minute extended version - 2022 Year End Market and Economic Report

Asking for a Friend - What's going on with the Stock Market and Economy?

December 5, 2022

Question: What’s going on with the stock market and economy?

Answer: Thank you for asking this question!

Each month we have new summary for our readers. For those that want the very high level, we’ve created a 2-minute Summary and for those that want a bit more detail, we’ve created extended version.

Click on the links below for the December report on YouTube and make sure you subscribe to get future notifications!

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend - We lost my dad about a year ago and I’m starting to see my mom making some unusual spending decisions. Any suggestions?

November 28, 2022

Question: We lost my dad about a year ago and I’m starting to see my mom making some unusual spending decisions.  I know she is still significantly grieving, and I am trying to be there for her, but I don’t know what to do.  Any suggestions?

Answer: We are so sorry for your loss. I know you’ve likely heard that a number of times over the past year. While we are not experts when it comes to the grieving process, we certainly have witnessed a fair share of it.

A couple of thoughts come to mind:

  • If her spending decisions are going to unusual sources, it’s important to make sure your mom is not falling victim to any fraudulent activity.  We know it’s hard to bring this up, but it’s best to ask her if she’s heard about the most recent fraudulent tactics.

  • If she’s spending more on family members, it may be that it makes her feel good to give.  As long as it isn’t at the cost of her financial wellbeing then perhaps let it go.

  • If it is charitable giving to the community, it may be her way of getting involved.

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking For a Friend - Recently I inherited money; I want to honor the use of that money, but I don’t really know how. Do you have any suggestions?

November 14, 2022

Question:

Recently I inherited money; I want to honor the use of that money, but I don’t really know how. Do you have any suggestions?

Answer:

Was it from an IRA?  Read more about the 10-year rule: IRS Issues Ruling on 10-Year RMD Rule | ThinkAdvisor

  • Becky Suggests: 

    • Take your time and let the money sit for a little while.

    • Make a list of your goals and see if any of the goals could be funded with this money. 

    • Then think about if you would feel fulfilled by using the inherited money in that capacity.

  • Kate Suggests:

    • You may be overwhelmed by the decisions and options available. Working with a financial planner can help to give you direction, to prioritize and work through various scenarios you may be considering.

    • If this was an unexpected windfall this can be a unique psychological experience. Don't feel pressured to make any immediate decisions while you process the emotions behind the inheritance. If you are dealing with strong emotions around this money we would encourage you to speak with a therapist. There are also many books written on the topic of handling a financial windfall.

  • Amy Suggests:

    • Be aware of possible conflicts this new wealth can bring you.  Money and emotions are tied tightly together.  If you are married, make sure you and your spouse understand what this money is going to be used for so that there are no hurt feelings.  That does not mean you should title the assets in a joint account; it just means you should have an understanding of how you will use this wealth.

We also have a checklist that may be helpful:

What Issues Should I Consider If I Experience a Sudden Wealth Event?

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend - What's going on with the Stock Market and Economy?

November 7, 2022

Question: What’s going on with the stock market and economy?

Thank you for asking this question! You’ve prompted us to start a new monthly summary for our readers. For those that want the very high level, we’ve created a 2-minute Summary and for those that want a bit more detail, we’ve created extended version.

Click on the links below for the November report on YouTube and make sure you subscribe to get future notifications!

We also have a checklist you might be interested in:

What Issues Should I Consider Before the End of The Year?

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend - It's open enrollment at my job, are my benefits enough?

October 24, 2022

Question: It’s open enrollment at my job, are my benefits enough?

Answer from Becky: Take a look at the benefits offered to you. Common benefits are life insurance, disability insurance, and health insurance. 

  • Life Insurance - If something happened to you would your surviving dependents be able to live off your benefit amount?

    • If the answer is no, then you should consider additional coverage, either through your employer or an outside insurance policy.

    • Do you have life insurance on any of your loans? If you do, this could reduce your need for life insurance.

  • Disability Insurance - If you become disabled would you be able to pay your bills for an extended period of time?

    • Do you have an emergency fund?

    • Could you reduce your living expenses at all?

    • Do any of your loans have disability insurance on them? 

    • If you believe that your cash flow would be tight if you became disabled you should see what additional coverage your employer may offer. Some employers offer supplemental coverage at a much lower rate than an independent policy would cost.

  • Health Insurance - Compare your options. Would you be better off with a high deductible plan or a low deductible plan?

    • High deductible plans generally have lower premiums

      • These plans are often eligible for an HSA

      • Employers often contribute a set amount to an HSA on the employees behalf

    • PPO plans have a lower deductible but the monthly premiums are higher than a high deductible plan. 

  • Are there other benefits your employer offers that you aren’t utilizing? Such as legal plans and flexible spending accounts for either medical or dependent care.

We also have a checklist you might be interested in:

What Issues Should I Consider with My Employer-Provided Benefits?

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend - What if I buy a Long-Term Care policy after they enact the payroll tax?

October 17, 2022

Question:

I read your article the other day about State’s adding on a long-term care tax (NY, PA, CA). What does that actually mean and what if I buy a policy after they enact the payroll tax?

Answer:

Kate Welker (AKA our Tax Ninja) says:

  • This means that the state is going to create a state trust program for long term care benefits.

    • Workers will pay into this system through a mandatory payroll deduction. In turn, if they have paid the required contributions, they will be eligible for long term care benefits if they qualify for long term care services.

    • Under the current proposed New York State law, the definition to qualify for services is that an individual requires assistance with three activities of daily living (bathing, dressing, transferring, walking, continence, and eating)

  • According to what we know now, there may be a period to opt out of this payroll deduction if you can prove you currently have a long-term care policy.

  • If you purchase a policy after the deadline imposed by your state's law, you will not be exempt from the payroll deduction.

  • Even if you are covered by your state's plan you may still need an additional policy if the proposed coverage limits are not sufficient for your situation.

We also have a checklist you might be interested in:

What Issues Should I Consider When Purchasing Long-Term Care Insurance?

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend: Do you have any suggestions on actions I can take to cope with markets in years like this?

October 10, 2022

Question: I realize there is no way to time the stock (or bond) market - but do you have any suggestions on actions I can take to cope with markets in years like this?

Tips From Kate: 

  • Make sure you have enough in cash reserves so that you aren't relying on your investments to provide living expenses. By doing this you can rely on the long-term perspective to wait out the market volatility and wait for the market to recover.

  • Invest regularly and systematically in a diversified portfolio- There is generally always an asset class performing well and an asset class not performing well. By investing regularly, especially through down markets, you can take advantage of purchasing at a lower price.

  • Don't look at your statements- If you are troubled by a down market, try not to look at your balances often or ask your financial professional for a review.

Tips From Amy: 

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend: What's going on with the stock market and economy?

October 3, 2022

Question: What’s going on with the stock market and economy?

Answer: We have created our 2nd monthly summary for our readers.

For those that want the very high level, we’ve created a 2-minute Summary and for those that want a bit more detail, we’ve created an extended version.

Click on the links below for our latest report on YouTube and make sure you subscribe to get future notifications!

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

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